YANTAI CHANGYU PIONEER
WINE COMPANY LIMITED
2011 Annual Report
2012.04.20
1
Content
I. IMPORTANT……………………………………………………………………………… 3
II. KEY COMPANY DATA OF RECORD …………………..……………………..…. .. 4
III. SUMMARY OF ACCOUNTING AND FINANCIAL INFORMATION…….……. 5
CHANGES IN SHARE CAPITAL AND SUBSTANTIAL
IV. 6
SHAREHOLDERS ………………... ……... ……………….……. ………….……..
V. DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND STAFF….. … 10
VI. CORPORATE GOVERNANCE STRUCTURE…………………..…….……..…. …. 14
VII. INTERNAL CONTROL ………………………………………………………………… 18
VIII BRIEF SUMMARY OF THE SHAREHOLDERS’ MEETING………….….….. … 22
IX. BOARD OF DIRECTORS’ REPORT……………….…………………………….. .. 23
X. BOARD OF SUPERVISORS’ REPORT……………………..………….………….. 35
XI. MAJOR ISSUES…………………………………………………………..…………….. 37
XII. FINANCIAL REPORT………………..………………………..…………………….. .. 43
XIII. REFERENCE DOCUMENTS……………………………….. ..…………………….. .. 155
2
I. Important
The Board of Directors，the Board of Supervisors， 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.
All the directors have personally attended the Board of Directors’ meeting for this
report.
Ernst & Young Hua Ming Certified Public Accounts Co. Ltd. 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 any 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: Mr. Sun Liqiang
3. Secretary to the Board of Directors: Mr. 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: Mr. 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. 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 assigned by CSRC to carry the annual 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 and code number of the Shares: For A share: Changyu A, 000869;
For B share: Changyu B, 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.
Office address: Level 17, Ernst & Young Tower, Oriental Plaza, Beijing, the PRC
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III. SUMMARY OF ACCOUNTING AND FINANCIAL INFORMATION
1. Key Accounting Information
Unit：CNY
Item 2011 2010 More or less than last year(%) 2009
Business revenue 6,027,549,212 4,982,943,397 20.96 4,199,403,351
Business profit 2,517,894,707 1,907,241,238 32.02 1,472,056,684
Total profit 2,539,653,243 1,929,649,598 31.61 1,499,254,984
Net profit attributed to the shareholders of
1,907,208,732 1,434,218,328 32.98 1,127,328,843
the Company
Net profit attributed to the shareholders of
the Company after deducting the irregular 1,835,054,874 1,375,218,809 33.44 1,106,795,279
profit and loss
Net cash flows from the operating activities 1,505,722,107 1,289,922,042 16.73 1,359,587,515
Dec.31st 2011 Dec.31st 2010 More or less than last year (%) Dec.31st 2009
Total assets 7,295,944,221 5,983,377,253 21.94 5,364,160,798
Total liabilities 2,145,984,073 1,987,231,958 7.99 2,189,479,737
Equity attributed to shareholders of the
30.57 3,038,226,013
Company 5,013,641,661 3,839,708,341
Total share capital 527,280,000 527,280,000 0.00 527,280,000
2. Key Financial Information
Unit: CNY
Item 2011 2010 More or less than last year (%) 2009
Basic earnings per share 3.62 2.72 33.09 2.14
Diluted earnings per share 3.62 2.72 33.09 2.14
Basic earnings per share after deducting the irregular
3.48 2.61 33.33 2.10
profit and loss
Weighted average for the return rate of net assets (%) 43.18 41.57 1.61 41.17
Weighted average for the return rate of net assets (%)
41.55 39.86 1.69 40.42
after deducting the irregular profit and loss
Net cash flows per share from the operating activities 2.86 2.45 16.73 2.58
Net asset per share attributed to shareholders of the
9.51 7.28 30.63 5.76
Company
Asset-liability ratio (%) 29.41 33.21 -3.80 40.82
3. Details of Irregular Profit and Loss
Unit: CNY
Item 2011 2010
Gain on disposal of non-current assets, including the reversal of accrued impairment
provision 2,735,871 (436,922)
Tax refund or exemption that is either non-recurring or without proper approval 10,038,943 5,354,701
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) 4,701,553 17,289,537
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 52,122 900,000
Reversal of unpaid advertising fee 74,072,580 55,718,673
Other non-operating income and expenses 4,282,169 201,044
Corporate income tax (23,729,380) (19,756,758)
Attributable to minority interests (270,756)
Total 72,153,858 58,999,519
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4. Differences in Net Profit and Net Asset under the PRC Accounting Standards
and International Accounting Standards
The net profit and net asset attributed to the shareholders of the Company was respectively
CNY1,907,208,732 in 2011 and CNY5,013,641,661 at end of 2011 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.
IV. CHANGES IN SHARE CAPITAL AND SUBSTANTIAL SHAREHOLDERS
1. Changes in Share Capital
Unit: share’0000
Amount before this Change Amount after this
change (+, -) change
Allot Distribute Transfer other
Percentage Sub Percentage
Amount new bonus capital to share others Amount
% total %
share share capital
1. Restricted shares 21,303 40.40 -21,303 -21,303 0 0
(1)State Owned Shares
(2) State owned shares held
through legal persons
(3) Shares held by domestic -21,303
21,303 40.40 -21,303 0 0
investors
--- Shares held by domestic -21,303
21,303 40.40 -21,303 0 0
legal persons
--- Shares held by domestic
individuals
(4) Shares held by foreign
investors
--- Shares held by foreign
legal persons
--- Shares held by foreign
individuals
2. Unrestricted shares 31,425 59.60 21,303 21,303 52,728 100.00
(1) A shares 13,577 25.75 21,303 21,303 34,880 66.15
(2) B shares 17,848 33.85 17,848 33.85
(3) Shares listed in overseas
markets
Total shares 52,728 100.00 52,728 100.00
2. Changes in Restricted Shares
Unit: share’0000
Shareholder’s Name Restricted shares releasing the increasing the restricted shares Reasons for Releasing date for
on Jan.1st, 2011 restricted shares restricted shares on Dec.31st,2011 Restricted shares restricted shares
in 2011 in 2011
Yantai Changyu Share structure March 25th, 2011
21,303 21,303 0 0
Group Co. Ltd. reform
Total 21,303 21,303 0 0 --
3. Information about the Issuance and Listing of Stocks
(1) The Company did not issue any new stocks within preceding three years by the end of report
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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 employee shares.
4. Shareholders’ Information
(1) The total number and top 10 shareholders
Total amount of 13,304 shareholders including Total amount of Shareholders at 15,297shareholders including 10,030
Shareholders at end 8,049 shareholders with A end of one month before shareholders with A shares, 5,267
of 2011 shares, 5,255 shareholders disclosure date of this report shareholders with B shares
with B shares
The top 10 shareholders at end of 2011
Name of Shareholders The character of the Percentage Number of Number of Lien or frozen
shareholders (%) shares hold restricted shares
shares held
Domestic non-state-owned 0 0
YANTAI CHANGYU GROUP CO. LTD. 50.40% 265,749,120
legal person
GAO-LING FUND, L.P. Foreign shareholder 3.49% 18,397,894 0 0
HTHK/CMG FSGUFP-CMG FIRST STATE Foreign shareholder
3.13% 16,482,843 0 0
CHINA GROWTH FD
BBH BOS S/A FIDELITY FD-CHINA FOCUS FD Foreign shareholder 1.97% 10,373,597 0 0
GOVERNMENT OF SINGAPORE INV. CORP. Foreign shareholder
1.44% 7,592,374 0 0
–A/C “C”
BBH LUX-FIDELITY FUNDS— Foreign shareholder
0.86% 4,528,086 0 0
EMERGING MARKETS FUND
UBS (LUXEMBOURG) S.A Foreign shareholder 0.81% 4,284,236 0 0
MIXED SAFE RETURN OF THE GREAT WALL Domestic non-state-owned
0.78% 4,093,000 0 0
SECURITIES INVESTMENT FUND legal person
NORGES BANK Foreign shareholder 0.77% 4,060,589 0 0
CHINA UNIVERSAL GROWTH FOCUS Domestic non-state-owned
0.75% 3,953,348 0 0
EQUITY SECURITIES INVESTMENT FUND legal person
The top 10 Shareholders with unrestricted shares at end of 2011
Name of Shareholders Number of unrestricted Type of Shares
shares held
YANTAI CHANGYU GROUP CO. LTD. 265,749,120 A share
GAO-LING FUND, L.P. 18,397,894 B share
HTHK/CMG FSGUFP-CMG FIRST STATE CHINA GROWTH FD 16,482,843 B share
BBH BOS S/A FIDELITY FD-CHINA FOCUS FD 10,373,597 B share
GOVERNMENT OF SINGAPORE INV. CORP. –A/C “C” 7,592,374 B share
BBH LUX-FIDELITY FUNDS— B share
4,528,086
EMERGING MARKETS FUND
UBS (LUXEMBOURG) S.A 4,284,236 B share
MIXED SAFE RETURN OF THE GREAT WALL SECURITIES A share
4,093,000
INVESTMENT FUND
NORGES BANK 4,060,589 B share
CHINA UNIVERSAL GROWTH FOCUS EQUITY SECURITIES A share
3,953,348
INVESTMENT FUND
The explanation for the relationship and accordant action of Among the top 10 shareholders, Yantai Changyu Group Company
the top 10 shareholders Limited has no associated relationship with the other 9 listed
shareholders, and the relationship among the other shareholders is
unknown.
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(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, health liquor, distillating liquor, drinks, production, distribution, planting of
primary products and the export business under permission.
2) Legal actual controllers
Changyu Group is finally controlled by four parties, including 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 387,995,000
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 planting.
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. There is no shareholder holding 5% more shares in Yantai
Yusheng Investment & Development Co., Ltd.
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: 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 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
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Registered date: 1956
Business scope: International Finance Corporation is one of the members of World Bank, mainly
dedicated to investment 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.
④ State-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
R 62.22% 37.78%
A P A K R
M
A N A . C
N C 5%
N O REINA REINA REINA REINA
E Y U
AUGUSTO RICCARDO MARINA LODOVICO
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
10% 45% 33% 12%
current shareholders for A share Changyu Group current shareholders for B share
15.75% 50.40% 33.85%
the Company
(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.
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(4) Share holding of top 10 restricted shareholders and restriction conditions
By the end of report period, the shares holding by all the Company’s shareholders have not been
restricted.
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 shareholders’
meeting. The salary for the chairman, directors with administration duty, supervisors, managers
and other senior management should be paid on basis of the evaluation result according to the
Evaluation and Incentives Scheme for Senior Management of the Company which is passed during
the Board of Directors’ 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 64 2010.05.13— 0 0 --- NO
112.28
Board of Directors 2013.05.12
Zhou Hongjiang Vice-chairman to M 47 2010.05.13— 0 0 --- NO
the Board of 2013.05.12
112.28
Directors and
general manager
Leng Bin Director and M 49 2010.05.13— 0 0 --- NO
vice-general 2013.05.12 70.74
manager
Qu Weimin Director, M 54 2010.05.13— 0 0 --- NO
Vice-general 2013.05.12
manager and 79.18
Secretary to the
Board of Directors
Chen Jizong Director M 36 2010.05.13— 0 0 --- NO
0
2013.05.12
Augusto Reina Director M 71 2010.05.13— 0 0 --- NO
0
2013.05.12
Aldino Director M 59 2010.05.13— 0 0 --- NO
0
Marzorati 2013.05.12
Antonio Director M 73 2010.05.13— 0 0 --- NO
0
Appignani 2013.05.12
Jean Paul Pinard Director M 62 2010.05.13— 0 0 --- NO
0
2013.05.12
Geng Zhaolin Independent M 69 2006.12.07— 0 0 --- NO
5.00
Director 2009.12.06
Xiao Wei Independent M 51 2010.09.01— 0 0 ----- NO
5.00
Director 2013.05.12
Wang Zhuquan Independent M 47 2010.05.13— 0 0 -- NO
5.00
Director 2013.05.12
Wang Shigang Independent M 46 2011.05.10—
5.00
Director 2013.05.12
Fu Mingzhi Chairman for the M 58 2010.05.13— 0 0 --- NO
Board of 2013.05.12 74.35
supervisors
Zhang Hongxia supervisor F 55 2010.05.13— 0 0 --- 56.44 NO
10
2013.05.12
Jiang Jinqiang Supervisor M 39 2010.05.13— 0 0 --- NO
0
2013.05.12
Yang Ming Vice-general M 53 No 0 0 --- NO
69.01
manager
Li Jiming Chief Engineer M 45 No 0 0 --- 78.68 NO
Jiang Hua Vice-general M 48 No 0 0 --- NO
71.64
manager
Sun Jian Vice-general M 45 No 0 0 --- NO
63.90
manager
Jiang Jianxun Finance manager M 45 no 0 0 --- 46.43 NO
Total 0 0 --- 854.93 ---
(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 and general manager 2009.10.28—2013.10.27 No
Company LTD
Zhou Hongjiang Yantai Changyu Group Vice chairman 2009.10.28—2013.10.27 No
Company LTD
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, Party Secretary, Chairman and General
Manager of Changyu Group. He began serving as chairman of the Company on September 18th ,
1997 and has held the position ever since.
Mr. Zhou Hongjiang, is a mastership graduate and senior engineer, the vice chairman of
Changyu Group. He began serving as general manager of the Company on December 28th , 2001
and as Director, Vice Chairman and General Manager of the Company on May 20th , 2002.
Mr. Leng Bin, 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 15th, 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 to the board of directors of the
Company on September 18th , 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
11
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 the General Manager of Illva Saronno Holding
SpA and director of the board of directors of some branches under the group company and the
director of Changyu Group. He has been director of 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, now is the Vice Director of the China
Foods Standardization Technology Committee, executive director of China Foods Science &
Technology Institute, counselor of China Association of Wine Industry. He began serving as an
independent director of the Company on May 20th, 2002.
Mr. Wang Zhuquan, is the doctor for administration (accountancy), holds the qualifications of
China Certified Public Accountant and China Certified Public Valuer , 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.
Mr. Wang Shigang holds an MBA and also qualification of China Certified Public Accountant,
now is the director of Shandong Branch of Zhongxing Certified Public Accountants Firm,
independent director of Shandong Jinling Chemical Industry Co.,Ltd. He previously served as
independent director of the Company from May 20th , 2002 till May 13th, 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 began serving as
supervisor of the Company on September 18th, 1997.
Mr. Jiang Jinqiang, is a university graduate, holds the qualifications of China Certified Public
Accountant and China Certified Public Valuer, now is the full-time supervisor of SASAC Yantai
12
and once was the director of Changyu Group and also this company 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 12th, 1998.
Mr. Li Jiming, is a doctoratoral graduate and applied researcher. He began serving as Chief
Engineer of the Company on September 14th, 2001.
Mr. Jiang Hua, is a postgraduate and senior engineer. He began serving as Deputy General
Manager of the Company on September 14th, 2001.
Mr. Sun Jian, holds an MBA and is an assistant engineer. He began serving as Deputy General
Manager of the Company on March 22nd, 2006.
Mr. Jiang Jianxun, holds an MBA and is an accredited accountant. He began serving as
Financial Manager of the Company on May 20th, 2002.
3. Changes of Directors, Supervisors and Senior Management
During the report period, it is reviewed and proved by 2010 Shareholders’ Meeting that the
Company engages Mr. Wang Shigang as the independent director of the 5th Session of Board of
Directors, and Mr. Ju Guoyu will not serve as independent director of the Company. Apart from
this, there is no any other change for the directors, supervisors and senior management.
4. Staff of the Company
As to December 31st 2011, the total registered staff number of the Company (including the
headquarter and main controlling subsidiary company) was 4,942, consisting of:
Classification Category Number Percentage of total staff
Speciality Production staff 1,586 32.09%
Sales staff 2,974 60.18%
Technical staff 115 2.33%
Financial and administrative staff 267 5.40%
Education degree Bachelor or above 1,155 23.37%
College graduate 2,230 45.12%
Vocational school 611 12.36%
Senior high school diploma or below 946 19.14%
（1）Staff speciality
Technical staff Financial and administrative staff
2.33% 5.40%
Production staff
32.09%
Sales staff
60.18%
13
（2）Staff education degree
Senior high school diploma or below Bachelor or above
19.14% 23.37%
Vocational school
12.36%
College graduate
45.12%
(1) The Company implemented the social security system of Yantai city, all the retired staff’s
expenses were arranged by Yantai social security department, not by the Company.
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 Corporate Governance of Listed Companies”, “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 requirements of standard opinion of
shareholders’ meeting, made the great effort to provide convenient conditions for more
shareholders to participate the shareholders’ meeting, and ensured all shareholders to enjoy same
equity and well exercised their rights. The Company drew great attention to the communication
and exchange with shareholders, actively responded the shareholders’ inquiry and questions, and
widely listened to the suggestions and comments from shareholders.
(2) About the Company and holding shareholder
The Company has independent power on business and self-management, and also be independent
of its holding shareholder on business, staff, assets, organization and finance. The Board of
Directors, Board of Supervisors, management team and also internal organizations operated
independently in the Company. The holding shareholder of the Company could regulate its
activities, no other behavior was found that surpassed the shareholders’ meeting to directly or
14
indirectly interfere with the decision-making and business activities of the Company, or occupied
any assets of the Company which damaged the Company’s and medium & small shareholders’
interests.
(3) About the director and board of directors
The Company strictly appoints all directors in light of Company Law and Articles of Associations.
The qualifications of all directors are in line with the requirements of laws and regulations. In
accordance with the requirements of Corporate Governance Guidelines, the Company has 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. The Board of
Directors convened the meetings in accordance with related rules and regulations.
(4) About supervisor and board of supervisors
The Company strictly elected all supervisors in light of Company Laws and Articles of
Associations. At present, board of supervisors has three people among which one supervisor is
representative for staff, the number and composition of board of supervisor was in accord with
requirements of regulations and rules. All supervisors of the Company could follow the
requirement of Rules of Board of Supervisors’ Procedure, insist the principle of responsibility to
all shareholders, seriously perform their duties, effectively supervise and present their
independent opinion on important issues, interrelated deals, financial status, the duty performance
of directors and managers of the Company.
(5) About performance evaluation and incentive system
The engagement of managers was open and transparent, and accorded with laws and regulations.
The Company has established and gradually improved the performance evaluation standard and
formed efficient incentive system, so as to ensure the salary of staff to be linked with job
performance.
(6) About 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’ 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.
15
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 significant matters 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 two are accounting
professionals, one is legal professionals, and one is the expert in wine industry. During the report
period, all independent directors 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 sites 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.
(1) information about independent directors’ attendance to Board of Directors’ and other
professional committees’ meetings during the report period
Name Attendance as stated Personal attendance Authorized attendance Absence
BoD Auditing Emolument BoD Auditing Emolument BoD Auditing Emolument BoD Auditing Emolument
Committee committee Committee committee Committee committee Committee committee
Geng 7 3 1 7 3 1 0 0 0 0 0 0
Zhaolin
Wang 7 3 1 7 3 1 0 0 0 0 0 0
Zhuquan
Xiao Wei 7 3 1 7 3 1 0 0 0 0 0 0
Wang 5 2 0 5 2 0 0 0 0 0 0 0
Shigang
Remark: Mr. Wang Shigang served as the new independent director from May 10th, 2011.
(2) information about independent directors’ attendance to shareholders’ meetings during the
report period
Name Attendance as stated Personal attendance Authorized attendance Absence
Geng Zhaolin 1 1 0 0
Wang Zhuquan 1 1 0 0
Xiao Wei 1 1 0 0
Wang Shigang 0 0 0 0
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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 and independent system for labor, personal and
salary management.
(2) Assets: Tangible assets and Intangible assets including trademark, industrial property right
and non-patent technologies were all clearly divided between the Company and the controlling
shareholder, and all legal formalities were completed. The Company being a legal independent
entity consistently conducted business activities legally and provided no guarantee in any form
with its assets for its shareholders or individuals’ liabilities or any other legal persons or natural
persons. During the report period, Yantai Changyu Group Co., Ltd., the controlling shareholder,
has already transferred free the trademarks to the Company including 黄金冰谷，爱斐堡，爱菲
堡，爱斐 and AFIP which were once owned by the controlling shareholder, and the transfer has
been approved by Trademark Office of the State Administrative For Industry & Commerce of
PRC. However, due to some issues from the past, the Company’s assets are as yet incomplete,
the intangible assets such as part of trademark ownership and patent 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 complete, independent and standardized accounting system. The Company has also
established its own bank accounts, duly and legally paying taxes, workers insurance fund. All
financial individuals do not hold any concurrent posts in associated companies and are able to
make financial decisions independently. The Company has its own audit department, which is
especially responsible for the internal audit work of the Company.
(4) Offices: the Company has set up a sound organizational framework, in which the Board of
Directors and Board of Supervisors operate independently, no superior and subordinate
relationship exists between the functional departments of the controlling shareholder. The
Company has its own independent production & business offices, all functional departments are
independent to exercise their powers and carry out the production and business activities
independently.
(5) Operations: the operations of the Company are independent of the controlling shareholder, the
Company owns itself completely independent systems covering research and development, accounting,
workforce and labor, quality control, raw materials purchase, production and sales, and is possessed of
self-run capabilities, and has neither relationship with the controlling shareholder in terms of supply and
sales by proxy nor competition with the other.
4. Performance Evaluation and Incentive to Senior Management
The Company has already established a sound system for evaluation of achievement of senior
management and the related incentive system, which linked the reward with the Company’s
17
benefit and personal achievement. The Emolument Committee under Board of Directors assumed
the responsibility of stipulating the policy and appraising the scheme for salaries and rewards.
Based on the Company’s annual production and business goals, this committee examined senior
personals and also their responsible subsidiaries or departments according to their management
achievement and index, and took these as basis for awards or penalties.
VII. INTERNAL CONTROL
1. Formulation and Improvement of Internal Control Rules
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”, and also other normative documents issued by CSRC,
constantly improved its legal entity structure and internal management, legally conducted its
activities and strengthened the information disclosure, also in light of “Guidelines on Listed
Companies’ Internal Control” and combining the own actual situation, drew up more
comprehensive internal control system in terms of production & management, financial
management and information disclosure etc, ensured all those internal control measures to give
full play, which assured the normal production and business activities, efficaciously prevented
gross fault or misconducts and lowered the Company’s operation risks. Please read the detailed
information in “2011 Self Evaluation Report on Internal Control”.
2. The Responsibility Statement of Board of Directors on Internal Control
The Board of Directors released the statement as following: Thanks to implementation of the
internal control system, the Company’s internal control structure was much improved, and the
internal control system was rather adequate, in accordance with the requirement for management
and development of the Company, the internal control system was in good performance, and the
operation risks was reasonably controlled.
3. The Evaluation of Ernst & Young Hua Ming on the Company’s Internal Control
Ernst & Young Hua Ming has audited the Company’s self evaluation report on internal control,
and issued “Evaluation Report on Internal Control” (documentary number: Ernst &Young Hua
Ming (2012)zhuan zi di 60652799_A01), confirming that the internal control related to the
financial statements in the abovementioned internal control evaluation report dated Dec. 31st, 2011
of the Company has effectively conformed in all significant aspects with internal control for
financial statements related to norms & standards in the Internal Accounting Control Standard-
Basic Standard in Trial issued by Ministry of Finance.
4. Board of Supervisors’ Comments on the Company’s Self Evaluation for Internal Control
According to the related rules and regulations of “Guidelines on Listed Companies’ Internal
Control” and “Notice on Preparation of 2011 Annual Report of Listed Companies” issued by
Shenzhen Stock Exchange, the Board of Supervisors released the comments on the Company’s
self evaluation on internal control as following:
The Company has, in light of related regulations of the state and also regulatory authorities,
following up the basic policy of internal control, combining the actual operation situation at
present, formulated and improved the standardized and comprehensive internal control system in
18
terms of all aspects of operation and management, in accordance with current requirement of the
Company’s management requirement, with complete and reasonable internal control mechanism
and all internal audit department & staff in place, which assured the orderly performance of
operation activities, efficaciously prevented the fundamental interests of all shareholders. “The
Self Evaluation Report on Internal Control” completely, objectively and truly reported the actual
situation about formulating, performing, executing and regulating of internal control system of the
Company.
During the report period, the Company was found no conducts and behaviors against laws and
regulations, rules and provisions related to “Guide on Standard Operation of Main Board Listed
Companies” issued by Shenzhen Stock Exchange, “Articles of Associations ” and also the internal
control rules of the Company.
5. Independent Directors ’Comments on the Company’s Self Evaluation for Internal Control
During the report period, the Company has already set sound internal control system in
accordance with laws and rules of the state and authorities, in terms of all aspects of the
Company’s management, strictly fulfilled all operation activities in line with related regulations,
the internal control is strict, adequate and efficient on subsidiaries management, related transaction,
external guarantee, major investment and information disclosure, in accordance with the
Company’s actual situation which could ensure the normal operation and management. “The Self
Evaluation Report on Internal Control” completely, objectively and truly reported the actual
situation about formulating, performing, executing and regulating of internal control system of the
Company.
During the report period, the Company was found no conducts and behaviors against laws and
regulations, rules and provisions related to “Guide on Standard Operation of Main Board Listed
Companies” issued by Shenzhen Stock Exchange, “Articles of Associations ” and also the internal
control rules of the Company.
6. Formulation and Performance of Internal Control System for Financial Report
The Company has, carrying out The Accounting Standards of Enterprises and other state rules &
regulations, combining own situation, set up series of financial management system, and
effectively performed those systems in actual management, so improved the functions &
permissions of accounting and financial management in terms of system. During the report period,
no significant fault was found for the internal control system of financial report.
7. Formulation and Performance of Responsibility Ascertainment Rule of Major Mistakes in
the Annual Information Disclosure
The Company has drawn up the Responsibility Ascertainment Rule of Major Mistakes in the Annual
Information Disclosure according to the requirements of the state laws and rules and also normative
documents, specified the policy on responsibility identification and punishment for any major
mistakes for the annual information disclosure. During the report period, the Company strictly
implemented this rule, no major mistake was found for the annual information disclosure.
8. The Working plan and Implementation Scheme for Formulation and Improvement of Internal
Control Rules
19
According to the General Standards of Company’s Internal Control and the supplementary guidelines
jointly promulgated by five authorities including the Ministry of Finance and China Securities Regulatory
Commission as well as the Circular on Supervision of Implementation of the Internal Control Rules of
Shandong Region’s Listed Companies in the Main-board Market formulated by China Securities
Regulatory Commission Shandong Regulatory Bureau, the Company will standardize and improve the
current situation of internal control. The details for working plan and implementation scheme are as follows:
(1) Working plan of internal control system construction
The Company will carry out the work in this regard step by step and in a planned way and try to fulfill
the preset goals before September 30, 2012. The working steps are as follows:
① Stage of initial preparations
a. Before March 23, 2012, the Company will design an internal control implementation plan and
scheme, refer it to the Board of Directors for approval and then submit it to The China Securities
Regulatory Commission Shandong Supervision Bureau.
b. The Company will choose a day between March 26 and March 31, 2012 to hold a start-up meeting
of internal control construction.
c. Between March 26 and April 10, 2012, the Company will organize the concerned leaders,
accountants and other managerial staff of functional departments, subsidiaries and subordinates to take
part in the internal control training courses that are designed in various forms like discussion, lecture
and demonstration to deepen their comprehension of importance and necessity of internal control
system construction, strengthen their sense of initiative in and active demand for internal control rule
construction, and try to build an internal control environment favourable to construction and running of
the internal control mechanism.
②Scope of internal control to be finished before April 30, 2012
a. The Company’s concerned organs will define a detailed working range of internal control
construction including the subsidiaries and subordinates to be included into the internal control
construction as well as the important processes, designate the responsible persons and refer the related
issues to the internal control leading group, the Board of Directors or the auditing committee who will
submit, after approval, to Shandong Securities Regulatory Bureau.
b. The Company’s concerned organs will make detailed risk assessments to relevant business
departments, subsidiaries and subordinates as well as the important processes, determine risk degrees,
work out risk lists and confirm the most important risk points in different key processes.
③ Design defects in the internal control system will be found out before May 31, 2012
a. Before May 31, 2012, the concerned functional departments, subsidiaries and subordinates will, in
the light of the General Standards of Company’s Internal Control and the supplementary guidelines, make
an overall and systematic check, analysis and classification to their respective management structure, post
setup, division of work and workers’ duties as well as internal control rules and implementation results,
compare the present policies, rules with the risk lists and find out the defects in the internal control system.
b. The internal control assessment files relating to the subsidiaries and subordinates’ important
business processes will be made ready, including risk control matrix, flowchart and summary
statement of the problems found in the internal control design.
④ The search for defects in implementation of internal control rules will be finished before June 30,
2012
20
a. Regarding the identified key control points in the internal control system, the Company will work
out control test measures, bring the control tests into use and search defects in implementation of the
internal control rules before June 30, 2012.
b. The test files relating to effectiveness of the subsidiaries and subordinates’ internal control systems
will be made ready, including test measures of internal control, test files and summary statement of the
problems found in terms of effectiveness of the internal control implementation.
⑤The Company will summarize and classify the defects in the internal control, analyse the nature and
cause of the defects, lay corresponding correction scheme before June 30, 2012 and refer it to the
internal control leading group who will submit, after approval, to Securities Regulatory Bureau.
⑥ Before August 31, 2012, the Company will finish the arrangements for correction of the defects.
The functional departments, subsidiaries and subordinates will, according to the ratified correction
scheme, make revision of internal rules and adjustment to departments, workers and posts.
⑦ Check the correction results. Before September 30, 2012, the auditing department will organize the
internal control standardization group members and the functional department heads to check the
correction results and effects of the internal control defects.
⑧ Disclosure of internal control implementation progress. Within 5 working days after the end of
every quarter of 2012 and from the year on, the Company will submit the explanations on progress of
the Company’s internal control rule implementation to China Securities Regulatory Commission
Shandong Regulatory Bureau and disclose the information in its regular reports, and submit the interim
reports and final report of internal control standards to China Securities Regulatory Commission
Shandong Regulatory Bureau respectively before June 30 and December 31, 2012.
(2) The Company’s internal control self-review working plan
Before January 2013, the Company’s internal auditing department will organize relevant persons to
start the internal control self review according to the given procedures, and confirm the self review
scope, procedures and detailed contents in the light of the Company’s operating characteristics and
working adjustments, changes of operating environment, business development condition, actual risk
level, etc. and in consideration of the factors such as the in-house control environment, risk assessment,
control activities, information and communication, internal supervision. The details are as follows:
①Before commencement of the internal control self review, the internal auditing department director
shall organize the internal control standardization group and other managerial staff to lay a self-review
working scheme which defines the review scope, assignments, assessment procedures, personnel
arrangement and timetable, and form an internal control self-review working group to carry out the
work.
② The assessment standards to confirm the defects of internal control will be set up. The internal
control review working group shall confirm the assessment standards to the defects of internal control
in the light of the Company’s nature, operating and managerial characteristics and major business risks
and so on and divide the internal control defects into major defect, important defect and general defect
according to the degree of influence.
③ Organize the implementation of self review activity and draft the internal control review working
instructions. The self-review working group shall collect the evidences as many as possible to decide
whether the concerned unit’s internal control design and operation are workable, draft the internal
control working instructions and analyze the defects in the internal control system by means of spot
investigation, individual interview, questionnaires, special discussion, field examination, tests,
sampling and comparison.
21
④ According to the evidences from spot tests, the Company will make a preliminary analysis to the
defects in the internal control system, classify the defects to the category of major defect or important
defect or general defect in reference to the degree of influence and compile a summary statement of
defect review.
⑤ The internal auditing department shall make a comprehensive analysis and overall check to the
defects found in the internal control system as well as to the cause, form and degree of influence of the
defects, make final remarks, express the defect-correction opinions together with the related units or
individuals, compile correction description, urge the concerned parties or individuals to correct the
errors, and report in a proper form to the company’s internal control leading group and board of
directors. The final confirmation of major defects will be made by the board of directors.
⑥ A self-review report on internal control will be compiled according to the evaluation result of
internal control, in reference to the review working instructions and summary statement of internal
control defects and in the light of the General Standards of Company’s Internal Control and the
supplementary guidelines.
⑦ The self-review report on internal control will be made public and submitted to the departments
including China Securities Regulatory Commission Shandong Regulatory Bureau and Shenzhen Stock
Exchange after it is approved by the leading group of internal control rule implementation and the
board of directors. The Company shall finish the self review before January 31, 2013 and disclose it
together with 2012 annual report.
(3) Working plan of the Company’s internal auditing
① Confirmation of a certified public accountants office for the Company’s internal auditing. The
company will engage a certified public accountants office to audit the effectiveness of the Company’s
internal control design and operation on the given date or December 31, 2012, to air its auditing
opinions and to release an internal control auditing report. The Company will, according to the actual
situation, make a final decision about appointment of the certified public accountants office for the
internal auditing as early as possible and urge the office to make everything ready in time.
② In accordance with the requirements for listed companies’ information disclosure, this Company
will disclose the internal control auditing report together with the Company’s 2012 annual report.
VIII. BRIEF INTRODUCTION TO THE SHAREHOLDERS’ MEETING
One shareholders’ meeting, or 2010 shareholders’ meeting was convened by the Company during
the report period, with detailed information as following:
2010 shareholders’ meeting was held on May 10th, 2011 in the meeting room of the Company’s
Wine Culture Museum. The total attendees of shareholders (authorized shareholders included)
were 18 shareholders, totally representing 367,079,112 shares, accounting for 69.62% of vote
shares of the Company, including 12 shareholders (authorized shareholders included) for A share,
representing 267,177,258 shares, accounting for 76.60% of vote A shares of the Company, 6
shareholders (authorized shareholders included) for B share, representing 99,901,854 shares,
accounting for 55.98% of vote B shares of the Company. The following proposals were
deliberated and approved:
1. The Board of Directors’ Work Report 2010
2. The Board of Supervisors’ Work Report 2010
3. 2010 Annual Report
4. Draft Proposal on 2010 Profit Distribution
22
5. Proposal on Nominating Independent Director
6. Proposal on Amendment of Articles of Association and the Board of Directors’ Rules Procedures
7. Proposal on Renewal of Contract with the Present Certified Public Accountants Firm
The resolution announcement of this Shareholders’ Meeting was published on May 11th 2011 in
“China Securities Newspaper”, “Securities Times” and web site http://www.cninfo.com.cn .
IX. 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 extremely fierce due
to the impact from large volume increase of import wines and the slow growth of the domestic
economy, thus gave much pressure on the Company’s continual and fast development. Facing
such more and more complicated situation outside, the Company insisted on keeping the market as
core target, timely updated the marketing strategy, improved the sales channel’s construction and
management, got a better business achievement and 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 2011 2010 More or less than last year(%)
Principal sales 6,027,549,212 4,982,943,397 20.96
Principal profit 2,517,894,707 1,907,241,238 32.02
Net profit attributed to shareholders of listed company 1,907,208,732 1,434,218,328 32.98
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 588,751 137,509 76.64% 20.40% 12.34% ↑1.67%
Total 588,751 137,509 76.64% 20.40% 12.34% ↑1.67%
By product
Wine 496,715 103,048 79.25% 22.07% 12.84% ↑1.69%
Brandy 75,752 28,680 62.14% 17.28% 16.00% ↑0.42%
Health Liquor 12,479 4,052 67.53% -11.42% -15.93% ↑1.74%
Sparkling Wine 3,805 1,729 54.56% 11.78% 12.49% ↓0.29%
Total 588,751 137,509 76.64% 20.40% 12.34% ↑1.67%
Related party transaction 1,366 290 78.77% 44.40% 30.04% ↑2.39%
23
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 500,615 20.20
The middle region 60,170 21.11
The western region 27,966 22.46
Total 588,751 20.40
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 496,715 103,048 79.25%
Brandy 75,752 28,680 62.14%
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 16,438 Proportion of all purchases 14.6%
Total products sold to the top 5 clients 13,771 Proportion of all products sold 2.4%
③ The Company’s asset compositions and changes of financial data
Unit: CNY’0000
December 31, 2011 December 31, 2010
More or less of proportion
Entry Proportion in
Proportion in Amount in total assets
Amount total assets
total assets (%)
(%)
Account receivable 12,691 1.74 10,011 1.67 0.07
Inventory 175,596 24.07 129,441 21.63 2.44
Investable realty 0 0 0 0 0
Long-term equity
500 0.07 500 0.08 -0.01
investment
Fixed assets 160,911 22.05 118,272 19.77 2.28
Unfinished project 40,635 5.57 24,211 4.05 1.43
Short-term loans 0 0 0 0 0
Long-term loans 0 0 0 0 0
Entry Amount for this year Amount for last year More or less than last year
Operating cost 150,349 133,847 12.33%
Overheads 23,483 21,801 7.72%
Finance income 4,450 2,897 53.61%
Income tax 63,244 47,545 33.02%
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 2011 had no significant changes compared with 2010, which was mainly
24
composed of salary, social insurance, rental fee, depreciation, amortization and
administrative expenses occurred from daily operation.
c) The increase on finance income was due to more 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’0000
Entry Amount this year Amount last year Increased or decreased amount %
Cash flow generated from operating activities
Subtotal of cash inflow 814,346 665,987 22.28
Subtotal of cash outflow 663,774 536,995 23.61
Net cash flow generated from operating activities 150,572 128,992 16.73
Cash flow generated from investment activities
Subtotal of cash inflow 27,659 3,745 638.56
Subtotal of cash outflow 78,673 145,877 -46.07
Net cash flow generated from investment activities -51,014 -142,132 64.11
Cash flow generated from financing activities
Subtotal of cash inflow 19 0 -
Subtotal of cash outflow 73,819 86,834 -14.99
Net cash flow generated from financing activities -73,800 -86,834 15.01
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 change on cash flow from operating activities occurred since the cash inflow
and cash outflow increased a lot, while the net cash flow increased 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 increase on cash inflow and
decrease of cash outflow from investment activities due to the growth of time deposit over
three months during report period as well as the decrease of cash for buying the deposit over
three months, purchasing fixed assets, intangible assets and other long term assets.
c) The great change on cash flow from financing activities was due to the decrease of the cash
for repaying debts 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.
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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 20,183 10,847 4,161
Chateau Co. LTD. sparkling wine of Changyu-Castle
Langfang Castel- To produce Dry red wine,
49% USD3 million 3,506 3,013 65
Changyu Wine Co. LTD. and sell wine Dry white wine
Yantai Kylin To produce and sell Cork, aluminum cap,
50% USD1.4 million 6,019 3,929 -133
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 22,438 14,113 2,348
wine and white wine
wine
Chateau Liaoning
Changyu Ice Wine 51% To produce ice wine Ice wine 2,630 9,374 3,701 344
Co., Ltd.
Xinjiang Tianzhu To plant grape,
Winery Co., Ltd. produce and sell grape
60% Grape and bulk wine 3000 20,951 15,543 1,521
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., Yantai Kylin Packaging Co., Ltd. and Xinjiang Tianzhu Winery
Co. Ltd. dropped by 23.75%, 73.67%, 125.89% and 53.64% respectively compared with last year,
mainly due to the reduction on four companies’ internal settlement price by the Company, the net
profit of Chateau Changyu AFIP Global is almost the same with last year, the net profit of Chateau
Liaoning Changyu Ice Wine Co., Ltd. increased by 73.55% because of its sales growth.
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 Industry development tendency and market competition situation
Thanks to the sustainable growth of Chinese economy, the increase of national income, people’s more
and more concern about health and unremitting pursuits to modern lifestyle, the Chinese wine market
which is expected to be dominated by the middle-range and high-grade wine in the near future will
maintain a faster expansion in a predicable period, which renders this company a good opportunity to
expand its sales volume. From the viewpoint of the subdivided markets, the Chinese wine markets
have broader space. The medium-term and long-term trends of stable expansion of the Chinese wine
market will remain unchanged. While attracting more and more foreign wine exporters, the extensive
Chinese wine market also has an affinity for other domestic industries, which results in sharper
competition in the market, more difficulties in market development and incessant rise of investment in
the market.
Facing the abovementioned operating environment, the company’s board of directors, board of
supervisors and executive level will perform their duties as well as before, diligently, conscientiously,
26
realistically and creatively, exert their utmost efforts to fulfill or overfulfill the company’s all preset
indicators and create more wealth for the stockholders.
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, speed up to
promote the marketing channels reformation, balance the development of all wine categories, so
as to improve the Company’s profit making abilities.
The Company anticipates a turnover not less than CNY 6.6 billion in 2012 and plans to hold the
main operating cost and other three period costs less than CNY 3.5 billion. To realize the
abovementioned goals, the Company will mainly take the following measures:
Firstly, to continue its market focus, speed up the sales system reformation and strengthen the
market management. On basis of further perfecting the wine sales system, the Company will
separately establish and improve the sales system composed mainly of brandy and import wine,
increase the market coverage of brandy and import wine; raise the investment on the sales
terminals and the evaluation, advance the products’ sales ability; perfect the market evaluation
system, further strengthen the pertinence and science of the evaluation works; enhance the
management for the sales expenses, ensure to get the antipicated result for the market investment;
continue to enlarge the marketing advertisement and enhance the brand influence.
Secondly, to properly increase capital input, strengthen the quality management and continue to
improve the Company’s production ability and products’ quality. The Company will continue to
enlarge the high quality grape base, fasten the construction for the three chateaus in the western of
China and Yantai Changyu Chateau in Yantai development zone, try the best to push in succession the
high quality wine products of the three western chateaus into the market in the second half of the year;
accelerate the technological innovation for the existing production facilities, improve the supporting
production capacity; strengthen the whole quality management from the raw material to the finished
products, establish the whole quality traceability system on the base of the informatization technology,
further enrich the products’ structure and improve the products’ quality and production capability, so as
to lay better foundation for middle to long-term development for the Company.
Thirdly, to strengthen the financial and auditing management, intensify the management for the
expenses and investments, effectively push energy saving and consumption reducing, advance the
operation quality and profits. The Company will further perfect the financial budget monitoring system,
refine the assessment projects, emphasize the examination and audit for the five expenses of production
system, ten expenses of sales system and the investments for the engineering projects; on support of the
information technology, increase the strength and breadth of the audit works, set up the supervision
system for audit, finance and operation; lower the energy consumption through improving the existing
equipment and introducing the new energy-saving technologies as well as other measures, and try to
reduce the energy consumption on per ton wine by 5% compared with last year.
Fourthly, to improve the management and construction on vineyard base, complete well the purchase
on raw materials such as grape in 2012. The Company will continue to perfect the architecture system,
management model and responsibilities at all levels for the vineyard bases, strengthen the management
for the input and output of the base, the process management and the comprehensive evaluation of
grape quality; promote the pollution-free and organic cultivation techniques, carry out the mechanized
mode of operation, improve the grapes quality and reduce the management costs; further improve the
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price formation system on the grape purchasing to fix reasonably and scientificly the price of the raw
materials, so as to ensure the good and enough grape supply with proper varieties and fair price in
2012.
③ The Company’s capital demand and investment plan
In 2012, the total capital expenditure plan is CNY 1,975.58 million in construction of 13 projects,
including 4 continued projects with total investment amount CNY414.56 million as construction
of Tinlot Chateau, construction of Changyu Reina Chateau Sha'anxi, Chateau Changyu Laurenz
XV Co., Ltd. Ningxia and construction of Changyu Baron Balboa Chateau XinJiang, 9 new
projects with investment amount CNY1,561.02 million as Yantai Changyu Chateau Blending and
Cooling Center, Yantai Changyu Chateau Filling Center, Yantai Changyu Chateau Logistics
Center, Changyu Viniculture and Wine Research Institute, Treasure Wine Chateau, Expansion of
Langfang Changyu Wine Company’s Production Capacity, procurement of oak barrels,
construction of vineyard base and green investment.
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
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According to the scheme, the Company will launch more investment projects in future years with
large investment amount, long construction period for few projects and more unpredicted factors.
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
The company totally invested its own capital CNY 558.08 million in 2011 in the following 11
projects:
A) Purchase of offices for sales companies. The progressive total input in this project so far is CNY
79.75 million including CNY 55.84 million spent in 2011in buying 46 offices. The office purchase in
the remaining 8 cities will be finished in 2012.
B) An indoor logistics center in XiShan production area. The progressive total input in this project
so far is CNY 25.94 million including CNY 25.19 million spent in 2011, the completed bill of
quantity is CNY 39 million and all civil work has been completed.
C) Project of expansion of production scale of Changyu-Afip Chateau Beijing. The progressive
total input in this project so far is CNY 76.75 million including CNY 4.96 million spent in 2011,
the completed bill of quantity is CNY 83 million and construction and reconstruction of new
workshops and roads have been completed.
D) Construction of Changyu Reina Chateau Sha'anxi. The progressive total input in this project so
far is CNY 160 million including CNY 85.05 million spent in 2011, the completed bill of quantity
is CNY 210 million and most civil work of the office building, the dormitory building and the
main structures as well as landscaping engineering have been completed.
E) Construction of Changyu Baron Balboa Chateau XinJian. The progressive total input in this
project so far is CNY 167.9 million including CNY 77.9 million spent in 2011, the completed bill
of quantity is CNY 200 million and the construction of the main production facilities and
landscaping engineering is almost finished except for partial unfinished interior and exterior
decorations.
F) Purchase of a piece of land of 110 hectares at Yantai economic and technological development
zone. The progressive total input in this project so far is CNY 77.9 million including CNY 76.3
million spent in 2011 in buying the lots of 540mu of all the land to be acquired.
G) Chateau Changyu Laurenz XV Co., Ltd. Ningxia. The progressive total input in this project so far is
CNY 172.26 million including CNY 86.47 million spent in 2011, the completed bill of quantity is
almost CNY 200 million, all civil work, the exterior decoration of most main structures as well as the
29
factory road construction and landscaping engineering have been completed.
H) Project of oak barrel purchasing. The progressive total input in this project so far is CNY 90.3
million including CNY 54.92 million spent in 2011 in buying 11,695 oak barrels. The procurement
plan has been successfully fulfilled.
I) Construction of a 10,000m2 underground cellar in Xishan Production Area. The progressive
total input in this project so far is CNY 25.45 million which was all invested in 2011, the civil
work of the main buildings and the brick work have been completed and the interior and exterior
decorations will be started.
J) Construction of a 15,000t wine tank area in Xishan Production Area. The progressive total input in
this project so far is CNY 20 million which was all invested in 2011, the completed bill of quantity is
CNY 26.6 million. The company’s construction of a 17,400t wine storage tank area in its Xishan
Production Area is to meet its needs for wine production. This project has already been put into
production in August 2011.
K) Construction of Tinlot Chateau. The progressive total input in this project so far is CNY 46 million
which was all invested in 2011, the completed bill of quantity is CNY 60 million, the construction of
a 6,000m2 underground cellar and most civil work of the ground structures have been completed.
3. Audits and Changes of Accounting Policies
(1) Audits information
Ernest & Yong Hua Ming audited the Company’s 2011 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
The board of directors held 7 meetings during the report period, which are as follow:
1) Fifth Session Board of Directors’ 4th Meeting was held on April 7th, 2011, during which period
the following proposals were deliberated and passed:
A) The Board of Directors’ Work Report 2010
B) General Manager’s Work Report 2010
C) 2010 annual Report
D) Proposal on 2010 profit Distribution
E) Proposal on 2011 Capital Expenditure Plan
F) Proposal on 2010 Assessment Results of the Company’s Senior Officers’ Performance
G) Proposal on 2011 Routine related Party Transaction.
H) Proposal on Renewal of Contract with the Present Certified Public Accountants Firm
I) Self Assessment Report on the Company's 2010 Internal Control
J) Report on the Company's 2010 Social Responsibilities
K) Proposal on Amendment of Articles of Association and the Board of Directors’ rules
procedures
L) Proposal on Nominating Independent Director
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M) Proposal on Examination of the Responsibility Ascertainment Rule of Major Mistakes in the
Annual Information Disclosure
N) Proposal on Report on 2010 Portfolio Investment
O)Proposal on Relevant Issues of Convening 2010 Stockholders’ Meeting
The resolution announcement was published in “China Securities Newspaper”, “Securities Times”,
“Hongkong Commercial Daily” and http://www.cninfo.com.cn on April 9th, 2011.
2) The Fifth Session Board of Directors’ 5th Meeting of Yantai Changyu Pioneer Wine Co., Ltd.
was held on April 22nd , 2011, during which period the “the First Quarter Report 2011” was
deliberated and passed.
3) The Fifth Session Board of Directors’ 6th Meeting of Yantai Changyu Pioneer Wine Co., Ltd.
was held on July 4th , 2011, during which period the “The Proposal on Terminating the Present
Cooperation of Yantai Kylin Packing Co., Ltd.” was deliberated and passed. The resolution
announcement was published in “China Securities Newspaper”, “Securities Times” and
http://www.cninfo.com.cn on July 5th, 2011.
4) The Fifth Session Board of Directors’ 7th Meeting of Yantai Changyu Pioneer Wine Co., Ltd.
was held on August 5th , 2011, during which period the “2011 Semiannual Report ”and “Proposal
on Semiannual Profit Distribution 2011” was deliberated and passed. The resolution announcement
was published in “China Securities Newspaper”, “Securities Times” and http://www.cninfo.com.cn
on August 9th, 2011.
5) The board of director’s 1st Interim Meeting of 2011 of Yantai Changyu Pioneer Wine Co., Ltd.
on August 29th, 2011, during which period the “Proposal on Offer for Order of the Time-bargain
Wine of Changyu Century Cellar” was deliberated and passed.
6) The Fifth Session Board of Directors’ 8th Meeting of Yantai Changyu Pioneer Wine Co., Ltd.
was held on Oct. 26th , 2011, during which period the “the Third Quarter Report 2011” was
deliberated and passed.
7) The Fifth Session Board of Directors’ 9th Meeting of Yantai Changyu Pioneer Wine Co., Ltd.
was held on Dec. 15th , 2011, during which period the “Proposal on Selling the healthy liquors
Company’s Idle Assets”was deliberated and passed.
(2) Information on the Board of Directors’ execution of the resolutions of shareholders’ meetings
1) According to the resolution of 2010 Stockholders’ Meeting, the board of directors brought 2010
profit distribution scheme into effect during the report period, that is, based on the existing cardinal
number of 527.28 million shares, the company distributed CNY 14 for every 10 shares to all of its
stockholders (including tax). After tax deduction, the company distributed CNY 12.6 in cash actually
for every 10 shares to Stock A’s individual stockholders, securities investment fund and qualified
foreign institutional investor. The company distributed CNY 12.6 in cash actually for every 10 shares to
Stock B’s individual stockholders and non-resident enterprise shareholder. On June 7th , 2011, the
company published the “Notice of 2010 Melon-Cutting and Profit Distribution” in “China Securities
Newspaper”, “Securities Times” and http://www.cninfo.com.cn, fixing the date of June 13th , 2011 as
the registration day of Stock A and the last transaction day of Stock B and the date of June 14th , 2011
as the equity and interest calculation day. The company had finished all work on profit distribution
before the latter part of the June 2011.
2) The Board of Directors of the Company has revised “Articles of Association” and “the
Board of Directors’ rules procedures” according to the resolutions of 2010 shareholders’
meeting.
31
3) The Board of Directors of the Company has retained Ernest & Yong Hua Ming as the auditor
in 2011 according to the resolution of 2010 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.
(3) Summarized report on performance of the auditing committee under the Board of Directors
1) On March 25th, 2011, 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 as well as the control risks that were found during auditing and should be given
attention. We observe that the Company has made an adjustments to the items in reference to the
certified public accountants’ comments. According to the communication results with 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 2010 financial statements preliminarily
determined by Ernst & Young Hua Ming and its preliminary auditing opinions. ”
2) On 7th April 2011 the auditing committee deliberated and approved “The Auditing Report 2010’
issued by Ernest & Young Hua Ming, “The Proposal on Profit Distribution Plan of 2010”, “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 4th meeting of 5th-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 and standard audit advice
for the Company’s 2010 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.
④ The Company’s 2011 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.
⑤ During the meeting, it was suggested to renew the contract with Ernest & Young Hua Ming as
the auditing firm in 2011 with contract period for one year, auditing expenditure for
CNY1.5million including travelling fee and all operating cost.
3) On 5th August 2011, the auditing committee deliberated and approved “The 2011 Semi-annual
Report” and “The Profit Distribution Plan for First Half of 2011”, the meeting conclusion was
made as following:
32
① The Company’s financial statement for first half of 2011 truly, objectively and accurately
reported the finance status, operation achievement and cash flow situation.
②Since the Company has already implemented the 2010 profit distribution plan in middle June,
so it was proposed not to fulfill any profit distribution for first half of 2011, and reserve all the net
profit achieved during report period to the end of 2011. And the auditing committee all considered
it was a rather rational proposal.
③ It was unanimously agreed to submit the abovementioned proposals to the 7th meeting of 5th
session Board of Directors for deliberation.
4) On 14th December 2011, the auditing committee discussed “The Audit Plan for 2011” with the
certified public accountants, and confirmed the time arrangement for the financial statement audit
works in 2011. The auditing committee urged the accountants to strictly practice the audit works
according to the 2011 audit plan and submit the audit report in the promised time.
(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.
On April 7th 2011, the emolument committee of the Board of Directors deliberated the “ Proposal
on 2010 Assessment Results of the Company’s Senior Officers’ Performance”, they agreed that the
content of the proposal was in accordance with the assessment methods regulated in “the
Incentive programs for the Company’s Senior Officers”, which was deliberated and passed in the
20th meeting of the 4th session Board of Directors. It was unanimously agreed to submit the
proposal to the 4th meeting of 5th session Board of Directors for deliberation.
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 2010. 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 2011
According to the audit result from Ernst & Young Hua Ming, the Company’s net profit
achieved in 2011 is CNY 1907.21 million, and the net profit attributed to the Company’s
shareholders is CNY 1907.21 million after deducting minor shareholders’ equity.
The following is the distributable profits of the consolidated and parent company in 2011
according to Chinese accounting standard:
Unit: CNY
Consolidated Parent company
Distributable profit after tax 3,628,279,989 3,286,312,378
Among which: net profit for 2011 1,907,208,732 1,409,090,776
Distributable profit carried forward 2,459,263,257 2,615,413,602
from beginning of report period
Dividends distribution of 2010 738,192,000 738,192,000
According to article 157 in the Article of association as that “The company can distribute the
dividends either in cash or stock. The profit distributed every year is no less than 50% of the
distributable profit made in the same year”, at the same time, in consideration of the company’s
big amount of capital expenditure in 2012 and upon precondition that the company’s expansion
33
and normal operations are not affected, the company has designed its 2011 draft profit distribution
scheme as follows:
Because the left amount of legal earned surplus reserve exceeds 50% of registered capital, while
making profit distribution, the legal earned surplus reserve will be not drawn. Based on the
Company’s 527.28 million shares at total up to December 31, 2011, we plan to pay CNY 15.2 in
cash as dividends for every ten shares including tax to the Company’s all stockholders, totaling up
to CNY 801.4656 million. The Company plans to give 158.184 million shares as stock dividends
in the proportion of 3 shares per 10 shares to the Company’s all stockholders. The actual cash after
deduction of the tax for Stock A’s individual stockholders and investment funds is CNY 13.38 for
every 10 shares, and for Stock B’s individual stockholders and non-resident enterprises
stockholders is CNY 13.38 for every 10 share. After giving stock dividends, the registered capital
of this company will be from 527.28 million shares to 685.464 million shares.
According to the above profit distribution, total distributable profit in 2011 is CNY 959.65 million
accounted for 50.32% of net profits CNY 1907.21 million attributable to shareholders of parent
company in the consolidated statements. The retained and undistributed profit of CNY 947.56
million will be reserved for distribution in the next year. The cash dividends to be distributed to
the stockholders holding the domestically listed foreign-currency stock (Stock B) will be paid
after CNY is changed to HK dollar according to the middle price of exchange rate of CNY to
HKD listed by People’s Bank of China on the first working day after the resolution of the 2011
stockholders’ meeting is made.
6. The information of cash dividend distribution for preceding three years
Unit: CNY
Cash dividend amount Net profit attributed to parent Percentage of net profit attributed to
(income tax included ) company’s shareholders in parent company’s shareholders in
consolidated financial statements consolidated financial statements
2010 738,192,000 1,434,218,328 51.47%
2009 632,736,000 1,127,328,843 56.13%
2008 632,736,000 894,620,794 70.73%
7. Adjustment instructions for the company’s cash dividend policy
Because of the long time construction period and the big accumulated investment amounts in the
new projects such as Changyu Chateau in development zone of Yantai, as well as the other
normal technical innovations, the Company has to spend a lot of capitals every year in the future
years. The said investments will be all from the company’s own funds. In order to take both the
stockholders’ interests and the company’s capital expenditure into account, the company plans to
amend the current cash dividend policy of “the Company can distribute dividends either in cash
or by stock dividends, the profit to be distributed each year is not less than 50% of the
distributable profit realized in the same year and the accumulated sum of profit to be distributed
in cash in the next three years is not less than 30% of the yearly average distributable profit to be
realized in the next three years” to “the company can distribute dividends either in cash or by
stock dividend. The profit to be distributed each year is not less than 25% of the distributable
profit realized in the same year and the accumulated sum of profit to be distributed in cash in the
next three years is not less than 30% of the yearly average distributable profit to be realized in
the next three years”. The above adjustment will be valid after the approval of the shareholders’
meeting.
34
8. Fulfillment of social responsibilities
The Company’s 2011 Social Responsibilities Report was deliberated and passed in the 10th
meeting of 5th-term board of directors. This report is in a comprehensive record for the
Company’s fulfillment of the social responsibilities. During the reporting period, the Company
does not exist in significant environmental and other major social security issues. With more
details, please see the Company’s 2011 Social Responsibilities Report, which was disclosed in
“China Securities Newspaper”, “Securities Times” and http://www.cninfo.com.cn on April 20th
2011.
9. The establishment and implementation for the managerial system of the internal
information insiders’ registration
(1) The Company has already worked out the Managerial System of the Internal Information
Insiders’ Registration, and it has already been delberated and passed in the 10th meeting of 5th
session board of directors on April 18th 2012 for deliberation.
(2) Under the request of the regulatory authorities, the Company has already make registration
and management for the insiders. Through the self-examination, in this year there are no insiders
in the Company to make use of the inside information to buy or sell the Company’s stock.
(3) There are no regulatory measures or administrative penalties for the Company or the staffs
because of the implementation for the managerial system of the internal information insiders’
registration or the alleged insider trading.
10. Significant environmental or other social security issues
There are no significant environmental or other social security issues for the Company.
11. Other disclosed information
1）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.
2）During the reporting period, in the Decanter World Wine Awards hold by the international
renowned authoritative wine magazine “Decanter”, the ice wine from Changyu Golden Ice Valley
won the silver award in the category of sweet wine, Koyac XO brandy won the Silver best in class
and Koyac VSOP brandy won the silver award.
X. BOARD OF SUPERVISOR’ S REPORT
1. Meetings of the board of supervisors
Four meetings of the Board of Supervisors were convened during the report period.
The 4th meeting of the 4th-term Board of Supervisors was held on April 7th 2011, three proposals
were deliberated including “Proposal on 2010 Annual Report”, “2010 Profit Distribution
Scheme ” and “The Scheme on Renewal of Contract with Certified Public Accounts Firm”, and
two proposals were approved including “Work Report of the Board of Supervisors in 2010” and
“Suggestions on the Self-evaluation Report for the Company’s Internal Control”.
The 5th meeting of the 4th session Board of Supervisors was held on April 22nd 2011, the
proposal as “The Report of First Quarter 2011” was deliberated and approved.
35
The 6th meeting of the 4th session board of supervisors was held on August 5th 2011, the
proposals as “The Report of Semi-annual Report 2011” and “The Profit Distribution Plan for
First Half of 2011” were deliberated and approved.
The 7th meeting of the 4th session board of supervisors was held on October 26th 2011, the
proposal as “Report of Third Quarter 2011” was deliberated and approved.
2. Independent comments of the board of supervisors for relative issues 2011
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 2011 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.
(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.
36
XI．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 investing in securities and holding share equity of other listed
company or financial enterprise
In 2011, because the China's securities market remained low, in order to avoid of the market risks
and to ensure the safety of fund, the company stopped to subscribe IPO shares in 2011. From Jan.
1 to Jan. 27th, 2011, the total yield the company acquired for selling the allotted IPO shares
(issued at end of 2010 but not listed for transaction) was CNY52000.00. The earnings were
entered into 2011 profit and loss. 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
During the reporting period, approved by the 9th meeting of 5th session board of directors on
December 15th 2011, the Company sold the idle production equipments of healthy liquor, whose
net book value up to September 30, 2011 was CNY 10.42 million and whose value appraised was
CNY 13.04 million, to Yantai Zhongya Pharmaceutical Company in the price of CNY 13.04
million. Except that, the Company had no other merger and acquisition, sales of assets during the
report period.
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, mortgage 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., Yantai Changyu Tourism Co. Ltd. and Yantai Shenma Packaging Co. Ltd., the
three subsidiary companies should pay CNY 1.54 million of products purchases to the
Company, the Company should pay CNY 6.21 million to Yantai Shenma Packaing Co. Ltd. for
the purchases of packaging materials and should pay CNY 108.91 million to the controlling
shareholder Yantai Changyu Group Co. Ltd. for the trademark usage. Except that, no related
claims & 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
37
impact on the Company’s operating results and financial condition.
During the reporting period, the Company take the future earnings of 30,000 bottles of Century
Cellar dry red wine as the mortgage, and sign the relative agreements with Bank of China and
Zhonghai Trust to offer together the time-bargain dry red wine with the trademark “Changyu
Century Cellar” in the quantity of 30,000 bottles and CNY 108 million.
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 CNY88.236 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 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
Promised issue Promisee Promised content Execution
Promise for capital Changyu (1) The shares of the Company held by Group Company will not be listed It has already
reform Group and transferred within 36 months from the date for obtaining the listing been fulfilled.
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
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 Methods It is fulfilling now.
including additional Group of Takingover Listed Companies, Guidance on Releasing the Limited
promises 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.
38
9. Information about appointing and dismissing certified public accountants firm
The resolution was passed during the 2010 shareholders’ meeting in which the Company decided
to renewal the contract with Ernest & Yong Huaming to be the auditor for the Company in 2011
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 Wells Fargo Fund
2011.01.11
the Company
Meeting room of Field survey Manley Fidelity
2011.01.20
the Company Investments
Meeting room of Field survey Industrial Securities
2011.01.27
the Company
Meeting room of Field survey Ping An Asset
2011.02.10
the Company Management
Meeting room of Field survey Huaxia Fund Principal operation
2011.02.15
the Company and the future
Meeting room of Field survey Xinhua Assets development of
2011.02.23
the Company the company
Meeting room of Field survey Soochow Fund
2011.02.28 the Company
2011.03.05 Meeting room of Field survey Hua An Fund
the Company
2011.03.08 Meeting room of Field survey SW Securities
the Company
Meeting room of Field survey CLSA
2011.04.15
the Company
2011.04.18 Meeting room of Field survey Investment Securities
the Company
2011.04.19 Meeting room of Field survey Shunya Investment
the Company
Meeting room of Field survey Industrial Global Fund
2011.04.20
the Company
39
Meeting room of Field survey Bank of China Fund
2011.04.26
the Company
Meeting room of Field survey Heqi Investment
2011.05.09
the Company
Meeting room of Field survey CTCI Investment
2011.05.13
the Company
Meeting room of Field survey Bond Assets
2011.05.16
the Company
Meeting room of Field survey Boshi Fund
2011.05.17
the Company
Meeting room of Field survey Hongyuan Securities
2011.05.20
the Company
Meeting room of Field survey Leading Fund
2011.05.25
the Company
Meeting room of Field survey National Wealth Fund
2011.06.02
the Company
Meeting room of Field survey Dacheng Fund
2011.06.07
the Company
Meeting room of Field survey Changjiang Securities
2011.06.15
the Company
Meeting room of Field survey Jinyuan Securities
2011.06.17
the Company
Meeting room of Field survey CITIC Construction
2011.06.22
the Company
Meeting room of Field survey Penghua Fund
2011.06.28
the Company
Meeting room of Field survey Eastern Fund
2011.07.05
the Company
Meeting room of Field survey Yinhua Fund
2011.07.07
the Company
Meeting room of Field survey Changjiang Securities
2011.07.14
the Company
Meeting room of Field survey Hua Rong Securities
2011.07.14
the Company
2011.07.14 Meeting room of Field survey Calm Investment
the Company
2011.07.14 Meeting room of Field survey Shanghai Trust
the Company
2011.07.14 Meeting room of Field survey Central Europe Fund
the Company
2011.07.14 Meeting room of Field survey SWS MU Fund
the Company
2011.07.14 Meeting room of Field survey National Trust
the Company
Meeting room of Field survey Maverick Investment
2011.08.05
the Company
Meeting room of Field survey Yasunobu Fund
2011.08.12
the Company
Meeting room of Field survey Everbright Securities
2011.08.29
the Company
Meeting room of Field survey Guotai Junan
2011.08.29
the Company
Meeting room of Field survey Xinhua Assets
2011.09.01
the Company
Meeting room of Field survey Huaxia Fund
2011.09.01
the Company
Meeting room of Field survey Founder Fubon Fund
2011.09.02
the Company
40
Meeting room of Field survey First State Investment
2011.09.05
the Company
Meeting room of Field survey Platinum
2011.09.07
the Company
Meeting room of Field survey China International
2011.09.07 the Company Capital Corporation
Hong Kong Securities
Meeting room of Field survey Nomura International
2011.09.08
the Company
Meeting room of Field survey Sumitomo Mitsui
2011.09.08
the Company
Meeting room of Field survey ICBC Credit Suisse
2011.09.16
the Company
Meeting room of Field survey Franklin Fund
2011.09.21
the Company
Meeting room of Field survey Broad Peak
2011.09.27
the Company
Meeting room of Field survey Orient Securities
2011.11.22
the Company
Meeting room of Field survey Huaxia Fund
2011.11.22
the Company
Meeting room of Field survey Golden State Securities
2011.12.07
the Company
Meeting room of Field survey Yunnan Trust
2011.12.07
the Company
Meeting room of Field survey Xin Chao Capital
2011.12.21
the Company
Meeting room of Field survey Changjiang Securities
2011.12.23
the Company
2011.12.23 Meeting room of Field survey Celestica fund
the Company
2011.12.23 Meeting room of Field survey Guangfa Securities
the Company
13. Index for Information Disclosure of the Company
Announcement Title Publication Date Publication address
number
2011-lin 001 Announcement on Litigation and Examining 2011.01.18 “China Securities News”,
& Appraising on Jiebaina trademark. “Securities Times”
2011-lin 002 Indicative Announcement on Limited Shares 2011.03.24 and “Hong Kong
Release Commercial Daily”
th
2011-lin 003 Announcement on Resolution of 4 meeting 2011.04.09
th
of 5 Session of Board of Directors
2011-lin 004 Announcement on Resolution of 4th meeting 2011.04.09
th
of 4 Session of
Board of Supervisors
2011-lin 005 Announcement on the related transaction 2011.04.09
2011
2011-lin006 Nominee Statement for Independent Director 2011.04.09
2011-lin007 Candidate Statement for Independent 2011.04.09
Director
2011-lin008 Notice of opening 2010 shareholders’ 2011.04.09
41
meeting
2011-Ding 001 Summary for 2010 Annual report 2011.04.09
2011-Ding 002 2011 First-quarter report 2011.04.25
2011-Lin 009 Announcement on the resolution of 2010 2011.05.11
shareholders’ meeting
2011-Lin 010 Announcement on the implementation of 2011.06.07
rights distribution in 2010
2011-Lin 011 Announcement on Resolution of 6th meeting 2011.07.05
th
of 5 Session of
Board of Directors
2011-Lin 012 Indicative Announcement on First State 2011.07.19
Investment’s reduction of stocks
2011-Ding 003 2011 Semi-annual Report 2011.08.09
th
2011-Lin 013 Announcement on the resolution of 7 2011.08.09
th
meeting of 5 session board of directors
2011-Ding 004 2011 Third-quarter Report 2011.10.27
All above-mentioned information has also been disclosed in web site 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.
42
XII．FINANCIAL REPORT
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 2011, 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.
Management’ responsibility for the financial statements
The management of the Company is responsible for the preparation and the true and fair
presentation of these financial statements. This responsibility includes (1) preparing and fairly
presenting the financial statements in accordance with Chinese Accounting Standards; (2)
designing, implementing, maintaining internal control as management determines is necessary to
enable the preparation of the 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 Chinese Standards on Auditing. Those standards require
that we comply with Code of Ethics for Chinese Certified Public Accountants and plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free
from material misstatement.
An audit involves performing 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 auditors consider internal control
relevant to the entity’s preparation and 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 management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
43
INDEPENDENT AUDITORS’ REPORT (continued)
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 2011 and its performance 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 18 April 2012
44
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED BALANCE SHEET
31 December 2011
ASSETS Notes 5 2011 2010
CURRENT ASSETS
Cash and bank (1) 2,532,967,197 2,489,804,162
Bills receivable (2) 56,268,482 31,447,207
Trade receivables (3) 126,906,526 100,113,271
Advances to suppliers (4) 77,252,611 74,728,756
Interest receivable (5) 15,763,431 9,519,721
Other receivables (6) 75,423,614 30,686,839
Inventories (7) 1,755,964,582 1,294,406,406
Total current assets 4,640,546,443 4,030,706,362
NON-CURRENT ASSETS
Long-term equity investments (8) 5,000,000 5,000,000
Property, plant and equipment (9) 1,609,111,868 1,188,081,245
Construction in progress (10) 406,353,081 242,107,575
Intangible assets (11) 263,838,087 208,847,847
Biological assets (12) 42,355,441 37,773,638
Long-term prepaid expenses (13) 148,429,436 106,233,673
Deferred tax assets (14) 175,528,938 160,275,366
Other non-current assets
4,780,927 4,351,547
Total non-current assets 2,655,397,778 1,952,670,891
Total assets 7,295,944,221 5,983,377,253
45
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED BALANCE SHEET (CONTINUED)
31 December 2011
LIABILITIES AND EQUITY Notes 5 2011 2010
CURRENT LIABILITIES
Trade payables (16) 229,920,729 259,022,075
Advances from customers (17) 293,655,222 309,481,976
Employee benefits (18) 188,274,937 186,915,812
Taxes payable (19) 698,459,857 649,365,259
Other payables (20) 476,897,721
536,059,000
Non-current liability due within 1 (21) 81,081,000 -
year
Other current liabilities (22)
4,744,074 -
Total current liabilities 2,032,194,819 1,881,682,843
NON-CURRENT LIABILITIES
Deferred tax liability (14) 5,336,115 5,336,115
Other non-current liabilities (23) 108,453,139 100,213,000
Total non-current liabilities 113,789,253 105,549,115
Total liabilities 2,145,984,073 1,987,231,958
EQUITY
Share capital (24) 527,280,000 527,280,000
Capital surplus (25) 562,139,042 557,222,454
Surplus reserve (26) 295,942,630 295,942,630
Retained earnings (27) 3,628,279,989 2,459,263,257
Equity attributable to shareholders of
the Company 5,013,641,661 3,839,708,341
Minority interests 136,318,487 156,436,954
Total equity 5,149,960,148 3,996,145,295
Total liabilities and equity 7,295,944,221 5,983,377,253
46
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED INCOME STATEMENT
Year ended 31 December 2011
Notes 5 2011 2011
Revenue (29) 6,027,549,212 4,982,943,397
Less: Cost of sales (29) 1,439,417,134 1,257,910,216
Taxes and surcharges (30) 362,103,767 286,375,938
Selling expenses (31) 1,503,492,226 1,338,470,218
Administrative expenses (32) 234,832,194 218,008,020
Impairment loss of assets (33) 14,364,887 4,802,933
Add: Financial income (34) 44,503,581
28,965,166
Investment income (35)
52,122 900,000
Operating profit 2,517,894,707 1,907,241,238
Add: Non-operating income (36) 26,578,054 25,584,050
Less: Non-operating expenses (37) 4,819,518 3,175,690
Including: losses on disposal
of non-current assets 775,064 551,220
Profit before tax 2,539,653,243 1,929,649,598
Less: Income tax (38) 632,444,511 475,449,364
Profit for the year 1,907,208,732 1,454,200,234
Attributable to shareholders of the
Company 1,907,208,732 1,434,218,328
Minority interests 19,981,906
-
Earnings per share
Basic earnings per share (39)
3.62 2.72
Diluted earnings per share (39) N/A N/A
Comprehensive income 1,907,208,732 1,454,200,234
Attributable to shareholders of
the Company 1,907,208,732 1,434,218,328
Attributable to minority interests 19,981,906
-
47
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED SATATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2011
2011
Attributable to shareholders of the Company
Issued Capital Surplus Retained Minority
capital surplus reserve earnings Subtotal interests Total
1January 2011 527,280,000 557,222,454 295,942,630 2,459,263,257 3,839,708,341 156,436,954 3,996,145,295
Profit for the year - - - 1,907,208,732 1,907,208,732 - 1,907,208,732
Total comprehensive
income - - - 1,907,208,732 1,907,208,732 - 1,907,208,732
Proposed final dividend
( Notes 5 (27) ) - - - ( 738,192,000 ) ( 738,192,000 ) - ( 738,192,000 )
Injection of minority
interest shareholder - - - - - 190,371 190,371
Acquisition of minority
interest ( Notes 5 (25) ) - 4,916,588 - - 4,916,588 ( 20,308,838 ) ( 15,392,250 )
31 December 2011 527,280,000 562,139,042 295,942,630 3,628,279,989 5,013,641,661 136,318,487 5,149,960,148
2010
Attributable to shareholders of the Company
Issued Capital Surplus Retained Minority
capital surplus reserve earnings Subtotal interests Total
1January 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 19,981,906 1,454,200,234
- - -
Total comprehensive
income - - - 1,434,218,328 1,434,218,328 19,981,906 1,454,200,234
Proposed final dividend
( Notes 5 (27) ) - - - ( 632,736,000 ) ( 632,736,000 ) - ( 632,736,000)
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
48
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December 2011
Notes 5 2011 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from sales of goods or rendering
of service 8,020,168,162 6,554,373,682
Cash received form tax refund 14,835,943 5,726,969
Cash received relating to other operating
activities (40) 108,456,913 99,770,783
Cash inflows from operating activities 8,143,461,018 6,659,871,434
Cash paid for goods and services (3,165,478,308 ) (2,459,887,169 )
Cash paid to and on behalf of employees ( 389,160,880 ) ( 323,612,090 )
Cash paid for all types of taxes (1,683,046,968 ) (1,300,243,322 )
Cash paid relating to other operating activities (40) (1,400,052,755 ) (1,286,206,811 )
Cash outflows from operating activities (6,637,738,911 ) (5,369,949,392 )
Net cash flows from operating activities (41) 1,505,722,107 1,289,922,042
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in term deposits over 3 months 219,562,493 -
Proceeds from return on investments 45,126,875 33,874,239
Proceeds from disposal of property, plant and
equipment 11,898,259 3,572,356
Cash inflows from investing activities 276,587,627 37,446,595
Cash paid for acquisition of properties, plants
and equipments, intangible assets and other
long-term assets ( 766,332,806 ) ( 514,446,007 )
Cash paid for term deposits over 3 months ( 5,000,000 ) ( 944,328,054 )
Other cash paid relating to investing activities ( 15,392,250 ) -
Cash outflows from investing activities ( 786,725,056 ) (1,458,774,061 )
Net cash flows from investing activities ( 510,137,429 ) (1,421,327,466 )
49
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)
Year ended 31 December 2011
Notes 5 2011 2010
CASH FLOWS FROM FINANCING
ACTIVITIES
Cash received from minority interest 190,371 -
Cash inflows from financing activities 190,371 -
Repayment of borrowings - ( 235,000,000 )
Dividends paid and interest paid ( 738,192,000 ) ( 633,341,030 )
Cash outflows from financing activities ( 738,192,000 ) ( 868,341,030 )
Net cash flows from financing activities (738,001,629 ) ( 868,341,030 )
NET INCREASE/(DECREASE) OF CASH
AND CASH EQUIVALENTS 257,583,049 ( 999,746,454 )
ADD: CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 998,934,824 1,998,681,278
CASH AND CASH EQUIVALENTS AT END (41)
OF YEAR 1,256,517,873 998,934,824
50
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
BALANCE SHEET
Year ended 31 December 2011
ASSETS Notes 11 2011 2010
CURRENT ASSETS
Cash and bank 1,568,184,564 1,898,488,544
Bills receivables 25,779,768 12,871,415
Trade receivables (1) 20,977,065 11,708,820
Advances to suppliers 45,090,601 40,352,558
Interest receivable 15,763,431 9,519,721
Dividend receivable 1,866,646,179 1,765,637,075
Other receivables (2) 1,685,950,766 1,155,602,622
Inventories 579,452,383 481,049,315
Total current assets 5,807,844,757 5,375,230,070
NON-CURRENT ASSETS
Long-term equity investments (3) 598,299,363 331,907,113
Property, plant and equipment 365,152,521 325,016,812
Construction in progress 42,040,898 13,603,659
Intangible assets 89,684,756 87,521,064
Biological assets 9,683,931 10,270,836
Deferred tax assets 31,337,829 27,019,769
Other non-current assets 3,854,796 4,538,447
Total non-current assets 1,140,054,094 799,877,700
Total assets 6,947,898,851 6,175,107,770
51
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
BALANCE SHEET (CONTINUED)
Year ended 31 December 2011
LIABILITIES AND EQUITY 2011 2010
CURRENT LIABILITIES
Trade payables 134,893,846 165,884,293
Employee benefits 97,418,899 114,351,323
Taxes payable 115,489,659 122,920,579
Other payables 1,918,592,985 1,768,065,889
Other current liabilities 828,000 -
Total current liabilities 2,267,223,389 2,171,222,084
NON-CURRENT LIABILITIES
Other non-current liabilities 13,918,000 8,027,000
Total non-current liabilities 13,918,000 8,027,000
Total liability 2,281,141,389 2,179,249,084
EQUITY
Share capital Notes 5 (25) 527,280,000 527,280,000
Capital surplus Notes 11 (4) 557,222,454 557,222,454
Surplus reserve Notes 5 (27) 295,942,630 295,942,630
Retained earnings 3,286,312,378 2,615,413,602
Total equity 4,666,757,462 3,995,858,686
Total liabilities and equity 6,947,898,851 6,175,107,770
52
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
INCOME STATEMENT
Year ended 31 December 2011
Notes 11 2011 2010
Revenue (5) 1,864,033,002 1,563,030,583
Less: Cost of sales (5) 1,516,393,443 1,278,064,848
Taxes and surcharges 203,595,724 163,100,755
Administrative expenses 103,293,450 132,886,700
Impairment loss of assets 3,120,600 5,000,000
Add: Financial income 42,257,079 26,899,607
Investment income (6) 1,340,842,685 1,547,676,058
Operating Profit 1,420,729,549 1,558,553,945
Add: Non-operating income 6,853,437 860,312
Less: Non-operating expenses 757,865 20,228
Profit before tax 1,426,825,121 1,559,394,029
Less: Income tax 17,734,345 16,302,396
Profit for the year 1,409,090,776 1,543,091,633
Total comprehensive income 1,409,090,776 1,543,091,633
53
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2011
2011
Capital Surplus Retained
Issued capital surplus reserve earnings Total
1 January 2011 527,280,000 557,222,454 295,942,630 2,615,413,602 3,995,858,686
Profit for the year
- - - 1,409,090,776 1,409,090,776
Total comprehensive
income - - - 1,409,090,776 1,409,090,776
Proposed final dividend
(Notes 5 (27)) - - - ( 738,192,000) ( 738,192,000)
31 December 2011 527,280,000 557,222,454 295,942,630 3,286,312,378 4,666,757,462
2010
Capital Surplus Retained
Issued capital surplus reserve earnings Total
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 (27)) - - - ( 632,736,000) ( 632,736,000)
31 December 2010 527,280,000 557,222,454 295,942,630 2,615,413,602 3,995,858,686
54
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CASH FLOW STATEMENT
Year ended 31 December 2011
Notes 11 2011 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from sales of goods or rendering
of service 2,204,885,626 1,871,259,711
Cash received relating to other operating
activities 3,414,003 942,763,825
Cash inflows from operating activities 2,208,299,629 2,814,023,536
Cash paid for goods and services (1,889,029,729) (1,543,857,233 )
Cash paid to and on behalf of employees ( 106,908,222) ( 106,822,924 )
Cash paid for all types of taxes ( 285,074,377) ( 240,134,877 )
Cash paid relating to other operating activities ( 423,835,984) ( 691,116,978 )
Cash outflows from operating activities (2,704,783,862) (2,581,932,012 )
Net cash flows from operating activities (7) ( 496,536,355) 232,091,524
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in term deposits over 3 months 219,562,493 -
Proceeds from return on investments 1,278,509,420 960,903,754
Proceeds from disposals of property, plant and
equipment 6,856,964 3,773,563
Cash inflows from investing activities 1,504,928,877 964,677,317
Cash paid for acquisition of property, plant and
equipment, intangible assets and other long-
term assets ( 114,692,238) ( 38,317,534 )
Cash paid for term deposits over 3 months - ( 949,328,054 )
Other cash paid relating to investing activities ( 266,392,250) ( 107,829,935 )
Cash outflows from investing activities ( 381,084,488) (1,095,475,523 )
Net cash flows from investing activities 1,123,844,389 ( 130,798,206 )
55
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CASH FLOW STATEMENT (CONTINUED)
Year ended 31 December 2011
Notes 11 2011 2010
CASH FLOWS FROM FINANCING ACTIVITIES
Cash repayments of borrowings - ( 220,000,000)
Cash paid for distribution of dividends or profits
and for interest expenses ( 738,192,000) ( 633,341,030)
Cash outflows from financing activities ( 738,192,000) ( 853,341,030)
Net cash flows from financing activities ( 738,192,000) ( 853,341,030)
INCREASE/(DECREASE) OF CASH AND CASH
EQUIVALENTS ( 110,883,966) ( 752,047,712)
ADD: CASH AND CASH EQUIVALENTS (8)
ATBEGINNING OF THE YEAR 407,619,206 1,159,666,918
CASH AND CASH EQUIVALENTS AT END OF (8)
THE YEAR 296,735,240 407,619,206
56
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
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 2011, the total shares issued by the
Company amounts to 527,280,000 shares. Please refer to Notes 5 (24) in detail.
The holding company of the Group is Changyu Group Company, which is 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 18 April 2011.
According to the Company’s articles of association, the financial statements will be
reviewed by shareholders on the shareholder’s meeting.
57
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
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 Chinese Accounting Standards or “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 2011, financial performance and cash flow in
2011 of the Company and the Group.
(3) Accounting year
The accounting year of the Group is from 1 January to 31 December of each calendar year.
(4) Reporting currency
The Group reporting and presentation currency is the Renminbi (“RMB”). Unless otherwise
stated, the unit of the currency is Yuan.
58
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
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.
59
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
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 2011. 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.
60
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(8) Accounts receivable
(i) Individually significant and provision
The Group assesses at each balance sheet date whether there is any objective evidence
that the accounts receivable and other receivables, whose individual carrying amount is
greater than RMB4,800,000 is impaired. If there is any evidence indicates that the
carrying amount of the individual asset is lower than the present value of future cash
flows, the impairment will be recognized.
(ii) Individually insignificant and provision
The Group made assessment on whether or not there is any indication of potential asset
impairment. If there is any evidence indicates that the carrying amount of the individual
insignificant accounts receivable is lower than the present value of future cash flows,
the impairment will be recognized.
(9) 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 differences arisen from the transaction
are dealt with in the income statement for the year.
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.
61
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(10) Inventories
Inventories comprise raw materials, work in progress and finished goods.
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.
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.
62
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(11) Long term equity investments
Long-term equity investments include investments in subsidiaries, jointly controlled
enterprises and associates, and investments where the Group does not have control, joint
control or significant influence over the investees and which are not quoted in an active
market and the fair values of which cannot be reliably measured.
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. Control means having direct or indirect ability through voting rights or
similar rights to make decisions about a legal entity’s financial and operating activities, and
right to receive benefits from operating activities of the legal entity.
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 financial
and operating of an enterprise but not to control or joint control together with other parties
over the formulation of the policies.
When using 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.
63
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(11) Long term equity investments (continued)
When using 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 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 (19). 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 (18).
(12) 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.
64
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(12) Biological assets (continued)
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 life Estimated residual Annual depreciation
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.
When biological assets are sold, lost, dead, or damaged, the carrying amount is recognized in
the income statement after deduction of relevant taxes.
65
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(13) 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 equipment are 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 (19).
66
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(14) 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 (19).
(15) 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.
67
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(15) 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.
68
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(16) 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 (19).
69
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(17) 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
Greening fee 5 years
Others 50 years
(18) 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.
70
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(18) 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.
71
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(18) 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.
72
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(18) 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.
73
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(18) 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.
74
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(18) 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.
75
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(19) 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.
76
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(19) 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.
(20) 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.
77
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(21) 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.
(22) 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.
78
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(23) 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.
(24) Profit distribution
The cash dividend is recognized as liability after the approval of shareholders’ meeting.
(25) 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.
79
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(25) 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.
80
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(26) 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.
(27) 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.
(28) 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.
81
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(28) 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 (13), 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.
82
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(28) Significant Accounting Judgments and Accounting Estimates (continued)
Estimation uncertainty (continued)
Impairment of biological assets
As set out in Note 2 (12), 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 (19), 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.
83
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
ACCOUNTING ESTIMATES (CONTINUED)
(28) 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 and part of brandy is
levied at quantity and certain tax rate of gross turnover,
namely levied at 20% of total turnover and RMB1000 per
ton before October.1.2011. After October.1.2011 it is levied
at 10% of total turnover. For all other products, 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.
84
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
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 of Legal Business Registered Principle Incorporate
registration representative nature capital activities code
Subsidiary acquired from a business combination: under non-common control
Xinjiang Tianzhu Wine Co.,Ltd. 11 April 2006 Zhou Manufacturing RMB Production and 787 604 261
(“Xinjiang Tianzhu”) (a) 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 Co., Ltd. (“Vehicular Yantai, Shandong, Lixian 300,000 service
Transportation”) China
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”) (b) 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”) (c) 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 24 December 2001 Jiang Sales RMB Sales of wine 746 576 380
Sales Co., Ltd. Yantai, Shandong, Hua 8,000,000
(“Sales Company”) 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”) (d) China
85
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
4. SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS (continued)
(1) Particulars of the subsidiaries (continued)
Name Place and date of Legal Business nature Registered Principle
registration represe-ntat capital activities Incorporate
ive code
Changyu (Jingyang) Pioneer Wine 8 April 2002 Zhou Sales RMB Sales of
Sales Co., Ltd. Jingyang, Shanxi, Mingqiang 1,000,000 wine 735 379 154
(“Jingyang Sales”) China
Langfang Changyu Pioneer Wine 19 April 2002 Liu Sales RMB Sales of wine 737 388 150
Sales Co.,Ltd. Langfang, Hebei, Wanqiang 1,000,000
(“Langfang Sales”). China
Shanghai Changyu Sales and 28 April 2003 Zhou Sales RMB Sales of wine 749 571 075
Distribution Co., Ltd. Shanghai, China Hongjiang 1,000,000
(“Shanghai Sales”)
Beijing Changyu AFIP Wine 27 October 2005 Sun Manufacturing RMB Production and 780 953 469
Chateau Co., Ltd. Beijing, China Liqiang 110,000,000 sales of wine
(“Beijing Chateau”) (e)
Yantai Changyu Wine Sales Co., 9 January 2006 Jiang Sales RMB Sales of wine 783 487 627
Ltd.( “Wines Sales”) Yantai, Shandong, Hua 5,000,000
China
Yantai Changyu Pioneer 29 September 2005 Zhou Sales RMB Import and 780 766 161
International Co., Ltd. Yantai, Shandong, Hongjiang 5,000,000 export of wine
(“Pioneer International”) China and technology
Hangzhou Changyu Wine Sales 14 June 2006 Jiang Sales RMB Whole-sale and 788 283 631
Co., Ltd.(“Hangzhou Changyu”) Hangzhou, Hua 500,000 retail of
Zhejiang, China packaging food
Ningxia Changyu Grape-Growing 16 November 2006 Shao Planting RMB Plant and 788 200 410
Co., Ltd.(“Ningxia Growing”) Yinchuang, Chunsheng 1,000,000 purchase of
Ningxia, China grape
Huanren Changyu National Wines 16 November 2006 Leng Sales RMB Whole-sale and 794 822 179
Sales Co., Ltd. (“National Wines”) Huanren, Liaoning, Bin 2,000,000 retail of wine
China
Liaoning Changyu Ice Wine 3 April 2003 Zhou Manufacturing RMB Production and 747 128 301
Chateau Co., Ltd. Benxi, Liaoning, Hongjiang 26,300,000 sales of ice wine
(“Ice Chateau”) (f) China
Yantai Development Zone 4 December 2006 Zhou Sales RMB Whole-sale and 796 183 411
ChangyuTrade Co.,Ltd. Yantai, Shandong, Hongjiang 5,000,000 retail of wine
(“Development Zone Trade”) China
Shenzhen Changyu Wine 17 July 2007 Lin Sales RMB Whole-sale and 664 195 20X
Marketing Ltd.(“Shenzhen Futian, Shenzhen, Pu 500,000 retail of wine
Marketing”) China
86
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
4. SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS (continued)
(1) Particulars of the subsidiaries (continued)
Name Place and Legal Business Registered Principle Incorporate
date of represe nature capital activities code
registration -ntative
Yantai Changyu 27 March 2007 Zhou Sales RMB Whole-sale and 660 176 044
Trading Company Yantai, Hongjiang 5,000,000 retail of wine
(“Fushan Trading”) Shandong,
China
Beijing AFIP 4 December Sun Services RMB Meeting service, 669 926 612
Meeting Center 2007 Hongbo 500,000 foods,
(“Meeting Center”) (g) Miyun, accommodation,
Beijing , China tourism and sales
of souvenir
Beijing AFIP 4 June 2008 Liu Tourism RMB Tourism and 676 627 372
Tourism and Culture Miyun, Shilu 500,000 culture
Company (“AFIP Beijing , China communication,
Tourism”) (h) development of
tourist resources,
meeting service
Ningxia Changyu 25 April 2008 Li Manufacturing RMB Manufacturing 670 408 275
Pioneer Wine Co., Yinchuan, Jiming 1,000,000 and sales of wine,
Ltd. (“Ningxia Ningxia, China packing material,
Wine”) plant, process and
purchase of grapes
Yantai Changyu 26 November Liu Quan Sales RMB Packaging 683 222 859
DingLuoTe Chateau. 2008 Yantai, 80,000,000
(“Ding Luo Te Shandong
China
Chateau”) (i)
Qing Tong Xia 17 November Cai Sales RMB Whole-sale and 694 334 151
Changyu Wine 2009 Jianshe 500,000 retail of wine
Qing Tong
Marketing Ltd. Xia , Ningxia,
(“Qing Tong Xia China
Sales”)
XinJiang BaBao 2 April 2011 Sun Manufacturing RMB Manufacturing 552 414 949
Baron Changyu Wine Shihezi, Liqiang 150,000,000 and sales of wine
Chateau Co., Xinjiang,
China
Ltd.(“Shi He Zi
Chateau”)
87
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
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 Rose 15th 26 April 2010 Zhou Manufacturing RMB Wine / packaging 694 349 740
Changyu Wine Chateau Yinchuan, Hongjiang 2,000,000 manufacturing,
Co., Ltd. (“ Ningxia Ningxia, tourism
Chateau”) China
XianYang Changyu Rina 12April 2010 Sun Manufacturing RMB Tourism and wine 552 180 142
Castle Chateau Co., Xianyang, Liqiang 20,000,000 manufacturing
Ltd.(“ Chang’an Shanxi, China
Chateau”)
Yantai Changyu Wine 29 March Sun Manufacturing RMB Research and 555 235 76X
Research and 2010 Liqiang 500,000,000 development of
Development Co., Ltd. Yantai, winery
(“R&D Centre”) (j) Shandong
China
Changyu (HuanRen) 2 December Zhou Hong Jiang Manufacturing RMB Fermatition 587 310 365
Wine Co., Ltd. (“Huan 2011 5,000,000 project preparation
Ren Wine”) (k) Benxi
LiaoNing
China
88
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
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
s of 31 December power financial ng interest
2011 statements
Subsidiary acquired in business combination :under non-common control
Xinjiang Tianzhu (a) RMB 60% - 100% 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 (b) RMB 100% - 100% Yes -
23,176,063
Changyu Chateau (c) RMB 70% - 100% Yes RMB
28,968,100 12,365,016
Jingyang Wine RMB 90% 10% 100% Yes -
1,000,000
Sales Company RMB 90% 10% 100% Yes -
8,000,000
Langfang Castel (d) RMB 49% - 100% Yes RMB
12,142,200 12,640,000
Jingyang Sales RMB 10% 90% 100% Yes -
1,000,000
89
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
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
s of 31 December power financial interest
2011 statements
Langfang Sales RMB 10% 90% 100% Yes -
1,000,000
Shanghai Sales RMB 30% 70% 100% Yes -
1,000,000
Beijing Chateau (e) RMB 70% - 100% 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 (f) 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
90
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
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 as of power financial ling interest
12/31/2011 statements
Fushan Trading RMB - 100% 100% Yes -
5,000,000
Meeting Center (g) RMB - 100% 100% Yes -
500,000
AFIP Tourism(h) RMB 70% - 100% Yes RMB
350,000 2,966,399
Ningxia Wine RMB 100% - 100% Yes -
1,000,000
Ding Luo Te Chateau (i) RMB 100% - 100% Yes -
80,000,000
Qing Tong Xia Sales RMB 100% 100% Yes -
500,000
Shi He Zi Chateau RMB 100% - 100% Yes -
150,000,000
Ningxia Chateau RMB 100% - 100% Yes -
2,000,000
Chang’an Chateau RMB 100% - 100% Yes -
20,000,000
Research and Development RMB 99% - 99% Yes -
Centre (j) 100,000,000
Huan Ren Wine (k) RMB 100% - 100% Yes -
5,000,000
91
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
4. SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS (continued)
(1) Particulars of the subsidiaries (continued)
(a) Xinjiang Tianzhu was acquired by the Company in 2009, accounting for 60% of
Tianzhu’s equity interest. Pursuant to the operation contract signed by the Company,
the Company is entrusted to manage Tianzhu and therefore has the full power to
control its strategic operating, investing and financing policies by paying the
non-controlling party contract fee. The operation agreement will be terminated on 31
December 2018.
(b) Kylin Packaging is a sino-foreign joint venture founded in 29 September 1999. On 4
July 2011, the Company has purchased the 50% share of Kylin Packaging held by the
foreign investor at the price of RMB15,392,250. By 23 August 2011, the Company has
become the parent company of Kylin Packaging by fully paid the valuable
consideration. The license of Kylin Packaging was still in progressing by 31 December
2011.
(c) 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, 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 be terminated on 31 December 2012.
(d) 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 consolidated financial statements. The operation agreement will be terminated
on 31 December 2012.
(e) Beijing Chateau is a joint venture established by the Company and two investors.
Pursuant to an operation contract signed by the Company and the investors, the
Company is entrusted to manage Beijing Chateau and therefore has the full power to
control its strategic operating, investing and financing policies. The operation
agreement will be terminated on 2 September 2019.
(f) 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 be terminated on 31 December 2016.
92
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
4. SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS (continued)
(1) Particulars of the subsidiaries (continued)
(g) Meeting Centre is a joint venture established by the Company and two investors.
Pursuant to an operation contract signed by the Company and the investors, the
Company is entrusted to manage Meeting Centre and therefore has the full power to
control its strategic operating, investing and financing policies. The operation
agreement will be terminated on 2 September 2019.
(h) AFIP Tourism is a joint venture established by the Company and two investors.
Pursuant to an operation contract signed by the Company and the investors, the
Company is entrusted to manage AFIP Tourism and therefore has the full power to
control its strategic operating, investing and financing policies. The operation
agreement will be terminated on 2 September 2019.
(i) Ding Luo Te Chateau is a limited liability company solely founded by the Company.
Its paid capital is RMB80,000,000 which has been fully paid by the end of 2011.
(j) R&D Centre is a joint venture established by the Company and Shandong Yantai
Brewing Co., Ltd. The registered capital is RMB500,000,000. According to the
investment agreement, the company would contribute RMB495,000,000 while
Shandong Yantai Brewing Co., Ltd. would contribute the rest RMB5,000,000. Up to 31
December 2011, the first stage of contribution of RMB100,000,000 has been
contributed solely by the Company. Accordingly, the Company has 99% controlling
power of R&D Centre through voting rights and 100% right to its operational profit.
(k). Huan Ren Wine is a limited liability company solely founded by the Company. Its paid
capital is RMB5, 000,000 which has been fully paid by the end of 2011.
(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.
(3) The entity newly included in the consolidation and the entity no longer in the consolidation
The newly included subsidiary is as following:
Net Asset Net profit up
as at 2011.12.31 to date
Huan Ren Wine 5,000,000 -
93
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Cash and bank
2011 2010
Cash on hand 74,859 89,425
Cash at bank 2,508,587,182 2,466,052,613
Other monetary assets 24,305,156 23,662,124
2,532,967,197 2,489,804,162
As at 31 December 2011, the balance of restricted cash of the Group is RMB2,604,604, which
is the Company’s housing fund (31 December 2010：RMB2,462,124).
As at 31 December 2011, the Group has no overseas cash and bank deposit (31 December
2010：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.
As at 31 December 2011, The Group’s term deposits with original maturity of more than three
months when acquired is RMB1,273,844,720 (31 December 2010: RMB1,488,407,214) with
interest rates ranging from 3.25%-3.50%, which will mature from 3 months to 1 year.
(2) Bills receivable
2011 2010
Bank acceptance bills 56,268,482 31,447,207
As of 31 December 2011, there was no pledged bills receivable (31 December 2010: Nil), and
no bills receivable were reclassified as accounts receivable due to the default of drawer (31
December 2010: Nil).
As at 31 December 2011, the top five bills receivable endorsed to third parties but not yet
matured is as follows:
2011
Drawer Issuing date Maturity date Amount
Weifang Hongda Co.,Ltd. 5/8/2011 5/2/2012 500,000
Anqing Hailin electronic Co.,Ltd. 4/7/2011 4/1/2012 200,000
Qingzhou Longxing cloth Co.,Ltd. 1/7/2011 1/1/2012 200,000
Changzhou Changlai metallic 11/7/2011 11/1/2012 200,000
materials Co.,Ltd.
Huabei Zhiyao Hebei Minyao
Co.,Ltd. 14/10/2011 14/4/2012 115,000
1,215,000
94
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(2) Bills receivable (continued)
As at 31 December 2010, the top five bills receivable endorsed to third parties but not yet
matured is as follows:
Drawer Issuing date Maturity date Amount
Wuhan Hexiangxing economic 29/11/2010 28/2/2011 1,500,000
development Co.,Ltd.
Wuhan Tongchuang Weiye Co.,Ltd. 24/11/2010 24/2/2011 1,000,000
Wuhu Licheng trading Co.,Ltd. 16/12/2010 16/6/2011 1,000,000
Langfang Anjia trading Co.,Ltd. 23/12/2010 13/6/2011 1,000,000
Tangshan Zhijing trading Co.,Ltd. 23/11/2010 23/2/2011 900,000
5,400,000
As at 31 December 2011, there was no notes receivable discounted to obtain short-term loan
(31 December 2010: 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 aging analysis is as follows:
2011 2010
Within 1 year 126,906,526 100,113,271
As at 31 December 2011, there was no bad debt provision for trade receivables (31 December
2010: Nil). There was no bad debt provision made, reversed or written-off by management in
2011 (2010: Nil).
2011 2010
Balance Provision Balance Provision
Amount % Amount % Amount % Amount %
Individually
significant 63,712,485 50.2 - - 37,472,999 37.4 - -
Individually
insignificant 63,194,042 49.8 - - 62,640,272 62.6 - -
126,906,526 100.0 - 100,113,271 100.0 -
As at 31 December 2011, there was no trade receivable due from shareholders with voting
rights of 5% or above (31 December 2010: Nil)
95
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) Trade receivables (continued)
As at 31 December 2011, the top 5 of trade receivables are as follows:
Relationship Percentage
with the of total
Group receivables
Amount Aging %
Yantai Zhongya Sales Co., Ltd Third party 13,667,157 Within 1 year 10.8
Nonggongshang supermarket (group)
Co., Ltd Third party 13,261,917 Within 1 year 10.5
Yantai Zhongya pharmacy Co., Ltd Third party 7,309,907 Within 1 year 5.8
Suguo Supermarket Co., Ltd Third party 6,895,232 Within 1 year 5.4
Jiangsu Hengxing wine Co., Ltd Third party 6,651,512 Within 1 year 5.2
47,785,725 37.7
As at 31 December 2010, the top 5 of trade receivables are as follows:
Relationship Percentage
with the of total
Group receivables
Amount Aging %
Nonggongshang Co., Ltd Third party 9,369,211 Within 1 year 9.4
Nonggongshang supermarket (group)
Co., Ltd Third party 6,767,820 Within 1 year 6.8
Huanren Hongyu Co., Ltd Third party 6,434,578 Within 1 year 6.4
Yantai Zhongya Sales Co., Ltd Third party 6,216,172 Within 1 year 6.2
Shanghai Darunfa Co., Ltd Third party 4,365,619 Within 1 year 4.4
33,153,400 33.2
96
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) Trade receivables (continued)
As at 31 December 2011, trade receivables due from related parties are as following:
Relationship with the Percentage of total
Group Amount receivables %
Yantai Changyu
International Window
of the Wine City Under the control of the
Company Limited same parent company 218,690 0.2
Yantai Changyu Under the control of the
Tourism Limited same parent company 358,020 0.3
Yantai ShenMa Under the control of the
Packing Limited same parent company 968,136 0.8
1,544,846 1.3
As of 31 December 2010, trade receivables from related parties are as following:
Percentage of total
Relationship with Group Amount receivables %
Yantai Changyu Under the control of the
Tourism Limited same parent company 120,322 0.1
(4) Advances to suppliers
The aging analysis is as follows:
2011 2010
Balance % Balance %
Within 1 year 77,252,611 100.0 74,728,756 100.0
97
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) Advances to suppliers (continued)
As at 31 December 2011, the top 5 of advances to suppliers are as follows:
Percentage of
Relationship Reason total advances
with the for being to suppliers
Group Amount Aging outstanding %
Shandong Yantai Brewing goods not
Sales Co.,Ltd. Third party 17,874,715 Within 1 year received 23.1
goods not
Yantai Custom Third party 6,160,448 Within 1 year received 8.0
goods not
Qingdao Xiangu Co., Ltd. Third party 5,863,346 Within 1 year received 7.6
goods not
Seguin Morean Co., Ltd. Third party 5,838,421 Within 1 year received 7.6
Yantai Zhongya Sales Co., goods not
Ltd. Third party 5,686,206 Within 1 year received 7.4
41,423,136 53.7
As at 31 December 2010, the top 5 of advances to suppliers are as follows:
Percentage of
Relationship Reason total advances
with the for being to suppliers
Group Amount Aging outstanding %
Shandong Yantai Brewing goods not
Sales Co., Ltd Third party 22,453,121 Within 1 year received 30.0
goods not
Qingdao Xiangu Co., Ltd. Third party 5,952,642 Within 1 year received 8.0
Yantai Zhongya Sales Co., goods not
Ltd Third party 5,615,367 Within 1 year received 7.5
goods not
Longkou Fruit Co., Ltd. Third party 5,259,570 Within 1 year received 7.0
goods not
Tulufan Wine Co., Ltd. Third party 3,528,000 Within 1 year received 4.7
42,808,700 57.2
As at 31 December 2011, there was no advance paid to shareholders with voting rights of 5%
or above (31 December 2010: Nil).
98
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) Interest receivable
2011
Opening Closing
balance Increase Decrease balance
Interests of term
deposits 9,519,721 34,027,807 (27,784,097) 15,763,431
2010
Opening Closing
balance Increase Decrease balance
Interests of term
deposits 8,969,343 12,234,345 (11,683,967) 9,519,721
As at 31 December 2011, there was no overdue interest receivable (31 December 2010: Nil).
(6) Other receivables
The aging analysis is as follows:
2011 2010
Within 1 year 71,196,465 20,568,664
1 to 2 years 3,480,623 9,911,712
2 to 3 years 7,394,855 47,524
Over 3 years 8,006,463 8,158,939
90,078,406 38,686,839
Less: bad debts provision ( 14,654,792 ) ( 8,000,000 )
75,423,614 30,686,839
99
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOT ES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) Other receivables
The movement of other receivables is as follows:
2011 2010
Bad debts Bad debts
Balance provision Balance provision
Amount % Amount % Amount % Amount %
Individually
significant and
Provision 16,869,512 18.7 8,000,000 47.4 11,048,886 28.6 8,000,000 72.4
Individually
insignificant
and Provision 73,208,894 81.3 6,654,792 9.1 27,637,953 71.4 - -
90,078,406 100.0 14,654,792 38,686,839 100.0 8,000,000
As at 31 December 2011 and 2010, the bad debt provision for individually significant balance is as
follows:
Bad debts Reason for provision
Balance provision Percentage
The debto
Tiantong Security r is in the process of
Co., Ltd. 8,000,000 8,000,000 100% liquidation
As at 31 December 2011, the bad debt provision for individually insignificant balances is as
follows:
Bad debts Reason for provision
Balance provision Percentage
Jingyang Finance Aging over 2 years and
Bureau 3,120,600 3,120,600 100% unlikely to recover
Penglai Daliuhang Aging over 2 years and
Vineyard 4,451,936 3,534,192 79.4% unlikely to recover
7,572,536 6,654,792
As at 31 December 2011, there was no other receivable due from shareholders with voting rights of
5% or above (31 December 2010: Nil).
100
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) Other receivables (continued)
As at 31 December 2011, the top 5 of other receivables are as follows:
Percentage of
Relationship total other
with the receivables
Group Amount Aging %
Yantai Development Zone
Management Committee Third party 49,410,000 Within 1 year 54.9
Tiantong Security Co., Ltd. Third party 7,928,286 Within 1 year 8.8
Yantai Zhifu State Taxation
Bureau Third party 6,213,946 Within 1 year 6.9
Penglai Daliuhang Vineyard Third party 4,451,936 Within 1 year 4.9
Jingyang Finance Bureau Third party 3,120,600 2 years-3 years 3.5
71,124,768 79.0
As at 31 December 2010, the top 5 of other receivables are as follows:
Percentage of
Relationship total other
with the receivables
Group Amount Aging %
Jingyang Finance Bureau Third party 3,120,600 1 year-2 years 8.1
Yantai Zhifu State Taxation
Bureau Third party 1,412,546 Within 1 year 3.6
Xinjiang Nongbashi 142 Tuan Third party 1,227,280 Within 1 year 3.2
Xinjiang Nongbashi 144 Tuan Third party 1,036,364 Within 1 year 2.7
Yantai Fushan Finance Bureau Third party 1,000,000 Within 1 year 2.6
7,796,790 20.2
As at 31 December 2011, there was no other receivable due from related parties (31 December
2010: Nil).
101
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) Inventories
2011 2010
Net carrying Net carrying
Balance Provision amount Balance Provision amount
Raw
material 55,439,304 - 55,439,304 59,385,786 - 59,385,786
Finished
goods 783,191,752 12,600,933 770,590,819 538,480,066 10,077,620 528,402,446
Work in
progress 929,934,459 - 929,934,459 706,618,174 - 706,618,174
1,768,565,515 12,600,933 1,755,964,582 1,304,484,026 10,077,620 1,294,406,406
Movement of inventory provision is as follows:
2011 Opening Closing
balance Increase Decrease balance
Finished goods 10,077,620 7,710,095 (5,186,782 ) 12,600,933
Opening Increase Decrease Closing
2010 Balance Balance
Finished goods 10,274,687 - ( 197,067 ) 10,077,620
As at 31 December 2011, the carrying amount of inventory with restrictions in ownership is
RMB18,030,733 (31 December 2010: 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 and Zhong Hai Trust Co.,Ltd. Please also refer to Notes 5 (21) and
(23).
In 2011, no provision was reversed.
Percentage
of closing
balance of
2010 Balance Basis for provision Reason for reversal inventory
Expected Calculation based on
Finished damage rate from the expected damage r
goods 538,480,066 daily handling atefrom daily operating 0.03%
102
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) Long-term equity investment
2011
Opening
and Voti
closing Equity ng
Initial cost balance interest Power Provision
% %
Cost method:
Yantai Dingtao Construction
and Development Co.,
Ltd. (“Yantai Dingtao”) 10,000,000 5,000,000 18 18 -
2010
Opening Movement Closing Equity Voting
Initial Cost Balance for the year Balance Interest Power Provision
% %
Cost method:
Yantai Dingtao 10,000,000 10,000,000 ( 5,000,000) 5,000,000 18 18 5,000,000
The initial investment in Yantai Dingtao is RMB10, 000,000, as at 31 December 2011 and 2010, and the
Group holds 18% of its equity interests.
103
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) Property, plant and equipment
2011 Opening Closing
balance Increase Decrease balance
Cost:
Buildings 812,780,815 385,469,087 ( 6,000,834) 1,192,249,068
Machineries and
equipment 875,907,151 132,641,281 (36,000,500) 972,547,932
Motor vehicles 1,954,011 ( 311,572)
1,708,507,505 520,064,379 (42,312,906) 2,186,258,978
Accumulated
depreciation:
Buildings 129,641,538 30,498,848 ( 3,196,710) 156,943,676
Machineries and
equipment 377,433,760 57,068,617 (29,650,995) 404,851,382
Motor vehicles 13,350,962 2,303,904 ( 302,814) 15,352,052
520,426,260 89,871,369 (33,150,519) 577,147,110
Net carrying
amount:
Buildings 683,139,277 354,970,239 ( 2,804,124) 1,035,305,392
Machineries and
equipment 498,473,391 75,572,664 ( 6,349,505) 567,696,550
Motor vehicles
6,468,577 ( 349,893) ( 8,758) 6,109,926
1,188,081,245 430,193,010 ( 9,162,387) 1,609,111,868
104
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) Property, plant and equipment (continued)
2010 Opening Closing
balance Increase Decrease balance
Cost:
Buildings 698,714,336 117,389,989 ( 3,323,510) 812,780,815
Machineries and
equipment 737,132,083 148,327,144 ( 9,552,076) 875,907,151
Motor vehicles 17,488,40 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
equipment 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
equipment 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
The increase of accumulated depreciation for 2011 and 2010 are all depreciation accrued for
the year. In 2011, the value of property, plant and equipment transferred from construction in
progress is RMB486,899,261 (2010: RMB189, 903,490).
As at 31 December 2011, there was no property, plant and equipment with ownership
restricted (31 December 2010: RMB1,439,022).
At at 31 December 2011, there was no property, plant and equipment are idle, held for
disposal or under finance or operating lease (31 December 2010: Nil).
105
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) Property, plant and equipment (continued)
As at 31 December 2011, 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 warehouse and sewage treatment centre waiting for completion report
Xinjiang Tianzhu fermertation and storage warehouse waiting for completion report
Kylin Packaging finished goods warehouse and workshop 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 and boiler room waiting for completion report
Sales Company office buildings processing
Ning Xia Wine production factory and office building waiting for completion report
Shihezi Chateau office and factory waiting for completion report
Shihezi Chateau gate and wing building waiting for completion report
106
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(11) Construction in progress
2011 2010
West mountain factory project 30,878,151 2,985,201
Brandy capacity enlargement project 152,609 -
Sparkling wine reconstruction project 902,463 -
Cabernet centre project 5,581,283 7,619,532
Cabernet wine cellar project 4,491,463 -
Fermentation centre reconstruction project 34,930 2,998,926
Kylin Packing production line project 1,674,302 -
Beijing Chateau 3000 Ton production line project - 30,000,000
Beijing Chateau construction project 200,512 19,468,392
Ningxia united workshop 1,743,526 3,380,801
Xinjiang Tianzhu workshop reconstruction project 5,999,376 17,878,259
Jingyang ferment project 505,520 15,048,365
Sales Company construction project 34,221,669 33,737,780
Shi He Zi Chateau construction project 47,662,677 85,455,488
Ningxia Chateau construction project 102,421,590 11,271,515
Xianyang Chateau construction project 118,802,003 10,458,506
R&D Centre construction 1,804,810 1,804,810
project
Ding Luo Te Chateau Project 49,276,197
-
406,353,081 242,107,575
107
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(10) Construction in progress (continued)
2011 Budget Opening Addition Transfer to PPE Closing Financed Accumulated
Balance Balance by expenditure
/budget
%
West Mountain factory project 40,000,000 2,985,201 49,562,462 ( 21,669,512) 30,878,151 Self-raised 131.4%
Brandy Capacity enlargement 7,690,000 - 7,388,722 ( 7,236,113) 152,609 Self-raised 96.1%
project
Sparkling Wine reconstruction 45,000,000 - 1,466,146 ( 563,68 ) 902,463 Self-raised 132.9%
project 3
Cabernet Centre project 21,000,000 7,619,532 - ( 2,038,249) 5,581,283 Self-raised 36.3%
Cabernet Wine cellar project 50,000,000 - 4,491,463 - 4,491,463 Self-raised 9.0%
Carbernet container project 36,480,000 - 25,000,000 ( 25,000,000) - Self-raised 68.5%
Cabernet Centre project 22,000,000 - 10,000,000 ( 10,000,000) - Self-raised 45.5%
Cabernet Packing warehouse 36,000,000 - 22,000,000 ( 22,000,000) - Self-raised 61.1%
project
Fermentation Centre 5,000,000 2,998,926 1,465,580 ( 4,429,576) 34,930 Self-raised 92.6%
reconstruction project
Kylin Packing production line 6,200,000 - 2,599,241 ( 924,939) 1,674,302 Self-raised 41.9%
project
Beijing Chateau 3000 Ton 92,500,000 30,000,000 22,257,726 ( 52,257,726) - Self-raised 56.5%
Production Line Project
Beijing Chateau construction 455,750,000 19,468,392 30,330,610 ( 49,598,490) 200,512 Self-raised 100.6%
project
Ningxia United Workshop 58,700,000 3,380,801 1,298,927 ( 2,936,202) 1,743,526 Self-raised 97.5%
Xinjiang Tianzhu Workshop 37,570,000 17,878,259 6,672,094 ( 18,550,977) 5,999,376 Self-raised 96.2%
Reconstruction Project
Jingyang ferment project 26,000,000 15,048,365 2,583,383 ( 17,126,228) 505,520 Self-raised 71.5%
Sales Company construction 53,000,000 33,737,780 14,881,068 ( 14,397,179) 34,221,669 Self-raised 139.6%
project
Shihezi Chateau Construction 540,000,000 85,455,488 200,377,576 (238,170,387) 47,662,677 Self-raised 58.2%
Project
Ningxia Chateau Construction 196,000,000 11,271,515 91,150,075 - 102,421,590 Self-raised 52.3%
Project
Xianyang Chateau Construction 250,000,000 10,458,506 108,343,497 - 118,802,003 Self-raised 47.5%
Project
R&D Centre Construction 165,000,000 1,804,810 - - 1,804,810 Self-raised 1.1%
Project
Ding Luo Te Chateau project 152,400,000 49,276,197 Self-raised 32.3%
- - 49,276,197
242,107,575 651,144,767 (486,899,261) 406,353,081
108
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(10) Construction in progress (continued)
2010 Budget Opening Addition Transferred Closing Financed Accumulated
balance to property, plant balance by expenditure
and equipment /budget
%
Red Wind Club 15,000,000 - 5,307,768 ( 5,307,768 ) - Self-raised 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
R&D 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
There was no interest capitalized in construction in progress in 2011 (2010: Nil).
As at 31 December 2011, there was no provision was made for the construction in process
(31 December 2010: Nil).
109
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) Intangible assets
2011 Opening Closing
balance Increase balance
Cost:
Land use right 220,872,498 59,568,713 280,441,211
Software use right 3,480,000
224,352,498 59,568,713 283,921,211
Accumulated amortization
Land use right 13,416,651 3,882,473 17,299,124
Software use right 2,088,000 696,000 2,784,000
15,504,651 4,578,473 20,083,124
Net carrying amount:
Land use right 207,455,847 55,686,240 263,142,087
Software use right 1,392,000 ( 696,000) 696,000
208,847,847 54,990,240 263,838,087
2010 Opening Closing
balance Increase balance
Cost:
Land use right 155,444,429 65,428,069 220,872,498
Software use right 3,480,00
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
The increase of accumulated amortization in 2011 and 2010 are all amortization accrued for the
year.
As at 31 December, there was no intangible asset with restricted ownership (31 December 2010:
Nil).
110
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) Biological assets
2011 2010
Opening balance 37,773,638 39,717,396
Addition 6,615,603 2,156,974
Amortization ( 2,033,800 ) ( 4,100,732)
Closing balance 42,355,441 37,773,638
As at 31 December 2011, there is no biological asset with ownership restricted (31 December
2010: Nil).
The biological assets are vines. The risks, such as disasters, plant diseases and insect pests,
fluctuation in market demand and other risk factors, may lead to impairment on biological
assets. The Group will take effective procedures and controls to prevent plant diseases and
insect pests, and strengthen the management of vines and soils to protect the biological assets.
Except for the new biological assets in 2011, the remaining biological assets had reached
production status and thus had been amortized from 2009.
As at 31 December 2011, there is no indication that biological assets may be impaired, and no
provision was made (31 December 2010: Nil).
(13) Long-term prepaid expenses
2011 Opening Closing
balance Increase Amortization balance
Land lease prepayments 65,299,233 1,069,596 ( 1,495,373) 64,873,456
Land requisition fee 38,484,280 236,514 ( 380,768) 38,340,026
Greening fee - 51,111,856 ( 7,666,779) 43,445,077
Others 2,450,160 - ( 679,283) 1,770,877
106,233,673 52,417,966 (10,222,203) 148,429,436
111
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(13) Long-term prepaid expenses (continued)
2010 Opening Closing
balance Increase Amortization 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
(14) Deferred tax assets/liabilities
Deferred tax assets and liabilities are presented separately:
Deferred tax assets and liabilities recognized are as follows:
2011 2010
Deferred tax assets
Unrealized profit from intra-company transactions 107,340,177 110,184,929
Unpaid bonus 39,118,917 36,072,822
Retirement benefit 7,873,591 6,725,237
Asset impairment provision 8,063,931 5,769,405
Deductable losses 4,572,888 1,383,138
Deferred income 8,559,434 -
Pre-operating expenses - 139,835
175,528,938 160,275,366
Deferred tax liabilities
Fair value adjustment in business combination under
non-common control 5,336,115 5,336,115
Deferred tax assets and liabilities not recognized:
Deductable losses 20,591,253 24,719,043
112
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(14) Deferred tax assets/liabilities (continued)
Deductable losses not recognized as deferred tax assets will expire in:
2011 - 5,491,212
2012 85,340 85,340
2013 64,997 64,997
2014 19,077,494 19,077,494
2016 1,363,422 -
20,591,253 24,719,043
Temporary differences from assets and liabilities that resulting in such differences are as
follows:
2011 2010
Deductible temporary difference
Unrealized profit from intra-company
transactions 429,360,708 440,739,716
Unpaid bonus 156,475,668 144,291,288
Early retirement benefit 31,494,364 26,900,948
Provision for impairment 32,255,725 23,077,620
Deductible losses 18,291,552 5,532,552
Deferred income 47,440,738 -
Pre-operating expenses - 559,340
715,318,755 641,101,464
2011 2010
Taxable temporary difference
Fair value adjustment in business
combination under non-common control 21,344,460 21,344,460
113
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(15) Provision for impairment of assets
2011
Opening Closing
balance Accrual Written off balance
Bad debt provision 8,000,000 6,654,792 - 14,654,792
Inventory provision 10,077,620 7,710,095 (5,186,782) 12,600,933
Impairment of long-
term investment 5,000,000 - - 5,000,000
23,077,620 14,364,887 (5,186,782) 32,255,725
2010
Opening Accrual Reversal Closing
balance balance
Bad debt provision 8,000,000 - - 8,000,000
Inventory provision 10,274,687 - ( 197,067) 10,077,620
Impairment of long-
term investment - 5,000,000 - 5,000,000
18,274,687 5,000,000 ( 197,067 ) 23,077,620
114
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(16) Trade payables
The trade payables are interest free with a credit period no more than three months from its
suppliers normally.
2011 2010
Within 1 year 229,920,729 259,022,075
As at 31 December 2011, the Group had no outstanding balance payable to related parties or
shareholders with voting rights of 5% or above (31 December 2010: Nil).
As at 31 December 2011, the Group had no significant outstanding balance aged more than
one year (31 December 2010: Nil).
(17) Advances from customers
2011 2010
Within 1 year 293,655,222 309,481,976
As at 31 December 2011, the Group had no outstanding balance payable to the related parties
or shareholders with voting rights of 5% or above (31 December 2010: Nil).
115
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(18) Employee benefit
31 December 2011
Opening Closing
balance Increase Decrease balance
Salaries and bonus 122,804,887 289,613,276 (287,379,448 ) 125,038,715
Staff benefit - 8,590,306 ( 8,590,306 ) -
Staff welfare 3,022,339 32,131,473 ( 34,814,932 ) 338,880
Includes:
Medical insurance 598,887 7,695,132 ( 8,220,007 ) 74,012
Pension 2,199,409 20,613,939 ( 22,558,954 ) 254,394
Unemployment
insurance 81,668 1,791,145 ( 1,865,661 ) 7,152
Injury insurance 137,764 1,120,452 ( 1,256,482 ) 1,734
Maternity insurance 4,611 910,805 ( 913,828 ) 1,588
Housing fund 430,600 5,654,408 ( 5,595,720 ) 489,288
Union fee and education fee 5,644,688 1,383,090 ( 3,241,299 ) 3,786,479
Termination benefits 31,252,497 15,456,078 ( 10,433,283 ) 36,275,292
Other allowances 23,760,801 - ( 1,414,518 ) 22,346,283
186,915,812 352,828,631 (398,469,506 ) 188,274,937
31 December 2010
Opening Closing
balance Increase Decrease 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
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 17,768 ( 5,848,586 ) 23,760,801
176,980,999 358,106,617 (348,171,804 ) 186,915,812
116
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(18) Employee benefit (continued)
As at 31 December 2011, the Group had no overdue employee benefit payable (31 December
2010: Nil).
In 2011, the Group paid union fee and education fee of RMB3,241,299 (2010: RMB
1,097,852), termination payment of RMB10,433,283 (2010 RMB 13,518,866). There is no
non-monetary welfare in 2011 (2010: Nil).
(19) Taxes payable
2011 2010
Value added tax 22,405,920 20,867,507
Consumption tax 48,064,764 36,964,290
Business tax 372,616 346,375
Corporation income tax 596,777,047 567,303,677
Urban land use tax 709,120 744,172
Individual income tax 6,968,982 7,434,054
City construction tax 11,907,032 8,449,064
Property tax 1,774,578 1,715,820
Others 9,479,798 5,540,300
698,459,857 649,365,259
117
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(20) Other payables
2011 2010
Advertising costs 89,115,832 190,122,855
Deposit from distributors 152,184,670 135,052,781
Payables for equipment and construction 86,651,441 50,072,081
Royalty fee 108,911,034 41,640,572
Deposits from suppliers 10,377,751 4,326,760
Others 88,818,272 55,682,672
536,059,000 476,897,721
The balance due to the shareholders with voting right of 5% or above is as follows:
2011 2010
Royalty fee 108,911,034 41,640,572
As at 31 December 2011, significant outstanding balance aged over than one year is as
follows:
Amount payable Reasons for
outstanding
Deposits from distributors 98,242,428 Deposits
There was no repayment of the above balances after the balance sheet date.
118
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(21) Non-current liabilities due within one year
2011 2010
Trust scheme due within one year 77,220,000 -
Interest payable 3,816,000 -
81,081,000 -
In September 2011, the Company and Zhong Rong International Trust Co., Ltd. entered into a
profit transfer agreement, pursuant to which the Company agreed to transfer its right to the
profit generated by certain type of wine to a special trust fund established by Zhong Rong
International Trust Co., Ltd. and received RMB80,028,000 with annual interest rate of 5%. The
trust scheme is guaranteed by Changyu Group Company, the parent company of the Company.
The trust scheme payable decreased by RMB2,808,000 due to sold of certain type of wine in
2011.
(22) Other current liabilities
2011 2010
Deferred income 4,744,074 -
Details of deferred income:
2011 2010
Government grant related with assets
Fund to support major constructing projects 1,334,874 -
Fund to support emerging and key industries 828,000 -
Others 2,581,200 -
4,744,074 -
119
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(23) Other non-current liabilities
2011 2010
Employee benefit 11,424,000 20,185,000
(1)
Trust scheme 52,785,000 80,028,000
(2)
Interest payable 1,847,475 80,028,000
(2)
Deferred income 42,696,664 -
(3)
108,753,139 100,213,000
(1) Employee benefit represents bonus accrued for management. According to the bonus
payment schedule, the bonus is expected to be paid during 2013 to 2015.
(2) In July 2011, the Company and Zhong Hai Trust Co., Ltd. entered into a profit transfer
agreement, pursuant to which the Company has transferred right to the profit generated by
certain type of wine to a special trust fund established by Zhong Hai Trust Co., Ltd and
received RMB52,785,000 with the annual interest rate of 7%. The special trust fund will
be terminated in February 2013.
(3) Details of deferred income:
2011 2010
Government grant related with assets
Fund to support major constructing projects 12,013,864 -
Fund to support emerging and key industries 7,452,000 -
Others 23,230,800 -
42,696,664 -
120
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(24) Share capital
2011 Opening balance Unrestricted in 2011 Closing balance
Restricted shares
Shares held by domestic
investors
Including：
Shares held by non-state
owned legal persons 213,021,120 (213,021,120) -
Total of restricted shares 213,021,120 (213,021,120) -
Unrestricted shares
A Shares 135,794,880 213,021,120 348,816,000
B Shares 178,464,000 - 178,464,000
Total of unrestricted shares 314,258,880 213,021,120 527,280,000
Total shares 527,280,000 - 527,280,000
2010 Opening balance Unrestricted in 2010 Closing balance
Restricted shares
Share Shares held by
domestic investors
Including：
Shares held by non-state
owned legal persons 239,385,120 ( 26,364,000) 213,021,120
Total of restricted shares 239,385,120 ( 26,364,000) 213,021,120
Unrestricted shares
A Shares 109,430,880 26,364,000 135,794,880
B Shares 178,464,000 - 178,464,000
Total of unrestricted shares 287,894,880 26,364,000 314,258,880
Total shares 527,280,000 - 527,280,000
Restricted shares of 213,021,120 (2010: 26,364,000) held by Yantai Changyu Group Co.,Ltd.,
representing 40% (2010:5%) of total shares issued, were released since 25 March 2011 (2010:
1 April 2010).
121
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(25) Capital surplus
2011 Opening Closing
Balance Addition Balance
Share premium 557,222,454 - 557,222,454
Other - 4,916,588 4,916,588
557,222,454 4,916,588 562,139,042
2010
Share premium 557,222,454 - 557,222,454
Pursuant to the share transfer agreement entered into by the Company and the minority equity
holder of Kylin Packing on 23 August 2011, the Company acquired the 50% of equity interests
of Kylin Packing held by the minority equity holder for a consideration of RMB15,392,250. At
the completion date of this transaction, the book value of the equity interest acquired was
RMB20,308,838. The difference of RMB 4,916,588 between the consideration paid and the
book value of the equity interest acquired were dealt with in the capital reserve.
(26) 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.
122
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(27) Retained earnings
2011 2010
Retained earnings brought forward 2,459,263,257 1,657,780,929
Add: profit attributable to
shareholders of the Company 1,907,208,732 1,434,218,328
Less: dividends paid in respect prior
year’s profit ( 738,192,000) ( 632,736,000)
Retained earnings carried forward 3,628,279,989 2,459,263,257
On 18 April 2012, the board of the directors of the Company proposed a cash dividend of
RMB15.2 every 10 shares in respect of 2011 based on the issued shares of 527,280,000. The
aggregate amount of cash dividend is RMB 801,465,600. Meanwhile, the board of the
directors proposed an allotment to all shareholders by 3 shares every 10 shares based on the
issued shares of 527,280,000. The proposed profit distribution plan is subject to the approval
from the Annual General Meeting.
123
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(28) Assets with restriction of ownership
2011 Opening Closing
Balance Increase Decrease balance
Restricted assets
due to other reasons
Cash at bank 2,462,124 170,923 ( 28,443) 2,604,604(i)
Inventory 13,524,960 4,968,469 ( 462,696) 18,030,733(ii)
15,987,084 5,139,392 ( 491,139) 20,635,337
2010 Opening Closing
Balance Decrease balance
Assets as collateral
Property, plant and equipment 1,439,022 ( 1,439,022) -
Intangible assets
8,882,146 ( 8,882,146) -
10,321,168 (10,321,168) -
Opening Closing
Balance Increase Decrease balance
Restricted assets
due to other reasons
Cash at bank 2,449,848 59,974 ( 47,698) 2,462,124
Inventory 13,524,960 - 13,524,960
-
2,449,848 13,584,934 ( 47,698) 15,987,084
(i) As at 31 December 2011 and 2010, the restricted deposit is the Group’s housing fund.
(ii) As at 31 December 2011, inventory with restriction in ownership was due to the trust scheme.
Please also refer to Note 5 (21) and (23) for details.
124
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(29) Operating income and costs
Operating income is as follows:
2011 2010
Revenue 5,939,875,597 4,946,381,708
Other operating income 87,673,615 36,561,689
6,027,549,212 4,982,943,397
2011 2010
Cost of sales 1,396,984,223 1,246,290,445
Other operating expenses 42,432,911 11,619,771
1,439,417,134 1,257,910,216
The operating income for the group is mainly from the sales of wine, brandy and sparkling
wine. Over 99% of the sales generated in PRC.
Operating income from top five customers in 2011 is as follows:
Amount Percentage of total
operating incomes
%
Putian Baicheng trading Co., Ltd. 34,363,944 0.
Zhuhai Huahaipengcheng wine Co., Ltd. 27,566,277 0.5
Fuzhou Bainianhanggang trading Co., Ltd. 27,258,001 0.5
Shaoguan Zhenjiang Youhui Co., Ltd. 24,414,643 0.4
Foushan Nanhai Lizhi Store 24,109,304 0.4
137,712,169 2.4
Operating income from top five customers in 2010 is as follows:
Amount Percentage of total
operating incomes
%
Zhuhai Huahaipengcheng wine Co., Ltd. 29,352,577 0.6
Putian Baicheng trading Co., Ltd. 25,886,223 0.5
Xiamen Ronghua Trading Co., Ltd. 23,565,699 0.5
Hangzhou Xinyou Trading Co., Ltd. 23,516,666 0.5
Cixi Junlong Foods Co., Ltd. 23,326,067 0.5
125,647,232 2.6
125
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(29) Operating income and costs (continued)
Operating income is analyzed as follows:
2011 2010
Sales of goods 5,939,875,597 4,946,381,708
Rendering services 87,673,615 36,561,689
6,027,549,212 4,982,943,397
(30) Taxes and surcharges
2011 2010
Consumption tax 243,150,036 192,626,509
Business Tax 4,583,506 3,541,419
City construction tax 62,942,415 56,345,553
Education fee and surcharges 46,167,761 33,045,631
Others 5,260,049 816,826
362,103,767 286,375,938
(31) Selling expenses
2011 2010
Advertising costs 863,774,831 776,928,026
Freight 162,039,548 139,440,780
Salary and employee benefit 211,834,772 190,266,613
Trademark fee 108,911,034 96,975,246
Warehouse leasing expenses 35,763,374 30,184,352
Travelling expenses 20,298,868 17,952,447
Commission 11,319,425 8,957,329
Expenses incurred for Wine festival 2,720,426 10,410,350
Others 86,829,948 67,355,075
1,503,492,226 1,338,470,218
The reversal of unpaid advertising expense of RMB74,072,580 was included in the selling
expenses (2010: RMB55,718,673).
126
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(32) General and administrative expense
2011 2010
Salary and employee benefit 50,482,485 46,549,783
Insurance fee 30,171,410 23,550,518
Leasing expenses 10,258,411 10,862,402
Depreciation 20,468,648 17,879,147
Amortization 7,655,556 9,513,903
Administrative expenses 13,584,278 14,320,518
Travelling expenses 7,058,152 4,580,694
Entertainment fee 4,079,211 3,548,986
Property tax, stamp duty and other taxes 10,898,973 9,732,151
Maintenance fee 5,178,210 2,437,416
Management fee 12,531,670 4,514,810
Others 62,465,190 70,517,692
234,832,194 218,008,020
(33) Loss on impairment of assets
2011 2010
Inventory provision/(write-off) 7,710,095 ( 197,067)
Bad debts provision 6,654,792 -
Impairment of long-term investment - 5,000,000
14,364,887 4,802,933
(34) Financial income
2011 2010
Interest income 51,747,843 32,295,374
Less: interest expenses ( 5,708,475) -
Bank charges ( 1,535,787) ( 3,330,208 )
44,503,581 28,965,166
127
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(35) Investment income
2011 2010
Investment income gained from disposal
of financial assets held for trading 52,122 900,000
(36) Non-operation income
2011 2010
Gains on disposal of non-current assets 3,510,935 114,298
Including: gain on disposal of plant property and
equipments 3,510,935 114,298
Government grants 14,740,496 22,644,238
Penalty income 1,150,934 276,024
Others 7,175,689 2,549,490
26,578,054 25,584,050
Government grants recognized in the income statement is as follows:
2011 2010
Major projects support fund 1,483,193 15,792,069
Small and medium enterprises support fund 1,425,000 -
Tax refund 10,038,943 5,726,969
Others 1,793,360 1,125,200
14,740,496 22,644,238
128
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(37) Non-operation expenses
2011 2010
Loss on disposal of non-current assets 775,064 551,220
Including: loss on disposal of property, plant
and equipment 775,064 551,220
Donation 412,662 2,333,667
Others 3,631,792 290,803
4,819,518 3,175,690
(38) Income tax
2011 2010
Current income tax 647,698,083 496,457,456
Deferred income tax ( 15,253,572 ) ( 21,008,092 )
632,444,511 475,449,364
Reconciliation between income tax expenses and profits is as follows:
2011 2010
Profit before tax 2,539,653,243 1,929,649,598
25% 25%
Income tax expense at statutory tax rate 634,913,311 482,412,400
Effect of different tax rates applied by certain
subsidiaries ( 4,543,795 ) ( 9,237,208 )
Tax losses not recognized 340,856 -
Non-taxable income - ( 3,519,517)
Non-deductable expenses
1,734,139 5,793,689
Income tax expenses at the Group’s
effective tax rate 632,444,511 475,449,364
129
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(39) Earnings per share
The calculation of basic earnings per share is based on the consolidated profit attributable to
ordinary shareholders of the Company during the year and the weighted average number of
outstanding ordinary shares.
2011 2010
Earnings
Consolidated profit attributable to
ordinary shareholders of the Company 1,907,208,732 1,434,219,328
Shares
Weighted average number of outstanding
ordinary shares 527,280,000 527,280,000
Basic earnings per share 3.62 2.72
Diluted earnings per share N/A N/A
The company does not have potential dilutive ordinary shares.
From the balance sheet date to the date of approval of this report, there are no subsequent
events which would affect the numbers of the weighted average number of outstanding of
ordinary shares.
(40) Notes to consolidated cash flow statement
Cash received relating to other operating activities:
2011 2010
Government grants 47,345,289 16,917,269
Trust scheme 52,785,000 80,028,000
Others 8,326,624 2,825,514
99,770,783
Cash paid relating to other operating activities:
2011 2011
Selling expenses 1,259,544,184 1,142,340,990
General and administrative expenses 105,976,203 110,764,518
Others 34,532,368 33,101,303
1,400,052,755 1,286,206,811
130
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(41) 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:
2011 2010
Net profit 1,907,208,732 1,454,200,235
Add: Loss for impairment of assets 14,364,887 4,802,933
Depreciation 89,871,369 72,750,608
Amortization of intangible assets 4,578,473 4,089,777
Amortization of Biological assets 2,033,800 4,100,732
Amortization of long-term prepaid
expenses 10,222,203 1,341,392
Losses/(gain) on disposal of property,
plant and equipment ( 2,735,871) 436,922
Finance costs ( 46,039,368) ( 32,295,374 )
Investment income (52,122) ( 900,000 )
Increase in deferred tax assets ( 15,253,572 ) ( 21,008,092 )
Increase in inventories ( 469,268,271) ( 162,968,447 )
Increase in operating receivables ( 105,672,433) ( 48,160,002 )
Increase in operating payables
116,464,280 13,531,356
Net cash flows from operating activities 1,505,722,107 1,289,922,042
(ii) Cash and cash equivalents
2011 2010
Cash 1,256,517,873 998,934,824
Including：
Cash on hand 74,859 89,425
Bank deposits on demand 1,234,742,462 977,645,399
Other monetary capital on demand 21,700,552 21,200,000
Closing balance of cash and
cash equivalents 1,256,517,873 998,934,824
131
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
6. RELATED PARTY AND RELATED PARTY TRANSACTIONS
(1) Parent company
Name of Type of Place of Legal Scope of Registered Percentage Percentage Incorporate
parent enterprise registration representative business capital of shares of voting Code
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 2011, there is no change in parent company’s registered
capital, shares holding or voting power.
(2) Subsidiaries
Please refer to Note 4 (1).
(3) Other related parties
Nature of related parties Incorporate code
Yantai Changyu Travelling Co., Ltd. Fellow subsidiary 258 258 654
Yantai Changyu International
Window of the Wine City Co., Ltd. Fellow subsidiary 672 208 146
Yantai ShenMa Packing Co., Ltd. Fellow subsidiary 553 393 350
(4) Significant related party transactions
(i) Purchases from and sales to related parties
Purchase from related parties
2011 2010
Yantai Changyu Travelling Co. Ltd. 425,193 1,728,709
Yantai Changyu International Window of the
Wine City Co., Ltd 65,508 3,807
Yantai ShenMa Packing Co., Ltd 78,774,219 -
79,264,920 1,732,516
All related party transactions are based on the negotiated price.
In 2011, purchases from related parties accounted for less than 3% of the Group’s total
purchase (2010: less than 1%).
132
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
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
2011 2010
Yantai Changyu Travelling Co. Ltd. 6,791,363 5,731,398
Yantai Changyu International Window of the
Wine City Co., Ltd. 5,354,827 3,730,560
Yantai ShenMa Packing Co., Ltd. 1,515,455 -
13,661,645 9,461,958
All related party transactions are based on the negotiated price.
In 2011, sales to related parties accounted for less than 1% of the Group’s total sales (2010:
less than 1%).
(ii) Property leased from a related party
2011 Note Assets leased Beginning date Ending date Rental expense
Changyu Group (a) Warehouse and office
Company building 2007/1/1 2011/12/31 6,383,000
2010 Note Assets leased Beginning Date Ending Date Rental expense
Changyu Group (a) Warehouse and office
Company building 2007/1/1 2011/12/31 6,383,000
(a) Pursuant to the lease agreement entered into between the Company and Changyu Group
Company on 28 November 2006, starting from 1 January 2007, the Company rented
properties from Changyu Group Company for operation purposes at a basic annual
rental of RMB6,383,000, and till 31 December 2011. For the year ended 31 December
2011, the rental expenses payable to Changyu Group Company amounted to
RMB6,383,000 (2010: RMB6,383,000).
During 2011, leasing expenses paid to related company accounted for 13.9% of the
Group (during 2010: 15.6%).
133
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
6. RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)
(4) Significant related party transactions (continued)
(iii) Other significant related party transactions
Note 2011 2010
Royalty fee (a) 108,911,034 96,975,246
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 2011, royalty fee paid to related company accounted for 100% of the Group (2010:
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 2011, the patents usage fee payable to Changyu Group Company amounted to
RMB 50,000 (2010: RMB50,000).
During 2011, patent fee paid to related company accounted for 100% of the Group (2010:
100%).
(iv) Remuneration of the management
2011 2010
Remuneration of the management 11,341,529 10,673,444
134
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
6. RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)
(4) Significant related party transactions (continued)
(v) Guarantee provided by a related party
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 2011, Changyu Group Company has provided guarantee to the Company for the full
responsibility under the trust scheme amounting to RMB88,236,000 (2010: RMB
88,236,000).
(5) Balance due from related parties
2011 2010
Trade receivables Balance Provision Balance Provision
Yantai Changyu Travelling Co.
Ltd. 358,020 - - -
Yantai Changyu International
Window of the
Wine City Co., Ltd. 218,690 - 120,322 -
Yantai Shen Ma Packing Co.Ltd.
968,136 - - -
1,544,846 - 120,322 -
The above amounts due from related parties are unsecured, interest-free and have no fixed terms
of repayment.
2011 2010
Trade payable
Yantai Shen Ma Packing Co, Ltd. 6,213,337 -
Other payable
Royalty fee payable to parent company 108,911,034 41,640,572
115,124,371 41.640,572
The above amounts due to related parties are unsecured, interest-free and have no fixed terms of
repayment.
135
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
7. CONTINGENT LIABILITIES
The Group and the Company did not have any significant contingent liabilities as at balance
sheet date.
8. COMMITMENT
2011 2010
Capital commitments
Authorized, but not contracted 626,590,498 1,235,076,405
Investment commitments
Contracted, but not provided for 395,000,000 395,000,000
As at 31 December 2011, all capital commitments in 2010 have been fulfilled.
9. POST BALANCE SHEET DATE EVENT
On 18 April 2012, the board of the directors of the Company proposed a cash dividend of
RMB15.2 every 10 shares in respect of 2011 based on the issued shares of 527,280,000. The
aggregate amount of cash dividend is RMB 801,465,600. Meanwhile, the board of the
directors proposed an allotment to all shareholders by 3 shares every 10 shares based on the
issued shares of 527,280,000. The proposed profit distribution plan 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:
2011 2010
Within one year 23,814,036 23,285,671
One year to two years 5,908,103 15,254,576
Two years to three years 2,852,650 5,298,402
Three years and above 15,262,627 12,606,980
47,837,416 56,445,629
136
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
10. OTHER SIGNIFICANT EVENTS (continued)
(2) Segment report
Over 99% of the Group’s revenue is generated within the PRC, and 100% assets of the Group
are located in the PRC. As all the major customers and operating activities are within the PRC,
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 principal financial instruments comprise cash and bank and trust scheme. The
main purpose of these financial instruments is to raise funds for the Group's operations. The
Group has various other financial assets and liabilities such as accounts receivable and trade
payable, which arise directly from its operations. The main risks arising from the Group's
financial instruments are credit risk, liquidity risk and market risk.
CLASSIFICATION FOR FINANCIAL INSTRUMENT
The carrying amounts of each category of financial instruments as at the balance sheet date are
as follows:
2011 2010
Financial assets
Loans and receivables Loans and receivables
Cash and bank 2,532,967,197 2,489,804,162
Bills receivable 56,268,482 31,447,207
Trade receivables 126,906,526 100,113,271
Other receivables 75,423,614 30,686,839
Interests receivable 15,763,431 9,519,721
2,807,329,250 2,661,571,200
137
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
10. OTHER SIGNIFICANT EVENTS (CONTINUED)
(3) Financial instrument and risk management (continued)
Financial liabilities
2011 2010
Other financial liabilities Other financial liabilities
Trade payables 229,920,729 259,022,075
Other payables 536,059,000 476,897,721
Non-current liabilities due
within one year 81,081,000 -
Other non-current liability 54,632,475 80,280,000
901,693,204 815,947,796
CREDIT RISK
Credit risk is the risk of financial loss on one party of a financial instrument due to the failure
of another party to meet its obligations.
The Group trades only with recognized and creditworthy third parties. It is the Group's policy
that all customers who wish to trade on credit terms are subject to credit verification procedures.
In addition, receivable balances are monitored on an ongoing basis to ensure that the Group's
exposure to bad debts is not significant. For transactions that are not denominated in the
functional currency of the relevant operating unit, the Group does not offer credit terms without
the specific approval of the Department of Credit Control in the Group.
The credit risk of the Group's other financial assets, which comprise cash and bank, bills
receivable, interests receivable and other receivables,, arises from default of the counterparty,
with a maximum exposure equal to the carrying amounts of these instruments.
Since the Group trades only with recognized and creditworthy third parties, there is no
requirement for collateral. Concentrations of credit risk are managed by customer/counterparty,
by geographical region and by industry sector. As at 31 December 2011, 37.7% of trade
receivables of the Group are due from the top 5 customers (31 December 2010: 33.2%). There
is no collateral or other credit enhancement on the balance of the trade receivables of the
Group.
Further quantitative data in respect of the Group’s exposure to credit risk arising from trade
receivable and other receivables are disclosed in Note 5, (3) and (6) to the financial statements.
138
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
10. OTHER SIGNIFICANT EVENTS (CONTINUED)
(3) Financial instrument and risk management (continued)
As at 31 December 2009, the maturity profile of financial assets which are regarded that no
impairment has been incurred are analyzed as follows:
2011
Delinquent period
Total Neither overdue Within 1 to 3 3 to 6 Over 6
nor impaired 1month months months Months
Trade receivables 126,906,526 126,906,526 - - - -
Other receivables 74,505,870 74,505,870 - - -
Bills receivable 56,268,482 56,268,482 - - - -
Interests receivable 15,763,43 15,763,431 - - - -
1
273,444,309 273,444,309 - - - -
2010
Delinquent period
Total Neither overdue Within 1 to 3 3 to 6 Over 6
nor impaired 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 - - - -
Interests receivable 9,519,721 9,519,721 - - - -
171,767,038 171,767,038 - - - -
139
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
10. OTHER SIGNIFICANT EVENTS (CONTINUED)
(3) Financial instrument and risk management (continued)
LIQUIDITY RISK
Liquidity risk is the risk that an enterprise may encounter deficiency of funds in meeting
obligations associated with financial liabilities.
The Group monitors its risk of deficiency of funds using a recurring liquidity planning tool.
This tool considers the maturity of both its financial instruments and expected cash flows from
the Group’s operations.
The table below summarizes the maturity profile of the Group's financial assets and liabilities
as at the balance sheet date, based on the undiscounted contractual cash flows:
2011
Financial assets
1 to 3 months 3 to 12 months 1 to 5 Years Total
Cash and bank 1,259,122,477 1,273,844,720 - 2,532,967,197
Trade receivables 32,864,335 23,404,147 - 56,268,482
Bills receivable 126,906,526 - - 126,906,526
Other receivables 75,423,614 - - 75,423,614
Interest receivables 15,763,431 - - 15,763,431
1,510,080,383 1,297,248,867 - 2,807,329,250
Financial liabilities
1 to 3 Months 3 to 12 Months 1 to 5 Years Total
Trade payables 229,920,729 - - 229,920,729
Other payables 455,899,312 80,159,688 - 536,059,000
Non-Current
Liabilities due within
one year - 83,011,500 - 83,011,500
Other non-current
liabilities - - 58,327,425 58,327,425
685,820,041 163,171,188 58,327,425 907,318,654
140
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
10. OTHER SIGNIFICANT EVENTS (CONTINUED)
(3) Financial Instrument and risk management (continued)
LIQUIDITY RISK (continued)
The Group’s financial liabilities mainly consist of trade payables and other payables (except
for deposits) arose from principal activities and amount received from trust scheme. The fair
value of the financial liabilities is equal to their book value. The Group is of the view that the
cash flow from the above financial assets is adequate to cover all financial liabilities whereby
the Group has no significant liquidity risk.
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 liabilities
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 non-current
liability - - 88,236,000 88,236,000
398,401,615 337,518,181 88,236,000 824,155,796
MARKET RISK
Market risk represents the fair value or future cash flows of financial instruments may vary
with the change of market price. Market risk includes interest rate risk and foreign currency.
141
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
10. OTHER SIGNIFICANT EVENTS (CONTINUED)
(3) Financial instrument and risk management (continued)
INTEREST RATE RISK
Interest rate risk represents the fair value of financial instruments of the present value cash
flows may vary with the change of interest rate.
The income and the cash flow from operating activities are generally independent with
fluctuation of market interest rate, and there was no significant interest bearing assets and
liabilities except for cash in bank and other non-current liabilities. The Company is of the view
that the Group has no significant 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 the 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 fair value.
Since the remaining period for cash and bank, trade receivables, bills receivables and trade
payables is not long, their fair value are deemed to be the same as the book value.
The fair value of non-current liabilities due within one year and other non-current liabilities are
calculated by discounting the expected future cash flows with the effective interest rate
currently available for the instruments on similar terms.
The Group’s financial assets mainly consist of cash and bank, trade receivables, bills
receivables and other receivables. Financial liabilities mainly consist of trade payables, other
payables and non-current liabilities due within one year. On 31 December 2011, except for the
restricted bank deposit (Note 5 (1)), there was no significant restrictions on the Group’s
financial assets. Except for the balance in other receivables that have been provided for, no
provision of the Group’s financial assets is needed.
142
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
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:
2011 2010
Within 1 year 20,977,065 11,708,820
As at 31 December 2011, there was no provision provided for trade receivables (31 December
2010: Nil). The Company did not provide, reverse or write off any provision during 2011 (31
December 2010: Nil)
2011 2010
Amount % Provision Amount % Provision
Individually significant 19,185,460 91.0 - 10,535,769 90.0 -
Individually insignificant 1,791,605 9.0 - 1,173,051 10.0 -
20,977,065 100.0 11,708,820 100.0
As at 31 December 2011, there was no account receivable due from the Company’s shareholders
with voting rights of 5% or above (31 December 2010: Nil).
As at 31 December 2011, the particulars of top 5 account receivables amount are as follows:
Relationship Ratio of total
with the receivables
Company Amount Aging %
Yantai Zhongya Co., Ltd. Third party 15,458,760 Within 1 year 73.7
Yantai Zhongya Sales Co., Ltd. Third party Within 1 year 26.3
5,518,305
20,977,065 100.0
143
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
11. NOTES TO COMPANY FINANCIAL STATEMENTS (CONTINUED)
(1) Trade receivables (continued)
As at 31 December 2010, the particulars of top 5 account receivable amount are as follows:
Relationship Ratio of total
with the receivables %
Company Amount Aging
Yantai Zhongya Sales Co., Ltd. Third party 6,216,172 Within 1 year 53.1
Yantai Zhongya Co., Ltd. Third party 4,319,597 Within 1 year 36.9
Fushan Liquan Wine Co., Ltd. Third party 996,882 Within 1 year 8.5
Yantai Shenma Packing Co., Ltd. Third party Within 1 year 1.5
176,169
11,708,820 100.0
As at 31 December 2011, no outstanding balance was due from related parties (31 December
2010: Nil).
(2) Other receivables
The aging analysis is as follows:
2011 2010
Bad debt Account Book Bad debt Account
Book Value Provision Balance Value Provision Balance
Within 1 year 1,550,839,490 - 1,550,839,490 877,461,750 - 877,461,750
1 to 2 years 134,263,466 - 134,263,466 277,992,300 - 274,992,300
2 to 3 years 3,961,947 3,120,600 841,347 46,707 - 46,707
Over 3 years 8,006,463 8,000,000 6,463 8,101,865 8,000,000 101,865
1,697,071,366 11,120,600 1,685,950,766 163,602,622 8,000,000 1,155,602,622
2011 2010
Amount % Bed debt % Amount % Bed debt %
provision provision
Individually significant
and provided for 1,688,856,669 99.5 8,000,000 0.5 1,162,026,156 99.9 8,000,000 0.7
Individually insignificant
and provided for 8,214,697 0.5 3,120,600 38.0 1,576,466 0.1 - -
1,697,071,366 100.0 11,120,600 1,163,602,622 100.0 8,000,000
144
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
11. NOTES TO COMPANY FINANCIAL STATEMENTS (CONTINUED)
(2) Other receivables (continued)
The provision of bad debts for other receivable was RMB 11,120,600 in 2011 (2010: RMB
8,000,000).
As at 31 December 2011, there was no other receivable due from the shareholders with voting
rights of 5% or above. (31 December 2010: Nil)
As at 31 December 2011, the particulars of top 5 other receivables are as follows:
Relationship with Amount Aging Percentage of
the Group total advances
to suppliers %
Beijing Chateau related party 469,605,240 Within 1 year 27.7
Shihezi Chateau related party 359,412,913 Within 1 year 21.2
Ningxia Wine related party 263,080,539 Within 1 year 15.5
Changan Chateau related party 203,848,400 Within 1 year 12.0
Ningxia Chateau related party 146,072,400 Within 1 year 8.6
1,442,019,492 85.0
As at 31 December 2010, the particulars of top 5 other receivables amount are as follows:
Relationship with Amount Aging Percentage of
the Group total advances
to suppliers %
Beijing Chateau related party 414,607,102 Within 1 year 35.6
Ningxia Wine related party 211,345,055 Within 1 year 18.2
Shihezi Chateau related party 164,126,000 Within 1 year 14.1
Changan Chateau related party 83,328,400 Within 1 year 7.1
Changyu Chateau related party 80,969,908 Within 1 year 7.0
954,376,465 82.0
At 31 December 2011, the balance of other receivables from related parties is RMB
1,442,019,492, approximately 85.0% of total other receivables. These were all from
subsidiaries of the Company (2010: the balance of other receivable from related parties is
RMB954,376,465, approximately 82.0% of total other receivables).
145
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
11. NOTES TO COMPANY FINANCIAL STATEMENTS (CONTINUED)
(3) Long-term equity investments
2011 Share Voting Cash
Opening Movement Closing holding power Dividends for
Cost balance for the year balance % % the year
Cost Method:
Xinjiang Tianzhu (a) 60,000,000 60,000,000 60,000,000 100 100 -
Vehicular 300,000 300,000 - 300,000 100 100 -
Transportation
Kylin Packaging 23,176,063 7,783,813 15,392,250 23,176,063 100 100 -
Changyu Chateau (a) 28,968,100 28,968,100 - 28,968,100 70 100 42,091,942
AFIP Tourism (a) 350,000 350,000 - 350,000 70 100 -
Pioneer International 3,500,000 3,500,000 - 3,500,000 70 100 3,747,021
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 44,868,620
Ice Chateau (a) 13,413,000 13,413,000 - 13,413,000 51 100 -
Beijing Chateau (a) 77,000,000 77,000,000 - 77,000,000 70 100 -
Sales Company 7,200,000 7,200,000 - 7,200,000 90 100 1,200,000,000
Langfang Sales 100,000 100,000 - 100,000 10 100 2,894,035
Langfang Castel (a) 12,142,200 12,142,200 - 12,142,200 49 100 445,206
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 35,929,376
Jingyang Wine 900,000 900,000 - 900,000 90 100 10,814,363
Ningxia Wine 1,000,000 1,000,000 - 1,000,000 100 100 -
Yantai Dingtao 10,000,000 5,000,000 5,000,000 18 18 -
Ningxia Chateau 2,000,000 2,000,000 2,000,000 100 100 -
Dingluote Chateau 80,000,000 - 80,000,000 80,000,000 100 100 -
Shihezi Chateau 150,000,000 2,000,000 148,000,000 150,000,000 100 100 -
Xianyang Chateau 20,000,000 2,000,000 18,000,000 20,000,000 100 100 -
Development Centre 100,000,000 100,000,000 100,000,000 99 99 -
Huanren Wine 5,000,000 - 5,000,000 5,000,000 100 100 -
603,299,363 331,907,113 266,392,250 598,299,363 1,340,790,563
(a) The Group is entrusted to manage these non-wholly owned subsidiaries whereby the Group
owned the entire operating results of these subsidiaries deducting fixed fees paid to the minority
interests holders. Please refer to Note 4 (1) for details.
146
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
11. NOTES TO COMPANY FINANCIAL STATEMENTS (CONTINUED)
(3) Long-term equity investment (Cont.)
During 2011and 2010, there was no significant restriction on the remittance of fund from the
investees to the Company.
As at 31 December 2011, the impairment provision of RMB5, 000,000 was provided for Yantai
Dingtao (31 December 2010: RMB5,000,000).
(4) Capital reserve
As at 31 December 2011 and 31 December 2010, the balance of capital reserve represented
capital premium.
(5) Revenue and cost of sales
Revenue is as follows:
2011 2010
Income from principal activities 1,864,033,002 1,563,030,583
Cost of sales is as follows:
2011 2011
Cost from principal activities 1,516,393,443 1,278,064,848
In 2011, revenue derived from top 5 customers is as follows:
Amount Percentage of total
revenue
%
Sales Company 1,615,286,672 86.7
Changyu Chateau 100,938,580 5.4
Qing tong xia Sales 51,346,947 2.8
Beijing Chateau 39,288,676 2.1
Pioneer International
22,180,136 1.2
1,829,041, 011 98.2
In 2011, top 5 customers of the Company are all subsidiaries.
147
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
11. NOTES TO COMPANY FINANCIAL STATEMENTS (CONTINUED)
(5) Revenue and cost of sales (continued)
In 2010, revenue derived from top 5 customers is as follows:
Amount Percentage of total
revenue
%
Sales Company 1,423,750,722 91.1
Changyu Chateau 13,330,260 0.9
Qing tong xia Sales 0.4
6,994,875
Beijing Chateau 0.2
2,954,169
Langfang Castel 0.1
2,160,790
1,449,190,816 92.7
In 2010, top 5 customers of the Company are all subsidiaries.
Revenue is analyzed as follows:
2011 2010
Sales of goods 1,864,033,002 1,563,030,583
(6) Investment income
2011 2010
Long-term equity investment income
accounted for by using the cost method 1,340,790,563 1,546,776,057
Investment income from disposal
of held for trading financial assets 52,122 900,000
1,340,842,685 1,547,676,057
148
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
11. NOTES TO COMPANY FINANCIAL STATEMENTS (CONTINUED)
(6) Investment income (continued.)
Among the long-term equity investment income accounted for by using cost method, the
investees with investment income accounting for more than 5% of the Company’s total profit
before tax are as follows:
Investees 2011 2010
Changyu Chateau 42,091,942 355,540,340
National Wines 44,868,620 124,052,032
Sales Company 1,200,000,000 958,438,619
1,286,960,562 1,438,030,991
As at 31 December 2011 and at 31 December 2010, there was no significant restriction on the
remittance of investment income to the Company.
149
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
11. NOTES TO COMPANY FINANCIAL STATEMENTS (CONTINUED)
(7) Supplement to cash flow statement
Cash flows from operating activities calculated by adjusting the net profit:
2011 2010
Net profit 1,409,090,776 1,543,091,633
Add: Impairment provision 3,120,600 5,000,000
Depreciation 37,104,808 34,321,889
Amortization of intangible assets 3,069,076 3,058,244
Amortization of Biological assets 586,905 1,173,810
Losses on disposal of property, plant ( 2,694,891 ) ( 100,916 )
and equipments
Finance costs ( 44,235,900 ) ( 28,408,967 )
Investment income (1,340,790,563 ) ( 1,547,676,057 )
Increase in deferred tax assets ( 4,318,060 ) ( 704,304 )
Increase in inventories ( 98,403,068 ) ( 13,647,144 )
Increase in trade receivables ( 560,525,865 ) ( 1,247,040,826 )
Increase in trade payables 101,511,949 1,483,024,162
Net cash flows from operating activities ( 496,484,233 ) 232,091,524
(8) Cash and cash equivalents
2011 2010
Cash and bank 296,735,240 407,619,206
Including: Cash on hand 26,472 46,647
Bank deposits on demand 275,011,335 386,372,559
Other monetary capital on demand 21,697,433 21,200,000
296,735,240 407,619,206
150
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2011
1. DETAILS OF EXTRAORDINARY PROFIT AND LOSS
2011
Loss on disposal of non-current assets, including
reversal of accrued impairment provision 2,735,871
Tax refund or exemption that is either non-recurring
or without proper approval 10,038,943
Government grants credited in profit and loss
(except for those recurring government grants that are
closely related to the Group's operation, in line with related regulations
and have proper basis of calculation) 4,701,553
Gains on fair value change and disposal of held for trading financial assets
and financial liabilities, except for those from hedgings
that are closely related to the Group's principal operations 52,122
Reversal of unpaid advertisement fee
74,072,580
Other non-operating income and expense 4,282,169
95,883,238
Corporate income tax effect (23,729,380)
72,153,858
The Group’s extraordinary profit and loss 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 2011.Please
refer to Note 5 (36) and (37).
151
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
SUPPLEMENTARY INFORMATION TO THE FINANCIAL STATEMENTS
Year ended 31 December 2011
2. RETRUN ON EQUITY (“ROE”) AND EARNINGS PRE SHARE (“EPS”)
2011 Weighted average ROE Basic EPS
(%) (RMB)
Net profit attributable to shareholders of the
Company 43.18 3.62
Net profit attributable to shareholders of the
Company deducting extraordinary profit and
loss 41.55 3.48
The Company did not have any potential dilutive shares.
2010 Weighted average ROE Basic EPS
(%) (RMB)
Net profit attributable to shareholders of the
Company 41.57 2.72
Net profit attributable to shareholders of the
Company deducting extraordinary profit and
loss 39.86 2.61
The Company did not have any potential dilutive shares.
152
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
SUPPLEMENTARY INFORMATION TO THE FINANCIAL STATEMENTS
Year ended 31 December 2011
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 2011 was RMB 2,532,967,197,
increasing by 2% compared with 2010. The increase was in line with the growth of
sales.
(2) The balance of bills receivable as at 31 December 2011 was RMB 56,268,482,
increasing by 79% compared with 2010, which is in line the growth sales.
(3) The balance of interest receivable as at 31 December 2011 was RMB 15,763,431,
increasing by 66% compared with 2010. The increase was mainly due to the increase of
interest rate of term deposits in 2011.
(4) The balance of other receivables at 31 December 2011 is RMB 75,423,614, increasing
by 146% compared with 2010, which was the increase of deposits made for bid of land.
(5) The balance of inventory as at 31 December 2011 was RMB 1,755,694,582, increasing
by 36% compared with 2010, which is mainly due to the increase of procurement and
finished goods in 2010 as a result of increased production volume.
(6) The balance of property, plant and equipment as at 31 December 2011 was RMB
1,609,111,868, increasing by 35% compared with 2010, which was mainly due to the
transfers from construction in process to property, plant and equipment.
(7) The balance of construction in progress as at 31 December 2011 was RMB 406,353,081,
increasing by 68% compared with 2010, which was mainly due to the construction of
three newly established subsidiaries. Meanwhile improvement project on the production
lines also contributed to the increase of construction in progress.
(8) The balance of long-term deferred expenses was RMB 148,429,436 as at 31 December
2011, increasing by 40% compared with 2010, which mainly due to the greening fees
incurred in 2011.
(9) The balance of tax payables as at 31 December 2011 was RMB 698,459,857, increasing
by 8% compared with 2010, which is in line with the increase of net profit in 2011.
153
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
SUPPLEMENTARY INFORMATION TO THE FINANCIAL STATEMENTS
Year ended 31 December 2011
3. VARIANCE ANALYSIS (CONTINUED)
(10) The balance of other payables was RMB 536,059,000 as at 31 December 2011,
increasing by 13% compared with 2010. The increase was mainly due to the following:
(1) increase of royalty fee the payable to the parent company of the Group, which is in
line with the increase of sales; and (2) the increase of land transfer fees and land leasing
fee in Xinjiang and Beijing Chateau.
(11) The balance of non-current liabilities due within one year as at 31 December 2011 was
RMB 81,081,000, which represented the principal and interest payable of the trust
scheme of 2010.
(12) The balance of other current liabilities as at 31 December 2011 was RMB 4,744,074,
which represented the deferred government grants to be recognised within one year.
(13) The balance of other non-current liabilities was RMB 108,453,139 as at 31 December
2011, increasing by 8% compared with 2010, which is mainly due to the combined
effect of the following: (1) the accrual of interest on the trust scheme in 2011; (2)
reclassification of the trust scheme in 2010 to non-current liability due within one year;
and (3) deferred government grants.
(14) The balance of issued capital was RMB527,280,000 as at 31 December 2011 with no
fluctuation compared with 2010.
.
(15) The balance of capital surplus was RMB 562,139,042 as at 31 December 2011. The
increase was due to the acquisition of minority interests of Kylin Packaging.
(16) The balance of retained earnings was RMB 3,628,279,989 as at 31 December 2011,
increasing by 48% compared with 2010, which was due to the combined effects of net
profit of 2011 and distribution of profit of 2010.
(17) The revenue of 2011 was RMB 6,027,549,212, increasing by 21% compared with 2010.
The increase was mainly contributed by the continuous growth on sales of wine,
champagne and brandy. The cost of sales of 2011 was RMB 1,439,417,134, increasing
by 14% compared with 2010. The increase was in line with the increase of sales.
(18) The taxes and surcharges for 2011 was RMB 362,103,767, increasing 26% compared
with t 2010. The increase is in line with the increase of sales.
(19) The selling expense for 2011 was RMB 1,503,492,226, increasing by 12% compared
with 2010. The increase was mainly due to the increase of promotion expenses,
transportation expenses and bonus to sales personnel, which is in line with the increase
of sales volume and expansion of operation in 2011.
(20) The assets impairment loss for the year ended 31 December 2011 was RMB 14,364,887,
increasing by 199% compared with that of the year 2010. The increase was mainly due
to the increase of bad debts of other receivables and provision of inventory.
154
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
SUPPLEMENTARY INFORMATION TO THE FINANCIAL STATEMENTS
Year ended 31 December 2011
3. VARIANCE ANALYSIS (CONTINUED)
(21) The financial income for 2011 was RMB 44,503,581, increasing by 54% compared with
year 2010. The increase was mainly due to the increase of interest income from term
deposits.
(22) The investment income for 2011was RMB 52,122, decreasing by 94% compared with
2010. The decrease was mainly due to the decrease of investment income from disposal
of held-for-trading financial assets.
(23) The other expense was RMB 4,819,518 in 2011, increasing by 52% compared with
2010. The increase was mainly due to the loss from physical inventory in 2011.
(24) The income tax for 2011 was RMB 632,444,511, increasing by 33% compared with
2010. The increase was in line with the increase of taxable income of the Group caused
by the increase of revenue.
(25) The net profit attributable to minority interest holders for 2011 and 2010 was nil and
RMB 19,981,906, respectively. The decrease is due to that the Group has entered into
contracts with all non-wholly owned subsidiaries except for Development Centre by the
end of 2011, pursuant to which all the net profits are attributable to the Group after the
deduction of fixed fees. As a result, no minority interests are recognised for 2011.
XIII. 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 20th, 2012
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