Yantai Changyu Pioneer Wine Co., Ltd. 2019 Semi-annual Report Yantai Changyu Pioneer Wine Co., Ltd. 2019 Semi-annual Report Final 2019-03 August, 2019 1 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Contents 2019 Semi-annual Report.................................................................................................................. 1 I. Important Notice, Contents and Definition..................................................................................3 II. Brief Introduction for the Company and Main Financial Indicators .................................... 5 III. Summary of the Company’s Businesses .................................................................................. 9 IV. Management Discussion and Analysis ................................................................................... 12 V. Major issues ............................................................................................................................... 26 VI. Changes in Shares and the Shareholders’ Situation .............................................................39 VII. Related Situation of Preferred Shares ..................................................................................44 VIII. Situation for Directors, Supervisors, Senior Executives..................................................... 45 IX. Related Situation of Corporation Bonds ................................................................................47 X. Financial Report.......................................................................................................................... 47 XI. Reference Documents.............................................................................................................. 162 2 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report I. Important Notice, Contents and Definition The board of directors, the board of supervisors, directors, supervisors and senior executives of the Company guarantee the truthfulness, accuracy and completeness of the contents contained in semi-annual report with no false records, misleading statements or significant omissions, and undertake individual and joint legal liabilities. Mr. Zhou Hongjiang (Person in charge of the Company) and Mr. Jiang Jianxun (Person in charge of accounting work as well as Person in charge of accounting organ & account in charge) assure the truthfulness, accuracy and completeness of the financial report in the semi-annual report. No directors, supervisors or senior executives issue a statement of objection to 2019 semi-annual report. Except following director, other directors have personally attended the meeting for deliberating the semi-annual report. Name of director not Position of director Reason of not attending the meeting not attending the attending the meeting Name of entrustee personally meeting personally personally Duan Changqing Independent director On a business trip Wang Zhuquan Regarding major risks that the Company may face during the production and management process, please refer to “10. Risks faced with by the Company and response measures” in “IV Management Discussion and Analysis” in this report. Investors are suggested to read carefully and pay attention to investment risks. The Company has no plan to distribute cash dividends and bonus shares and capital reserve will not be transferred to equity. 3 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Definition Definition Item Refers to Definition Content Company/this Company Refers to Yantai Changyu Pioneer Wine Co., Ltd. Changyu Group/Controlling Refers to Yantai Changyu Group Co., Ltd. Shareholder CSRC Refers to China Securities Regulatory Commission SSE Refers to Shenzhen Stock Exchange Refers to Deloitte Hua Yong Certified Public Accountants Deloitte Hua Yong Co., LTD (special general partnership) CNY Refers to Chinese Yuan 4 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report II、Brief Introduction for the Company and Main Financial Indicators 1. Company’s information Abbreviation of the Shares: Changyu A、Changyu B Code number of the Shares 000869、200869 Abbreviation of the Shares - after alteration Place of listing of the Shares Shenzhen Stock Exchange Legal Name in Chinese 烟台张裕葡萄酿酒股份有限公司 Abbreviation of Chinese name 张裕 Legal Name in English YANTAI CHANGYU PIONEER WINE COMPANY LIMITED Abbreviation of English name CHANGYU Legal Representative Mr. Zhou Hongjiang 2. Contact person and information Authorized Representative of the Securities Secretary of Board of Directors Affairs Name Mr. Jiang Jianxun Mr. Li Tingguo Address 56 Dama Road, Yantai, Shandong, China 56 Dama Road, Yantai, Shandong, China Tel 0086-535-6602761 0086-535-6633656 Fax 0086-535-6633639 0086-535-6633639 E-mail jiangjianxun@changyu.com.cn stock@changyu.com.cn 3. Other information 1) The Company’s contact information Whether there is any change in the Company’s registered address, office address, post code, website and e-mail address during the report period. □Available Not available There is no change in the Company’s office address, post code, website and e-mail address during the report period. For detailed information, please refer to 2018 annual report. 2) Information disclosure and file location Whether there is any change in the information disclosure and file location during the report period. □Available Not available There is no change in the name of newspapers in which the Company’s information is disclosed, the website assigned by CSRC to carry the semi-annual report and the location of the Company’s 5 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report semi-annual report during the report period. For detailed information, please refer to 2018 annual report. 4. Key accounting data and financial indicators Whether the Company makes retroactive adjustments or restates the accounting data of previous fiscal years. □Yes No In the same period of last More or less than last During the report period year year (%) Business revenue (CNY) 2,558,274,785 2,828,230,064 -9.55% Net profit attributed to the shareholders of the listed 603,403,789 635,837,405 -5.10% company (CNY) Net profit attributed to the shareholders of the listed company after deducting the 552,490,695 606,678,719 -8.93% irregular profit and loss (CNY) Net cash flows from the 499,476,006 552,753,472 -9.64% operating activities (CNY) Basic earnings per share 0.88 0.93 -5.38% (CNY/share) Diluted earnings per share 0.88 0.93 -5.38% (CNY/share) Weighted average for earning 6.13% 6.89% -0.76% rate of the net assets The end of this report More or less than last The end of last year period year (%) Total assets (CNY) 13,383,093,433 13,117,729,052 2.02% Net Assets attributed to the shareholders of the listed 9,791,885,091 9,606,099,365 1.93% company (CNY) 5. Differences in accounting data under PRC accounting standards and international accounting standards 1) Differences of net profit and net asset in the financial report disclosed according to both international accounting standards and PRC accounting standards Available Not available 6 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Unit:CNY Net profit attributed to the Net Assets attributed to the shareholders shareholders of the listed company of the listed company Current period Last period End of period Beginning of period According to PRC accounting 603,403,789 635,837,405 9,791,885,091 9,606,099,365 standards Item and amount adjusted according to international accounting standards According to international 603,403,789 635,837,405 9,791,885,091 9,606,099,365 accounting standards 2) Differences of net profit and net asset in the financial report disclosed according to both foreign accounting standards and PRC accounting standards □Available Not available There are no differences of net profit and net asset in the financial report disclosed according to both foreign accounting standards and PRC accounting standards during the report period. 3) Explanation of the differences in accounting data under domestic and overseas accounting standards □Available Not available 6. Item and amount of irregular profit and loss Available □Not available Unit:CNY Amount Explanation Profit and loss on disposal of non-current assets (including the offset 1,138 of provision for impairment of assets) Government grants credited in current profit and loss (except for government grants that are closely related to the entity's business 64,211,892 and are enjoyed with a quota or with a limited quantity in accordance with national uniform standard Other non-operating income and expenditure besides 3,411,864 above-mentioned items Less: Amount affected by income tax 16,671,778 Amount affected by minority equity (after tax) 40,022 Total 50,913,094 - The reasons shall be made clear and definitely as to the irregular profit and loss that the Company has defined by virtue of the Explanatory Notice on Public Company’s Information Disclosure No.1 7 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report - Irregular Profit and Loss and as to regarding the irregular profit and loss as recurrent profit and loss as specified in the Explanatory Notice on Public Company’s Information Disclosure No.1 - Irregular Profit and Loss. □Available Not available There is no situation that the irregular profit and loss is defined and specified as recurrent profit and loss in accordance with the Explanatory Notice on Public Company’s Information Disclosure No.1 - Irregular Profit and Loss during the report period. 8 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report III. Summary of the Company’s Businesses 1. Main businesses during the report period Whether the Company needs to follow the disclosure requirement of special business No. During the report period, the Company’s main business is to produce and operate wine and brandy, thus providing the domestic and foreign consumers with healthy and fashionable alcoholic drinks. Compared with earlier stage, there are no major changes in the Company’s main businesses. Although there is a certain fluctuation and exists downward pressure in the domestic wine market at present in short term, seen in the long term, the Chinese wine industry is generally in the growth stage and still remain the rising trend. The Company takes the dominant position in the domestic wine market. 2. Major changes of main assets 1) Major changes of main assets Main assets Explanation of major changes Equity asset No major change Fixed asset No major change Intangible asset No major change Construction in process No major change 2) Main overseas assets condition Available □Not available 9 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Proportion of Control measures for Whether there are Details of Formation Operating Earning overseas assets in Assets scale Location safeguarding asset major impairment assets reason mode position the Company’s net security risks assets This Company participates in making Hacienda Y important decisions Vinedos Acquisition Independent 500,554,860 Spain through board of 1,859,381 4.97% No Marques Del of equity operation directors and appoints Atrio, SL CFO for financial management This Company participates in making Indomita Wine Establishmen important decisions Independent Company t by joint 505,803,310 Chile through board of 3,762,504 5.02% No operation Chile, SpA venture directors and appoints CFO for financial management This Company directly Francs Establishmen appoints senior Champs t by sole Independent 229,246,260 France executive to conduct 36,704 2.28% No Participations proprietorshi operation operation and SAS p management This Company participates in making Kilikanoon Acquisition Independent 147,071,845 Australia important decisions -1,509,147 1.46% No Estate Pty Ltd of equity operation through board of directors Other During the report period, Kilikanoon Estate Pty Ltd realized the net profit of CNY550thousand for its own production and management, but condition after conducting the amortization of premium at the time of acquisition in accordance with accounting policy, the loss was CNY1.5million. explanation 10 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 3. Analysis of core competitiveness Whether the Company needs to follow the disclosure requirement of special business? No. In the competition pattern of Chinese wine industry, compared with other participants in the industry, we believe that the Company has following advantages: Firstly, the Company has a well-known wine brand with more than 120 years of history, “Changyu”, “Noble Dragon” and “AFIP” are Chinese famous trademarks that have strong influence and good reputation. Secondly, the Company has set up a nationwide marketing network. The Company forms a “three-level” marketing network system mainly composed of two teams containing the Company’s marketing personnel and distributors, possessing a strong marketing ability and market exploitation ability. Thirdly, the Company owns strong scientific prowess and a product R&D system. Relying on the sole “National-level Wine R&D Center”, the Company grasps advanced winemaking technology and production processes and has fairly strong product innovation capacity and perfect quality control system. Fourthly, the Company is in possession of grape bases that could meet the requirements of development. The scale and the structure of grape bases locating in regions that are the most suitable for growing wine-making grapes in China, such as Shandong, Ningxia, Xinjiang, Liaoning, Hebei and Shaanxi, have basically met the Company’s demands for development. Fifthly, the Company has a complete high-end, medium-end and low-end products as well as varieties and categories. More than 100 varieties of wine, brandy, sparkling wine etc., covering high-end, medium-end and low-end grades, can meet the needs of different consumer groups. After more than 10 years of rapid development, the Company has occupied the leading position in the domestic wine industry, which has certain comparative advantages in the future competition. Sixthly, the Company has a relatively perfect incentive mechanism. Most of Company’s employees indirectly hold the Company’s equity through controlling shareholders. There are high consistency between employee benefits and shareholder benefits, in favor of better motivating employees to create value for shareholders. Seventhly, the Company has established a flexible and efficient decision-making mechanism. The core management of the Company has been maintaining a united and pragmatic work style and flexible and efficient decision-making mechanism, enabling the Company to more unhurriedly respond to market changes. Eighthly, the Company has basically completed the layout of global production capacity. The Company has completed the production capacity layout in the worldwide main wine-producing countries, such as China, France, Chile, Spain and Australia and so on, and can make better use of global high-quality raw material resources, capital, talents and advanced production techniques and technologies to provide consumers with diversified high quality products. Based on above reasons, the Company has formed strong core competitiveness and will maintain this comparative advantage in the foreseeable market competition in the future. 11 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report IV. Management Discussion and Analysis 1. Summarization During the report period, influenced by the slowdown of domestic economic growth, the overall demand of domestic wine industry was relatively weak. Both domestic and imported wine had experienced decline at varying degrees in sales volume and sales revenue. The competition in domestic wine market, especially for middle-and-low-level wines, was very fierce. Due to continuously influences such as increase in the prices of raw materials and packaging materials, depreciation of fixed assets and increase in freight and labor costs, the Company’s profitability was under greater pressure. Facing quite a lot of unfavorable factors, the Company insisted in taking the market as the center, insisted the development strategy of “Focus on middle-and-high level, Focus on high quality, Focus on big product” (the strategy of “Three Focuses”) without wavering, continued intensifying internal reform, further optimized product structure and market layout. Through product innovation, management innovation and marketing innovation, the Company strived to promote product sales and achieved certain effects under the background of the market that both domestic wine and imported wine show a large decrease wholly in China market, realizing the business income of CNY2558.27million in the first half year with a decrease of 9.55% compared with last year and the net profit attributable to the parent company’s shareholders of CNY603.4million in the first half year with a decrease of 5.1% compared with last year. During the report period, the Company mainly did following work: Firstly, the Company's Board of Directors, Board of Supervisors and senior executives were successfully re-elected, injecting new forces, optimizing staff structure, enhancing the management level and decision-making ability of the management team and providing a reliable organizational guarantee for the Company’s sustainable and healthy development in the future. Secondly, the "Three Focuses" strategy was steadily advanced and initial results were achieved. During the report period, among the three core business segments of domestic wine, brandy and imported wine, the Company concentrated its main resources to focus on the three domestic wine brands such as MOSER, Noble Dragon and ZENITHWIRL; the two brandy brands “KOYA” and “Changyu Superior Five-star Special Fine Brandy” and the two imported wine brands Kilikanoon and INDOMITA achieved good results, which slowed down the Company’s wine decline and achieved a small increase in brandy sales revenue. Thirdly, the organization structure of sales system was basically completed in terms of adjustment and optimization. The transformation from management dealers to serving dealers was actively promoted and the construction of “Fund pool” with dealers was energetically developed. During the report period, the Company eliminated, adjusted, rotated and supplemented some of the provincial and municipal sales personnel, further rationalized the sales management system and enhanced the fighting capacity of the sales team. The authorized operation was deeply advanced, which further mobilized the enthusiasm and initiative of sales personnel. Besides, the Company improved the performance appraisal mode and work focus, which promoted sales personnel to be closer to the market and clients and better served terminals and consumers. Moreover, the construction of sales team and “Fund pool” with dealers was intensified, which alleviated the contradiction of insufficient market input. Fourthly, the Company actively coordinated controlling shareholders and other relevant parties. 12 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report After repeated communication and full argumentation, the Company re-determined the proportion of trademark use fee of "张裕"(Changyu) and other trademarks, revised and improved Trademark License Contract and eliminated defects in the contract. In addition, the Company cooperated closely with the controlling shareholders and was freely transferred part of trademarks and patents from the controlling shareholders, which better guaranteed the integrity of the Company’s assets and reduced related transactions. Fifthly, the Company optimized the layout of raw material bases, strengthened quality management, strived to reduce raw material costs and improved product quality. During the report period, the Company carried out an overall planning for domestic and foreign raw material supply bases and laid out medium and long-term raw material bases in Australia, Chile and France. In addition, the Company increased a large number of high-quality raw material bases in Xinjiang, Ningxia and Yantai, strengthened the assessments of basic management, profit and key work to the raw material bases, and use internal self-examination, random sampling, third-party inspection, flight inspection and other means to strengthen product quality monitoring and control. Moreover, the Company re-approved supplier list, eliminated unqualified suppliers and continuously improved the quality of raw material and packaging. As these measures become effective, the product quality and reduce raw material costs will be fundamentally improved. Sixthly, it was to strengthen financial management and audit supervision, strive to reduce capital costs and operational risks, and improve the Company’s operational efficiency. During the report period, after repeated communication and negotiation, the Company further reduced the bank loan interest rate and financing cost. In addition, the Company used the SAP system to monitor and allocate cash flow in real time, strictly implemented two-line management of financial revenues and expenditures and paid use system of funds, which accelerated capital turnover, improved funds use efficiency and reduced funds occupation. Moreover, the Company intensified the audit work of key areas such as the authenticity of financial revenues and expenditures, channel inventory, unsalable products, advertising fees and economic responsibility of outgoing personnel, and timely investigated and punished illegal acts, which effectively prevented significant operational risks. Seventhly, scientific dispatch, carefully organization and close cooperation guaranteed the good quality and smooth progress of investment projects. During the report period, all projects under construction of the Company progressed as planned and the project quality was excellent. Eighthly, it was to continue implementing the internationalization strategy and actively carry out joint venture and cooperation with strong foreign peers. During the report period, in order to reduce operating costs of a single winery and play a synergistic effect, the Company used its wholly-owned subsidiary in France Francs Champs Participations SAS to establish a joint venture company L&M HOLDINGS together with Advini SA’s subsidiary SC Garri du Gai in France, promoting the management and operation level of the French wine business segment. In order to achieve the business objectives set by the Company at the beginning of the year, the Company will focus on the following work in the second half of 2019: Firstly, the current market situation has determined that the Company must unswervingly promote the development strategy of “Three Focus”. The Company will continue classifying products, compressing the number of products, centralizing superior resources and focusing on market exploration and marketing work. Secondly, considering that the main contradiction for future development lies in the market, the 13 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Company will continue focusing on the construction of two teams of backbone distributors and full-time sales personnel and further establish and improve the sales system to extend market coverage. The Company will also make deep penetration into key markets and strive to achieve breakthrough. In addition, the marketing innovation will be strengthened and the communications media will be optimized in order to improve the marketing level. A systematic brand manager system will also be established and a full-time marketing team will be set up for providing systemic marketing solutions to boost brands by virtue of the top outsourcing companies in the industry. The Company will take full advantage and integrate online advantageous platform and explore the digital marketing mode in line with Changyu to provide consumers with a more perfect consumer experience and enhance user stickiness. Thirdly, continuous improvement in product quality is the most fundamental thing to win the market competition. While strictly implementing various quality management measures, the Company will establish a systematic brand winemaker system, give full play to the main responsibility of winemakers at all levels and propose clear requirements of salary, appointment, selection, promotion and exit for winemakers at different levels in order to stimulate winemakers' enthusiasm and sense of responsibility and promote the significant improvement in product quality. Fourthly, the establishment of a talent team that is compatible with the Company's development to the core to achieve sustained and rapid development. The Company will focus on cultivating 60 high-level provincial general managers and 600 outstanding city managers comprehensively optimize talent echelon and strive to make up the weakness in talents. Moreover, the Company will further optimize performance appraisal methods, establish and improve various flexible and efficient incentive mechanisms with the combination of long-term mechanism and short-term mechanism as well as complementary advantages, and further stimulate the Company’s vitality to enhance the attraction and centripetal force to the outstanding talents. Fifthly, the Company will reasonably arrange the production schedule, do well the connection between production and sales, make full use of sales peak season including Mid-Autumn Festival, National Day and Spring Festival, increase marketing efforts and promote product sales, providing important guarantee for achieving annual sales targets. Sixthly, the Company will scientifically make procurement plan for raw materials such as grapes, rationally arrange procurement progress and fully complete the procurement work of grape raw material, providing core raw materials with sufficient quantity, complete varieties, high quality and low price for future development. In short, we preliminarily judge that in the second half of this year, with the cumulative effects of various reform measures in the past year starting to appear, although the downward pressure on the domestic wine market is increasing, the sales situation of our company may actually gradually go out of the trough, and revenue may also begin to enter the growth track. The Company will strive to complete the established revenue target of not lower than CNY5.3 billion at the beginning of the year. In addition, affected by the double favorable factors of the national cutting taxes and fees policies and the controlling shareholder's offset of trademark use fee, the Company's profit level may be improved compared with the same period of last year. 14 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 2. Analysis of main business Please refer to “1. Summarization” in “Management Discussion and Analysis”. Change in major financial data on year-on-year basis Unit: CNY In the report In the same period More or Reason for changes period of last year less (%) Operating revenue 2,558,274,785 2,828,230,064 -9.55% Mainly owing to the year-on-year decrease in sales volume Operating costs Mainly owing to the year-on-year increase in the price of grape 936,252,225 974,557,292 -3.93% material Sales expenses Mainly owing to the year-on-year decrease in marketing expense and 591,970,801 710,659,033 -16.70% trademark use fee Administration expense 155,552,312 157,964,882 -1.53% No major change Financial expense 8,789,583 13,085,942 -32.83% Mainly owing to the year-on-year decrease in interest expenditure Income tax expense 210,281,578 211,979,735 -0.80% No major change Research & 2,706,811 2,127,006 27.26% Mainly owing to the increased investment in scientific research Development Investment Net cash flow from Mainly owing to the decrease in received cash from selling products 499,476,006 552,753,472 -9.64% operating activities and providing labor service Net cash flow from Mainly owing to the decrease in the cash paid for purchasing fixed -114,534,608 -291,217,548 60.67% term deposit and the net cash paid by subsidiaries and other business investment activities units Net cash flow from Mainly owing to the year-on-year decrease in received fixed term -18,128,357 -6,350,537 -185.46% financing activities deposit used for pledge of long-term loan 15 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Net increased amount of cash and cash Mainly owing to the year-on-year decrease in the cash outflow of 366,866,743 247,781,188 48.06% investment activities equivalents Whether there is any major change for the Company’s profit structure or profit source during the report period □Available Not available There is no major change for the Company’s profit structure or profit source during the report period. Structure of main businesses Unit: CNY Increase or decrease of Increase or decrease of Increase or decrease of gross Operating Operating Gross profit Item operating revenue over the operating cost over the same profit rate over the same revenue cost rate (%) same period of last year (%) period of last year (%) period of last year By Sector Manufactu ring of liquor and 2,558,274,785 936,252,225 63.40% -9.55% -3.93% -2.14% alcoholic beverages By Product Wine 1,928,554,268 680,125,496 64.73% -13.01% -9.65% -1.31% 16 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Brandy 563,451,068 229,703,175 59.23% 3.33% 18.50% -5.22% Tourism 42,604,382 12,307,699 71.11% -7.44% -12.47% 1.66% Other 23,665,067 14,115,855 40.35% 19.01% 1.95% 9.98% Total 2,558,274,785 936,252,225 63.40% -9.55% -3.93% -2.14% By Region Domestic 2,330,780,056 791,113,867 66.06% -9.92% -2.36% -2.63% business Overseas 227,494,729 145,138,358 36.20% -5.50% -11.69% 4.47% business Total 2,558,274,785 936,252,225 63.40% -9.55% -3.93% -2.14% 3. Analysis to non-main business □Available Not available 4. Assets and liabilities situation 1) Major changes in assets Unit: CNY The end of this report period The end of the same period of last year Proportion increase Explanation for major Proportion in the Proportion in the or decrease Amount Amount changes total assets (%) total assets (%) (%) Monetary funds 1,848,632,953 13.81% 1,683,038,453 12.91% 0.90% No major change Account receivable 186,131,192 1.39% 243,413,092 1.87% -0.48% No major change 17 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Mainly owing to the year-on-year increase in Inventory 2,606,781,436 19.48% 2,338,925,432 17.94% 1.54% work-in-process including bulk wine at the end of report period Investment real estate 30,560,470 0.23% 17,877,379 0.14% 0.09% No major change Long-term equity - - - - - No major change investment Mainly owing to the transfer of construction in Fixed assets 5,684,612,653 42.48% 5,457,575,677 41.86% 0.62% process during the report period Mainly owing to the transfer of construction in Construction in process 789,872,373 5.90% 1,015,914,753 7.79% -1.89% process into fixed assets during the report period Mainly owing to the repayment of short-term Short-term borrowing 678,170,667 5.07% 750,454,676 5.76% -0.69% borrowing during the report period Long-term loan 165,949,250 1.24% 153,965,191 1.18% 0.06% No major change 2) Measuring assets and liabilities at fair value □Available Not available 3) Assets rights restricted situation up to the end of report period No 5. Investment situation analysis 18 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 1) Overall situation Available □Not available Amount of investment during the report Amount of investment in the same period of Extent of change period (CNY) last year (CNY) 210,000,000.00 210,931,400.00 0.44% 2) Situation of major equity investments acquired during the report period □Available Not available 3) Situation of ongoing major non-equity investments during the report period Available □Not available Unit: CNY Reasons Accumulated Accumulated for Whether actual realized Investment unreached it belongs investment Process income up Investment Involved amount Capital Estimated planning Disclosure Disclosure Project name to fixed amount up of to the end mode industry during the source income schedule date index assets to the end project of the report period and investment of the report report estimated income period period Construction Please refer to project of Announcement Yantai Liquor and on Resolution of Changyu Self- alcoholic 110,000,000.0 1,486,114,100 Owned the Seventh Yes 0 .00 100% - - No direct income 2019.04.20 International constructed beverage fund Session Board Wine City industry of blending and Directors 10th cooling Meeting 19 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report center disclosed on the Construction website of project of CNINFO Yantai Liquor and (www.cninfo.co Changyu Self- alcoholic 953,200,000.0 Owned m.cn) Yes 40,000,000.00 0 100% - - No direct income 2019.04.20 International constructed beverage fund (announcement Wine City industry number: bottling 2019-Temporar center y 06) Construction project of Yantai Liquor and Changyu Self- alcoholic 459,907,200.0 Owned Yes 43,400,000.00 0 100% - - No direct income 2019.04.20 International constructed beverage fund Wine City industry logistics center Construction project of Liquor and Changyu Self- alcoholic 122,974,800.0 Owned Not put into grape Yes 6,000,000.00 0 85% - - 2019.04.20 constructed beverage fund operation and wine industry research institute Construction Liquor and project of Self- alcoholic 128,820,000.0 Owned Not put into Yes 0.00 0 70% - - 2019.04.20 treasure wine constructed beverage fund operation chateau industry 147,329,000.0 Construction Self- Yes Liquor and 0.00 0 Owned 100% - - Just put into 2019.04.20 20 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report project of constructed alcoholic fund operation and no Koya brandy beverage income chateau industry Liquor and Oak Barrel Self- alcoholic Owned Procurement Yes 7,000,000.00 13,432,000.00 30% - - No direct income 2019.04.20 constructed beverage fund Project industry Construction project of Liquor and industrial Self- alcoholic Owned Yes 600,000.00 38,450,000.00 70% - - Not completed 2019.04.20 production constructed beverage fund SAP industry information Procurement project of Liquor and automatic Self- alcoholic Owned unibloc Yes 0 0 0.00% - - Not completed 2019.04.20 constructed beverage fund equipment for industry Yantai chateau Project of “Constant temperature and humidity” Liquor and system in Self- alcoholic Owned Yes 3,000,000.00 3,000,000.00 80% - - Not completed 2019.04.20 underground constructed beverage fund cellar of industry Research & Development Center 21 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Construction project of changyu Liquor and supplier Self- alcoholic Owned management Yes 0.00 0.00 0% - - Not Completed 2019.04.20 constructed beverage fund platform and industry equipment management platform 210,000,000.0 3,353,227,100 Total — — — — — 0.00 0.00 -- -- -- 0 .00 4) Financial assets investment (1) Security investment □Available Not available There is no security investment for the Company during the report period. (2) Derivative investment □Available Not available There is no derivative investment for the Company during the report period. 6. Sale of major assets and equities 1) Sale of major assets □Available Not available 22 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report There is no sale of major assets during the report period. 2) Sale of major equity □Available Not available 7. Analysis to the major holding and joint stock companies Available □Not available Situation of main subsidiaries as well as joint stock companies affecting over 10% of the Company’s net profit Unit: CNY Company Company Main business Registered capital Total Net asset Operation Operation Net Profit name type assets revenue profit Chateau Changyu Development, production and sales of 240,824,9 Castel Co., Ltd. Subsidiary wine and sparkling wine as well as the USD5million 77,648,048 24,470,842 -2,182,761 -2,189,871 54 YANAI tourism service Chateau Changyu Development, production and sales of CNY642.75 686,690,4 12,711,98 AFIP Global Wine Subsidiary 640,778,175 90,339,526 17,401,737 brandy and wine million 42 5 Co., Ltd. Chateau Liaoning CNY59.6873 84,854,20 Changyu Ice Wine Subsidiary Production of ice wine 53,126,828 19,763,387 -1,049,804 -1,986,710 million 7 Co., Ltd. Hacienda Y Vinedos Production and management of wine and EUR2.385732 500,554,8 Marques Del Atrio, Subsidiary 123,548,662 129,064,457 959,423 1,859,381 other liquors million 60 SL Indomita Wine Production and management of wine and 505,803,3 Company Chile, Subsidiary USD47.19million 361,957,114 86,818,838 2,477,697 3,762,504 other liquors 10 SpA Kilikanoon Estate Subsidiary Production and management of wine and AUD6.529221 147,071,8 82,030,855 22,852,809 -2,587,400 -1,509,147 23 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Pty Ltd other liquors million 45 Acquisition and disposal of subsidiaries during the report period Available □Not available Mode of Acquisition and disposal of Company name Effect on overall production and management as well as performance subsidiaries during the report period As a newly-established company, this company has very little influence L&M HOLDINGS Establishment by joint venture in overall production and management as well as performance. Joint venture partner uses Chateau This chateau currently has very little influence in overall production and Chateau Liversan Liversan as contribution of capital management as well as performance. Explanation for main holding and joint stock companies During the report period, Chateau Changyu Castel Co., Ltd. YANAI and Chateau Liaoning Changyu Ice Wine Co., Ltd. incurred operating losses, mainly because the two companies, as production units, sold their products to the Company’s internal sales units at the internal settlement price determined by the Company, which could not truly reflect the profitability of the two companies’ products. If it includes the profit generated by the internal sales units selling products to external customers, the products produced by these two companies are profitable. During the report period, Kilikanoon Estate Pty Ltd realized the net profit of CNY550thousand for its own production and management, but after conducting the amortization of premium at the time of acquisition in accordance with accounting policy, the loss was CNY1.5million. 8. Situation of structured subject controlled by the Company □Available Not available 9. Forecast for the operating performance from January to September of 2019 Caution and explanation for the prediction that the cumulative net profit from the beginning of the year to the end of next report period could be in a loss or there will be in a great change compared with the same period of last year. □Available Not available 24 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 10. Risks faced with by the Company and response measures (1) Risks in price fluctuation of raw materials Grapes are the Company’s main raw materials. The grape’s yield and quality are affected to a certain extent by the natural factors such as drought, wind, rain, frost and snow. These force majeure factors greatly influence the procurement quantity and price of raw materials and add the uncertainty to the Company’s production and operation. Therefore, the Company will lower the fluctuation risks of grape quality and price by means of stabilizing the area of self-run grape bases, strengthening the management of grape bases and optimizing the layout of grape bases. (2) Risks in uncertainty of market input and output To cope with increasingly fierce market competition and to meet the needs for market development, the Company will maintain certain market input. The proportion of sales expense in the operation revenue is also high. The situation of input and output will affect the Company’s business performance to a great extent and there might occur the risk that partial input may not reach the expectations. Therefore, the Company will strengthen market research and analysis, enhance market forecast accuracy and continue perfecting the input-output evaluation system to ensure the market input to reach the expectations. (3) Risks in product transportation The Company’s products are fragile and sold to all over the world mostly by sea transportation, railway transportation and road transportation. The peak season of sales is usually in cold winter and is close to the spring festival when there is a great need in the market. However, at this time, the domestic transportation departments may be overloaded by the flow of people and logistics, causing serious shortage of transportation capacity. In addition to natural and human factors such as snow, ice and traffic accidents and so on, there is a possibility that it is difficult to safely and timely transport products to the market, thus facing the potential risk of missing sales peak season. Therefore, the company will strive to reduce such risks by doing well sales forecasts and the connection between production and sales, rationally arranging production and transportation routes and reasonably increasing off-site inventory before the coming of peak season and so on. (4) Risks in investment faults According to the programme, the Company has basically completed the production layout at home and abroad. The investment amount of Yantai Changyu Industrial Park (in other words Yantai Changyu International Wine City) is large, but there are many uncertainties in domestic wine market, which may lengthen the investment recovery period. Moreover, the integration and management of overseas M&A projects are difficult and it might also be difficult for some individual projects to obtain the expected investment income owing to being affected by various factors. Therefore, the Company will make sufficient demonstration and scientific decision on investment projects and strive to reduce and avoid investment risks. 25 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report V. Major issues 1. Information for the Shareholders’ Meeting and Interim Shareholders’ Meeting held during the report period 1) Information for the Shareholders’ Meeting during the report period Participation ratio of Session Meeting type Convening date Disclosure date Disclosure Index investors http://www.cninfo.com.cn Annual Announcement on Resolution of 2018 Annual Shareholders’ 2018 Annual Shareholders’ shareholders’ 58.85% 2019.05.17 2019.05.18 Meeting Meeting (Announcement meeting number:2019- Temporary 25) http://www.cninfo.com.cn Interim Announcement on Resolution of First Interim Shareholders’ First Interim Shareholders’ shareholders’ 60.89% 2019.07.02 2019.07.03 Meeting in 2019 Meeting in 2019 (Announcement meeting number:2019- Temporary 37) 2) Request for convening Interim Shareholders’ Meeting by priority shareholders owing recovered voting right □Available Not available 2. Situation of profit distribution and capitalization of capital reserve into share capital during the report period □Available Not available The Company plans not to distribute cash dividends or give bonus shares or make capitalization of capital reserve into share capital. 26 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 3. Commitments that the Company’s actual controllers, shareholders, related parties, acquirers and the Company and other related commitment parties have implemented during the report period and have not implemented up to the end of the report period Available □Not available Commitment Commitment Commitment Commitment Commitment Commitments Implementation party type content time period Commitments at equity reformation Commitments made in acquisition report or equity change report Commitments at asset restructuring Commitments at the Yantai Changyu Solve horizontal Non-horizontal initial public offering or May 18th, 1997 Forever Has been performing Group Co. Ltd. competition competition refinancing 27 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report According to Trademark License According to Trademark Contract, the License Contract, the trademark trademark use fee of use fee annually charged by Changyu and other Yantai Changyu Group Co., trademarks paid by Ltd. shall be mainly used to this Company to publicize trademarks including Yantai Changyu Clear the use of Yantai Changyu May 18th, 1997 Forever Chagnyu and contractual Group Co.,Ltd. trademark use fee Group Co., Ltd every products. Except 2013 to 2017 year is mainly used during which the commitment for advertising was not strictly performed, Changyu and other Yantai Changyu Group Co., trademarks and the Ltd. has been performing the contractual products commitment. by Yantai Changyu Group Co., Ltd. Equity incentive commitments Commitments at middle and small shareholders of the Company Commitment under timely implementation No or not According to the Trademark License Contract (hereafter referred to as “the Contract”), Changyu Group promises that the trademark Detailed explanation for use fee annually paid by the Company to Changyu Group shall be mainly used by Changyu Group to publicize trademarks and specific reasons of contractual products. But above-mentioned ‘mainly’ is not a specific number, which is easy to cause divergence due to different unimplemented understanding and leads to problem appearance during the implementation process. commitment as well as From 2013 to 2017, Changyu Group collected a total of CNY420,883,902 trademark use fee, of which 51% was used to publicize next work plan if trademarks including Changyu and contract products with amount of CNY214,650,790. The amount has been used to publicize commitment is not trademarks including Changyu and contract products is CNY50,025,181, with a balance of CNY164,625,609. completed in the In 2018 and 2019, the trademark use fee collected of 2017 and 2018 is CNY155,623,907, of which 51% is used to publicize commitment period trademarks including Changyu and contract products with amount of CNY79,368,193. The amount has been used to publicize trademarks including Changyu and contract products is CNY12,225,187, with a balance of CNY67,143,006. 28 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Since 2013, the accumulated balance of Changyu Group using to publicize trademarks including Changyu and contract products is CNY231,768,615. Changyu Group promises that the four-year trademark use fee from 2019 to 2022 will be used for offset. If insufficient, the shortfall would be filled in one time in 2023. If there is any excess, the excess portion of the trademark use fee would be collected from the year with excess occurrence. If Changyu Group is not able to implement the above-mentioned commitment owing to various reasons, the Company will timely supervise and urge Changyu Group to fulfill its commitment and request Changyu Group to raise funds through bank loaning, assets sales and equity sales etc in order to implement the commitment. For other details, please refer to Announcement on Commitment Issues of Yantai Changyu Group Company Limited disclosed by the Company on April 4th, 2019. 4. The appointment and dismissal of certified public accountants Whether the semi-annual report has been audited □ Yes No The semi-annual report has not been audited. 5. Explanation from the board of directors and the board of supervisors for the “Non-standard Audit Report” during this report period □Available Not available 6. Explanation from the board of directors for the “Non-standard Audit Report” of last year □Available Not available 7. Issues related with bankruptcy reorganization □Available Not available There are no related issues of bankruptcy reorganization happened at the end of the report period. 8. Litigation Issue Material litigation and arbitration □Available Not available 29 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report There are no material litigation and arbitration during the report period. Other Litigation Issue □Available Not available 9. Penalty and rectification Available Not available Investigation Disclosure Name Type Reason Conclusion Disclosure Index and Punishment date Yantai http://www.cninfo.com.cn Changyu Rectification Report of Person Other Other - 2019.04.04 Pioneer Wine In Charge such as Yantai Co., Ltd. Yantai Changyu Group Co., Ltd Changyu Pioneer Wine Co., has not strictly fulfilled the Litd. Etc on Decision of commitment “Annual trademark Administrative Supervision Yantai use fee is mainly used to publicize Measures issued by China Changyu Controlling trademarks including Changyu Securities Regulatory and contractual products”. Other - 2019.04.04 Commission Shandong Group Co., shareholder Ltd. Regulatory Authority (Announcement number:2019- Temporary 05) The explanation of rectification situation Available Not available During the period, this Company, Yantai Changyu Group Co., Ltd. and other related person in charge have received Decision of Administrative Supervision Measures issued by China Securities Regulatory Commission Shandong Regulatory Authority, and they have made rectification according to the requirement. 30 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 10. Credit of the Company, its controlling shareholder and actual controller Available Not available 11. Implementation of the Company’s equity inventive plan, employee stock ownership plan or other employee incentive measures □Available Not available There are no implementation of the Company’s equity inventive plan, employee stock ownership plan and other employee incentive measures during the report period. 12. Major related transactions 1) Related transactions in relation to routine operations Available □Not available Whether Approved Available Proportion exceeding Related Pricing Amount transaction Clearing market price Disclosure Disclosure Relationship Type Content Price in similar approved party principle (CNY‘0000) quota form of similar date index transactions transactio (CNY‘0000) transactions n quota Purchase and Yantai Controlled Purchase and manufacturing Determined Shenma by the same Contractu April manufacturing consignment by 7,497 10.44% 17,500 No Cash No - Packaging parent al pricing 20th , 2019 consignment of packaging agreement Co., Ltd. company materials Total - - 7,497 - 17,500 - - - - - Details information about the return of large sales No Actual performance of the estimated total amount for daily related transactions that will occur during this report period No by category (if have) Reason for the bigger deference between transaction price and Not available market reference price(if applicable) 31 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 2) Related transactions in relation to acquisition and sales of assets or equity □Available Not available There are no related transactions in relation to acquisition or sales of assets or equity during the report period. 3) Related transactions in relation to common foreign investment □Available Not available There are no related transactions in relation to common foreign investment during the report period. 4) Related credit and debt dealings Available Not available There are no related credit and debt dealings during the report period. 5) Other major related transactions □Available Not available There are no other major related transactions during the report period. 13. Non-operating capital occupying of the Company by controlling shareholder and its related parties □Available Not available There is no non-operating capital occupying of the Company by controlling shareholder and its related parties during the report period. 14. Major contracts and execution condition 1) Trusteeship, contract and lease issues (1) Trusteeship situation □Available Not available There is no trusteeship situation during the report period. (2) Contract situation Available □Not available Explanation for contract situation For the Company’s contract operation situation during the report period, please refer to ‘‘23. Other payables’’ in Note 7 ‘‘Notes on consolidated financial statement’’ in the financial report of this report. 32 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Project whose profit and loss brought for the Company reach more than 10% of the total profit during the report period □Available Not available There are no contract projects whose profit and loss brought for the Company reach more than 10% of the total profit during the report period. (3) Lease situation Available □Not available Explanation for lease situation On January 1st, 2017, the Company renewed the Space Lease Agreement with the controlling shareholder Yantai Changyu Group Company Limited. The Company leased the space with 15196.94 square meters locating at No. 174 Shihuiyao Road, Zhifu District, Yantai City. The rent per year is CNY1.4645 million with a rental period of 5 years from January 1st, 2017 to December 31st, 2021. On January 1st, 2017, the Company’s subordinate Sales & Marketing Co. of Yantai Changyu Pioneer Wine Company Limited Brandy Sales Division renewed the Space Lease Agreement with the controlling shareholder Yantai Changyu Group Company Limited, leasing the space with 42552.83 square meters locating at No. 1 Jichang Road, Zhifu District, Yantai City and the space with 3038 square meters locating at 56 Dama Road, Zhifu District, Yantai City, which are all under the name of controlling shareholder. The rent of above spaces per year is CNY4.3935million with a rental period of 5 years from January 1st, 2017 to December 31st, 2021. On July 1st, 2017, this Company signed a house-leasing contract with Yantai Shenma Packaging Company Limited. According to this contract, since July 1st, 2017, this Company leased property to Yantai Shenma Packaging Company Limited for a business purpose with the annual rent of CNY1,626,880. This contract expires on June 30th, 2022. Project whose profit and loss brought for the Company reach more than 10% of the total profit during the report period □Available Not available There are no lease projects whose profit and loss brought for the Company reach more than 10% of the total profit during the report period. 2) Major guarantee Available □Not available 33 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report (1) Guarantee situation Unit: CNY’0000 External guarantee of the Company and its subsidiaries(excluding guarantee to subsidiaries) Whether or not Disclosure date of related Actual date of Whether or not Actual guarantee Guarantee belong to Guarantee object name announcement about Guarantee quota occurrence (date of Guarantee type complete amount Period related-party guarantee quota agreement) implementation guarantee Yantai Economic and Technological Mortgage; 2016.12.22 34,160 2016.12.21 34,160 10years No No Development Zone Pledge Management Council Total of the external guarantee quota approved Total of the actual external guarantee 0 0 during the report period (A1) amount during the report period (A2) Balance of the actual external Total of the external guarantee quota approved at the 34,160 guarantee at the end of the report 34,160 end of the report period (A3) period (A4) Guarantee situations between the Company and subsidiaries Whether or not Disclosure date of related Actual date of Whether or not Actual guarantee Guarantee belong to Guarantee object name announcement about Guarantee quota occurrence (date of Guarantee type complete amount Period related-party guarantee quota agreement) implementation guarantee Sales & Marketing Company of Yantai Joint liability 2016.10.31 10,000 2016.11.05 10,000 2 years No Yes Changyu Pioneer Wine assurance Company Limited Yantai Changyu Pioneer 2016.12.22 11,984 2016.12.21 11,984 Mortgage; 10 years No Yes 34 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Wine Company Limited Pledge Yantai Changyu Wine Joint liability Research and 2016.12.22 72,176 2016.12.21 72,176 assurance; 10 years No Yes Development Company Mortgage Limited Kilikanoon Estate Pty Joint liability 2017.12.12 7,100 2018.01.09 7,100 1 year No Yes Ltd assurance Total of the actual guarantee amount Total of the approved guarantee quota to subsidiaries 0 for subsidiaries during the report 0 during the report period (B1) period (B2) Balance of the actual guarantee for Total of the approved guarantee quota to subsidiaries 89,276 subsidiaries at the end of the report 89,276 at the end of the report period (B3) period (B4) Guarantee situations between subsidiaries Whether or not Disclosure date of related Actual date of Whether or not Actual guarantee Guarantee belong to Guarantee object name announcement about Guarantee quota occurrence (date of Guarantee type complete amount Period related-party guarantee quota agreement) implementation guarantee Hacienda Y Vinedos Marques Del Atrio. 2016.04.29 3,502 2015.10.08 3,502 Mortgage Long-term No No SL Indomita Wine Company Chile, 2018.04.23 1,986 2018.04.20 1,986 Mortgage Long-term No No SpA Total of the actual guarantee amount Total of the approved guarantee quota to 5,976 0 for subsidiaries during the report 35 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report subsidiaries during the report period (C1) period (C2) Balance of the actual guarantee for Total of the approved guarantee quota to 11,464 subsidiaries by the end of the report 5,488 subsidiaries at the end of the report period (C3) period (C4) Total guarantee amount of the Company(Total of above three major items) Total of the actual guarantee amount Total of the approved guarantee quota during the 5,976 during the report period 0 report period(A1+B1+C1) (A2+B2+C2) Balance of the actual guarantee by Total of the approved guarantee quota at the end of 134,900 the end of the report period 128,924 the report period(A3+B3+C3) (A4+B4+C4) The proportion of actual total guarantee amount (A4+B4+C4) accounting for the Company’s 13.17% net asset Among : Balance of guarantee for shareholders, actual controllers and their related parties(D) 0 Balance of direct or indirect debt guarantee for the guaranteed objects whose asset-liability ratio is 0 more than 70%(E) Amount of the part in total guarantee amount that exceed 50% of net assets(F) 0 Total amount of the above-mentioned three items(D+E+F) 0 Explanation for undue guarantees that might bear joint and several responsibilities for clearing the No debts during the report period (if have) Explanation for violating due process to provide external guarantee (if have) No Explanation on specific situations of adapting guarantee by complex methods 36 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report No. (2) Illegal external guarantee □Available Not available There is no illegal guarantee during the report period. 3) Other major contracts □Available Not available There are no other important contracts during the report period. 15. Situation for social responsibility 1) Major environmental situation Whether or not the listed company and its subsidiaries belong to key pollutant discharging units stipulated by the state environmental protection department. Not applicable. No 2) Situation for carrying out social responsibility of targeted poverty alleviation (1) Targeted poverty alleviation plan The Company has reached the mutual agreement with the government of Zhuqiao Town and the village committee of Dalangya Village to establish a cooperative specialized for grape. It plans to help to conduct the construction of 100 mu of vineyard per year from 2019 to 2021 with a total area of 300 mu and also to sign grape purchase contract in order to help local villagers to get rid of poverty and become better off. (2) Summary of semi-annual targeted poverty alleviation The Company intends to help farmers grow their income by establishing vineyards together with farmers. (3) Effectiveness of targeted poverty alleviation The Company has established vineyards with farmers as planned, which is progressing smoothly now. (4) Subsequent plan for targeted poverty alleviation No 37 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 16. Explanation for other major issues □Available Not available There are no other major issues need to be explained during the report period. 17. Major issues of the Company’s subsidiaries □Available Not available 38 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report VI. Changes in Shares and the Shareholders’ Situation 1. Changes in shares 1) Changes in shares Unit: share Amount before this change Change at this time (+, -) Amount after this change Transfer Amount Percentage % Issuing new Distribute capital others Subtotal Amount Percentage % share bonus share reserve to share capital 1. Unrestricted shares 685,464,000 100% 685,464,000 100% (1) A shares 453,460,800 66.15% 453,460,800 66.15% (2) B shares 232,003,200 33.85% 232,003,200 33.85% 2. Total shares 685,464,000 100% 685,464,000 100% Reason of changes in shares □Available Not available Approval of changes in shares □Available Not available Ownership transfer of changes in shares □Available Not available Implementation progress of share buy-back □Available Not available 39 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Implementation progress of reducing repurchased shares by the way of centralized bidding □Available Not available The influence of changes in shares on financial indicators in the most recent year and the most recent report period, such as basic earnings per share, diluted earnings per share and net asset per share attributable to the Company’s common shareholders and so on □Available Not available Other contents that the Company thinks necessary or securities regulatory departments ask to disclose. □Available Not available 2) Changes in restricted shares □Available Not available 2. Securities issuance and listing situation □Available Not available 3. Situation for the number of shareholders and shareholdings of the Company Unit:share Total common shareholders at the Total number of preferred shareholder recovering voting 42,531 0 end of report period power at the end of report period (if have) (refer to note 8) Shareholders holding more than 5% or shareholdings of the top 10 common shareholders Number of Number of Pledged or frozen Common share Changes Character of Shareholding restricted unrestricted Name of Shareholder shareholder ratio held at the end of during the Share the report period common common Amount report period status share share YANTAI Domestic 50.40% 345,473,856 0 0 345,473,856 40 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report CHANGYU GROUP non-state-owned legal CO. LTD. person GAOLING Foreign legal person 3.08% 21,090,219 0 0 21,090,219 FUND,L.P. CHINA State-owned legal 2.25% 15,440,794 0 0 15,440,794 SECURITIES person FINANCE CORP BBH BOS S/A FIDELITY FD - Foreign legal person 2.22% 15,241,826 0 0 15,241,826 CHINA FOCUS FD SHENWAN HONGYUAN Foreign legal person 1.28% 8,798,233 450570 0 8,798,233 SECURITIES(HON G KONG) LIMITED FIDELITY PURITAN TRUST: FIDELITY SERIES Foreign legal person 0.93% 6,350,762 250000 0 6,350,762 INTRINSIC OPPORTUNITIES FUND GUOTAI JUNAN SECURITIES(HON Foreign legal person 0.76% 5,229,016 185509 0 5,229,016 GKONG) LIMITED CENTRAL HUIJIN ASSET State-owned legal 0.69% 4,761,200 0 0 4,761,200 MANAGEMENT person LTD. 41 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report VANGUARD EMERGING Foreign legal person 0.55% 3,788,487 0 0 3,788,487 MARKETS STOCK INDEX FUND FIDELITY CHINA SPECIAL Foreign legal person 0.55% 3,779,202 0 0 3,779,202 SITUATIONS PLC Situation of Strategic investors or general legal person becoming the top 10 shareholders owing to placing of new No shares (if have)(see note 3) Among the top 10 shareholders, Yantai Changyu Group Company Limited has no Explanation for above shareholders’ associated associated relationship or concerted action relationship with the other 9 circulating relationship and concerted action shareholders, and the relationship among the other shareholders is unknown. Shareholdings of top 10 common shareholders with unrestricted shares Number of unrestricted shares held at Type of share Name of Shareholders the end of the report period Type of share Amount YANTAI CHANGYU GROUP CO. LTD. 345,473,856 A 345,473,856 GAOLING FUND,L.P. 21,090,219 B 21,090,219 CHINA SECURITIES FINANCE CORP 15,440,794 A 15,440,794 BBH BOS S/A FIDELITY FD - CHINA FOCUS FD 15,241,826 B 15,241,826 SHENWAN HONGYUAN SECURITIES(HONG KONG) LIMITED 8,798,233 B 8,798,233 FIDELITY PURITAN TRUST: FIDELITY SERIES INTRINSIC 6,350,762 B 6,350,762 OPPORTUNITIES FUND GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED 5,229,016 B 5,229,016 CENTRAL HUIJIN ASSET MANAGEMENT LTD. 4,761,200 A 4,761,200 VANGUARD EMERGING MARKETS STOCK INDEX FUND 3,788,487 B 3,788,487 FIDELITY CHINA SPECIAL SITUATIONS PLC 3,779,202 B 3,779,202 42 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Explanation for associated relationship and concerted action among top Among the top 10 shareholders, Yantai Changyu Group Company Limited 10 common shareholders with unrestricted shares and between top 10 has no associated relationship or concerted action relationship with the other common shareholders with unrestricted shares and top 10 common 9 circulating shareholders, and the relationship among the other shareholders shareholders is unknown. Explanation for top 10 common shareholders who are involved in The top 10 shareholders are not involved in f securities margin trading securities margin trading business (if have)(see note 4) business. Whether or not the Company’s top 10 common shareholders and top 10 shareholders with unrestricted shares take agreed repurchase transaction during the report period □Yes No There is no agreed repurchase transaction taken by the Company’s top 10 common shareholders and top 10 shareholders with unrestricted shares during the report period. 4. Changes in controlling shareholders or actual controllers Changes in the controlling shareholders during the report period □Available Not available There is no any change in the controlling shareholders during the report period. Changes in the actual controllers during the report period □Available Not available There is no any change in the actual controllers during the report period. 43 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report VII. Related Situation of Preferred Shares □Available Not available There are no preferred shares during the report period. 44 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report VIII. Situation for Directors, Supervisors, Senior Executives 1. Changes in shareholdings of directors, supervisors and senior executives □Available Not available There is no change in shareholdings of directors, supervisors and senior executives during the report period. For details, please refer to 2018 Annual Report 2. Personnel changes in the Company's directors, supervisors and senior executives Available □Not available Name Position Type Date Reason Leaving the post owing Sun Liqiang Director 2019.05.17 Retirement to expiration of tenure Leaving the post owing Qu Weimin Director 2019.05.17 Retirement to expiration of tenure Leaving the post owing Expiration of tenure Zhang Ming Director 2019.05.17 to expiration of tenure and job change Antonio Leaving the post owing Expiration of tenure Director 2019.05.17 Appignani to expiration of tenure Independent Leaving the post owing Expiration of tenure Wang Shigang 2019.05.17 director to expiration of tenure Independent Leaving the post owing Expiration of tenure Liu Yan 2019.05.17 director to expiration of tenure Being elected as director when Chen Dianxin Director Elected 2019.05.17 reelecting new session Board of Directors Being elected as director when Enrico Sivieri Director Elected 2019.05.17 reelecting new session Board of Directors Being elected as director when Sun Jian Director Elected 2019.05.17 reelecting new session Board of Directors Being elected as director when Li Jiming Director Elected 2019.05.17 reelecting new session Board of Directors 45 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Being elected as independent director Duan Independent Elected 2019.05.17 when reelecting new Changqing director session Board of Directors Being elected as independent director Independent Liu Huirong Elected 2019.05.17 when reelecting new director session Board of Directors Secretary of Leaving the post owing Qu Weimin the Board of 2019.05.28 Retirement to expiration of tenure Directors Chief Leaving the post owing Li Jiming 2019.05.28 Expiration of tenure engineer to expiration of tenure Deputy Being appointed by Li Jiming general Appointed 2019.05.28 Board of Directors manager Chief Leaving the post owing Jiang Jianxun Financial 2019.05.28 Expiration of tenure to expiration of tenure Officer Deputy general manager & Being appointed by Jiang Jianxun Appointed 2019.05.28 Secretary of Board of Directors the Board of Directors Resigning from the Independent post of independent Guo Guoqing Leaving the post 2019.07.02 director director on his own initiative Independent Being elected as Liu Qinglin Elected 2019.07.02 director independent director 46 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report IX. Related Situation of Corporation Bonds Whether or not there are the Company’s corporation bonds issued in public and listed in the stock exchange, but not due on the issuance date approved in the semi-annual report or failing to pay in full on the due date No. X. Financial Report 1. Audit report Whether the semi-annual report has been audited □ Yes √ No The semi-annual report of the Company has not been audited. 2. Financial statement The unit in the statements of the financial annotations is RMB Yuan. 2.1 Consolidated balance sheet Compiling unit: Yantai Changyu Pioneer Wine Co., Ltd. June 30, 2019 Unit: Yuan December 31, Item Note June 30, 2019 2018 Current assets: Monetary fund 7.1 1,848,632,953 1,475,700,477 Settlement reserves Lending funds Tradable financial assets Financial assets measured at the fair value and the variation of which is recorded into the current profits and losses Derivative financial assets Bills receivable 7.2 288,667,988 Accounts receivable 7.3 186,131,192 242,153,083 Receivables financing 7.4 372,281,872 Advance payment 7.5 3,490,928 4,219,949 Premium receivable Reinsurance accounts receivable Receivable reserves for reinsurance contract Other receivables 7.6 28,618,983 22,636,086 Including: Interest receivable 2,099,109 1,332,681 Dividends receivable Redemptory monetary capital for sale Inventories 7.7 2,606,781,436 2,724,591,457 Contract assets Assets held for sale Non-current assets due within one year Other current assets 7.8 300,418,901 258,676,396 47 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report December 31, Item Note June 30, 2019 2018 Total current assets 5,346,356,265 5,016,645,436 Non-current assets: Offering loans and imprest Debt investments Available-for-sale financial assets 467,251 Other debt investments Held-to-maturity investments Long-term receivables Long-term equity investments Other investments in equity instruments Other non-current financial assets 7.9 515,922 Investment real estate 7. 10 30,560,470 31,572,489 Fixed assets 7.11 5,684,612,653 5,749,731,667 Construction in progress 7.12 789,872,373 759,296,591 Productive biological assets 7.13 207,613,439 209,266,373 Oil-and-gas assets Right-of-use assets Intangible assets 7.14 647,158,886 655,473,459 Development expenditure Goodwill 7.15 165,199,111 165,199,111 Long-term prepaid expenses 7.16 276,557,711 244,640,416 Deferred income tax assets 7.17 234,646,603 285,436,259 Other non-current assets Total non-current assets 8,036,737,168 8,101,083,616 Total assets 13,383,093,433 13,117,729,052 Current liabilities: Short-term loans 7.18 678,170,667 688,002,410 Borrowings from the Central Bank Loans from other banks and other financial institutions Tradable financial liabilities Financial liabilities measured at the fair value and the variation of which is recorded into the current profits and losses Derivative financial liabilities Bills payable Accounts payable 7.19 539,459,878 713,572,881 Advances from customers 7.20 177,549,080 226,075,244 Financial assets sold for repurchase Deposits from customers and interbank Receivings from vicariously traded securities Receivings from vicariously sold securities Employee remunerations payable 7.21 177,466,368 212,304,217 Taxes and dues payable 7.22 109,000,802 128,912,790 Other payables 7.23 977,667,007 608,479,890 Including: Interest payable 2,669,667 712,826 Dividends payable 412,646,375 48 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report December 31, Item Note June 30, 2019 2018 Handling charges and commissions payable Dividend payable for reinsurance Contract liabilities Liabilities held for sale Non-current liabilities due within one year 7.24 180,362,314 152,940,788 Other current liabilities 7.25 14,545,254 15,860,254 Total current liabilities 2,854,221,370 2,746,148,474 Non-current liabilities: Reserves for insurance contracts Long-term borrowings 7.26 165,949,250 156,480,662 Bonds payable Including: Preferred stock Perpetual bonds Lease liabilities Long-term accounts payable 7.27 201,000,000 225,000,000 Long-term employee remunerations payable Estimated liabilities Deferred income 7.28 64,050,895 70,367,039 Deferred income tax liabilities 7.17 18,629,612 22,010,647 Other non-current liabilities 7.29 7,159,222 7,234,853 Total non-current liabilities 456,788,979 481,093,201 Total liabilities 3,311,010,349 3,227,241,675 Owner’s equity: Capital stock 7.30 685,464,000 685,464,000 Other equity instruments Including: Preferred stock Perpetual bonds Capital surplus 7.31 565,955,441 565,955,441 Minus: Treasury stock Other comprehensive income 7.32 -95,344 2,965,377 Special reserves Surplus reserves 7.33 342,732,000 342,732,000 General risk preparation Undistributed profit 7.34 8,197,828,994 8,008,982,547 Total owner’s equities attributable to the parent company 9,791,885,091 9,606,099,365 Minority equity 280,197,993 284,388,012 Total owner’s equities 10,072,083,084 9,890,487,377 Total liabilities and owner’s equities 13,383,093,433 13,117,729,052 Legal Representative: Zhou Hongjiang Accounting Supervisor: Jiang Jianxun Accounting Department Manager: Jiang Jianxun 2.2 Balance sheet of the parent company Compiling unit: Yantai Changyu Pioneer Wine Co., Ltd. Unit: Yuan 49 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Item Note June 30, 2019 December 31, 2018 Current assets: Monetary fund 1,083,333,310 624,588,809 Tradable financial assets Financial assets measured at the fair value and the variation of which is recorded into the current profits and losses Derivative financial assets Bills receivable 39,885,254 Accounts receivable 15.1 1,447,973 Receivables financing 56,047,969 Advance payment 427,816 227 Other receivables 15.2 526,593,613 1,025,643,356 Including: Interest receivable 277,785 254,088 Dividends receivable 4,103,925 500,000,000 Inventories 505,479,473 385,154,740 Contract assets Assets held for sale Non-current assets due within one year Other current assets 35,992,255 24,704,844 Total current assets 2,207,874,436 2,101,425,203 Non-current assets: Debt investments Available-for-sale financial assets Other debt investments Held-to-maturity investments Long-term receivables Long-term equity investments 15.3 7,420,803,069 7,420,803,069 Other investments in equity instruments Other non-current financial assets Investment real estate 30,560,470 31,572,489 Fixed assets 260,448,515 265,311,274 Construction in progress 7,319,082 6,311,701 Productive biological assets 121,158,460 125,002,793 Oil and gas assets Right-of-use assets Intangible assets 66,054,490 67,244,066 Development expenditure Goodwill Long-term prepaid expenses Deferred income tax assets 20,699,273 24,194,967 Other non-current assets 985,700,000 972,700,000 Total non-current assets 8,912,743,359 8,913,140,359 Total assets 11,120,617,795 11,014,565,562 Current liabilities: Short-term loans 150,000,000 150,000,000 Tradable financial liabilities Financial liabilities measured at the fair value and the variation of which 50 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Item Note June 30, 2019 December 31, 2018 is recorded into the current profits and losses Derivative financial liabilities Bills payable Accounts payable 106,793,658 132,704,304 Advances from customers Contract liabilities Employee remunerations 59,598,048 72,345,179 Taxes and dues payable 3,749,762 13,111,431 Other payables 913,805,782 607,974,519 Including: Interest payable 163,125 181,250 Dividends payable 411,278,400 Liabilities held for sale Non-current liabilities due within one year Other current liabilities 3,433,054 3,433,054 Total current liabilities 1,237,380,304 979,568,487 Non-current liabilities: Long-term borrowings Bonds payable Including: Preferred stock Perpetual bonds Lease liabilities Long-term accounts payable Long-term employee remuneration payable Estimated liabilities Deferred income 7,459,789 8,910,918 Deferred income tax liabilities Other non-current liabilities 2,951,042 2,710,575 Total non-current liabilities 10,410,831 11,621,493 Total liabilities 1,247,791,135 991,189,980 Owner’s equity: Capital stock 685,464,000 685,464,000 Other equity instruments Including: Preferred stock Perpetual bonds Capital surplus 557,222,454 557,222,454 Minus: Treasury stock Other comprehensive income Special reserves Surplus reserves 342,732,000 342,732,000 Undistributed profit 8,287,408,206 8,437,957,128 Total owner’s equities 9,872,826,660 10,023,375,582 Total liabilities and owner’s equities 11,120,617,795 11,014,565,562 Legal Representative: Zhou Hongjiang Accounting Supervisor: Jiang Jianxun Accounting Department Manager: Jiang Jianxun 51 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 2.3 Consolidated profit statement Compiling unit: Yantai Changyu Pioneer Wine Co., Ltd. Unit: Yuan Item Note Sum of current period Sum of prior period 1. Total operating income 2,558,274,785 2,828,230,064 Including: Operating income 7.35 2,558,274,785 2,828,230,064 Interest income Earned premium Handling fee and commission income 2. Total operating costs 1,818,822,580 2,023,670,406 Including: Operating costs 7.35 936,252,225 974,557,292 Interest expenditure Handling fees and commission expenditure Premium rebate Net amount of indemnity expenditure Net amount of the withdrawn reserve fund for insurance contract Policy bonus payment Amortized reinsurance expenditures Taxes and surcharges 7.36 123,550,848 165,276,251 Selling expenses 7.37 591,970,801 710,659,033 Administrative expenses 7.38 155,552,312 157,964,882 Research and development expenses 7.39 2,706,811 2,127,006 Financial expenses 7.40 8,789,583 13,085,942 Including: Interest expenses 9,812,560 18,739,528 Interest income 4,606,417 7,245,870 Plus: Other profit 7.41 64,211,892 37,982,878 Investment profit (loss is listed with "-") Including: Investment profit for joint-run business and joint venture Financial assets measured at amortized cost cease to be recognized as income (loss is listed with "-") Exchange income (loss is listed with "-") Net exposure hedge income (loss is listed with "-") Income from fair value changes (loss is listed with "-") Credit impairment loss (loss is listed with "-") 7.42 -765,935 Asset impairment loss (loss is listed with "-") 7.43 6,148,729 4,730,948 Income from asset disposal (loss is listed with "-") 7.44 1,138 93,958 3. Operating profit (loss is listed with "-") 809,048,029 847,367,442 Plus: Non-operating income 7.45 3,575,914 2,006,392 Minus: Non-operating expenses 7.46 164,050 1,392,362 4. Total profits (total loss is listed with "-") 812,459,893 847,981,472 Minus: Income tax expenses 7.47 210,281,578 211,979,735 5. Net profit (net loss is listed with "-") 602,178,315 636,001,737 5.1 Classification by operation continuity 5.1.1 Net profit from continuing operation (net loss is listed with 602,178,315 636,001,737 "-") 52 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 5.1.2 Net profit from terminating operation (net loss is listed with "-") 5.2 Classification by ownership 5.2.1 Net profit attributable to owner of the parent company 603,403,789 635,837,405 5.2.2 Minority interest income -1,225,474 164,332 6. Net after-tax amount of other comprehensive income 7.48 -4,657,291 -11,126,413 Net after-tax amount of other comprehensive income attributable to -3,060,721 -9,230,820 owner of the parent company 6.1 Other comprehensive income not to be reclassified into profit and loss later 6.1.1 Changes after remeasuring and resetting the benefit plans 6.1.2 Other comprehensive income not to be reclassified into profit and loss under equity law 6.1.3 Changes in the fair value of other investments in equity instruments 6.1.4 Changes in the fair value of the enterprise's own credit risk 6.1.5 Other 6.2 Other comprehensive income to be reclassified into profit and -3,060,721 -9,230,820 loss later 6.2.1 Other comprehensive income to be reclassified into profit and loss under equity law 6.2.2 Changes in the fair value of other debt investments 6.2.3 Profit and loss from changes in the fair value of financial assets for sale 6.2.4 Amount of financial assets reclassified into other comprehensive income 6.2.5 Profit and loss from reclassification of held-to-maturity investments into financial assets for sale 6.2.6 Provision for credit impairment of other credit investments 6.2.7 Provision for cash-flow hedge 6.2.8 Difference in translation of Foreign Currency Financial -3,060,721 -9,230,820 Statement 6.2.9 Other Net after-tax amount of other comprehensive income attributable to -1,596,570 -1,895,593 minority shareholders 7. Total comprehensive income 597,521,024 624,875,324 Attributable to owner of the parent company 600,343,068 626,606,585 Attributable to minority shareholders -2,822,044 -1,731,261 8. Earnings per share: 8.1 Basic earnings per share 0.88 0.93 8.2 Diluted earnings per share 0.88 0.93 Legal Representative: Zhou Hongjiang Accounting Supervisor: Jiang Jianxun Accounting Department Manager: Jiang Jianxun 2.4 Profit statement of the parent company Compiling unit: Yantai Changyu Pioneer Wine Co., Ltd. Unit: Yuan Item Note Sum of current period Sum of prior period 1. Operating income 15.4 352,351,002 408,845,211 Minus: Operating costs 15.4 309,570,580 352,646,989 53 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Taxes and surcharges 13,140,156 24,463,375 Selling expenses Administrative expenses 39,434,246 39,827,281 Research and development expenses 405,061 360,466 Financial expenses -3,657,370 -15,151,608 Including: Interest expenses -2,705,073 11,357,611 Interest income 1,470,667 29,630,717 Plus: Other profit 1,716,527 1,976,527 Investment profit (loss is listed with "-") 15.5 264,221,755 312,409,576 Including: Investment profit for joint-run business and joint venture Financial assets measured at amortized cost cease to be recognized as income (loss is listed with "-") Net exposure hedge income (loss is listed with "-") Income from fair value changes (loss is listed with "-") Credit impairment loss (loss is listed with "-") Asset impairment loss (loss is listed with "-") Income from asset disposal (loss is listed with "-") 75,000 2. Operating profit (loss is listed with "-") 259,396,611 321,159,811 Plus: Non-operating income 703,559 56,479 Minus: Non-operating expenses 97,638 528 3. Total profits (total loss is listed with "-") 260,002,532 321,215,762 Minus: Income tax expenses -726,946 2,450,592 4. Net profit (net loss is listed with "-") 260,729,478 318,765,170 4.1Net profit from continuing operation (net loss is listed with 260,729,478 318,765,170 "-") 4.2 Net profit from terminating operation (net loss is listed with "-") 5. Net after-tax amount of other comprehensive income 5.1 Other comprehensive income not to be reclassified into profit and loss later 5.1.1 Changes after remeasuring and resetting the benefit plans 5.1.2 Other comprehensive income not to be reclassified into profit and loss under equity law 5.1.3 Changes in the fair value of other investments in equity instruments 5.1.4 Changes in the fair value of the enterprise's own credit risk 5.1.5 Other 5.2 Other comprehensive income to be reclassified into profit and loss later 5.2.1 Other comprehensive income to be reclassified into profit and loss under equity law 5.2.2 Changes in the fair value of other debt investments 5.2.3 Profit and loss from changes in the fair value of financial assets for sale 5.2.4 Amount of financial assets reclassified into other comprehensive income 5.2.5 Profit and loss from reclassification of held-to-maturity investments into financial assets for sale 5.2.6 Provision for credit impairment of other credit investments 54 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 5.2.7 Provision for cash-flow hedge 5.2.8 Difference in translation of Foreign Currency Financial Statement 5.2.9 Other 6. Total comprehensive income 260,729,478 318,765,170 7. Earnings per share: 7.1 Basic earnings per share 0.38 0.47 7.2 Diluted earnings per share 0.38 0.47 Legal Representative: Zhou Hongjiang Accounting Supervisor: Jiang Jianxun Accounting Department Manager: Jiang Jianxun 2.5 Consolidated cash flow statement Compiling unit: Yantai Changyu Pioneer Wine Co., Ltd. Unit: Yuan Item Note Sum of current period Sum of prior period 1. Cash flows from operating activities: Cash received from sales of goods and rending of 2,399,548,448 2,680,388,050 services Net increase in customer and interbank deposits Net increase in borrowings from central bank Net increase in borrowings from other financial institutions Cash received from receiving insurance premium of original insurance contract Net cash received from reinsurance business Net increase in policy holder deposits and investment funds Cash received from collecting interest, handling fees and commissions Net increase in borrowing funds Net increase in repurchasement business funds Net cash received for buying and selling securities Tax refund received 20,038,271 26,089,608 Other cash received related to operating activities 7.49 67,785,620 42,343,021 Subtotal of cash flows of operating activities 2,487,372,339 2,748,820,679 Cash paid for goods and services 718,093,432 677,552,938 Net increase in customer loans and advances Net increase in deposits in central bank and interbank deposits Cash paid to original insurance contract payments Net increase in financial assets held for trading purposes Net increase in lending funds Cash paid to interest, handling fees and commissions Cash paid to policy bonus Cash paid to and on behalf of employees 278,638,333 278,814,385 Cash paid for taxes and expenses 598,384,101 802,722,798 Other cash paid related to operating activities 7.49 392,780,467 436,977,086 Sub-total of cash outflows of operating activities 1,987,896,333 2,196,067,207 55 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Item Note Sum of current period Sum of prior period Net cash flow from operating activities 499,476,006 552,753,472 2. Cash flow from investing activities: Cash received from disinvestment Cash received from withdrawal of fixed deposits 104,597,650 305,000,000 Cash received from obtaining investment income Cash received from obtaining interest income 1,004,552 2,342,015 Cash received from disposal of fixed assets, intangible 175,837 471,130 assets and other long-term assets Net cash received from disposal of branch and other business unit Other cash received related to investing activities Subtotal of cash flows of investment activities 105,778,039 307,813,145 Cash paid to acquire fixed assets, intangible assets and 135,073,897 154,464,274 other long-term assets Cash for investment Cash paid for purchasing fixed deposits 85,238,750 340,000,000 Net increase in hypothecated loan Net cash paid for acquiring branch and other business 104,566,419 unit Other cash paid related to investment activities Subtotal of cash outflows of investment activities 220,312,647 599,030,693 Net cash flow from investing activities -114,534,608 -291,217,548 3. Cash flow from financing activities Cash received from acquiring investment Including: cash received from acquiring minority shareholders investment by branch Cash received from acquiring loans 656,495,139 669,905,706 Cash received from issuing bonds Other cash received related to financing activities 7.49 23,521,431 Subtotal cash flows of financing activities 656,495,139 693,427,137 Cash paid for paying debts 658,033,492 658,512,141 Cash paid for distributing dividend and profit or paying 16,590,004 21,265,533 interest Including: dividend and profit paid to minority shareholders by branch Other cash paid related to financing activities 7.49 20,000,000 Subtotal of cash outflows of financing activities 674,623,496 699,777,674 Net cash flow from financing activities -18,128,357 -6,350,537 4. Influences of exchange rate fluctuation on cash 53,702 -7,404,199 and cash equivalents 5. Net Increase in cash and cash equivalents 366,866,743 247,781,188 Plus: balance at the beginning of the period of cash and 1,206,860,334 1,180,889,274 cash equivalents 6. Balance at the end of the period of cash and cash 1,573,727,077 1,428,670,462 equivalents Legal Representative: Zhou Hongjiang Accounting Supervisor: Jiang Jianxun Accounting Department Manager: Jiang Jianxun 56 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 2.6 Cash flow statement of the parent company Compiling unit: Yantai Changyu Pioneer Wine Co., Ltd. Unit: Yuan Item Sum of current period Sum of prior period 1. Cash flows from operating activities: Cash received from sales of goods and rending of services 219,405,421 275,862,358 Tax refund received Other cash received related to operating activities 57,674,830 100,163,394 Subtotal of cash flows of operating activities 277,080,251 376,025,752 Cash paid for goods and services 163,184,301 200,935,534 Cash paid to and on behalf of employees 45,116,586 43,647,320 Cash paid for taxes and expenses 22,530,113 43,132,327 Other cash paid related to operating activities 321,847,893 19,942,485 Sub-total of cash outflows of operating activities 552,678,893 307,657,666 Net cash flow from operating activities -275,598,642 68,368,086 2. Cash flow from investing activities: Cash received from disinvestment Cash received from withdrawal of fixed deposits 40,000,000 305,000,000 Cash received from obtaining investment income 760,152,668 717,667,435 Cash received from obtaining interest income 484,857 2,342,015 Net cash received from disposal of fixed assets, intangible assets and 7,519 538,055 other long-term assets Net cash received from disposal of branch and other business unit Other cash received related to investing activities Subtotal of cash flows of investment activities 800,645,044 1,025,547,505 Cash paid to acquiring fixed assets, intangible assets and other 10,164,233 11,968,401 long-term assets Cash for investment 13,000,000 105,926,184 Cash paid for purchasing fixed deposits 85,238,750 340,000,000 Net cash paid for acquiring branch and other business unit Other cash paid related to investment activities Subtotal of cash outflows of investment activities 108,402,983 457,894,585 Net cash flow from investing activities 692,242,061 567,652,920 3. Cash flow from financing activities Cash received from acquiring investment Cash received from acquiring loans 200,000,000 Cash received from issuing bonds Other cash received related to financing activities Subtotal cash flows of financing activities 200,000,000 Cash paid for debts 600,000,000 Cash paid to distribute dividend, profit or pay interest 3,248,000 11,660,417 Other cash paid related to financing activities Subtotal of cash outflows of financing activities 3,248,000 611,660,417 Net cash flow from financing activities -3,248,000 -411,660,417 4. Influences of exchange rate fluctuation on cash and cash equivalents 5. Net Increase in cash and cash equivalents 413,395,419 224,360,589 Plus: balance at the beginning of the period of cash and cash 532,384,882 493,568,866 57 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Item Sum of current period Sum of prior period equivalents 6. Balance at the end of the period of cash and cash equivalents 945,780,301 717,929,455 Legal Representative: Zhou Hongjiang Accounting Supervisor: Jiang Jianxun Accounting Department Manager: Jiang Jianxun 58 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 2.7 Consolidated owner’s equity changing list Unit: Yuan This period Owners’ equity of the parent company Item Other equity Minority Minus: Other General Total owners’ instruments Capital Special Surplus Undistributed shareholders’ Capital stock Treasury comprehensive risk Other Subtotal equity reserves reserves reserves profits equity Preferred Perpetual stock income preparation stock bonds Other 1. Balance at the end of 685,464,000 565,955,441 2,965,377 342,732,000 8,008,982,547 9,606,099,365 284,388,012 9,890,487,377 last year Plus: Accounting -3,278,942 -3,278,942 -3,278,942 policies changing Previous error correction Business combination under common control Other 2. Balance at the 685,464,000 565,955,441 2,965,377 342,732,000 8,005,703,605 9,602,820,423 284,388,012 9,887,208,435 beginning of this year 3. Increased or decreased amount in this period (reducing -3,060,721 192,125,389 189,064,668 -4,190,019 184,874,649 amount is listed with "-") 3.1 Total -3,060,721 603,403,789 600,343,068 -2,822,044 597,521,024 comprehensive income 3.2 Owners' invested and reduced capital 3.2.1 Owner’ invested common stock 3.2.2 Other equity instrument holders’ invested capital 3.2.3 Amount of shares paid and reckoned in 59 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report owners' equity 3.2.4 Other 3.3 Profit distribution -411,278,400 -411,278,400 -1,367,975 -412,646,375 3.3.1 Accrued surplus reserves 3.3.2 Accrued general risk preparation 3.3.3 Distribution to owners (or -411,278,400 -411,278,400 -1,367,975 -412,646,375 shareholders) 3.3.4 Other 3.4 Internal transfer of owners' equity 3.4.1 Capital reserves transferred and increased capital (or capital stock) 3.4.2 Surplus reserves transferred and increased capital (or capital stock) 3.4.3 Surplus reserves covering deficit 3.4.4 Retained earnings carried over from the benefit plan amount 3.4.5 Retained earnings carried over from other comprehensive income 3.4.6 Other 3.5 Special reserves 3.5.1 Withdrawal in this period 3.5.2 Usage in this period 3.6 Other 4. Balance at the end of 685,464,000 565,955,441 -95,344 342,732,000 8,197,828,994 9,791,885,091 280,197,993 10,072,083,084 this period 60 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Last period Owners’ equity of the parent company Item Other equity Minority Minus: Other General Total owners’ instruments Capital Special Surplus Undistributed shareholders’ Capital stock Treasury comprehensive risk Other Subtotal equity reserves reserves reserves profits equity Preferred Perpetual stock income preparation stock bonds Other 1. Balance at the end of 685,464,000 565,955,441 3,109,240 342,732,000 7,309,081,618 8,906,342,299 271,636,379 9,177,978,678 last year Plus: Accounting policies changing Previous error correction Business combination under common control Other 2. Balance at the 685,464,000 565,955,441 3,109,240 342,732,000 7,309,081,618 8,906,342,299 271,636,379 9,177,978,678 beginning of this year 3. Increased or decreased amount in this period (reducing -143,863 699,900,929 699,757,066 12,751,633 712,508,699 amount is listed with "-") 3.1 Total -143,863 1,042,632,929 1,042,489,066 -1,381,414 1,041,107,652 comprehensive income 3.2 Owners' invested 17,532,823 17,532,823 and reduced capital 3.2.1 Owner’ invested common stock 3.2.2 Other equity instrument holders’ invested capital 3.2.3 Amount of shares paid and reckoned in owners' equity 3.2.4 Other 17,532,823 17,532,823 61 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 3.3 Profit distribution -342,732,000 -342,732,000 -3,399,776 -346,131,776 3.3.1 Accrued surplus reserves 3.3.2 Accrued general risk preparation 3.3.3 Distribution to owners (or -342,732,000 -342,732,000 -3,399,776 -346,131,776 shareholders) 3.3.4 Other 3.4 Internal transfer of owners' equity 3.4.1 Capital reserves transferred and increased capital (or capital stock) 3.4.2 Surplus reserves transferred and increased capital (or capital stock) 3.4.3 Surplus reserves covering deficit 3.4.4 Retained earnings carried over from the benefit plan amount 3.4.5 Retained earnings carried over from other comprehensive income 3.4.6 Other 3.5 Special reserves 3.5.1 Withdrawal in this period 3.5.2 Usage in this period 3.6 Other 4. Balance at the end of 685,464,000 565,955,441 2,965,377 342,732,000 8,008,982,547 9,606,099,365 284,388,012 9,890,487,377 this period 62 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 2.8 Owner’s equity changing list of the parent company Unit: Yuan This period Item Other equity instruments Minus: Other Total owners’ Capital Capital Special Surplus Undistributed equity Preferred Perpetual Treasury comprehensive Other stock Other reserves reserves reserves profits stock bonds stock income 1. Balance at the end of last year 685,464,000 557,222,454 342,732,000 8,437,957,128 10,023,375,582 Plus: Accounting policies changing Previous error correction Other 2. Balance at the beginning of this year 685,464,000 557,222,454 342,732,000 8,437,957,128 10,023,375,582 3. Increased or decreased amount in this period (reducing amount is listed with -150,548,922 -150,548,922 "-") 3.1 Total comprehensive income 260,729,478 260,729,478 3.2 Owners' invested and reduced capital 3.2.1 Shareholders’ invested common stock 3.2.2 Other equity instrument holder’ invested capital 3.2.3 Amount of shares paid and reckoned in owners' equity 3.2.4 Other 3.3 Profit distribution -411,278,400 -411,278,400 3.3.1 Drew surplus reserves 3.3.2 Distribution to owners (or -411,278,400 -411,278,400 shareholders) 3.3.3 Other 3.4 Internal transfer of owners' equity 3.4.1 Capital reserves transferred and increased capital (or capital stock) 3.4.2 Surplus reserves transferred and 63 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report increased capital (or capital stock) 3.4.3 Surplus reserves covering deficit 3.4.4 Retained earnings carried over from the benefit plan amount 3.4.5 Retained earnings carried over from other comprehensive income 3.4.6 Other 3.5 Special reserves 3.5.1 Accrual in this period 3.5.2 Usage in this period 3.6 Other 4. Balance at the end of this period 685,464,000 557,222,454 342,732,000 8,287,408,206 9,872,826,660 Unit: Yuan Last period Item Other equity instruments Minus: Other Total owners’ Capital Capital Special Surplus Undistributed equity Preferred Perpetual Treasury comprehensive Other stock Other reserves reserves reserves profits stock bonds stock income 1. Balance at the end of last year 685,464,000 557,222,454 342,732,000 7,811,100,555 9,396,519,009 Plus: Accounting policies changing Previous error correction Other 2. Balance at the beginning of this year 685,464,000 557,222,454 342,732,000 7,811,100,555 9,396,519,009 3. Increased or decreased amount in this period (reducing amount is listed with 626,856,573 626,856,573 "-") 3.1 Total comprehensive income 969,588,573 969,588,573 3.2 Owners' invested and reduced capital 3.2.1 Shareholders’ invested common stock 3.2.2 Other equity instrument holder’ invested capital 3.2.3 Amount of shares paid and 64 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report reckoned in owners' equity 3.2.4 Other 3.3 Profit distribution -342,732,000 -342,732,000 3.3.1 Drew surplus reserves 3.3.2 Distribution to owners (or shareholders) 3.3.3 Other 3.4 Internal transfer of owners' equity 3.4.1 Capital reserves transferred and increased capital (or capital stock) 3.4.2 Surplus reserves transferred and increased capital (or capital stock) 3.4.3 Surplus reserves covering deficit 3.4.4 Retained earnings carried over from the benefit plan amount 3.4.5 Retained earnings carried over from other comprehensive income 3.4.6 Other 3.5 Special reserves 3.5.1 Accrual in this period 3.5.2 Usage in this period 3.6 Other 4. Balance at the end of this period 685,464,000 557,222,454 342,732,000 8,437,957,128 10,023,375,582 65 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 3. Company profile Yantai Changyu Pioneer Wine Co., Ltd. (the “Company” or the “Joint-stock 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 the merger and reorganization carried out by Yantai Changyu Group Co., Ltd. (“Changyu Group Company”) with its assets and liabilities in relation to wine business. The Company and its subsidiary companies (hereinafter collectively referred to as the “Group”) are engaged in the production and sale of wine, brandy and champagne, planting and purchase of grapes, development of tourism resources, etc. The registered address of the Company is Yantai City, Shandong Province, and the office address of the headquarters is 56 Dama Road, Zhifu District, Yantai City, Shandong Province. As at June 30, 2019, the Company issued 685,464,000 shares accumulatively. Refer to Note 7.30 for details. The parent company of the Group is Changyu Group Company incorporated in China, which was ultimately and actually controlled by four parties, including Yantai Guofeng Investment Holding Co., Ltd., ILLVA Saronno Holding Spa, International Finance Corporation and Yantai Yuhua Investment & Development Co., Ltd. The financial statement and the consolidated financial statement of the Company were approved by the Board of Directors on August 26, 2019. The details of scope of the consolidated financial statement in this period can be seen in Note 9 “Equity in other entities”. The details of scope changes of the consolidated financial statement in this period can be seen in Note 8 “Changes of the consolidated scope”. 4. Preparation basis of financial statement 4.1 Preparation basis The Group implements the Accounting Standards for Business Enterprises (including the new and revised editions published in 2014) (“ASBE”) published by the Ministry of Finance and relevant 66 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report regulations thereof. Note-accounting basis and pricing principle The note-accounting basis of financial accounting adopted by the Group is accrual system and the measurement basis adopted by the Group in preparing its financial statement is historical cost. Subsequently, if the assets are impaired, the impairment provisions are made in accordance with relevant accounting standards. When the historical cost measurement is used, the assets are measured by the amount of cash or cash equivalent when the assets are purchased or the fair value of the consideration. The liabilities are measured by the actually received funds or assets for performing the current obligations, or the contract amount for performing the current obligations, or the amount of cash or cash equivalent paid for anticipated liabilities in the daily activities. Fair value refers to a price received for selling an asset or paid for transferring a liability by the market participant in orderly transactions on the measurement date. No matter the fair value is observable or estimated by the valuation technique, the fair value measured and disclosed in this financial statement is recognized on this basis. The fair value measurement is divided into three levels based on the observable degree of the input fair value and the importance of this input value on the whole fair value measurement: *The input value of the first level is the unadjusted price of the same assets or liabilities which can be acquired in an active market on the measurement date. *The input value of the second level is the directly or indirectly observable input value of relevant assets or liabilities except that of the first level. *The input value of the third level is the unobservable input value of relevant assets or liabilities. 4.2 Continuous operation The Group has appraised the ability of continuous operation for 12 months from June 30, 2019, and no 67 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report issues or situations causing major doubts to this ability are found. Therefore, this financial statement is prepared on the basis of the continuous operation assumption. 5. Main accounting policies and accounting estimates 5.1 Statement on compliance with ASBE This financial statement fulfills the requirement of ASBE and gives a true and integrated view of the financial status and the consolidated financial status as at June 30, 2019, as well as the operating result, the consolidated operating result, the cash flow and the consolidated cash flow of the Company from January to June 2019. 5.2 Accounting period The accounting period of the Group is from January 1 to December 31. 5.3 Operating cycle The operating cycle refers to the period from the enterprise purchases the assets used for processing to the cash or cash equivalent is realized. The operating cycle of the Company is 12 months. 5.4 Recording currency Since Renminbi (RMB) is the currency of the main economic environment in which the Company and the domestic subsidiary companies thereof are situated, the Company and the subsidiary companies thereof adopt RMB as the recording currency. The overseas subsidiary companies thereof determine EUR, CLP and AUD as the recording currency according to the main economic environment in which they are situated. The currency in this financial statement prepared by the Group is RMB. 5.5 Accounting treatment method for business combination under common control and non-common control 5.5.1 Business combination and goodwill under non-common control 68 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report A business combination under non-common control is a business combination in which all of the combining enterprises are not ultimately controlled by the same party or parties before and after the combination. The combination cost shall be the fair value of the assets paid, the liabilities incurred or assumed or the equity instruments issued by the acquirer in exchange for the control over the acquiree. The intermediary expenses such as audit, legal services and assessment consultation and other related management expenses paid by the acquirer for business combination are included in the current profits and losses when they occur. The identifiable assets, liabilities and contingent liabilities which are obtained from the acquiree in the business combination and meet the recognition conditions shall be measured on the acquisition date according to the fair value thereof. Where the cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference shall be recognized as goodwill as an asset and initially measured at cost. Where the cost of combination is less than the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the acquirer firstly re-assesses the measurement of the fair values of the acquiree’s identifiable assets, liabilities and contingent liabilities and measurement of the cost of combination. If after that reassessment, the cost of combination is still less than the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the acquirer recognizes the remaining difference immediately in profit or loss for the current period. The goodwill formed due to business combination shall be separately listed in the consolidated financial statement and measured on the basis of the cost minus the accumulative impairment provision. 5.6 Compiling methods of consolidated financial statement The consolidation scope of the consolidated financial statement is determined on the basis of control. Control means that the investor holds the power in the invested party, obtains variable returns by participating in relevant activities of the invested party and has the ability to affect the amount of the returns by using the power on the invested party. Once any change of the relevant facts and situations results in any change of relevant elements of the above definition of Control, the Group will carry out reappraisal. 69 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report The merger of any subsidiary company starts from the date when the Group acquires the power to control this subsidiary company, while the termination of any subsidiary company ends in the date when the Group losses the power to control this subsidiary company. As for any subsidiary company obtained in a business combination under non-common control, the business result and the cash flow thereof since the acquisition date (date of obtaining the control power) shall have been properly included in the consolidated income statement and the consolidated cash flow statement. The principal accounting policies and accounting period adopted by the subsidiary companies shall be determined in accordance with the accounting policies and accounting period uniformly regulated by the Company. The influence of the internal transaction between the Company and the subsidiary companies as well as among subsidiary companies on the consolidated financial statement shall be neutralized at the time of combination. The shares in the owner's equity of the subsidiary companies, which do not belong to the parent company, shall be recognized as the minority equity and listed under the item of “minority equity” of the owner’s equity in the balance sheet. The shares in the current profits and losses of the subsidiary companies, which belong to the minority equity, shall be listed under the item of “minority equity” of the net profit in the consolidated income statement. If the loss of the subsidiary companies borne by minority shareholders exceeds the shares of the owner's equity entitled therein by the minority shareholders at the beginning of the period, the difference shall be still credited against the minority equity. 5.7 Determination standard of cash and cash equivalents Cash comprises cash on hand and demand deposit of the Company. Cash equivalents refer to short-term highly liquid investments held by the Group which are readily convertible into known amount of cash with an insignificant risk of changes in value. 5.8 Foreign currency transaction and foreign currency statement translation 70 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 5.8.1 Foreign currency transaction At the time of initial recognition of a foreign currency transaction, the amount of the foreign currency shall be translated into the amount of the recording currency at the spot exchange rate on the transaction date. The monetary items of the foreign currency transaction shall be translated into RMB at the spot change rate on the balance sheet date. The currency translation difference generated by the difference between the spot change rate on the balance sheet date and the spot change rate at the initial recognition or on the previous balance sheet date shall be included in the current profits and losses, except: ① the currency translation difference of the dedicated foreign currency loan that meets the capitalization condition shall be included in the cost of assets as capitalization during the capitalization period; ② the currency translation difference of the arbitrage tool to avoid foreign exchange risk shall be treated according to the hedge accounting method; ③ the currency translation difference of the available-for-sale monetary items generated by changes of the book balance other than the amortized cost shall be recognized as other comprehensive income and included in the current profits and losses. 5.8.2 Translation of foreign currency financial statement In order to compile a consolidated financial statement, the foreign currency financial statement of overseas business shall be translated into RMB financial statement in accordance with the following methods: all asset and liability items in the balance sheet shall be translated at the spot exchange rate on the balance sheet date; the shareholders' equity items, except for the ones as "undistributed profits", shall be translated at the spot exchange rate at the time when they occur; all items and the items reflecting the accrual profit distribution in the profit statement shall be translated at the exchange rate similar to the spot exchange rate at the time when they occur; the undistributed profits at the beginning of the year shall be the translated to the undistributed profits at the end of the previous year; the undistributed profits at the end of the year shall be calculated and listed as the translated profit distribution items; and the difference between the asset items and the sum of the liability items and the shareholders’ equity items shall be recognized as other comprehensive income and included in the shareholder's equity. The foreign currency cash flows and the cash flows of the overseas subsidiary companies shall be translated at the exchange rate similar to the spot exchange rate at the time when they occur; the 71 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report amount of the cash and cash equivalents impacted by the exchange rate movement shall be, as a reconciling item, separately listed under “impact of exchange rate movement on cash and cash equivalents” in the cash flow statement. The balance at the beginning of the year and the actual amount of the previous year shall be listed as the amount translated according to the financial statement of the previous year. 5.9 Financial instruments When becoming a party to a contract of financial instruments, the Company shall recognize a financial asset or financial liability. 5.9.1 Classification, recognition and measurement of financial assets According to the business model of financial assets management and the contractual cash flow characteristics of financial assets, the Company divides financial assets into: financial assets measured at amortized cost; financial assets measured at fair value and the variation of which is included in other comprehensive income; and financial assets measured at fair value and the variation of which is included in the current profits and losses. At the time of initial recognition, financial assets shall be measured at their fair value. As for the financial assets measured at their fair value and the variation of which is included in the current profits and losses, the transaction expenses thereof shall be directly included in the current profits and losses; as for other categories of financial assets, the transaction expenses thereof shall be included in initial recognized cost. For accounts receivable or bills receivable arising from sale of products or provision of services, which do not contain or do not take into account material financing elements, the Company shall take the amount of consideration that the Company is entitled to receive as expected as the initial recognized amount. ① Financial assets measured at amortized cost The Company manages such financial assets by the following business model: collecting contractual cash flow as the target, with the contractual cash flow characteristics of such financial assets consistent with the basic lending arrangement, that is, the cash flow generated on a specific date is only the payment of principal and interest based on the outstanding principal amount. The Company shall recognize the interest income of such financial assets by the actual interest rate method, and conduct subsequent measurement at amortized cost. The profits or losses generated from the amortization or 72 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report impairment shall be included in the current profits and losses. ② Financial assets measured at fair value and the variation of which is included in other comprehensive income The Company manages such financial assets by the following business model: aiming at both receiving contractual cash flow and selling, with the contractual cash flow characteristics of such financial assets consistent with the basic lending arrangements. Such financial assets are measured at fair value and the variation of which is included in other comprehensive income, but impairment losses or gains, exchange gains and losses and interest income calculated by the effective interest rate method shall be included in the current profits and losses. In addition, the Company designates some non-tradable equity instrument investments as financial assets measured at fair value and the variation of which is included in other comprehensive income. The Company shall include relevant dividend income of such financial assets in the current profits and losses, and the fair value changes in other comprehensive income. When the recognition of such financial assets is terminated the accumulated gains or losses previously recorded in other comprehensive income will be transferred into retained income from other comprehensive income, which shall not be included in the current profits and losses. ③ Financial assets measured at fair value and the variation of which is included in the current profits and losses The Company divides those financial assets excluding the above financial assets measured at amortized cost and financial assets measured at fair value and the variation of which is included in other comprehensive income into financial assets measured at fair value and the variation of which is included in the current profits and losses, and list as tradable financial assets. In addition, at the time of initial recognition, in order to eliminate or significantly reduce accounting mismatches, the Company designates some financial assets as financial assets measured at fair value and the variation of which is included in the current profits and losses. For such financial assets, the Company adopts fair value for subsequent measurement, and the variation in fair value shall be included in the current profits and losses. The financial assets that have matured for more than one year since the balance sheet date and are expected to be held for more than one year are listed as other non-current financial assets. 5.9.2 Classification, recognition and measurement of financial liabilities At the time of initial recognition, financial liabilities are divided into financial liabilities measured at fair value and the variation of which is included in the current profits and losses and other financial liabilities. As for the financial liabilities measured at fair value and the variation of which is included 73 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report in the current profits and losses, the transaction expenses thereof shall be directly included in the current profits and losses; as for other financial liabilities, the transaction expenses thereof shall be included in initial recognized cost. ① Financial liabilities measured at fair value and the variation of which is included in the current profits and losses Financial liabilities measured at fair value and the variation of which is included in the current profits and losses include tradable financial liabilities (including derivatives belonging to financial liabilities) and financial liabilities designated as those measured at fair value when initially recognized and the variation of which is included in the current profits and losses. Tradable financial liabilities (including derivatives belonging to financial liabilities) shall be subsequently measured at fair value, and the variation in the fair value shall be included in the current profits and losses except those related to hedge accounting. For the financial liabilities designated as those measured at fair value and the variation of which is included the current profits and losses, the variation in fair value caused by changes in the Company's own credit risk is included into other comprehensive income, and when the recognition of this liability is terminated, the accumulated variation in fair value caused by changes in its own credit risk which is included into other comprehensive income shall be transferred into retained income. The remaining variations in fair value are included in the current profits and losses. If any accounting mismatch in profits and losses is caused or enlarged by handling the impact of changes in the own credit risk of such financial liabilities in the above way, the Company shall include all the gains or losses of such financial liabilities (including the impact amount of changes in the credit risk of the enterprise) in the current profits and losses. ② Other financial liabilities In addition to the financial assets of which the transfer doesn’t meet the conditions to terminate the recognition or financial liabilities formed by continuous involvement in the transferred financial assets and other financial liabilities beyond the financial guarantee contract classified as financial liabilities measured at amortized cost, the financial liabilities shall be measured at the amortized cost for subsequent measurement, and the profits or losses caused by termination of recognition or amortization shall be included in the current profits and losses. 5.9.3 Recognition basis and measurement method for the transfer of financial assets 74 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Where a financial asset meets any of the following requirements, the recognition of it shall be terminated: ① The contractual rights for collecting the cash flow of the said financial asset are terminated; ② The financial asset has been transferred and almost all the risks and rewards in the ownership of the financial asset have been transferred to the transferee; ③The financial asset has been transferred, although the enterprise has neither transferred nor retained almost all the risks and rewards in the ownership of the financial asset, it has given up its control over the financial asset. If the enterprise has neither transferred nor retained nearly all the risks and rewards in the ownership of the financial asset, and has not given up its control over the financial asset, relevant financial asset shall be recognized according to the extent of its continued involvement in the transferred financial asset, and relevant liabilities shall be recognized accordingly. The extent of continued involvement in the transferred financial asset refers to the risk level faced by the enterprise due to the change in the value of the financial asset. Where the overall transfer of the financial asset meets the derecognition conditions, the difference between the book value of the transferred financial asset as well as the consideration received due to such transfer and the summation of the cumulative amount of the fair value of the asset that is originally included in other comprehensive income shall be included in the current profits and losses. Where the partly transfer of a financial asset meets the derecognition conditions of termination, the book value of the transferred financial asset shall be distributed between the terminated part of the recognition and the unterminated part of the recognition, and the difference between the sum of the consideration received as a result of the transfer and the accumulated mount of the changes in the fair value of the derecognized part that is originally included in other comprehensive income and the aforesaid distributed book amount shall be included in the current profits and losses. The Company shall determine whether almost all the risks and rewards in the ownership of the financial assets sold by means of attached right of recourse or the financial assets that it holds which are endorsed to transfer have been transferred. Where almost all the risks and rewards in the ownership of the financial assets have been transferred to the transferee, the recognition of such financial assets shall be terminated; Where almost all the risks and rewards in the ownership of the financial assets are retained, the recognition of such financial assets shall not be terminated; If almost all the risks and rewards in the ownership of the financial assets are neither transferred nor retained, the enterprise shall continue to judge whether it retains control over the assets and then conduct accounting treatment in accordance with the principles described in the preceding paragraphs. 75 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 5.9.4 Derecognition of financial liabilities Where the current obligation of a financial liability (or part thereof) has been discharged, the Company shall terminate the recognition of such financial liability (or part thereof). If the Company (borrower) signs an agreement with the lender to replace the original financial liability by assuming the new financial liability, and the contract terms of the new financial liability are substantially different from those of the original financial liability, the recognition of the original financial liability shall be terminated and a new financial liability shall be recognized at the same time. If the Company substantially modifies the contract terms of the original financial liability (or part thereof), it shall terminate the recognition of the original financial liability and recognize a new financial liability in accordance with the revised terms at the same time. If the recognition of a financial liability (or part of it) is terminated, the Company shall record the difference between its book value and the consideration paid (including the transferred non-cash assets or liabilities assumed) into the current profits and losses. 5.9.5 Offsetting of financial assets and financial liabilities Where the Company has a legal right that is currently enforceable to set off the recognized amount of financial assets and financial liabilities, and intends either to settle on a net basis, or to realise the financial assets and clear off the financial liabilities simultaneously, the financial assets and financial liabilities shall be offset and the net amount is presented in the balance sheet. Except for the above circumstances, financial assets and financial liabilities shall be presented separately in the balance sheet and shall not be offset. 5.9.6 Determination method of the fair value of financial assets and liabilities The fair value refers to the price that market participants need to pay to receive or transfer a liability when selling an asset in an orderly transaction that takes place on the measurement date. Where there is an active market for a financial instrument, the Company shall determine its fair value by the quotation in the active market. Quotations in the active market are prices that are readily available from exchanges, brokers, trade associations, pricing services, etc., on a regular basis, which represent the prices of actual market transactions that occur in fair trade. Where there is no active market for financial instruments, the Company shall use valuation 76 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report techniques to determine their fair value. Valuation techniques include referring to prices used in recent market transactions by parties familiar with the situation and willing to trade, current fair values of other financial instruments that are substantially the same, discounted cash flow method, option pricing models, etc. At the time of valuation, the Company adopts valuation techniques applicable to the current situation and supported by sufficient available data and other information, selects input values consistent with the asset or liability characteristics considered by market participants in the transaction of related assets or liabilities, and gives priority to relevant observable input values as far as possible. When relevant observable input values can’t be obtained or are not practicable to obtain, the non-inputable values shall be used. 5.9.7 Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. The Company issues (including refinancing), repurchases, sells or cancels equity instruments as changes in equity, and transaction costs related to equity transactions are deducted from the equity. The Company does not recognize any variation in the fair value of equity instruments. Dividends paid on the Company's equity instruments during their existence (including the “interest” generated by the instruments classified as equity instruments) shall be treated as profit distribution. 5.9.8 Impairment of financial assets For financial assets measured at amortized cost and debt instrument investments measured at fair value and whose changes are included in other comprehensive income, the Company shall recognize provision for losses on the basis of expected credit losses. The Company takes reasonable and reliable information about past events, current situation and forecast of future economic situation into consideration, calculates the probability weighted amount of the present value of the difference between the cash flow receivable of the contract and the cash flow expected to be received based on the weight of the risk of default, and recognizes the expected credit losses. 77 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report On each balance sheet date, the Company measures the expected credit losses of financial instruments at different stages respectively. If the credit risk of the financial instrument does not increase significantly after the initial recognition, in the first stage, the Company shall measure the provision for losses according to the expected credit losses in the next 12 months; If the credit risk of a financial instrument has increased significantly since the initial recognition, but no credit impairment has occurred, in the second stage, the Company shall measure the provision for losses according to the expected credit loss of the entire duration of the instrument; If the credit impairment of a financial instrument has occurred since the initial recognition, in the third stage, the Company shall measure the provision for losses according to the expected credit loss of the entire duration of the instrument. For financial instruments with low credit risk on the balance sheet date, the Company assumes that the credit risk has not increased significantly since the initial recognition, and measures the provision for losses according to the expected credit loss in the next 12 months. For the financial instruments in the first and second stages and with low credit risk, the Company calculates the interest income according to the book balance without deduction of impairment provision at the actual interest rate. For financial instruments in the third stage, interest income is calculated according to the book balance minus the amortized cost at the actual interest rate after the provision for impairment has been accrued. When an individual financial asset can’t evaluate the information of the expected credit loss at a reasonable cost, the Company divides the receivables into several combinations according to the characteristics of credit risk, and calculates the expected credit loss on the basis of the combination. For bills receivable and accounts receivable, no matter whether there is a significant financing component, the Company measures the provision for losses according to the expected credit loss throughout the duration. For the bills receivable divided into portfolio, the Company calculates the expected credit loss by referring to the historical credit loss experience, combining the current situation as well as the forecast of the future economic situation, and through the default risk exposure and the expected credit loss rate of the entire duration. For the accounts receivable divided into portfolio, the Company calculates the expected credit loss by referring to the historical credit loss experience, combining the current situation as well as the forecast 78 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report of the future economic situation, and formulating the comparison table of the overdue days of accounts receivable and the expected credit loss rate of the whole duration. For other receivables divided into portfolio, the Company calculates the expected credit loss by referring to the historical credit loss experience, combining the current situation as well as the forecast of the future economic situation, and through the default risk exposure and the expected credit loss rate within the next 12 months or the entire duration. The Company will include the accrued or transferred-back provision for losses in the current profits and losses. For debt instruments that are measured at fair value and the variation of which is included in other comprehensive income, the Company shall adjust other comprehensive income while including impairment loss or profit in the current profits and losses. 5.10 Inventories 5.10.1 Categories of inventories The inventories of the Group mainly include raw materials, goods in process and finished goods. Inventories are initially measured at cost. Inventory costs include purchase costs, processing costs and other expenses incurred to bring inventory to its current location and condition. The agricultural products harvested are treated in accordance with the Accounting Standard for Business Enterprises No.1 – Inventories. 5.10.2 Valuation method of inventories upon delivery The actual cost of inventories upon delivery is calculated by the weighted average method. 5.10.3 Determination basis for net realisable value of inventories On the balance sheet date, inventories are measured at the lower of cost and net realisable value. If the net realisable value is below the cost of inventories, a provision for decline in value of inventories is made. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion, the estimated costs necessary to make the sale and relevant taxes. Net 79 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report realisable value is determined on the basis of clear evidence obtained, and takes into consideration the purposes of holding inventories and effect of post balance sheet events. Provision for decline in value of other inventories is made based on the excess of cost of inventory over its net realisable value on an item-by-item basis. After the provision for decline in value of inventories is made, if the circumstances that previously caused inventories to be written down below cost no longer exist so that the net realisable value of inventories is higher than their cost, the original provision for decline in value is reversed and the reversal is included in profit or loss for the period. 5.10.4 Inventory count system The perpetual inventory system is maintained for stock system. 5.10.5 Amortization method for low cost and short-lived consumable items and packaging materials Packaging materials and low cost and short-lived consumable items are amortized using the immediate write-off method. 5.11 Non-current assets held for sale Non-current assets and disposal groups are classified as held for sale category when the Group recovers the book value through a sale (including an exchange of nonmonetary assets that has commercial substance) rather than continuing use. Non-current assets or disposal groups classified as held for sale are required to satisfy the following conditions: (1) the asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset or disposal group; (2) the sale is highly probable, i.e. the Group has made a resolution about selling plan and obtained a confirmed purchase commitment and the sale is expected to be completed within one year. The Group measures the no-current assets or disposal groups classified as held for sale at the lower of 80 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report their carrying amount and fair value less costs to sell. Where the carrying amount is higher than the net amount of fair value less costs to sell, carrying amount should be reduced to the net amount of fair value less costs to sell, and such reduction is recognized in impairment loss of assets and included in profit or loss for the period. Meanwhile, provision for impairment of held-for-sale assets are made. When there is increase in the net amount of fair value of non-current assets held for sale less costs to sell On the balance sheet date, the original deduction should be reversed in impairment loss of assets recognized after the classification of held-for-sale category, and the reverse amount is include in profit or loss for the period. Non-current assets held for sale in non-current assets are not subject to depreciation or amortization. 5.12 Long-term equity investments 5.12.1 Judgment basis of control, joint control and significant influence Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating policy decisions relating to the activity require the unanimous consent of the parties sharing control. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. When determining whether an investing enterprise is able to exercise control or significant influence over an investee, the effect of potential voting rights of the investee (for example, warrants and convertible debts) held by the investing enterprises or other parties that are currently exercisable or convertible shall be considered. 5.12.2 Determination of initial investment cost For a long-term equity investment acquired not involving enterprises under common control, the investment cost of the long-term equity investment is the cost of acquisition. Audit fee, legal services, evaluation and consulting fees and other related management costs in acquisition are expensed in profits and losses when happened. Other long-term equity investments acquired from other than acquisitions are recognized using 81 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report original cost. 5.12.3 Subsequent measurement and recognition of profit or loss Long-term equity investment accounted for using the cost method The financial statement of the Company accounts for long-term equity investment using the cost method. A subsidiary is an investee that is controlled by the Group. Under the cost method, a long-term equity investment is measured at initial investment cost. Long-term equity investment is adjusted when capital is added or recollected. Investment income is recognized in the period in accordance with the attributable share of cash dividends or profit distributions declared by the investee. 5.12.4 Disposal of long-term equity investments On disposal of a long-term equity investment, the difference between the proceeds actually received and receivable and the carrying amount is recognized in profit or loss for the period. 5.13 Investment properties Investment property is property held to earn rentals or for capital appreciation or both. An investment property is measured initially at cost. Subsequent expenditures incurred for such investment property are included in the cost of the investment property if it is probable that economic benefits associated with an investment property will flow to the Group and the subsequent expenditures can be measured reliably. Other subsequent expenditures are recognized in profit or loss in the period in which they are incurred. The Group uses the cost model for subsequent measurement of investment properties, and adopts a depreciation or amortization policy for the investment property which is consistent with that for buildings or land use rights. When an investment property is sold, transferred, retired or damaged, the Group recognizes the 82 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report amount of any proceeds on disposal net of the carrying amount and related taxes in profit or loss for the period. 5.14 Fixed assets 5.14.1 Recognition condition Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and have useful lives of more than one accounting year. A fixed asset is recognized only when it is probable that economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. Fixed assets are initially measured at cost. Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and if it is probable that economic benefits associated with the asset will flow to the Group and the subsequent expenditures can be measured reliably. Meanwhile the carrying amount of the replaced part is derecognized. Other subsequent expenditures are recognized in profit or loss in the period in which they are incurred. 5.14.2 Depreciation method A fixed asset is depreciated over its useful life using the straight-line method since the month subsequent to the one in which it is ready for intended use. The useful life, estimated net residual value rate and annual depreciation rate of each category of fixed assets are as follows: Depreciation Residual value Annual depreciation Classification Depreciation method life rate rate Straight-line Houses and buildings 20-40 years 0-5% 2.4%-5.0% depreciation Straight-line 5-30 years 0-5% 3.2%-20.0% Machinery equipment depreciation Straight-line 4-12 years 0-5% 7.9%-25.0% Transportation tools depreciation Estimated net residual value assumes the situation where a fixed asset expire for its estimated useful life and is in its expected final status. Estimated net residual value is the amount that the Group can 83 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report obtain from the disposal less expected disposal fees. 5.14.3 Other explanations If a fixed asset is upon disposal or no future economic benefits are expected to be generated from its use or disposal, the fixed asset is derecognized. When a fixed asset is sold, transferred, retired or damaged, the amount of any proceeds on disposal of the asset net of the carrying amount and related taxes is recognized in profit or loss for the period. The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation method applied at least once at each financial year-end, and account for any change as a change in an accounting estimate. 5.15 Construction in progress Construction in progress is measured at its actual costs. The actual costs include various construction expenditures during the construction period, borrowing costs capitalised before it is ready for intended use and other relevant costs. Construction in progress is not depreciated. Construction in progress is transferred to a fixed asset when it is ready for intended use. 5.16 Borrowing costs Borrowing costs directly attributable to the assets meeting the capitalization conditions during the acquisition, construction or production shall be capitalized when expenditures for such asset and borrowing costs are incurred and activities relating to the acquisition, construction or production of the asset that are necessary to prepare the asset for its intended use or sale have commenced. Capitalization of borrowing costs shall be terminated when the qualifying asset being acquired, constructed or produced becomes ready for its intended use or sale. Capitalization of borrowing costs is suspended during the period in which the acquisition, construction or production of a qualifying asset is suspended abnormally and when the suspension is for a continuous period of more than 3 months, until the acquisition, construction or production of the asset is resumed. Other borrowing costs are recognized as an expense in the period in which they are incurred. The interest expenses actually incurred in the current period of the special loan shall be capitalized after deducting the interest income obtained by depositing the unused loan funds into the bank or the 84 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report investment income obtained from the temporary investment. 5.17 Biological assets The biological assets of the Group are productive biological assets. Productive biological assets are biological assets, for example, held for the production of agricultural produce, provision of services or leasing Productive biological assets in the Group are vines to produce grapes. A productive biological asset is initially measured at cost. The cost of a productive biological asset self-grown or self-bred comprises those costs necessarily incurred and directly attributable to the asset before the asset becomes available for its intended production and operating purposes, and any borrowing cost meeting the capitalisation criteria. The productive biological assets are not accrued depreciation until reaching the intended production and operation purposes. After reaching the intended production and operation purposes, the productive biological assets are accrued depreciation within the service life straight-line depreciation. The service life, estimated net residual value rate and annual depreciation rate of different productive biological assets are as follows: Category Useful life Estimated net residual rate Annual depreciation rate Vines 20 years 5.0% The Group evaluates the useful life and expected net salvage value by considering the normal producing life of the productive biological assets. The Group reviews the useful life and estimated net residual value of productive biological assets and the depreciation method applied at least once at each financial year-end, and account for any change as a change in an accounting estimate. On the sale, identification of any shortages during stocktaking, death or damage of biological asset, the proceeds on disposal net of the carrying amount and relevant taxes is recognized in profit or loss for the current period. 85 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 5.18 Intangible assets Intangible assets include land use right, software, trademark, etc. An intangible asset is measured initially at cost method. When an intangible asset with a finite useful life is available for use, its original cost less net residual value and any accumulated impairment losses is amortized over its estimated useful life using the straight-line method. Intangible assets with indefinite useful lives are not amortized. The useful lives of the intangible assets are as follows: Category Useful life Estimated net residual rate Annual amortization rate Land use right 40-50 years - 2%-2.5% Software 5-10 years - 10%-20% Trademark 10 years 10% Except for the above intangible assets with finite useful life, the Group also has land use right and trademark use right with infinite useful lives. Land use right with infinite useful life refers to the permanent land property right held by the Company for purchasing by Via Indómita, S.A., Via Dos Andes, S.A., and Bodegas Santa Alicia SpA. (collectively referred to as the "Chile Indomita Wine Group") and Kilikanoon Estate Pty Ltd (hereinafter referred to as “Australian Kilikanoon Estate”) according to related Chilean and Australian law, which doesn’t need to be amortized. Trademark use right refers to the trademark held by the Group for purchasing Chile Indomita Wine Group and Australian Kilikanoon Estate, which has no finite useful life. The valuation of trademark use right is based on the trends in the market and competitive environment, product cycle, and managing long-term development strategy. Those basis indicated the trademark will provide net cash flows to the Group within a given period. Because it was hard to predict the period that it would bring economic benefits to the Group, the useful lives were uncertain. For an intangible asset with a finite useful life, the Group reviews the useful life and Amortization method at the end of the period, and makes adjustments when necessary. 5.19 Impairment of long-term assets The Group and the Company review the impairment status of long-term equity investments, fixed assets, investment real estate, construction in progress, productive biological asset and intangible assets with finite useful life at the end of each year. If the assets exist impairment, the Group estimates the recoverable amount of the assets. Intangible assets with indefinite useful life and intangible assets 86 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report not yet available for use are tested for impairment annually, irrespective of whether there is any indication that the assets may be impaired. Recoverable amount is estimated on individual basis. If it is not practical to estimate the recoverable amount of an individual asset, the recoverable amount of the asset group to which the asset belongs will be estimated. The recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of the future cash flows expected to be derived from the asset. If recoverable amount of assets is less than book value, the difference is recognized as impairment provision and expensed in current period. Goodwill is tested for impairment at least at the end of each year. For the purpose of impairment testing, goodwill is considered together with the related assets group (s), i.e., goodwill is reasonably allocated to the related assets group (s) or each of assets group (s) expected to benefit from the synergies of the combination. An impairment loss is recognized if the recoverable amount of the assets group or sets of assets groups (including goodwill) is less than its carrying amount. The impairment loss is firstly allocated to reduce the carrying amount of any goodwill allocated to such assets group or sets of assets groups, and then to the other assets of the group pro-rata on the basis of the carrying amount of each asset (other than goodwill) in the group. The impairment is recognized in profit or loss for the period in which it is incurred and will not be reversed in any subsequent period. 5.20 Long-term unamortized expenses The Long-term unamortized expenses are amortized evenly over the period of estimated earnings, and the long-term unamortized expenses of the Group are amortized over the following period: Amortization period Land requisition fee 50 years Land lease prepayment 50 years Greening fee 5-20 years Leasehold improvement 3-5years Other 3 years 87 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 5.21 Employee remuneration 5.21.1 Accounting treatments of short-term remuneration In an accounting period in which an employee has rendered service to the Group, the Group recognizes the actual long-term remuneration for that service as a liability, and includes in the current profits and losses or the related asset costs. Employee welfare expenses incurred by the Group shall be recorded into the current profits and losses or related asset costs according to the actual amount. Non-monetary employee benefits are measured at fair value. Social insurances such as medical insurance, injury insurance and pregnancy insurance, housing funds, labor union and employee education fees paid by the Group for employees, are recognized as relevant liability in the period in which the employees provide service, in accordance with the regulated recognition basis and percentage. The related expenditures are included in the current profits and losses or related asset costs. 5.21.2 Accounting treatments of retired benefits Retired benefits of the Group are all predetermined provision plan. In the period in which the employees provide service, the Group recognize liability in accordance with the amounts to be paid calculated according to the predetermined provision plan, and the related expenditures are either included in cost of related assets or charged to profit or loss in the period when they are incurred. 5.21.3 Accounting treatments of termination benefits When providing termination benefits to employees, the Group recognize employee benefits payroll resulting from termination benefits at the earlier of: the Group cannot unilaterally withdraw from the termination plan or the redundancy offer; the Group recognize relevant costs and expenses related to the payment of termination benefits in reconstructuring. 88 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 5.22 Revenue 5.22.1 Revenue from sale of goods Revenue from sale of goods is recognized when the Group has transferred to the buyer the significant risks and rewards of ownership of the goods. The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold. The amount of revenue can be measured reliably and it is probable that the associated economic benefits will flow to the Group. The associated costs incurred or to be incurred can be measured reliably. 5.22.2 Revenue from rendering of services When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction shall be recognized by reference the stage of completion of the transaction at the reporting date. The outcome of a transaction can be estimated reliably. When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognized only to the extent of the costs incurred that will be recoverable, and the costs incurred are recognized as expenses for the period. When it is not probable that the costs incurred will be recovered, revenue is not recognized. 5.23 Government grants Government grants are transfer of monetary assets and non-monetary assets from the government to the Group at no consideration. A government grant is recognized only when the Group can comply with the conditions attaching to the grant and the Group will receive the grant. Monetary government grants are measured by the amount received or receivable. 5.23.1 Judgment basis and accounting treatments of government grant related to an asset A government grant related to an asset is recognized as deferred income, and evenly amortized to 89 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report profit or loss over the useful life of the related asset. 5.23.2 Judgment basis and accounting treatments of government grant related to income For a government grant related to income, if the grant is a compensation for related expenses or losses to be incurred in subsequent periods, the grant is recognized as deferred income, and recognized in profit or loss over the periods in which the related costs are recognized. If the grant is a compensation for related expenses or losses already incurred, the grant is recognized immediately in profit or loss for the period. A government grant related to the Group's daily activities is recognized in other income based on the nature of economic activities; a government grant is not related to the Group's daily activities is recognized in non-operating income and expenses. The Company's government loans with below-market rate of interest are directly paid to the Company, and the related low rate interest will write off related borrowing costs. The government loans with below-market rate of interest obtained by other subsidiaries of the Group are government loans, which is provided by local bureau of finance through bank with below-market rate of interest. The actual amount of the loan received by the Group recognized as borrowings, and the related borrowing costs are calculated according to the principal of the loan and the below-market rate. 5.24 Deferred income tax assets/deferred income tax liabilities The income tax expenses include current income tax and deferred income tax. 5.24.1 Current income tax On the balance sheet date, current income tax liabilities (or assets) for the current and prior periods are measured at the amount expected to be paid (or recovered) according to the requirements of tax laws. 5.24.2 Deferred income tax assets and deferred income tax liabilities For temporary differences between the carrying amounts of certain assets or liabilities and their tax base, or between the nil carrying amount of those items that are not recognized as assets or liabilities 90 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report and their tax base that can be determined according to tax laws, deferred income tax assets and liabilities are recognized using the balance sheet liability method. Deferred tax is generally recognized for all temporary differences. Deferred income tax assets for deductible temporary differences are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilised. However, for temporary differences associated with the initial recognition of goodwill and the initial recognition of an asset or liability arising from a transaction (not a business combination) that affects neither the accounting profit nor taxable profits (or deductible losses) at the time of transaction, no deferred tax asset or liability is recognized. For deductible losses and tax credits that can be carried forward, deferred income tax assets are recognized to the extent that it is probable that future taxable profits will be available against which the deductible losses and tax credits can be utilised. Deferred income tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. On the balance sheet date, deferred income tax assets and liabilities are measured at the tax rates, according to tax laws, that are expected to apply in the period in which the asset is realised or the liability is settled. Current and deferred tax expenses or income are recognized in profit or loss for the period, except when they arise from transactions or events that are directly recognized in other comprehensive income or in shareholders' equity, in which case they are recognized in other comprehensive income or in shareholders' equity; and when they arise from business combinations, in which case they adjust the carrying amount of goodwill. On the balance sheet date, the carrying amount of deferred income tax assets is reviewed and reduced if it is no longer probable that sufficient taxable profits will be available in the future to allow the 91 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report benefit of deferred income tax assets to be utilised. Such reduction in amount is reversed when it becomes probable that sufficient taxable profits will be available. 5.24.3 Net off of income taxes When the Group has a legal right to settle on a net basis and intends either to settle on a net basis or to realise the assets and settle the liabilities simultaneously, current tax assets and current tax liabilities are offset and presented on a net basis. When the Group has a legal right to settle current tax assets and liabilities on a net basis, and deferred income tax assets and deferred income tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax assets and liabilities on a net basis or to realise the assets and liabilities simultaneously, in each future period in which significant amounts of deferred income tax assets or liabilities are expected to be reversed, deferred income tax assets and deferred income tax liabilities are offset and presented on a net basis. 5.25 Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. 5.25.1 Operating lease accounting treatments The Group as lessee under operating leases Operating lease payments are recognized on a straight-line basis over the term of the relevant lease, and are either included in the cost of related asset or charged to profit or loss for the period. Initial direct costs incurred are charged to profit or loss for the period. The Group as lessor under operating leases Rental income from operating leases is recognized in profit or loss on a straight-line basis over the term of the relevant lease. Initial direct costs with more than an insignificant amount are capitalised 92 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report when incurred, and are recognized in profit or loss on the same basis as rental income over the lease term. Other initial direct costs with an insignificant amount are charged to profit or loss in the period in which they are incurred. Contingent rents are charged to profit or loss in the period in which they actually arise. 5.26 Changes in major accounting policies and accounting estimates 5.26.1 Changes in major accounting policies Content and reason of accounting policy Examination and approval procedure Remarks change In 2017, the Ministry of Finance issued the revised Accounting Standards for Enterprises No.22–Recognition and Measurement of Financial Instruments, Accounting Standards for Enterprises No.23–Transfer of Financial Assets, Accounting Standards for Enterprises No.24 –Hedging and Accounting In the consolidated balance sheet on Standards for Enterprises No.37- January 1, 2019, the accounts receivable Presentation of Financial Instruments changed from RMB 242,153,083 to RMB (hereinafter referred to as “New 237,781,161; the deferred income tax Financial Instruments Standards”). From Approved by the second meeting of the assets were changed from RMB January 1, 2019, the Group conducted eighth Board of Directors. 285,436,259 to RMB 286,529,239; and accounting treatment in accordance with the undistributed profit was changed from the above newly revised standards. RMB 8,008,982,547 to RMB According to the linkage provisions, no 8,005,703,605. adjustment will be made to the information during the comparable period. The undistributed profits at the beginning of this reporting period will be retroactively adjusted based on the difference between the new standards and the existing standards on the first day of implementation. According to the requirements in the Notice on Revising, Printing & Distributing Financial Report Format for General Enterprises in 2019 (Cai Kuai [2019]No. 6), in the balance sheet, the item of “bills receivable and accounts receivable” shall be divided into “bills receivable” and “accounts receivable”; The change of accounting policy has no and the item of “bills payable and Approved by the second meeting of the impact on the merger and the net profit of accounts payable” shall be divided into eighth Board of Directors. the Company and the owner's equity. “bills payable” and “accounts payable”; in the income statement, the item of “R&D expenses” not only reflects the expensed expenditure incurred in the research and development process, but also includes the amortization of self-developed intangible assets listed in the item of “management expenses”. 5.26.2 Changes in major accounting estimates Nil 93 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 5.26.3 Particulars of first implementation of New Financial Instruments Standards, new income standards, and new lease standards to adjust the first implementation of related items in the financial statements at the beginning of the year Consolidated Balance Sheet Unit: Yuan Item December 31, 2018 January 1, 2019 Adjusted amount Bills receivable 288,667,988 -288,667,988 Accounts receivable 242,153,083 237,781,161 -4,371,922 Receivables financing 288,667,988 288,667,988 Available-for-sale financial 467,251 -467,251 assets Other non-current financial 467,251 467,251 assets Deferred income tax assets 285,436,259 286,529,239 1,092,980 Undistributed profit 8,008,982,547 8,005,703,605 -3,278,942 Total owner’s equity 9,606,099,365 9,602,820,423 -3,278,942 Explanation for adjustment: Unit: Yuan Impact of the Book value listed Book value listed New Impact of changes in according to the original according to the new Item Financial presentation of other standards on December 31, standards on January 1, Instrument financial statements 2018 2019 Standards Bills receivable and 530,821,071 -530,821,071 accounts receivable Bills receivable -288,667,988 288,667,988 Accounts receivable -4,371,922 242,153,083 237,781,161 Receivables financing 288,667,988 288,667,988 Available-for-sale 467,251 -467,251 financial assets Other non-current 467,251 467,251 financial assets Deferred income tax 285,436,259 1,092,980 286,529,239 assets Total 816,724,581 -3,278,942 813,445,639 Balance Sheet of the Parent Company Unit: Yuan Item December 31, 2018 January 1, 2019 Adjusted amount Bills receivable 39,885,254 -39,885,254 Accounts 1,447,973 1,447,973 receivable Receivables 39,885,254 39,885,254 financing Total owner’s 10,023,375,582 10,023,375,582 equity 94 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Explanation for adjustment: Unit: Yuan Impact of the Book value listed Impact of changes Book value listed New according to the original in presentation of according to the new Item Financial standards on December 31, other financial standards on January 1, Instrument 2018 statements 2019 Standards Bills receivable and 41,333,227 -41,333,227 accounts receivable Bills receivable -39,885,254 39,885,254 Accounts receivable 1,447,973 1,447,973 Receivables financing 39,885,254 39,885,254 Other receivables 1,025,643,356 1,025,643,356 Total 1,066,976,583 1,066,976,583 5.27 Other Critical judgments in applying accounting policies and key assumptions and uncertainties in accounting estimates In the application of accounting policies as set out in Note 4, the Group is required to make judgments, estimates and assumptions about the carrying amounts of items in the financial statements that cannot be measured accurately, due to the internal uncertainties of the operating activities. These judgments, estimates and assumptions are based on historical experience of the Group's management as well as other factors that are considered to be relevant. Actual results may differ from these estimates. The Group periodically reviews the judgments, estimates and assumptions above on a going concern basis. For those changes in accounting policies that only affect current financial statements, the influences are recognized in current period. For those changes in accounting policies that affect both current and future financial statements, the influences are recognized in both current and prospective periods. Key assumption and uncertainties in accounting estimates The following are key assumptions for after balance sheet date event and other factors of uncertain estimation. They may cause material adjustment on balance sheet in following accounting period. Deferred income tax assets recognized by deductible loss 95 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Deferred income 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 income tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies. Depreciation of fixed assets The depreciation is calculated on the straight line basis to write-off the cost of each item of fixed assets to its residual value over its estimated useful life. The Group's management determines the estimated useful lives for its fixed assets. This estimate is based on the historical experience of the actual useful lives of fixed assets of similar nature and functions. If the previous estimates have significant changes, depreciation expenses will be adjusted in the future period. Impairment of long-term assets The Group assesses whether the recoverable amount is lower than the book value. If there are any indicators that the book value of non-current assets cannot be fully recoverable, impairment losses should be recorded. The recoverable amount is the higher of an asset's fair value less costs to sell and the present value of the future cash flows expected to be derived from an asset. As it is difficult for the Group to obtain the quoted market price of the assets (or assets group), the fair value of the assets cannot be reliably estimated. When estimating the present value of future cash flows, it is necessary to make important judgments about the output, selling price, related operating costs, discount rate used in calculating the present value of the asset (or asset group), etc. In estimating the recoverable amount, the Group uses all readily available information, including projections of production volumes, selling prices and associated operating costs based on reasonable and supportable assumptions. Inventory depreciation provision accrued based on net realizable value The inventories are measured on the lower of carrying value and net realizable value, and provision should be made for impairment on obsolete and slow moving inventories. The Group will reassess whether the net realizable value is lower than the carrying cost at the end of each year. 96 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Preparation for the measurement of the fair value of identifiable assets and liabilities of the acquiree from a business combination For the cost of business combination, the Group allocates the purchase price based on the fair value of the identifiable assets and liabilities of the acquiree on the date of acquisition. When measuring the fair value of the above identifiable assets and liabilities in accordance with the present value of future cash flow, the management of the Group needs to estimate the sales growth rate based on the supply and demand situation of the future market to forecast the cash flow, and consider to choose the appropriate discount rate for the discount. The management may use significant accounting estimates and judgments in the progress. 6. Taxes 6.1 The main taxes and tax rates are as follows: Tax category Taxation basis Tax rates Value added tax Levied on the balance between the 13%, 9% 6% (Chinese), 20% output tax calculated based on taxable (France), 21% (Spain), 19% (Chile), income and the input tax allowed to be 10% (Australia) deducted in current period Consumption tax Levied on taxable income 10%, 20% (Chinese) City development tax Levied on circulation tax actually paid 7% (Chinese) Corporate income tax Levied on taxable income 25%(Chinese), 33.3%(France), 28% (Spain), 27% (Chile), 30% (Australia) 6.2 Tax incentives and relative permit Ningxia Changyu Grape Growing Co., Ltd.("Ningxia Growing"), a subsidiary of the Group, whose principal activity is grape growing is incorporated in Ningxia Huizu Autonomous Region. According to clause 27 of PRC Corporate Income Tax and clause 86 of PRC Corporate Income Tax Measures for Implementation, Ningxia Growing enjoys an exemption of corporate income tax. Yantai Changyu Grape Growing Co., Ltd.(" Grape Growing "), a branch of the Company, whose principal activity is grape growing is incorporated in Zhifu District, Yantai City, Shandong Province. 97 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report According to clause 27 of PRC Corporate Income Tax and clause 86 of PRC Corporate Income Tax Measures for Implementation, Grape Growing enjoys an exemption of corporate income tax. Xinjiang Tianzhu Co., Ltd ("Xinjiang Tianzhu"), a subsidiary of the Company, is an enterprise of wine production and sales incorporated in Shihezi city, Xinjiang Weizu Autonomous. In accordance with the Notice on Tax Policy Issues concerning Further Implementation of the Western China Development Strategy (Cai Shui [2011] No.58), Xinjiang Tianzhu is qualified to enjoy preferential taxation policies, which means it can pay corporate income tax at a preferential rate of 15% for the period from 2015 to 2020. Xinjiang Babao Baron Chateau Co., Ltd. ("Shihezi Chateau"), a subsidiary of the Company, is an enterprise of wine production and sales incorporated in Shihezi city, Xinjiang Weizu Autonomous. In accordance with the Notice on Tax Policy Issues concerning Further Implementation of the Western China Development Strategy (Cai Shui [2011] No.58), Shihezi Chateau is qualified to enjoy preferential taxation policies, which means it can pay corporate income tax at a preferential rate of 15% for the period from 2015 to 2020. 7. Notes to items in the consolidated financial statement 7.1 Monetary capital Unit: Yuan Item Ending balance Beginning balance Cash on hand 70,198 114,335 Bank deposit 1,756,744,006 1,382,399,749 Other monetary capital 91,818,749 93,186,393 Total 1,848,632,953 1,475,700,477 As at June 30, 2019, the restricted bank deposit details are listed as follows: Unit: Yuan Item Ending balance Beginning balance Housing fund of the unit 2,647,877 2,611,350 Total 2,647,877 2,611,350 As at June 30, 2019, the details of other monetary funds are listed as follows: Unit: Yuan Item Ending balance Beginning balance Pledge of fixed deposits by Yantai Changyu Wine Research, 46,100,000 46,100,000 Development and Manufacture Co., Ltd. (“R&D Company”) Guaranteed deposits paid for the letter 44,540,850 44,540,850 of credit Account balance of Alipay 1,042,367 2,483,816 98 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Guaranty money for the unit card 125,532 51,727 Guaranty money for ICBC platform 10,000 10,000 Total 91,818,749 93,186,393 As at June 30, 2019, the bank deposits of the Group including short-term fixed deposits ranging from 3 months to 12 months amounted to RMB 180,439,250 Yuan (December 31, 2018: RMB 173,042,400 Yuan), with the interest rates ranging from 1.40% to 2.03%. 7.2 Bills receivable 7.2.1 Classification of bills receivable Unit: Yuan Type Ending balance Beginning balance Bank acceptance 288,667,988 Trade acceptance Total 288,667,988 7.2.2 Provision for bad debts accrued, withdrawn or transferred back in this period Nil 7.2.3 Bills receivable pledged by the Company at the end of period Nil 7.2.4 Bills receivable endorsed or discounted by the Company at the end of period but not yet matured as of the balance sheet date Unit: Yuan Amount terminating recognition at the end Amount not terminating recognition Item of period at the end of period Bank acceptance 275,760,494 Trade acceptance Total 275,760,494 7.2.5 Bills receivable reclassified as accounts receivable by the Company due to the default of drawer at the end of period Nil 7.2.6 Bills receivable actually cancelled after verification in this period Nil 99 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 7.3 Accounts receivable 7.3.1 Accounts receivable disclosed by type Unit: Yuan Ending balance Beginning balance Provision for bad Provision for bad Book balance Book balance Type debts debts Book value Book value Amount Proportion Amount Accrued Amount Proportion Amount Accrued proportion proportion Accounts receivable for which provision for 242,153,083 100% 242,153,083 bad debts is accrued on a single item basis Including: Accounts receivable for which provision for 191,269,049 100% 5,137,857 2.78% 186,131,192 bad debts is accrued on a combined basis Including: Accounts receivable for which provision for 191,269,049 100% 5,137,857 2.78% 186,131,192 bad debts is accrued by credit risk features Total 191,269,049 100% 5,137,857 2.78% 186,131,192 242,153,083 100% 242,153,083 Provision for bad debts accrued on a combined basis: Unit: Yuan Ending balance Name Book balance Provision for bad debts Accrued proportion Accounts receivable for which provision for bad debts is 191,269,049 5,137,857 2.78% accrued by credit risk features Total 191,269,049 5,137,857 -- Disclosed by age: Unit: Yuan Age Ending balance Within 1 year (including) 180,854,504 1-2 years 8,978,048 2-3 years 1,199,269 Over 3 years 237,228 Total 191,269,049 100 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report As at June 30, 2019, the accounts receivable with ownership restrictions were RMB 31,134,017 Yuan (December 31, 2018: RMB 52,015,032 Yuan). Please refer to Note 7.18 for details. 7.3.2 Provision for bad debts accrued, withdrawn or transferred back in this period Provision for bad debts accrued in this period: Unit: Yuan Adjusted Changes in t his period Beginning amount in the balance of first Beginning the original implementation balance of the Withdrawn Ending Type or financial of the New year after Accrued Cancelled balance instruments Financial adjustment transferred standards Instruments back Standards Accounts receivable for which provision 4,371,922 4,371,922 765,935 5,137,857 for bad debts is accrued by credit risk features Total 4,371,922 4,371,922 765,935 5,137,857 There were no provision for bad debts withdrawn or transferred back in this period. 7.3.3 Accounts receivable actually cancelled after verification in this period Nil 7.3.4 Accounts receivable collected by the borrowers of top 5 units ranked by the ending balance Unit: Yuan Relationship with the Percentage in total Unit Amount Period Company accounts receivable Nonggongshang Supermarket (Group) Co., Third party 10,077,717 Within 1 year 5.3% Ltd. Suguo Supermarket Co., Ltd. Third party 7,168,620 Within 1 year 3.7% Viedos y Bodegas Las Third party 6,917,840 Within 1 year 3.6% Pircas Lianhua Supermarket Third party 5,408,819 Within 1 year 2.8% Holdings Co., Ltd. MARKS AND SPENCER Third party 5,365,322 Within 1 year 2.8% Total -- 34,938,318 -- 18.3% 7.3.5 Accounts receivable terminating recognition due to transfer of financial assets Nil 101 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 7.3.6 Accounts receivable transferred and included in assets and liabilities Nil 7.4 Receivables financing Unit: Yuan Item Ending balance Beginning balance Bank acceptance 372,281,872 Total 372,281,872 7.5 Advance payment 7.5.1 Advance payment listed by age Unit: Yuan Ending balance Beginning sum Age Amount Proportion Amount Proportion Within 1 year 3,490,928 100% 4,219,949 100% 1-2 years 2-3 years More than 3 years Total 3,490,928 -- 4,219,949 -- 7.5.2 Advance payment collected by the prepaid parties of top 5 units ranked by the ending balance Unit: Yuan Percentage Relationship with in the total Category of client Amount Age Reason for unsettlement the Group advance payment% Within 1 Ningxia Vangarie Wine Co., Ltd. Third party 600,000 Failure to receive the goods 17.2% year Yantai Power Supply Company of State Within 1 Prepaid electricity Grid Shandong Electric Power Third party 500,000 14.3% year purchasing fund Company Within 1 DONELLI VINI S.P.A. Third party 463,523 Failure to receive the goods 13.3% year YEDA Thermal Power Construction & Third party 250,545 Within 1 Failure to receive the goods 7.2% 102 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Installation Engineering Co., Ltd. year Yantai Deyi Hardware Mechanical & Within 1 Third party 192,045 Failure to receive the goods 5.5% Electrical Co., Ltd. year Total -- 2,006,113 -- -- 57.4% 7.6 Other receivables Unit: Yuan Item Ending balance Beginning balance Interest receivable 2,099,109 1,332,681 Dividends receivable Other receivables 26,519,874 21,303,405 Total 28,618,983 22,636,086 7.6.1 Interest receivable Unit: Yuan Item Ending balance Beginning balance Fixed deposit 2,099,109 1,332,681 Entrusted loan Bond investment Total 2,099,109 1,332,681 7.6.2 Other receivables 7.6.2.1 Other receivables classified by nature Unit: Yuan Nature Ending book balance Beginning book balance Deposit and guaranty money receivable 9,991,516 10,453,624 Imprest receivable 2,776,485 2,274,038 Accounts receivable from related parties 1,911,880 813,440 Consumption tax and added-value tax export rebate 9,651,893 6,273,882 Other 2,188,100 1,488,421 Total 26,519,874 21,303,405 7.6.2.2 Disclosed by age Unit: Yuan Age Ending balance Within 1 year (including) 15,284,516 1-2 years 1,162,933 2-3 years 8,302,579 103 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Age Ending balance More than 3 years 1,769,846 Total 26,519,874 7.6.2.3 Provision for bad debts accrued, withdrawn or transferred back in this period The provision for bad debts accrued in this period was RMB 0 Yuan; and that withdrawn or transferred back in this period was RMB 0 Yuan. 7.6.2.4 Other receivables actually cancelled after verification in this period Nil 7.6.2.5 Other receivables collected by the borrowers of top 5 units ranked by the ending balance Unit: Yuan Percentage in total Ending balance of Ending Unit Nature Age ending balance of other provision for bad balance accounts receivable debts Construction YEDA Construction Industry guaranty 7,709,477 Within 3 years 29.10% Association money Lease Yantai God Horse Packing Co., payment 1,626,880 Within 1 year 6.10% Ltd. Printing Branch receivable Lease Yantai Zhongya Medical Health payment 285,000 Within 1 year 1.10% Wine Co., Ltd. receivable Guaranty YEDA Finance Bureau 198,056 Within 1 year 0.70% money Yantai Power Supply Company of State Grid Shandong Electric Deposit 80,000 Within 1 year 0.30% Power Company Total -- 9,899,413 -- 37.30% 7.6.2.6 Accounts receivable involving government subsidies Nil 7.6.2.7 Other receivables that are terminated for recognition due to transfer of financial assets Nil 7.6.2.8 Other receivables transferred and then included in assets and liabilities Nil 104 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 7.7 Inventories 7.7.1 Inventory classification Unit: Yuan Ending balance Beginning balance Item Depreciation Depreciation Book balance Book value Book balance Book value provision provision Raw materials 88,705,179 88,705,179 67,267,035 67,267,035 Goods in process 1,837,958,108 1,837,958,108 1,787,819,923 1,787,819,923 Commodity stocks 698,652,646 18,534,497 680,118,149 894,187,725 24,683,226 869,504,499 Total 2,625,315,933 18,534,497 2,606,781,436 2,749,274,683 24,683,226 2,724,591,457 7.7.2 Inventory depreciation provision Unit: Yuan Increase in this period Decrease in this period Beginning Item Transfer back or Ending balance balance Accrual Other Other write-off Raw materials Goods in process Commodity stocks 24,683,226 6,148,729 18,534,497 Total 24,683,226 6,148,729 18,534,497 7.8 Other current assets Unit: Yuan Item Ending balance Beginning balance Prepaid corporate income tax 70,523,939 24,077,323 Deductible input tax 229,478,097 233,087,707 Rent to be amortized 416,865 1,511,366 Total 300,418,901 258,676,396 7.9 Other non-current financial assets Unit: Yuan Item Ending balance Beginning balance Other 515,922 Total 515,922 7.10 Investment real estate 7.10.1 Investment real estate by cost measurement method 105 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Unit: Yuan Houses and Construction in Item Land use right Total buildings progress Ⅰ Original book value 1. Beginning balance 70,954,045 70,954,045 2. Increase in this period 2.1 Outsourcing 2.2 Transfer in from inventories\fixed assets\ construction in progress 2.3 Business merger increase 3. Decrease in this period 3.1 Disposal 3.2 Other transfer out 4. Ending balance 70,954,045 70,954,045 Ⅱ Accumulated depreciation & accumulated amortization 1. Beginning balance 39,381,556 39,381,556 2. Increase in this period 1,012,019 1,012,019 2.1 Accrual or 1,012,019 1,012,019 amortization 3. Decrease in this period 3.1 Disposal 3.2 Other transfer out 4. Ending balance 40,393,575 40,393,575 Ⅲ Impairment provision 1. Beginning balance 2. Increase in this period 2.1 Accrual 3. Decrease in this period 3.1 Disposal 3.2 Other transfer out 4. Ending balance Ⅳ Book value 1. Ending book value 30,560,470 30,560,470 2. Beginning book value 31,572,489 31,572,489 7.11 Fixed assets Unit: Yuan Item Ending balance Beginning balance Fixed assets 5,684,612,653 5,749,731,667 Disposal of fixed assets Total 5,684,612,653 5,749,731,667 7.11.1 Particulars of fixed assets 106 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Unit: Yuan Houses and Item Machinery equipment Construction tools Total buildings Ⅰ Original book value: 1. Beginning balance 4,761,426,425 2,665,798,814 26,580,639 7,453,805,878 2. Increase in this period 33,949,084 48,642,164 1,281,845 83,873,093 2.1 Acquisition 4,174,052 13,254,325 1,281,845 18,710,222 2.2 Transfer in from 29,775,032 35,387,839 65,162,871 construction in progress 2.3 Business merger increase 3. Decrease in this period 5,422,920 2,867,114 456,453 8,746,487 3.1 Disposal or 5,422,920 2,867,114 456,453 8,746,487 retirement 4. Ending balance 4,789,952,589 2,711,573,864 27,406,031 7,528,932,484 Ⅱ Accumulated depreciation 1. Beginning balance 621,266,769 1,062,064,237 20,743,205 1,704,074,211 2. Increase in this period 67,239,979 79,376,506 1,071,000 147,687,485 2.1 Accrual 67,239,979 79,376,506 1,071,000 147,687,485 3. Decrease in this period 4,489,447 2,518,788 433,630 7,441,865 3.1 Disposal or 4,489,447 2,518,788 433,630 7,441,865 retirement 4. Ending balance 684,017,301 1,138,921,955 21,380,575 1,844,319,831 Ⅲ Impairment provision 1. Beginning balance 2. Increase in this period 2.1 Accrual 3. Decrease in this period 3.1 Disposal or retirement 4. Ending balance Ⅳ Book value 1. Ending book value 4,105,935,288 1,572,651,909 6,025,456 5,684,612,653 2. Beginning book value 4,140,159,656 1,603,734,577 5,837,434 5,749,731,667 As at June 30, 2019, the net value of the fixed assets with ownership restrictions was RMB 353,013,613 Yuan (December 31, 2018: RMB 412,006,421 Yuan). Please refer to Note 7.51 for details. 7.11.2 Particulars of temporarily idle fixed assets Unit: Yuan Original book Accumulated Depreciation Item Book value Remarks value depreciation reserves Temporarily idle fixed 124,758,075 67,762,891 56,995,184 assets 107 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 7.11.3 Particulars of fixed assets under finance leases Nil 7.11.4 Fixed assets under operating lease Unit: Yuan Item Ending book value Machinery equipment 115,720 7.11.5 Particulars of fixed assets without property certificates Unit: Yuan Reason for not receiving the property Item Book value certificate Industrial Production Center of the R&D Company 1,733,732,977 Under transaction Dormitory Building, Main Building and Reception Building of 280,709,011 Under transaction Chang’an Chateau European Town, Main Building and Service Building of Beijing 184,687,307 Under transaction Chateau Main Building of Yantai Chateau Changyu Tinlot 81,685,892 Under transaction Fermentation Workshop and Wine Storage Workshop of Xinjiang 17,499,421 Under transaction Tianzhu Office Building and Packaging Workshop of Icewine Valley 9,044,465 Under transaction Wine-making Workshop of Changyu (Jingyang) 4,017,018 Under transaction Office Building, Laboratory Building and Workshop of 3,572,175 Under transaction Fermentation Center Finished Goods Warehouse and Workshop of Kylin Packaging 2,351,511 Under transaction Office Building of Guangxi Guilin Office and Office Building of 1,110,076 Under transaction Shanxi Datong Office Total 2,318,409,853 Under transaction 7.12 Construction in progress 7.12.1 Particulars of construction in progress Ending balance Beginning balance Item Impairment Impairment Book balance Book value Book balance Book value provision provision Research, Development & Manufacture Center (“Changyu Wine City 672,975,492 672,975,492 608,553,617 608,553,617 Complex”) Construction Project of Chang’an 17,537,828 17,537,828 39,793,893 39,793,893 Chateau Construction Project of Ningxia 47,371,353 47,371,353 47,163,863 47,163,863 Chateau Construction Project of Shihezi 379,517 379,517 23,664,124 23,664,124 108 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Chateau Construction Project of Sales Company 19,145,181 19,145,181 17,985,882 17,985,882 Construction Projects of Other 32,463,002 32,463,002 22,135,212 22,135,212 Companies Total 789,872,373 789,872,373 759,296,591 759,296,591 109 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 7.12.2 Changes of major construction in progress in this period Unit: Yuan Transferred Proportion of Accumulative Including: Other Capitalization Beginning Increase in to fixed accumulative capitalized capitalized amount Item Budget decrease in Ending balance ratio of interest Capital source balance this period assets in this project input in amount of of interest in this this period in this period period budget interest period Loans form financial Changyu Wine City 1.20% and institutions and 4,505,780,000 608,553,617 105,008,609 30,903,286 9,683,448 672,975,492 76.60% 16,954,039 Complex 4.3% self-raised funds Construction Project of Self-raised funds 620,740,000 39,793,893 7,523,270 29,779,335 17,537,828 109.90% Chang’an Chateau Construction Project of Self-raised funds 780,000,000 23,664,124 4,615,627 138,172 27,762,062 379,517 96.90% Shihezi Chateau Construction Project of Self-raised funds 161,350,000 17,985,882 1,262,622 103,323 19,145,181 98.50% Sales Company Construction Project of Self-raised funds 41,415,000 47,163,863 207,490 47,371,353 102.60% Ningxia Chateau Total 6,109,285,000 737,161,379 118,617,618 60,924,116 37,445,510 757,409,371 -- -- 16,954,039 -- As at June 30, 2019, there was no indication for impairment of construction in progress of the Group, so no provision for impairment was made. 110 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 7.13 Productive biological assets 7.13.1 Productive biological assets by cost measurement method Unit: Yuan Item Plantation Total Immature Mature Ⅰ Original book value 1. Beginning balance 13,837,608 235,246,042 249,083,650 2. Increase in this period -4,798,454 9,593,745 4,795,291 2.1 Outsourcing 2.2 Self cultivation 2,388,310 2,406,981 4,795,291 The immature turn to the mature -7,186,764 7,186,764 3. Decrease in this period 3.1 Disposal 3.2 Other 4. Ending balance 9,039,154 244,839,787 253,878,941 Ⅱ Accumulated depreciation 1. Beginning balance 39,817,277 39,817,277 2. Increase in this period 6,448,225 6,448,225 2.1 Accrual 6,448,225 6,448,225 3. Decrease in this period 3.1 Disposal 3.2 Other 4. Ending balance 46,265,502 46,265,502 Ⅲ Impairment provision 1. Beginning balance 2. Increase in this period 2.1 Accrual 3. Decrease in this period 3.1 Disposal 3.2 Other 4. Ending balance Ⅳ Book value 1. Ending book value 9,039,154 198,574,285 207,613,439 2. Beginning book value 13,837,608 195,428,765 209,266,373 111 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report As at June 30, 2019, no ownership of the biological assets was restricted. As at June 30, 2019, there was no indication for impairment of biological assets of the Group, so no provision was made. 7.14 Intangible assets 7.14.1 Particulars of intangible assets Unit: Yuan Item Land use right Software use right Trademark Total Ⅰ Original book value 1.Beginning balance 528,252,911 75,822,057 170,068,735 774,143,703 2. Increase in this period 16,176 107,993 124,169 2.1 Acquisition 16,176 107,993 124,169 2.2 Internal R&D 2.3 Business merger increase 3. Decrease in this period 3.1 Disposal 4.Ending balance 528,269,087 75,930,050 170,068,735 774,267,872 Ⅱ Accumulated amortization 1.Beginning balance 78,070,910 26,722,815 13,876,519 118,670,244 2.Increase in this period 5,231,260 3,185,493 21,989 8,438,742 2.1 Accrual 5,231,260 3,185,493 21,989 8,438,742 3.Decrease in this period 3.1 Disposal 4.Ending balance 83,302,170 29,908,308 13,898,508 127,108,986 Ⅲ Impairment provision 1. Beginning balance 2. Increase in this period 2.1 Accrual 3. Decrease in this period 3.1 Disposal 4. Ending balance Ⅳ Book value 1. Ending book value 444,966,917 46,021,742 156,170,227 647,158,886 112 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 2. Beginning book value 450,182,001 49,099,242 156,192,216 655,473,459 As at June 30, 2019, the net value of the intangible assets with ownership restrictions was RMB 215,282,924 Yuan (December 31, 2018: RMB 218,070,414 Yuan). Please refer to Note 7.51 for details. 7.14.2 Particulars of land use right of that not receiving the property certificate Nil 7.15 Goodwill Unit: Yuan Name of the invested Increase in this period Decrease in this period Beginning unit or matter forming Formed by business Ending balance balance Other Disposal Other goodwill merger Etablissements Roullet Fransac (“Roullet 13,112,525 13,112,525 Fransac”) Dicot Partners, S.L 92,391,901 92,391,901 (“Atrio Group”) Societe Civile Argricole Du Chateau 15,761,440 15,761,440 De Mirefleurs (“Mirefleurs”) Indomita Wine 6,870,115 6,870,115 Company Chile, SpA Kilikanoon Estate, 37,063,130 37,063,130 Australia Total 165,199,111 165,199,111 7.16 Long-term unamortized expenses Unit: Yuan Increase in this Amortization in this Item Beginning balance Other decrease Ending balance period period Land lease fees 54,217,763 1,073,811 53,143,952 Land acquisition 43,427,739 215,293 43,212,446 fees Afforestation fees 141,224,472 9,683,449 4,615,467 146,292,454 Renovation costs 775,647 27,762,062 476,300 28,061,409 113 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Other 4,994,795 1,134,446 281,791 5,847,450 Total 244,640,416 38,579,957 6,662,662 276,557,711 Remarks: The amount transferred to long-term unamortized expenses from construction in progress was RMB 38,234,356 Yuan. 7.17 Deferred income tax assets/liabilities 7.17.1 Un-offset deferred income tax assets Unit: Yuan Ending Balance Beginning Balance Deductible Deductible Item Deferred income Deferred income temporary temporary tax assets tax assets difference difference Unrealized profits from inter-company 383,079,453 95,769,863 602,476,583 150,619,145 transactions Unpaid bonus 107,118,804 26,808,863 141,808,257 35,485,814 Dismission welfare 21,108,526 5,277,132 26,186,243 6,546,561 Asset impairment provision 23,672,354 5,918,088 24,683,226 6,170,807 Deductible loss 326,241,084 83,564,280 262,937,999 67,566,387 Deferred income 78,596,149 17,132,928 86,227,293 18,868,963 Asset valuation impairment 649,811 175,449 661,415 178,582 Total 940,466,181 234,646,603 1,144,981,016 285,436,259 7.17.2 Un-offset deferred income tax liabilities Unit: Yuan Ending Balance Beginning Balance Taxable Taxable Item Deferred income Deferred income temporary temporary tax liabilities tax liabilities difference difference Assets appraisal appreciation in business 69,392,888 18,629,612 81,338,130 22,010,647 merger under non-common control Total 69,392,888 18,629,612 81,338,130 22,010,647 7.17.3 Details of unconfirmed deferred income tax assets Unit: Yuan Item Ending balance Beginning balance 114 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Deductable temporary difference Deductible loss 157,722,738 171,430,831 Total 157,722,738 171,430,831 7.17.4 Deductible losses of unconfirmed deferred income tax assets will expire in: Unit: Yuan Year Ending sum Beginning sum Remark 2020 45,960,766 45,960,766 2021 82,685,213 82,685,213 2022 14,362,787 14,362,787 2023 6,987,182 21,110,792 2024 7,726,790 Total 157,722,738 164,119,558 -- 7.18 Short-term loans 7.18.1 Classification of short-term loans Unit: Yuan Item Ending balance Beginning balance Pledge loan Mortgage loan 65,507,517 79,467,832 Guaranteed loan 7,145,835 3,331,870 Fiduciary loan 605,517,315 605,202,708 Total 678,170,667 688,002,410 As at June 30, 2019, the mortgage loans referred to a loan of factoring business for accounts receivable of EUR 3,982,860 (equivalent to RMB 31,134,017 Yuan) that Hacienda y Vinedos Marques del Atrio, S.L.U. (“Marques del Atrio”) transacted in such banks as Banco de Sabadell, S.A. (December 31, 2018: RMB 52,015,032 Yuan), a loan of USD 5,000,000 (equivalent to RMB 34,373,500 Yuan) that Indomita Wine Company Chile, SpA borrowed from BBVA bank by mortgage of its fixed assets of CLP 2,931,854,000 (equivalent to RMB 29,904,911 Yuan) (December 31, 2018: RMB 27,452,800 Yuan). The guaranteed loan referred to a loan borrowed by the Company from Australia & New Zealand Banking with a guarantee for Kilikanoon Estate, Australia of AUD 1,483,893 (equivalent to RMB 7,145,835 Yuan) (December 31, 2018: RMB 3,331,870 Yuan). 115 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 7.19 Accounts payable 7.19.1 List of accounts payable Unit: Yuan Item Ending balance Beginning balance Trade accounts payable 539,459,878 713,572,881 Total 539,459,878 713,572,881 7.19.2 Explanation of significant accounts payable aged more than one year As at June 30, 2019, there were no significant accounts payable aged more than one year. 7.20 Advances from customers 7.20.1 List of advances from customers Unit: Yuan Item Ending sum Beginning sum Advances from customers 177,549,080 226,075,244 Total 177,549,080 226,075,244 7.20.2 Advances from customers of significant amount aged more than one year As at June 30, 2019, the Company had no advances from customers of significant amount aged more than one year. 7.21 Employee remunerations payable 7.21.1 List of employee remunerations payable Unit: Yuan Increase in this Decrease in this Item Beginning balance Ending balance period period 1. Short-term remuneration 185,893,109 214,884,524 245,100,514 155,677,119 2. Post-employment welfare – defined 224,865 27,605,713 27,149,855 680,723 contribution plan 3. Dismission welfare 26,186,243 1,310,247 6,387,964 21,108,526 4.Other welfare due within one year Total 212,304,217 243,800,484 278,638,333 177,466,368 116 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 7.21.2 List of short-term remunerations Unit: Yuan Increase in this Decrease in this Item Beginning balance Ending balance period period 1. Salaries, bonuses, allowances 187,685,990 188,388,623 215,640,569 160,434,044 and subsidies 2. Staff welfare 3,014,288 4,969,229 7,875,107 108,410 3. Social insurance charges 461,095 14,314,931 14,435,562 340,464 Including: Medical insurance 460,440 12,510,735 12,656,526 314,649 Injury insurance 655 914,251 889,091 25,815 Maternity insurance 889,945 889,945 4. Housing fund 52,510 6,147,006 6,191,272 8,244 5. Union fee and staff education 1,914,079 1,064,735 1,033,635 1,945,179 fee 6. Short-term compensated absences 7. Short-term profit-sharing plan Minus: Those divided into 7,234,853 75,631 7,159,222 non-current assets Total 185,893,109 214,884,524 245,100,514 155,677,119 7.21.3 List of defined contribution plan Unit: Yuan Item Beginning balance Increase Decrease Ending balance 1. Basic endowment insurance 224,533 26,914,033 26,457,843 680,723 2. Unemployment insurance 332 691,680 692,012 3. Enterprise annuity payment Total 224,865 27,605,713 27,149,855 680,723 7.21.4 Dismission welfare Unit: Yuan Item Beginning balance Increase Decrease Ending balance 1. Compensation for server of labor 1,275,387 1,275,387 - relation 2. Compensation for early retirement 26,186,243 34,860 5,112,577 21,108,526 117 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Item Beginning balance Increase Decrease Ending balance Total 26,186,243 1,310,247 6,387,964 21,108,526 7.22 Taxes and dues payable Unit: Yuan Item Ending balance Beginning balance Value added tax 28,114,274 36,442,868 Consumption tax 9,089,447 28,636,646 Corporate income tax 59,137,357 40,869,507 Individual income tax 276,031 5,669,099 Urban maintenance and construction tax 2,407,009 4,337,712 Property tax 5,406,700 5,165,128 Urban land use tax 2,255,344 2,476,527 Other 2,314,640 5,315,303 Total 109,000,802 128,912,790 7.23 Other payables Unit: Yuan Item Ending balance Beginning balance Interest payable 2,669,667 712,826 Dividends payable 412,646,375 Other payables 562,350,965 607,767,064 Total 977,667,007 608,479,890 Remarks: Other payables in the above list refer to the payables after deducting interest payable and dividends payable. 7.23.1 Interest payable Unit: Yuan Item Ending balance Beginning balance Interest of long-term loans with interest paid by installment and principal paid on maturity Interest of corporate bonds Interest payable of short-term loans 2,669,667 712,826 Interest of preferred shares\ perpetual bonds divided into financial liabilities 118 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Item Ending balance Beginning balance Other Total 2,669,667 712,826 7.23.2 Dividends payable Unit: Yuan Item Ending balance Beginning balance Ordinary stock dividends 411,278,400 Preferred stock dividends/sustainable debt dividends divided into equity instruments Other 1,367,975.00 Total 412,646,375.00 7.23.3 Other payables 7.23.3.1 Other payables listed by nature Unit: Yuan Item Ending balance Beginning balance Dealer’s deposit payable 166,741,693 159,191,138 Equipment purchase and construction costs 93,902,789 152,825,734 payable Transportation charges payable 15,579,562 38,867,725 Trademark use fees payable for Changyu Group 78,414,978 Company Advertisement marketing expenses payable 209,606,196 96,429,861 Employee cash deposit 869,282 2,806,766 Supplier’s deposit payable 18,732,029 15,901,210 Contracting fees payable 19,130,850 27,070,584 Other 37,788,564 36,259,068 Total 562,350,965 607,767,064 7.23.3.2 Other significant accounts payable aged more than one year Unit: Yuan Item Ending balance Cause of unpayment or carry-over Beijing Qinglang Ecological Agriculture 3,513,506 The contracting fees haven’t been settled 119 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Technology Development Co., Ltd. (“Beijing Qinglang”) VASF Company 4,878,866 The contracting fees haven’t been settled Total 8,392,372 -- 7.24 Non-current liabilities due within one year Unit: Yuan Item Ending balance Beginning balance Long-term loans due within one 146,362,314 118,940,788 year Bonds payable due within one year Long-term accounts payable due 34,000,000 34,000,000 within one year Lease liabilities due within one year Total 180,362,314 152,940,788 7.25 Other current liabilities Unit: Yuan Item Ending balance Beginning balance Short-term bonds payable Refunds payable Deferred income 14,545,254 15,860,254 Total 14,545,254 15,860,254 7.26 Long-term loans 7.26.1 Classification of long-term loans Unit: Yuan Item Ending balance Beginning balance Pledge loan Mortgage loan 3,529,655 3,924,916 Guaranteed loan 98,156,000 110,750,000 Fiduciary loan 64,263,595 41,805,746 Total 165,949,250 156,480,662 Description of the classification of long-term loans: Unit: Yuan 120 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Item Ending balance Long-term loan due within one Long-term loan due over one year year Pledge loan Mortgage loan 6,616,377 3,086,722 3,529,655 Guaranteed loan 116,906,000 18,750,000 98,156,000 Fiduciary loan 188,789,187 124,525,592 64,263,595 Total 312,311,564 146,362,314 165,949,250 As at June 30, 2019, the guaranteed loan referred to the long-term loan of RMB 68,750,000 Yuan borrowed by the Company for the R&D Company by means of credit guarantee (December 31, 2018: 81,250,000 Yuan), which was borrowed from Australia & New Zealand Banking by the Company for Kilikanoon Estate, Australia of AUD 10,000,000 (equivalent to RMB 48,156,000 Yuan) (December 31, 2018: 48,250,000 Yuan). The mortgage loan referred to the loan of EUR 678,868 (equivalent to RMB 5,306,710 Yuan) borrowed from Popular Espaol by Marques del Atrio by mortgaging its fixed assets of EUR 2,900,925 (equivalent to RMB 22,676,531 Yuan) (December 31, 2018: RMB 6,749,944 Yuan). Kilikanoon Estate, Australia borrowed a loan of AUD 271,963 (equivalent to RMB 1,309,667 Yuan) by pledging its fixed assets of AUD 503,163 (equivalent to RMB 2,423,032 Yuan) from NAB bank (December 31, 2018: RMB 48,250,000 Yuan). 7.27 Long-term accounts payable 7.27.1 Long-term accounts payable listed by nature Unit: Yuan Item Ending balance Beginning balance China Agricultural Development Key Construction Fund 201,000,000 225,000,000 Total 201,000,000 225,000,000 In 2016, Agricultural Development Fund invested RMB 305,000,000 Yuan in the Research, Development & Manufacture Company, accounting for 37.9% of the registered capital. According to the investment agreement, it is agreed that Agricultural Development Fund will take back the investment fund in ten years and obtain fixed income according to year, which is 1.2% of the remaining principal. Except for the above fixed income, the Agricultural Development Fund shall not enjoy other profits of the Research, Development & Manufacture Company or bear the losses of the Research, Development & Manufacture Company. Accordingly, the investment of the Agricultural Development Fund in the Research, Development & Manufacture Company is equity investment nominally, which is debt investment (finance discount interest loan) in deed. The Group included the investment of the Agricultural Development Fund in long-term accounts payable measured by amortized cost. From January to June 2019, the Group gave back the principal of RMB 24,000,000 Yuan. Refer to Note 7.51 for details of mortgaged and pledged assets. 121 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Unit: Yuan Balance of long-term accounts Long-term accounts payable Long-term accounts payable due in one payable due within one year year later 235,000,000 34,000,000 201,000,000 7.28 Deferred income Unit: Yuan Increase in this Decrease in this Item Beginning balance Ending balance Forming reason period period Governmental 86,227,293 4,465,398 12,096,542 78,596,149 subsidy Minus: Those included in current 15,860,254 1,315,000 14,545,254 liabilities Non-current 70,367,039 4,465,398 10,781,542 64,050,895 -- liabilities Projects related to governmental subsidy Unit: Yuan Amount of Amount Amount Amount subsidy included in included in Beginning offset Other Ending Related to Item of liabilities newly non-operating other balance the cost changes balance assets/income increased revenue in income in expenses in this this period this period period Grape bulk wine 3,304,500 717,450 2,587,050 Related to assets brewing project Reward for investment in fixed assets of 6,996,600 1,140,000 5,856,600 Related to assets Chateau Shihezi project Industrial revitalization and technical 15,642,000 711,000 14,931,000 Related to assets transformation project in Xinjiang Special subsidy for 4,240,000 530,000 3,710,000 Related to assets 122 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Amount of Amount Amount Amount subsidy included in included in Beginning offset Other Ending Related to Item of liabilities newly non-operating other balance the cost changes balance assets/income increased revenue in income in expenses in this this period this period period supporting infrastructure Tourism development Related to 500,000 500,000 fund subsidy project income Construction project of grape brewing 3,200,000 200,000 3,000,000 Related to assets production capacity (Huanren) Electronic traceability 2,525,257 333,527 2,191,730 Related to assets system project of wine Wine industry 558,000 93,000 465,000 Related to assets development project Peninsula blue economic zone 6,000,000 1,000,000 5,000,000 Related to assets construction project Technical transformation project of information-based 2,900,000 290,000 2,610,000 Related to assets system construction engineering Cross-border Related to 880,256 67,114 813,142 e-commerce project income Fund for water Related to pollution treatment 206,530 56,801 149,729 income project Infrastructure 1,718,750 62,500 1,656,250 Related to assets construction project Supporting fund for 32,800,000 2,050,000 30,750,000 Related to assets industrial development Subsidy for economic and energy-saving 1,026,400 64,150 962,250 Related to assets technical transformation project Special fund for 1,639,000 81,000 1,558,000 Related to assets 123 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Amount of Amount Amount Amount subsidy included in included in Beginning offset Other Ending Related to Item of liabilities newly non-operating other balance the cost changes balance assets/income increased revenue in income in expenses in this this period this period period efficient water-saving irrigation project Guiding fund for the Related to development of service 2,000,000 4,200,000 4,700,000 1,500,000 income industry Subsidy for boiler Related to renovation and 90,000 90,000 income demolition Subsidy for mechanical 265,398 265,398 Related to assets development Total 86,227,293 4,465,398 12,096,542 78,596,149 Minus: Those included 15,860,254 1,315,000 14,545,254 in current liabilities Non-current liabilities 70,367,039 4,465,398 10,781,542 64,050,895 7.29 Other non-current liabilities Unit: Yuan Item Ending balance Beginning balance Employee remunerations payable 7,159,222 7,234,853 Total 7,159,222 7,234,853 As at June 30, 2019, the employee remunerations payable referred to the job security deposit deducted from the year-end bonus of the employees higher than sales manager of the Company in proportion, which will be paid from 2020 to 2022 as predicted. 7.30 Share capital Unit: Yuan Increase or decrease (+,-) in this period Share Beginning Ending Newly issued Allocated transferred balance Other Subtotal balance shares shares from accumulation 124 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report fund Total shares 685,464,000 685,464,000 7.31 Capital reserves Unit: Yuan Decrease in this Item Beginning balance Increase in this period Ending balance period Capital premium (Share 560,038,853 560,038,853 capital premium) Other capital reserves 5,916,588 5,916,588 Total 565,955,441 565,955,441 7.32 Other comprehensive income Unit: Yuan Amount incurred in this period Minus: amount Amount included in incurred other Minus: Attributable Attributable Beginning Ending Item before comprehensive income to parent to minority balance balance income tax income before tax company shareholders in this and transferred expenses after tax after tax period to profit or loss in this period 1. Other comprehensive income not to be reclassified into profit and loss later Including: change in net liabilities and net assets from recalculated defined benefit plan Share enjoyed in other comprehensive income not to be reclassified into profit and loss in invested unit under equity law 2. Other comprehensive income to be reclassified into profit and loss 2,965,377 -4,657,291 -3,060,721 -1,596,570 -95,344 later Including: share enjoyed in other comprehensive income to be reclassified into profit and loss in 125 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Amount incurred in this period Minus: amount Amount included in incurred other Minus: Attributable Attributable Beginning Ending Item before comprehensive income to parent to minority balance balance income tax income before tax company shareholders in this and transferred expenses after tax after tax period to profit or loss in this period invested unit under equity law Profit and loss from changes in fair value of financial assets for sale Profit and loss from reclassification of held-to-maturity investment into fair value of financial assets for sale Effective part of profit and loss of cash-flow hedge Difference in translation of Foreign Currency Financial 2,965,377 -4,657,291 -3,060,721 -1,596,570 -95,344 Statement Total other comprehensive income 2,965,377 -4,657,291 -3,060,721 -1,596,570 -95,344 7.33 Surplus reserves Unit: Yuan Decrease in this Item Beginning balance Increase in this period Ending balance period Legal surplus reserves 342,732,000 342,732,000 Free surplus reserves Reserve fund Enterprise expansion fund Other Total 342,732,000 342,732,000 7.34 Undistributed profit 126 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Unit: Yuan Item Ending balance Beginning balance Undistributed profit at the end of prior period before adjustment 8,008,982,547 7,309,081,618 Total Undistributed profit at the beginning of the period before adjustment -3,278,942 (increase listed with+ , and decrease listed with -) Undistributed profit at the beginning of the period after adjustment 8,005,703,605 7,309,081,618 Plus: Net profit for owner of the parent company 603,403,789 1,042,632,929 Minus: Drawn legal surplus Drawn free surplus Drawn common risk provision Common dividend payable 411,278,400 342,732,000 Common dividend transferred to share capital Undistributed profit at the end of period 8,197,828,994 8,008,982,547 7.35 Operating income and operating cost Unit: Yuan Amount incurred in this period Amount incurred in prior period Item Income Cost Income Cost Main business 2,541,459,605 927,958,197 2,818,814,912 969,407,949 Other business 16,815,180 8,294,028 9,415,152 5,149,343 Total 2,558,274,785 936,252,225 2,828,230,064 974,557,292 7.36 Taxes and surcharges Unit: Yuan Item Amount incurred in this period Amount incurred in prior period Consumption tax 68,699,658 97,343,463 Urban maintenance and construction tax 18,763,626 23,778,056 Education surcharges 13,670,717 17,417,976 Building tax 14,184,915 16,878,556 Land use tax 5,478,045 6,013,248 Stamp duty 1,504,356 2,247,814 Other 1,249,531 1,597,138 Total 123,550,848 165,276,251 127 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 7.37 Selling expenses Unit: Yuan Item Amount incurred in this period Amount incurred in prior period Marketing expenses 268,185,487 326,942,076 Employee remunerations 130,725,779 139,247,494 Transportation expenses 53,735,626 67,177,736 Trademark use fees 43,363,867 Storage and lease expenses 24,274,917 19,857,616 Depreciation expenses 20,476,637 21,735,895 Advertisement expenses 26,920,257 23,574,432 Conference expenses 8,945,999 9,319,883 Design & production expenses 2,365,761 2,457,300 Service charges 11,484,614 12,459,237 Travel expenses 11,822,548 10,886,711 Water, electricity and gas charges 7,697,325 7,166,936 Office & postage costs 2,801,706 2,349,806 Packing expenses 3,971,486 3,873,287 Public security & clean-keeping 2,214,479 2,336,546 expenses Business entertainment expenses 1,763,307 1,995,516 Other 14,584,873 15,914,695 Total 591,970,801 710,659,033 7.38 Management expenses Unit: Yuan Item Amount incurred in this period Amount incurred in prior period Employee remunerations 62,572,295 60,660,238 Depreciation expenses 31,887,697 35,410,914 Contracting expenses 7,178,106 7,178,106 Repair expenses 8,253,897 7,076,148 Office expenses 10,177,651 10,977,189 Amortization expenses 7,677,849 9,520,182 Afforestation fees 7,682,946 6,493,556 Safe production costs 2,357,016 2,422,526 Rental expenses 4,766,202 5,061,778 128 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Business entertainment expenses 2,631,383 2,815,060 Public security & clean-keeping 3,356,435 3,953,646 expenses Travel expenses 2,971,468 2,139,939 Other 4,039,367 4,255,600 Total 155,552,312 157,964,882 7.39 R&D expenses Unit: Yuan Item Amount incurred in this period Amount incurred in prior period R&D expenses 2,706,811 2,127,006 Total 2,706,811 2,127,006 7.40 Financial expenses Unit: Yuan Item Amount incurred in this period Amount incurred in prior period Interest expenditure 9,812,560 18,739,528 Minus: Interest income 4,606,417 7,245,870 Plus: Commission charges 1,271,831 3,005,483 Exchange gain or loss 2,311,609 -1,413,199 Total 8,789,583 13,085,942 7.41 Other income Unit: Yuan Amount incurred in prior Source of other income Amount incurred in this period period Supporting fund for industrial development 2,050,000 2,050,000 Industrial revitalization and technical transformation 1,086,000 project in Ningxia Reward for investment in fixed assets 1,140,000 1,140,000 Special fund for construction of peninsula blue economic 1,000,000 1,000,000 zone Other 3,082,627 4,012,100 Special fund for supporting corporate development 51,633,350 15,011,673 Other 5,305,915 13,683,105 129 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Amount incurred in prior Source of other income Amount incurred in this period period Total 64,211,892 37,982,878 7.42 Loss on impairment of credit Unit: Yuan Item Amount incurred in this period Amount incurred in prior period Loss on bad debts of accounts receivable -765,935 Total -765,935 7.43 Loss on impairment of assets Unit: Yuan Item Amount incurred in this period Amount incurred in prior period 1. Loss on bad debts 2. Inventory falling price loss 6,148,729 4,730,948 3. Loss on impairment of available-for-sale financial assets 4. Loss on impairment of held-to maturity investment 5. Loss on impairment of long-term equity investment 6. Loss on impairment of investment real estate 7. Loss on impairment of fixed assets 8. Loss on impairment of engineering materials 9. Loss on impairment of construction in progress 10. Loss on impairment of productive biological assets 11. Loss on impairment of oil and gas assets 12. Loss on impairment of intangible assets 13. Loss on impairment of goodwill 14. Other Total 6,148,729 4,730,948 7.44 Income from asset disposal Unit: Yuan Source of income from asset disposal Amount incurred in this period Amount incurred in prior period 130 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Income from disposal of fixed assets 1,138 93,958 Total 1,138 93,958 7.45 Non-operating income Unit: Yuan Amount incurred in Amount incurred in Amount included in the current Item this period prior period non-recurring profits/losses Gains on debt recombination Gains on exchange of non-monetary assets Grains on donations Governmental subsidy Other 3,575,914 2,006,392 3,575,914 Total 3,575,914 2,006,392 3,575,914 7.46 Non-operating expenses Unit: Yuan Amount incurred in Amount incurred in Amount included in the current Item this period prior period non-recurring profits/losses Loss on debt recombination Loss on exchange of non-monetary assets Donation Fine, penalty and overdue fine 10,811 1,187,713 10,811 paid due to violation of laws and administrative regulations Other 153,239 204,649 153,239 Total 164,050 1,392,362 164,050 7.47 Income tax expenses 7.47.1 List of income tax expenses Unit: Yuan Item Amount incurred in this period Amount incurred in prior Current income tax expenses 161,779,976 178,993,081 Deferred income tax expenses 48,501,602 32,986,654 Total 210,281,578 211,979,735 131 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 7.47.2 Adjustment process of accounting profit and income tax expenses Unit: Yuan Item Amount incurred in this Total profit 812,459,893 Income tax expenses calculated according to the legal/applicable tax rate 203,114,973 Influence of different tax rates applicable to subsidiary -66,516 Influence of income tax in the term before adjustment 3,082,397 Influence of nontaxable income Influence of non-deductible costs, expenses and losses 2,219,026 Influence of deductible loss from use of unconfirmed deferred income tax assets in prior period Influence of deductible temporary difference or deductible loss of unconfirmed deferred 1,931,698 income tax assets in this period Income tax expense 210,281,578 7.48 Other comprehensive income Refer to Note 7.32 for details. 7.49 Items of cash flow statement 7.49.1 Other cash received related to operating activities Unit: Yuan Item Amount incurred in this period Amount incurred in prior period Governmental subsidy income 62,580,748 33,687,978 Interest income 2,835,438 3,302,294 Net amercement income 1,225,511 1,609,829 Other 1,143,923 3,742,920 Total 67,785,620 42,343,021 7.49.2 Other cash paid related to operating activities Unit: Yuan Item Amount incurred in this period Amount incurred in prior period Selling expenses 348,849,996 387,846,396 Administrative expenses 41,017,612 45,235,101 Other 2,912,859 3,895,589 132 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Total 392,780,467 436,977,086 7.49.3 Other cash received related to financial activities Unit: Yuan Item Amount incurred in this period Amount incurred in prior period Government subsidies received related 3,150,000 to assets Interest income from pledge of fixed 371,431 deposits by the R&D Company Long-term loans from pledge of fixed 20,000,000 deposits by R&D Company Total 23,521,431 7.49.4 Other cash paid related to financial activities Unit: Yuan Item Amount incurred in this period Amount incurred in prior period R&D Company’ long-term loans pledged by 20,000,000 fixed-term deposits Total 20,000,000 7.50 Supplementary information to cash flow statement 7.50.1 Supplementary information to cash flow statement Unit: Yuan Supplementary materials Amount incurred in this period Amount incurred in prior period 1. Cash flows from operating activities calculated by -- -- adjusting the net profit: Net profit 602,178,315 636,001,737 Plus: Provision for impairment of assets -5,382,794 -4,730,948 Depreciation of fixed assets, oil-and-gas assets and 155,147,729 148,983,240 productive biological assets Depreciation of right-of-use assets Amortization of intangible assets 8,438,742 11,567,301 Amortization of long-term deferred expenses 6,662,662 8,117,444 Losses on disposal of fixed assets, intangible assets and -1,138 -93,958 other long-term assets (profit listed with “-”) 133 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Supplementary materials Amount incurred in this period Amount incurred in prior period Losses on retirement of fixed assets (profit listed with “-”) Losses on fair value change (profit listed with “-”) Financial costs (profit listed with “-”) 13,987,879 15,048,678 Investment losses (profit listed with “-”) Decrease in deferred income tax assets (increase listed 50,789,656 37,133,223 with “-”) Increase of deferred income tax liabilities (decrease -3,381,035 -4,146,569 listed with “-”) Decrease in inventories (increase listed with “-”) 123,958,750 216,486,236 Decrease in operating receivables (increase listed with -305,623,146 “-”) -172,662,167 Increase in operating payable (decrease listed with “-”) -280,260,593 -205,989,766 Other Net cash flows from operating activities 499,476,006 552,753,472 2. Significant investment and financing activities not -- -- involving cash deposit and withdrawal: Debt transferred into assets Convertible corporate bond due within 1 year Fixed assets under financing lease 3. Net changes of cash and cash equivalent: -- -- Ending balance of cash 1,573,727,077 1,428,670,462 Minus: Beginning balance of cash 1,206,860,334 1,180,889,274 Plus: Ending balance of cash equivalent Minus: Beginning balance of cash equivalent Net increase amount of cash and cash equivalent 366,866,743 247,781,188 7.50.2 Composition of cash and cash equivalents Unit: Yuan Item Ending balance Beginning balance 1. Cash 1,573,727,077 1,428,670,462 Including: Cash on hand 70,198 151,228 Bank deposits on demand 1,573,656,879 1,428,519,234 Other monetary capital on demand Due from central bank available for payment 134 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Due from the industry Inter-bank lending 2. Cash equivalents Including: Bond investment due within three months 3. Balance of cash and cash equivalents at the end of 1,573,727,077 1,428,670,462 period Including: Restricted use of parent company or subsidiaries in the group 7.51 Assets with ownership or use right restrictions Unit: Yuan Item Ending book value Reason for restriction Loan deposit, L/C deposit, frozen balance of Alipay, Monetary capital 94,466,626 housing fund and guaranty money for deposit in unit card Accounts receivable 31,134,017 Pledge of short-term loans Pledge of short-term loans, long-term loans and Fixed assets 353,013,613 long-term accounts payable Intangible assets 215,282,924 Pledge of long-term accounts payable Total 693,897,180 -- 7.52 Foreign currency monetary items 7.52.1 Foreign currency monetary items The foreign currency monetary items of the Group in domestic entities of China are listed as follows: Unit: Yuan Item Ending foreign currency balance Translation exchange rate Ending converted RMB balance Monetary capital -- -- 46,815,034 Including: USD 6,805,498 6.8747 46,785,757 EUR 2,901 7.817 22,677 HKD 7,503 0.8797 6,600 7.52.2 Overseas operational entities The currency adopted by the overseas subsidiaries of the Company according to the main economic environment where the operation is located shall be chosen as the recording currency. Marques del Atrio and Francs Champs Participations SAS (“Francs Champs”) both use euro as the recording currency, Indomita Wine Company Chile, SpA uses Chilean peso as the recording currency, and Kilikanoon Estate, Australia uses Australian dollar as the 135 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report recording currency. The foreign currency assets or liabilities of overseas subsidiaries are listed as follows: Unit: Yuan Item Ending foreign currency balance Translation exchange rate Ending converted RMB balance Monetary capital -- -- 3,553,711 Including: USD 516,926 6.8747 3,553,711 EUR HKD Short-term loans -- -- 75,621,700 Including: USD 11,000,000 6.8747 75,621,700 EUR HKD 8. Changes in scope of consolidation Nil 9. Equity in other entities 9.1 Equity in the subsidiaries 9.1.1 Constitution of enterprise group Proportion of Business Name of subsidiary Principal business location Registration place shareholding Acquisition mode nature Direct Indirect Acquired from a Shihezi City, Xinjiang Shihezi City, Xinjiang Uygur Manufacturing business combination Xinjiang Tianzhu (a) Uygur Autonomous Region, 60% Autonomous Region, China industry under non-common China control Acquired from a business combination Roullet Fransac Cognac, France Cognac, France Trading 100% under non-common control Acquired from a business combination Mirefleurs Bordeaux, France Bordeaux, France Trading 100% under non-common control Marques del Atrio Navarra, Spain Navarra, Spain Sales 75% Acquired from a 136 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Proportion of Business Name of subsidiary Principal business location Registration place shareholding Acquisition mode nature Direct Indirect business combination under non-common control Acquired by Indomita Wine Santiago, Chile Santiago, Chile Sales 85% establishment or investment Acquired from a Kilikanoon Estate, business combination Adelaide, Australia Adelaide, Australia Sales 80% Australia under non-common control Beijing Changyu Wine Acquired by Marketing Co., Ltd. Beijing City, China Beijing City, China Sales 50% 50% establishment or (“Beijing Marketing”) investment Yantai Kylin Packaging Acquired by Yantai City, Shandong Yantai City, Shandong Manufacturing Co., Ltd. (“Kylin 100% establishment or Province, China Province, China industry Packaging”) investment Yantai Chateau Acquired by Yantai City, Shandong Yantai City, Shandong Manufacturing Changyu-Castel Co., Ltd. 70% establishment or Province, China Province, China industry (“Chateau Changyu”) (b) investment Changyu (Jingyang) Acquired by Xianyang City, Shaanxi Xianyang City, Shaanxi Manufacturing Pioneer Wine Co., Ltd. 100% establishment or Province, China Province, China industry (“Jingyang Wine”) investment Yantai Changyu Pioneer Acquired by Yantai City, Shandong Yantai City, Shandong Wine Sales Co., Ltd. Sales 100% establishment or Province, China Province, China (“Sales Company”) investment Langfang Development Acquired by Zone Castel-Changyu Wine Langfang City, Hebei Langfang City, Hebei Manufacturing 39% 10% establishment or Co., Ltd. (“Langfang Province, China Province, China industry investment Castel”) (c) Changyu (Jingyang) Acquired by Xianyang City, Shaanxi Xianyang City, Shaanxi Pioneer Wine Sales Co., Sales 100% establishment or Province, China Province, China Ltd. (“Jingyang Sales”) investment Langfang Changyu Pioneer Acquired by Langfang City, Hebei Langfang City, Hebei Wine Sales Co., Ltd. Sales 100% establishment or Province, China Province, China (“Langfang Sales”) investment Shanghai Changyu Wine Acquired by Marketing Co., Ltd. Shanghai City, China Shanghai City, China Sales 30% 70% establishment or (“Shanghai Marketing”) investment 137 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Proportion of Business Name of subsidiary Principal business location Registration place shareholding Acquisition mode nature Direct Indirect Beijing Changyu AFIP Eco-agriculture Acquired by Miyun County, Beijing City, Miyun County, Beijing City, Development Co., Ltd. Sales 100% establishment or China China (“Eco-agriculture investment Development”) Beijing Changyu AFIP Acquired by Manufacturing Wine Chateau Co., Ltd. Beijing City, China Beijing City, China 90% establishment or industry (“Beijing Chateau”) (d) investment Acquired by Yantai Changyu Wine Sales Yantai City, Shandong Yantai City, Shandong Sales 90% 10% establishment or Co., Ltd. ( “Wine Sales”) Province, China Province, China investment Yantai Changyu Pioneer Acquired by International Wine Co., Yantai City, Shandong Yantai City, Shandong Sales 70% 30% establishment or Ltd. (“Pioneer Province, China Province, China investment International”) Hangzhou Changyu Wine Acquired by Hangzhou City, Zhejiang Hangzhou City, Zhejiang Sales Co., Ltd. (“Hangzhou Sales 100% establishment or Province, China Province, China Changyu”) investment Acquired by Yinchuan City, Ningxia Hui Yinchuan City, Ningxia Hui Planting Ningxia Growing 100% establishment or Autonomous Region, China Autonomous Region, China industry investment Huanren Changyu National Acquired by Benxi City, Liaoning Benxi City, Liaoning Province, Wine Sales Co., Ltd. Sales 100% establishment or Province, China China (“National Wine”) investment Liaoning Changyu Icewine Acquired by Benxi City, Liaoning Benxi City, Liaoning Province, Manufacturing Valley Co., Ltd. (“Icewine 51% establishment or Province, China China industry Valley”) (e) investment Yantai Development Zone Acquired by Changyu Trading Co., Ltd. Yantai City, Shandong Yantai City, Shandong Sales 100% establishment or (“Development Zone Province, China Province, China investment Trading”) Shenzhen Changyu Wine Acquired by Shenzhen City, Guangdong Shenzhen City, Guangdong Marketing Co., Ltd. Sales 100% establishment or Province, China Province, China (“Shenzhen Marketing”) investment Yantai Fushan District Acquired by Yantai City, Shandong Yantai City, Shandong Changyu Trading Co., Ltd. Sales 100% establishment or Province, China Province, China (“Fushan Trading”) investment Beijing Changyu AFIP Miyun County, Beijing City, Miyun County, Beijing City, Service 100% Acquired by 138 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Proportion of Business Name of subsidiary Principal business location Registration place shareholding Acquisition mode nature Direct Indirect International Conference China China industry establishment or Center Co., Ltd. investment (“Conference Center”) Beijing Changyu AFIP Acquired by Miyun County, Beijing City, Miyun County, Beijing City, Tourist Tourism and Culture Co., 100% establishment or China China industry Ltd. (“AFIP Tourism”) investment Acquired by Yinchuan City, Ningxia Hui Yinchuan City, Ningxia Hui Manufacturing Ningxia Wine 100% establishment or Autonomous Region, China Autonomous Region, China industry investment Yantai Changyu Chateau Acquired by Yantai City, Shandong Yantai City, Shandong Wholesale and Tinlot Co., Ltd. (“Chateau 65% 35% establishment or Province, China Province, China retail Tinlot”) investment Changyu (Qingtongxia) Qingtongxia City, Ningxia Acquired by Qingtongxia City, Ningxia Hui Wine Sales Co., Ltd. Hui Autonomous Region, Sales 100% establishment or Autonomous Region, China (“Qingtongxia Sales”) China investment Shihezi City, Xinjiang Acquired by Shihezi City, Xinjiang Uygur Manufacturing Shihezi Chateau Uygur Autonomous Region, 100% establishment or Autonomous Region, China industry China investment Acquired by Yinchuan City, Ningxia Hui Yinchuan City, Ningxia Hui Manufacturing Ningxia Chateau 100% establishment or Autonomous Region, China Autonomous Region, China industry investment Chateau Changyu Rena Acquired by Xianyang City, Shaanxi Xianyang City, Shaanxi Manufacturing Shaanxi Co., Ltd. 100% establishment or Province, China Province, China industry (“Chang’an Chateau”) investment Acquired by Research, Development & Yantai City, Shandong Yantai City, Shandong Manufacturing 68% establishment or Manufacture Company (f) Province, China Province, China industry investment Changyu (Huanren) Wine-making Acquired by Benxi City, Liaoning Benxi City, Liaoning Province, Pioneer Wine Co., Ltd. project 100% establishment or Province, China China (“Huanren Wine”) preparation investment Xinjiang Changyu Wine Acquired by Xinjiang Uygur Xinjiang Uygur Autonomous Sales Co., Ltd. (“Xinjiang Sales 100% establishment or Autonomous Region, China Region, China Sales”) investment Ningxia Changyu Trading Acquired by Yinchuan City, Ningxia Hui Yinchuan City, Ningxia Hui Co., Ltd. (“Ningxia Sales 100% establishment or Autonomous Region, China Autonomous Region, China Trading”) investment Shaanxi Changyu Rena Xianyang City, Shaanxi Xianyang City, Shaanxi Acquired by Sales 100% Wine Sales Co., Ltd. Province, China Province, China establishment or 139 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Proportion of Business Name of subsidiary Principal business location Registration place shareholding Acquisition mode nature Direct Indirect (“Shaanxi Sales”) investment Penglai Changyu Wine Acquired by Penglai City, Shandong Penglai City, Shandong Sales Co., Ltd. (“Penglai Sales 100% establishment or Province, China Province, China Wine”) investment Laizhou Changyu Wine Acquired by Laizhou City, Shandong Laizhou City, Shandong Sales Co., Ltd. (“Laizhou Sales 100% establishment or Province, China Province, China Sales”) investment Acquired by Francs Champs Investment Cognac, France Cognac, France 100% establishment or Participations SAS trade investment Lanzhou Changyu Wine Acquired by Lanzhou City, Gansu Lanzhou City, Gansu Province, Marketing Co., Ltd. Sales 100% establishment or Province, China China (“Lanzhou Marketing”) investment Beijing Changyu Trading Acquired by Co., Ltd. (“Beijing Beijing City, China Beijing City, China Sales 100% establishment or Trading”) investment Tianjin Changyu Pioneer Acquired by Wine Sales Co., Ltd. Tianjin City, China Tianjin City, China Sales 100% establishment or (“Tianjin Pioneer”) investment Fuzhou Changyu Pioneer Acquired by Fuzhou City, Fujian Fuzhou City, Fujian Province, Wine Co., Ltd. (“Fuzhou Sales 100% establishment or Province, China China Pioneer”) investment Nanjing Changyu Pioneer Acquired by Nanjing City, Jiangsu Nanjing City, Jiangsu Wine Co., Ltd. (“Nanjing Sales 100% establishment or Province, China Province, China Pioneer”) investment Xianyang Changyu Pioneer Acquired by Xianyang City, Shaanxi Xianyang City, Shaanxi Wine Sales Co., Ltd. Sales 100% establishment or Province, China Province, China (“Xianyang Pioneer”) investment Shenyang Changyu Pioneer Acquired by Shenyang City, Liaoning Shenyang City, Liaoning Wine Co., Ltd. (“Shenyang Sales 100% establishment or Province, China Province, China Pioneer”) investment Jinan Changyu Pioneer Acquired by Jinan City, Shandong Jinan City, Shandong Province, Wine Co., Ltd. (“Jinan Sales 100% establishment or Province, China China Pioneer”) investment Shanghai Changyu Pioneer Acquired by Wine Co., Ltd. (“Shanghai Shanghai City, China Shanghai City, China Sales 100% establishment or Pioneer”) investment Fuzhou Changyu Pioneer Fuzhou City, Jiangxi Fuzhou City, Jiangxi Province, Sales 100% Acquired by 140 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Proportion of Business Name of subsidiary Principal business location Registration place shareholding Acquisition mode nature Direct Indirect Wine Co., Ltd. (“Fuzhou Province, China China establishment or Pioneer”) investment Shijiazhuang Changyu Acquired by Pioneer Wine Sales Co., Shijiazhuang City, Hebei Shijiazhuang City, Hebei Sales 100% establishment or Ltd. (“Shijiazhuang Province, China Province, China investment Pioneer”) Hangzhou Yuzefeng Acquired by Hangzhou City, Zhejiang Hangzhou City, Zhejiang Trading Co., Ltd. Sales 100% establishment or Province, China Province, China (“Hangzhou Yuzefeng”) investment Acquired by Jilin Changyu Pioneer Wine Changchun City, Jilin Changchun City, Jilin Sales 100% establishment or Co., Ltd. (“Jilin Pioneer”) Province, China Province, China investment Beijing Changyu Pioneer Acquired by Wine Sales Co., Ltd. Beijing City, China Beijing City, China Sales 100% establishment or (“Beijing Pioneer”) investment Harbin Changyu Pioneer Acquired by Harbin City, Heilongjiang Harbin City, Heilongjiang Wine Sales Co., Ltd. Sales 100% establishment or Province, China Province, China (“Harbin Pioneer”) investment Hunan Changyu Pioneer Acquired by Changsha City, Hunan Changsha City, Hunan Wine Co., Ltd. (“Hunan Sales 100% establishment or Province, China Province, China Pioneer”) investment Yinchuan Changyu Pioneer Acquired by Yinchuan City, Ningxia Hui Yinchuan City, Ningxia Hui Wine Co., Ltd. (“Yinchuan Sales 100% establishment or Autonomous Region, China Autonomous Region, China Pioneer”) investment Kunming Changyu Pioneer Acquired by Kunming City, Yunnan Kunming City, Yunnan Wine Co., Ltd. (“Kunming Sales 100% establishment or Province, China Province, China Pioneer”) investment Chongqing Changyu Acquired by Pioneer Wine Sales Co., Chongqing City, China Chongqing City, China Sales 100% establishment or Ltd. (“Chongqing Pioneer”) investment Wuhan Changyu Pioneer Acquired by Wuhan City, Hubei Wuhan City, Hubei Province, Wine Co., Ltd. (“Wuhan Sales 100% establishment or Province, China China Pioneer”) investment Hohhot Changyu Pioneer Hohhot City, Inner Acquired by Hohhot City, Inner Mongolia Wine Co., Ltd. (“Hohhot Mongolia Autonomous Sales 100% establishment or Autonomous Region , China Pioneer”) Region , China investment Chengdu Changyu Pioneer Chengdu City, Sichuan Chengdu City, Sichuan Acquired by Sales 100% Wine Co., Ltd. (“Chengdu Province, China Province, China establishment or 141 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Proportion of Business Name of subsidiary Principal business location Registration place shareholding Acquisition mode nature Direct Indirect Pioneer”) investment Nanning Changyu Pioneer Nanning City, Guangxi Acquired by Nanning City, Guangxi Zhuang Wine Co., Ltd. (“Nanning Zhuang Autonomous Sales 100% establishment or Autonomous Region, China Pioneer”) Region, China investment Lanzhou Changyu Pioneer Acquired by Lanzhou City, Gansu Lanzhou City, Gansu Province, Wine Co., Ltd. (“Lanzhou Sales 100% establishment or Province, China China Pioneer”) investment Yantai Roullet-Fransac Acquired by Imported Wine Sales Co., Yantai City, Shandong Yantai City, Shandong Sales 100% establishment or Ltd. (“Yantai Province, China Province, China investment Roullet-Fransac”) Hefei Changyu Pioneer Acquired by Hefei City, Anhui Province, Hefei City, Anhui Province, Wine Co., Ltd. (“Hefei Sales 100% establishment or China China Pioneer”) investment Urumchi Changyu Pioneer Urumchi City, Xinjiang Acquired by Urumchi City, Xinjiang Uygur Wine Co., Ltd. (“Urumchi Uygur Autonomous Region, Sales 100% establishment or Autonomous Region, China Pioneer”) China investment Guangzhou Changyu Acquired by Guangzhou City, Guangzhou City, Guangdong Pioneer Wine Co., Ltd. Sales 100% establishment or Guangdong Province, China Province, China (“Guangzhou Pioneer”) investment Acquired by Yantai City, Shandong Yantai City, Shandong Wine Sales Co., Ltd. Sales 100% establishment or Province, China Province, China investment Explanation for difference between the proportion of shareholding and proportion of voting power in the subsidiaries: (a) Xinjiang Tianzhu is a subsidiary of the Company obtained by merger and acquisition, whose 60% of the shares are held by the Company. The Company exercises full control over the operation, investment and financing policies of Xinjiang Tianzhu by contract arrangement. This contract arrangement was expired on August 6, 2017. After the expiration, the minority shareholders of Xinjiang Tianzhu shall enjoy/bear all rights/duties of shareholders specified in the Articles of Association. (b) Changyu Chateau is a Sino-foreign joint venture established by the Company and a foreign investor, whose 70% of the shares are held by the Company. The Company exercises full control over the operation, investment and financing policies of Changyu Chateau by contract arrangement. The contract arrangement will expire on December 31, 2022. (c) Langfang Castel is a Sino-foreign joint venture established by the Company and a foreign 142 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report investor, whose 49% of the shares are held by the Company and its subsidiaries. The Company exercises full control over the operation, investment and financing policies of Langfang Castel by contract arrangement. The contract arrangement expired on December 31, 2017. After the expiration of the contract arrangement, the minority shareholders of Langfang Castel normally enjoy/undertake all rights/duties of the shareholders agreed in the Articles of Association of the Company. (d) Beijing Chateau is a limited liability company jointly established by the Company and Yantai De’an and Beijing Qinglang, in which the Company holds 90% of the shares. The Company exercises full control over the operation, investment and financing policies of Beijing Chateau by contract arrangement. The contract arrangement will expire on September 2, 2019. (e) Icewine Valley is a Sino-foreign joint venture established by the Company and a foreign investor, whose 51% of the shares are held by the Company. The Company exercises full control over the operation, investment and financing policies of Icewine Valley by contract arrangement. The contract arrangement will expire on December 31, 2021. (f) The Research, Development & Manufacture Company is a joint venture established by the Company and Agricultural Development Fund, whose 68% of the shares were held by the Company on June 30, 2019. As stated in Note 7.27, the Company exercises full control over the operation, investment and financing policies of the Research, Development & Manufacture Company by contract arrangement. The contract arrangement will expire on May 22, 2026. Up to June 30, 2019, the remaining investment of the Agricultural Development Fund accounted for 32% of the registered capital. 9.1.2 Important non-wholly-owned subsidiaries Unit: Yuan Dividend declared to be Shareholding Profit/loss attributable Balance of minority distributed to minority Name of subsidiary proportion of minority to minority shareholders shareholder’s interest at shareholders in this shareholders in this period the end of period period Xinjiang Tianzhu 40% -1,200,628 49,412,020 Marques del Atrio 25% 464,844 1,367,975 29,878,944 Changyu Chateau 30% 12,365,016 Langfang Castel 51% -752,237 20,175,744 Beijing Chateau 10% 65,133,868 Icewine Valley 49% 33,319,062 Indomita Wine 15% 564,376 53,709,304 Kilikanoon Estate, 20% -301,829 16,204,035 Australia 143 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Explanation for difference between the proportion of shareholding and proportion of voting power of the minority shareholders in the subsidiaries: See details in Note 9.1.1. 9.1.3 Main financial information of important non-wholly-owned subsidiaries Unit: Yuan Ending balance Beginning balance Name of Current Non-curren Current Non-curren Total Current Non-curren Total Current Non-curren Total subsidiary Total assets assets t assets liabilities t liabilities liabilities assets t assets assets liabilities t liabilities liabilities Xinjiang 26,891,774 64,187,998 91,079,771 -169,932 5,336,114 5,166,181 27,390,495 66,486,795 93,877,290 5,336,114 5,336,114 Tianzhu Changyu 126,947,614 113,877,340 240,824,954 163,176,906 163,176,906 141,298,023 114,694,168 255,992,191 171,869,662 171,869,662 Chateau Langfang 16,966,616 15,672,549 32,639,165 4,033,546 4,033,546 17,659,511 16,001,682 33,661,193 3,358,322 3,358,322 Castel Beijing 228,256,490 458,433,952 686,690,442 45,912,267 45,912,267 219,973,582 461,115,089 681,088,671 62,598,545 62,598,545 Chateau Icewine 61,748,346 23,105,860 84,854,207 31,627,378 100,000 31,727,378 45,194,591 23,920,890 69,115,481 14,974,458 100,000 15,074,458 Valley Marques 407,617,465 92,937,395 500,554,860 304,115,810 72,890,389 377,006,198 464,421,130 99,080,668 563,501,798 381,659,315 54,520,937 436,180,252 del Atrio Indomita 210,503,095 295,300,215 505,803,310 138,985,158 4,861,038 143,846,196 214,784,490 300,969,342 515,753,832 148,359,328 4,976,161 153,335,489 Wine Kilikanoon Estate, 82,656,715 64,415,130 147,071,845 12,813,137 52,227,853 65,040,990 87,634,707 63,759,866 151,394,573 13,387,942 51,893,171 65,281,113 Australia Unit: Yuan Amount incurred in this period Amount incurred in prior period Name of Total Total Operating Operating Operating Operating subsidiary Net profit comprehensive Net profit comprehensive income cash flow income cash flow income income Xinjiang -3,001,571 -1,297,212 -417,462 18,803 -184,572 -184,572 10,284,801 Tianzhu Changyu 24,470,842 -2,189,871 -686,874 6,946,282 43,226,910 2,861,474 2,861,474 2,419,427 Chateau Langfang -1,474,975 -821,013 25,801 5,038,281 -1,952,954 -1,952,954 -4,435,022 144 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Castel Beijing 12,711,985 22,752,823 9,667,568 78,502,666 15,243,700 15,243,700 12,282,145 Chateau 90,339,526.00 Icewine -1,986,710 -754,056 1,903,734 27,305,133 905,396 905,396 2,018,740 Valley 19,763,387.00 Marques 129,064,457 1,859,381 -4,084,674 -23,846,960 148,197,893 1,214,012 -929,332 -21,783,821 del Atrio Indomita 86,818,838 3,762,504 1,880,687 -1,725,571 93,719,341 -281,859 -4,460,814 -7,723,684 Wine Kilikanoon Estate, 22,852,809 -1,509,147 -4,011,458 1,024,962 25,904,401 -115,317 -3,779,883 -1,469,903 Australia 10. Risks related to financial instruments The main financial instruments of the Group include monetary capital, bills receivable, accounts receivable, receivables financing, other receivables, other non-current financial assets, short-term loans, non-current liabilities due within one year, accounts payable, other payables, long-term accounts payable and long-term loans, etc. Please refer to Note 7 for details of each financial instruments. The risks related to these financial instruments and risk management policies adopted by the Group to reduce these risks are shown as follows. The management of the Group manages and monitors these risk exposures to ensure that the above-mentioned risks are controlled within a defined scope. The Group adopts sensitivity analysis techniques to analyze the possible influence of possible reasonable changes of risk variables on the current profits and losses and shareholders’ equity. Since any risk variable merely changes independently and the final influence of relevance between variables on the change of certain risk variable will exert a great effect, the following content is carried out under the hypothesis that each variable changes independently. The risk management objective of the Group is to achieve proper balance between risks and benefits, to minimize the negative influence of the risks on the business performance of the Group and to maximize the shareholders’ benefit. Based on this risk management objective, the basic risk management strategy of the Group is to determine and analyze various risks faced by the Group, to set up proper risk tolerance bottom line and to carry out risk management, and to supervise various risks 145 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report timely and reliably to control the risks within a defined scope. 10.1 Risk management objective and policy 10.1.1 Market risk ① Foreign exchange risk Foreign exchange risk refers to the risk that causes loss due to exchange rate fluctuation. The foreign exchange risk borne by the Group is mainly relevant to EUR and USD. Except that the overseas subsidiaries of the Group purchase and sell in EUR, Chilean peso and AUD, which borrow in USD, and domestic subsidiaries deposit in EUR and USD, other main business activities of the Group are priced and settled in RMB. As at June 30, 2019, except that the assets and liabilities mentioned in the table below were the balance of deposits or loans shown in foreign currencies, other assets and liabilities of the entities of the Group were settled in their respective functional currencies. Unit: Yuan Item Ending balance Beginning balance Monetary capital (EUR) 22,677 199,753 Monetary capital (USD) 50,339,468 51,283,910 Short-term loans (USD) 75,621,700 75,495,200 The foreign exchange risk caused by the assets and liabilities of such foreign currency balance may exert an influence on the business performance of the Group. The Group pays close attention to the influence of exchange rate fluctuation on the foreign exchange risk of the Group. The Group has not taken any measures to avoid the foreign exchange risk at present. Sensitivity analysis of foreign exchange risk With the other variables unchanged, the pre-tax influence of possible reasonable exchange rate fluctuation on current profit and loss and shareholders’ equity is shown as follows: Domestic entities: 146 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Unit: Yuan This period Item Exchange rate fluctuation Influence on profit in this period Influence on shareholders’ equity EUR 5% appreciation against RMB 1,134 1,134 EUR 5% depreciation against RMB -1,134 -1,134 USD 5% appreciation against RMB 2,339,288 2,339,288 USD 5% depreciation against RMB -2,339,288 -2,339,288 Overseas entities: Unit: Yuan This period Item Exchange rate fluctuation Influence on profit in this period Influence on shareholders’ equity USD 5% appreciation against EUR 10,250 10,250 USD 5% depreciation against EUR -10,250 -10,250 USD 10% appreciation against CLP -115,086 -115,086 USD 10% depreciation against CLP 115,086 115,086 Note: As at June 30, 2019, the management of the Group predicted that EUR and USD exchange rate against RMB, and USD exchange rate against EUR changed by 5%; and USD exchange rate against CLP changed by 15%. ② Interest rate risk – risk of change in cash flow The risk of change in cash flow of financial instruments caused by interest rate change of the Group is mainly relevant to the monetary capital and bank loan at floating interest rate. The policy of the Group is to maintain the floating interest rate of these loans to eliminate the risk of change in fair value of the interest rate. Sensitivity analysis of interest rate risk Sensitivity analysis of interest rate risk is based on the hypothesis that the change in market interest rate influences the interest income or expense of financial instruments at variable rate. The management of the Group thinks that the interest rate risk of deposit in bank borne by the Group 147 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report is not significant, and therefore the sensitivity analysis of interest rate of deposit in bank is not disclosed here. On the basis of the above-mentioned hypothesis, with the other variables unchanged, the pre-tax influence of possible reasonable exchange rate fluctuation on current profit and loss and shareholders’ equity is as follows: Unit: Yuan This period Item Interest rate change Influence on profit of this period Influence on shareholders’ equity Bank loan Increase by 50 BP -323,958 -323,958 Bank loan Decrease by 50 BP 323,958 323,958 Note: As at June 30, 2019, the management of the Group predicted that the bank floating rate changed by 50 basis points 10.1.2 Credit risk As at June 30, 2019, the largest credit risk exposure possibly causing the financial loss of the Group was mainly caused by the loss generated by the financial assets of the Group due to failure of another party of the contract in fulfilling obligations. To lower the credit risk, the Group only trades with the recognized and reputable third party. In accordance with the policy of the Group, credit check shall be carried out for all customers who transact by means of credit. In addition, the Group conducts continuous monitoring on the balance of accounts receivable to ensure that the Group will not face major risk of bad debts. For transactions not settled with recording currency of relevant business units, unless the credit control department of the Group specially approves, the Group will not provide credit trade terms. In addition, the Group audits the collection of each single significant account receivable on each date of balance sheet to ensure that sufficient bad-debt provision is accrued for accounts unable to be collected. Therefore, the management of the Group thinks the credit risk borne by the Group is greatly reduced. 148 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Since the Group only trades with the recognized and reputable third party, no collateral is required. The credit risk is managed centrally according to the customer/counter-party, geographic area and industry. As at June 30, 2019, 18.3% of accounts receivable of the Group came from top five borrowers in accounts receivable of the Group (December 31, 2018: 19.8%). The Group holds no collateral or other credit enhancement for the balance of accounts receivable. 10.1.3 Liquidity risk When managing the liquidity risk, the Group reserves and monitors the cash and cash equivalents the management considers sufficient to satisfy the operation need of the Group and reduce the influence of fluctuation in cash flow. The management of the Group monitors the use of bank loans and ensures to abide by the loan agreement. 11. Related parties and related transactions 11.1 Particulars of the parent company of the Company Proportion of Proportion of Name of parent shareholding of the voting powers of Registration place Business nature Registered capital company parent company in the parent company the Company in the Company Changyu Group Manufacturing Yantai City 50,000,000 50.40% 50.40% Company industry From January to June 2019, there was no fluctuation in the registered capital of the parent company and its share in equity interest and voting right. 11.2 Particulars of the subsidiaries of the Company See particulars of the subsidiaries of the Company in Note 9. 11.3 Particulars of other related parties Name of other related parties Relationship between other related parties and the Company Yantai Changyu Wine Culture Museum Co., Ltd. (“Wine A company controlled by the same parent company Culture Museum”) Yantai Changyu Window of International Wine City Co. Ltd. A company controlled by the same parent company (“Window of Wine City”) 149 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Yantai God Horse Packing Co., Ltd. (“God Horse Packing”) A company controlled by the same parent company Yantai Zhongya Medical Health Wine Co., Ltd. (“Zhongya A company controlled by the same parent company Medical”) Yantai Changyu Cultural Tourism Product Sales Co., Ltd. A company controlled by the same parent company (“Cultural Sales”) Yantai Changyu Cultural Tourism Development Co., Ltd. A company controlled by the same parent company (“Cultural Development”) 11.4 Related transactions 11.4.1 Related transactions of purchasing and selling goods and providing and receiving services List of purchasing goods/receiving services Unit: Yuan Approved transaction Exceeding the Related Amount incurred Amount incurred in Related parties amount transaction amount or transactions in this period prior period not Purchasing God Horse Packing 74,970,845 95,990,354 goods Purchasing Zhongya Medical 2,970,007 6,037,893 goods Wine Culture Purchasing 7,324,199 9,475,159 Museum goods Window of Wine Purchasing 6,853,112 2,857,130 City goods Purchasing Cultural Sales 65,907 goods Cultural Purchasing 40,458 Development goods List of selling goods/providing services Unit: Yuan Amount incurred in this Related parties Related transactions Amount incurred in prior period period Wine Culture Museum Selling goods 3,377,011 13,889,017 Window of Wine City Selling goods 3,891,101 8,773,612 Zhongya Medical Selling goods 2,559,870 2,203,629 God Horse Packing Selling goods 3,520 15,742 150 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Cultural Sales Selling goods 3,873,204 Cultural Development Selling goods 1,847,727 220,759 The price of transactions between the Group and the related parties are based on the negotiated price. 11.4.2 Related trusteeship/contracting and mandatory administration/outsourcing Nil 11.4.3 Leasing with related parties The Company as a lessor: Unit: Yuan Rental income recognized in Rental income recognized in Name of the lessee Type of leased assets this period prior period Office building and God Horse Packing 742,883 739,491 plant Window of Wine City Office building 488,595 486,364 Zhongya Medical Office building 260,279 259,091 The Company as a lessee: Unit: Yuan Rent recognized in prior Name of the lessor Type of leased assets Rent recognized in this period period Changyu Group Company Office building and plant 3,447,891 3,432,147 11.4.4 Related guarantee Nil 11.4.5 Inter-bank borrowing and lending of related parties Nil 11.4.6 Asset transfer and debt recombination of related parties Nil 11.4.7 Other related transactions Unit: Yuan Item Note Amount incurred in this period Amount incurred in prior period Trademark use fee (a) 44,428,033 Patent fee (b) 25,000 151 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 11.5 Accounts receivable and payable of the related parties 11.5.1 Accounts receivable Unit: Yuan Ending balance Beginning balance Provision Item Related parties Book Provision for for bad Book balance balance bad debts debts Accounts receivable Zhongya Medical 4,384,629 2,768,391 Accounts receivable God Horse Packing 17,137 Accounts receivable Window of Wine City 1,777,525 1,911,157 Other receivables God Horse Packing 1,626,880 813,440 Other receivables Zhongya Medical 285,000 Other receivables Window of Wine City 535,000 11.5.2 Accounts payable Unit: Yuan Item Related parties Ending book balance Beginning book balance Accounts payable God Horse Packing 36,227,351 55,366,785 Accounts payable Zhongya Medical 8,002,230 6,722,667 Accounts payable Wine Culture Museum 7,301,765 4,646,731 Accounts payable Window of Wine City 1,139,407 4,789,600 Accounts payable Cultural Sales 6,360 Other accounts payable Changyu Group Company 3,775,362 78,414,978 Other accounts payable God Horse Packing 450,000 12. Commitment and contingency 12.1 Significant commitment Unit: Yuan Item Ending balance Beginning balance Making long-term asset commitments 469,980,000 996,675,000 12.2 Contingency As of the balance sheet date, the Group didn’t have any contingency to be disclosed. 13. Matters after balance sheet 13.1 Important non-adjusting events Nil 152 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 13.2 Profit distribution Unit: Yuan Profits or dividends to be distributed 411,278,400 Allocated profits or dividends approved to declare upon 411,278,400 discussion 13.3 Other statement of events after the balance sheet date According to the decision of the Shareholders’ Meeting dated May 17, 2019, based on the issued capital stock of 685,464,000 shares in 2018, the Company allocated RMB 6 Yuan in cash (including tax) for every 10 shares to all shareholders with the total cash dividends of RMB 411,278,400 Yuan. Such cash dividends were distributed on July 8, 2019 and July 10, 2019 respectively. 14. Other important matters Nil 15. Notes on major items in financial statements of the parent company 15.1 Accounts receivable 15.1.1 Accounts receivable disclosed by type Unit: Yuan Ending balance Beginning balance Provision for bad Provision for bad Book balance Book balance Type debts debts Book value Book value Accrued Accrued Amount Proportion Amount Amount Proportion Amount proportion proportion Accounts receivable for which provision for bad 1,447,973 100% 1,447,973 debts is accrued on a single item basis Accounts receivable for bad debts is accrued on a combined basis Total 1,447,973 100% 1,447,973 15.1.2 Provision for bad debts accrued, withdrawn or transferred back in this period The provision for bad debts accrued in this period was RMB 0 Yuan; and that withdrawn or transferred back in this period was RMB 0 Yuan. 15.1.3 Accounts receivable actually cancelled after verification in this period Nil 153 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 15.1.4 Accounts receivable collected by the borrower of top 5 units ranked by the ending balance Nil 15.1.5 Accounts receivable derecognized due to transfer of financial assets Nil 15.1.6 Accounts receivable transferred and included in assets and liabilities Nil 15.2 Other receivables Unit: Yuan Item Ending balance Beginning balance Interest receivable 277,785 254,088 Dividends receivable 4,103,925 500,000,000 Other receivables 522,211,903 525,389,268 Total 526,593,613 1,025,643,356 Remarks: The other receivables in the above list refer to those deducting interest receivable and dividends receivable. 15.2.1 Interest receivable Unit: Yuan Item Ending balance Beginning balance Fixed deposit 277,785 254,088 Entrusted loan Bond investment Total 277,785 254,088 15.2.2 Dividends receivable Unit: Yuan Item (or the invested unit) Ending balance Beginning balance Dividends receivable from subsidiaries 4,103,925 500,000,000 Total 4,103,925 500,000,000 15.2.3 Other receivables 15.2.3.1 Particulars of other receivables classified by nature Unit: Yuan Nature Ending book balance Beginning book balance 154 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Nature Ending book balance Beginning book balance Accounts receivable from subsidiaries 518,330,846 523,579,831 Deposit and guaranty money receivable 12,500 Other 3,881,057 1,796,937 Total 522,211,903 525,389,268 15.2.3.2 Disclosed by age Unit: Yuan Age Ending balance Within 1 year (including) 422,841,109 1-2 years 99,270,390 2-3 years 100,404 More than 3 years Total 522,211,903 15.2.3.3 Provision for bad debts accrued, withdrawn or transferred back in this period The provision for bad debts accrued in this period was RMB 0 Yuan; and that withdrawn or transferred back in this period was RMB 0 Yuan. 15.2.3.4 Accounts receivable actually cancelled after verification in this period Nil 15.2.3.5 Other accounts receivable collected by the borrower of top 5 units ranked by the ending balance Unit: Yuan Percentage in the Ending balance Nature of total ending Unit Ending balance Age of provision for fund balance of other bad debts accounts receivable Internal Sales Company incomings Within 1 year 34.3% 179,295,939 and outgoings Internal R&D Company incomings Within 1 year 21.3% 111,343,650 and outgoings Internal Laizhou Wine incomings Within 1 year 1.1% 5,549,972 and outgoings Internal Penglai Sales incomings Within 1 year 0.8% 3,992,770 and outgoings 155 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Percentage in the Ending balance Nature of total ending Unit Ending balance Age of provision for fund balance of other bad debts accounts receivable Internal Indomita Wine Company Chile, SpA incomings Within 1 year 0.6% 3,330,413 and outgoings Total -- 303,512,744 -- 58.1% 15.2.3.6 Accounts receivable related to governmental subsidy Nil 15.2.3.7 Other accounts receivable derecognized due to transfer of financial assets Nil 15.2.3.8 Other accounts receivable transferred and included in assets and liabilities Nil 15.3 Long-term equity investment Unit: Yuan Ending balance Beginning balance Item Impairment Impairment Book balance Book value Book balance Book value reserve reserve Investment in 7,420,803,069 7,420,803,069 7,420,803,069 7,420,803,069 subsidiaries Investment in associated enterprises and joint ventures Total 7,420,803,069 7,420,803,069 7,420,803,069 7,420,803,069 15.3.1 Investment in subsidiaries Unit: Yuan Provision for Ending balance Beginning Increase in this Decrease in this impairment Invested unit Ending balance of impairment balance period period accrued in this provision period Xinjiang Tianzhu 60,000,000 60,000,000 (a) Kylin Packaging 23,176,063 23,176,063 Changyu Chateau 28,968,100 28,968,100 (a) Pioneer 3,500,000 3,500,000 International (b) 156 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Provision for Ending balance Beginning Increase in this Decrease in this impairment Invested unit Ending balance of impairment balance period period accrued in this provision period Ningxia Growing 36,573,247 36,573,247 National Wine 2,000,000 2,000,000 Icewine Valley (a) 30,440,500 30,440,500 Beijing Chateau (a) 579,910,000 579,910,000 Sales Company 7,200,000 7,200,000 Langfang Sales (b) 100,000 100,000 Langfang Castel (a) 19,835,730 19,835,730 Wine Sales 4,500,000 4,500,000 Shanghai Marketing 300,000 300,000 (b) Beijing Marketing 850,000 850,000 Jingyang Sales (b) 100,000 100,000 Jingyang Wine (b) 900,000 900,000 Ningxia Wine 222,309,388 222,309,388 Ningxia Chateau 453,463,500 453,463,500 Chateau Tinlot (b) 212,039,586 212,039,586 Shihezi Chateau 812,019,770 812,019,770 Chang’an Chateau 803,892,258 803,892,258 Research, Development & 3,288,906,445 3,288,906,445 Manufacture Company (a) Huanren Wine 22,200,000 22,200,000 Wine Sales Company Francs Champs 236,025,404 236,025,404 Marques del Atrio 190,150,544 190,150,544 Indomita Wine 274,248,114 274,248,114 Kilikanoon Estate, 107,194,420 107,194,420 Australia Total 7,420,803,069 7,420,803,069 (a) The Company acquired 100% voting right and usufruct of such non-wholly-owned subsidiaries by 157 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report means of contract arrangement. Please refer to Note 9.1. (b) The Company acquired 100% voting right of such subsidiaries by means of indirect holding through its wholly-owned subsidiaries. From January to June 2019, there were no restrictions for the invested entities of the Company to transfer assets to the Company. 15.4 Operating income and operating cost Unit: Yuan Amount incurred in this period Amount incurred in prior period Item Income Cost Income Cost Main business 334,207,600 292,023,685 384,520,180 330,810,994 Other business 18,143,402 17,546,895 24,325,031 21,835,995 Total 352,351,002 309,570,580 408,845,211 352,646,989 15.5 Investment income Unit: Yuan Amount incurred in this Amount incurred in prior Item period period Income from long-term equity investment by cost method 264,221,755 312,409,576 Income from long-term equity investment by equity method Investment income from disposal of long-term equity investment Investment income of the financial assets measured at their fair values and the variation of which is recorded into the current profits and losses during the holding period Investment income gained from disposal of the financial assets measured at their fair values and the variation of which is recorded into the current profits and losses Investment income of held-to-maturity investment during the holding period Investment income of financial assets held for sale during the holding period Investment income gained from disposal of financial assets held for sale 158 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Gains generated from the remaining equity remeasured as per fair value after the loss of control Total 264,221,755 312,409,576 16. Supplementary materials 16.1 List of non-current profits/losses in this period Unit: Yuan Item Amount Remark Profits/losses on disposal of non-current assets 1,138 Tax return, deduction and exemption approved beyond the authority or without formal approval document Governmental subsidy included in the current profits/losses (excluding those closely related to the enterprise business and 64,211,892 enjoyed in accordance with the unified standard quota or ration of the state) Payment for use of funds by non-financial enterprises included in the current profits/losses Income obtained when the investment cost obtained by the enterprise from subsidiaries, joint-run business and joint venture is less than the fair value of the net identifiable assets obtained from the invested units when the investment is made Profits/losses on exchange of non-monetary assets Profits/losses on entrusting other people to make investment or manage assets Asset impairment provision accrued due to force majeure such as natural disaster Profits/losses on debt restructuring Enterprise reorganization expenses such as staffing expenditure and integration expenses, etc. Profits/losses on those beyond the fair value generated from transactions with unfair transaction price Current net profits/losses on subsidiaries acquired from a business combination under common control from the beginning to the consolidation date Profits/losses on contingencies irrelated to the normal business of the Company 159 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report Item Amount Remark Profits/losses on changes of fair value of tradable financial assets, derivative financial assets, tradable financial liabilities and derivative financial liabilities, and investment income from disposal of tradable financial assets, derivative financial assets, tradable financial liabilities, derivative financial liabilities and other investment in creditor's rights, excluding effective hedging operations relevant to the normal business of the Company Transfer-back of accounts receivable with single impairment test and provision for impairment of contract assets Profits/losses on external entrusted loans Profits/losses on fair value changes of investment real estate with fair value mode for follow-up measurement Influence of the one-time adjustment of the current profits/losses in accordance with tax and accounting laws and regulations on the current profits/losses Trustee fee income from entrusted operation Other non-operating income and expenditure besides the 3,411,864 above items Other profits/losses conforming to the definition of non-current profits/losses Minus: Influenced amount of income tax 16,671,778 Influenced amount of minority shareholders’ equity 40,022 Total 50,913,094 -- 16.2 Return on net assets and earnings per share Earnings per share Weighted average return on Profit incurred in this period Basic EPS Diluted EPS net assets (Yuan/Share) (Yuan/Share) Net profit attributable to common 6.13% 0.88 0.88 shareholders of the Company Net profit attributable to common shareholders of the Company deducting 5.62% 0.81 0.81 non-incidental profits/losses 160 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report 16.3 Accounting data difference under domestic and foreign accounting standard 16.3.1 Net profits & net assets difference disclosed in the financial report according to the international accounting standard and Chinese accounting standard Unit: Yuan Net profits Net assets Amount incurred in Amount incurred in prior Ending balance Beginning balance this period period In accordance with the 603,403,789 635,837,405 9,791,885,091 9,606,099,365 Chinese accounting standard Item & amount adjusted in accordance with the international accounting standard: In accordance with the international accounting 603,403,789 635,837,405 9,791,885,091 9,606,099,365 standard 161 Yantai Changyu Pioneer Wine Co. Ltd. 2019 Semi-annual Report XI. Reference Documents (1)The original of 2019 Semi-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 of Stock A 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 Co., Ltd. Board of Directors August 28th, 2019 162