YANTAI CHANGYU PIONEER WINE COMPANY LIMITED ENGLISH TRANSLATION OF FINANCIAL STATEMENTS FOR THE YEAR 1 JANUARY 2020 TO 31 DECEMBER 2020 IF THERE IS ANY CONFLICT BETWEEN THE CHINESE VERSION AND ITS ENGLISH TRANSLATION, THE CHINESE VERSION WILL PREVAIL AUDITOR’S REPORT KPMG Huazhen Shen Zi No. 2103362 All Shareholders of Yantai Changyu Pioneer Wine Company Limited: Opinion We have audited the accompanying financial statements of Yantai Changyu Pioneer Wine Company Limited (“Yantai Changyu”), which comprise the consolidated balance sheet and company balance sheet as at 31 December 2020, the consolidated income statement and company income statement, the consolidated cash flow statement and company cash flow statement, the consolidated statement of changes in shareholders’ equity and company statement of changes in shareholders’ equity for the year then ended, and notes to the financial statements. In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position and company financial position of Yantai Changyu as at 31 December 2020, and of its consolidated financial performance and company financial performance and its consolidated cash flows and company cash flows for the year then ended in accordance with Accounting Standards for Business Enterprises issued by the Ministry of Finance of the People’s Republic of China. Basis for Opinion We conducted our audit in accordance with China Standards on Auditing for Certified Public Accountants (“CSAs”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of Yantai Changyu in accordance with the China Code of Ethics for Certified Public Accountants (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Page 1 of 6 AUDITOR’S REPORT (continued) KPMG Huazhen Shen Zi No. 2103362 Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements for the year. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Recognition of Sales Revenue from Distributors Refer to the accounting policies set out in the notes to the financial statements “III. Significant accounting policies and accounting estimates” 22 and “V. Notes to the consolidated financial statements” 36. How the Matter was Addressed in Our Key Audit Matters Audit The principal activities of Yantai Changyu and Our audit procedures to evaluate revenue its subsidiaries (hereinafter referred to as recognition of sales revenue from “Yantai Changyu Group”) include manufacture distributors included the following: and sales of wine, brandy and sparkling wine. Understand and evaluate the The revenue of Yantai Changyu Group is Management’s design and operation mainly derived from sales of distributors. All effectiveness of key internal controls distributor transaction terms adopt the unified related to distributor sales revenue transaction terms formulated by Yantai recognition; Changyu Group. Selecting the sales contracts Yantai Starting from 1 January 2020, Yantai Changyu Changyu signed with distributors in has implemented the Accounting Standards for order to examine whether Yantai Business Enterprises No.14 “Revenue Changyu has adopted the unified (Revised)" and sales revenue is recognised transaction terms, and evaluate when the customer obtains control of the whether the accounting policy of relevant goods. Based on the contractual revenue recognition meets the agreement and the business arrangement, requirements of the Accounting Yantai Changyu sells products to distributors Standards for Business Enterprises; and the transfer of product ownership is completed and the revenue is recognised when On a sampling basis, reconcile the the goods are delivered to distributors and revenue recorded for the year to signed for acceptance. relevant supporting files such as relevant orders and signed delivery As revenue is one of the key performance notes, etc. to evaluate whether indicators of Yantai Changyu Group, there is revenue is recognised in accordance an inherent risk that the management will with the accounting policy of Yantai manipulate revenue in order to achieve specific Changyu; performance objectives or expectations. Therefore, we recognise sales revenue from distributors as a key audit matter. Page 2 of 6 AUDITOR’S REPORT (continued) KPMG Huazhen Shen Zi No. 2103362 Key Audit Matters (continued) Recognition of Sales Revenue from Distributors (continued) Refer to the accounting policies set out in the notes to the financial statements “III. Significant accounting policies and accounting estimates” 22 and “V. Notes to the consolidated financial statements” 36. How the matter was addressed in our The Key Audit Matters audit On a sampling basis, reconcile the sales transaction before and after balance sheet date to relevant supporting files such as relevant orders, signed delivery notes, etc. to evaluate whether revenue is recognised in appropriate accounting period; Selecting the balances of current accounts on balance sheet date and the amount of sales transaction for the year to perform confirmation procedures; Check the sales record after the balance sheet date to identify significant sales returns and check relevant supporting files (If applicable) in order to evaluate whether relevant revenue is recorded in the appropriate accounting period; Select revenue accounting entries that meet specific risk criteria and check related supporting documents. Page 3 of 6 AUDITOR’S REPORT (continued) KPMG Huazhen Shen Zi No. 2103362 Other Information Management of Yantai Changyu is responsible for the other information. The other information comprises all the information included in the 2020 annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Accounting Standards for Business Enterprises, and for the design, implementation and maintenance of such internal control necessary to enable that the financial statements are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing Yantai Changyu’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate Yantai Changyu or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing Yantai Changyu’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with CSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Page 4 of 6 AUDITOR’S REPORT (continued) KPMG Huazhen Shen Zi No. 2103362 Auditor’s Responsibilities for the Audit of the Financial Statement (continued) As part of an audit in accordance with CSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: (1) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. (2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. (3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. (4) Conclude on the appropriateness of management’s use of the going concern basis of accounting and, basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on Yantai Changyu’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause Yantai Changyu to cease to continue as a going concern. (5) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. (6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express our audit opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. Page 5 of 6 AUDITOR’S REPORT (continued) KPMG Huazhen Shen Zi No. 2103362 Auditor’s Responsibilities for the Audit of the Financial Statement (continued) We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and, where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. KPMG Huazhen LLP Certified Public Accountants Registered (Stamp) in the People’s Republic of China Wang Ting (Engagement Partner) (Signature and stamp) Beijing, China Chai Jing (Signature and stamp) Date:26 April 2021 Page 6 of 6 Yantai Changyu Pioneer Wine Company Limited Consolidated balance sheet as at 31 December 2020 (Expressed in Renminbi Yuan) 31 December 31 December 31 January Note 2020 2019 2019 (Restated) (Restated) Assets Current assets Cash at bank and on hand V.1 1,194,214,929 1,597,410,775 1,505,126,258 Accounts receivable V.2 183,853,362 265,730,156 230,711,055 Receivables under V.3 338,090,187 317,270,229 288,998,115 financing Prepayments V.4 71,296,416 67,764,156 4,682,354 Other receivables V.5 22,428,956 24,350,228 22,815,697 Inventories V.6 2,945,548,651 2,901,651,555 2,748,419,225 Other current assets V.7 234,118,715 269,002,321 259,602,897 Total current assets 4,989,551,216 5,443,179,420 5,060,355,601 Non-current assets Long-term equity V.8 48,263,507 43,981,130 - investments Available-for-sale financial - - 467,251 assets Investment properties V.9 27,057,730 29,714,586 31,572,489 Fixed assets V.10 5,724,935,846 5,943,969,099 5,799,345,351 Construction in progress V.11 635,495,152 567,478,833 759,296,591 Bearer biological assets V.12 192,173,536 202,425,286 209,266,373 Intangible assets V.13 660,989,065 652,543,848 655,663,382 Goodwill V.14 132,938,212 141,859,193 165,199,111 Long-term deferred V.15 314,465,855 280,478,194 247,942,506 expenses Deferred tax assets V.16 206,241,275 265,551,343 288,561,790 Other non-current assets V.17 170,370,147 193,674,320 - Total non-current assets 8,112,930,325 8,321,675,832 8,157,314,844 Total assets 13,102,481,541 13,764,855,252 13,217,670,445 The notes on pages 20 to 107 form part of these financial statements. 1 Yantai Changyu Pioneer Wine Company Limited Consolidated balance sheet as at 31 December 2020 (continued) (Expressed in Renminbi Yuan) 31 December 31 December 31 January Note 2020 2019 2019 (Restated) (Restated) Liabilities and shareholders’ equity Current liabilities Short-term loans V.18 689,090,715 754,313,744 688,002,410 Accounts payable V.19 484,347,958 570,849,779 713,641,568 Advance payments V.20 - 128,907,605 232,793,208 received Contract liabilities V.21 135,073,280 - - Employee benefits payable V.22 188,779,911 240,801,344 216,787,066 Taxes payable V.23 213,412,813 375,620,295 129,280,966 Other payables V.24 386,105,526 456,480,389 612,334,263 Other current liabilities V.25 14,820,653 - - Non-current liabilities due V.26 133,311,890 150,826,221 152,940,786 within one year Total current liabilities 2,244,942,746 2,677,799,377 2,745,780,267 Non-current liabilities Long-term loans V.27 200,352,968 128,892,501 156,480,662 Long-term payables V.28 86,000,000 191,000,000 225,000,000 Deferred income V.29 52,653,609 70,701,288 86,227,293 Deferred tax liabilities V.16 12,022,613 14,691,424 22,010,647 Other non-current liabilities V.30 2,078,971 7,645,777 7,234,853 Total non-current liabilities 353,108,161 412,930,990 496,953,455 Total liabilities 2,598,050,907 3,090,730,367 3,242,733,722 The notes on pages 20 to 107 form part of these financial statements. 2 Yantai Changyu Pioneer Wine Company Limited Consolidated balance sheet as at 31 December 2020 (continued) (Expressed in Renminbi Yuan) 31 December 31 December 31 January Note 2020 2019 2019 (Restated) (Restated) Liabilities and shareholders’ equity (continued) Shareholders’ equity Share capital V.31 685,464,000 685,464,000 685,464,000 Capital reserve V.32 524,968,760 642,775,360 643,680,379 Other comprehensive V.33 576,129 (4,235,583) 2,965,377 income Surplus reserve V.34 342,732,000 342,732,000 342,732,000 Retained earnings V.35 8,714,091,755 8,735,513,044 8,013,924,148 Total equity attributable to shareholders of the 10,267,832,644 10,402,248,821 9,688,765,904 Company Non-controlling interests 236,597,990 271,876,064 286,170,819 Total owners’ equity 10,504,430,634 10,674,124,885 9,974,936,723 Total liabilities and 13,102,481,541 13,764,855,252 13,217,670,445 shareholders’ equity These financial statements were approved by the Board of Directors of the Company on 26 April 2021. Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp) Legal The person in The head of the Representative charge accounting of accounting affairs department (Signature and (Signature and (Signature and stamp) stamp) stamp) The notes on pages 20 to 107 form part of these financial statements. 3 Yantai Changyu Pioneer Wine Company Limited Company balance sheet as at 31 December 2020 (Expressed in Renminbi Yuan) 31 December 31 December 31 January Note 2020 2019 2019 (Restated) (Restated) Assets Current assets Cash at bank and on hand 267,548,326 710,505,269 624,588,809 Accounts receivable - 1,988,326 1,447,973 Receivables under XV.1 13,920,000 41,679,635 39,885,254 financing Prepayments 171,709 776,539 227 Other receivables XV.2 580,131,798 586,424,958 1,025,643,356 Inventories 482,442,935 434,007,808 385,154,740 Other current assets 24,842,325 39,130,466 24,704,844 Total current assets 1,369,057,093 1,814,513,001 2,101,425,203 Non-current assets Long-term equity XV.3 7,599,778,880 7,432,422,621 7,420,803,069 investments Investment properties - 29,714,586 31,572,489 Fixed assets 270,692,477 261,137,072 265,311,274 Construction in progress 2,865,243 - 6,311,701 Bearer biological assets 115,103,753 121,414,096 125,002,793 Intangible assets 80,789,731 64,864,913 67,244,066 Deferred tax assets 18,285,685 16,255,870 24,194,967 Other non-current assets 1,530,700,000 1,427,700,000 972,700,000 Total non-current assets 9,618,215,769 9,353,509,158 8,913,140,359 Total assets 10,987,272,862 11,168,022,159 11,014,565,562 The notes on pages 20 to 107 form part of these financial statements. 4 Yantai Changyu Pioneer Wine Company Limited Company balance sheet as at 31 December 2020 (continued) (Expressed in Renminbi Yuan) 31 December 31 December 31 January Note 2020 2019 2019 (Restated) (Restated) Liabilities and shareholders’ equity Current liabilities Short-term loans 150,000,000 150,000,000 150,000,000 Accounts payable 76,470,081 63,655,240 132,704,304 Employee benefits payable 67,808,910 70,445,847 72,345,179 Taxes payable 9,123,959 6,052,456 13,111,431 Other payables 521,505,947 660,149,563 607,974,519 Total current liabilities 824,908,897 950,303,106 976,135,433 Non-current liabilities Deferred income 5,507,708 9,176,315 12,343,972 Other non-current liabilities 1,164,471 3,146,707 2,710,575 Total non-current liabilities 6,672,179 12,323,022 15,054,547 Total liabilities 831,581,076 962,626,128 991,189,980 The notes on pages 20 to 107 form part of these financial statements. 5 Yantai Changyu Pioneer Wine Company Limited Company balance sheet as at 31 December 2020 (continued) (Expressed in Renminbi Yuan) 31 December 31 December 31 January Note 2020 2019 2019 (Restated) (Restated) Liabilities and shareholders’ equity (continued) Shareholders’ equity Share capital 685,464,000 685,464,000 685,464,000 Capital reserve 560,182,235 557,222,454 557,222,454 Surplus reserve 342,732,000 342,732,000 342,732,000 Retained earnings 8,567,313,551 8,619,977,577 8,437,957,128 Total owners’ equity 10,155,691,786 10,205,396,031 10,023,375,582 Total liabilities and 10,987,272,862 11,168,022,159 11,014,565,562 shareholders’ equity These financial statements were approved by the Board of Directors of the Company on 26 April 2021. Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp) Legal The person in The head of the Representative charge accounting of accounting affairs department (Signature and (Signature and (Signature and stamp) stamp) stamp) The notes on pages 20 to 107 form part of these financial statements. 6 Yantai Changyu Pioneer Wine Company Limited Consolidated income statement for the year ended 31 December 2020 (Expressed in Renminbi Yuan) Note 2020 2019 (Restated) I. Operating income V.36 3,395,402,001 5,074,025,899 Less: Operating cost V.36 1,503,877,407 1,877,658,738 Taxes and surcharges V.37 203,789,274 269,888,681 Selling and distribution V.38 788,252,485 1,088,305,385 expenses General and administrative V.39 290,646,466 311,904,656 expenses Research and development 4,531,418 6,041,116 expenses Financial expenses V.40 20,441,713 35,302,229 Including: Interest expenses 32,890,621 41,570,794 Interest income 14,247,274 12,327,441 Add: Other income V.41 73,063,620 77,370,841 Investment (losses)/income V.42 (2,217,623) 5,112,733 Including: Losses from investment in joint (2,217,623) (1,120,928) ventures and associates Credit reversal/ (losses) V.43 4,348,309 (6,678,498) Impairment losses V.44 (3,215,978) (20,552,916) (Losses)/ Gains from disposal V.45 (1,180,655) 39,015 of assets The notes on pages 20 to 107 form part of these financial statements. 7 Yantai Changyu Pioneer Wine Company Limited Consolidated income statement for the year ended 31 December 2020 (continued) (Expressed in Renminbi Yuan) Note 2020 2019 (Restated) II. Operating profit 654,660,911 1,540,216,269 Add: Non-operating income V.46 11,908,510 11,021,303 Less: Non-operating expenses V.46 1,702,858 3,634,552 III. Total profit 664,866,563 1,547,603,020 Less: Income tax expenses V.47 191,804,500 405,597,320 IV. Net profit 473,062,063 1,142,005,700 (1) Net profit classified by continuity of operations: 1. Net profit from continuing 473,062,063 1,142,005,700 operations 2. Net profit from discontinued - - operations (2) Net profit classified by ownership: 1. Net profit attributable to 470,860,587 1,141,367,296 owners of the Company 2. Non-controlling interests 2,201,476 638,404 V. Other comprehensive income, net of 5,171,635 (8,542,792) tax (1) Other comprehensive income (net of tax) attributable to 4,811,712 (7,200,960) shareholders of the Company Translation differences arising from translation of foreign 4,811,712 (7,200,960) currency financial statements (2) Other comprehensive income (net of tax) attributable to non- 359,923 (1,341,832) controlling interests The notes on pages 20 to 107 form part of these financial statements. 8 Yantai Changyu Pioneer Wine Company Limited Consolidated income statement for the year ended 31 December 2020 (continued) (Expressed in Renminbi Yuan) Note 2020 2019 (Restated) VI. Total comprehensive income for the 478,233,698 1,133,462,908 year (1) Attributable to shareholders of 475,672,299 1,134,166,336 the Company (2) Attributable to non-controlling 2,561,399 (703,428) interests VII. Earnings per share: (1) Basic earnings per share V.48 0.69 1.67 (2) Diluted earnings per share V.48 0.69 1.67 Note 1: The Group had a business combination under common control in 2020. The net profit realised by the combining party before the combination was RMB10,730,129 and the net profit realised by the combining party in 2019 was RMB11,709,978. These financial statements were approved by the Board of Directors of the Company on 26 April 2021. Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp) Legal The person in The head of the Representative charge accounting of accounting affairs department (Signature and (Signature and (Signature and stamp) stamp) stamp) The notes on pages 20 to 107 form part of these financial statements. 9 Yantai Changyu Pioneer Wine Company Limited Company income statement for the year ended 31 December 2020 (Expressed in Renminbi Yuan) Note 2020 2019 (Restated) I. Operating income XV.4 512,303,553 740,856,362 Less: Operating cost XV.4 452,368,512 655,504,063 Taxes and surcharges 19,841,835 25,045,041 General and administrative 74,929,302 86,481,192 expenses Research and development 728,793 815,233 expenses Net financial income (602,459) (4,798,485) Including: Interest expenses 4,875,912 497,277 Interest income 5,594,285 5,843,698 Add: Other income 5,339,898 3,953,002 Investment income XV.5 449,504,721 621,620,723 Credit reversal/ (losses) 601,610 (601,610) Gains from disposal of assets - 22,297 II. Operating profit 420,483,799 602,803,730 Add: Non-operating income 3,961,267 1,840,062 Less: Non-operating expenses 1,050,415 1,118,124 The notes on pages 20 to 107 form part of these financial statements. 10 Yantai Changyu Pioneer Wine Company Limited Company income statement for the year ended 31 December 2020 (continued) (Expressed in Renminbi Yuan) Note 2020 2019 (Restated) III. Total profit 423,394,651 603,525,668 Less: Income tax expenses (3,766,123) 10,226,819 IV. Net profit 427,160,774 593,298,849 (i) Net profit from continuing 427,160,774 593,298,849 operations (ii) Net profit from discontinued - - operations V. Other comprehensive income, net of - - tax VI. Total comprehensive income for the 427,160,774 593,298,849 year These financial statements were approved by the Board of Directors of the Company on 26 April 2021. Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp) Legal The person in The head of the Representative charge accounting of accounting affairs department (Signature and (Signature and (Signature and stamp) stamp) stamp) The notes on pages 20 to 107 form part of these financial statements. 11 Yantai Changyu Pioneer Wine Company Limited Consolidated cash flow statement for the year ended 31 December 2020 (Expressed in Renminbi Yuan) Note 2020 2019 (Restated) I. Cash flows from operating activities: Proceeds from sale of goods and 3,259,057,195 4,698,813,366 rendering of services Refund of taxes and surcharges 45,642,498 40,944,192 Proceeds from other operating V.49(1) 81,197,248 96,517,766 activities Sub-total of cash inflows 3,385,896,941 4,836,275,324 Payment for goods and services 1,095,500,438 1,342,960,997 Payment to and for employees 529,304,037 594,680,599 Payment of various taxes 704,054,796 1,127,433,460 Payment for other operating activities V.49(2) 551,890,997 922,347,908 Sub-total of cash outflows 2,880,750,268 3,987,422,964 Net cash flows from operating V.50(1) 505,146,673 848,852,360 activities II. Cash flows from investing activities: Proceeds from disposal of 135,647,402 234,632,139 investments Investment returns received 1,730,511 1,809,786 Net proceeds from disposal of fixed assets, intangible assets and other 49,200,301 6,334,375 long-term assets Sub-total of cash inflows 186,578,214 242,776,300 Payment for acquisition of fixed assets, intangible assets and other 155,918,502 281,228,617 long-term assets Payment for acquisition of 83,508,393 170,023,444 investments Net cash paid for the acquisition of subsidiaries and other business V.50(2) 89,519,789 - units Sub-total of cash outflows 328,946,684 451,252,061 Net cash flows from investing (142,368,470) (208,475,761) activities The notes on pages 20 to 107 form part of these financial statements. 12 Yantai Changyu Pioneer Wine Company Limited Consolidated cash flow statement for the year ended 31 December 2020 (continued) (Expressed in Renminbi Yuan) Note 2020 2019 (Restated) III. Cash flows from financing activities: Proceeds from borrowings 987,668,379 942,134,032 Sub-total of cash inflows 987,668,379 942,134,032 Repayments of borrowings 1,098,773,637 939,525,426 Payment for dividends, profit 531,697,065 470,955,473 distributions or interest Payment for other financing activities V.49(3) 62,966,747 11,619,552 Sub-total of cash outflows 1,693,437,449 1,422,100,451 Net cash flows from financing (705,769,070) (479,966,419) activities IV. Effect of foreign exchange rate changes on cash and cash (1,743,498) 703,173 equivalents V. Net increase in cash and cash V.50(1) (344,734,365) 161,113,353 equivalents Add: Cash and cash equivalents at 1,397,399,470 1,236,286,117 the beginning of the year VI. Cash and cash equivalents at the end V.50(3) 1,052,665,105 1,397,399,470 of the year These financial statements were approved by the Board of Directors of the Company on 26 April 2021. Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp) Legal The person in The head of the Representative charge accounting of accounting affairs department (Signature and (Signature and (Signature and stamp) stamp) stamp) The notes on pages 20 to 107 form part of these financial statements. 13 Yantai Changyu Pioneer Wine Company Limited Company cash flow statement for the year ended 31 December 2020 (Expressed in Renminbi Yuan) Note 2020 2019 (Restated) I. Cash flows from operating activities: Proceeds from sale of goods and 365,804,968 737,920,018 rendering of services Proceeds from other operating 19,507,538 211,049,689 activities Sub-total of cash inflows 385,312,506 948,969,707 Payment for goods and services 261,854,964 710,601,952 Payment to and for employees 65,247,752 91,738,062 Payment of various taxes 6,778,231 48,817,363 Payment for other operating activities 139,442,785 28,434,079 Sub-total of cash outflows 473,323,732 879,591,456 Net cash flows from operating (88,011,226) 69,378,251 activities II. Cash flows from investing activities: Proceeds from disposal of 58,238,750 131,133,236 investments Investment returns received 450,538,570 922,250,025 Net proceeds from disposal of fixed assets, intangible assets and other 131,260 1,354,733 long-term assets Proceeds from borrowings to 9,000,000 8,000,000 subsidiaries Sub-total of cash inflows 517,908,580 1,062,737,994 Payment for acquisition of fixed assets, intangible assets and other 51,762,211 21,417,387 long-term assets Payment for acquisition of 131,408,115 138,566,890 investments Net cash paid for the acquisition of subsidiaries and other business 89,519,789 - units Cash paid to subsidiaries 112,000,000 463,000,000 Sub-total of cash outflows 384,690,115 622,984,277 Net cash flows from investing 133,218,465 439,753,717 activities The notes on pages 20 to 107 form part of these financial statements. 14 Yantai Changyu Pioneer Wine Company Limited Company cash flow statement for the year ended 31 December 2020 (continued) (Expressed in Renminbi Yuan) Note 2020 2019 (Restated) III. Cash flows from financing activities: Proceeds from borrowings 150,000,000 150,000,000 Sub-total of cash inflows 150,000,000 150,000,000 Repayments of borrowings 150,000,000 150,000,000 Payment for dividends or interest 486,200,712 418,400,308 Sub-total of cash outflows 636,200,712 568,400,308 Net cash flows from financing (486,200,712) (418,400,308) activities IV. Effect of foreign exchange rate changes on cash and cash - - equivalents V. Net decrease/(increase) in cash (440,993,473) 90,731,660 and cash equivalents Add: Cash and cash equivalents at the beginning of the 623,116,542 532,384,882 year VI. Cash and cash equivalents at the 182,123,069 623,116,542 end of the year These financial statements were approved by the Board of Directors of the Company on 26 April 2021. Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp) Legal The person in The head of the Representative charge accounting of accounting affairs department (Signature and (Signature and (Signature and stamp) stamp) stamp) The notes on pages 20 to 107 form part of these financial statements. 15 Yantai Changyu Pioneer Wine Company Limited Consolidated statement of changes in shareholders’ equity for the year ended 31 December 2020 (Expressed in Renminbi Yuan) Attributable to shareholders of the Company Total Other Non-controlling Note Retained shareholders’ Share capital Capital reserve comprehensive Surplus reserve Sub-total interests earnings equity income I. Balance at the beginning of the 685,464,000 642,775,360 (4,235,583) 342,732,000 8,735,513,044 10,402,248,821 271,876,064 10,674,124,885 year II. Changes in equity during the year (1) Total comprehensive income - - 4,811,712 - 470,860,587 475,672,299 2,561,399 478,233,698 (2) Shareholders’ contributions Acquisitions of non-controlling - (28,286,811) - - - (28,286,811) (34,679,936) (62,966,747) interests (3) Appropriation of profits V.35 Distributions to shareholders - - - - (492,281,876) (492,281,876) (3,159,537) (495,441,413) (4) Business combination under VI.(1) - (89,519,789) - - - (89,519,789) - (89,519,789) common control III. Balance at the end of the year 685,464,000 524,968,760 576,129 342,732,000 8,714,091,755 10,267,832,644 236,597,990 10,504,430,634 These financial statements were approved by the Board of Directors of the Company on 26 April 2021. Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp) Legal Representative The person in charge of The head of the accounting accounting affairs department (Signature and stamp) (Signature and stamp) (Signature and stamp) The notes on pages 20 to 107 form part of these financial statements. 16 Yantai Changyu Pioneer Wine Company Limited Consolidated statement of changes in shareholders’ equity for the year ended 31 December 2019 (Expressed in Renminbi Yuan) Attributable to shareholders of the Company Total Other Non-controlling Note Retained shareholders’ Share capital Capital reserve comprehensive Surplus reserve Sub-total interests earnings equity income I. Balance at the beginning of the 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 year Add: Changes in accounting III.33 - - - - (7,540,537) (7,540,537) - (7,540,537) policies Business combination under - 77,724,938 - - 12,482,138 90,207,076 1,782,807 91,989,883 common control Adjusted balance at the beginning 685,464,000 643,680,379 2,965,377 342,732,000 8,013,924,148 9,688,765,904 286,170,819 9,974,936,723 of the year II. Changes in equity during the year (1) Total comprehensive income - - (7,200,960) - 1,141,367,296 1,134,166,336 (703,428) 1,133,462,908 (2) Contribution by owners Acquisitions of non-controlling - (905,019) - - - (905,019) (10,714,533) (11,619,552) interests (3) Appropriation of profits V.35 Distributions to shareholders - - - - (419,778,400) (419,778,400) (2,876,794) (422,655,194) III. Balance at the end of the year 685,464,000 642,775,360 (4,235,583) 342,732,000 8,735,513,044 10,402,248,821 271,876,064 10,674,124,885 These financial statements were approved by the Board of Directors of the Company on 26 April 2021. Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp) Legal Representative The person in charge of The head of the accounting accounting affairs department (Signature and stamp) (Signature and stamp) (Signature and stamp) The notes on pages 20 to 107 form part of these financial statements. 17 Yantai Changyu Pioneer Wine Company Limited Company statement of changes in shareholders’ equity for the year ended 31 December 2020 (Expressed in Renminbi Yuan) Total Retained Note Share capital Capital reserve Surplus reserve shareholders’ earnings equity I. Balance at the 685,464,000 557,222,454 342,732,000 8,619,977,577 10,205,396,031 beginning of the year II. Changes in equity during the year (1) Total comprehensive - - - 427,160,774 427,160,774 income (2) Shareholders’ contributions Purchase of share equity of Yantai Changyu Culture VII.1 - 2,959,781 - - 2,959,781 Development Co., Ltd (“Culture Development”) (3) Appropriation of profits Distributions to - - - (479,824,800) (479,824,800) shareholders III. Balance at the end of 685,464,000 560,182,235 342,732,000 8,567,313,551 10,155,691,786 the year These financial statements were approved by the Board of Directors of the Company on 26 April 2021. Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp) Legal The person in The head of the Representative charge accounting of accounting affairs department (Signature and (Signature and (Signature and stamp) stamp) stamp) The notes on pages 20 to 107 form part of these financial statements. 18 Yantai Changyu Pioneer Wine Company Limited Company statement of changes in shareholders’ equity for the year ended 31 December 2019 (continued) (Expressed in Renminbi Yuan) Total Retained Note Share capital Capital reserve Surplus reserve shareholders’ earnings equity I. Balance at the 685,464,000 557,222,454 342,732,000 8,437,957,128 10,023,375,582 beginning of the year Add: Changes in accounting III. 33 - - - - - policies Adjusted balance at the beginning 685,464,000 557,222,454 342,732,000 8,437,957,128 10,023,375,582 of the year II. Changes in equity for the year 1. Total comprehensive - - - 593,298,849 593,298,849 income 2. Appropriation of profits Distributions to - - - (411,278,400) (411,278,400) shareholders III. Balance at the end of 685,464,000 557,222,454 342,732,000 8,619,977,577 10,205,396,031 the year These financial statements were approved by the Board of Directors of the Company on 26 April 2021. Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp) Legal The person in The head of the Representative charge accounting of accounting affairs department (Signature and (Signature and (Signature and stamp) stamp) stamp) The notes on pages 20 to 107 form part of these financial statements. 19 Yantai Changyu Pioneer Wine Company Limited Notes to the financial statements (Expressed in Renminbi Yuan unless otherwise indicated) I. Company status 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 a reorganisation carried out by Yantai Changyu Group Co., Ltd. ("Changyu Group"), in which Changyu Group Company injected certain assets and liabilities in relation to the brandy, wine, and sparkling wine production and sales businesses to the Company. The Company and its subsidiaries (the "Group") are principally engaged in the production and sales of wine, brandy, sparkling wine, grape growing and acquisition, as well as travel resource development, etc. Registration place of the Company is Yantai, Shandong. Headquarter of the Company is located at No. 56 Da Ma Lu, Zhifu District, Yantai, Shandong, PRC. As at 31 December 2020 the total shares issued by the Company amounts to 685,464,000 shares. Please refer to Note V. 31 in detail. The holding company of the Group is Changyu Group Company, which is jointly controlled by Yantai GuoFeng Investment Holding Ltd, ILLVA SARONNO HOLDING SPA, International Finance Corporation and Yantai Yuhua Investment and Development Company Limited. The financial statements have been authorised by the board of directors on 26 April 2021. According to the Company's articles of association, the financial statements will be reviewed by shareholders on the shareholder's meeting. For consolidation scope of the year, please refer to Note VII "Equity in other entities" in detail. For detail of changes in consolidation scope of the year, please refer to Note VI "Change in consolidation scope". II. Basis of preparation The financial statements have been prepared on the going concern basis. Since 1 January 2019, the Group has adopted new financial instrument standards revised by MOF in 2017, including CAS 22 — Recognition and Measurement of Financial Instruments. Since 1 January 2020, the Group has adopted new revenue standards revised by MOF in 2017, including CAS 14 — Revenue (See Note III. 33). The Group has not adopted CAS No. 21 — Lease revised in 2018 respectively. 20 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 III. Significant accounting policies and accounting estimates 1 Statement of compliance The financial statements have been prepared in accordance with the requirements of Accounting Standards for Business Enterprises or referred to as China Accounting Standards (“CAS”) issued by the MOF. These financial statements present truly and completely the consolidated financial position and financial position of the Company as at 31 December 2020, and the consolidated financial performance and financial performance and the consolidated cash flows and cash flows of the Company for the year then ended. These financial statements also comply with the disclosure requirements of “Regulation on the Preparation of Information Disclosures by Companies Issuing Securities, No. 15: General Requirements for Financial Reports” as revised by the China Securities Regulatory Commission (“CSRC”) in 2014. 2 Accounting period The accounting period is from 1 January to 31 December. 3 Operating cycle The Company takes the period from the acquisition of assets for processing to until the ultimate realisation of cash or cash equivalents as a normal operating cycle. The operating cycle of the Company is 12 months. 4 Functional currency Renminbi ("RMB") is the currency of the primary economic environment in which the Company and its domestic subsidiaries operate. Therefore, the Company and its domestic subsidiaries choose RMB as their functional currency. Overseas subsidiaries of the Company adopt Euro, Chilean Peso and Australian Dollar as their functional currencies on the basis of the primary economic environment in which they operate. The Company adopts RMB to prepare its financial statements. 5 Accounting treatments for business combinations involving entities under common control and not under common control A transaction constitutes a business combination when the Group obtains control of one or more entities (or a group of assets or net assets). Business combination is classified as either business combinations involving enterprises under common control or business combinations not involving enterprises under common control. For a transaction not involving enterprises under common control, the acquirer determines whether acquired set of assets constitute a business. The Group may elect to apply the simplified assessment method, the concentration test, to determine whether an acquired set of assets is not a business. If the concentration test is met and the set of assets is determined not to be a business, no further assessment is needed. If the concentration test is not met, the Group shall perform the assessment according to the guidance on the determination of a business. 21 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 When the set of assets the group acquired does not constitute a business, acquisition costs should be allocated to each identifiable assets and liabilities at their acquisitiondate fair values. It is not required to apply the accounting of business combination described as below. (1) Business combinations involving entities under common control A business combination involving entities under common control is a business combination in which all of the combining entities are ultimately controlled by the same party or parties both before and after the business combination, and that control is not transitory. The assets acquired and liabilities assumed are measured based on their carrying amounts in the consolidated financial statements of the ultimate controlling party at the combination date. The difference between the carrying amount of the net assets acquired and the consideration paid for the combination (or the total par value of shares issued) is adjusted against share premium in the capital reserve, with any excess adjusted against retained earnings. Any costs directly attributable to the combination are recognised in profit or loss when incurred. The combination date is the date on which one combining entity obtains control of other combining entities. (2) Business combinations involving entities not under common control A business combination involving entities not under common control is a business combination in which all of the combining entities are not ultimately controlled by the same party or parties both before and after the business combination. Where (1) the aggregate of the acquisition-date fair value of assets transferred (including the acquirer’s previously held equity interest in the acquiree), liabilities incurred or assumed, and equity securities issued by the acquirer, in exchange for control of the acquiree, exceeds (2) the acquirer’s interest in the acquisition-date fair value of the acquiree’s identifiable net assets, the difference is recognised as goodwill (see Note III.18). If (1) is less than (2), the difference is recognised in profit or loss for the current period. Other acquisition-related costs are expensed when incurred. The acquiree’s identifiable asset, liabilities and contingent liabilities, if the recognition criteria are met, are recognised by the Group at their acquisition-date fair value. The acquisition date is the date on which the acquirer obtains control of the acquiree. For a business combination involving entities not under common control and achieved in stages, the Group remeasures its previously-held equity interest in the acquiree to its acquisition-date fair value and recognises any resulting difference between the fair value and the carrying amount as investment income or other comprehensive income for the current period. In addition, any amount recognised in other comprehensive income that may be reclassified to profit or loss, in prior reporting periods relating to the previously-held equity interest, and any other changes in the owners’ equity under equity accounting, are transferred to investment income in the period in which the acquisition occurs (see Note III.11(2)(b)). If equity interests of the acquiree held before acquisition-date were equity instrument investments measured at fair value through other comprehensive income, other comprehensive income recognised shall be moved to retained earnings on acquisition-date. 22 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 6 Consolidated financial statements (1) General principles The scope of consolidated financial statements is based on control and the consolidated financial statements comprise the Company and its subsidiaries. Control exists when the investor has all of following: power over the investee; exposure, or rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. When assessing whether the Group has power, only substantive rights (held by the Group and other parties) are considered. The financial position, financial performance and cash flows of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Non-controlling interests are presented separately in the consolidated balance sheet within shareholders’ equity. Net profit or loss attributable to non-controlling shareholders is presented separately in the consolidated income statement below the net profit line item. Total comprehensive income attributable to non-controlling shareholders is presented separately in the consolidated income statement below the total comprehensive income line item. When the amount of loss for the current period attributable to the non-controlling shareholders of a subsidiary exceeds the non-controlling shareholders’ share of the opening owners’ equity of the subsidiary, the excess is still allocated against the non-controlling interests. When the accounting period or accounting policies of a subsidiary are different from those of the Company, the Company makes necessary adjustments to the financial statements of the subsidiary based on the Company’s own accounting period or accounting policies. Intra- group balances and transactions, and any unrealised profit or loss arising from intra-group transactions, are eliminated when preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains, unless they represent impairment losses that are recognised in the financial statements. (2) Subsidiaries acquired through a business combination Where a subsidiary was acquired during the reporting period, through a business combination involving entities under common control, the financial statements of the subsidiary are included in the consolidated financial statements based on the carrying amounts of the assets and liabilities of the subsidiary in the financial statements of the ultimate controlling party as if the combination had occurred at the date that the ultimate controlling party first obtained control. The opening balances and the comparative figures of the consolidated financial statements are also restated. Where a subsidiary was acquired during the reporting period, through a business combination involving entities not under common control, the identifiable assets and liabilities of the acquired subsidiaries are included in the scope of consolidation from the date that control commences, based on the fair value of those identifiable assets and liabilities at the acquisition date. 23 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (3) Disposal of subsidiaries When the Group loses control over a subsidiary, any resulting disposal gains or losses are recognised as investment income for the current period. The remaining equity investment is re-measured at its fair value at the date when control is lost, any resulting gains or losses are also recognised as investment income for the current period. When the Group loses control of a subsidiary in multiple transactions in which it disposes of its long-term equity investment in the subsidiary in stages, the following are considered to determine whether the Group should account for the multiple transactions as a bundled transaction: - arrangements are entered into at the same time or in contemplation of each other; - arrangements work together to achieve an overall commercial effect; - the occurrence of one arrangement is dependent on the occurrence of at least one other arrangement; - one arrangement considered on its own is not economically justified, but it is economically justified when considered together with other arrangements. If each of the multiple transactions does not form part of a bundled transaction, the transactions conducted before the loss of control of the subsidiary are accounted for in accordance with the accounting policy for partial disposal of equity investment in subsidiaries where control is retained (see Note III.6(4)). If each of the multiple transactions forms part of a bundled transaction which eventually results in the loss of control in the subsidiary, these multiple transactions are accounted for as a single transaction. In the consolidated financial statements, the difference between the consideration received and the corresponding proportion of the subsidiary’s net assets (calculated continuously from the acquisition date) in each transaction prior to the loss of control shall be recognised in other comprehensive income and transferred to profit or loss when the parent eventually loses control of the subsidiary. (4) Changes in non-controlling interests Where the Company acquires a non-controlling interest from a subsidiary’s non-controlling shareholders or disposes of a portion of an interest in a subsidiary without a change in control, the difference between the proportion interests of the subsidiary’s net assets being acquired or disposed and the amount of the consideration paid or received is adjusted to the capital reserve (share premium) in the consolidated balance sheet, with any excess adjusted to retained earnings. 7 Cash and cash equivalents Cash and cash equivalents comprise cash on hand, deposits that can be readily withdraw on demand, and short-term, highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of change in value. 8 Foreign currency transactions and translation of foreign currency financial statements When the Group receives capital in foreign currencies from investors, the capital is translated to Renminbi at the spot exchange rate at the date of the receipt. Other foreign currency transactions are, on initial recognition, translated to Renminbi at the spot exchange rates. 24 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 Monetary items denominated in foreign currencies are translated to Renminbi at the spot exchange rate at the balance sheet date. The resulting exchange differences are generally recognised in profit or loss, unless they arise from the re-translation of the principal and interest of specific borrowings for the acquisition and construction of qualifying assets (see Note III. 15). Non-monetary items that are measured at historical cost in foreign currencies are translated to Renminbi using the exchange rate at the transaction date. In translating the financial statements of a foreign operation, assets and liabilities of foreign operation are translated to Renminbi at the spot exchange rate at the balance sheet date. Equity items, excluding retained earnings and the translation differences in other comprehensive income, are translated to Renminbi at the spot exchange rates at the transaction dates. Income and expenses in the income statement are translated to Renminbi at the spot exchange rates at the transaction dates. The resulting translation differences are recognised in other comprehensive income. The translation differences accumulated in other comprehensive income with respect to a foreign operation are transferred to profit or loss in the period when the foreign operation is disposed. 9 Financial instruments Financial instruments include cash at bank and on hand, investments in debt and equity securities other than those classified as long-term equity investments (see Note III.11), receivables, payables, loans and borrowings and share capital. (1) Recognition and initial measurement of financial assets and financial liabilities A financial asset or financial liability is recognised in the balance sheet when the Group becomes a party to the contractual provisions of a financial instrument. A financial assets (unless it is a trade receivable without a significant financing component) and financial liabilities is measured initially at fair value. For financial assets and financial liabilities at fair value through profit or loss, any related directly attributable transaction costs are charged to profit or loss; for other categories of financial assets and financial liabilities, any related directly attributable transaction costs are included in their initial costs. A trade receivable, without significant financing component or practical expedient applied for one year or less contracts, is initially measured at the transaction price in accordance with Note III.22. (2) Classification and subsequent measurement of financial assets (a) Classification of financial assets The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. On initial recognition, a financial asset is classified as measured at amortised cost, at fair value through other comprehensive income (“FVOCI”), or at fair value through profit or loss (“FVTPL”). Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. 25 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: - it is held within a business model whose objective is to hold assets to collect contractual cash flows; and - its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL: - it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and - its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an investment-by-investment basis. The instrument meets the definition of equity from the perspective of the issuer. All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. The business model refers to how the Group manages its financial assets in order to generate cash flows. That is, the Group’s business model determines whether cash flows will result from collecting contractual cash flows, selling financial assets or both. The Group determines the business model for managing the financial assets according to the facts and based on the specific business objective for managing the financial assets determined by the Group’s key management personnel. In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs, as well as a profit margin. The Group also assesses whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. (b) Subsequent measurement of financial assets - Financial assets at FVTPL These financial assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss unless the financial assets are part of a hedging relationship. 26 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 - Financial assets at amortised cost These assets are subsequently measured at amortised cost using the effective interest method. A gain or loss on a financial asset that is measured at amortised cost and is not part of a hedging relationship shall be recognised in profit or loss when the financial asset is derecognised, reclassified, through the amortisation process or in order to recognise impairment gains or losses. - Debt investments at FVOCI These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, impairment and foreign exchange gains and losses are recognised in profit or loss. Other net gains and losses are recognised in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss. - Equity investments at FVOCI These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss. Other net gains and losses are recognised in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to retained earnings. (3) Classification and subsequent measurement of financial liabilities Financial liabilities are classified as measured at FVTPL or amortised cost by the Group. - Financial liabilities at FVTPL A financial liability is classified as at FVTPL if it is classified as held-for-trading (including derivative financial liability) or it is designated as such on initial recognition. Financial liabilities at FVTPL are subsequently measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss, unless the financial liabilities are part of a hedging relationship. - Financial liabilities at amortised cost These financial liabilities are subsequently measured at amortised cost using the effective interest method. (4) Offsetting Financial assets and financial liabilities are generally presented separately in the balance sheet, and are not offset. However, a financial asset and a financial liability are offset and the net amount is presented in the balance sheet when both of the following conditions are satisfied: - The Group currently has a legally enforceable right to set off the recognised amounts; - The Group intends either to settle on a net basis, or to realise the financial asset and settle the financial liability simultaneously. 27 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (5) Derecognition of financial assets and financial liabilities Financial asset is derecognised when one of the following conditions is met: - the Group’s contractual rights to the cash flows from the financial asset expire; - the financial asset has been transferred and the Group transfers substantially all of the risks and rewards of ownership of the financial asset; or; - the financial asset has been transferred, although the Group neither transfers nor retains substantially all of the risks and rewards of ownership of the financial asset, it does not retain control over the transferred asset. Where a transfer of a financial asset in its entirety meets the criteria for derecognition, the difference between the two amounts below is recognised in profit or loss: - the carrying amount of the financial asset transferred measured at the date of derecognition; - the sum of the consideration received from the transfer and, when the transferred financial asset is a debt investment at FVOCI, any cumulative gain or loss that has been recognised directly in other comprehensive income for the part derecognised. The Group derecognises a financial liability (or part of it) only when its contractual obligation (or part of it) is extinguished. (6) Impairment The Group recognises loss allowances for expected credit loss (ECL) on: - financial assets measured at amortised cost; - financial investments at fair value through other comprehensive income Financial assets measured at fair value, including debt investments or equity securities at FVPL, equity securities designated at FVOCI and derivative financial assets, are not subject to the ECL assessment. Measurement of ECLs ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive). The maximum period considered when estimating ECLs is the maximum contractual period (including extension options) over which the Group is exposed to credit risk. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument. 12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the balance sheet date (or a shorter period if the expected life of the instrument is less than 12 months). 28 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 For accounts receivable, loss allowance are always measured at an amount equal to lifetime ECLs. ECLs on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current and forecast general economic conditions at the balance sheet date. For assets other than accounts receivable that meet one of the following conditions, loss allowance are measured at an amount equal to 12-month ECLs. For all other financial instruments, the Group recognises a loss allowance equal to lifetime ECLs: - If the financial instrument is determined to have low credit risk at the balance sheet date; - If the credit risk on a financial instrument has not increased significantly since initial recognition. Financial instruments that have low credit risk The credit risk on a financial instrument is considered low if the financial instrument has a low risk of default, the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations. Significant increases in credit risk In assessing whether the credit risk of a financial instrument has increased significantly since initial recognition, the Group compares the risk of default occurring on the financial instrument assessed at the balance sheet date with that assessed at the date of initial recognition. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort, including forward-looking information. In particular, the following information is taken into account: - failure to make payments of principal or interest on their contractually due dates; - an actual or expected significant deterioration in a financial instrument’s external or internal credit rating (if available); - an actual or expected significant deterioration in the operating results of the debtor; and - existing or forecast changes in the technological, market, economic or legal environment that have a significant adverse effect on the debtor’s ability to meet its obligation to the Group. Depending on the nature of the financial instruments, the assessment of a significant increase in credit risk is performed on either an individual basis or a collective basis. When the assessment is performed on a collective basis, the financial instruments are grouped based on shared credit risk characteristics, such as past due status and credit risk ratings. The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. 29 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 Credit-impaired financial assets At each balance sheet date, the Group assesses whether financial assets carried at amortised cost and debt investments at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data: - significant financial difficulty of the borrower or issuer; - a breach of contract, such as a default or delinquency in interest or principal payments; - for economic or contractual reasons relating to the borrower’s financial difficulty, the Group having granted to the borrower a concession that would not otherwise consider; - it is probable that the borrower will enter bankruptcy or other financial reorganisation; or - the disappearance of an active market for that financial asset because of financial difficulties. Presentation of allowance for ECL ECLs are remeasured at each balance sheet date to reflect changes in the financial instrument’s credit risk since initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profit or loss. The Group recognises an impairment gain or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for debt investments that are measured at FVOCI, for which the loss allowance is recognised in other comprehensive income. Write-off The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. A write-off constitutes a derecognition event. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due. Subsequent recoveries of an asset that was previously written off are recognised as a reversal of impairment in profit or loss in the period in which the recovery occurs. (7) Equity instrument The consideration received from the issuance of equity instruments net of transaction costs is recognised in shareholders’ equity. Consideration and transaction costs paid by the Company for repurchasing self-issued equity instruments are deducted from shareholders’ equity. When the Company repurchases its own shares, those shares are treated as treasury shares. All expenditure relating to the repurchase is recorded in the cost of the treasury shares, with the transaction recording in the share register. Treasury shares are excluded from profit distributions and are presented as a deduction under shareholders’ equity in the balance sheet. 30 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 10 Inventories (1) Classification and cost Inventories include raw materials, work in progress and reusable materials. Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase, costs of conversion and other expenditure incurred in bringing the inventories to their present location and condition. In addition to the purchase cost of raw materials, work in progress and finished goods include direct labour costs and an appropriate allocation of production overheads. Agricultural products harvested are reported in accordance with the CAS No.1 - Inventories. (2) Measurement method of cost of inventories Cost of inventories is calculated using the weighted average method. Consumables including low-value consumables and packaging materials are amortised when they are used. The amortisation charge is included in the cost of the related assets or recognised in profit or loss for the current period. (3) Basis for determining the net realisable value and method for provision for obsolete inventories At the balance sheet date, inventories are carried at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale and relevant taxes. The net realisable value of materials held for use in the production is measured based on the net realisable value of the finished goods in which they will be incorporated. The net realisable value of the inventory held to satisfy sales or service contracts is measured based on the contract price, to the extent of the quantities specified in sales contracts, and the excess portion of inventories is measured based on general selling prices. Any excess of the cost over the net realisable value of each item of inventories is recognised as a provision for impairment, and is recognised in profit or loss. (4) Inventory count system The Group maintains a perpetual inventory system. 31 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 11 Long-term equity investments (1) Investment cost of long-term equity investments (a) Long-term equity investments acquired through a business combination - The initial cost of a long-term equity investment acquired through a business combination involving entities under common control is the Company’s share of the carrying amount of the subsidiary’s equity in the consolidated financial statements of the ultimate controlling party at the combination date. The difference between the initial investment cost and the carrying amount of the consideration given is adjusted to the share premium in the capital reserve, with any excess adjusted to retained earnings. For a long-term equity investment in a subsidiary acquired through a business combination achieved in stages which do not form a bundled transaction and involving entities under common control, the Company determines the initial cost of the investment in accordance with the above policies. The difference between this initial cost and the sum of the carrying amount of previously-held investment and the consideration paid for the shares newly acquired is adjusted to capital premium in the capital reserve, with any excess adjusted to retained earnings. - For a long-term equity investment obtained through a business combination not involving enterprises under common control, the initial cost comprises the aggregate of the fair value of assets transferred, liabilities incurred or assumed, and equity securities issued by the Company, in exchange for control of the acquiree. For a long-term equity investment obtained through a business combination not involving entities under common control and achieved through multiple transactions in stages which do not form a bundled transaction, the initial cost comprises the carrying amount of the previously-held equity investment in the acquiree immediately before the acquisition date, and the additional investment cost at the acquisition date. (b) Long-term equity investments acquired other than through a business combination - A long-term equity investment acquired other than through a business combination is initially recognised at the amount of cash paid if the Group acquires the investment by cash, or at the fair value of the equity securities issued if an investment is acquired by issuing equity securities. (2) Subsequent measurement of long-term equity investment (a) Investments in subsidiaries In the Company’s separate financial statements, long-term equity investments in subsidiaries are accounted for using the cost method unless the investment is classified as held for sale (See Note III. 28). Except for cash dividends or profit distributions declared but not yet distributed that have been included in the price or consideration paid in obtaining the investments, the Company recognises its share of the cash dividends or profit distributions declared by the investee as investment income for the current period. The investments in subsidiaries are stated in the balance sheet at cost less accumulated impairment losses. 32 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 For the impairment of the investments in subsidiaries, refer to Note III.20. In the Group’s consolidated financial statements, subsidiaries are accounted for in accordance with the policies described in Note III.6. (b) Investment in joint ventures and associates A joint venture is an arrangement whereby the Group and other parties have joint control (see Note III.11(3)) and rights to the net assets of the arrangement. Associated enterprises refer to enterprises to which the Group can exercise significant influence (see Note III.11(3)). A long-term equity investment in a joint venture is accounted for using the equity method for subsequent measurement, unless the investment is classified as held for sale (see Note III.28). The accounting treatments under the equity method adopted by the Group are as follows: - Where the initial cost of a long-term equity investment exceeds the Group’s interest in the fair value of the investee’s identifiable net assets at the date of acquisition, the investment is initially recognised at cost. Where the initial investment cost is less than the Group’s interest in the fair value of the investee’s identifiable net assets at the date of acquisition, the investment is initially recognised at the investor’s share of the fair value of the investee’s identifiable net assets, and the difference is recognised in profit or loss. - After the acquisition of the investment, the Group recognises its share of the investee’s profit or loss and other comprehensive income as investment income or losses and other comprehensive income respectively, and adjusts the carrying amount of the investment accordingly. Once the investee declares any cash dividends or profit distributions, the carrying amount of the investment is reduced by the amount attributable to the Group. Changes in the Group’s share of the investee’s owners’ equity, other than those arising from the investee’s net profit or loss, other comprehensive income or profit distribution (referred to as “other changes in owners’ equity”), is recognised directly in the Group’s equity, and the carrying amount of the investment is adjusted accordingly. - In calculating its share of the investee’s net profits or losses, other comprehensive income and other changes in owners’ equity, the Group recognises investment income and other comprehensive income after making appropriate adjustments to align the accounting policies or accounting periods with those of the Group based on the fair value of the investee’s identifiable net assets at the date of acquisition. Unrealised profits and losses resulting from transactions between the Group and its associates or joint ventures are eliminated to the extent of the Group’s interest in the associates or joint ventures. Unrealised losses resulting from transactions between the Group and its associates or joint ventures are eliminated in the same way as unrealised gains but only to the extent that there is no impairment. 33 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 - The Group discontinues recognising its share of further losses of the investee after the carrying amount of the long-term equity investment and any long-term interest that in substance forms part of the Group’s net investment in the associate is reduced to zero, except to the extent that the Group has an obligation to assume additional losses. If the joint venture subsequently reports net profits, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised. For the impairment of the investments in joint ventures and associates, refer to Note III.20. (3) Criteria for determining the existence of joint control over an investee Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities (activities with significant impact on the returns of the arrangement) require the unanimous consent of the parties sharing control. The following factors are usually considered when assessing whether the Group can exercise joint control over an investee: - Whether no single participant party is in a position to control the investee’s related activities unilaterally; - Whether strategic decisions relating to the investee’s related activities require the unanimous consent of all participant parties that sharing of control. Significant influence is the power to participate in the financial and operating policy decisions of an investee but does not have control or joint control over those policies. 12 Investment properties Investment properties are properties held either to earn rental income or for capital appreciation or for both. Investment properties are accounted for using the cost model and stated in the balance sheet at cost less accumulated depreciation, amortisation and impairment losses, and adopts a depreciation or amortisation policy for the investment property which is consistent with that for buildings or land use rights, unless the investment property is classified as held for sale (see Note III.28). For the impairment of the investment properties, refer to Note III.20. Estimated useful Residual value rate Depreciation rate Category life (years) (%) (%) Plant and buildings 20 - 40 years 0 - 5% 2.4% - 5.0% 13 Fixed assets (1) Recognition of fixed assets Fixed assets represent the tangible assets held by the Group for use in production of goods, supply of services, for rental or for administrative purposes with useful lives over one accounting year. 34 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 The cost of a purchased fixed asset comprises the purchase price, related taxes, and any directly attributable expenditure for bringing the asset to working condition for its intended use. The cost of self-constructed assets is measured in accordance with the policy set out in Note III.14. Where the parts of an item of fixed assets have different useful lives or provide benefits to the Group in a different pattern, thus necessitating use of different depreciation rates or methods, each part is recognised as a separate fixed asset. Any subsequent costs including the cost of replacing part of an item of fixed assets are recognised as assets when it is probable that the economic benefits associated with the costs will flow to the Group, and the carrying amount of the replaced part is derecognised. The costs of the day-to-day maintenance of fixed assets are recognised in profit or loss as incurred. Fixed assets are stated in the balance sheet at cost less accumulated depreciation and impairment losses. (2) Depreciation of fixed assets The cost of a fixed asset, less its estimated residual value and accumulated impairment losses, is depreciated using the straight-line method over its estimated useful life, unless the fixed asset is classified as held for sale (see Note III.28). The estimated useful lives, residual value rates and depreciation rates of each class of fixed assets are as follows: Estimated useful Residual value rate Depreciation rate Class life (years) (%) (%) Plant and buildings 20 - 40 years 0 - 5% 2.4% - 5.0% Machinery equipment 5 - 30 years 0 - 5% 3.2% - 20.0% Motor vehicles 4 - 12 years 0 - 5% 7.9% - 25.0% Useful lives, estimated residual values and depreciation methods are reviewed at least at each year-end. (3) For the impairment of the fixed assets, refer to Note III.20. (4) Disposal of fixed assets The carrying amount of a fixed asset is derecognised: - when the fixed asset is holding for disposal; or - when no future economic benefit is expected to be generated from its use or disposal. Gains or losses arising from the retirement or disposal of an item of fixed asset are determined as the difference between the net disposal proceeds and the carrying amount of the item, and are recognised in profit or loss on the date of retirement or disposal. 35 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 14 Construction in progress The cost of self-constructed assets includes the cost of materials, direct labour, capitalised borrowing costs (see Note III.15), and any other costs directly attributable to bringing the asset to working condition for its intended use. A self-constructed asset is classified as construction in progress and transferred to fixed asset when it is ready for its intended use. No depreciation is provided against construction in progress. Construction in progress is stated in the balance sheet at cost less accumulated impairment losses (see Note III.20). 15 Borrowing costs Borrowing costs incurred directly attributable to the acquisition, and construction or production of a qualifying asset are capitalised as part of the cost of the asset. Other borrowing costs are recognised as financial expenses when incurred. During the capitalisation period, the amount of interest (including amortisation of any discount or premium on borrowing) to be capitalised in each accounting period is determined as follows: - Where funds are borrowed specifically for the acquisition and construction or production of a qualifying asset, the amount of interest to be capitalised is the interest expense calculated using effective interest rates during the period less any interest income earned from depositing the borrowed funds or any investment income on the temporary investment of those funds before being used on the asset. - To the extent that the Group borrows funds generally and uses them for the acquisition and construction or production of a qualifying asset, the amount of borrowing costs eligible for capitalisation is determined by applying a capitalisation rate to the weighted average of the excess amounts of cumulative expenditure on the asset over the above amounts of specific borrowings. The capitalisation rate is the weighted average of the interest rates applicable to the general-purpose borrowings. The effective interest rate is determined as the rate that exactly discounts estimated future cash flow through the expected life of the borrowing or, when appropriate, a shorter period to the initially recognised amount of the borrowings. During the capitalisation period, exchange differences related to the principal and interest on a specific-purpose borrowing denominated in foreign currency are capitalised as part of the cost of the qualifying asset. The exchange differences related to the principal and interest on foreign currency borrowings other than a specific-purpose borrowing are recognised as a financial expense when incurred. 36 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 The capitalisation period is the period from the date of commencement of capitalisation of borrowing costs to the date of cessation of capitalisation, excluding any period over which capitalisation is suspended. Capitalisation of borrowing costs commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities of acquisition, construction or production that are necessary to prepare the asset for its intended use are in progress, and ceases when the assets become ready for their intended use. Capitalisation of borrowing costs should cease when the qualifying asset being constructed or produced has reached its expected usable or saleable condition. Capitalisation of borrowing costs is suspended when the acquisition, construction or production activities are interrupted abnormally for a period of more than three months. 16. Biological assets The Group's biological assets are bearer biological assets. Bearer biological assets are those that are held for the purposes of producing agricultural produce, rendering of services or rental. Bearer biological assets in the Group are vines. Bearer biological assets are initially measured at cost. The cost of self-grown or self-bred bearer biological assets represents the necessary directly attributable expenditure incurred before satisfying the expected production and operating purpose, including capitalised borrowing costs. Bearer biological assets, after reaching the expected production and operating purpose, are depreciated using the straight-line method over its estimated useful life. The estimated useful lives, estimated net residual value rates and depreciation rates of bearer biological assets are as follows: Estimated useful Estimated net Depreciation rate Category life (years) residual value rate (%) Vines 20 years 0% 5.0% The Group evaluates the useful life and expected net salvage value by considering the normal producing life of the bearer biological assets. Useful lives, estimated residual values and depreciation methods of bearer biological assets are reviewed at least at each year-end. Any changes should be treated as changes in accounting estimates. For a bearer biological asset that has been sold, damaged, dead or destroyed, any difference between the disposal proceeds and the carrying amount of the asset should be recognised in profit or loss for the period in which it arises. 17 Intangible assets Intangible assets are stated in the balance sheet at cost less accumulated amortization (where the estimated useful life is finite) and impairment losses (see Note III.20). For an intangible asset with finite useful life, its cost estimated less residual value and accumulated impairment losses is amortised on the straight-line method over its estimated useful life, unless the intangible asset is classified as held for sale (see Note III.28). 37 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 The respective amortisation periods for intangible assets are as follows: Item Amortisation period (years) Land use rights 40 - 50 years Software licenses 5 - 10 years Trademarks 10 years Useful lives and amortisation methods of intangible asset with finite useful life are reviewed at least at each year-end. An intangible asset is regarded as having an indefinite useful life and is not amortised when there is no foreseeable limit to the period over which the asset is expected to generate economic benefits for the Group. At the balance sheet date, the Group had intangible assets with infinite useful lives including the land use rights and trademarks. Land use rights with infinite useful lives are permanent land use rights with permanent ownership held by the Group under the relevant Chile and Australian laws arising from the Group’s acquisition of Via Indómita, S.A., Via Dos Andes, S.A., and Bodegas Santa Alicia SPA. (collectively referred to as the "Chile Indomita Wine Group"), and the acquisition of Kilikanoon Estate Pty Ltd. (hereinafter referred to as the "Australia Kilikanoon Estate"), therefore there was no amortisation. The right to use trademark refers to the trademark held by the Group arising from the acquisition of the Chile Indomita Wine Group and the Australia Kilikanoon Estate with infinite useful lives. The valuation of trademark was based on the trends in the market and competitive environment, product cycle, and managing long-term development strategy. Those basis indicated the trademark will provide net cash flows to the Group within an uncertain period. The useful life is indefinite as it was hard to predict the period that the trademark would bring economic benefits to the Group. 18 Goodwill The initial cost of goodwill represents the excess of cost of acquisition over the acquirer’s interest in the fair value of the identifiable net assets of the acquiree under a business combination not involving entities under common control. Goodwill is not amortised and is stated in the balance sheet at cost less accumulated impairment losses (see Note III.20). On disposal of an asset group or a set of asset groups, any attributable goodwill is written off and included in the calculation of the profit or loss on disposal. 19 Long-term deferred expenses Long-term deferred expenses are amortised using a straight-line method within the benefit period. The respective amortisation periods for such expenses are as follows: Item Amortisation period Land requisition fee 50 years Land lease prepayment 50 years Greening fee 5-20 years Leasehold improvement 3-5 years Others 3 years 38 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 20 Impairment of assets other than inventories and financial assets The carrying amounts of the following assets are reviewed at each balance sheet date based on internal and external sources of information to determine whether there is any indication of impairment: - fixed assets - construction in progress - intangible assets - Bearer biological assets - investment properties measured using a cost model - long-term equity investments - goodwill - long-term deferred expenses, etc. If any indication exists, the recoverable amount of the asset is estimated. In addition, the Group estimates the recoverable amounts of goodwill and intangible assets with infinite useful lives at each year-end, irrespective of whether there is any indication of impairment. Goodwill is allocated to each asset group, or set of asset groups, that is expected to benefit from the synergies of the combination for the purpose of impairment testing. The recoverable amount of an asset (or asset group, set of asset groups) is the higher of its fair value (see Note III.21) less costs to sell and its present value of expected future cash flows. An asset group is composed of assets directly related to cash-generation and is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or asset groups. The present value of expected future cash flows of an asset is determined by discounting the future cash flows, estimated to be derived from continuing use of the asset and from its ultimate disposal, to their present value using an appropriate pre-tax discount rate. An impairment loss is recognised in profit or loss when the recoverable amount of an asset is less than its carrying amount. A provision for impairment of the asset is recognised accordingly. Impairment losses related to an asset group or a set of asset groups are allocated first to reduce the carrying amount of any goodwill allocated to the asset group or set of asset groups, and then to reduce the carrying amount of the other assets in the asset group or set of asset groups on a pro rata basis. However, such allocation would not reduce the carrying amount of an asset below the highest of its fair value less costs to sell (if measurable), its present value of expected future cash flows (if determinable) and zero. Once an impairment loss is recognised, it is not reversed in a subsequent period. 21 Fair value measurement Unless otherwise specified, the Group measures fair value as follows: Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 39 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 When measuring fair value, the Group takes into account the characteristics of the particular asset or liability (including the condition and location of the asset and restrictions, if any, on the sale or use of the asset) that market participants would consider when pricing the asset or liability at the measurement date, and uses valuation techniques that are appropriate in the circumstances and for which sufficient data and other information are available to measure fair value. Valuation techniques mainly include the market approach, the income approach and the cost approach. 22 Revenue recognition Revenue is the gross inflow of economic benefits arising in the course of the Group’s ordinary activities when the inflows result in increase in shareholders’ equity, other than increase relating to contributions from shareholders. Revenue is recognised when the Group satisfies the performance obligation in the contract by transferring the control over relevant goods or services to the customers. Where a contract has two or more performance obligations, the Group determines the stand- alone selling price at contract inception of the distinct good or service underlying each performance obligation in the contract and allocates the transaction price in proportion to those stand-alone selling prices. The Group recognises as revenue the amount of the transaction price that is allocated to each performance obligation. The stand-alone selling price is the price at which the Group would sell a promised good or service separately to a customer. If a stand-alone selling price is not directly observable, the Group considers all information that is reasonably available to the entity, maximises the use of observable inputs to estimate the stand-alone selling price. For the contract with a warranty, the Group analyses the nature of the warranty provided, if the warranty provides the customer with a distinct service in addition to the assurance that the product complies with agreed-upon specifications, the Group recognises for the promised warranty as a performance obligation. Otherwise, the Group accounts for the warranty in accordance with the requirements of CAS No.13 – Contingencies. The transaction price is the amount of consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. The Group recognises the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Where the contract contains a significant financing component, the Group recognises the transaction price at an amount that reflects the price that a customer would have paid for the promised goods or services if the customer had paid cash for those goods or services when (or as) they transfer to the customer. The difference between the amount of promised consideration and the cash selling price is amortised using an effective interest method over the contract term. The Group does not adjust the consideration for any effects of a significant financing component if it expects, at contract inception, that the period between when the Group transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. 40 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 The Group satisfies a performance obligation over time if one of the following criteria is met; or otherwise, a performance obligation is satisfied at a point in time: - the customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs; - the customer can control the asset created or enhanced during the Group’s performance; or - the Group’s performance does not create an asset with an alternative use to it and the Group has an enforceable right to payment for performance completed to date. For performance obligation satisfied over time, the Group recognises revenue over time by measuring the progress towards complete satisfaction of that performance obligation. When the outcome of that performance obligation cannot be measured reasonably, but the Group expects to recover the costs incurred in satisfying the performance obligation, the Group recognises revenue only to the extent of the costs incurred until such time that it can reasonably measure the outcome of the performance obligation. For performance obligation satisfied at a point in time, the Group recognises revenue at the point in time at which the customer obtains control of relevant goods or services. To determine whether a customer has obtained control of goods or services, the Group considers the following indicators: - the Group has a present right to payment for the goods or services; - the Group has transferred physical possession of the goods to the customer; - the Group has transferred the legal title of the goods or the significant risks and rewards of ownership of the goods to the customer; and - the customer has accepted the goods or services. For the sale of a product with a right of return, the Group recognises revenue when the Group obtains control of that product, in the amount of consideration to which the Group expects to be entitled in exchange for the product transferred (i.e. excluding the amount of which expected to be returned), and recognises a refund liability for the products expected to be returned. Meanwhile, an asset is recognised in the amount of carrying amount of the product expected to be returned less any expected costs to recover those products (including potential decreases in the value of returned products), and carry forward to cost in the amount of carrying amount of the transferred products less the above costs. At the end of each reporting period, the Group updates its assessment of future sales return. If there is any change, it is accounted for as a change in accounting estimate. A contract asset is the Group’s right to consideration in exchange for goods or services that it has transferred to a customer when that right is conditional on something other than the passage of time. The Group recognises loss allowances for expected credit loss on contract assets (see Note III.9(6)). Accounts receivable is the Group’s right to consideration that is unconditional (only the passage of time is required). A contract liability is the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. The following is the description of accounting policies regarding revenue from the Group’s principal activities: The Group's sales revenue is mainly derived from dealer sales. Revenue is recognised when the Group transfers control of the related products to the customer. Based on the business contract, the Group recognised the sales revenue of these transfers when the product is confirmed and signed for acceptance by the customers. 41 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 23 Contract costs Contract costs are either the incremental costs of obtaining a contract with a customer or the costs to fulfil a contract with a customer. Incremental costs of obtaining a contract are those costs that the Group incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained e.g. an incremental sales commission. The Group recognises as an asset the incremental costs of obtaining a contract with a customer if it expects to recover those costs. Other costs of obtaining a contract are expensed when incurred. If the costs to fulfil a contract with a customer are not within the scope of inventories or other accounting standards, the Group recognises an asset from the costs incurred to fulfil a contract only if those costs meet all of the following criteria: - the costs relate directly to an existing contract or to a specifically identifiable anticipated contract, including direct labour, direct materials, allocations of overheads (or similar costs), costs that are explicitly chargeable to the customer and other costs that are incurred only because the Group entered into the contract - the costs generate or enhance resources of the Group that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; and - the costs are expected to be recovered. Assets recognised for the incremental costs of obtaining a contract and assets recognised for the costs to fulfil a contract (the “assets related to contract costs”) are amortised on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the assets relate and recognised in profit or loss for the current period. The Group recognises the incremental costs of obtaining a contract as an expense when incurred if the amortisation period of the asset that the entity otherwise would have recognised is one year or less. The Group recognises an impairment loss in profit or loss to the extent that the carrying amount of an asset related to contract costs exceeds: - remaining amount of consideration that the Group expects to receive in exchange for the goods or services to which the asset relates; less - the costs that relate directly to providing those goods or services that have not yet been recognised as expenses. 24 Employee benefits (1) Short-term employee benefits Employee wages or salaries, bonuses, social security contributions such as medical insurance, work injury insurance, maternity insurance and housing fund, measured at the amount incurred or accured at the applicable benchmarks and rates, are recognised as a liability as the employee provides services, with a corresponding charge to profit or loss or included in the cost of assets where appropriate. 42 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (2) Post-employment benefits – defined contribution plans Pursuant to the relevant laws and regulations of the People’s Republic of China, the Group participated in a defined contribution basic pension insurance plan in the social insurance system established and managed by government organisations. The Group makes contributions to basic pension insurance plans based on the applicable benchmarks and rates stipulated by the government. Basic pension insurance contributions payable are recognised as a liability as the employee provides services, with a corresponding charge to profit or loss or included in the cost of assets where appropriate. (3) Termination benefits When the Group terminates the employment with employees before the employment contracts expire, or provides compensation under an offer to encourage employees to accept voluntary redundancy, a provision is recognised with a corresponding expense in profit or loss at the earlier of the following dates: - When the Group cannot unilaterally withdraw the offer of termination benefits because of an employee termination plan or a curtailment proposal; - When the Group has a formal detailed restructuring plan involving the payment of termination benefits and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it. 25 Government grants Government grants are non-reciprocal transfers of monetary or non-monetary assets from the government to the Group except for capital contributions from the government in the capacity as an investor in the Group. A government grant is recognised when there is reasonable assurance that the grant will be received and that the Group will comply with the conditions attaching to the grant. If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or receivable. If a government grant is in the form of a transfer of a non- monetary asset, it is measured at fair value. Government grants related to assets are grants whose primary condition is that the Group qualifying for them should purchase, construct or otherwise acquire long-term assets. Government grants related to income are grants other than those related to assets. A government grant related to an asset is recognised as deferred income and amortised over the useful life of the related asset on a reasonable and systematic manner as other income or non-operating income. A grant that compensates the Company for expenses or losses to be incurred in the future is recognised as deferred income, and included in other income or non-operating income in the periods in which the expenses or losses are recognised. Or included in other income or non-operating income directly. 26 Income tax Current tax and deferred tax are recognised in profit or loss except to the extent that they relate to a business combination or items recognised directly in equity (including other comprehensive income). 43 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 Current tax is the expected tax payable calculated at the applicable tax rate on taxable income for the year, plus any adjustment to tax payable in respect of previous years. At the balance sheet date, current tax assets and liabilities are offset only if the Group has a legally enforceable right to set them off and also intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. Deferred tax assets and deferred tax liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases, which include the deductible losses and tax credits carried forward to subsequent periods. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is not recognised for the temporary differences arising from the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting profit nor taxable profit (or deductible loss). Deferred tax is not recognised for taxable temporary differences arising from the initial recognition of goodwill. At the balance sheet date, deferred tax is measured based on the tax consequences that would follow from the expected manner of recovery or settlement of the carrying amounts of the assets and liabilities, using tax rates enacted at the balance sheet date that are expected to be applied in the period when the asset is recovered or the liability is settled. The carrying amount of a deferred tax asset is reviewed at each balance sheet date, and is reduced to the extent that it is no longer probable that the related tax benefits will be utilised. Such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available. At the balance sheet date, deferred tax assets and deferred tax liabilities are offset if all of the following conditions are met: - the taxable entity has a legally enforceable right to offset current tax liabilities and current tax assets; - they relate to income taxes levied by the same tax authority on either: - the same taxable entity; or - different taxable entities which intend either to settle the current tax liabilities and current tax assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or deferred tax assets are expected to be settled or recovered. 27 Operating leases and finance leases A lease is classified as either a finance lease or an operating lease. A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of a leased asset to the lessee, irrespective of whether the legal title to the asset is eventually transferred. An operating lease is a lease other than a finance lease. (1) Operating lease charges Rental payments under operating leases are recognised as part of the cost of another related asset or as expenses on a straight-line basis over the lease term. Contingent rental payments are expensed as incurred. 44 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (2) Assets leased out under operating leases Fixed assets leased out under operating leases, except for investment properties (see Note III.12), are depreciated in accordance with the Group’s depreciation policies described in Note III.13(2). Impairment losses are recognised in accordance with the accounting policy described in Note III.20. Income derived from operating leases is recognised in profit or loss using the straight-line method over the lease term. If initial direct costs incurred in respect of the assets leased out are material, the costs are initially capitalised and subsequently amortised in profit or loss over the lease term on the same basis as the lease income. Otherwise, the costs are charged to profit or loss immediately. 28 Assets held for sale The Group classified a non-current asset or disposal group as held for sale when the carrying amount of a non-current asset or disposal group will be recovered through a sale transaction rather than through continuing use. A disposal group refers to a group of assets to be disposed of, by sale or otherwise, together as a whole in a single transaction and liabilities directly associated with those assets that will be transferred in the transaction. A non-current asset or disposal group is classified as held for sale when all the following criteria are met: - According to the customary practices of selling such asset or disposal group in similar transactions, the non-current asset or disposal group must be available for immediate sale in their present condition subject to terms that are usual and customary for sales of such assets or disposal groups; - Its sale is highly probable, that is, the Group has made a resolution on a sale plan and has obtained a firm purchase commitment. The sale is to be completed within one year. Non-current assets or disposal groups held for sale are stated at the lower of carrying amount and fair value (see Note III.21) less costs to sell (except financial assets (see Note III.9), deferred tax assets (see Note III.26) and investment properties subsequent measured at fair value (see Note III. 12) initially and subsequently. Any excess of the carrying amount over the fair value (see Note III.21) less costs to sell is recognised as an impairment loss in profit or loss. 29 Profit distributions Dividends or profit distributions proposed in the profit appropriation plan, which will be approved after the balance sheet date, are not recognised as a liability at the balance sheet date but are disclosed in the notes separately. 30 Related parties If a party has the power to control, jointly control or exercise significant influence over another party, or vice versa, or where two or more parties are subject to common control or joint control from another party, they are considered to be related parties. Related parties may be individuals or enterprises. Enterprises with which the Company is under common control only from the State and that have no other related party relationships are not regarded as related parties. 45 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 In addition to the related parties stated above, the Company determines related parties based on the disclosure requirements of Administrative Procedures on the Information Disclosures of Listed Companies issued by the CSRC. 31 Segment reporting The Group is principally engaged in the production and sales of wine, brandy, and sparkling wine in China, France, Spain, Chile and Australia. In accordance with the Group's internal organisation structure, management requirements and internal reporting system, the Group's operation is divided into five parts: China, Spain, France, Chile and Australia. The management periodically evaluates segment results, in order to allocate resources and evaluate performances. In 2020, over 85% of revenue, more than 93% of profit and over 92% of non-current assets derived from China/are located in China. Therefore the Group does not need to disclose additional segment report information. 32 Significant accounting estimates and judgements The preparation of the financial statements requires management to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates as well as underlying assumptions and uncertainties involved are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. (1) Significant accounting estimates Except for accounting estimates relating to depreciation and amortisation of assets such as investment properties, fixed assets, bearer biological assets and intangible assets (see Notes III. 13 and 16) and provision for impairment of various types of assets (see Notes V.2, 6, 10, 13 and 14). Other significant accounting estimates are as follows: (i) Note V. 16 – Recognition of deferred tax asset; (ii) Note IX. – Fair value measurements of financial instruments. 33 Changes in significant accounting policies and accounting estimates (1) Description and reasons of changes in accounting policies In 2020, the Group has adopted the following revised accounting standards issued by the MOF recently: - CAS No.14 - Revenue (Revised) (“new revenue standard”) - CAS Bulletin No.13 (Caikuai [2019] No.21) (“Bulletin No.13”) - Accounting Treatment of COVID-19-Related Rent Concessions (Caikuai [2020] No.10) (a) New revenue standard New revenue standard replaces CAS No.14 – Revenue and CAS No.15 - Construction Contracts issued by the MOF in 2006 (collectively referred to as “previous revenue standard”). 46 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 Under previous revenue standard, the Group recognised revenue when the risks and rewards had passed to the customers. The Group's revenue from sales of goods was recognised when the following conditions were met: the significant risks and rewards of ownership of the goods had been transferred to the customer, the amount of revenue and related costs could be reliably measured, the relevant economic benefits would probably flow to the Group and the Group retained neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold. Under new revenue standard, revenue is recognised when the customer obtains control of the promised goods or services in the contract. Please refer to Note III.22 for relevant accounting policies. The effects of new revenue standard on each of the line items in the consolidated balance sheet and company balance sheet as at 1 January 2020 are analysed as follows: Increase/(decrease) in the line items as a result of applying new accounting policies The Group Parent Liabilities: Advance payments received (128,907,604) - Other payables (11,855,592) - Contract liabilities 126,910,470 - Other current liabilities 13,852,726 - The Group adjusts the amount of contractual consideration received before the transfer of goods to customers or the right to unconditionally receive contractual consideration from advance payments received and other payables to contract liabilities, and any amounts involving value-added tax will be adjusted to other current liabilities. The following tables provide information of the impact on each of the line items in the consolidated income statement and company income statement, and the consolidated balance sheet and company balance sheet for the year ended 31 December 2020 had the previous policies still been applied in the year. The effects on each of the line items in the consolidated income statement and company income statement for the year ended 31 December 2020 are analysed as follows: Increase/(decrease) in the line items for the year as a result of applying new accounting policies The Group Parent Operating costs 87,534,630 - Selling and distribution expenses (87,534,630) - The Group considers the transportation expenses incurred before the transfer of control to the customer as contractual performance costs, which has been adjusted from sales expenses to operating costs. 47 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 The effects on each of the line items in the consolidated balance sheet and company balance sheet as at 31 December 2020 are analysed as follows: Increase/(decrease) in the line items as a result of applying new accounting policies The Group Parent Liabilities: Advance payments received (133,031,452) - Other payables (16,862,481) - Contract liabilities 135,073,280 - Other current liabilities 14,820,653 - There is no significant impact on each of the line items in the consolidated cash flow statement and company cash flow statement for the year ended 31 December 2020 had the previous policies still been applied in the year. (2) The Group completed the acquisition of Culture Development in July 2020 and made corresponding adjustments to the comparative financial information in accordance with the relevant regulations on business combination under common control (Note VI). IV. Taxation 1 Main types of taxes and corresponding tax rates Output VAT is calculated on 13%, 9%, 6% (China, after 1 April product sales and taxable 2019), 16%, 10%, 6% (China, 1 May Value-added tax services revenue. The basis 2018 to 31 March 2019), 17%, 13%, (VAT) for VAT payable is to deduct 6% (China, before 1 May 2018), 20% input VAT from the output (France), 21% (Spain), 19% (Chile) VAT for the period and 10% (Australia) 10% of the price, 20% of the price and Consumption tax Based on taxable revenue RMB1,000 each ton (China) Urban maintenance and construction Based on VAT paid 7% (China) tax Corporate income 25% (China), 28% (France), 28% Based on taxable profits tax (Spain), 27% (Chile), 30% (Australia) Other than tax incentives stated in Note IV. 2, applicable tax rates of the Group in 2020 and 2019 are all stated as above. 48 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 2 Tax preferential treatments 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 the Corporate Income Tax Law of the People’s Republic of China and clause 86 of the Implementation Rules of Enterprise Income Tax Law of the People’s Republic of China, Ningxia Growing enjoys an exemption of corporate income tax. Yantai Changyu Grape Growing Co., Ltd. (" Grape Growing "), a branch of the Company, whose principal activity is grape growing is incorporated in Zhifu District, Yantai City, Shandong Province. According to clause 27 of the Corporate Income Tax Law of the People’s Republic of China and clause 86 of the Implementation Rules of Enterprise Income Tax Law of the People’s Republic of China, Grape Growing enjoys an exemption of corporate income tax. Yantai Changyu Wine Research & Development Centre Co., Ltd. (“R&D Centre”), a branch of the Company, is an enterprise engaged in grape growing in the Economic and Technological Development Zone of Yantai City, Shandong Province. Pursuant to Article 27 of the Enterprise Income Tax Law of the People’s Republic of China and Article 86 of the Implementation Regulations of the Enterprise Income Tax Law of the People's Republic of China, R&D Centre enjoys the preferential policy of exemption of enterprise income tax on income from grape growing. Beijing Changyu AFIP Agriculture Development Co., Ltd ("Agriculture Development"), a subsidiary of the Group, whose principal activity is grape growing is incorporated in Miyun, Beijing. According to clause 27 of the Corporate Income Tax Law of the People’s Republic of China and clause 86 of the Implementation Rules of Enterprise Income Tax Law of the People’s Republic of China, Agriculture Development enjoys an exemption of corporate income tax. Xinjiang Tianzhu Wine 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 Chateau Changyu Baron Balboa Co., Ltd. ("Chateau Shihezi"), 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. Pursuant to the Announcement on Taxation Policies Supporting the Prevention and Control of the Pneumonia Epidemic related to Covid-19" (Announcement from the Ministry of Finance and the State Taxation Administration [2020] No.8), from 1 January 2020, income from providing public transportation services and daily life services to taxpayers and providing express delivery service of daily necessities to residents are exempt from value- added tax. The Company has branches and subsidiaries such as Yantai Changyu Wine Culture Museum Co., Ltd. ("Museum") that provide catering, accommodation, tourism and other daily services. The income from their provision of daily life services will be exempted from value-added tax from 1 January 2020. 49 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 Based on the Notice of the Department of Finance of Shaanxi Province and the Shaanxi Provincial Taxation Bureau under the State Taxation Administration on Matters Concerning the Relief and Exemption of Urban Land Use Tax and Real Estate Tax in Fighting the Epidemic (Shaan Cai Shui [2020] No.4), the Department of Finance and the Taxation Bureau shall approve the application for tax relief and exemption submitted by taxpayers who have difficulties to pay urban land use tax and real estate tax owing to the suspension of production and business for more than 30 days (inclusive) arising from the epidemic. Shaanxi Chateau Changyu Rena Co., Ltd. and Changyu (Jingyang) Wine Co., Ltd., two subsidiaries of the Company, meet the application requirements and will be exempted from real estate tax and urban land use tax in the first quarter of 2020. Pursuant to the Notice of the Taxation Bureau in Ningxia Hui Autonomous Region under the State Taxation Administration and the Department of Finance in Ningxia Hui Autonomous Region on Implementing the Policies of Real Estate Tax and Urban Land Use Tax by the People’s Government in Autonomous Region in response to the impact from Covid-19 Epidemic (Ning Shui Han [2020] No.19), the Taxation Bureau shall approve the application for tax relief submitted by enterprises that have difficulties to pay real estate tax and urban land use tax owing to the epidemic. Shaanxi Chateau Changyu Rena Co., Ltd. and Changyu (Ningxia) Wine Co., Ltd., two subsidiaries of the Company, meet the application requirements and will be exempted from real estate tax and urban land use tax for five months in 2020. V. Notes to the consolidated financial statements 1 Cash at bank and on hand Item 2020 2019 Cash on hand 19,637 65,195 Bank deposits 1,128,882,937 1,506,110,752 Other monetary funds 65,312,355 91,234,828 Total 1,194,214,929 1,597,410,775 Including: Total overseas deposits 47,674,019 42,752,630 As at 31 December 2020, the balance of restricted cash of the Group is as follows: Item 2020 2019 House maintenance funds 2,684,407 2,647,877 As at 31 December 2020, the Group's term deposits with previous maturity of more than three months is RMB73,553,062 with interest rate 1.50%-2.75% (31 December 2019: RMB106,128,600). As at 31 December 2020, the Group's other monetary assets is as follows: Item 2020 2019 Yantai Changyu Pioneer Wine Company Limited Research and Development Co., Ltd. ("R&D 20,000,000 46,100,000 Centre") pledged deposit for long-term payables Deposits for letters of credit 44,540,850 44,540,850 Alipay account balance 761,505 583,978 Deposit for ICBC platform 10,000 10,000 Total 65,312,355 91,234,828 50 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 2 Accounts receivable (1) Accounts receivable by customer type are as follows: 31 December 31 December Type 2020 2019 Amounts due from related parties 2,268,311 4,292,387 Amounts due from other customers 193,911,657 278,112,684 Sub-total 196,179,968 282,405,071 Less: Provision for bad and doubtful debts (12,326,606) (16,674,915) Total 183,853,362 265,730,156 As at 31 December 2020, ownership restricted accounts receivable is RMB28,557,991 (31 December 2019: RMB54,663,422), referring to Note V. 51. (2) The ageing analysis of accounts receivable is as follows: Ageing 2020 2019 Within 1 year (inclusive) 190,047,491 276,186,686 Over 1 year but within 2 years (inclusive) 5,581,750 5,743,777 Over 2 years but within 3 years (inclusive) 366,053 308,950 Over 3 years 184,674 165,658 Sub-total 196,179,968 282,405,071 Less: Provision for bad and doubtful debts (12,326,606) (16,674,915) Total 183,853,362 265,730,156 The ageing is counted starting from the date when accounts receivable are recognised. (3) Accounts receivable by provisioning method At all times the Group measures the impairment loss for accounts receivable at an amount equal to lifetime ECLs, and the ECLs are based on the number of overdue days and the loss given default. According to the historical experience of the Group, there are no significant differences in the losses of different customer groups. Therefore, different customer groups are not further distinguished when calculating impairment loss based on the overdue information. 51 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 2020 Carrying amount at Impairment loss at Loss given default the end of the year the end of the year Current 0.4% 146,425,314 650,298 Overdue for 1 to 30 days 3.4% 14,631,174 495,839 Overdue for 31 to 60 days 6.4% 6,678,504 424,266 Overdue for 61 to 90 days 10.3% 5,582,357 574,675 Overdue for 91 to 120 days 12.9% 2,054,400 265,530 Overdue for 121 to 150 days 15.6% 2,769,171 431,319 Overdue for 151 to 180 days 21.7% 3,970,361 859,903 Overdue for 181 to 210 days 30.3% 1,417,385 429,287 Overdue for 211 to 240 days 32.0% 5,413,890 1,731,246 Overdue for 241 to 270 days 35.7% 993,299 354,988 Overdue for 271 to 300 days 54.6% 111,636 60,963 Overdue for 301 to 330 days 88.7% 748,270 664,085 Overdue for 331 to 360 days 100.0% 323,563 323,563 Overdue for 360 days 100.0% 5,060,644 5,060,644 Total 6.3% 196,179,968 12,326,606 2019 Carrying amount at Impairment loss at Loss given default the end of the year the end of the year Current 0.5% 212,907,296 1,042,035 Overdue for 1 to 30 days 3.4% 30,742,719 1,048,024 Overdue for 31 to 60 days 7.1% 11,523,509 814,636 Overdue for 61 to 90 days 12.1% 5,764,703 700,190 Overdue for 91 to 120 days 17.4% 1,590,671 276,279 Overdue for 121 to 150 days 22.4% 2,311,625 517,066 Overdue for 151 to 180 days 28.5% 661,492 188,571 Overdue for 181 to 210 days 33.3% 2,583,362 861,027 Overdue for 211 to 240 days 39.4% 4,686,242 1,844,776 Overdue for 241 to 270 days 72.9% 588,355 428,627 Overdue for 271 to 300 days 87.8% 583,701 512,581 Overdue for 301 to 330 days 97.3% 753,239 732,946 Overdue for 331 to 360 days 100.0% 1,491,202 1,491,202 Overdue for 360 days 100.0% 6,216,955 6,216,955 Total 5.9% 282,405,071 16,674,915 The loss given default is measured based on the actual credit loss experience in the past 12 months, and is adjusted taking into consideration the differences among the economic conditions during the historical data collection period, the current economic conditions and the economic conditions during the expected lifetime. 52 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (4) Movements of provisions for bad and doubtful debts: 2020 2019 Balance under the previous financial instruments - - standards Adjustment on initial application of the new financial - (10,050,869) instruments standards Balance at the beginning of the year after (16,674,915) (10,050,869) adjustment Charge for the year (11,591,483) (6,678,498) Recoveries or reversals during the year 15,939,792 - Written-off during the year - 54,452 Balance at the end of the year (12,326,606) (16,674,915) (5) Five largest accounts receivable by debtor at the end of the year: Ending balance Percentage of Relationship with Balance at the of provision for Name Ageing ending balance the Group end of the year bad and doubtful of others (%) debts Lianhua Supermarket Third party 14,891,601 Within 1 year 7.6% 817,856 Holdings Co., Ltd. NGS Supermarket (Group) Third party 6,703,398 Within 1 year 3.4% 1,945,399 Co., Ltd. Concord Investment (China) Third party 6,363,346 Within 1 year 3.2% 27,264 Co., Ltd. THE CO-OP FOOD GROUP Third party 6,045,716 Within 1 year 3.1% 129,588 SLIGRO B.V. Third party 5,861,893 Within 1 year 3.0% 125,648 Total 39,865,954 20.3% 3,045,755 3 Receivables under financing Item Note 2020 2019 Bills receivable (1) 338,090,187 317,270,229 (1) The pledged bills receivable of the Group at the end of the year: As at 31 December 2020, there was no pledged bills receivable (31 December 2019: Nil). (2) Outstanding endorsed bills that have not matured at the end of the year: Amount Item derecognised at year end Bank acceptance bills 260,721,441 Total 260,721,441 As at 31 December 2020, bills endorsed by the Group to other parties which are not yet due at the end of the period is RMB260,721,441 (31 December 2019: RMB265,759,455). The notes are used for payment to suppliers and constructions. The Group believes that due to good reputation of bank, the risk of notes not accepting by bank on maturity is very low, therefore derecognise the note receivables endorsed. If the bank is unable to pay the notes on maturity, according to the relevant laws and regulations of China, the Group would undertake limited liability for the notes. 53 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 4 Prepayments (1) Prepayments by category: Item 2020 2019 Prepayments 71,296,416 66,864,156 Other prepayments - 900,000 Total 71,296,416 67,764,156 (2) The ageing analysis of prepayments is as follows: 2020 2019 Ageing Percentage Percentage Amount Amount (%) (%) Within 1 year (inclusive) 70,977,636 99.6% 67,498,332 99.6% Over 1 year but within 2 years 318,780 0.4% 265,824 0.4% (inclusive) Total 71,296,416 100.0% 67,764,156 100.0% The ageing is counted starting from the date when prepayments are recognised. (3) Five largest prepayments by debtor at the end of the year: Ending balance Percentage of Nature of the Balance at the of provision for Name Ageing ending balance receivable end of the year bad and doubtful of others (%) debts Xinjiang Yuyuan Wine Co., Ltd. Prepayments 32,791,457 Within 1 year 46.0% - Fang Cao Hu Branch of Xinjiang Tianyu grape wine Prepayments 18,885,867 Within 1 year 26.5% - making Co., Ltd Wine-World.com Co., Ltd. Prepayments 6,812,267 Within 1 year 9.6% - RR WINE LTDA Prepayments 4,459,064 Within 1 year 6.3% - Yantai power supply company of State Grid Shandong Prepayments 1,229,571 Within 1 year 1.7% - electric power company Total 64,178,226 90.0% - 5 Other receivables 31 December 31 December Note 2020 2019 Interest receivable (1) - 148,927 Others (2) 22,428,956 24,201,301 Total 22,428,956 24,350,228 (1) Interest receivable (a) Interest receivable by category: 31 December 31 December Item 2020 2019 Interest receivable on bank deposits - 148,927 54 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (b) Significant overdue interest: As at 31 December 2020, there was no overdue interest receivable (31 December 2019: Nil). (2) Others (a) Others by customer type: 31 December 31 December Customer type 2020 2019 Amounts due from related parties 522,936 813,440 Amounts due from other companies 21,906,020 23,387,861 Sub-total 22,428,956 24,201,301 Less: Provision for bad and doubtful debts - - Total 22,428,956 24,201,301 (b) The ageing analysis is as follows: Ageing 2020 2019 Within 1 year (inclusive) 10,738,225 16,156,330 Over 1 year but within 2 years (inclusive) 3,927,625 940,668 Over 2 years but within 3 years (inclusive) 787,908 6,547,178 Over 3 years 6,975,198 557,125 Sub-total 22,428,956 24,201,301 Less: Provision for bad and doubtful debts - - Total 22,428,956 24,201,301 The ageing is counted starting from the date when other receivables are recognised. (c) Movements of provisions for bad and doubtful debts As at 31 December 2020, no bad and doubtful debt provision was made for other receivables (31 December 2019: Nil). As at 31 December 2020, the Group has no other receivables written off (31 December 2019: Nil). 55 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (d) Others categorised by nature Nature of other receivables 2020 2019 Deposit 10,287,959 9,915,442 Refund of consumption tax and VAT 8,254,195 8,937,164 Petty cash receivable 124,878 1,741,147 Others 3,761,924 3,607,548 Sub-total 22,428,956 24,201,301 Less: Provision for bad and doubtful debts - - Total 22,428,956 24,201,301 (e) Five largest others-by debtor at the end of the year Ending balance Percentage of Nature of the Balance at the of provision for Name Ageing ending balance receivable end of the year bad and doubtful of others (%) debts Sercicio de Impuestos Refund of VAT 7,044,680 Within 1 year 31.4% - Internos Finance Bureau of Yantai Economic and Deposits 5,262,324 Over 3 years 23.5% - Technological Development Area Yantai Economic and Technological Construction Development Zone 1,143,500 Over 3 years 5.1% - deposit Construction Industry Federation Municipalidad de Deposits 920,000 Within 1 year 4.1% - Casablanca Yantai Municipal Tax Service, State Over 1 year but Refund of VAT 736,946 3.3% - Taxation within 2 years Administration Total 15,107,450 67.4% - 6 Inventories (1) Inventories by category: 2020 2019 Provision for Provision for Item Carrying Carrying Book value impairment of Book value impairment of amount amount inventories inventories Raw materials 70,165,666 - 70,165,666 72,140,633 - 72,140,633 Work in progress 2,236,815,423 - 2,236,815,423 2,105,226,082 - 2,105,226,082 Finished goods 653,042,196 (14,474,634) 638,567,562 744,464,477 (20,179,637) 724,284,840 Total 2,960,023,285 (14,474,634) 2,945,548,651 2,921,831,192 (20,179,637) 2,901,651,555 (2) Provision for impairment of inventories: Increase during Decrease during Item Opening balance the year the year Closing balance Recognised Reversal Finished goods 20,179,637 14,474,634 (20,179,637) 14,474,634 56 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 7 Other current assets Item 2020 2019 Prepaid income taxes 16,087,815 16,854,091 Input tax to be credited 215,812,506 250,552,566 Prepaid rent 2,218,394 1,595,664 Total 234,118,715 269,002,321 8 Long-term equity investments (1) Long-term equity investments by category: Item 2020 2019 Investments in joint ventures 42,019,654 43,981,130 Investments in associates 6,243,853 - Sub-total 48,263,507 43,981,130 Less: Provision for impairment - - Total 48,263,507 43,981,130 (2) Movements of long-term equity investments during the year are as follows: Movements during the year 2020 Losses from Balance at the 2020 Shareholding Investee Increase in investments beginning of the Closing balance percentage capital under equity- year method Joint ventures SAS L&M Holdings (“L&M 43,981,130 - (1,961,476) 42,019,654 55% Holdings”) Associates WEMISS (Shanghai) Enterprise Development Co., - 3,000,000 (256,110) 2,743,890 30% Ltd (“WEMISS Shanghai”) Yantai Santai Real Estate - 3,500,000 (37) 3,499,963 35% Development Co., Ltd Sub-total - 6,500,000 (256,147) 6,243,853 Total 43,981,130 6,500,000 (2,217,623) 48,263,507 9 Investment properties Buildings and plants Cost Balance as at 31 December 2019 and 31 December 2020 70,954,045 Accumulated depreciation 31 December 2019 (41,239,459) Charge for the year (2,656,856) 31 December 2020 (43,896,315) Carrying amount 31 December 2020 27,057,730 31 December 2019 29,714,586 57 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 10 Fixed assets (1) Fixed assets Machinery & Item Plant & buildings Motor vehicles Total equipment Cost 31 December 2019 5,157,724,379 2,741,954,286 26,777,052 7,926,455,717 Additions during the year - Purchases 38,183,113 76,184,901 1,292,028 115,660,042 - Transfers from construction in 5,962,066 5,450,980 - 11,413,046 progress Disposals or written-offs during (65,110,863) (36,280,680) (502,488) (101,894,031) the year 31 December 2020 5,136,758,695 2,787,309,487 27,566,592 7,951,634,774 Accumulated depreciation 31 December 2019 (774,068,821) (1,170,786,526) (20,153,244) (1,965,008,591) Charge for the year (138,522,840) (154,702,790) (2,341,841) (295,567,471) Disposals or written-offs during 20,009,805 30,842,868 502,488 51,355,161 the year 31 December 2020 (892,581,856) (1,294,646,448) (21,992,597) (2,209,220,901) Provision for impairment 31 December 2019 - (17,478,027) - (17,478,027) Charge for the year - - - - 31 December 2020 - (17,478,027) - (17,478,027) Carrying amount 31 December 2020 4,244,176,839 1,475,185,012 5,573,995 5,724,935,846 31 December 2019 4,383,655,558 1,553,689,733 6,623,808 5,943,969,099 As at 31 December 2020, ownership restricted net value of fixed assets is RMB333,748,819 (31 December 2019: RMB344,670,852), referring to Note V. 51. (2) Fixed assets leased out under operating leases Accumulated Provision for Item Cost Carrying amount depreciation impairment Buildings 47,821,026 (16,328,522) - 31,492,504 Machinery equipment 73,592,531 (52,434,878) (17,478,027) 3,679,626 Motor vehicles 3,344,518 (3,179,606) - 164,912 Total 124,758,075 (71,943,006) (17,478,027) 35,337,042 (3) Fixed assets leased out under operating leases Carrying amount at Item the end of the year Machinery equipment 15,825 58 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (4) Fixed assets pending certificates of ownership Reason why the Item Carrying amount certificates are pending Industry Production Centre of R&D Centre 1,606,465,153 Processing Dormitories, main building and reception 283,897,062 Processing building of Changan Chateau European town, main building and service 176,052,749 Processing building of Chateau Beijing Fermentation shop and warehouse of Xinjiang 16,480,122 Processing Tianzhu Office and packaging shop of Golden Icewine 9,360,274 Processing Valley Fermentation shop of Zhangyu (Jingyang) 5,504,822 Processing Office, experiment building and workshop of 2,585,022 Processing Fermentation Centre Finished goods warehouse and workshop of 2,215,494 Processing Kylin Packaging Others 1,118,794 Processing The buildings without property certificate above have no significant impact on the Group's management. 11 Construction in progress (1) Construction in progress 2020 2019 Project Provision for Carrying Provision for Carrying Book value Book value impairment amount impairment amount R&D Centre ("Changyu 589,010,299 - 589,010,299 485,017,326 - 485,017,326 Wine Complex") Project Ningxia Chateau 420,440 - 420,440 46,448,561 - 46,448,561 Construction Project Sales Company 738,462 - 738,462 6,313,962 - 6,313,962 Construction Project Changan Chateau 7,626,393 - 7,626,393 4,052,839 - 4,052,839 Construction Project Shihezi Chateau 5,000 - 5,000 877,348 - 877,348 Construction Project Other Companies’ 37,694,558 - 37,694,558 24,768,797 - 24,768,797 Construction Project Total 635,495,152 - 635,495,152 567,478,833 - 567,478,833 59 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (2) Movements of major construction projects in progress during the year Attributable Transfers to Percentage Interest rate Transfers to Accumulated to: Budget Opening Additions Transfers to long-term Closing of actual for Sources of Item Intangible capitalised Interest (RMB million) balance during the year fixed assets deferred balance cost to capitalisation funding assets interest capitalised for expenses budget (%) in 2020 (%) the year Loans from financial Changyu Wine 4,506 485,017,326 105,934,721 (1,941,748) - - 589,010,299 80.0% 16,210,123 797,021 1.2%及 4.3% institutions Complex and self- raised Ningxia Chateau 428 46,448,561 4,995,252 (2,294,265) - (48,729,108) 420,440 100.0% - - - Self-raised Construction Project Changan Chateau 698 4,052,839 9,823,371 (6,249,817) - - 7,626,393 99.6% - - - Self-raised Construction Project Shihezi Chateau 780 877,348 39,484 (911,832) - - 5,000 96.4% - - - Self-raised Construction Project Sales Company 165 6,313,962 2,079,500 - (7,655,000) - 738,462 99.6% - - - Self-raised Construction Project 60 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 12 Bearer biological assets Bearer biological assets are vines, which measured in cost method. Immature Mature biological Item Total biological assets assets Original book value 31 December 2019 12,828,822 240,517,972 253,346,794 Additions during the year - Increase in cultivated 3,018,864 - 3,018,864 - Transferred to mature (8,240,129) 8,240,129 - 31 December 2020 7,607,557 248,758,101 256,365,658 Accumulated amortisation 31 December 2019 - (50,921,508) (50,921,508) Charge for the year - (13,270,614) (13,270,614) 31 December 2020 - (64,192,122) (64,192,122) Carrying amount 31 December 2020 7,607,557 184,565,979 192,173,536 31 December 2019 12,828,822 189,596,464 202,425,286 As at 31 December 2020, there is no biological asset with ownership restricted (31 December 2019: Nil). As at 31 December 2020, no provision for impairment of biological asset of the Group was recognised as there is no any indication exists (31 December 2019: Nil). 13 Intangible assets Item Land use rights Software licenses Trademarks Total Original book value 31 December 2019 531,755,702 88,927,195 170,773,266 791,456,163 Additions during the year - Purchase 314,211 2,393,612 18,496,021 21,203,844 - Transfers from construction - 7,655,000 - 7,655,000 in progress 31 December 2020 532,069,913 98,975,807 189,269,287 820,315,007 Accumulated amortisation 31 December 2019 (89,333,506) (35,237,011) (14,341,798) (138,912,315) Additions during the year - Charge for the year (11,164,963) (9,088,033) (160,631) (20,413,627) Decrease during the year 31 December 2020 (100,498,469) (44,325,044) (14,502,429) (159,325,942) Carrying amount 31 December 2020 431,571,444 54,650,763 174,766,858 660,989,065 31 December 2019 442,422,196 53,690,184 156,431,468 652,543,848 As at 31 December 2020, the Group has land use right with infinite useful lives of RMB30,746,186 (31 December 2019: RMB30,589,474), representing the freehold land held by Chile Indomita Wine Group and Australia Kilikanoon Estate under relevant Chile and Australia laws, on which the amortisation is not required. 61 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 As at 31 December 2020, the Group has trademark with infinite useful lives of RMB154,901,004 (31 December 2019: RMB154,674,985), which is held by Chile Indomita Wine Group and Australia Kilikanoon Estate. The recoverable amount of the trademark is determined according to the present value of the expected future cash flows generated from the asset group to which the single assets of trademark right belongs. The management prepares the cash flow projection for future 5 years (the "projecting period") based on the latest financial budget assumption, and estimates the cash flows after the future 5 years (the "subsequent period"). The pretax discount rates used in the cash flow projections are 11.5% and 12.8%, respectively. A key assumption in the estimate of future cash flows is the revenue growth rate in the projecting period. Such revenue growth rate is determined based on the industry and the expected growth rate of Chile Indomita Wine Group and Australia Kilikanoon Estate. The Group recognises the trademark with infinite useful lives as intangible assets, the impairment assessment of which is made at the end of each reporting year. The management believes that any reasonable change of the above assumptions will not result in the total book value of the asset group to which the single assets of trademark right belongs exceeding its recoverable amount. According to the result of impairment assessment, by the end of 31 December 2020, the management believes there is no impairment loss on those trademarks with infinite useful lives of the Group. As at 31 December 2020, ownership restricted net value of intangible assets is RMB206,920,456 (31 December 2019: RMB212,495,435), referring to Note V. 51. 14 Goodwill (1) Changes in goodwill Name of investee or events from 31 December Additions during Disposals during 31 December Note which goodwill arose 2019 the year the year 2020 Original book value Etablissements Roullet Fransac (a) 13,112,525 - - 13,112,525 (“Roullet Fransac”) Dicot Partners, S.L (“Dicot”) (a) 92,391,901 - - 92,391,901 Chile Indomita Wine Group (a) 6,870,115 - - 6,870,115 Australia Kilikanoon Estate (a) 37,063,130 - - 37,063,130 Sub-total 149,437,671 - - 149,437,671 Impairment provision (7,578,478) (8,920,981) - (16,499,459) Carrying amount 141,859,193 (8,920,981) - 132,938,212 (a) The Group acquired Fransac Sales, Dicot and Mirefleurs, Chile Indomita Wine Group and Australia Kilikanoon Estate in December 2013, September 2015, July 2017 and January 2018 respectively, resulting in respective goodwill amounting to RMB13,112,525, RMB92,391,901, RMB 6,870,115 and RMB37,063,130. The goodwill had been allocated to corresponding asset groups for impairment testing. 62 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (2) Provision for impairment of goodwill The Group has allocated the above goodwill to relevant asset groups for impairment testing. The recoverable amount of the asset group is determined according to the present value of the expected future cash flows. The management prepares the cash flow projection for future 5 years (the "projecting period") based on the latest financial budget assumption, and estimates the cash flows after the future 5 years (the "subsequent period"). The pretax discount rate used in calculating the recoverable amounts of Fransac Sales, Dicot, Mirefleurs, Indomita Wine and Australia Kilikanoon Estate are 12.6%, 11.2%, 11.5% and 12.8%, respectively (2019: 14.2%, 11.4%, 11.6% and 12.8%). The key assumption is the growth rate of annual revenue growth rate of relevant subsidiaries, which is computed based on the expected growth rate of each subsidiary and long-term average growth rates of relevant industries. Other relevant key assumption is budget gross profit margin, which is determined based on the historical performance of each subsidiary and its expectations for market development. According to the results of the impairment test, the Group found that the recoverable amount of the asset group including goodwill of Australia Kilikanoon Estate is lower than its book value. Therefore, on 31 December 2020, the provision for impairment of goodwill was RMB16,499,459. The impairment loss amounting to RMB8,920,981 was recognised in asset impairment loss in 2020. 15 Long-term deferred expenses 31 December Additions during Amortisation for 31 December Item 2019 the year the year 2020 Land lease prepayment 52,129,414 - (788,199) 51,341,215 Land requisition fee 41,460,260 - (1,880,339) 39,579,921 Greening fee 145,952,499 1,287,402 (9,054,648) 138,185,253 Leasehold improvement 35,871,673 48,910,962 (4,336,456) 80,446,179 Others 5,064,348 367,762 (518,823) 4,913,287 Total 280,478,194 50,566,126 (16,578,465) 314,465,855 16 Deferred tax assets and deferred tax liabilities (1) Deferred tax assets and liabilities 31 December 2020 31 December 2019 Deductible or Deductible or Deferred tax Deferred tax Item taxable taxable assets/ assets/ temporary temporary (liabilities) (liabilities) differences differences Deferred tax assets: Provision for impairment of assets 44,279,268 9,732,098 54,774,331 13,693,583 Unrealised profits of intra-group 313,043,226 78,260,807 482,394,726 120,598,682 transactions Unpaid bonus 147,824,610 36,956,152 184,674,946 46,168,736 Termination benefits 16,274,352 4,068,588 24,833,512 6,208,378 Deductible tax losses 268,074,301 65,844,999 247,147,752 63,459,305 Deferred income 52,653,609 11,378,631 70,643,437 15,422,659 Sub-total 842,149,366 206,241,275 1,064,468,704 265,551,343 Deferred tax liabilities: Revaluation due to business combinations involving entities not 49,156,771 (12,022,613) 51,829,561 (14,691,424) under common control 63 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (2) Details of unrecognised deferred tax assets Item 2020 2019 Deductible tax losses 187,130,828 132,081,819 (3) Expiration of deductible tax losses for unrecognised deferred tax assets Year 2020 2019 2020 - 5,718,454 2021 25,008,263 36,741,465 2022 21,367,869 26,609,674 2023 22,801,737 31,350,376 2024 42,088,453 31,661,850 2025 75,864,506 - Total 187,130,828 132,081,819 17 Other non-current assets Item 2020 2019 Royalty 170,370,147 193,674,320 Pursuant to a royalty agreement dated 18 May 1997, starting from 18 September 1997, the Company may use certain trademarks of Changyu Group Company, which have been registered with the PRC Trademark Office. An annual royalty fee at 2% of the Group's annual sales is payable to Changyu Group. The license is effective until the expiry of the registration of the trademarks. According to the above royalty agreement, Changyu Group collected a total of RMB576,507,809 for royalty from 2013 to 2019, of which 51% was used to promote trademarks such as Changyu and the product of this contract, totalling RMB294,018,093. The amount is used for promotion of Changyu and other trademarks and the products of this contract, totalling RMB62,250,368, the difference is RMB231,768,615 (including tax). On 18 May 2019, the general meeting of shareholders approved the proposal of the amendment to the royalty agreement. Article 6.1 of the royalty agreement with Changyu Group was amended to: During the validity period of this contract, the Group pays Changyu Group royalty on an annual basis. The royalty is calculated based on 0.98% of the sales volume of the Group ’s contract products using this trademark. The article is amended to: The royalty paid to the Changyu Group by the Group shall not be used to promote this trademark and the contract products. Changyu Group promised to offset the difference of RMB231,768,615 above with the royalty for four years, i.e. from 2019 to 2022.If it is not sufficient for deduction, the rest will be repaid in a one-off manner in 2023. If there is surplus, the surplus part of the royalty will be charged from the year when the surplus occurs. As the amount is a long-term prerpayment, the Company recognises the amount as other non-current assets and meanwhile offset the sales fee, i.e. royalty. As at 31 December 2020, the Group's royalty in 2020 was RMB23,304,173 (VAT included). When the difference is deducted by the above-mentioned amount, the balance of royalty due from Changyu Group was RMB170,370,147. 64 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 18 Short-term loans Short-term loans by category: Item 2020 2019 Unsecured loans 619,149,908 661,067,617 Mortgaged loans 55,724,891 82,568,222 Guaranteed loans 14,215,916 10,677,905 Total 689,090,715 754,313,744 As at 31 December 2020, details of short-term borrowings were as follows: Exchange Nature of Interest rate at the Amount Amount Interest rate rate interest rate end of the year RMB % % Credit loans (RMB) 150,000,000 1.0000 150,000,000 Floating 1-year LPR-0.005 3.35% Annual benchmark Credit loans (RMB) 400,000,000 1.0000 400,000,000 Floating 3.35% interest rate Credit loans (EUR) 1,697,075 8.0250 13,619,024 Fixed 1% - 3.28% 1% - 3.28% Credit loans (USD) 8,490,000 6.5407 55,530,884 Fixed 1.26% - 1.38% 1.26% - 1.38% Mortgaged loans (EUR) 3,683,730 8.0250 29,561,931 Fixed 0.35% - 0.9% 0.35% - 0.9% Mortgaged loans (USD) 4,000,000 6.5407 26,162,960 Fixed 1.32% 1.32% Guaranteed loans (AUD) 2,833,945 5.0163 14,215,916 Fixed 2.50% 2.50% Total 689,090,715 As at 31 December 2020, mortgaged loans (EUR) were Hacienda y Viedos Marques del Atrio, S.L.U (" Atrio ") factoring of accounts receivable from banks including Banco de Sabadell, S.A. of EUR3,558,629 (equivalent of RMB28,557,993) (31 December 2019: RMB54,663,422). Mortgaged loans were Atrio mortgaged EUR2,929,628 (equivalent of RMB23,510,265) of its land to Popular Espaol of EUR125,101 (equivalent of RMB1,003,938) (31 December 2019: RMB3,875,992). On 31 December 2020, Chile Indomita Wine Group pledged its fixed assets to Banco Scotiabank to borrow USD4,000,000 (equivalent to RMB26,162,960) (31 December 2019: RMB27,904,800). On 31 December 2020, the secured loan represented the secured loan of Australia Kilikanoon Estate of AUD2,833,945 (equivalent to RMB14,215,916) (31 December 2019: RMB10,677,905). 19 Accounts payable Ageing 2020 2019 Within 1 year (inclusive) 477,926,275 565,400,597 Over 1 year but within 2 years (inclusive) 2,173,356 2,255,083 Over 2 years but within 3 years (inclusive) 1,277,767 3,007,686 Over 3 years 2,970,560 186,413 Total 484,347,958 570,849,779 There is no significant accounts payable with ageing of more than one year. 65 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 20 Advance payments received Details of advances from customers are as follows: Item 2020 2019 Advances from customers - 128,907,605 There is no significant advances from customers with ageing of more than one year. 21 Contract liabilities As at 31 As at 1 January Item December 2020 2020 Receipt in advance 118,210,799 115,054,878 Withholding sales rebates 16,862,481 11,855,592 Total 135,073,280 126,910,470 Contract liabilities primarily relate to the Group’s advances from sales contracts of specific customers and the withholding sales rebates. Relevant contract liabilities are recognised as revenue when the control of the goods is transferred to the customer. 22 Employee benefits payable (1) Employee benefits payable: Additions during Decrease during Note 31 December 2019 31 December 2020 the year the year Short-term employee (2) 215,231,685 439,138,855 (482,194,455) 172,176,085 benefits Post-employment benefits - defined (3) 736,147 36,601,589 (37,008,262) 329,474 contribution plans Termination benefits 24,833,512 1,542,160 (10,101,320) 16,274,352 Total 240,801,344 477,282,604 (529,304,037) 188,779,911 (2) Short-term employee benefits Additions during Decrease during 31 December 2019 31 December 2020 the year the year Salaries, bonuses, 218,360,023 391,442,192 (439,524,904) 170,277,311 allowances Staff welfare 2,001,589 13,058,813 (13,325,679) 1,734,723 Social insurance 567,446 18,919,443 (19,146,156) 340,733 Medical insurance 567,446 18,085,064 (18,311,777) 340,733 Work-related injury - 699,316 (699,316) - insurance Maternity insurance - 135,063 (135,063) - Housing fund 14,195 12,761,086 (12,747,784) 27,497 Labour union fee, staff and 1,934,209 2,957,321 (3,016,738) 1,874,792 workers’ education fee Sub-total 222,877,462 439,138,855 (487,761,261) 174,255,056 Less: Non-current liabilities 7,645,777 - (5,566,806) 2,078,971 Total 215,231,685 439,138,855 (482,194,455) 172,176,085 66 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (3) Post-employment benefits - defined contribution plans Additions during Decrease during 31 December 2019 31 December 2020 the year the year Basic pension insurance 736,137 35,667,206 (36,073,879) 329,464 Unemployment insurance 10 934,383 (934,383) 10 Total 736,147 36,601,589 (37,008,262) 329,474 Pursuant to the Notice of the Ministry of Human Resources and Social Security, the Ministry of Finance and the State Taxation Administration on Extending the Implementation Period of the Phased Reduction and Exemption of the Policy of Corporate Social Insurance Premiums (Ren She Bu Fa [2020] No.49), from February 2020 to the end of June 2020, all provinces (except Hubei Province) implemented the policy of halving the payment of three types of social insurances (i.e. basic endowment insurance, unemployment insurance and work- related injury insurance) for insured entities of large enterprises; from February 2020 to the end of December 2020, all provinces implemented the exemption policy for the payment of three types of social insurances for insured entitles of medium, small and micro enterprises. The Company’s branches and subsidiaries, such as Yantai Changyu Pioneer Wine Sales Co., Ltd., applied the preferential policies for large enterprises from February 2020 to the end of June 2020 and the payment of three types of social insurances was levied by half; the Company’s branches and subsidiaries, such as Hangzhou Changyu Wine Sales Co., Ltd. applied the preferential policies for medium, small and micro enterprises from February 2020 to the end of December 2020 and the payment of three types of social insurances was exempted. 23 Taxes payable Item 2020 2019 Value-added tax 25,853,102 88,590,035 Consumption tax 42,076,231 48,497,550 Corporate income tax 130,621,524 217,226,553 Individual income tax 614,344 843,601 Tax on the use of urban land 2,327,666 2,263,012 Education surcharges 2,498,374 4,858,987 Urban maintenance and construction tax 3,429,038 6,726,425 Others 5,992,534 6,614,132 Total 213,412,813 375,620,295 24 Other payables 31 December 31 December Note 2020 2019 Interest payable 553,471 758,047 Dividends payable 1,003,125 1,866,559 Others (1) 384,548,930 453,855,783 Total 386,105,526 456,480,389 67 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (1) Others (a) Details of others by nature are as follows: Item 2020 2019 Deposit payable to dealer 177,129,582 164,994,995 Advertising fee payable 50,444,091 91,091,404 Equipment and construction fee payable 51,381,563 72,004,009 Freight charges payable 26,061,359 31,960,557 Deposits due to suppliers 14,836,302 14,081,530 Contracting fee payable 9,656,066 16,997,685 Staff deposit 359,282 1,866,765 Others 54,680,685 60,858,838 Total 384,548,930 453,855,783 (b) Significant others aged over one year: Balance at the end Reasons why not Item of the year settled Weicheng Branch of Bureau of Land and Project subject to 16,508,909 Resources in Xianyang City acceptance 25 Other current liabilities As at 31 As at 1 January As at 31 Item December 2020 2020 December 2019 Tax to be transferred out as sales 14,820,653 13,852,726 - 26 Non-current liabilities due within one year Non-current liabilities due within one year by category are as follows: Item 2020 2019 Long-term loans due within one year 111,311,890 116,826,221 Long-term payables due within one year 22,000,000 34,000,000 Total 133,311,890 150,826,221 27 Long-term loans (1) Long-term loans by category Item 2020 2019 Credit loans 220,219,258 136,749,730 Guaranteed loans 91,445,600 105,093,000 Mortgaged loans - 3,875,992 Less: Long-term loans due within one year 111,311,890 116,826,221 Total 200,352,968 128,892,501 68 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 As at 31 December 2020, details of long-term borrowings were as follows: Interest rate at the Long-term Long-term Exchange Amount Nature of Interest rate Amount end of the year loans due loans due after rate interest rate RMB % % within one year one year Credit loans 27,441,652 8.0250 220,219,258 Fixed 1.0%-1.7% 1.25%-3.28% 86,311,890 133,907,368 (EUR) Guaranteed 31,250,000 1.0000 31,250,000 Floating 90% of 5-year LPR 4.275% 25,000,000 6,250,000 loans (RMB) Guaranteed 12,000,000 5.0163 60,195,600 Fixed 2.50% 2.50% - 60,195,600 loans (AUD) Total 311,664,858 111,311,890 200,352,968 As at 31 December 2020, Credit loans(EUR) were EUR27,441,652 borrowed by Banco Sabadell, Bankia, Banco Santander, BBVA, Caja Rural de Navarr etc. (equivalent of RMB220,219,258) (31 December 2019: RMB136,749,730). Guaranteed loans (RMB) were long-term borrowings of RMB31,250,000 of the R&D Centre, a subsidiary of the Company (31 December 2019: RMB56,250,000). Australia Kilikanoon Estate has borrowed AUD12,000,000(equivalent of RMB60,195,600) (31 December 2019: RMB48,843,000) from ANZ Bank and it was guaranteed by the Company. 28 Long-term payables Item 2020 2019 Agricultural Development Fund of China ("CADF") 108,000,000 225,000,000 Less: Long-term payables due within one year 22,000,000 34,000,000 Balance of long-term payables 86,000,000 191,000,000 In 2016, RMB305,000,000 from CADF was invested in R&D Centre, CADF accounted for 37.9% of the registered capital. According to the investment agreement, CADF will recovery investment funds over 10 years, the investment income received equal to 1.2% of the remaining unpaid principal per annum. In addition to the fixed income, CADF will no longer enjoy other profits or bear the loss of R&D Centre. Therefore, although the investment in R&D Centre, nominally equity investment, is actually a debt investment (financial discount loan). The Group take this investment as long-term payables, which measured in amortized cost. The Group repays the principal of RMB117,000,000 in 2020. Refer to Note V. 51 for details of mortgaged and pledged assets. Balance of long-term Return on Termination date Mortgaged and pledged Investment date Due within one year Due after one year payables investment of repayment assets RMB RMB RMB 29 February 28 February Fixed assets and 108,000,000 1.2% 22,000,000 86,000,000 2016 2025 intangible assets 29 Deferred income Additions during the Decrease during Item 31 December 2019 31 December 2020 year the year Government grants 70,701,288 1,367,400 (19,415,079) 52,653,609 69 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 Government grants: Amounts Additions of recognised in other Related to Liability 31 December 2019 government grants 31 December 2020 income during the assets/income during the year year Government Industrial development support 28,700,000 - (4,100,000) 24,600,000 grants related project to assets Government Fixed asset investment reward 4,716,600 - (2,280,000) 2,436,600 grants related of Shihezi Chateau project to assets Shandong Peninsula Blue Government Economic Area construction 4,000,000 - (2,000,000) 2,000,000 grants related funds to assets Xinjiang industrial revitalisation Government and technological 14,220,000 - (1,422,000) 12,798,000 grants related transformation project to assets Government Special government grant for 3,180,000 - (1,060,000) 2,120,000 grants related infrastructure to assets Government Raw wine fermentation project 1,869,600 - (1,434,900) 434,700 grants related to assets Wine fermentation capacity Government construction (Huanren) 2,800,000 - (400,000) 2,400,000 grants related project to assets Engineering technology Government transformation of information 2,320,000 - (580,000) 1,740,000 grants related system project to assets Government Liquor electronic tracking 1,858,203 - (667,053) 1,191,150 grants related project to assets Government Infrastructure construction 350,000 - (350,000) - grants related project to assets Government Special fund for efficient water- 1,877,000 - (562,000) 1,315,000 grants related saving irrigation project to assets Subsidy for economic and Government energy-saving technological 898,100 - (128,300) 769,800 grants related transformation projects to assets Government Wine industry development 372,000 - (186,000) 186,000 grants related project to assets Subsidy for mechanic Government development of Penglai 265,397 - (26,539) 238,858 grants related Daliuhang Base to assets Government Coal subsidy 201,500 - (201,500) - grants related to assets Cross-border e-commerce Related to project 839,958 - (638,157) 201,801 income Travelling development fund Related to subsidy project 560,000 - (560,000) - income Water pollution control project Related to fund 92,930 - (92,930) - income Subsidy for boiler Related to 80,000 - (10,000) 70,000 reconstruction and demolition income Special funds for the Related to 1,500,000 - (1,500,000) - development of enterprises income Prize from Industrial Design Related to Competition of Yantai - 100,000 (50,000) 50,000 income Mayor's Cup Special Funds for Innovation- Related to Driven Development of Yantai - 500,000 (398,300) 101,700 income City Total 70,701,288 600,000 (18,647,679) 52,653,609 70 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 30 Other non-current liabilities 31 December 31 December Item 2020 2019 Employee benefits payable 2,078,971 7,645,777 As at 31 December 2020, employee benefit represents deposit from bonus accrued for managers and above. The bonus is expected to be paid in 2022. 31 Share capital At 31 December 2019 and 31 December 2020 Unrestricted A shares 453,460,800 B shares 232,003,200 Total of unrestricted shares 685,464,000 32 Capital reserve Additions during Decrease during Item 31 December 2019 31 December 2020 the year the year Share premium 636,858,772 - (117,806,600) 519,052,172 Others 5,916,588 - - 5,916,588 Total 642,775,360 - (117,806,600) 524,968,760 The balance amounting to RMB28,286,811 between the long-term equity investment acquired due to the purchase of minority shareholding and the share of net assets continuously calculated since the date of acquisition by the subsidiary based on the proportion of newly increased shareholding shall be offset against the capital reserve. Details of non-controlling interests acquired during the year, see Note- VII. 2. During the reporting period, the Group purchased the equity of Culture Development, which constituted a business combination involving entities under common control. The Group reduced the capital reserve by RMB89,519,789 based on the consideration of combination paid on the date of combination. Please refer to Note VI for details. 33 Other comprehensive income Balance at the Accrued during the year Balance at the beginning of Less: Net-of-tax Net-of-tax end of the year the year Previously amount Less: amount attributable to Item attributable to Before-tax recognised attributable to Income tax attributable to shareholders shareholders amount amount shareholders expenses non-controlling of the of the transferred to of the interests Company Company profit or loss Company Items that may be reclassified to profit or loss Translation differences arising from translation of (4,235,583) 5,171,635 - - 4,811,712 359,923 576,129 foreign currency financial statements 71 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 34 Surplus reserve 31 December 31 December Item 2020 2019 Statutory surplus reserve 342,732,000 342,732,000 In accordance with the Company Law and the Articles of Association Company, the Company appropriated 10% of its net profit to statutory surplus reserve. The appropriation to the statutory surplus reserve may be ceased when the accumulated appropriation reaches over 50% of the registered capital of the Company. The Company does not appropriate net profit to the surplus reserve in 2019 as surplus reserve of the Company is above 50% of the registered capital. The Company can appropriate discretionary surplus reserve after appropriation of the statutory surplus reserve. Discretionary surplus reserve can be utilised to offset the deficit or increase the share capital after approval. 35 Retained earnings Item Note 2020 2019 Retained earnings at the beginning of the 8,735,513,044 8,008,982,547 year (before adjustment) Impact of retrospective adjustment of (1)(a) - (7,540,537) accounting standards Impact of business combination involving (1)(b) - 12,482,138 entities under common control Retained earnings at the beginning of the 8,735,513,044 8,013,924,148 year (after adjustment) Add: Net profits for the year attributable to 470,860,587 1,141,367,296 shareholders of the Company Less: Dividends to ordinary shares (2) (479,824,800) (411,278,400) Distribution of dividends to existing shareholders from Culture (12,457,076) (8,500,000) Development Retained earnings at the end of the year (3) 8,714,091,755 8,735,513,044 (1) Adjustments on beginning retained earnings are as follows: (a) As a result of the implementation of the new financial instrument standards by the Group in 2019, the undistributed profit at the beginning of 2019 was reduced by RMB7,540,537. (b) Since the acquisition of the equity of Culture Development constituted a combination under common control, the undistributed profit at the beginning of 2019 increased by RMB12,482,138 (see Note VI). (2) Dividends in respect of ordinary shares declared during the year Pursuant to the shareholders’ approval at the shareholders’ general meeting on 27 May 2020, a cash dividend of RMB0.7 per share (2019: RMB0.6 per share), totalling RMB479,824,800 (2019: RMB411,278,400), was declared and paid to the Company’s ordinary shareholders on 10 July 2020. 72 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (3) Retained earnings at the end of the year As at 31 December 2020, the consolidated retained earnings attributable to the Company included an appropriation of RMB58,021,644 (2019: RMB56,059,538) to surplus reserve made by the subsidiaries. 36 Operating income and operating costs 2020 2019 Item Income Cost Income Cost Principal activities 3,325,812,768 1,479,923,326 4,964,988,674 1,839,985,387 Other operating activities 69,589,233 23,954,081 109,037,225 37,673,351 Total 3,395,402,001 1,503,877,407 5,074,025,899 1,877,658,738 (1) Details of 2020 operating income: 2020 Item Income Cost Principal activities 3,325,812,768 1,479,923,326 Other operating activities 69,589,233 23,954,081 Total 3,395,402,001 1,503,877,407 Including: Revenue from contracts with customers 3,393,386,515 1,502,467,908 Rent income 2,015,486 1,409,499 Disaggregation of revenue from contracts with customers: Type of contract 2020 By type of goods or services - Liquor 3,325,812,768 - Others 67,573,747 By timing of transferring goods or services - Revenue recognised at a point in time 3,393,386,515 (2) Details of 2019 operating income: 2019 Principal activities - Selling goods 4,964,988,674 Other operating activities - Rent income 2,015,486 - Others 107,021,739 Total 5,074,025,899 73 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 37 Taxes and surcharges Item 2020 2019 Consumption tax 120,563,955 159,206,181 Urban maintenance and construction tax 23,169,608 36,525,428 Education surcharges 16,756,851 26,728,398 Property tax 26,843,414 30,538,234 Tax on the use of urban land 11,332,778 11,219,740 Stamp duty 3,650,250 3,117,257 Others 1,472,418 2,553,443 Total 203,789,274 269,888,681 38 Selling and distribution expenses Item 2020 2019 Salaries and benefits 289,527,114 372,247,597 Marketing fee 200,259,537 378,706,496 Labour service fee 58,723,298 72,851,229 Depreciation expense 41,224,340 42,943,495 Storage rental 35,744,058 38,773,610 Advertising fee 22,724,095 47,339,106 Royalty 21,985,068 (182,711,622) Travelling expenses 20,065,075 26,383,799 Design and production fee 15,427,023 27,238,641 Conference fee 15,387,699 42,369,153 Water, electricity and gas fee 13,427,340 14,773,735 Transport charges - 122,802,027 Others 53,757,838 84,588,119 Total 788,252,485 1,088,305,385 39 General and administrative expenses Item 2020 2019 Salaries and benefits 73,329,053 90,477,287 Depreciation expenses 72,637,754 61,831,915 Repair costs 23,714,008 28,555,032 Administrative expenses 20,927,794 23,101,636 Amortisation expenses 19,568,760 18,373,495 Amortisation of greening fee 18,187,244 18,409,031 Rental charge 9,969,494 12,938,864 Safety production costs 7,831,443 9,510,828 Security and cleaning fee 7,650,813 8,124,135 Contracting fee 7,603,536 13,377,255 Others 29,226,567 27,205,178 Total 290,646,466 311,904,656 74 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 40 Financial expenses Item 2020 2019 Interest expenses from loans and payables 35,187,642 50,212,059 Less: Borrowing costs capitalised 797,021 1,141,265 Less: Financial expenses offset by fiscal interest 1,500,000 7,500,000 subsidy Interest income from deposits and receivables (14,247,274) (12,327,441) Net exchange (gains)/losses (274,140) 3,611,536 Other financial expenses 2,072,506 2,447,340 Total 20,441,713 35,302,229 Fiscal interest subsidy during reporting period has been included in non-recurring gains and losses. 41 Other income Related to Item 2020 2019 assets/income Government grants Reward on the fixed asset investment 2,280,000 2,280,000 related to assets Shandong Peninsula Blue Economic Government grants 2,000,000 2,000,000 Area construction funds related to assets Industrial development support Government grants 4,100,000 4,100,000 project related to assets Others - Government grants related Government grants 7,018,292 7,567,504 to assets related to assets Special funds for the development of 23,068,826 37,449,390 Related to income enterprises Tax refunds 12,324,440 8,724,775 Related to income Strong industrial city special funds 792,600 2,518,700 Related to income Others - Government grants related 21,479,462 12,730,472 Related to income to income Total 73,063,620 77,370,841 Other income during reporting period has been included in non-recurring gains and losses. 42 Investment (losses)/income Investment (losses)/income by item Item 2020 2019 Long-term equity investment losses under equity (2,217,623) (1,120,928) method Investment income from disposal of long-term - 6,233,661 equity investments Total (2,217,623) 5,112,733 43 Credit reversal/(losses) Item 2020 2019 Accounts receivable 4,348,309 (6,678,498) Total 4,348,309 (6,678,498) 75 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 44 Impairment losses Item 2020 2019 Inventories 5,705,003 4,503,589 Fixed assets - (17,478,027) Goodwill (8,920,981) (7,578,478) Total (3,215,978) (20,552,916) 45 (Loss)/Gains from asset disposals Item 2020 2019 (Loss)/Gains from disposal of fixed assets (1,180,655) 39,015 Gains from disposal of assets during reporting period has been included in non-recurring gains and losses. 46 Non-operating income and non-operating expenses (1) Non-operating income by item is as follows: Item 2020 2019 Inventory stocktake surplus 3,823,905 134,563 Insurance compensation 3,067,670 90,000 Net income from fine 3,098,877 2,593,116 Others 1,918,058 8,203,624 Total 11,908,510 11,021,303 Non-operating income during reporting period has been included in non-recurring gains and losses. (2) Non-operating expenses Item 2020 2019 Compensation, penalty and fine expenses 347,635 403,975 Donations provided 1,048,300 699,296 Others 306,923 2,531,281 Total 1,702,858 3,634,552 Non-operating expenses during reporting period has been included in non-recurring gains and losses. 47 Income tax expenses Item Note 2020 2019 Current tax expense for the year based 135,163,243 389,906,096 on tax law and regulations Changes in deferred tax assets/liabilities (1) 56,641,257 15,691,224 Total 191,804,500 405,597,320 76 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (1) The analysis of changes in deferred tax is set out below: Item 2020 2019 Origination of temporary differences 56,641,257 15,691,224 Total 56,641,257 15,691,224 (2) Reconciliation between income tax expenses and accounting profit: Item 2020 2019 Profit before taxation 664,866,563 1,547,603,020 Estimated income tax at 25% 166,216,641 386,900,755 Effect of different tax rates applied by subsidiaries 1,310,363 (707,938) Effect of non-deductible costs, expense and losses 7,185,074 7,224,709 Effect of deductible losses of deferred tax assets 16,417,337 7,397,810 not recognised for the year Deferred tax assets written-off 675,085 4,781,984 Income tax expenses 191,804,500 405,597,320 48 Basic earnings per share and diluted earnings per share (1) Basic earnings per share Basic earnings per share is calculated as dividing consolidated net profit attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding: 2020 2019 Consolidated net profit attributable to ordinary 470,860,587 1,141,367,296 shareholders of the Company Weighted average number of ordinary shares 685,464,000 685,464,000 outstanding Basic earnings per share (RMB/share) 0.69 1.67 Weighted average number of ordinary shares is calculated as follows: 2020 2019 Issued ordinary shares at the beginning of the year 685,464,000 685,464,000 Weighted average number of ordinary shares at the 685,464,000 685,464,000 end of the year (2) The Group does not have any potential dilutive ordinary shares for the listed years. 49 Cash flow statement (1) Proceeds relating to other operating activities: Item 2020 2019 Government grants 56,515,941 69,311,576 Penalty income 3,098,877 2,593,116 Interest income from bank 14,396,201 12,463,811 Others 7,186,229 12,149,263 Total 81,197,248 96,517,766 77 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (2) Payments relating to other operating activities: Item 2020 2019 Selling and distribution expenses 399,973,695 770,753,478 General and administrative expenses 127,666,411 138,738,416 Others 24,250,891 12,856,014 Total 551,890,997 922,347,908 (3) Proceeds relating to other financing activities: Item 2020 2019 Cash paid for acquisition of minority interests 62,966,747 11,619,552 50 Supplementary information on cash flow statement (1) Supplement to cash flow statement a. Reconciliation of net profit to cash flows from operating activities: Item 2020 2019 Net profit 473,062,063 1,142,005,700 Add: Provisions for impairment of assets 3,215,978 20,552,916 Credit (reversal)/ losses (4,348,309) 6,678,498 Depreciation of fixed assets and 298,224,327 306,907,536 investment property Amortisation of intangible assets 20,413,627 20,194,590 Amortisation of long-term deferred 16,578,465 15,475,669 expenses Amortisation of biological assets 13,270,614 12,722,828 Losses/(Gains) from disposal of fixed assets, intangible assets, and other 1,338,570 (39,015) long-term assets Financial expenses 36,134,118 49,520,411 Royalty 21,985,068 (182,711,622) Investment losses/(income) 2,217,623 (5,112,733) Decrease in deferred tax assets 59,310,068 23,010,447 Decrease in deferred tax liabilities (2,668,811) (7,319,223) Increase in gross inventories (38,192,093) (163,688,318) Increase in operating receivables (41,443,296) (288,772,895) Decrease in operating payables (353,951,339) (100,572,429) Net cash flows from operating activities 505,146,673 848,852,360 b. Significant investing and financing activities not requiring the use of cash: Item 2020 2019 Payment of intangible assets and other long- 141,440,165 165,716,961 term assets by bank acceptances 78 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 c. Change in cash and cash equivalents: Item 2020 2019 Cash equivalents at the end of the year 1,052,665,105 1,397,399,470 Less: Cash equivalents at the beginning of 1,397,399,470 1,236,286,117 the year Net (dercrease)/increase in cash and cash (344,734,365) 161,113,353 equivalents (2) Information on acquisition or disposal of subsidiaries and other business units during the year: Information on acquisition of subsidiaries and other business units: 2020 2019 Consideration for acquiring subsidiaries and other 89,519,789 - business units Cash or cash equivalents paid during the year for acquiring subsidiaries and other business units 89,519,789 - during the year Including: Culture Development 89,519,789 - Less: Cash and cash equivalents held by disposed subsidiaries and other business - - units Net cash paid for the acquisition 89,519,789 - (3) Details of cash and cash equivalents Item 2020 2019 Cash at bank and on hand Including: Cash on hand 19,637 65,195 Bank deposits available on demand 1,052,645,468 1,397,334,275 Closing balance of cash and cash equivalents 1,052,665,105 1,397,399,470 51 Assets with restrictive ownership title or right of use Balance at the Item Opening balance Reason for restriction end of the year R&D Centre mortgage for long- Cash at bank and on hand 93,882,705 67,996,762 term payables etc. Short-term borrowings Account receivable (i) 54,663,422 28,557,991 mortgage from Atrio R&D Centre mortgage for long- Fixed assets 344,670,852 333,748,819 term payables and long-term and short-term borrowings R&D Centre mortgage for long- Intangible assets 212,495,435 206,920,456 term payables Total 705,712,414 637,224,028 (i) As at 31 December 2020, the amount of accounts receivable with restricted ownership is EUR 3,558,628 (equivalent of RMB28,557,991), which refers to accounts receivable Atrio conducted for factoring from Banco de Sabadell, S.A. Etc. (31 December 2019: EUR6,994,232, equivalent of RMB54,663,422) 79 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 VI Change of consolidation scope Business combination involving entities under common control (1) Business combinations involving entities under common control during the year Proportion From the beginning of the year to the 2019 of equity acquisition date Basis for business Basis for Name of interests Acquisition combination under determination of acquiree acquired in Date Net cash common control acquisition date Income Net profit Income Net profit business outflow combination The Company and Culture Development Culture were controlled by As at 1 Acquisition of 100% 39,533,385 10,730,129 3,057,305 82,390,613 11,709,978 Development Changyu Group before July 2020 effective control the combination on a non-transitional basis Culture Development is a company established in Zhifu District, Yantai City on 18 May 2018. Its headquarters is based in Zhifu District, Yantai City. It is mainly engaged in the management of tourist attractions, the development of tourism resources and the provision of cultural tourism services. (2) Acquisition cost Culture Acquisition cost Development Cash 89,519,789 Total 89,519,789 (3) Carrying values of assets and liabilities of the acquiree at the acquisition date Culture Development 31 December Acquisition date 2019 Assets Cash at bank and on hand 8,238,501 11,295,806 Receivables 4,932,103 493,028 Receivables under financing 50,000 800,000 Prepayments 41,339 56,619 Other receivables 74,448,103 25,334,395 Inventories 20,656,182 31,737,700 Fixed assets 4,379,150 49,900,202 Construction in progress 560,463 597,493 Long-term deferred expenses 2,673,135 2,882,786 Liabilities: Payables 3,994,056 9,251,396 Receipt in advance 4,131,134 8,298,105 Taxes payable 1,893,962 (1,127,059) Other payables 13,480,254 10,146,379 Net asset 92,479,570 96,529,208 Less: Non-controlling interests - 1,948,333 Net assets acquired 92,479,570 94,580,875 Culture Development adopted accounting policies different from those adopted in the preparation of the Company’s financial statements before combination. On the acquisition date, the Company adjusted the financial statements prepared by Culture Development under the accounting policies adopted in the preparation of the Company’s financial statements. 80 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 VII. Interests in other entities 1 Interests in subsidiaries (1) Composition of the Group Shareholding ratio Principal place of Business (%) Name of the Subsidiary Registered place Registered capital Acquisition method business nature (or similar equity interest) Business combinations Xinjiang Tianzhu Wine Co., Ltd. (“Xinajing Shihezi, Xinjiang, Shihezi, Xinjiang, Manufacturing RMB75,000,000 60 - involving entities not under Tianzhu”) China China common control Business combinations Etablissements Roullet Fransac Cognac, France Cognac, France Trading EUR2,900,000 - 100 involving entities not under (“Roullet Fransac”) common control Business combinations Marketing and Dicot Partners, S.L (“Dicot”) Navarre, Spain Navarre, Spain EUR2,000,000 90 - involving entities not under sales common control Via Indómita, S.A., Via Dos Andes, S.A., Marketing and Acquired through and Bodegas Santa Alicia SpA. (“Chile Santiago, Chile Santiago, Chile CLP31,100,000,000 85 - sales establishment or investment Indomita Wine Group”) Business combinations Kilikanoon Estate Pty Ltd. Marketing and Adelaide, Australia Adelaide, Australia AUD6,420,000 97.5 - involving entities not under (“Australia Kilikanoon Estate”) sales common control Beijing Changyu Sales and Distribution Co., Marketing and Acquired through Beijing, China Beijing, China RMB1,000,000 100 - Ltd ("Beijing Sales") sales establishment or investment Yantai Kylin Packaging Co., Ltd. ("Kylin Yantai, Shandong, Yantai, Shandong, Acquired through Manufacturing RMB15,410,000 100 - Packaging") China China establishment or investment Yantai Chateau Changyu-Castel Co., Ltd Yantai, Shandong, Yantai, Shandong, Acquired through Manufacturing USD5,000,000 70 - ("Chateau Changyu") (d) China China establishment or investment Changyu (Jingyang) Wine Co., Ltd. Xianyang, Shaanxi, Xianyang, Shaanxi, Acquired through Manufacturing RMB1,000,000 90 10 ("Jingyang Wine") China China establishment or investment Yantai Changyu Pioneer Wine Sales Co., Yantai, Shandong, Yantai, Shandong, Marketing and Acquired through RMB8,000,000 100 - Ltd. ("Sales Company") China China sales establishment or investment Langfang Development Zone Castel- Langfang, Hebei, Langfang, Hebei, Acquired through Changyu Wine Co., Ltd ("Langfang Manufacturing USD6,108,818 39 10 China China establishment or investment Castel") Changyu (Jingyang) Wine Sales Co., Ltd. Xianyang, Shaanxi, Xianyang, Shaanxi, Marketing and Acquired through RMB1,000,000 10 90 ("Jingyang Sales") China China sales establishment or investment Langfang Changyu Pioneer Wine Sales Co., Langfang, Hebei, Langfang, Hebei, Marketing and Acquired through RMB1,000,000 10 90 Ltd ("Langfang Sales") China China sales establishment or investment 81 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 Shareholding ratio Principal place of Business (%) Name of the Subsidiary Registered place Registered capital Acquisition method business nature (or similar equity interest) Shanghai Changyu Sales and Distribution Marketing and Acquired through Shanghai, China Shanghai, China RMB1,000,000 100 - Co., Ltd. ("Shanghai Sales") sales establishment or investment Beijing Changyu AFIP Agriculture Miyun, Beijing, Marketing and Acquired through development Co., Ltd ("Agriculture Miyun, Beijing, China RMB1,000,000 - 100 China sales establishment or investment Development") Beijing Chateau Changyu AFIP Global Co., Acquired through Beijing, China Beijing, China Manufacturing RMB642,750,000 91.53 - Ltd. (“AFIP”) (e) establishment or investment Yantai Changyu Wine Sales Co., Ltd. Yantai, Shandong, Yantai, Shandong, Marketing and Acquired through RMB5,000,000 90 10 ("Wines Sales") China China sales establishment or investment Yantai Changyu Pioneer International Co., Yantai, Shandong, Yantai, Shandong, Marketing and Acquired through RMB5,000,000 70 30 Ltd. ("Pioneer International") China China sales establishment or investment Hangzhou Changyu Wine Sales Co., Ltd. Hangzhou, Zhejiang, Hangzhou, Zhejiang, Marketing and Acquired through RMB500,000 - 100 ("Hangzhou Changyu") China China sales establishment or investment Ningxia Changyu Grape Growing Co., Ltd. Yinchuan, Ningxia, Acquired through Ningxia, China Plating RMB1,000,000 100 - (“Ningxia Growing”) China establishment or investment Huanren Changyu National Wines Sales Benxi, Liaoning, Marketing and Acquired through Benxi, Liaoning, China RMB2,000,000 100 - Co., Ltd. ("National Wines") China sales establishment or investment Liaoning Changyu Golden Icewine Valley Benxi, Liaoning, Acquired through Benxi, Liaoning, China Manufacturing RMB59,687,300 51 - Co., Ltd. ("Golden Icewine Valley") (e) China establishment or investment Yantai Development Zone Changyu Trading Yantai, Shandong, Yantai, Shandong, Marketing and Acquired through RMB5,000,000 - 100 Co., Ltd ("Development Zone Trading") China China sales establishment or investment Yantai Changyu Fushan Trading Company Yantai, Shandong, Yantai, Shandong, Marketing and Acquired through RMB5,000,000 - 100 ("Fushan Trading") China China sales establishment or investment Beijing AFIP Meeting Center ("Meeting Miyun, Beijing, Acquired through Miyun, Beijing, China Services RMB500,000 - 100 Center") China establishment or investment Beijing AFIP Tourism and Culture ("AFIP Miyun, Beijing, Acquired through Miyun, Beijing, China Tourism RMB500,000 - 100 Tourism") China establishment or investment Changyu (Ningxia) Wine Co., Ltd. (“Ningxia Acquired through Ningxia, China Ningxia, China Manufacturing RMB1,000,000 100 - Wine”) establishment or investment Yantai Changyu Chateau Tinlot Co., Ltd. Yantai, Shandong, Yantai, Shandong, Wholesale and Acquired through RMB400,000,000 65 35 ("Chateau Tinlot") China China retail establishment or investment Qing Tong Xia Changyu Wine Marketing Marketing and Acquired through Ningxia, China Ningxia, China RMB500,000 - 100 Ltd. ("Qing Tong Xia Sales") (a) sales establishment or investment Xinjiang Chateau Changyu Baron Balboa Shihezi, Xinjiang, Shihezi, Xinjiang, Acquired through Manufacturing RMB550,000,000 100 - Co., Ltd. (“Chateau Shihezi”) China China establishment or investment Ningxia Chateau Changyu Moser XV Co., Yinchuan, Ningxia, Yinchuan, Ningxia, Acquired through Manufacturing RMB2,000,000 100 - Ltd. (“Chateau Ningxia”) China China establishment or investment Shaanxi Chateau Changyu Rena Co., Ltd. Xianyang, Shaanxi, Xianyang, Shaanxi, Acquired through Manufacturing RMB20,000,000 100 - (“Chateau Changan”) China China establishment or investment 82 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 Shareholding ratio Principal place of Business (%) Name of the Subsidiary Registered place Registered capital Acquisition method business nature (or similar equity interest) Yantai Changyu Wine Research & Yantai, Shandong, Yantai, Shandong, Acquired through Development Centre Co., Ltd. (“R&D Manufacturing RMB805,000,000 82.24 - China China establishment or investment Centre”) (g) Wine Changyu (HuanRen) Wine Co., Ltd ("Huan Benxi, Liaoning, Acquired through Benxi, Liaoning, China production RMB5,000,000 100 - Ren Wine") China establishment or investment projecting Xinjiang Changyu Sales Co., Ltd ("Xinjiang Shihezi, Xinjiang, Shihezi, Xinjiang, Marketing and Acquired through RMB10,000,000 - 100 Sales") China China sales establishment or investment Ningxia Changyu Trading Co., Ltd ("Ningxia Yinchuan, Ningxia, Yinchuan, Ningxia, Marketing and Acquired through RMB1,000,000 - 100 Trading") China China sales establishment or investment Shaanxi Changyu Rena Wine Sales Co., Xianyang, Shaanxi, Xianyang, Shaanxi, Marketing and Acquired through RMB3,000,000 - 100 Ltd ("Shaanxi Sales") China China sales establishment or investment Penglai Changyu Wine Sales Co., Ltd Penglai, Shandong, Penglai, Shandong, Marketing and Acquired through RMB5,000,000 - 100 ("Penglai Sales") China China sales establishment or investment Laizhou Changyu Wine Sales Co., Ltd Laizhou, Shandong, Laizhou, Shandong, Marketing and Acquired through RMB1,000,000 - 100 ("Laizhou Sales") China China sales establishment or investment Francs Champs Participations SAS (“Francs Investment Acquired through Cognac, France Cognac, France EUR32,000,000 100 - Champs”) and trading establishment or investment Tianjin Changyu Pioneer Sales Co., Ltd Marketing and Acquired through Tianjin, China Tianjin, China RMB500,000 - 100 ("Tianjin Pioneer") sales establishment or investment Beijing Changyu Pioneer Sales Co., Ltd Marketing and Acquired through Beijing, China Beijing, China RMB500,000 - 100 ("Beijing Pioneer") (a) sales establishment or investment Yantai Roullet Fransac Wine Sales Co., Ltd. Yantai, Shandong, Yantai, Shandong, Marketing and Acquired through RMB1,000,000 - 100 (“Yantai Roullet Fransac”) China China sales establishment or investment Guangzhou Changyu Pioneer Sales Co., Guanghzou, Guanghzou, Marketing and Acquired through RMB11,000,000 - 100 Ltd ("Guangzhou Pioneer") (a) Guangdong, China Guangdong, China sales establishment or investment Yantai Changyu Wine Sales Co., Ltd. Yantai, Shandong, Yantai, Shandong, Marketing and Acquired through RMB5,000,000 100 - ("Wine Sales Company") China China sales establishment or investment Shaanxi Chateau Changyu Rena Tourism Xianxin, Shaanxi, Xianxin, Shaanxi, Acquired through Tourism RMB1,000,000 - 100 Co., Ltd ("Chateau Tourism") China China establishment or investment Longkou Changyu Wine Sales Co., Ltd Yantai, Shandong, Yantai, Shandong, Marketing and Acquired through RMB1,000,000 - 100 ("Longkou Sales") China China sales establishment or investment Yantai, Shandong, Yantai, Shandong, Acquired through Culture Development (b) Tourism RMB10,000,000 100 - China China establishment or investment Yantai, Shandong, Yantai, Shandong, Acquired through Museum (b) Tourism RMB500,000 - 100 China China establishment or investment Yantai Changyu Culture Tourism Production Yantai, Shandong, Yantai, Shandong, Acquired through Tourism RMB5,000,000 - 100 Sales Co., Ltd. ("Culture Sales") (b) China China establishment or investment 83 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 Shareholding ratio Principal place of Business (%) Name of the Subsidiary Registered place Registered capital Acquisition method business nature (or similar equity interest) Yantai Changyu International Window of the Yantai, Shandong, Yantai, Shandong, Acquired through Wine City Co., Ltd. ("Window of the Wine Tourism RMB60,000,000 - 100 China China establishment or investment City”) (b) Yantai KOYA Brandy Chateau Co., Ltd Yantai, Shandong, Yantai, Shandong, Acquired through Manufacturing RMB10,000,000 100 - (“Chateau KOYA”) (c) China China establishment or investment Changyu (Shanghai) International Digital Marketing and Acquired through Marketing Center Limited Shanghai, China Shanghai, China RMB50,000,000 100 - sales establishment or investment (“Digital Marketing”) (c) (a) Companies above were deregistered in 2020. (b) On 1 July 2020, Changyu Group and the Company signed the Equity Transfer Agreement of Culture Development pursuant to which Changyu Group shall transfer its 100% equity in Culture Development at a consideration of RMB89,519,789 to the Company. The Company adjusted the difference between the book value of Culture Development’s net assets and the equity transfer price on the acquisition date to the Company’s capital reserve of RMB2,959,781. Musuem, Culture Sales and Window of the Wine City are all wholly- owned subsidiaries of Culture Development. (c) The companies above are newly established companies in 2020. 84 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 Reasons for the inconsistency between the proportion of shareholdings in a subsidiary and the proportion of voting rights: (d) Chateau Changyu is a Sino-foreign joint venture established by the Company and a foreign investor, accounting for 70% of Changyu Chateau's equity interest. Through agreement arrangement, the Company has the full power to control Changyu Chateau's strategic operating, investing and financing policies. The agreement arrangement will be terminated on 31 December 2022. (e) AFIP is a limited liability company established by Yantai Dean and Beijing Qinglang. In June 2019, Yantai Dean transferred 1.31% of its equity to Yantai Changyu.After the equity change, the Company holds 91.53% of its equity. Through agreement arrangement, the Company has the full power to control AFIP's strategic operating, investing and financing policies. The agreement arrangement will be terminated on 2 September 2024. (f) Golden Icewine Valley is a Sino-foreign joint venture established by the Company and a foreign investor, accounting for 51% of Golden Icewine Valley's equity interest. Through agreement arrangement, the Company has the full power to control Golden Icewine Valley's strategic operating, investing and financing policies. The agreement arrangement will be terminated on 31 December 2021. (g) R&D Centre is a joint venture established by the Company and CADF, accounting for 82.24% of R&D Centre's equity interest. Through agreement arrangement in Note V. 28, the Company has the full power to control R&D Centre's strategic operating, investing and financing policies. The agreement arrangement will be terminated on 28 February 2025. As at 31 December 2020, remaining investment of CADF accounts for 17.76% of the registered capital. 85 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (2) Material non-wholly owned subsidiaries Comprehensive Proportion of income Dividend declared Balance of non- ownership attributable to non- to non-controlling controlling Name of the Subsidiary interest held by controlling shareholders interests at the non-controlling interests for the during the year end of the year interests year Xinjiang Tianzhu 40% 1,466,038 - (46,118,100) AFIP 8.47% - - (56,409,393) Golden Icewine Valley 49% - - (33,319,062) IWCC 15% (2,763,125) 684,907 (56,009,346) 86 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (3) Key financial information about material non-wholly owned subsidiaries The following table sets out the key financial information of the above subsidiaries without offsetting internal transactions, but with adjustments made for the fair value adjustment at the acquisition date and any differences in accounting policies: Xinjiang Tianzhu AFIP Golden Icewine Valley Chile Indomita Wine Group 2020 2019 2020 2019 2020 2019 2020 2019 Current assets 24,223,370 24,829,435 248,357,550 251,829,164 27,638,263 38,234,720 231,503,343 223,722,688 Non-current assets 45,465,308 61,886,751 434,045,076 452,444,880 24,246,983 23,291,375 291,345,642 291,630,115 Total assets 69,688,678 86,716,186 682,402,626 704,274,044 51,885,246 61,526,095 522,848,985 515,352,803 Current liabilities (17,583) 36,185 41,910,462 45,607,611 9,967,686 12,077,206 132,100,755 142,365,749 Non-current liabilities 5,336,115 5,336,114 - 201,500 - 100,000 9,794,949 5,152,974 Total liabilities 5,318,532 5,372,299 41,910,462 45,809,111 9,967,686 12,177,206 141,895,704 147,518,723 Operating income - - 168,184,273 266,347,444 20,488,946 32,223,734 225,121,450 253,543,171 Net (loss)/ profit (3,665,095) (7,571,274) 2,092,230 30,398,744 (7,431,328) (5,764,649) 18,196,663 16,279,461 Total comprehensive income (3,665,095) (7,571,274) 2,092,230 30,398,744 (7,431,328) (5,764,649) 18,420,833 10,322,810 Cash flows from operating (105,873) 20,457 3,821,964 27,503,336 4,654,744 1,655,465 37,132,027 5,073,408 activities 87 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 2 Transactions that cause changes in interests in subsidiaries that do not result in loss of control (1) Changes in interests in subsidiaries: Proportion of ownership interest held by non- Year Name of the Subsidiary Acquisition date controlling interests acquired 2020 Museum 10.00% 27 March 2020 2020 Dicot 15.00% 31 August 2020 Australia Kilikanoon 2020 15.00% 26 November 2020 Estate (2) Impact from transactions with non-controlling interests and equity attributable to the shareholders of the Company: Australia Museum Dicot Kilikanoon Estate Purchase cost - Cash 1,033,911 42,991,725 18,941,111 Total 1,033,911 42,991,725 18,941,111 Less: share of net assets in subsidiaries based on the 655,653 21,241,590 12,782,693 shares acquired Difference Including: Adjustment on capital 378,258 21,750,135 6,158,418 reserve VIII. Risk related to financial instruments The Group has exposure to the following main risks from its use of financial instruments in the normal course of the Group’s operations: - Credit risk - Liquidity risk - Interest rate risk - Foreign currency risk The following mainly presents information about the Group’s exposure to each of the above risks and their sources, their changes during the year, and the Group’s objectives, policies and processes for measuring and managing risks, and their changes during the year. The Group aims to seek appropriate balance between the risks and benefits from its use of financial instruments and to mitigate the adverse effects that the risks of financial instruments have on the Group’s financial performance. Based on such objectives, the Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. 88 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 1 Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Group’s credit risk is primarily attributable to cash at bank, receivables, debt investments and derivative financial instruments entered into for hedging purposes. Exposure to these credit risks are monitored by management on an ongoing basis. The cash at bank of the Group is mainly held with well-known financial institutions. Management does not foresee any significant credit risks from these deposits and does not expect that these financial institutions may default and cause losses to the Group. As at 31 December 2020, the Group's maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties. In order to minimise the credit risk, the Group has adopted a policy to ensure that all sales customers have good credit records. According to the policy of the Group, credit review is required for clients who require credit transactions. In addition, the Group continuously monitors the balance of account receivable to ensure there’s no exposure to significant bad debt risks. For transactions that are not denominated in the functional currency of the relevant operating unit, the Group does not offer credit terms without the specific approval of the Department of Credit Control in the Group. In addition, the Group reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the management of the Group considers that the Group's credit risk is significantly reduced. Since the Group trades only with recognised and creditworthy third parties, there is no requirement for collateral. Concentrations of credit risk are managed by customer/counterparty, by geographical region and by industry sector. As at 31 December 2020, 20.3% of the Group trade receivables are due from top five customers (31 December 2019: 20.5%). There is no collateral or other credit enhancement on the balance of the trade receivables of the Group. 2 Liquidity risk Liquidity risk is the risk that an enterprise will encounter difficulty in meeting obligations that are settled by delivering cash or another financial asset. The Company and its individual subsidiaries are responsible for their own cash management, including short-term investment of cash surpluses and the raising of loans to cover expected cash demands (subject to approval by the Company’s board when the borrowings exceed certain predetermined levels). The Group’s policy is to regularly monitor its liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash, readily realisable marketable securities and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term. 89 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 The following tables set out the remaining contractual maturities at the balance sheet date of the Group’s financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the balance sheet date) and the earliest date the Group can be required to pay: 2020 Contractual undiscounted cash flow Carrying amount Item More than at balance sheet Within 1 year or More than 1 to 2 years 2 years but less Total date on demand 5 years than 5 years Short-term loans 698,571,997 - - - 698,571,997 689,090,715 Accounts payable 484,347,958 - - - 484,347,958 484,347,958 Other payables 386,105,526 - - - 386,105,526 386,105,526 Long-term loans (including the 33,175,345 24,182,478 149,719,792 135,013,150 342,090,765 311,664,858 portion due within one year) Long-term payables (including the portion due within one 23,074,674 22,810,674 64,868,800 - 110,754,148 108,000,000 year) Total 1,625,275,500 46,993,152 214,588,592 135,013,150 2,021,870,394 1,979,209,057 2019 Contractual undiscounted cash flow Carrying amount Item More than at balance sheet Within 1 year or More than 1 to 2 years 2 years but less Total date on demand 5 years than 5 years Short-term loans 768,403,432 - - - 768,403,432 754,313,744 Accounts payable 570,849,779 - - - 570,849,779 570,849,779 Other payables 456,480,389 - - - 456,480,389 456,480,389 Long-term loans (including the 121,077,261 51,214,719 77,814,096 5,577,899 255,683,975 245,718,722 portion due within one year) Long-term payables (including the portion due within one 36,462,109 36,054,170 106,374,904 55,473,753 234,364,936 225,000,000 year) Total 1,953,272,970 87,268,889 184,189,000 61,051,652 2,285,782,511 2,252,362,634 3 Interest rate risk Interest-bearing financial instruments at variable rates and at fixed rates expose the Group to cash flow interest rate risk and fair value interest risk, respectively. The Group determines the appropriate weightings of the fixed and floating rate interest-bearing instruments based on the current market conditions and performs regular reviews and monitoring to achieve an appropriate mix of fixed and floating rate exposure. (1) As at 31 December, the Group held the following interest-bearing financial instruments: Fixed rate instruments: 2020 2019 Item Effective interest Effective interest Amounts Amounts rate rate Financial assets - Cash at bank 1.5% - 2.75% 93,553,062 1.1% - 2.75% 154,364,265 Financial liabilities - Short-term loans 0.35% - 3.28% (139,090,715) 0.35% - 4.9% (204,313,744) - Long-term loans (including the 1% - 3.28% (280,414,858) 1% - 2.5% (189,468,722) portion due within one year) - Long-term payables (including the 1.20% (108,000,000) 1.20% (225,000,000) portion due within one year) Total (433,952,511) (464,418,201) 90 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 Variable rate instruments: 2020 2019 Item Effective interest Effective interest Amounts Amounts rate rate Financial assets - Cash at bank 0.3% - 1.0% 1,100,642,230 0.3% - 1.75% 1,442,981,317 Financial liabilities - Short-term loans 1 year LPR 0.005 (550,000,000) LPR (550,000,000) - Long-term loans (including the 90% of 90% of (31,250,000) (56,250,000) portion due within one year) 5 year LPR 5 year LPR Total 519,392,230 836,731,317 (2) Sensitivity analysis Management of the Group believes interest rate risk on bank deposit is not significant, therefore does not disclose sensitivity analysis for interest rate risk. As at 31 December 2020, based on assumptions above, it is estimated that a general increase of 50 basis points in interest rates, with all other variables held constant, would decrease the Group’s equity by RMB2,179,688 (2019: RMB2,273,438), and net profit by RMB2,179,688 (2019: RMB2,273,438). The sensitivity analysis above indicates the instantaneous change in the net profit and equity that would arise assuming that the change in interest rates had occurred at the balance sheet date and had been applied to re-measure those financial instruments held by the Group which expose the Group to fair value interest rate risk at the balance sheet date. In respect of the exposure to cash flow interest rate risk arising from floating rate non-derivative instruments held by the Group at the balance sheet date, the impact on the net profit and equity is estimated as an annualised impact on interest expense or income of such a change in interest rates. 4 Foreign currency risk In respect of cash at bank and on hand, accounts receivable and payable, short-term loans denominated in foreign currencies other than the functional currency, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. (1) As at 31 December, the Group’s exposure to main currency risk arising from recognised assets or liabilities denominated in foreign currencies is presented in the following tables. For presentation purposes, the amounts of the exposure are shown in Renminbi, translated using the spot rate at the balance sheet date. Differences resulting from the translation of the financial statements denominated in foreign currency are excluded. 2020 2019 Balance at Balance at RMB Balance at Balance at RMB foreign currency equivalent foreign currency equivalent Cash at bank and on hand 2,029,849 14,053,435 6,662,301 46,592,213 - USD 1,492,923 9,744,604 6,525,673 45,524,399 - EUR 536,926 4,308,831 136,628 1,067,814 Short-term loans 12,490,000 81,524,728 12,490,000 87,132,738 - USD 12,490,000 81,524,728 12,490,000 87,132,738 91 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (2) The following are the exchange rates for Renminbi against foreign currencies applied by the Group: Balance sheet date mid-spot Average rate rate 2020 2019 2020 2019 USD 6.8884 6.8948 6.5272 6.9762 EUR 7.9065 7.7161 8.0250 7.8155 (3) Sensitivity analysis Assuming all other risk variables remained constant, a 5% strengthening of the Renminbi against the US dollar and Euro dollar at 31 December would have impact on the Group’s equity and net profit by the amount shown below. whose effect is in Renminbi and translated using the spot rate at the year-end date: Equity Net profit 31 December 2020 USD 3,589,006 3,589,006 EUR (215,442) (215,442) Total 3,373,564 3,373,564 31 December 2019 USD 2,080,417 2,080,417 EUR (53,391) (53,391) Total 2,027,026 2,027,026 A 5% weakening of the Renminbi against the US dollar and Euro dollar at 31 December would have had the equal but opposite effect to the amounts shown above, on the basis that all other variables remained constant. IX. Fair value disclosure All financial assets and financial liabilities held by the Group are carried at amounts not materially different from their fair value at 31 December 2020 and 31 December 2019. 92 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 X. Related parties and related party transactions 1 Information about the parent of the Company Registered Shareholding Percentage of Ultimate controlling party of the Company name Business nature Registered capital place percentage (%) voting rights (%) Company Jointly controlled by Yantai GuoFeng Investment Holding Ltd, ILLVA SARONNO HOLDING SPA, Changyu Group Yantai Manufacturing 50,000,000 50.4% 50.4% International Finance Corporation and Yantai Yuhua Investment and Development Company Limited. There are no changes on the registered capital and shareholding percentage/percentage of voting rights of the parent company. Page 93 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 2 Information about the subsidiaries of the Company For information about the subsidiaries of the Company, refer to Note VII.1. 3 Information about joint ventures and associates of the Company Joint ventures and associates that have related party transactions with the Group during this year or the previous year are as follows: Name of entity Relationship with the Company WEMISS Shanghai Associate of the Group L&M Holdings Joint venture of the Group 4 Information on other related parties Name of other related parties Related party relationship Yantai Shenma Packaging Co., Ltd. (“Shenma Controlled by the same parent Packaging”) company Yantai Zhongya Pharmaceutical Tonic Wine Co., Ltd. Controlled by the same parent ("Zhongya Pharmaceutical") company Mirefleurs Subsidiaries of the joint venture CHATEAU DE LIVERSAN (“LIVERSAN”) Subsidiaries of the joint venture 5 Transactions with related parties (1) Product procurement Related parties Nature of transaction 2020 2019 Shenma Packaging Product procurement 78,520,694 134,044,857 Zhongya Pharmaceutical Product procurement 850,478 1,244,991 Mirefleurs Product procurement 9,261,722 6,429,542 LIVERSAN Product procurement 3,746,069 1,632,941 Total 92,378,963 143,352,331 (2) Sales of goods Related parties Nature of transaction 2020 2019 Zhongya Pharmaceutical Sales of goods 3,920,047 4,474,004 WEMISS Shanghai Sales of goods 1,374,616 - Shenma Packaging Sales of goods 293,488 347,453 Total 5,588,151 4,821,457 (3) Services Related parties Nature of transaction 2020 2019 Shenma Packaging Services 106,195 - Total 106,195 - Page 94 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (4) Purchase of fixed assets Related parties of the Company Nature of transaction 2020 2019 Purchase of fixed Changyu Group - 1,897,126 assets Total - 1,897,126 (5) Sale of fixed assets Related parties of the Company Nature of transaction 2020 2019 Changyu Group Sale of fixed assets 44,845,989 - Total 44,845,989 - (6) Leases (a) As the lessor Lease income Lease income Name of lessee Type of assets leased recognised in 2020 recognised in 2019 Shenma Packaging Offices and plants 1,492,550 1,492,550 Zhongya Pharmaceutical Offices and plants 522,936 522,936 Total 2,015,486 2,015,486 (b) As the lessee Type of assets Lease expense Lease expense Name of lessor leased recognised in 2020 recognised in 2019 Changyu Group Office buildings 1,612,118 1,612,118 Changyu Group Offices and plants 1,394,762 1,394,762 Changyu Group Offices and plants 4,184,286 4,184,286 Offices and Changyu Group 1,050,000 - commercial building Changyu Group Office buildings 714,286 - Total 8,955,452 7,191,166 (7) Remuneration of key management personnel Item 2020 2019 Remuneration of key management personnel 6,975,110 12,297,689 (8) Other related party transactions Related parties Nature of transaction Note 2020 2019 Changyu Group Royalty (a) 21,985,068 35,938,014 Royalty deducted in the Changyu Group (a) - (218,649,636) previous years Transfer of trademark use Changyu Group (b) 18,334,528 - rights Transfer of Culture Changyu Group VI 89,519,789 - Development Zhongya Equity transfer of Changyu VII 1,033,912 - Pharmaceutical Museum Page 95 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (a) Contract of trademarks usage Pursuant to a royalty agreement dated 18 May 1997, starting from 18 September 1997, the Company may use certain trademarks of Changyu Group Company, which have been registered with the PRC Trademark Office. An annual royalty fee at 2% of the Group's annual sales is payable to Changyu Group. The license is effective until the expiry of the registration of the trademarks. According to the above royalty agreement, Changyu Group collected a total of RMB576,507,809 for royalty from 2013 to 2019, of which 51% was used to promote trademarks such as Changyu and the product of this contract, totalling RMB294,018,093. The amount is used for promotion of Changyu and other trademarks and the products of this contract, totalling RMB62,250,368, the difference is RMB231,768,615(tax inclusive). On 18 May 2019, the general meeting of shareholders approved the proposal of the amendment to the royalty agreement. Article 6.1 of the royalty agreement with Changyu Group was amended to: During the validity period of this contract, the Group pays Changyu Group royalty on an annual basis. The royalty is calculated based on 0.98% of the sales volume of the Group ’s contract products using this trademark. The article is amended to: The royalty paid to the Changyu Group by the Group shall not be used to promote this trademark and the contract products. In addition, in accordance with agreement the Group signed with Changyu Group in November 2019, Changyu Group promised to offset the difference of RMB231,768,615 above with the royalty for four years, i.e. from 2019 to 2022.If it is not sufficient for deduction, the rest will be repaid in a one-off manner in 2023. If there is surplus, the surplus part of the royalty will be charged from the year when the surplus occurs. The Group incurred a trademark usage fee of RMB21,985,068 this year. (b) Transfer of trademark use rights On 22 April 2020, the Fourth Meeting of the Eighth Board of Directors of the Group reviewed and approved the Proposal on Transferring the "KOYA" and Other Trademarks of Yantai Changyu Group Co., Ltd.. On 16 June 2020, the Group and Changyu Group signed the Trademark Transfer Agreement to transfer the ownership of 43 trademarks owned by Changyu Group, including KOYA, ZENITHWIRL, FRANLLET, WEMISS and PIONEER at an estimated price of RMB19,434,600 (tax inclusive). Page 96 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 6 Receivables from and payables to related parties Receivables from related parties 2020 2019 Provision for Provision for Item Related party Book value bad and Book value bad and doubtful debts doubtful debts Zhongya Accounts receivable 714,995 3,175 4,292,387 909,935 Pharmaceutical WEMISS Accounts receivable 1,553,316 6,898 - - Shanghai Shenma Prepayments 126,818 - - - Packaging Other non-current assets Changyu Group 170,370,147 - 193,674,320 - Zhongya Other receivables 522,936 - - - Pharmaceutical Shenma Other receivables - - 813,440 - Packaging Payables to related parties Item Related party 2020 2019 Accounts payable Shenma Packaging 33,421,165 40,072,151 Accounts payable Zhongya 455,176 1,024,310 Pharmaceutical Accounts payable Changyu Group 19,434,600 2,143,752 Other payables Shenma Packaging 450,000 450,000 XI. Capital management The Group’s primary objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost. The Group’s capital structure is regularly reviewed and managed to achieve an optimal structure and return for shareholders. Factors for the Group’s consideration include: its future funding requirements, capital efficiency, actual and expected profitability, expected cash flows, and expected capital expenditure. Adjustments are made to the capital structure in light of changes in economic conditions affecting the Group. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. XII. Commitments and contingencies 1 Significant commitment (1) Capital commitments Item 2020 2019 Long-term assets acquisition commitment 249,379,500 679,980,000 Total 249,379,500 679,980,000 Page 97 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (2) Operating lease commitments As at 31 December, the total future minimum lease payments under non-cancellable operating leases of the Group’s properties were payable as follows: Item 2020 2019 Within 1 year (inclusive) 24,076,000 17,756,000 Over 1 year but within 2 years (inclusive) 17,735,000 16,189,000 Over 2 years but within 3 years (inclusive) 15,564,000 9,757,000 Over 3 years 106,278,000 89,550,940 Total 163,653,000 133,252,940 2 Contingencies The Group do not have any significant contingencies as at balance sheet date. XIII. Subsequent events Distribution of dividends on ordinary shares approved after the balance sheet date According to the proposal of the Board of Directors on 26 April 2021, the Company intends to distribute cash dividend totaling RMB274,185,600 to all shareholders of 685,464,000 capital shares for the year ended 31 December 2020 on the basis of RMB4.0 (including tax) for every 10 shares. The proposal is subject to the approval by the Shareholders’ meeting. This distribution of profit in cash has not been recognised as a liability at the balance sheet date. XIV. Other significant items 1 Segment reporting The Group is principally engaged in the production and sales of wine, brandy, and sparkling wine in China, France, Spain, Chile and Australia. In accordance with the Group's internal organisation structure, management requirements and internal reporting system, the Group's operation is divided into five parts: China, Spain, France, Chile and Australia. The management periodically evaluates segment results, in order to allocate resources and evaluate performances. In 2020, over 85% of revenue, more than 93% of profit and over 92% of non-current assets derived from China/are located in China. Therefore, the Group does not need to disclose additional segment report information. XV. Notes to the Company’s financial statements 1 Receivables under financing Item Note 2020 2019 Bills receivable (1) 13,920,000 41,679,635 Total 13,920,000 41,679,635 (1) The pledged bills receivable of the Company at the end of the year As at 31 December 2020, there was no pledged bills receivable (31 December 2019: Nil). Page 98 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (2) Outstanding endorsed bills that have not matured at the end of the year Amount Item derecognised at year end Bank acceptance bills 49,849,895 Total 49,849,895 As at 31 December 2020, bills endorsed by the Company to other parties which are not yet due at the end of the period is RMB49,849,895 (31 December 2019: RMB65,303,181). The notes are used for payment to suppliers. The Company believes that due to good reputation of bank, the risk of notes not accepting by bank on maturity is very low, therefore derecognise the note receivables endorsed. If the bank is unable to pay the notes on maturity, according to the relevant laws and regulations of China, the Company would undertake limited liability for the notes. 2 Other receivables 31 December 31 December Note 2020 2019 Interest receivable (1) - 90,355 Dividends receivable (2) 200,000,000 200,000,000 Others (3) 380,131,798 386,334,603 Total 580,131,798 586,424,958 (1) Interest receivable (a) Interest receivable by category: 31 December 31 December Item 2020 2019 Interest receivable on bank deposits - 90,355 Total - 90,355 (b) Significant overdue interest: N/A (2) Dividends receivable 31 December 31 December Item 2020 2019 Dividends to subsidiaries 200,000,000 200,000,000 Total 200,000,000 200,000,000 Page 99 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (3) Others (a) Others by customer type: 31 December 31 December Customer type 2020 2019 Amounts due from subsidiaries 379,375,427 385,328,319 Amounts due from related parties 522,936 813,440 Others 233,435 192,844 Sub-total 380,131,798 386,334,603 Less: Provision for bad and doubtful debts - - Total 380,131,798 386,334,603 (b) The ageing analysis is as follows: Ageing 2020 2019 Within 1 year (inclusive) 378,307,160 386,314,603 Over 1 year but within 2 years (inclusive) 1,804,638 - Over 2 years but within 3 years (inclusive) - 20,000 Over 3 years 20,000 - Sub-total 380,131,798 386,334,603 Less: Provision for bad and doubtful debts - - Total 380,131,798 386,334,603 The ageing is counted starting from the date when other receivables are recognised. (c) Others by method of provisioning 2020 2019 Provision for bad and doubtful Provision for bad and doubtful Category Book value Book value debts Carrying debts Carrying Percentage Percentage amount Percentage Percentage amount Amount Amount Amount Amount (%) (%) (%) (%) Individual assessment - Total other - - - - - - - - - - receivables Collective assessment - Amounts due from 379,375,427 99.8 - - 379,375,427 385,328,319 99.7 - - 385,328,319 subsidiaries - Amounts due from related 522,936 0.1 - - 522,936 813,440 0.2 - - 813,440 parties - Amounts due from third 233,435 0.1 - - 233,435 192,844 0.1 - - 192,844 parties Total 380,131,798 100.0 - - 380,131,798 386,334,603 100.0 - - 386,334,603 (d) Movements of provisions for bad and doubtful debts As at 31 December 2020, no bad and doubtful debt provision was made for other receivables (31 December 2019: Nil). As at 31 December 2020, the Company has no other receivables written off (31 December 2019: Nil). Page 100 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (e) Others categorised by nature Nature of other receivables 2020 2019 Amounts due from subsidiaries 379,375,427 385,328,319 Amounts due from related parties 522,936 813,440 Others 233,435 192,844 Sub-total 380,131,798 386,334,603 Less: Provision for bad and doubtful debts - - Total 380,131,798 386,334,603 (f) Five largest others-by debtor at the end of the year Ending balance Percentage of Nature of the Balance at the of provision for Debtor Ageing ending balance receivable end of the year bad and doubtful of others (%) debts Amounts due Sales Company 68,221,331 Within 1 year 17.9 - from subsidiaries Amounts due R&D Centre 58,134,999 Within 1 year 15.3 - from subsidiaries Amounts due Longkou Sales 10,270,021 Within 1 year 2.7 - from subsidiaries Amounts due Laizhou Sales 9,177,937 Within 1 year 2.4 - from subsidiaries Amounts due Chateau Changyu 6,136,795 Within 1 year 1.6 - from subsidiaries Total 151,941,083 39.9 3 Long-term equity investments (1) Long-term equity investments by category: 2020 2019 Item Provision for Carrying Provision for Carrying Book value Book value impairment amount impairment amount Investments in 7,593,535,027 - 7,593,535,027 7,432,422,621 - 7,432,422,621 subsidiaries Investments in 6,243,853 - 6,243,853 - - - associates Total 7,599,778,880 - 7,599,778,880 7,432,422,621 - 7,432,422,621 Page 101 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (2) Investments in subsidiaries: Balance at the Additions during Decrease during Balance at the Subsidiary beginning of the the year the year end of the year year Xinjiang Tianzhu 60,000,000 - - 60,000,000 Kylin Packaging 23,176,063 - - 23,176,063 Chateau Changyu 28,968,100 - - 28,968,100 Pioneer International 3,500,000 - - 3,500,000 Ningxia Growing 36,573,247 - - 36,573,247 National Wines 2,000,000 - - 2,000,000 Golden Icewine Valley 30,440,500 - - 30,440,500 Chateau Beijing 588,389,444 - - 588,389,444 Sales Company 7,200,000 - - 7,200,000 Langfang Sales 100,000 - - 100,000 Langfang Castel 19,835,730 - - 19,835,730 Wine Sales 4,500,000 - - 4,500,000 Shanghai Marketing 300,000 700,000 - 1,000,000 Beijing Sales 850,000 - - 850,000 Jingyang Sales 100,000 - - 100,000 Jingyang Wine 900,000 - - 900,000 Ningxia Wine 222,309,388 - - 222,309,388 Chateau Ningxia 453,463,500 - - 453,463,500 Chateau Tinlot 212,039,586 - - 212,039,586 Chateau Shihezi 812,019,770 - - 812,019,770 Chateau Changan 803,892,258 - - 803,892,258 R&D Centre 3,288,906,445 - - 3,288,906,445 Huanren Wine 22,200,000 - - 22,200,000 Wine Sales Company - 5,000,000 - 5,000,000 Francs Champs 236,025,404 - - 236,025,404 Dicot 190,150,544 42,991,725 - 233,142,269 Chile Indomita Wine 274,248,114 - - 274,248,114 Group Australia Kilikanoon 110,334,528 18,941,111 - 129,275,639 Estate Digital Marketing - 1,000,000 - 1,000,000 Culture Development - 92,479,570 - 92,479,570 Total 7,432,422,621 161,112,406 - 7,593,535,027 For information about the subsidiaries of the Company, refer to Note VII. (3) Investments in associates: Balance at the Additions during Decrease during Balance at the Subsidiary beginning of the the year the year end of the year year WEMISS Shanghai - 3,000,000 (256,110) 2,743,890 Yantai Santai Real Estate Development - 3,500,000 (37) 3,499,963 Co., Ltd Total - 6,500,000 (256,147) 6,243,853 Page 102 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 4 Operating income and operating costs 2020 2019 Item Income Cost Income Cost Principal activities 510,205,498 450,876,445 738,011,458 653,860,504 Other operating activities 2,098,055 1,492,067 2,844,904 1,643,559 Total 512,303,553 452,368,512 740,856,362 655,504,063 (1) Details of operating income of 2020 2020 Item Income Cost Principal activities 510,205,498 450,876,445 Other operating activities 2,098,055 1,492,067 Total 512,303,553 452,368,512 Including: revenue from contracts with customers 510,205,498 450,876,445 Rent income 2,098,055 1,492,067 Disaggregation of revenue from contracts with customers: Type of contract 2020 By type of goods or services - Liquor 510,205,498 By timing of transferring goods or services - Revenue recognised at a point in time 510,205,498 (2) Details of operating income of 2019 2019 Operating income from principal activities - Sale of goods 738,011,458 Income from other business - Rental income 2,844,904 Total 740,856,362 5 Investment income Item 2020 2019 Income from long-term equity investments 449,760,868 621,620,723 accounted for using cost method Loss from long-term equity investments accounted (256,147) - for using equity method Total 449,504,721 621,620,723 Page 103 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 6 Transactions with related parties (1) Product procurement Related parties Nature of transaction 2020 2019 Subsidiary of the parent Product procurement 107,663,061 161,501,245 company Other related parties of the Product procurement 36,249,251 59,925,186 Company Total 143,912,312 221,426,431 (2) Sales of goods Related parties Nature of transaction 2020 2019 Subsidiary of the parent Sales of goods 504,080,073 738,594,682 company Other related parties of the Sales of goods 2,952,493 2,261,680 Company Total 507,032,566 740,856,362 (3) Guarantee The Company as the guarantor Amount of Inception date of Maturity date of Guarantee Guarantee holder Currency guarantee guarantee guarantee expired (Y/N) R&D Centre RMB 500,000,000 08 March 2017 08 March 2022 N Australia Kilikanoon AUD 17,000,000 13 December 2018 13 December 2023 N Estate (4) Leases (a) As the lessor Lease income Lease income Name of lessee Type of assets leased recognised in 2020 recognised in 2019 Other related parties of Offices and plants 2,015,486 2,015,486 the Company Subsidiary of the parent Offices buildings 82,569 - company Total 2,098,055 2,015,486 (b) As the lessee Lease expense Lease expense Name of lessor Type of assets leased recognised in 2020 recognised in 2019 Other related parties of Office buildings 1,394,762 1,394,762 the Company Total Office buildings 1,394,762 1,394,762 Page 104 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 (5) Other related party transactions Related parties Nature of transaction 2020 2019 Transfer of trademark Changyu Group 18,334,528 - use rights Transfer of Culture Changyu Group 89,519,789 - Development 7 Receivables from and payables to related parties Receivables from related parties 2020 2019 Provision for Provision for Item Related party Book value bad and Book value bad and doubtful debts doubtful debts Other related parties Accounts receivable - - 2,589,936 601,610 of the Company Other related parties Prepayments 126,818 - - - of the Company Subsidiary of the Other receivables 379,375,427 - 385,328,319 - parent company Other related parties Other receivables 522,936 - 813,440 - of the Company Subsidiary of the Other non-current assets 1,530,700,000 - 1,427,700,000 - parent company Payables to related parties Item Related party 2020 2019 Other related parties of Accounts payable 29,634,723 11,630,361 the Company Subsidiary of the Other payables 319,936,973 381,487,360 parent company Other related parties of Other payables 450,000 450,000 the Company XVI. Non-recurring profit and loss statement in 2020 Item Amount (1) Profit and loss from disposal of non-current assets (1,165,162) Government grants recognised through profit or loss (excluding those having close (2) relationships with the Group’s operation and enjoyed in fixed amount or quantity 73,180,848 according to uniform national standard) Profit or loss of subsidiaries generated before acquisition date of a business (3) 12,715,544 combination involving entities under common control (Note 2) (4) Other non-operating income and expenses besides items above 10,098,551 Sub-total 94,829,781 (5) Tax effect (21,595,671) (6) Effect on non-controlling interests after taxation (28,710) Total 73,205,400 Note 1: Extraordinary gain and loss items (1) to (4) listed above are presented in the amount before taxation. Note 2: The non-recurring gains and losses of the combining party from 1 January 2020 to the acquisition date have been deducted from the corresponding non-recurring gains and losses. Page 105 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 XVII. Return on net assets and earnings per share 1 Calculation of earnings per share (1) Basic earnings per share For calculation of the basic earnings per share, please refer to Note V.48. (2) Basic earnings per share excluding extraordinary gain and loss Basic earnings per share excluding extraordinary gain and loss is calculated as dividing consolidated net profit excluding extraordinary gain and loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding: 2020 2019 Consolidated net profit attributable to ordinary 470,860,587 1,141,367,296 shareholders of the Company Extraordinary gains and losses attributable to 73,205,400 248,870,652 ordinary shareholders of the Company Consolidated net profit excluding extraordinary gain and loss attributable to the Company’s ordinary 397,655,187 892,496,644 equity shareholders Weighted average number of ordinary shares 685,464,000 685,464,000 outstanding Basic earnings per share excluding extraordinary 0.58 1.30 gain and loss (RMB/share) (3) Diluted earnings per share During the reporting period, the Company did not have dilutive potential ordinary shares. 2 Calculation of weighted average return on net assets (1) Weighted average return on net assets Weighted average return on net assets is calculated as dividing consolidated net profit attributable to ordinary shareholders of the Company by the weighted average amount of consolidated net assets: 2020 2019 Consolidated net profit attributable to ordinary 470,860,587 1,141,367,296 shareholders of the Company Weighted average amount of consolidated net 10,304,733,743 10,010,909,180 assets Weighted average return on net assets 4.57% 11.40% Page 106 Yantai Changyu Pioneer Wine Company Limited Financial statements for the year ended 31 December 2020 Calculation of weighted average amount of consolidated net assets is as follows: 2020 2019 Consolidated net assets at the beginning of 10,402,248,821 9,688,765,904 the year Business combination involving entities (37,299,912) - under common control Effect of consolidated net profit attributable 237,836,150 567,083,168 to ordinary shareholders of the Company The impact of the purchase of minority (8,046,940) (69,159) shareholders' equity Effect of shares repurchased (Note V.35) (290,004,376) (244,870,733) Weighted average amount of consolidated 10,304,733,743 10,010,909,180 net assets (2) Weighted average return on net assets excluding extraordinary gain and loss Weighted average return on net assets excluding extraordinary gain and loss is calculated as dividing consolidated net profit excluding extraordinary gain and loss attributable to ordinary shareholders of the Company by the weighted average amount of consolidated net assets: 2020 2019 Consolidated net profit excluding extraordinary gain and loss attributable to the Company’s ordinary 397,655,187 892,496,144 equity shareholders Weighted average amount of consolidated net 10,243,190,738 9,914,886,331 assets (Note) Weighted average return on net assets excluding 3.88% 9.00% extraordinary gain and loss Note: When a business combination under common control occurs during the reporting period, the net assets of the combining party shall be weighted from the month following the acquisition date when calculating the weighted average return on net assets after deducting non-recurring gains and losses. When calculating the weighted average return on net assets after deducting non-recurring gains and losses during the comparative period, the net assets of the combining party shall not be weighted. Page 107