Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Final 2017-03 August, 2017 1 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Contents I、Important Notice, Contents and Definition ............................................................................... 3 II、Brief Introduction for the Company and Main Financial Indicators .................................. 5 III、Summary of the Company’s Businesses ................................................................................ 9 IV、Management Discussion and Analysis ................................................................................. 11 V、Major issues ............................................................................................................................. 24 VI、Changes in Shares and the Shareholders’ Situation .......................................................... 34 VII、Related Situation of Preferred Shares ............................................................................... 39 VIII、 Situation for Directors, Supervisors, Senior Management Staffs .................................. 40 IX、 Related Situation of Corporation Bonds ........................................................................... 41 X、 Financial Report ...................................................................................................................... 42 XI、Reference Document ............................................................................................................. 138 2 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report I. Important Notice, Contents and Definition The Board of Directors , the Board of Supervisors , directors, supervisors & senior management staffs of the Company collectively and individually accept full responsibility for the truthfulness,accuracy and completeness of the information contained in this report and confirm that to the best of their knowledge and belief there are no unfaithful facts, significant omissions or misleading statements. Mr. Sun Liqiang (Chairman of the Company), Mr. Leng Bin (Chief Financial Officer) and Mr. Jiang Jianxun (Financial Director) assure the truthfulness, accuracy and completeness of the financial report in the annual report. Expect the following directors, other directors have personally attended the Board of Directors‘ meeting for deliberating this Semi-annual report. Director name with Director post with Reason for Mandatary Name non-present in person non-present in person non-present in person Liu Yan Independent director Business trip Luo Fei Wei Anning Director Business trip Qu Weimin About significant risks that may be faced in production and operation process, please refer to―10. Risks the Company faces and measures‖ in chapter four ―Management Discussion and Analysis‖ of this report. We advise investors to read carefully and pay attention to the investment risks. The business plan and target in the report do not represent the earnings forecast of the listed company to 2017. Whether the Company could achieve that or not depends on several factors including the changes of market conditions and the effort extent of managing team etc. with a great uncertainty, so the investors should be in a special attention. In the first half year, the Company has no plan to distribute cash dividends and bonus shares; capital reserve will not be transferred to equity. 3 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Definition Definition Item Refers to Definition Content Company/The Company/The Refers to Yantai Changyu Pioneer Wine Co. Ltd. Group Changyu Group/Controlling Refers to Yantai Changyu Group Co. Ltd. Shareholder CSRC Refers to China Securities Regulatory Commission SSE Refers to Shenzhen Stock Exchange Refers to Deloitte Hua Yong Certified Public Accountants Deloitte Hua Yong Co., LTD (special general partnership) CNY Refers to Chinese Yuan 4 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report II、Brief Introduction for the Company and Main Financial Indicators 1. Company’s information Abbreviation of the Shares: Changyu A、Changyu B Code number of the Shares 000869、200869 Abbreviation of the Shares - after alteration Place of listing of the Shares Shenzhen Stock Exchange Legal Name in Chinese 烟台张裕葡萄酿酒股份有限公司 Abbreviation of Chinese name 张裕 Legal Name in English YANTAI CHANGYU PIONEER WINE COMPANY LIMITED Abbreviation of English name CHANGYU Legal Representative Mr. Sun Liqiang 2. Contact person and information Authorized Representative of the Securities Secretary to the Board of Directors Affairs Name Mr. Qu Weimin Mr. Li Tingguo Address 56 Dama Road, Yantai, Shandong, China 56 Dama Road, Yantai, Shandong, China Tel 0086-535-6633656 0086-535-6633656 Fax 0086-535-6633639 0086-535-6633639 E-mail quwm@changyu.com.cn stock@changyu.com.cn 3. Other information 1)、The Company’s contact information Whether there is any change for the Company‘s registered address, office address, post code, website and e-mail address during the report period. □Available Not available There is no any change for the Company‘s office address, post code, website and e-mail address during the report period, please see 2016 annual report for more details. 2)、Information disclosure and filling location Whether there is any change for the information disclosure and filling location during the report period. □Available Not available 5 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report There is no any change for the newspapers in which the Company‘s information is disclosed, website assigned by CSRC to carry the semi-annual report and the filling location during the report period, please see 2016 annual report for more details. 4. Key accounting data and financial indicators Whether the Company makes retroactive adjustments or restates the accounting data of previous fiscal years. □ No In the same period of last More or less than last In the report period year year (%) Business revenue (CNY) 2,767,098,197 2,753,032,799 0.51% Net profit attributed to the shareholders of the listed 670,069,054 695,021,847 -3.59% company (CNY) Net profit attributed to the shareholders of the listed company after deducting the 652,906,375 678,478,321 -3.77% irregular profit and loss (CNY) Net cash flows from the 420,360,319 682,748,369 -38.43% operating activities (CNY) Basic earnings per share 0.98 1.01 -2.97% (CNY/share) Diluted earnings per share 0.98 1.01 -2.97% (CNY/share) Weighted average for earning 7.84% 8.78% -0.94% rate of the net assets The end of the report More or less than last The end of last year period year (%) Total assets (CNY) 12,273,978,471 11,528,077,971 6.47% Net Assets attributed to the shareholders of the listed 8,880,538,852 8,209,010,989 8.18% company (CNY) 5. Differences in accounting data under PRC accounting standards and international accounting standards 1)、Differences of net profit and net asset in the financial report disclosed according to both international accounting standards and PRC accounting standards Available □Not available 6 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Unit: CNY Net profit belonged to shareholders of Net asset belonged to shareholders of listed company listed company Amount in current Amount in last Amount at the end Amount at the period period of this period beginning of this period Based on Chinese 670,069,054 695,021,847 8,880,538,852 8,209,010,989 accounting standard Items and amount adjusted based on international accounting standard Based on international 670,069,054 695,021,847 8,880,538,852 8,209,010,989 accounting standard 2)、Differences of net profit and net asset in the financial report disclosed according to both foreign accounting standards and PRC accounting standards □Available Not available There are no differences of net profit and net asset in the financial report disclosed according to both foreign accounting standards and PRC accounting standards during the report period. 3)、Explanation of difference in accounting data based on Chinese and international accounting standards □Available Not available 6. Item and amount of irregular profit and loss Available □Not available Unit:CNY Item Amount Explanation Gain on disposal of non-current assets, including the reversal of -495,071 accrued impairment provision Tax return, deduction and exemption with unauthorized approval 12,737,950 or no official document of approval Government grants credited in profit and loss (except for those recurring government grants that are closely related to the entity's 6,997,254 operation, in line with related regulations and have proper basis of calculation) Other non-operating expense and income 3,225,833 Less: Income tax effect 5,303,287 Total 17,162,679 - The reasons shall be made clear and definitely as to the irregular profit and loss that the Company has defined by virtue of the Explanatory Notice on Public Company’s Information Disclosure No.1 7 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report - Irregular Profit and Loss and as to regarding the irregular profit and loss as recurrent profit and loss as specified in the Explanatory Notice on Public Company’s Information Disclosure No.1 - Irregular Profit and Loss. □Available Not available There is no situation that the irregular profit and loss is defined and specified as recurrent profit and loss in accordance with the Explanatory Notice on Public Company’s Information Disclosure No.1 - Irregular Profit and Loss during the report period. 8 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report III. Summary of the Company’s Businesses 1. Main businesses during the report period Whether the Company needs to follow the disclosure requirement of special business? No. During the report period, the Company‘s main business is to produce and operate wine and brandy, thus providing the domestic and foreign consumers with healthy and fashionable alcoholic drinks. The Company integrates the planting and procurement of grape, the procurement of raw and auxiliary material, the production and sales of products. Compared with earlier stage, there are no significant changes happened to the Company‘s main businesses. The wine industry that the Company involved in is still in the growth stage, the whole domestic wine market is on the rising trend. The Company takes the dominant position in the domestic wine market. During the report period, the sales of wines with low price is slightly down; middle-and-high-level wines, such as Noble Dragon and chateau wine, remain stable; the sales amount of brandy and imported wines keeps the favorable growth momentum. All these make the Company‘s business performance basically equal compared with the same period of last year. 2. Significant changes of main assets 1)、Significant changes of main assets Main assets Explanation of significant changes Equity asset No significant changes Fixed asset No significant changes Intangible asset No significant changes Increasing by 26.07% compared with the end of last year, mainly Construction in process owing to increased investment in projects under construction Increasing by 79.98% compared with the end of last year, mainly Notes receivable owing to increased amount of bank acceptance through selling products to clients Increasing by 1424.5% compared with the end of last year, Interest receivable mainly owing to increased interest of fixed deposit Increasing by 73.01% compared with the end of last year, mainly Other current assets owing to increased tax prepaid Increasing by 1832% compared with the end of last year, mainly owing that the settlement about the acquisition of Bethwines by Other non-current assets the Company‘s subsidiary Indomita Wine Company Chile, SpA is not finished 2)、Main overseas assets condition □Available Not available 9 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 3. Analysis of core competitiveness Whether the Company needs to follow the disclosure requirement of special business? No. Compared with the participants in the arena of the Chinese wine sector, we believe that the Company is provided with the following advantages: Firstly, the Company has been enjoying a well-known wine brand since 120-odd years, ―Changyu‖, ―Noble Dragon‖ and ―AFIP‖ are Chinese famous trademarks that have strong influence and good reputation. Secondly, the Company has set up a nationwide marketing network, formed a ―three-level‖ marketing network system mainly composed of the company‘s salesmen and distributors, possessed the strong marketing ability and market exploitation ability. Thirdly, the Company has already had strong research strength and a product R&D system, owned a one and only ―State-level Wine R&D Center‖, made mastery of advanced winemaking technology and production processes, been powerful enough in product innovation and established a perfect quality control system. Fourthly, the Company is in possession of a lot of grape-growing bases to meet its future development, having developed a great deal of vineyards in the most suitable areas for wine grape growing such as in Shandong, Ningxia, Xinjiang, Liaoning, Hebei and Shanxi, whose scales and structures have generally met the Company‘s needs for development. Fifthly, the Company has a great variety of products composed of all grades, its wine,brandy and sparkling wine of over 100 sorts can meet different consumers‘ demands. The Company has taken the lead in the domestic wine sector through rapid development in the past 10-odd years and has possessed comparative superiority in the future competition. Sixthly, the Company has a relatively respect motivation system. Most of Company‘s employees indirectly hold the Company‘s equity through controlling shareholders. There are high consistency between employee benefits and shareholders benefits, in favor of motivating employees to create value for shareholders. All in all, the Company has built up a strong core competitive edge and obtained and maintained a relatively dominant position in the long-term market competition. 10 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report IV. Management Discussion and Analysis 1. Summarization During the report period, influenced by the slowdown of domestic economic growth, the overall domestic wine industry is relatively stable. With the increased scale of domestic middle class, the effective demands for top-level products begin the slow recovery and the medium-and-low-level products suitable for mass consumption maintains a slight growth tendency. Influenced by the further decrease in product price resulting from the overwhelming flow of foreign wine into Chinese market, the competition in domestic wine market, especially for middle-and-low-level wines, is very fierce, plus the great impact brought by E-commerce and other new channels to traditional sales channels, resulting in bigger challenges for the Company to achieve sustained and steady growth. Facing quite a lot of external disadvantages, the Company insists to focus on the market, adjust the marketing tactics and product structure, strive to develop brandy and imported wine, optimize the market layout, perfect the marketing channels and assessment system, strive to promote product sales, achieving good results and realizing business income of CNY2767.09 million, an increase of 0.51% compared with last year; but due to the impact of increase in operating cost, taxes and additional, sales expense and administrative expense, the Company realized net profit of CNY670.06 million belonging to the parent company‘s shareholders, an decrease of 3.59% compared with last year. During the report period, the Company mainly did following works: Firstly, the Company focused on the market, strengthened the market adjustment and strived to promote the overall development of various products. During the report period, the Company insisted the strategy of ―focusing on wine while fully developing various products‖, further perfected the construction of sales system and performance assessment method for marketing personnel, integrated the sales structure of regional market, such as southwest, northwest and some coastal cities and so on, as well as that of sub channels, implemented ―personnel reduction with salary increase, personnel reduction with efficiency increase ‖, reorganized some exclusive shops, receiving favorable results; further perfect the team of key distributors and the team of professional sales personnel, consolidated the market position of middle-and-high-level products, such as chateau wine and Noble Dragon; quickened the layout of marketing network for brandy and reinforced the marketing of middle-level brandy, such as ―Three Star‖, ―Four Star‖ and ―Five Star‖ and so on, further increasing the profitability of brandy products; continued doing well the marketing work of overseas acquired enterprise‘s products which behave well in international market and retain steady growth momentum in domestic market, providing new power for accelerating the Company‘s development. Secondly, the Company strengthened the financial management and made efforts to achieve energy-saving and cost-reducing to further reduce the operating cost. During the report period, the Company scientifically made the programme for financing structure, strengthened the capital allocation and management and accelerated the capital flow, favorably squeezing the capital cost; reinforced the monitoring for key expenses, such as advertising expense, freight, big repair charge and grape planting expense, etc, and strengthened the profit assessment of self-owned grape bases, reducing the operating cost and improving the capital use efficiency. 11 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Thirdly, the Company continued implementing internationalization strategy and orderly proceeded the overseas acquisition work. During the report period, the Company decided to establish Indomita Wine Company Chile, SpA which acted as the platform to acquire Chilean Bethwines‘s three subsidiaries with wine business, further perfecting the Company‘s productivity layout and product structure and improving the Company‘s market competition in imported products. Fourthly, the Company intensified the project management to ensure that each construction project could be put into operation on schedule. During the report period, through reinforcing the project management, scientifically arranging schedule, strictly conforming to the budget requirement, making and implementing removal plan and doing well the connection between production and sales, the Company ensured that each construction project goes smoothly. At present, civil work of main invested projects have reached the ending phase and the production equipments are in the installation and commissioning phase. In order to achieve the operation target set by the Company at the beginning of this year, the Company would do following work in the second half year of 2017: Firstly, the Company would intensifying the brand construction and carding work, further clear brand positioning and optimize the product line. The Company would take thorough carding work to current brands and product lines, fully improve the packaging quality and level of products, further clear the market positioning of each brand and industriously compressing the quantity of categories in order for the Company to better carry out marketing work. Secondly, the Company would continue paying attention to the construction of key distributor team and professional sales personnel team, conducting the tasting and promotion work of middle-and-high-level products, such as chateau wine, Noble Dragon, ―Three Star‖ and above level brandy products, and striving to promote the sales of middle-and-high-level products; do the preparation work for the launch of new products, such as Koyac brandy, Chilean Indomita wines and small volume products, further perfect the product development and design of Grappie and put them on the market at the right time; continue promoting the sales work of acquired brands in domestic and foreign markets, such as Atrio, Mirefleurs, Donelli and Indomita and so on, further establish and perfect the domestic and foreign sales system, take full advantage of foreign sales network to enlarge the export scale of domestic wines; make the best of information technology, strengthen the ability to react to market conditions, change the production from plan-driven to order-driven, fully implement the strategy of utilizing the sales volume to decide the production, shorten the delivery time, strive to lower the inventory, reduce the fund occupation and increase the enterprise revenue; reinforce the training and reorganization work of marketing team, improve the assessment and incentive mechanism and further enhance the marketing capacity. Thirdly, the Company would orderly proceed the construction of invested projects and focus on the connection between production and sales. The Company would manly focus on the ending work of main body‘s civil work in Yantai Changyu International Wine City (in other words Yantai Changyu Industry Park) as well as the equipment installation and commissioning work, weed out backward production capacity, achieve the seamless connection between old capacity and new capacity and timely satisfy the market needs. 12 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Fourthly, the Company would optimize the layout of grape bases and comprehensively complete the procurement of grape materials. The Company would actively explore the new model of building overseas grape base, enlarge the area of overseas grape base, increase and improve the raw material supply channel, make effort to reduce raw material cost and improve raw material quality; keep optimizing the grape pricing mechanism, reasonably confirm grape procurement price and comprehensively complete the procurement work of raw material in order to ensure the material supply. 2. Analysis of main business Refer to ―1. Summarization‖ of ―Management Discussion and Analysis Period comparison of main financial data Unit: CNY In the report In the same period More or less (%) Reason for changes period of last year Operating revenue 2,767,098,197 2,753,032,799 0.51% - Operating cost 925,754,133 902,734,104 2.55% - Sales expense 668,735,726 650,737,234 2.77% - Management expense Mainly attributed to the increase of employee‘s compensation 130,542,386 122,695,845 6.40% and depreciation expense on year-on-year basis Mainly attributed to the decrease of interest income from bank Financial expense 11,147,949 10,988,233 1.45% deposits on year-on-year basis Mainly attributed to the decreased of deferred income tax Income tax expense 228,752,790 238,715,481 -4.17% expenses on year-on-year basis R&D investment 0 0 0% - Net amount of cash flow generated in Mainly attributed to the increase of bill receivable from goods 420,360,319 682,748,369 -38.43% selling operating activities 13 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Net amount of cash Mainly attributed to the increase of cash generated by building flow generated in of fixed assets, intangible assets and other long-term assets as -797,540,941 -397,659,283 -100.56% well as cash used for more than three months fixed deposit on investment activities year-on-year basis Net amount of cash flow generated in Mainly attributed to the decrease of cash used for debt 353,878,706 259,718,424 36.25% repayment on year-on-year basis financing activities Mainly attributed to the decrease of cash received from goods Net increased amount of selling and labor service providing on year-on-year basis but cash and cash -27,454,401 551,693,393 -104.98% the increase of cash generated by building of fixed assets, equivalents intangible assets and other long-term assets on year-on-year basis Whether there is any great change for the Company‘s profit structure or profit source during the report period □Available Not available There is no great change for the Company‘s profit structure or profit source during the report period. 14 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Structure of main businesses Unit: CNY Increase or decrease of Increase or decrease of operating Increase or decrease of gross Operating Operating Gross profit operating revenue over the cost over the same period of last profit over the same period of revenue cost (%) same period of last year (%) year (%) last year Sector Wine and alcoholic 2,767,098,197 925,754,133 66.54% 0.51% 2.55% -0.67% beverages Product Wine 2,151,123,903 704,020,080 67.27% -1.21% 0.10% -0.43% Brandy 575,324,933 200,170,322 65.21% 6.47% 9.13% -0.85% Other 40,649,361 21,563,731 46.95% 15.35% 34.88% -7.68% Region Domestic 2,629,066,639 841,890,209 67.98% 0.16% 3.88% -1.14% Overseas 138,031,558 83,863,924 39.24% 7.60% -9.09% 11.16% 3. Analysis to non-main business □Available Not available 15 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 4. Assets and liabilities situation 1)、Major changes of assets Unit: CNY The end of the report period The end of the same period of last year Proportion increase Explanation on major Proportion in the Proportion in the or decrease Amount Amount changes total assets (%) total assets (%) (%) Monetary funds 1,550,067,781 12.63% 1,391,517,607 12.07% 0.56% - Receivables 167,152,509 1.36% 173,062,628 1.50% -0.14% - Mainly attributed to the Inventory 2,024,302,929 16.49% 2,248,609,740 19.51% -3.02% decrease of amount of inventory goods selling Investment real estate 0% 0% 0% - Long-term equity 0% 0% 0% - investments Mainly attributed to the Fixed assets 4,591,037,486 37.40% 4,683,187,493 40.62% -3.22% increase of accumulated depreciation Mainly attributed to the increase of investment on Construction in progress 1,697,297,440 13.83% 1,346,281,737 11.68% 2.15% the construction in progress Mainly attributed to the Short-term borrowings 846,881,075 6.90% 662,388,882 5.75% 1.15% increase of short term loans acquired from banks Mainly attributed to the Long-term borrowings 175,270,580 1.43% 49,140,555 0.43% 1% increase of long term loans acquired from banks 2)、 Measuring assets and liabilities at fair value 16 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report □Available Not available 3)、Assets rights restricted situation up to the end of report period Assets rights restricted situation of the Company up to the end of report period, please refer to Notice on External Guarantee disclosed on the website (www.cninfo.com.cn) on December 22nd, 2016. 5. Investment situation analysis 1)、Overall situation □Available Not available 2)、Situation of acquired main equity investments during the report period Available □Not available Unit: CNY Investment Name of Progress up profit and Whether the Main Investment Investment Shareholding Capital Investmen Product to the Estimated Disclosure Disclosure Partners loss for or not to invested businesses mode amount ratio source t horizon type balance profit date index current prosecute company sheet date period Notice on Productio Registration Establishi Indomita n and already ng Wine operation th Newly LAMBO completed, May 26 , Joint-Vent Company of wine 280,502,100 85% Self-owned 50 years Alcohol 50,000,000. 0 No established SpA now taking 2017 ure Chile, and other settlement Indomita SpA alcoholic procedure Wine beverages Company 17 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Chile, SpA disclosed on the website (www. cninfo. com. cn) Total - - 280,502,100 - - - - - - 50,000,000. 0 - - - 3)、Situation of main ongoing non-equity investments during the report period Available □Not available Unit: CNY Reasons Accumulated Accumulated for Whether actual realized Investment unreached it belongs investment Process profit up Investment Involved Amount Capital Estimated planning Disclosure Disclosure Project name to fixed amount up of to the end mode sectors during the source profit schedule date index assets to the end project of the report period and investment of the report report estimated profit period period Yantai Notice on Changyu Resolution of Liquor and International the Seventh Self- alcoholic Owned Not completed or Wine City Yes 172,000,000 1,195,130,000 98% 0 2016.04.22 Session Board constructed beverage funds put into operation Blending and of sector Cooling Directors’ 4th Center Meeting Yantai Self- Liquor and Owned Not completed or disclosed on the Yes 103,000,000 879,690,000 98% 0 2016.04.22 Changyu constructed alcoholic funds put into operation website (www. 18 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report International beverage cninfo. com. cn) Wine City sector Bottling Center Yantai Changyu Liquor and International Self- alcoholic Owned Yes 4,700,000 403,592,000 100% 0 No direct earning 2016.04.22 Wine City constructed beverage funds Logistics sector Center Changyu Vine Liquor and and Wine Self- alcoholic Owned Not completed or Yes 2,000,000 107,760,000 60% 0 2016.04.22 Research constructed beverage funds put into operation Institute sector Liquor and Treasure Self- alcoholic Owned Not completed or Yes 23,860,000 102,850,000 60% 0 2016.04.22 Wine Chateau constructed beverage funds put into operation sector Liquor and Koyac Brandy Self- alcoholic Owned Not completed or Yes 32,240,000 144,168,000 60% 0 2016.04.22 Chateau constructed beverage funds put into operation sector Liquor and Greening Self- alcoholic Owned Yes 12,200,000 37,500,000 100% 0 No direct earning 2016.04.22 Investment constructed beverage funds sector Cognac Liquor and Self- Not completed or Fransac Yes alcoholic 0 0 — 0% 0 2016.04.22 constructed put into operation chateau beverage 19 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report renovation sector project Total — — — 350,000,000 2,870,690,000 — — 0 0 -- -- -- 4)、Financial assets investment (1) Security investment □Available Not available There is no security investment for the Company during the report period. (2) Derivative investment □Available Not available There is no derivative investment for the Company during the report period. 6. Sale of major assets and equities 1)、 Sale of major assets □Available Not available There is no sale of major assets during the report period. 2)、 Sale of major equities □Available Not available 20 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 7. Analysis to the major holding and joint stock companies Available □Not available Situation of main subsidiaries and joint stock companies affecting over 10% of the Company‘s net profit Unit: CNY Company Company Main business Industry Registered capital Total asset Net asset Operation Operation Net Profit name type revenue profit To plant grape, produce and Wine and alcoholic Xinjiang Tianzhu Subsidiary sell grape juice, bulk wine beverages industry CNY75million 171,307,123 123,857,826 115,904,168 26,750,711 22,453,715 Winery Co., Ltd. and fruit wine Yantai To research, produce and Wine and alcoholic Changyu-Chateau sell wine and sparkling beverages industry Subsidiary USD5million 246,486,329 79,644,461 20,668,538 1,138,003 -106,018 Changyu Castel Wine wine as well as the tourism Co. Ltd. service Langfang Castel- Joint stock Wine and alcoholic To produce and sell wine USD6.108818million 45,760,868 36,337,841 23,732,778 207,784 161,088 Changyu Wine Co. Ltd. company beverages industry Chateau Changyu AFIP To research, produce and Wine and alcoholic Subsidiary CNY110million 541,925,594 172,295,488 75,491,933 17,573,835 12,511,172 Global Wine Co. Ltd. sell brandy and wine beverages industry Chateau Liaoning Wine and alcoholic Changyu Ice Wine Co., Subsidiary To produce ice wine beverages industry CNY26.30million 79,162,817 49,835,838 16,724,881 -2,046,303 -2,063,324 Ltd. Hacienda Y Vinedos To produce and operate o Wine and alcoholic Subsidiary EUR2.385732million 435,592,862 124,144,131 131,223,890 -2,216,518 -233,187 Marques Del Atrio, SL wine and other liquor beverages industry Acquisition and disposal of subsidiaries during the report period □Available Not available Information of main holding and joint stock companies During the report period, Yantai Changyu-Castel Wine Chateau Co. Ltd. and Chateau Liaoning Changyu Ice Wine Co., Ltd. produced losses, which mainly attributed to the decrease of sales revenue of Yantai Changyu Pioneer Wine Sales Limited Company and other internal sales 21 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report organisations from the two sales companies. Hacienda Y Vinedos Marques Del Atrio, SL produced losses, which mainly attributed to the amortization of premium from initial acquisition. 8. Main part situation of the special purpose being controlled by the Company □ Not available 9. Forecast for the operation achievements from January to September of 2017 Caution and explanation for the prediction that the cumulative net profit from the beginning of the year to the end of next report period could be in a loss or there will be in a great change comparing with the same period of last year. □ Not available 10. Risks the Company faces and measures (1) Risks in price fluctuation of raw materials Grapes are the Company‘s main raw materials. The grape‘s yield and quality are affected to a certain extent by the natural factors such as drought, wind, rain, frost and snow. These force majeure factors greatly influence the quantity and price of the grapes in this Company orders and add the uncertainty to the Company‘s production and operation. Therefore, the Company will lower the risks that are likely to affect grape quality and result in price fluctuation by means of expanding the self-run vineyards, strengthening the vineyard management and optimizing the layout of vineyards. (2) Risks in uncertainty of market input and output To cope with the cutthroat market competition and to meet the needs for market development, the Company has input more and more capital in the market and the sales expense has taken up a higher percentage point in the business revenue. The input-output ratio will affect the Company‘s operating results to a great extent and the risk that some investments may not reach the expectations is likely to occur. Therefore, the Company will strengthen market research and analysis, enhance market forecast accuracy and continue to perfect the input-output evaluation system to ensure the investments in market to be satisfactory as expected. (3) Risks in product transport The Company‘s products are fragile and sent to different places all over the world, mostly by sea, railway and expressway. The peak season of sales is usually in cold winter and close to the spring festival when market has a great demand. At that time, the natural and human factors such as serious shortage of transport capacity resulting from busy flow of people and goods, wind, snow, freezing as well as traffic accidents make the transport departments difficult to send products to markets in time and safely. As a result, it makes this Company have to face the risks of missing the peak season of sales. Therefore, the Company will adopt all methods possible like making precise sales prediction and well designed connection of production and sales, reasonably arranging production and transport means and making use of more available warehouses in different places to lower these kinds of risks. 22 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report (4) Risks in investment faults According to the plan, currently the Company has finished the production layout at home, and the next step is to pay more attention to the overseas merge and acquisition in the same industry. Currently, Yantai Changyu International Wine City (namely Yantai Changyu Industrial Park) has those features such as the big investment amount, long-term construction period and many uncertain factors; more unforeseeable factors for the overseas merge and acquisition projects in the progress of M&A, it is difficult to make sure the fair and reasonable transaction price, the integration and management after M&A is also hard. Under the influence of uncertain factors for individual projects, it leads to have the risks of facing with the investment amount out of budget or hardly taking back the expected investment earnings. The Company will take an adequate argument and scientific decision-making for investment projects, try hard to reduce and avoid investment risks. 23 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report V. Major issues 1. Information for the shareholders’ meeting and temporary shareholders’ meeting held during the report period 1)、Information for the shareholders’ meeting during the report period Participation ratio Session Meeting type Convening date Disclosure date Disclosure Index of investors Annual http://www.cninfo.com.cn 2016 Annual Shareholders‘ shareholders‘ 61.86% 2017.06.15 2017.06.16 Notice on Resolution of 2016 Meeting meeting Annual Shareholders’ Meeting 2)、Request for convening temporary shareholders’ meeting by priority shareholders owing recovered voting right □Available Not available 2. The Company’s preliminary scheme of profit distribution and preliminary scheme of increasing equity with capital reserve □Available Not available There are no schemes of paying cash dividend, bonus share and increasing equity with capital during the semi-annual period. 3. Commitments that the Company’s actual controllers, shareholders, related parties, acquirers and the Company and other related commitment parties have implemented during the report period and have not implemented up to the end of the report period Available □Not available Commitments Commitment party Commitment type Commitment content Commitment time Commitment period Implementation Commitments at share reform Commitments 24 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report made in acquisition report or equity changes report Commitments at asset restructuring Yantai Changyu Solve horizontal Non-horizontal Has been 1997.05.18 Forever Group Co. Ltd. competition competition performing strictly According to Trademark License Contract, the Company will pay trademark royalty for the Commitments Changyu‘‘ at the initial products of Yantai public offering Yantai Changyu Clear the purpose Changyu Group Co., Has been 1997.05.18 Forever or refinancing Group Co. Ltd. of brand royalty Ltd every year, Yantai performing strictly Changyu Group Co., Ltd will use trademark royalty to advertise Changyu‘‘ trademarks and Contracted products in this contract. Equity incentive commitments Commitments at middle and small shareholders of 25 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report the Company Commitment under timely Yes implementatio n or not Whether or not to have specific reasons of the No unimplemented commitment and next steps 4. The appointment and dismissal of certified public accountants Whether the semi-annual report has been audited □ Yes No The semi-annual report has not been audited. 5. Explanation from the board of directors for the “Non-standard Audit Report” of last year □Available Not available 6. Explanation from the board of directors for the “Non-standard Audit Report” of last year □Available Not available 7. Bankruptcy reorganization □Available Not available There are no related issues of bankruptcy reorganization happened during the report period and until the report period. 26 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 8. Litigation Issue Material litigation and arbitration □Available Not available There are no material litigation and arbitration during the report period. Other Litigation Issue □Available Not available 9. Penalty and rectification □Available Not available There are no penalties or rectifications during the report period. 10. Credit of the Company, holding shareholders and actual controllers □Available Not available 11. Implementation of the Company’s equity inventive plan, employee stock ownership plan or other employee incentive measures □Available Not available There are no implementation of the Company‘s equity inventive plan, employee stock ownership plan and other employee incentive measures. 12. Significant related transactions 1)、 Related transactions in relation to routine operations □Available Not available There are no related transactions in relation to routine operations during the report period. 2)、 Related transactions in relation to acquisition and sales of assets or equity □Available Not available There are no related transactions in relation to acquisition or sales of assets or equity during the report period. 3)、 Related transactions in relation to common foreign investment 27 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report □Available Not available There are no related transactions in relation to common foreign investment during the report period. 4)、 Related current credit and debt Available □Not available Whether or not to exist non-operating related credit and debt □Yes No There are no non-operating related credit and debt during the report period. 5)、 Other major related transactions Available □Not available Detailed information about routine related transactions, please refer to Notes XI "Related party and Related Transaction" in the Financial Statement of the report in detail, or could also look up the Company‘s related temporary announcement according to the following index. Disclosure website of major related transactions‘ temporary reports for related query Name of Disclosure date of Website of disclosure of Temporary announcement temporary announcement temporary announcement Notice on 2017 Annual Routine Cninf 2017.04.22 Related Transaction (http://www.cninfo.com.cn) 13. Non-business capital occupying of listed company by controlling shareholder and its related parties □Available Not available There are no non-business capitals occupying of listed company by controlling shareholder and its related parties during the report period. 14. Major and important contracts and execution results 1)、Trusteeship, contract and leasehold issues (1) Trusteeship situation □Available Not available There is no trusteeship situation during the report period. 28 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report (2) Contract situation Available □Not available Contract situation description During the report period, about the Company‘s contract operation situation, please see 1. Equity in the subsidiaries‘‘ in Annex 9 Rights and interests of other subjects‘‘ in the financial report of this report. Project in gains and losses for the Company to achieve more than 10% of the total profit □Available Not available There are no contract projects in gains and losses for the Company to achieve more than 10% of the total profit during the report period. (3) Leasehold situation Available □Not available Leasehold situation description During the report period, the Company renewed the Space Lease Agreement with the controlling shareholder Changyu Group, the Company leased the space with 57749.77 square meters located at 174 Shihuiyao Road, Zhifu District,Yantai City and the space with 3038 square meters located at 56 Dama Road, Zhifu District, Yantai City, which are all under the name of controlling shareholder. The rent of the above spaces per year is CNY 5.858 million with a period of 5 years from January 1st, 2016 to December 31st, 2021. Project in gains and losses for the Company to achieve more than 10% of the total profit □Available Not available There are no leasehold projects in gains and losses for the Company to achieve more than 10% of the total profit during the report period. 2)、Major guarantee Available □Not available 29 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report (1) Guarantee situation Unit: CNY‘0000 External guarantee of the Company and its subsidiaries(excluding guarantee to subsidiaries) Disclosure date of Whether or not Guarantee object Guarantee Actual date of occurrence Guarantee Whether or not belong to related announcement Actual guarantee amount Guarantee type complete name quota (date of agreement) Period related-party guarantee about guarantee quota implement Yantai Economic and Technological Development Zone 2016.12.22 34,160 2016.12.21 34,160 Mortgage; Pledge 10 years No No Management Council. Total of the external guarantee quota Total of the actual external guarantee amount 0 0 approved during the report period (A1) during the report period (A2) Total of the external guarantee quota Balance of the actual external guarantee by the 34,160 34,160 approved by the end of the report period (A3) end of the report period (A4) Guarantee between the Company and subsidiaries Disclosure date of Whether or not Whether or not belong to Guarantee object Guarantee Actual date of occurrence Guarantee related announcement Actual guarantee amount Guarantee type complete related-party guarantee name quota (date of agreement) Period about guarantee quota implement Yantai Changyu Joint liability Pioneer Wine Sales 2016.10.31 10,000 2016.11.05 10,000 2years No Yes assurance Company Limited Yantai Changyu Pioneer Wine 2016.12.22 11,984 2016.12.21 11,984 Mortgage; Pledge 10years No Yes Company Limited Yantai Changyu Wine Research and Joint liability 2016.12.22 72,176 2016.12.21 72,176 10years No No Development assurance; Mortgage Company Limited 30 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Total of the guarantee quota approved to Total of the actual guarantee amount for 0 0 subsidiaries during the report period (B1) subsidiaries during the report period (B2) Total of the guarantee quota approved to Balance of the actual guarantee for subsidiaries subsidiaries by the end of the report period 82,176 82,176 by the end of the report period (B4) (B3) Guarantee between subsidiaries Disclosure date of Whether or not Guarantee object Guarantee Actual date of occurrence Guarantee Whether or not belong to related announcement Actual guarantee amount Guarantee type complete name quota (date of agreement) Period related-party guarantee about guarantee quota implement - - - - - - - - - Total of the guarantee quota approved to Total of the actual guarantee amount for 0 0 subsidiaries during the report period (C1) subsidiaries during the report period (C2) Total of the guarantee quota approved to Balance of the actual guarantee for subsidiaries subsidiaries by the end of the report period 0 0 by the end of the report period (C4) (C3) Total of the Company‘s guarantee amount(Total of above three major items) Total of the approved guarantee quota during the report period(A1+B1+C1) 0 Total of the actual guarantee amount during the report period(A2+B2+C2) 0 Total of the approved guarantee quota by the end of the report period(A3+B3+C3) 116,336 Balance of the actual guarantee by the end of the report period(A4+B4+C4) 116,336 The proportion of Actual total guarantee amount (A4+B4+C4) in the Company‘s net asset 13.10% Among : The amount of guarantee for shareholders, actual controllers and their related parties(D) 0 The amount of debt guarantee for the guaranteed objects whose asset-liability ratio is more than 70% directly or indirectly(E) 0 Total amount of guarantee that exceeds 50% of net assets(F) 0 Total amount of the above-mentioned three items(D+E+F) 0 Explanation for undue guarantees that have happened warranty liability or may take joint payback liabilities during the report period No Explanation for violating due process to provide external guarantee No Specific explanation on adopting complex guarantee type No 31 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report (2) Illegal external guarantee □Available Not available There is no illegal guarantee situation during the report period. 3)、Other important contracts □Available Not available There are no other important contracts during the report peri 15. Situation for Social Responsibility 1)、Situation for carrying out social responsibility of precise poverty There is not carried out precise poverty, no-plan for Subsequent precise poverty during the Semi-annual report period. 2)、Major environmental situation The listed company and its subsidiaries are whether or not to belong to the heavy pollution industry stipulated by the state environmental protection department. □Yes No 16. Other Major issues □Available Not available There are no other major issues need to be explained during the report period. 17. Major issues of Company’s subsidiaries Available □Not available 32 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Information of newly established subsidiaries during this report period is as follows: Full name of invested Incorporation date Corporate representative Business Character Registered capital Contribution amount unit and place Yantai Changyu 2017.01.18 Wang Hongshan Sales CNY 5,000,000 CNY 5,000,000 Pioneer Wine Sales Yantai, Shandong Company Limited province, China Indomita Wine 2017.04.06 WILFRED CHARLES Manufacturing USD 1,000,000 USD 40,110,000 Company Chile, SpA Santiago, Chile LEIGH NIELSEN industry 33 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report VI. Changes in Shares and the Shareholders’ Situation 1. Changes in shares 1)、Changes in shares Unit: share Amount before this change Change (+, -) Amount after this change Transfer Percentage Allot Distribute other Percentage Amount new capital to others Sub total Amount % bonus share % share share capital 1、Unrestricted shares 685,464,000 100% 685,464,000 100% (1)、A shares 453,460,800 66.15% 453,460,800 66.15% (2)、B shares 232,003,200 33.85% 232,003,200 33.85% 2、Total shares 685,464,000 100% 685,464,000 100% Cause of share change □Available Not available Approval of share change □Available Not available Transfer of changed shares □Available Not available 34 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report The influence of share change on the financial indicators such as basic earnings per share, diluted earnings per share of the latest year and the latest period, net asset per share belonging to the Company‘s common shareholders, etc. □Available Not available Other contents the Company thinks necessary or securities regulatory departments ask to make public. □Available Not available 2)、Changes in restricted shares □Available Not available 2. Securities issuance and listing situation □Available Not available 3. Situation for shareholders and the actual controllers Unit:share Total number of preferred Total common shareholders at the 43,009 (23,475 of Stock A and shareholder recovering 0 end of report period 19,534 of Stock B) voting power at the end of report period Shareholders holding more than 5% or the top 10 shareholders holding situation Percentag Shares held until the Changes Number Number of Pledged or frozen Name of Character of shareholders e Shareholders end of the report period during the of unrestricted Share Amount (%) report restricte shares status 35 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report period d shares YANTAI 50.40% 345,473,856 0 345,473,856 Domestic non-state-owned CHANGYU GROUP legal person CO. LTD. GAOLING Foreign legal person 3.11% 21,300,919 0 21,300,919 FUND,L.P. CHINA State-owned legal person 2.32% 15,924,155 0 15,924,155 SECURITIES FINANCE CORP BBH BOS S/A 2.22% 15,241,826 0 15,241,826 FIDELITY FD - Foreign legal person CHINA FOCUS FD TIANAN 1.43% 9,774,689 1,835,523 9,774,689 PROPERTY Domestic non-state-owned INSURANCE CO., legal person LTD—BAOYING NO.1 GUOTAI JUNAN 0.96% 6,582,957 1,261,479 6,582,957 SECURITIES(HONG Foreign legal person KONG) LIMITED FIDELITY 0.88% 6,000,851 3,700,858 6,000,851 PURITAN TRUST: FIDELITY SERIES Foreign legal person INTRINSIC OPPORTUNITIES FUND CENTRAL HUIJIN 0.69% 4,761,200 2,461,207 4,761,200 State-owned legal person ASSET 36 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report MANAGEMENT LTD. BBH A/C 0.55% 3,788,487 0 3,788,487 VANGUARD EMERGING Foreign legal person MARKETS STOCK INDEX FUND FIDELITY CHINA 0.55% 3,779,202 0 3,779,202 SPECIAL Foreign legal person SITUATIONS PLC Strategic investors or legal result of the placement of new No shares to become a top 10 shareholders(if have)(see note 3) Among the top 10 shareholders, Yantai Changyu Group Company Limited has no The explanation for the associated relationship and associated relationship or accordant action relationship with the other 9 listed accordant action shareholders, and the relationship among the other shareholders is unknown. The top 10 shareholders with unrestricted shares Number of unrestricted Type of share Name of Shareholders shares held until the end of Type of share Amount the year YANTAI CHANGYU GROUP CO. LTD. 345,473,856 A 345,473,856 GAOLING FUND,L.P. 21,300,919 B 21,300,919 CHINA SECURITIES FINANCE CORP 15,924,155 A 15,924,155 BBH BOS S/A FIDELITY FD - CHINA FOCUS FD 15,241,826 B 15,241,826 TIANAN PROPERTY INSURANCE CO., LTD—BAOYING NO.1 9,774,689 A 9,774,689 GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED 6,582,957 B 6,582,957 FIDELITY PURITAN TRUST: FIDELITY SERIES INTRINSIC 6,000,851 B 6,000,851 OPPORTUNITIES FUND CENTRAL HUIJIN ASSET MANAGEMENT LTD. 4,761,200 A 4,761,200 37 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report BBH A/C VANGUARD EMERGING MARKETS STOCK INDEX FUND 3,788,487 B 3,788,487 FIDELITY CHINA SPECIAL SITUATIONS PLC 3,779,202 B 3,779,202 The explanation for the associated relationship and accordant action of the top 10 Among the top 10 shareholders, Yantai Changyu Group shareholders with unrestricted shares, the the associated relationship and Company Limited has no associated relationship or accordant accordant action between the top 10 shareholders with unrestricted shares and the action relationship with the other 9 listed shareholders, and the top 10 shareholders relationship among the other shareholders is unknown. Explanation for the top 10 shareholders who involved in financing activities and The top 10 shareholders do not involve in financing activities and stock trading business (if have)(see note 4) stock trade business. Whether or not the Company‘s top 10 common shareholders and shareholders with unrestricted shares take agreed repurchase trading during the report period □Yes No There is no agreed repurchase trading taken by the Company‘s top 10 common shareholders and shareholders with unrestricted shares during the report period. 4. Changes of controlling shareholders or the actual controllers situation Changes of the controlling shareholders during the report period □Available Not available There is no any change of the controlling shareholders during the report period. Changes of the actual controllers during the report period □Available Not available There is no any change of the actual controllers during the report period. 38 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report VII. Related Situation of Preferred Shares □Available Not available There are no preferred shares during the report period. 39 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report VIII. Situation for Directors, Supervisors, Senior Management Staffs 1. Changes in shareholdings of directors, supervisors and senior management staffs □Available Not available There are no any changes in shareholdings of directors, supervisors and senior management staffs during the report period, details see 2016 annual report 2. Personnel changes in Company's directors, supervisors and senior management Available □Not available Name Positions held Type Date Reason Dai Hui Director Leave after 2017.06.15 - tenure Wei Anning Director Elected 2017.06.15 Zhou Hongjiang General manager Appointed 2017.04.20 - Leng Bin Vice-general manager Appointed 2017.04.20 Qu Weimin Vice-general manager Leave after 2017.04.20 - tenure Yang Ming Vice-general manager Appointed 2017.04.20 Li Jiming Chief engineer Appointed 2017.04.20 Jiang Hua Vice-general manager Appointed 2017.04.20 Sun Jian Vice-general manager Appointed 2017.04.20 Jiang Jianxun Finance manager Appointed 2017.04.20 - 40 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report IX. Related Situation of Corporation Bonds Whether or not the Company has the corporation bonds issued in public, listed in the stock exchange, not due on the Semi-annual report‘s authorized issue date or failed to pay in full on the due date. No. 41 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report X. Financial Report 1. Audit report Whether the semiannual report has been audited □ Yes √ No 2. Financial statement The unit in the statements of the financial annotations is RMB Yuan. 2.1 Consolidated balance sheet Compiling unit: Yantai Changyu Pioneer Wine Co., Ltd. Unit: Yuan Item Note Ending balance Beginning balance Current assets: Monetary fund 7.1 1,550,067,781 1,391,517,607 Settlement reserves Lending funds Financial assets measured at the fair value and the variation of which is recorded into the current profit and loss Derivative financial assets Bills receivable 7.2 378,804,230 210,470,027 Accounts receivable 7.3 167,152,509 173,062,628 Advance payment 7.4 2,114,086 2,175,606 Premium receivable Reinsurance accounts receivable Receivable reserves for reinsurance contract Interest receivable 7.5 368,928 24,200 Dividends receivable Other receivables 7.6 16,311,182 18,880,800 Buying back the sale of financial assets Inventories 7.7 2,024,302,929 2,248,609,740 Assets classified as holding and available for sale 7.8 2,000,197 2,000,197 Non-current assets due within one year Other current assets 7.9 293,294,297 169,522,242 Total current assets 4,434,416,139 4,216,263,047 Non-current assets: Offering loans and imprest Available-for-sale financial assets 7.10 463,800 340,263 Held-to-maturity investments Long-term receivables Long-term equity investments Investment real estate Fixed assets 7.11 4,591,037,486 4,683,187,493 Construction in progress 7.12 1,697,297,440 1,346,281,737 Construction materials 42 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Item Note Ending balance Beginning balance Disposal of fixed assets Productive biological assets 7.13 198,024,312 201,428,980 Oil and gas assets Intangible assets 7.14 479,362,173 483,815,080 Development expenditure Goodwill 7.15 121,265,866 121,265,866 Long-term prepaid expenses 7.16 157,020,911 162,206,229 Deferred tax assets 7.17 259,844,790 295,937,037 Other non-current assets 7.18 335,245,554 17,352,239 Total non-current assets 7,839,562,332 7,311,814,924 Total assets 12,273,978,471 11,528,077,971 Current liabilities: Short-term loans 7.19 846,881,075 662,388,882 Borrowings from the Central Bank Customer and interbank deposits Borrowing funds Financial liabilities measured at the fair value and the variation of which is recorded into the current profit and loss Derivative financial liabilities Bills payable 7.20 8,000,000 38,900,000 Accounts payable 7.21 399,318,487 545,231,319 Advances from customers 7.22 321,530,693 425,246,421 Financial assets sold for repurchase Handling fees and commissions payable Employee remunerations 7.23 158,977,820 206,431,734 Taxes payable 7.24 77,113,119 144,042,600 Interest payable 563,613 Dividends payable 7.25 703,430 Other payables 7.26 653,190,411 546,305,310 Dividend payable for reinsurance Reserves for insurance contracts Acting trading securities Acting underwriting securities Liabilities classified as holding and available for sale Non-current liabilities due within one year 7.27 106,975,215 71,799,093 Other current liabilities 7.28 11,163,882 11,163,883 Total current liabilities 2,583,854,132 2,652,072,855 Non-current liabilities: Long-term borrowings 7.29 175,270,580 49,140,555 Bonds payable Including: Preferred stock Perpetual capital securities Long-term accounts payable 7.30 269,000,000 293,000,000 Long-term employee remunerations payable Special accounts payable Estimated liabilities 43 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Item Note Ending balance Beginning balance Deferred income 7.31 97,348,319 101,775,243 Deferred tax liabilities 7.17 21,852,738 24,908,410 Other non-current liabilities 7.32 7,696,222 7,696,222 Total non-current liabilities 571,167,859 476,520,430 Total liabilities 3,155,021,991 3,128,593,285 Owner’s equity: Capital stock 7.33 685,464,000 685,464,000 Other equity instruments Including: Preferred stock Perpetual capital securities Capital surplus 7.34 565,955,441 565,955,441 Minus: Treasury stock Other comprehensive income 7.35 -3,800,205 -5,259,014 Special reserves Surplus reserves 7.36 342,732,000 342,732,000 General risk preparation Retained earnings 7.37 7,290,187,616 6,620,118,562 Total owner‘s equities attributable to the parent company 8,880,538,852 8,209,010,989 Minority equity 238,417,628 190,473,697 Total owner‘s equities 9,118,956,480 8,399,484,686 Total liabilities and owner‘s equities 12,273,978,471 11,528,077,971 Legal Representative: Sun Liqiang Accounting Supervisor: Leng Bin Accounting Department Manager: Jiang Jianxun 2.2 Balance sheet of the parent company Compiling unit: Yantai Changyu Pioneer Wine Co., Ltd. Unit: Yuan Item Note Ending balance Beginning balance Current assets: Monetary fund 747,876,320 269,460,060 Financial assets measured at the fair value and the variation of which is recorded into the current profit and loss Derivative financial assets Bills receivable 107,090,401 1,114,200 Accounts receivable 15.1 1,838,244 3,326,683 Advance payment 1,172,079 702,647 Interest receivable 34,313 24,200 Dividends receivable 324,673,936 531,819,113 Other receivables 15.2 3,539,710,433 3,582,532,862 Inventories 506,836,398 792,732,418 Assets classified as holding and available for sale 2,000,197 2,000,197 Non-current assets due within one year Other current assets 58,168,826 20,085,058 Total current assets 5,289,401,147 5,203,797,438 Non-current assets: Available-for-sale financial assets 44 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Item Note Ending balance Beginning balance Held-to-maturity investments Long-term receivables Long-term equity investments 15.3 2,108,589,655 1,834,341,541 Investment real estate Fixed assets 335,000,273 347,481,417 Construction in progress 268,929 500,000 Construction materials Disposal of fixed assets Productive biological assets 121,231,009 123,036,693 Oil and gas assets Intangible assets 70,812,796 72,002,372 Development expenditure Goodwill Long-term prepaid expenses Deferred tax assets 25,477,622 26,985,252 Other non-current assets 2,747,906,376 2,617,457,460 Total non-current assets 5,409,286,660 5,021,804,735 Total assets 10,698,687,807 10,225,602,173 Current liabilities: Short-term loans 700,000,000 500,000,000 Financial liabilities measured at the fair value and the variation of which is recorded into the current profit and loss Derivative financial liabilities Bills payable Accounts payable 61,360,245 247,568,857 Advances from customers 6,000,000 6,000,000 Employee remunerations 55,455,887 70,812,761 Taxes payable 14,378,705 33,266,225 Interest payable 0 563,613 Dividends payable 0 0 Other payables 813,653,329 368,310,362 Liabilities classified as holding and available for sale 0 0 Non-current liabilities due within one year 15,499,200 29,227,200 Other current liabilities 1,767,054 1,767,054 Total current liabilities 1,668,114,420 1,257,516,072 Non-current liabilities: Long-term borrowings Bonds payable Including: Preferred stock Perpetual capital securities Long-term accounts payable Long-term employee remuneration payable Special accounts payable Estimated liabilities Deferred income 18,986,990 19,933,699 Deferred tax liabilities 45 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Item Note Ending balance Beginning balance Other non-current liabilities 2,499,403 2,499,403 Total non-current liabilities 21,486,393 22,433,102 Total liabilities 1,689,600,813 1,279,949,174 Owner’s equity: Capital stock 685,464,000 685,464,000 Other equity instruments Including: Preferred stock Perpetual capital securities Capital surplus 557,222,454 557,222,454 Minus: Treasury stock Other comprehensive income Special reserves Surplus reserves 342,732,000 342,732,000 Retained earnings 7,423,668,540 7,360,234,545 Total owner‘s equities 9,009,086,994 8,945,652,999 Total liabilities and owner‘s equities 10,698,687,807 10,225,602,173 Legal Representative: Sun Liqiang Accounting Supervisor: Leng Bin Accounting Department Manager: Jiang Jianxun 2.3 Consolidated profit statement Compiling unit: Yantai Changyu Pioneer Wine Co., Ltd. Unit: Yuan Item Note Sum of current period Sum of prior period 1. Total operating income 2,767,098,197 2,753,032,799 Including: Operating income 7.38 2,767,098,197 2,753,032,799 Interest income Earned premium Handling fee and commission income 2. Total operating costs 1,890,800,616 1,840,237,208 Including: Operating costs 7.38 925,754,133 902,734,104 Interest expenditure Handling fees and commission expenditure Premium rebate Net amount of indemnity expenditure Net amount of the withdrawn reserve fund for insurance contract Policy bonus payment Amortized reinsurance expenditures Taxes and surcharges 7.39 160,473,998 153,081,792 Selling expenses 7.40 668,735,726 650,737,234 Administrative expenses 7.41 130,542,386 122,695,845 Financial expenses 7.42 11,147,949 10,988,233 Loss on impairment of assets 7.43 -5,853,576 0 Plus: Fair value change profit (loss is listed with "-") Investment profit (loss is listed with "-") Including: Investment profit for joint-run business and joint 46 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report venture Exchange income (loss is listed with "-") Other income 3. Operating profit (loss is listed with "-") 876,297,581 912,795,591 Plus: Non-operating income 7.44 23,304,205 21,933,526 Including: Gains on disposal of non-current assets 156,600 94,567 Minus: Non-operating expenses 7.45 838,239 343,776 Including: Losses on disposal of non-current assets 651,671 110,052 4. Total profits (total loss is listed with "-") 898,763,547 934,385,341 Minus: Income tax expenses 7.46 228,752,790 238,715,481 5. Net profit (net loss is listed with "-") 670,010,757 695,669,860 Net profit attributable to owner of the parent company 670,069,054 695,021,847 Minority interest income -58,297 648,013 6. Net after-tax amount of other comprehensive income 7.47 1,767,741 6,701,754 Net after-tax amount of other comprehensive income attributable to 1,458,809 6,249,919 owner of the parent company 6.1 Other comprehensive income not to be reclassified into profit and loss later 6.1.1 Net liabilities or net assets change after remeasuring and resetting the benefit plans 6.1.2 Share enjoyed in other comprehensive income not to be reclassified into profit and loss in invested unit under equity law 6.2 Other comprehensive income to be reclassified into profit and 1,458,809 6,249,919 loss later 6.2.1 Share enjoyed in other comprehensive income to be reclassified into profit and loss in invested unit under equity law 6.2.2 Profit and loss from changes in fair value of financial assets for sale 6.2.3 Profit and loss from reclassification of held-to-maturity investment into fair value of financial assets for sale 6.2.4 Effective part of profit and loss of cash-flow hedge 6.2.5 Difference in translation of Foreign Currency Financial 1,458,809 6,249,919 Statement 6.2.6 Other Net after-tax amount of other comprehensive income attributable to 308,932 451,835 minority shareholders 7. Total comprehensive income 671,778,498 702,371,614 (1) Attributable to owner of the parent company 671,527,863 701,271,766 (2) Attributable to minority shareholders 250,635 1,099,848 8. Earnings per share (1) Basic earnings per share 0.98 1.01 (2) Diluted earnings per share 0.98 1.01 Legal Representative: Sun Liqiang Accounting Supervisor: Leng Bin Accounting Department Manager: Jiang Jianxun 2.4 Profit statement of the parent company Compiling unit: Yantai Changyu Pioneer Wine Co., Ltd. Unit: Yuan Item Note Sum of current period Sum of prior period 1. Operating income 15.4 831,820,503 655,299,000 Minus: Operating costs 15.4 737,950,378 501,312,599 47 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Taxes and surcharges 48,865,790 73,401,856 Selling expenses Administrative expenses 40,078,068 55,027,172 Financial expenses 9,292,969 18,250,416 Loss on impairment of assets Plus: Fair value change profit (loss is listed with "-") Investment profit (loss is listed with "-") 15.5 66,127,980 683,891,453 Including: Investment profit for joint-run business and joint venture Other income 2. Operating profit (loss is listed with "-") 61,761,278 691,198,410 Plus: Non-operating income 1,134,756 1,141,128 Including: Gains on disposal of non-current assets 133,233 94,567 Minus: Non-operating expenses 143,042 36,839 Including: losses on disposal of non-current assets 122,785 21,839 3. Total profits (total loss is listed with "-") 62,752,992 692,302,699 Minus: Income tax expenses -681,003 2,102,811 4. Net profit (net loss is listed with "-") 63,433,995 690,199,888 5. Net after-tax amount of other comprehensive income 5.1 Other comprehensive income not to be reclassified into profit and loss later 5.1.1 Net liabilities or net assets change after remeasuring and resetting the benefit plans 5.1.2 Share enjoyed in other comprehensive income not to be reclassified into profit and loss in invested unit under equity law 5.2 Other comprehensive income to be reclassified into profit and loss later 5.2.1 Share enjoyed in other comprehensive income to be reclassified into profit and loss in invested unit under equity law 5.2.2 Profit and loss from changes in fair value of financial assets for sale 5.2.3 Profit and loss from reclassification of held-to-maturity investment into fair value of financial assets for sale 5.2.4 Effective part of profit and loss of cash-flow hedge 5.2.5 Difference in translation of Foreign Currency Financial Statement 5.2.6 Other 6. Total comprehensive income 63,433,995 690,199,888 7. Earnings per share (1) Basic earnings per share 0.09 1.01 (2) Diluted earnings per share 0.09 1.01 Legal Representative: Sun Liqiang Accounting Supervisor: Leng Bin Accounting Department Manager: Jiang Jianxun 2.5 Consolidated cash flow statement Compiling unit: Yantai Changyu Pioneer Wine Co., Ltd. Unit: Yuan Item Sum of current period Sum of prior period 1. Cash flows from operating activities: Cash received from sales of goods and rending of services 2,524,565,138 2,706,821,883 48 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Item Sum of current period Sum of prior period Net increase in customer and interbank deposits Net increase in borrowings from central bank Net increase in borrowings from other financial institutions Cash received from receiving insurance premium of original insurance contract Net cash received from reinsurance business Net increase in policy holder deposits and investment funds Net increase after disposal of financial assets measured at the fair value and the variation of which is recorded into the current profit and loss Cash received from collecting interest, handling fees and commission Net increase in borrowings Net increase in repurchasement business funds Tax refund received 12,777,072 13,866,472 Other cash received related to operating activities 38,889,912 27,834,008 Subtotal of cash flows of operating activities 2,576,232,122 2,748,522,363 Cash paid for goods and services 640,732,974 635,982,569 Net increase in customer loans and advances Net increase in deposits in central bank and interbank deposits Cash paid to original insurance contract payments Cash paid to interest, handling fees and commission Cash paid to policy bonus Cash paid to and on behalf of employees 239,805,346 230,296,149 Cash paid for taxes and expenses 842,815,705 756,992,525 Other cash paid related to operating activities 432,517,778 442,502,751 Sub-total of cash outflows of operating activities 2,155,871,803 2,065,773,994 Net cash flow from operating activities 420,360,319 682,748,369 2. Cash flow from investing activities: Cash received from return of investment Fixed deposit with the term of over 3 months 3,000,000 8,000,000 Cash received from obtaining investment profit 25,550 28,483 Cash received from disposal of fixed assets, intangible assets and 233,355 other long-term assets 237,161 Net cash received from disposal of branch and other business unit Other cash received related to investing activities Subtotal of cash flows of investment activities 3,262,711 8,261,838 Cash paid to acquire fixed assets, intangible assets and other 398,151,685 long-term assets 282,149,010 Cash for investment Cash paid to buy fixed deposit with the term of over 3 months 201,000,000 7,007,000 Net increase in hypothecated loan Net cash paid to acquire branch and other business unit 762,436 Other cash paid related to investment activities 317,654,642 Subtotal of cash outflows of investment activities 800,803,652 405,921,121 Net cash flow from investing activities -797,540,941 -397,659,283 3. Cash flow from financing activities Cash received from acquiring investment 48,396,726 49 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Item Sum of current period Sum of prior period Including: cash received from acquiring minority shareholders investment by branch 48,396,726 Cash received from acquiring loans 773,435,000 809,175,350 Cash received from issuing bonds Other cash received related to financing activities 1,303,473 Subtotal cash flows of financing activities 823,135,199 809,175,350 Cash paid to pay debts 451,386,980 512,516,014 Cash paid to distribute dividend, profit or pay interest 17,869,513 16,940,912 Including: dividend and profit paid to minority shareholders by branch Other cash paid related to financing activities 20,000,000 Subtotal of cash outflows of financing activities 469,256,493 549,456,926 Net cash flow from financing activities 353,878,706 259,718,424 4. Influences of exchange rate fluctuation on cash and cash 6,885,883 equivalents -4,152,485 5. Net Increase in cash and cash equivalents -27,454,401 551,693,393 Plus: balance at the beginning of the period of cash and cash equivalents 1,256,942,304 1,092,241,661 6. Balance at the end of the period of cash and cash equivalents 1,229,487,903 1,643,935,054 Legal Representative: Sun Liqiang Accounting Supervisor: Leng Bin Accounting Department Manager: Jiang Jianxun 2.6 Cash flow statement of the parent company Compiling unit: Yantai Changyu Pioneer Wine Co., Ltd. Unit: Yuan Item Sum of current period Sum of prior period 1. Cash flows from operating activities: Cash received from sales of goods and rending of services 570,587,513 595,186,103 Tax refund received Other cash received related to operating activities 385,490,644 239,938 Subtotal of cash flows of operating activities 956,078,157 595,426,041 Cash paid for goods and services 269,148,068 324,226,720 Cash paid to and on behalf of employees 52,895,854 79,790,054 Cash paid for taxes and expenses 169,319,730 88,941,454 Other cash paid related to operating activities 62,494,076 846,691,535 Sub-total of cash outflows of operating activities 553,857,728 1,339,649,763 Net cash flow from operating activities 402,220,429 -744,223,722 2. Cash flow from investing activities: Cash received from return of investment Fixed deposit with the term of over 3 months 3,000,000 8,000,000 Cash received from obtaining investment profit 198,082,845 1,164,454,077 Net cash received from disposal of fixed assets, intangible assets and 206,280 231,240 other long-term assets Net cash received from disposal of branch and other business unit Other cash received related to investing activities Subtotal of cash flows of investment activities 201,289,125 1,172,685,317 Cash paid to acquire fixed assets, intangible assets and other 3,295,270 15,892,483 long-term assets 50 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Item Sum of current period Sum of prior period Cash for investment 329,440,824 Cash paid to buy fixed deposit with the term of over 3 months 105,000,000 7,007,000 Net cash paid to acquire branch and other business unit Other cash paid related to investment activities Subtotal of cash outflows of investment activities 437,736,094 22,899,483 Net cash flow from investing activities -236,446,969 1,149,785,834 3. Cash flow from financing activities Cash received from acquiring investment Cash received from acquiring loans 700,000,000 400,000,000 Cash received from issuing bonds Other cash received related to financing activities Subtotal cash flows of financing activities 700,000,000 400,000,000 Cash paid to pay debts 514,667,600 420,114,492 Cash paid to distribute dividend, profit or pay interest 9,720,581 13,936,049 Other cash paid related to financing activities Subtotal of cash outflows of financing activities 524,388,181 434,050,541 Net cash flow from financing activities 175,611,819 -34,050,541 4. Influences of exchange rate fluctuation on cash and cash equivalents 5. Net Increase in cash and cash equivalents 341,385,279 371,511,571 Plus: balance at the beginning of the period of cash and cash 238,003,198 143,798,080 equivalents 6. Balance at the end of the period of cash and cash equivalents 579,388,477 515,309,651 Legal Representative: Sun Liqiang Accounting Supervisor: Leng Bin Accounting Department Manager: Jiang Jianxun 51 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 2.7 Consolidated owner’s equity changing list Unit: Yuan This period Owners‘ equity of the parent company Item Other equity instruments Minority Minus: Other Total owners‘ Capital Special Surplus General risk Undistributed shareholders‘ Capital stock Perpetual Treasury comprehensive equity Preferred capital reserves reserves reserves preparation profits equity stock Other stock income securities 1. Balance at the end of last 685,464,000 565,955,441 -5,259,014 342,732,000 6,620,118,562 190,473,697 8,399,484,686 year Plus: Accounting policies changing Previous error correction Business combination under common control Other 2. Balance at the beginning of 685,464,000 565,955,441 -5,259,014 342,732,000 6,620,118,562 190,473,697 8,399,484,686 this year 3. Increased or decreased amount in this period (reducing 1,458,809 670,069,054 47,943,931 719,471,794 amount is listed with "-") 3.1 Total comprehensive 1,458,809 670,069,054 250,635 671,778,498 income 3.2 Owners' invested and 48,396,726 48,396,726 reduced capital 3.2.1 Shareholders‘ invested 48,396,726 48,396,726 common stock 3.2.2 Other equity instrument holders‘ invested capital 3.2.3 Amount of shares paid and reckoned in owners' equity 52 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 3.2.4 Other 3.3 Profit distribution -703,430 -703,430 3.3.1 Accrued surplus reserves 3.3.2 Accrued general risk preparation 3.3.3 Distribution to owners -703,430 -703,430 (or shareholders) 3.3.4 Other 3.4 Internal transfer of owners' equity 3.4.1 Capital reserves transferred and increased capital (or capital stock) 3.4.2 Surplus reserves transferred and increased capital (or capital stock) 3.4.3 Surplus reserves covering deficit 3.4.4 Other 3.5 Special reserves 3.5.1 Withdrawal in this period 3.5.2 Usage in this period 3.6 Other 4. Balance at the end of this 685,464,000 565,955,441 -3,800,205 342,732,000 7,290,187,616 238,417,628 9,118,956,480 period 53 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Unit: Yuan Prior period Owners‘ equity of the parent company Item Other equity instruments Minority Minus: Other Total owners‘ Capital Special Surplus General risk Undistributed shareholders‘ Capital stock Preferred Perpetual Treasury comprehensive equity equity capital reserves reserves reserves preparation profits stock Other stock income securities 1. Balance at the end of last 685,464,000 565,955,441 -10,442,512 342,732,000 5,980,390,074 192,459,023 7,756,558,026 year Plus: Accounting policies changing Previous error correction Business combination under common control Other 2. Balance at the beginning of 685,464,000 565,955,441 -10,442,512 342,732,000 5,980,390,074 192,459,023 7,756,558,026 this year 3. Increased or decreased amount in this period (reducing 5,183,498 639,728,488 -1,985,326 642,926,660 amount is listed with "-") 3.1 Total comprehensive 5,183,498 982,460,488 -1,438,903 986,205,083 income 3.2 Owners' invested and reduced capital 3.2.1 Shareholders‘ invested common stock 3.2.2 Other equity instrument holders‘ invested capital 3.2.3 Amount of shares paid and reckoned in owners' equity 3.2.4 Other 54 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 3.3 Profit distribution -342,732,000 -546,423 -343,278,423 3.3.1 Drew surplus reserves 3.3.2 Drew general risk preparation 3.3.3 Distribution to owners (or -342,732,000 -546,423 -343,278,423 shareholders) 3.3.4 Other 3.4 Internal transfer of owners' equity 3.4.1 Capital reserves transferred and increased capital (or capital stock) 3.4.2 Surplus reserves transferred and increased capital (or capital stock) 3.4.3 Surplus reserves covering deficit 3.4.4 Other 3.5 Special reserves 3.5.1 Accrual in this period 3.5.2 Usage in this period 3.6 Other 4. Balance at the end of this 685,464,000 565,955,441 -5,259,014 342,732,000 6,620,118,562 190,473,697 8,399,484,686 period 55 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 2.8 Owner’s equity changing list of the parent company Unit: Yuan This period Other equity instruments Minus: Other Item Capital Capital Special Surplus Undistributed Total owners‘ Preferred Perpetual capital Treasury comprehensive stock Other reserves reserves reserves profits equity stock securities stock income 1. Balance at the end of last year 685,464,000 557,222,454 342,732,000 7,360,234,545 8,945,652,999 Plus: Accounting policies changing Previous error correction Other 2. Balance at the beginning of this year 685,464,000 557,222,454 342,732,000 7,360,234,545 8,945,652,999 3. Increased or decreased amount in this 63,433,995 63,433,995 period (reducing amount is listed with "-") 3.1 Total comprehensive income 63,433,995 63,433,995 3.2 Owners' invested and reduced capital 3.2.1 Shareholders‘ invested common stock 3.2.2 Other equity instrument holder‘ invested capital 3.2.3 Amount of shares paid and reckoned in owners' equity 3.2.4 Other 3.3 Profit distribution 3.3.1 Drew surplus reserves 3.3.2 Distribution to owners (or shareholders) 3.3.3 Other 3.4 Internal transfer of owners' equity 3.4.1 Capital reserves transferred and 56 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report increased capital (or capital stock) 3.4.2 Surplus reserves transferred and increased capital (or capital stock) 3.4.3 Surplus reserves covering deficit 3.4.4 Other 3.5 Special reserves 3.5.1 Accrual in this period 3.5.2 Usage in this period 3.6 Other 4. Balance at the end of this period 685,464,000 557,222,454 342,732,000 7,423,668,540 9,009,086,994 Unit: Yuan Prior period Other equity instruments Minus: Other Item Capital Capital Special Surplus Undistributed Total owners‘ Preferred Perpetual capital Treasury comprehensive stock reserves reserves reserves profits equity stock securities Other stock income 1. Balance at the end of last year 685,464,000 557,222,454 342,732,000 5,872,392,075 7,457,810,529 Plus: Accounting policies changing Previous error correction Other 2. Balance at the beginning of this year 685,464,000 557,222,454 342,732,000 5,872,392,075 7,457,810,529 3. Increased or decreased amount in this 1,487,842,470 1,487,842,470 period (reducing amount is listed with "-") 3.1 Total comprehensive income 1,830,574,470 1,830,574,470 3.2 Owners' invested and reduced capital 3.2.1 Shareholders‘ invested common stock 3.2.2 Other equity instrument holder‘ invested capital 57 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 3.2.3 Amount of shares paid and reckoned in owners' equity 3.2.4 Other 3.3 Profit distribution -342,732,000 -342,732,000 3.3.1 Drew surplus reserves 3.3.2 Distribution to owners (or shareholders) -342,732,000 -342,732,000 3.3.3 Other 3.4 Internal transfer of owners' equity 3.4.1 Capital reserves transferred and increased capital (or capital stock) 3.4.2 Surplus reserves transferred and increased capital (or capital stock) 3.4.3 Surplus reserves covering deficit 3.4.4 Other 3.5 Special reserves 3.5.1 Accrual in this period 3.5.2 Usage in this period 3.6 Other 4. Balance at the end of this period 685,464,000 557,222,454 342,732,000 7,360,234,545 8,945,652,999 58 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 3. Company profile Yantai Changyu Pioneer Wine Co., Ltd. (the ―Company‖ or the ―Joint-stock Company‖) was incorporated as a joint-stock limited company in accordance with the Company Law of the People‘s Republic of China (the ―PRC‖) in the merger and reorganization carried out by Yantai Changyu Group Co., Ltd. (―Changyu Group Company‖) with its assets and liabilities in relation to wine business. The Company and its subsidiary companies (hereinafter collectively referred to as the ―Group‖) are engaged in the production and sale of wine, brandy and champagne, planting and purchase of grapes, development of tourism resources, etc. The registered address of the Company is Yantai City, Shandong Province, and the office address of the headquarters is 56 Dama Road, Zhifu District, Yantai City, Shandong Province. As at June 30, 2017, the Company issued 685,464,000 shares accumulatively. Refer to Note 7.33 for the details. The parent company of the Group is Changyu Group Company incorporated in China, which was ultimately and actually controlled by four parties, including Yantai Guofeng Investment Holding Co., Ltd., ILLVA Saronno Holding Spa, International Finance Corporation and Yantai Yuhua Investment & Development Co., Ltd. The financial statement and the consolidated financial statement of the Company were approved by the Board of Directors on August 25, 2017. The scope of the consolidated financial statement in this period can be seen in Note 9 ―Equity in other entities‖. The scope changes of the consolidated financial statement in this period can be seen in Note 8 ―Changes of the consolidated scope‖. 4. Preparation basis of financial statement 4.1 Preparation basis The Group implements the Accounting Standards for Business Enterprises (including the new and revised editions published in 2014) (―ASBE‖) published by the Ministry of Finance and relevant regulations thereof. In addition, the Group also discloses relevant financial information in accordance with Information Disclosure and Preparation Rules for Enterprises Publically Issuing Securities No.15 ---- General Rules for Financial Statement (Revised in 2014). Note-accounting basis and pricing principle The note-accounting basis of financial accounting adopted by the Group is accrual system and the measurement basis adopted by the Group in preparing its financial statement is historical cost. Subsequently, if the assets are impaired, impairment provisions are made in accordance with relevant accounting standards. When the historical cost measurement is used, the assets are measured by the amount of cash or cash equivalent when the assets are purchased or the fair value of the consideration. The liabilities are measured by the actually received funds or assets for performing the current obligations, or the contract amount for performing the current obligations, or the amount of cash or cash equivalent paid for anticipated liabilities in the daily activities. Fair value refers to a price received for selling an asset or paid for transferring a liability by the market participant in orderly transactions on the measurement date. No matter the fair value is observable or estimated by the valuation technique, the fair value measured and disclosed in this financial statement is recognized on this basis. 59 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report The fair value measurement is divided into three levels based on the observable degree of the input fair value and the importance of this input value on the whole fair value measurement: *The input value of the first level is the unadjusted price of the same assets or liabilities which can be acquired in an active market on the measurement date. *The input value of the second level is the directly or indirectly observable input value of relevant assets or liabilities except that of the first level. *The input value of the third level is the unobservable input value of relevant assets or liabilities. 4.2 Continuous operation The Group has appraised the ability of continuous operation for 12 months from June 30, 2017, and no issues or situations causing major doubts to this ability are found. Therefore, this financial statement is prepared on the basis of the continuous operation assumption. 5. Main accounting policies and accounting estimates 5.1 Statement on compliance with ASBE This financial statement fulfills the requirement of ASBE and gives a true and integrated view of the financial status and the consolidated financial status as at June 30, 2017, as well as the operating result, the consolidated operating result, the cash flow and the consolidated cash flow of the Company from January to June 2017. 5.2 Accounting period The accounting period of the Group is from January 1 to December 31. 5.3 Operating cycle The operating cycle refers to the period from the enterprise purchases the assets used for processing to the cash or cash equivalent is realized. The operating cycle of the Company is 12 months. 5.4 Recording currency Since Renminbi (RMB) is the currency of the main economic environment in which the Company and the domestic subsidiary companies thereof are situated, the Company and the subsidiary companies thereof adopt RMB as the recording currency. The overseas subsidiary companies thereof determine Euro and Peso as the recording currency according to the main economic environment in which they are situated. The currency in this financial statement prepared by the Group is RMB. 5.5 Accounting treatment method for business combination under common control and non-common control 5.5.1 Business combination and goodwill under non-common control A business combination under non-common control is a business combination in which all of the combining enterprises are not ultimately controlled by the same party or parties before and after the combination. The combination cost shall be the fair value of the assets paid, the liabilities incurred or assumed or the equity instruments issued by the acquirer in exchange for the control over the acquiree. The intermediary expenses such as audit, legal services and assessment consultation and other related management expenses paid by the acquirer for business combination are included in the current profit and loss when they occur. The identifiable assets, liabilities and contingent liabilities which are obtained from the acquiree in the business combination and meet the recognition conditions shall be measured on the acquisition 60 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report date according to the fair value thereof. If the combination cost is larger than the fair value of the identifiable net assets obtained from the acquiree during the combination, the difference shall be recognized as business goodwill and initially measured according to the cost thereof. The goodwill formed due to business combination shall be separately listed in the consolidated financial statement and measured on the basis of the cost minus the accumulative impairment provision. 5.6 Compiling methods of consolidated financial statement The consolidation scope of the consolidated financial statement is determined on the basis of control. Control means that the investor holds the power in the invested party, obtains variable returns by participating in relevant activities of the invested party and has the ability to affect the amount of the returns by using the power on the invested party. Once any change of the relevant facts and situations results in any change of relevant elements of the above definition of Control, the Group will carry out reappraisal. The merger of any subsidiary company starts from the date when the Group acquires the power to control this subsidiary company, while the termination of any subsidiary company ends in the date when the Group losses the power to control this subsidiary company. As for any subsidiary company obtained in a business combination under non-common control, the business result and the cash flow thereof since the acquisition date (date of obtaining the control power) shall have been properly included in the consolidated income statement and the consolidated cash flow statement. The principal accounting policies and accounting period adopted by the subsidiary companies shall be determined in accordance with the accounting policies and accounting period uniformly regulated by the Company. The influence of the internal transaction between the Company and the subsidiary companies as well as among subsidiary companies on the consolidated financial statement shall be neutralized at the time of combination. The shares in the owner's equity of the subsidiary companies, which do not belong to the parent company, shall be recognized as the minority equity and listed under the item of ―minority equity‖ of the owner‘s equity in the balance sheet. The shares in the current profit and loss of the subsidiary companies, which belong to the minority equity, shall be listed under the item of ―minority equity‖ of the net profit in the consolidated income statement. If the loss of the subsidiary companies borne by minority shareholders exceeds the shares of the owner's equity entitled therein by the minority shareholders at the beginning of the period, the difference shall be still credited against the minority equity. The transaction of purchasing the minority interest of any subsidiary company or that doesn‘t lose the control power of this subsidiary company due to disposal of partial equity investment shall be recognized as equity transaction for business accounting, and the book value of the equity attributable to the owner of the parent company and the minority equity shall be adjusted to reflect the changes in the related rights and interests in the subsidiary company. The difference between the adjusted amount of the minority interest and the fair value of the paid/received consideration shall be adjusted as capital reserves. If the capital reserves are insufficient for offset, the retained income shall be adjusted accordingly. 5.7 Recognition standards of cash and cash equivalents Cash comprises cash on hand and demand deposit of the Company. Cash equivalents refer to short-term highly liquid investments which are readily convertible into known amount of cash with an insignificant risk of changes in value. 61 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 5.8 Foreign currency transaction and foreign currency statement translation 5.8.1 Foreign currency transaction At the time of initial recognition of a foreign currency transaction, the amount of the foreign currency shall be translated into the amount of the recording currency at the spot exchange rate on the transaction date. The monetary items of the foreign currency transaction shall be translated into RMB at the spot change rate on the balance sheet date. The currency translation difference generated by the difference between the spot change rate on the balance sheet date and the spot change rate at the initial recognition or on the previous balance sheet date shall be included in the current profit and loss, except: ① the currency translation difference of the dedicated foreign currency loan that meets the capitalization condition shall be included in the cost of assets as capitalization during the capitalization period; ② the currency translation difference of the arbitrage tool to avoid foreign exchange risk shall be treated according to the hedge accounting method; ③ the currency translation difference of the available-for-sale monetary items generated by the book value other than the amortized cost shall be recognized as other comprehensive income and included in other comprehensive income. The amount of the non-monetary items of the foreign currency transaction measured by historical cost shall be still translated into the amount in the recording currency at the spot exchange rate on the transaction date. The non-monetary items of the foreign currency transaction measured by the fair value shall be translated at the spot exchange rate on the fair value date, and the difference between the amount in the recording currency and the amount in original recording currency shall be treated as the change of the fair value (including exchange rate movement) and shall be included in the current profit and loss or recognized as other comprehensive income. 5.8.2 Translation of foreign currency financial statement In order to compile a consolidated financial statement, the foreign currency financial statement of overseas business shall be translated into RMB financial statement in accordance with the following methods: all asset and liability items in the balance sheet shall be translated at the spot exchange rate on the balance sheet date; the shareholders' equity items, except for the ones as "undistributed profits", shall be translated at the spot exchange rate at the time when they occur; all items and the items reflecting the accrual profit distribution in the profit statement shall be translated at the exchange rate similar to the spot exchange rate at the time when they occur; the undistributed profits at the beginning of the year shall be the translated to the undistributed profits at the end of the previous year; the undistributed profits at the end of the year shall be calculated and listed as the translated profit distribution items; and the difference between the asset items and the sum of the liability items and the shareholders‘ equity items shall be recognized as other comprehensive income and included in the shareholder's equity. The foreign currency cash flows and the cash flows of the overseas subsidiary companies shall be translated at the exchange rate similar to the spot exchange rate at the time when they occur; the amount of the cash and cash equivalents impacted by the exchange rate movement shall be, as a reconciling item, separately listed under ―impact of exchange rate movement on cash and cash equivalents‖ in the cash flow statement. The balance at the beginning of the year and the actual amount of the previous year shall be listed as the amount translated according to the financial statement of the previous year. 5.9 Financial instruments When becoming a party to a contract of financial instruments, the Group shall recognize a financial asset or financial liability. The financial assets and financial liabilities shall be measured at their 62 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report fair value at the time of initial recognition. For other categories of financial assets and financial liabilities, relevant transaction expenses thereof shall be included in the initially recognized amount. 5.9.1 Effective interest method The effective interest method refers to the method by which the amortized cost and the interest income or expenditure of different installments are calculated in light of the effective interest rates of the financial assets or financial liabilities (including a group of financial assets or financial liabilities). The effective interest rate refers to the interest rate adopted to cash the future cash flow of a financial asset or financial liability within the predicted term of existence or within a shorter applicable term into the current book value of the financial asset or financial liability. When the effective interest rate is calculated, the Group predicts the future cash flow (taking no account of the future credit loss) on the basis of considering all the contractual provisions concerning the financial assets or financial liabilities, as well as all kinds of charges, transaction expenses, discounts, premiums, etc. which are paid, charged, and included in the effective interest rate between the contracting parties of the financial assets or liabilities. 5.9.2 Classification, recognition and measurement of financial assets Financial assets are classified into the following categories when they are initially recognized: the financial assets which are measured at the fair value and the variation of which is included in the current profit and loss, the investments which will be held to their maturity, loans, accounts receivable and available-for-sale financial assets. The financial assets purchased and sold through common modes shall be recognized and terminated from recognition according to the accounting on the transaction date. The financial assets held by the Group are loans, accounts receivable and available-for-sale financial assets. Loans and accounts receivable Loans and accounts receivable refer to the non-derivative financial assets for which there is no quoted price in an active market and of which the repo amount is fixed or determinable. The financial assets classified by the Group into loans and accounts receivable include monetary capital, bills receivable, accounts receivable, interest receivable, dividends receivable and other receivables. The loans and accounts receivable shall be subsequently measured at amortized cost by adopting the effective interest rate method. The profits or losses that occur when such loans and accounts receivable are terminated from recognition, impaired or amortized shall be included in the current profit and loss. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are designated as available for sale at the time of initial recognition and the financial assets other than those measured at their fair value and the variation of which is included in the current profit and loss, loans, accounts receivable and the investments which will be held to their maturity. The equity instrument investment without quoted market price in an active market whose fair value cannot be reliably measured shall be measured by cost. 5.9.3 Impairment of financial assets On each balance sheet date, the Group checks the book value of the financial assets. If there is any objective evidence indicating that a financial asset is impaired, the impairment provision is accrued. Objective evidence indicating the impairment of financial assets refers to those occurring after the initial recognition, have effect on the estimated future cash flow of the financial assets, and can be 63 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report measured reliably. The objective evidence indicating the impairment of the financial assets includes the following observable matters: ① A serious financial difficulty occurs to the issuer or the debtor; ② The debtor breaches any of the contractual stipulations, such as, failure to pay or delay of the payment of interest or principal; ③ The Group makes any concession due to economic, legal factors or other factors to the debtor which is in financial difficulties; ④ The debtor will probably become bankrupt or carry out other financial reorganizations; ⑤ The financial assets can no longer continue to be traded in an active market due to serious financial difficulties of the issuer; ⑥ It is impossible to identify whether the cash flow of a certain asset within a certain group of financial assets has decreased or not. But after making an overall appraisal according to the public data available, it is found that the estimated future cash flow of the said group of financial assets has indeed decreased since it was initially recognized and such decrease can be measured, including: * The payment ability of the debtor of the said group of financial assets worsens gradually; * The country or economic region where the debtor is situated has the conditions that may cause the financial assets to be unpaid. ⑦ A serious unfavourable change occurs to the operating technology, market, economic environment, legal environment of the issuer of the equity instruments that causes the investor of the equity instruments can‘t recover the investment costs; ⑧ The fair value of the equity instrument investment has serious or permanent decline; and ⑨ Other objective evidence showing the depreciation of the financial assets. * Impairment of financial assets measured by amortized cost Where a financial asset measured at amortized cost is impaired, the book value of the said financial asset shall be written down to the current value of the predicted future cash flow determined according to the capitalization of original effective exchange rate (excluding the loss of future credits not yet occurred), and the amount as written down shall be recognized as loss of the impairment of the asset and shall be included into the current profit and loss. If there is any objective evidence proving that the value of the said financial asset has been restored, and it is objectively related to the events that occur after such loss is recognized, the impairment losses originally recognized shall be reversed. However, the reversed book value shall not be any more than the amortized costs of the said financial asset on the day of reverse under the assumption that no provision is made for the impairment. An impairment test shall be made by the Group independently on the individually significant financial assets; with regard to not individually significant financial assets, an independent impairment test may be carried out, or they may be included in a combination of financial assets with similar credit risk characteristics so as to carry out an impairment-related test. Where, upon independent test, the financial asset (including the individually significant financial assets and not individually significant financial assets) has not been impaired, it shall be included in a combination of financial assets with similar credit risk characteristics so as to conduct another impairment test. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized shall not be included in the combination of the financial assets with similar credit risk characteristics for impairment test. * Impairment of available-for-sale financial assets measured by cost 64 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report When the equity instrument investment without quoted market price in an active market and the fair value of which cannot be reliably measured is impaired, the book value is decreased to the current value confirmed by the discounted future cash flow according to the current market return of the similar financial assets. The decreased amount is recognized as impairment loss and included in the current profit and loss. The impairment loss of this kind of financial assets can‘t be transferred back upon confirmation. 5.9.4 Transfer of financial assets Where a financial asset satisfies any of the following conditions, it shall be terminated from recognition: ① Where the contractual rights for collecting the cash flow of the said financial asset are terminated; ② Where the said financial asset has been transferred and all the risks and rewards of the financial asset have been substantially transferred to the receiver; ③ Where the financial asset has been transferred, although the Group does not transfer or retain almost all the risks and rewards of the financial asset, the Group still waives the control over the financial asset. Where the overall transfer of the financial asset satisfies the derecognition conditions, the difference between the book value of the transferred financial asset as well as the consideration received due to such transfer and the summation of the cumulative amount of the fair value of the asset that is originally included in other comprehensive income shall be included in the current profit and loss. 5.9.5 Classification, recognition and measurement of financial liabilities The Group classifies the financial instruments or the components as financial liabilities or equity instruments at the time of initial recognition according to the contract terms of the issued financial instruments and the reflected economic essence rather than only the legal form, considering the definition of financial liabilities and equity instruments. The financial liabilities are classified as the financial liabilities and other financial liabilities measured by fair value and the variation of which is included in the current profit and loss at the time of initial recognition. The financial liabilities of the Group are other financial liabilities, including short-term loans, bills payable, accounts payable, interest payable, other payables, non-current liabilities due within one year, long-term loans and long-term payables. Other financial liabilities Other financial liabilities are subsequently measured at amortized cost by adopting effective interest rate method, wherein the profits or losses that arise when such financial liabilities are terminated from recognition or amortized shall be included in the current profit and loss. 5.9.6 Terminated recognition of financial liabilities When the prevailing obligations of a financial liability are relieved in all or in part, the recognition of the financial liability shall be terminated in all or in part. Where the recognition of a financial liability is totally or partially terminated, the difference between the book value of the part which has been terminated from recognition and the consideration which has been paid (including the transferred non-cash assets and the assumed new financial liabilities) shall be included into the current profit and loss. 5.9.7 Offset of financial assets and financial liabilities When the Group has the legal right to offset the recognized financial assets and financial liabilities and this right can be implemented at present, and when the Group plans to use net settlement or liquidate the financial assets and pay off the financial liabilities, the amount after the financial assets offset the financial liabilities is listed in the balance sheet. Besides, the financial assets and 65 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report the financial liabilities are respectively listed in the balance sheet without offset. 5.9.8 Equity instruments The equity instruments mean the contracts by which to hold the residual equity in the assets of the Group after deducting all the liabilities. The issuing (including refinancing), counter purchase, sale or cancellation of the equity instruments by the Group shall be handled as changes of the equity. The Group doesn‘t recognize any change to the fair value of the equity instruments. The transaction expenses related to the equity transaction shall be deducted from the equity. The distribution related to the equity instrument holder by the Group shall be considered as profit distribution, and the issued share dividends don‘t affect the total amount of the shareholders‘ equity. 5.10 Accounts receivable 5.10.1 Bad account provision of individually significant accounts receivable The accounts receivable with the amount above RMB Judgment reference or amount standard for individually 3,000,000 Yuan shall be recognized by the Group as the significant accounts individually significant accounts receivable. An impairment test shall be made independently by the Group on the individually significant financial assets. Where, upon independent test, the financial asset has not been impaired, it shall be included in a combination of financial assets with similar risk characteristics so as to Accruing method for individually significant accounts accrued for conduct another impairment test. The accounts receivable bad account provision individually that are independently assessed for impairment and for which an impairment loss is or continues to be recognized shall not be included in the combination of accounts receivable with similar credit risk characteristics for impairment test. 5.10.2 Individually insignificant accounts receivable accrued for bad account provision individually If there is objective evidence that the Group can‘t call back the accounts Reasons for accruing for bad account according to original articles, the individually insignificant accounts receivable provision individually can be accrued for bad account provision individually. The impairment losses are recognized according to the difference between the Methods for accruing bad account present value of future cash flow and the book value, and impairment provision provision is accrued. 5.11 Inventories 5.11.1 Classification of inventories Inventories of the Group comprise raw materials, goods in process and commodity stocks. The inventories are initially measured by cost. The inventory cost consists of purchase cost, processing cost and other expenditures to make inventories reach the current site and state. 5.11.2 Pricing methods for sending out inventories Weighted average method is used to determine the actual cost for sending out inventories when sending them out. The agricultural products after the harvest are handled in accordance with the ASBE 1- Inventories. 5.11.3 Recognition reference of the net realizable value of inventories Inventories are stated at the lower of cost and net realizable value on the balance sheet date. If the net realizable value is lower than the cost of inventories, the provision for the loss on decline in value of inventories are made. The net realizable value refers to the amount: the estimated sale price of inventories deducting the estimated cost to happen till completion, the estimated selling 66 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report expense and relevant taxes, in daily activities. Based on the acquired concrete evidence, the purpose for holding inventories and the impact of matters after balance sheet date shall be also considered during recognition of the net realizable value of inventories. The inventories are accrued inventory depreciation provision according to the difference of single inventory item and its net realizable value. After accruing inventory depreciation provision, if the previous influence factors writing down inventories value disappear resulting in the net realizable value of the inventories being higher than their book value, it shall be reversed from the originally accrued inventory depreciation provision amount and the reversed amount shall be included in the current profit and loss. 5.11.4 Inventory system for the inventories Inventory system: Perpetual inventory system 5.11.5 Amortization method of low-priced and easily-worn articles and packages Amortization method of packages and low-priced and easily-worn articles: One-off amortization method 5.12 Those divided into assets held for sale When a non-current asset of the Group (excluding deferred income tax asset) meets the following conditions simultaneously, the Group shall recognize it as holding for sale: This non-current asset can be sold immediately at the current state only according to the usual terms for selling such non-current assets; a resolution has been passed related to the disposal of this non-current asset; an irrevocable transfer agreement has been signed with the transferee; and this transfer will be completed within one year. As for non-current assets held for sale, the Group shall not withdraw the depreciation or carry out amortization, and the book value or the net amount deducting the disposal expenses from the fair value, whichever is less, shall be used for calculation. 5.13 Long-term equity investments 5.13.1 Judgment standard of control, common control and significant impact Control means that the investor holds the power in the invested party, obtains variable returns by participating in relevant activities of the invested party and has the ability to affect the amount of the returns by using the power on the invested party. Common control means a joint control over a certain arrangement according to relevant agreements and relevant activities of this arrangement must be decided upon unanimous consent of the participants sharing the control power. Significant impact refers to the right to participate in decision-making of the investor‘s financial and operating policies but not controlling or commonly controlling the formulation of these policies with other parties. When determining whether to control or exert significant influence on the invested unit, the potential voting power factors such as the current convertible company bonds and the current executable equity warrants held by the investor and other parties in the invested unit have been considered. 5.13.2 Recognition of initial investment cost For long-term equity investments acquired from business combination under non-common control, the combination cost shall be regarded as the initial investment cost of the long-term equity investments on the acquisition date. For the business merger ultimately formed under non-common control with the stock rights of the purchased party step by step through several transactions, it shall be handled depending on whether it is a ―package deal‖: If it belongs to a ―package deal‖, each transaction shall be regarded as a transaction with the control power acquired for the accounting treatment. The intermediary expenses such as audit, legal services and assessment consultation and other related management expenses paid by the acquirer for business combination are included in the current profit and loss when they occur. 67 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report For long-term equity investments other than those formed by business combination, initial measurement shall be carried out according to the cost. 5.13.3 Subsequent measurement and recognition of loss and profit Long-term equity investments by cost method Long-term equity investments in the subsidiary companies are measured on cost method basis in the corporate financial statement. Subsidiary companies refer to the invested entities by which the Group has control. When cost method is adopted, the long-term equity investments are measured at the initial investment cost. In case of additional or recovered investment, the cost of the long-term equity investments shall be adjusted accordingly. The current investment income shall be recognized according to the cash dividends or profits declared to issue by the invested unit. 5.13.4 Disposal of long-term equity investments When the long-term equity investments are disposed, the difference between the book value and the actually acquired price is included in the current profit and loss. 5.14 Fixed assets 5.14.1 Recognition conditions Fixed assets refer to the tangible assets held for producing goods, rendering services, leasing or operation management, with service life exceeding one accounting year. Fixed assets can only be confirmed that the economic benefits related to the fixed assets are likely to flow into the Group, and the cost of the fixed assets can be measured reliably. Initial measurement for fixed assets shall be carried out according to the cost. For the subsequent expenses related to the fixed asset, if the economic benefits related to the fixed asset are likely to flow into the Group and the cost thereby can be reliably measured, the subsequent expenses are included in fixed asset cost and the book value of the substituted part shall be terminated. Other subsequent expenses shall be included in the current profit and loss. 5.14.2 Depreciation methods Depreciation is calculated by the straight-line depreciation within the service life from the month following having been put into operation. The estimated service life, residual value and annual depreciation rate are as follows: Classification Depreciation method Depreciation life Residual value rate Annual depreciation rate Straight-line Houses and buildings 20-40 years 0-5% 2.4%-5.0% depreciation Straight-line Machinery equipment 5-20 years 0-5% 4.8%-20.0% depreciation Straight-line Transportation tools 4-12 years 0-5% 7.9%-25.0% depreciation The estimated residual value refers to the amount that the Group obtains from disposal of the assets at present after deducting the predicted disposition expenses at an estimated state on the assumption that the predicted service life of the fixed assets has expired. 5.14.3 Other description When the fixed assets are under disposal state or cannot generate any economic benefits through use or disposal as expected, the fixed assets shall be derecognized. The selling, transfer, scrapping or damage disposal income shall be included in the current profit and loss after deducting the book value and relevant taxes. The Group reviews the service life, expected net residual value, and the depreciation method of the fixed assets at least at the end of each year, and in case of any change, the change will be disposed 68 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report as accounting estimate change. 5.15 Construction in progress Construction in progress is measured by actual costs, and the actual costs include all costs of the engineering during the period of construction, capitalized borrowing costs before the engineering reaches the planned serviceable condition and other related costs. The construction in progress is not depreciated. The construction in progress is transferred to fixed assets after reaching the planned serviceable condition. 5.16 Borrowing costs Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset shall be capitalized after expenditure to acquire happens, borrowing costs happen, acquisition, construction or production essential for making the assets ready for their intended use or sales. Capitalization of borrowing costs shall cease when all the activities necessary to prepare the qualifying asset for its intended use of sale are substantially complete. If the acquisition, construction or production of a qualifying asset is abnormally interrupted, and the interruption period exceeds three months, the capitalization of borrowing costs shall be temporarily ceased, until the construction or production resumes. Other borrowing costs are recognized as expenses when occur. The amount after deducting the interest income of the borrowing funds that have not yet been used which are deposited in bank or the investment income from temporary investment from the interest expenses actually incurred in the current period of special borrowings shall be capitalized. 5.17 Biological assets The biological assets of the Group are productive biological assets. Productive biological assets refer to the biological assets held for the purposes of producing agricultural products, rendering services or leasing, etc. The productive biological assets of the Group are vines that produce grapes. Initial measurement for the productive biological assets is carried out according to the cost. For the occurred cost of the self-breeding productive biological asset before achieving the intended production and operation purposes can be directly attributable to the necessary expenses of the asset, including the borrowing cost conforming to capitalization. The productive biological assets are not accrued depreciation until reaching the intended production and operation purposes. After reaching the intended production and operation purposes, the productive biological assets are accrued depreciation within the service life straight-line depreciation. The service life, estimated net residual value rate and annual depreciation rate of different productive biological assets are as follows: Category of assets Service life Estimated residual value rate (%) Annual depreciation rate Vines 20 years 5% The service life of the productive biological assets of the Group and the estimated residual value are confirmed by the normal service life cycle of the biological assets. The Group reviews the service life, expected net residual value, and the depreciation method of the productive biological assets at least at the end of each year. In case of any change, the change will be disposed as accounting estimate change. At the time of sale, loss, death, damage or destroy of a productive biological asset, the difference after deducting the book value and relevant taxes from the disposal income are included in the current profit and loss. 5.18 Intangible assets 5.18.1 Pricing method, service life and impairment test Intangible assets include land use right, software, etc. 69 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Initial measurement for intangible assets is carried out according to the cost. For the intangible assets with finite lives, since they are available, the amount after the original value deducts expected net residual value and the accrued accumulative amount of provision for impairment is amortized evenly based on straight line method. The intangible assets with indefinite service life are not amortized. The amortization method, service life and estimated residual value of all kinds of intangible assets are shown as follows: Category of assets Service life Estimated net residual value rate Annual amortization rate Land use right 40-50 years - 2-2.5% Software 5-10 years - 10-20% Trademark 10 years - 10% At the end of the period, the service life and amortization method of the intangible assets with finite service life shall be reviewed and adjusted if necessary. 5.19 Impairment of long-term assets On each balance sheet date, the Group and the Company check the long-term equity investments, fixed assets, construction in progress, productive biological assets and intangible assets with finite service life to determine whether there is a sign indicating any impairment. If there is such a sign, the recoverable amount shall be estimated. The estimated recoverable amount of the asset is based on the single asset. If it is difficult to estimate the recoverable amount of a single asset, the recoverable amount is determined based on the asset group which the asset is in. The recoverable amount is the higher one between the net amount after the disposition expenses are deducted from the fair value of the asset or the asset group and the current value of the estimated future cash flow. If the recoverable amount of the asset is lower than its book value, the impairment provision of the asset is accrued based on the difference and included in the current profit and loss. Impairment test is carried out for goodwill at least at the end of each year. The impairment test of goodwill shall be carried out in combination with the related asset group or asset combination. That is to say, the book value of the goodwill is amortized to the asset group or asset combination benefiting from the synergistic effect of the business combination according to the reasonable methods from the acquisition date. If the recoverable amount of the asset group or asset combination which includes the amortized goodwill is lower than the book value, the corresponding impairment loss is recognized. The amount of impairment loss shall firstly offset the book value of the goodwill amortized to the asset group or asset combination and then offset the book value of other assets in proportion according to the proportion in the book value of other assets in the asset group or asset combination except for the goodwill. After the impairment loss of assets has been recognized, it is not be reversed in the future accounting periods. 5.20 Long-term unamortized expenses Amortization period of different long-term unamortized expenses of the Group are listed as follows: Amortization period Land requisition fee 50 years Land leasing fee 50 years Afforestation fee 5-20 years Decoration fee 3-5 years Other 3 years 70 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 5.21 Employee remunerations 5.21.1 Accounting treatment method of short-term remunerations During the accounting period that the employees provide services for the Group, the actual short-term remunerations are recognized as liabilities and included in the current profit and loss or relevant asset costs. The welfare expenses of the employees in the Group are included in the current profit and loss or relevant asset costs when occur based on the actual amount. The non-monetary welfare expenses of the employees are measured by the fair value. During the accounting period that the employees provide services for the Group, the corresponding employee remunerations and the corresponding liabilities are recognized and included in the current profit and loss or relevant asset costs after the social insurance premiums including medical insurance premium, industrial injury insurance premium and birth insurance premium as well as housing provident funds are paid by the Group for the employees, and labor union dues and employee education funds are withdrawn by the Group according to the regulated withdrawing base and proportion. 5.21.2 Accounting treatment method of welfare after resignation The Group makes the contribution plan for the welfare after resignation. During the accounting period that the employees provide services for the Group, the amount to be deposited which is calculated in accordance with the contribution plan is recognized as liabilities and included in the current profit and loss or relevant asset costs. 5.21.3 Accounting treatment method of welfare after dismission If the Group provides dismission welfare to the employees, the employee remuneration liabilities caused by the dismission welfare shall be recognized and included in the current profit and loss on the following date which is earlier: The Group can‘t unilaterally withdraw the dismission welfare due to termination of labor relation plan or redundancy suggestion; or the Group confirms the costs or expenses related to the reorganization involving the payment of the dismission welfare. 5.22 Revenue 5.22.1 Revenues from sale of goods When the significant risks and rewards of ownership of goods have been transferred to the buyer, provided that the Group maintains neither continuous management right involvement to the degree usually associated with ownership, nor effective control over the goods sold, and cost of sales can be measured reliably. When the relevant economic benefits are likely to flow into the enterprise and the relevant incurred cost or cost to be incurred can be measured reliably, the realization of the revenue from sale of goods can be recognized. 5.22.2 Rendering of services When income amount of rendering of services can be measured reliably, the relevant economic benefits are likely to flow into the Group, the stage of completion of the transaction can be measured reliably, and the incurred cost or cost to be incurred in the transaction can be measured reliably, then the income realization of rendering of services can be recognized. The Group confirmed the income of the rendered services according to percentage-of-completion method on the balance sheet date. The percentage-of-completion of the service transaction is determined according to the proportion of the rendered service accounting for the total services that shall be rendered. If the outcome of rendering of service transaction cannot be reliably estimated, the income of the rendered services are determined according to the render cost amount that is incurred and is expected to be compensated, and the incurred service cost shall be the period charge. If the incurred service cost is expected to be unable to be compensated, the income will not be determined. 71 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 5.23 Governmental subsidies 5.23.1 Judgment standard and accounting treatment method of governmental subsidies related to assets Governmental subsidies refer to monetary or non-monetary assets received by the Group from the government. According to the nature of the granted object clearly stipulated in relevant government documents, governmental subsidies include those related to assets and those related to income. Governmental subsidies are recognized where there is a reasonable assurance that the allowances will be received and all attaching conditions will be complied with. Monetary allowances are measured on the basis of the amount received or the amount receivable. Governmental subsidies related to assets are recognized as deferred income and are distributed equally in the current profit and loss within the useful lives of the relevant assets. 5.23.2 Judgment standard and accounting treatment method of governmental subsidies related to revenues The governmental subsidies related to revenues to be used as compensation for future expenses or losses are recognized as deferred income and are included in the profit and loss statement for the period where the relevant expenses are recognized; or those to be used as compensation for relevant expenses or losses already occurred are recorded directly in the current profit and loss. 5.24 Deferred income tax assets/deferred income tax liabilities The income tax expenses include the current income tax and deferred income tax. 5.24.1 Current income tax On the balance sheet date, the current income tax liabilities (or assets) formed in the current period and the prior periods are measured according to the predicted payable (refundable) income tax amount as stipulated by tax law. 5.24.2 Deferred income tax assets and deferred income tax liabilities The balance sheet liability method is used for recognizing deferred income tax assets and deferred income tax liabilities for the difference between certain assets, book value of liability items and their tax base, and the temporary differences arising from the book value of items (that are not recognized as assets and liabilities but can be recognized the tax bases as stipulated by tax law) and tax bases. Normally all temporary differences are recognized the relevant deferred income taxes. However, for the deductible temporary differences, the Group recognized the relevant deferred income tax assets taking the taxable income that is likely to be obtained for deducting deductible temporary differences as the limit. In addition, the temporary differences relevant to initial recognition of goodwill and relevant to the initial recognition of assets or liabilities arising from transaction not of business combination, and not influencing accounting profit and taxable income (or deductible loss) are not recognized for the relevant deferred income tax assets or liabilities. For the deductible losses and tax credits that can be transferred during subsequent years, the corresponding deferred income tax assets shall be recognized by taking the future taxable income that is likely to be used to deduct deductible losses and tax credits as the limit. The Group recognized the deferred income tax liabilities arising from the taxable temporary differences relevant to the subsidiary companies, except for that the Group can control the time of the reverse of the temporary differences which are unlikely to be reversed in the foreseeable future. For the deductible temporary differences relevant to the subsidiary companies, the Group will recognize the deferred income tax assets only when the temporary differences are likely to be reversed in the foreseeable future and the taxable income for deducting deductible temporary differences is likely to be achieved in the future. 72 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report On the balance sheet date, the deferred income tax assets and deferred income tax liabilities are measured according to the applicable tax rate during the period of expecting to repossess the relevant assets or pay off relevant liabilities as stipulated by tax law. Except for the current income taxes and deferred income taxes (relevant to transaction and matter that are directly included in other comprehensive income or stockholder's equity) that are included in other comprehensive income or stockholder's equity and the deferred income taxes arising from business combination that adjusts the book value of the goodwill, the expenses or revenues of other current income taxes and deferred income taxes are included in the current profit and loss. On the balance sheet date, the Group shall review the book value of deferred income tax assets and shall write down the book value of deferred income tax assets if sufficient taxable income is unlikely to be obtained in the future to deduct the benefits of deferred income tax assets. The amount written down shall be reversed when it is likely to obtain sufficient taxable income. 5.24.3 Offset of income tax When there is the legal right of netting or intention of netting or carrying out obtaining assets and paying off liabilities at the same time, the current income tax asset and current income tax liability of the Group are reported according to the net amount after offset. When there is the legal right of netting the current income tax asset and current income tax liability and the deferred income tax assets and deferred income tax liabilities are relevant to the income tax collected by same tax collection and management department on the same taxpayer or different taxpayers, however, the involved tax payers intend to net the current income tax assets and liabilities or obtain assets and pay off liabilities at the same time during every period of reverse of each significant deferred income tax assets and liabilities in the future, deferred income tax assets and deferred income tax liabilities of the Group are reported according to the net amount after offset. 5.25 Lease The term ―financing lease‖ refers to a lease that has transferred in substance all the risks and rewards related to the ownership of an asset. Other leases except for financing lease are the operating lease. 5.25.1 Accounting treatment method of operating lease The Group records the operating lease business as a lessee. Rental expenses under the operating lease are credited to related costs of the assets or the current profit and loss on the straight line basis over the lease terms. The initial direct expenses are included in the current profit and loss. 5.26 Changes in main accounting policies and accounting estimates 5.26.1 Changes in main accounting policies Nil 5.26.2 Changes in main accounting estimates Nil 5.27 Other Critical assumptions and uncertain factors adopted for important judgements and accounting estimates during the application of the accounting policies During the application of the accounting policies of this Financial Report IV, the Group needs to judge, estimate and assume the book value of the report items that are unable to be accurately measured due to the inherent uncertainties of business activities, in which the judgment, estimation and assumption are made based on the previous historical experience of the management level of the Group and considering other relevant factors. The actual results may have differences from the 73 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report estimation of the Group. The Group regularly reviews the above-mentioned judgment, estimation and assumption based on the continuous operation, and the change of accounting estimate only affects the current period of change, of which the influence number will be recognized at the current period of change; in case of influencing both current period and future period of change, the influence number will be recognized at the current period and future period of change. Critical assumptions and uncertain factors adopted for accounting estimates On the balance sheet date, the main critical assumptions and uncertainties in accounting estimates that are likely to result in significant adjustments in assets and book value of liabilities in the future period include: Deferred income tax assets Within the limit of the likeliness that there is sufficient taxable income to deduct deductible losses, the deferred income tax assets shall be recognized according to all deductible losses that have not been utilized, which requires the management level to use a lot of judgments to estimate the occurred time and amount of taxable income to be obtained in the future, and combine with tax planning strategy to decide the amount of deferred income tax assets that shall be recognized. Depreciation The Group uses straight line method for provision for depreciation within the expected service life after considering the residual value of the fixed assets. The Group regularly reviewed the expected service life to decide the amount of depreciation expense that will be included in every report period. The expected service life is recognized by the Group according to the previous experience on similar assets and in combination with the expected technical changes. The depreciation expense shall be adjusted if there are significant changes in the previous estimate. Service life of intangible assets The expected service life of intangible assets are estimated based on actual service life of the previous intangible assets of similar natures and functions and according to historical experience and in consideration of the duration of the contractual rights or other legal rights applicable to the intangible assets. In case that the service life of the intangible assets shortens or extends, the amortization period will be adjusted in the future period for intangible assets with finite life. Impairment of long-term assets The Group carries out impairment assessment on long-term assets to determine if the recoverable amount of assets drops to the amount lower than their book value. If the situation shows that the book value of the long-term assets may not be fully recovered, the relevant assets will be deemed as having been impaired and the impairment loss shall be correspondingly recognized. The recoverable amount is the higher in: the net amount of fair value of an asset (or asset group) minus disposal expense, and the present value of the estimated future cash flow of the asset (or asset group). It is difficult for the Group to accurately estimate the fair value of an asset because of difficulty in obtaining the open market price of the asset (or asset group). It needs to make significant judgments on the output, selling price, relevant operating cost of the asset (or asset group) and the discount rate used for calculating present value when estimating the present value of future cash flow. The Group will use all easily available materials in estimating the recoverable amount, including the forecast relevant to output, selling price and relevant operating cost according to the reasonable and supportable assumption. Bad account provision for accounts receivable Bad account provision for accounts receivable shall be recognized by the management level according to the objective evidences (e.g. the possibility of bankruptcy or severe financial difficulty 74 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report of the debtor) that can affect the recovery of the accounts receivable. The management level will reevaluate bad account provision in the end of every year. Inventory depreciation provision accrued based on net realizable value According to the inventory accounting policy, the Group carries out price decrease provision for obsolete and unsalable inventories with higher cost than the net realizable value measurement according to the lower of the cost and net realizable value. The Group will reevaluate if the inventories are obsolete and unsalable, and if the net realizable value is lower than inventory cost in the end of every year. 6. Taxes 6.1 Main taxes and tax rate Taxes Tax basis Tax rate VAT is levied by the output tax calculated by the taxable revenue as 17%, 6% (China), 19.6% Value added tax the tax base after deduction of eligible input VAT in this period. (France) and 21% (Spain) The consumption tax is levied by the taxable revenue as the tax Consumption tax 10%-20% (China) base. Business tax The business tax is levied by the taxable revenue as the tax base. 5% (China) Urban maintenance and The urban maintenance and construction tax is levied by the actually 7% (China) construction tax paid turnover tax as the tax base. The corporate income tax is levied by the taxable income as the tax 25% (China), 33% (France) Corporate income tax base. and 28% (Spain) 6.2 Tax incentives Ningxia Changyu Grape Growing Co., Ltd. (―Ningxia Growing‖), a subsidiary of the Company, whose principal activity is grape growing, is incorporated in Yongning County, Ningxia Hui Autonomous Region. According to Article 27 of PRC Corporate Income Tax and Article 86 of PRC Corporate Income Tax Measures for Implementation, it enjoys an exemption of corporate income tax related to grape growing. Xinjiang Tianzhu Wine Co., Ltd. (―Xinjiang Tianzhu‖) and Xinjiang Chateau Changyu Baron Balboa Co., Ltd. (―Shihezi Chateau‖), the subsidiaries of the Company, are enterprises engaged in the production and sales of bulk wine incorporated in Shihezi City, Xinjiang Uygur Autonomous Region. In accordance with relevant regulations of the Notice on Relevant Issues of Taxes Policies for Deeply Implementing the Western Development Strategy (Cai Shui [2011] No. 58), such enterprises enjoy the preferential policy for the corporate income tax, and the preferential tax rate of the corporate income tax is 15% from 2015 to 2020. 7. Notes to consolidated financial statement 7.1 Monetary capital Unit: Yuan Item Ending balance Beginning balance Cash on hand 112,832 117,507 Bank deposit 1,433,123,482 1,240,607,797 Other monetary capital 116,831,467 150,792,303 75 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Total 1,550,067,781 1,391,517,607 Including: Total amount of funds 17,223,253 16,080,618 deposited abroad As at June 30, 2017, the restricted bank deposit details are listed as follows: Item Ending balance Beginning balance Housing fund of the unit 2,748,410 2,711,926 Total 2,748,410 2,711,926 As at June 30, 2017, the details of other monetary funds are listed as follows: Item Ending balance Beginning balance Pledge of fixed deposits by Yantai Changyu Wine Research, 46,100,000 46,100,000 Development and Manufacture Co., Ltd. (―R&D Company‖) Refundable deposits of bills payable 8,000,000 38,900,000 Refundable deposits of the letter of 60,580,850 25,694,735 credit Account balance of Alipay 1,992,035 40,047,367 Guaranty money for the unit card 158,582 50,201 Total 116,831,467 150,792,303 As at June 30, 2017, the frozen amount in the account balance of Alipay was RMB 1,992,035 Yuan (December 31, 2016: RMB 18,118,441 Yuan). As at June 30, 2017, the monetary capital deposited abroad by the Group was RMB 17,223,253 Yuan (December 31, 2016: RMB 16,080,618 Yuan). As at June 30, 2017, the bank deposits of the Group including short-term fixed deposits ranging from 3 months to 1 year amounted to RMB 201,000,000 Yuan (December 31, 2016: RMB 3,000,000 Yuan), with the interest rates ranging from 1.3%-1.95%. 7.2 Bills receivable 7.2.1 Classification of bills receivable Unit: Yuan Type Ending balance Beginning balance Bank acceptance 378,804,230 210,470,027 Trade acceptance Total 378,804,230 210,470,027 7.2.2 Bills receivable pledged by the Company at the end of period Nil 76 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 7.2.3 Bills receivable endorsed or discounted by the Company at the end of period but not yet matured as of the balance sheet date Unit: Yuan Amount terminating recognition at the end Amount not terminating recognition Item of period at the end of period Bank acceptance 138,552,83 Trade acceptance Total 138,552,83 7.2.4 Bills receivable reclassified as accounts receivable by the Company due to the default of drawer at the end of period Nil 7.3 Accounts receivable 7.3.1 Accounts receivable disclosed by type Unit: Yuan Ending balance Beginning balance Bad debt Book balance Book balance Bad debt provision Type provision Book value Book value Amount Proportion Amount Accrued Amount Proportion Amount Accrued proportion proportion Accounts receivable of significant single amount 70,335,893 42.1% 70,335,893 75,230,493 43.5% 75,230,493 and single accrued bad debt provision Accounts receivable accrued bad debt provision by credit risk features Accounts receivable of insignificant single amount 96,816,616 57.9% 96,816,616 97,832,135 56.5% 97,832,135 and single accrued bad debt provision Total 167,152,509 100% 167,152,509 173,062,628 100% 173,062,628 The credit term of accounts receivable is normally one month. Major customers can be granted a credit term up to three months. The accounts receivable are free from interest. As at June 30, 2017, the accounts receivable with ownership restrictions were RMB 29,248,895 Yuan 77 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report (December 31, 2016: RMB 30,732,944 Yuan). Please refer to Note 7.19 for the details. 7.3.2 Bad debt provision accrued, transferred back or received in this period The bad debt provision accrued in this period was RMB 0 Yuan; and that transferred back or received in this period was RMB 0 Yuan. 7.3.3 Accounts receivable actually cancelled after verification in this period Nil 7.3.4 Accounts receivable collected by the borrowers of top 5 units ranked by the ending balance Relationship with the Percentage in total Unit Amount Period Company accounts receivable Nonggongshang Supermarket (Group) Co., Third party 11,144,490 Within 1 year 6.7% Ltd. Distribuidora Third party 9,926,131 Within 1 year 5.9% Internacional ( DIA) Wal-mart (China) Investment Co., Ltd. Third party 8,649,179 Within 1 year 5.2% Lianhua Supermarket Holdings Co., Ltd. Third party 8,599,554 Within 1 year 5.1% Suguo Supermarket Co., Ltd. Third party 8,406,322 Within 1 year 5.0% 46,725,676 28.0% Total -- -- 7.3.5 Accounts receivable terminating recognition due to transfer of financial assets Nil 7.3.6 Accounts receivable transferred and included in assets and liabilities Nil 7.4 Advance payment 7.4.1 Advance payment listed by age Unit: Yuan Ending balance Beginning sum Age Amount Proportion Amount Proportion Within 1 year 2,114,086 100% 2,175,606 100% 78 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 1-2 years 2-3 years More than 3 years Total 2,114,086 -- 2,175,606 -- 7.4.2 Advance payment collected by the prepaid parties of top 5 units ranked by the ending balance Percentage Relationship with in the total Unit Amount Age Reason for unsettlement the Group advance payment% Within 1 Chongqing Hoson Glass Co., Ltd. Third party 508,873 Failure to receive the goods 24.1% year Shandong Electric Power Group Within 1 Prepaid electricity Company Yantai Power Supply Third party 484,514 22.9% year purchasing fund Company Jiangsu Dibang Construction Within 1 Third party 421,357 Prepaid repair charges 19.9% Engineering Co., Ltd. year Yantai Yanlai Electromechanical Within 1 Equipment Production, Maintenance Third party 100,000 Prepaid repair charges 4.7% year and Supply Center Within 1 Yantai Refrigeration Equipment Plant Third party 54,544 Prepaid repair charges 2.6% year 1,569,288 74.2% Total -- -- -- 7.5 Interest receivable 7.5.1 Classification of interest receivable Unit: Yuan Item Ending balance Beginning balance Fixed deposit 368,928 24,200 Entrusted loan Bond investment Total 368,928 24,200 79 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 7.6 Other accounts receivable 7.6.1 Other accounts receivable disclosed by type Unit: Yuan Ending balance Beginning balance Book balance Bad debt provision Book balance Bad debt provision Type Amount Proportion Amount Accrued Book value Amount Proportion Amount Accrued Book value proportion proportion Other accounts receivable of significant single 5,460,380 33.5% 5,460,380 7,417,220 39.3% 7,417,220 amount and single accrued bad debt provision Other accounts receivable accrued bad debt provision by credit risk features Other accounts receivable of insignificant single 10,850,802 66.5% 10,850,802 11,463,580 60.7% 11,463,580 amount and single accrued bad debt provision Total 16,311,182 100% 16,311,182 18,880,800 100% 18,880,800 7.6.2 Bad debt provision accrued, transferred back or received in this period The bad debt provision accrued in this period was RMB 0 Yuan; and that transferred back or received in this period was RMB 0 Yuan. 7.6.3 Other accounts receivable actually cancelled after verification in this period Nil 7.6.4 Other accounts listed by nature Unit: Yuan Nature Ending book balance Beginning book balance Deposit and guaranty money receivable 11,867,142 13,191,851 80 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Nature Ending book balance Beginning book balance Imprest receivable 1,787,865 2,934,424 Consumption tax rebate 483,021 573,586 Other 2,173,154 2,180,939 Total 16,311,182 18,880,800 7.6.5 Other accounts receivable collected by the borrowers of top 5 units ranked by the ending balance Unit: Yuan Percentage in total Ending Ending balance of Unit Nature Age ending balance of other balance bad debt provision accounts receivable Construction YEDA Finance Bureau 5,460,380 Within 2 years 33.4% guarantee YEDA Construction Industry Construction More than 3 2,151,300 13.2% Association guarantee years Foreign Canada Oros Icewine Co., Ltd. investment 2,050,000 1-2 years 12.6% receivable Shandong Electric Power Group Power supply More than 3 Company Yantai Power Supply 1,206,853 7.4% guarantee years Company YEDA Thermochemistry Co., Deposit 500,000 Within 1 year 3.1% Ltd. Total -- 11,368,533 -- 69.7% 7.6.6 Other accounts receivable terminating recognition due to transfer of financial assets Nil 7.6.7 Other accounts receivable transferred and included in assets and liabilities Nil 7.7 Inventories 7.7.1 Inventory classification Unit: Yuan Ending balance Beginning balance Item Depreciation Depreciation Book balance Book value Book balance Book value provision provision Raw materials 40,739,604 40,739,604 72,011,633 72,011,633 Goods in process 1,453,452,930 1,453,452,930 1,253,218,347 1,253,218,347 Commodity stocks 545,683,575 15,573,180 530,110,395 944,806,516 21,426,756 923,379,760 81 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Total 2,039,876,109 15,573,180 2,024,302,929 2,270,036,496 21,426,756 2,248,609,740 7.7.2 Inventory depreciation provision Unit: Yuan Increase in this period Decrease in this period Beginning Item Transfer back or Ending balance balance Accrual Other Other write-off Raw materials Goods in process Commodity stocks 21,426,756 5,853,575.63 15,573,180 Total 21,426,756 5,853,575.63 15,573,180 7.8 Those divided into assets held for sale Unit: Yuan Estimated disposal Item Ending book value Fair value Estimated disposal time expenses Zhenshantun collective 2,000,197 16,282,224 3,878,560 apartment Total 2,000,197 16,282,224 3,878,560 -- The Company has signed an irrevocable agreement for disposing the fixed assets, and the contract amount is RMB 16,282,224 Yuan. The disposal is predicted to be completed in 2017. 7.9 Other current assets Unit: Yuan Item Ending balance Beginning balance Prepaid corporate income tax 68,535,748 26,238,092 Deductible input tax 218,239,811 135,316,274 Rent to be amortized 6,518,738 7,967,876 Total 293,294,297 169,522,242 7.10 Available-for-sale financial assets 7.10.1 Particulars of available-for-sale financial assets Unit: Yuan Ending balance Beginning balance Item Book Impairment Book Book Impairment Book balance provision value balance provision value Available-for-sale financial instruments: Available-for-sale equity 10,463,800 10,000,000 463,800 10,340,263 10,000,000 340,263 82 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report instruments: Fair value measurement Cost measurement 10,463,800 10,000,000 463,800 10,340,263 10,000,000 340,263 Total 10,463,800 10,000,000 463,800 10,340,263 10,000,000 340,263 7.10.2 Available-for-sale financial assets by cost measurement at the end of period Unit: Yuan Book balance Impairment provision Cash Shareholding Increase Decrease Increase Decrease dividend Invested unit ratio in the Beginning in this in this Ending Beginning in this in this Ending in this invested unit period period period period period Yantai Dingtao Construction and 10,000,000 10,000,000 10,000,000 10,000,000 18% Development Co., Ltd. (Note 1) Other (Note Less than 340,263 123,537 463,800 2) 1% Total 10,340,263 123,537 10,463,800 10,000,000 10,000,000 -- Note 1: The book balance of the equity investment made by the Company in Yantai Dingtao Construction and Development Co., Ltd. was RMB 10,000,000 Yuan, and the provision for impairment of RMB 10,000,000 Yuan has been withdrawn. The invested entity is an unlisted company and its fair value can‘t be measured reliably, so the Company shall measure such available-for-sale financial assets by cost method. Note 2: The Group holds less than 1% of the shares in such invested entities. These invested entities are all unlisted companies and their fair value can‘t be measured reliably, so the Group shall measure such available-for-sale financial assets by cost method. 7.10.3 Changes of impairment of available-for-sale financial assets in the report period Unit: Yuan Classification of available-for-sale Available-for-sale equity Available-for-sale debt Total financial assets instruments instruments Accrued impairment balance at the 10,000,000 10,000,000 beginning of period Accrued amount of this period Including: Transferred in from other comprehensive income Decrease in this period Including: Fair value recovered and transferred back after date Accrued impairment balance at the 10,000,000 10,000,000 end of period 7.11 Fixed assets 83 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 7.11.1 Particulars of fixed assets Unit: Yuan Houses and Item Machinery equipment Transportation tools Total buildings Ⅰ Original book value: 1. Beginning balance 3,956,177,208 1,969,135,575 29,329,141 5,954,641,924 2. Increase in this period 13,905,309 20,067,704 540,959 34,513,972 2.1 Acquisition 4,259,361 19,480,245 540,959 24,280,565 2.2 Transfer in from 9,645,948 587,459 10,233,407 construction in progress 2.3 Business merger increase 2.4 Other 3. Decrease in this period 517,494 10,793,669 2,193,612 13,504,775 3.1 Disposal or 517,494 10,793,669 2,193,612 13,504,775 retirement 3.2 Other 4. Ending balance 3,969,565,023 1,978,409,610 27,676,488 5,975,651,121 Ⅱ Accumulated depreciation 1. Beginning balance 410,161,600 840,158,129 21,134,702 1,271,454,431 2. Increase in this period 58,767,044 65,753,010 1,248,414 125,768,468 2.1 Accrual 58,767,044 65,753,010 1,248,414 125,768,468 2.2 Business merger increase 2.3 Other 3. Decrease in this period 502,888 10,039,409 2,066,967 12,609,264 3.1 Disposal or 502,888 10,039,409 2,066,967 12,609,264 retirement 3.2 Other 4. Ending balance 468,425,756 895,871,730 20,316,149 1,384,613,635 Ⅲ Impairment provision 1. Beginning balance 2. Increase 2.1 Accrual 2.2 Other 3. Decrease 3.1 Disposal or retirement 3.2 Other 4. Ending balance Ⅳ Book value 1. Ending book value 3,501,139,267 1,082,537,880 7,360,339 4,591,037,486 2. Beginning book value 3,546,015,608 1,128,977,446 8,194,439 4,683,187,493 As at June 30, 2017, the net value of the fixed assets with ownership restrictions was RMB 69,535,906 Yuan. Please refer to Note 7.50 for the details. 84 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 7.11.2 Temporarily idle fixed assets Nil 7.11.3 Fixed assets under finance leases Nil 7.11.4 Fixed assets under operating lease Nil 7.11.5 Fixed assets without property certificates Unit: Yuan Reason for not receiving the property Item Book value certificate Industrial Production Center of the R&D Company 1,196,449,426 Under transaction Dormitory Building, Main Building and Reception Building of 262,115,218 Under transaction Chang‘an Chateau Workshop and Plant of Xinjiang Shihezi Chateau 253,470,055 Under transaction European Town, Main Building and Service Building of Beijing 217,419,173 Under transaction Chateau Main Building of Yantai Changyu Tinlot Chateau 89,315,962 Under transaction Provincial Office of Sales Company 21,537,995 Under transaction Fermentation Workshop and Storage Workshop of Xinjiang Tianzhu 18,788,139 Under transaction Office Building and Packaging Workshop of Icewine Chateau 9,660,096 Under transaction Wine-making Workshop of Changyu (Jingyang) 4,244,130 Under transaction Office Building, Laboratory Building and Workshop of 3,913,797 Under transaction Fermentation Center Finished Goods Warehouse and Workshop of Kylin Packaging 2,532,867 Under transaction 7.12 Construction in progress 7.12.1 Particulars of construction in progress Unit: Yuan Ending balance Beginning balance Item Impairment Impairment Book balance Book value Book balance Book value provision provision Construction Project of Research, Development & Manufacture Center 1,480,406,758 1,480,406,758 1,227,968,480 1,227,968,480 (―Changyu Wine City Complex‖) Construction Project of Ningxia 57,067,866 57,067,866 36,717,169 36,717,169 Chateau Construction Project of Shihezi 29,704,077 29,704,077 30,600,684 30,600,684 Chateau 85 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Construction Project of Sales Company 39,933,379 39,933,379 26,011,600 26,011,600 Construction Project of Chang‘an 42,579,064 42,579,064 10,346,598 10,346,598 Chateau Construction Project of Tinlot Chateau 33,752,441 33,752,441 4,871,422 4,871,422 Reconstruction Project of AFIP 5,273,600 5,273,600 3,713,945 3,713,945 Tourism Plaza Reconstruction Project of Jingyang 2,931,559 2,931,559 2,331,559 2,331,559 Fermentation Workshop Plant Construction Project of Huanren 1,707,004 1,707,004 920,596 920,596 Winery Construction and Reconstruction 268,929 268,929 500,000 500,000 Project of Joint-stock Company Construction Projects of Other 3,672,763 3,672,763 2,299,684 2,299,684 Companies Total 1,697,297,440 1,697,297,440 1,346,281,737 1,346,281,737 86 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 7.12.2 Changes of major construction in progress in this period Unit: Yuan Proportion of Accumulative Including: Transferred Capitalization Beginning Other Ending accumulative Construction capitalization capitalization Item Budget Increase to fixed ratio of interest Capital source balance decrease balance project input in progress amount of amount of interest assets in this period budget interest in this period Construction Project of Research, Development & Loans form financial Manufacture Center 4,505,780,000 1,227,968,480 252,438,278 1,480,406,758 67.8% 4,107,701 1,817,978 1.2% institutions and ―Changyu Wine City self-raised funds Complex‖) Construction Project of 620,740,000 10,346,598 46,721,268 57,067,866 102.5% Self-raised funds Chang‘an Chateau Construction Project of Sales 161,350,000 26,011,600 4,808,231 1,115,754 29,704,077 93.0% Self-raised funds Company Construction Project of 780,000,000 30,600,684 14,724,227 5,391,532 39,933,379 89.8% Self-raised funds Shihezi Chateau Construction Project of 414,150,000 36,717,169 10,018,016 4,156,121 42,579,064 97.4% Self-raised funds Ningxia Chateau Construction Project of Tinlot 192,400,000 4,871,422 28,881,019 33,752,441 110.7% Self-raised funds Chateau Plant Construction Project of 31,000,000 920,596 786,408 1,707,004 97.5% Self-raised funds Huanren Winery Total 6,705,420,000 1,337,436,549 358,377,447 10,663,407 1,685,150,589 -- -- 4,107,701 1,817,978 -- As at June 30, 2017, there was no indication for impairment of construction in process of the Group, so no provision was made. 87 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 7.13 Productive biological assets 7.13.1 Productive biological assets by cost measurement Unit: Yuan Item Plantation Total Immature Mature Ⅰ Original book value 1. Beginning balance 77,841,960 141,208,504 219,050,464 2. Increase in this period -65,331,472 69,081,966 3,750,494 2.1 Outsourcing 0 2.2 Self cultivation 2,987,011 763,483 3,750,494 2.3 The immature turn to the mature -68,318,483 68,318,483 3. Decrease in this period 3.1 Disposal 3.2 Other 4. Ending balance 12,510,488 210,290,470 222,800,958 Ⅱ Accumulated depreciation 12,510,488 210,290,470 1. Beginning balance 17,621,484 17,621,484 2. Increase in this period 7,155,162 7,155,162 2.1 Accrual 7,155,162 7,155,162 2.2 Other 3. Decrease in this period 3.1 Disposal 3.2 Other 4. Ending balance 24,776,646 24,776,646 Ⅲ Impairment provision 1. Beginning balance 2. Increase in this period 2.1 Accrual 3. Decrease in this period 3.1 Disposal 3.2 Other 4. Ending balance Ⅳ Book value 1. Ending book value 12,510,488 185,513,824 198,024,312 88 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 2. Beginning book value 77,841,960 123,587,020 201,428,980 As at June 30, 2017, no ownership of the biological assets was restricted. As at June 30, 2017, there was no indication that biological assets may be impaired, so no provision was made. 7.14 Intangible assets 7.14.1 Particulars of intangible assets Unit: Yuan Item Land use right Software use right Trademark Total Ⅰ Original book value 1. Beginning balance 491,490,069 52,435,669 15,442,065 559,367,803 2. Increase in this 4,140,000 895,888 99,552 5,135,440 period 4,140,000 895,888 5,035,888 2.2 Internal R&D 2.3 Business merger increase 2.4 Other 99,552 99,552 3. Decrease in this 3.1period - - 4. Ending balance 495,630,069 53,331,557 - 564,503,243 Ⅱ Accumulated amortization 1. Beginning balance 56,803,430 12,548,283 6,201,010 75,552,723 2. Increase in this period 5,292,764 2,057,478 2,238,105 9,588,347 2.1 Accrual 5,292,764 2,057,478 2,238,105 9,588,347 2.2 Business merger increase 3. Decrease in this 3.1period - 4. Ending balance 62,096,194 14,605,761 8,439,115- 85,141,070- Ⅲ Impairment provision 1. Beginning balance - - 2. Increase in this period 2.1 Accrual - 3. Decrease in this - period - 89- Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 3.1 Disposal 4. Ending balance Ⅳ Book value - 3. Ending book value 433,533,875 38,725,796 7,102,502- 479,362,173- 4. Beginning book value 434,686,639 39,887,386 9,241,055 483,815,080 As at June 30, 2017, the net value of the intangible assets with ownership restrictions was RMB 143,892,516 Yuan. Please refer to Note 7.50 for the details. 7.14.2 Land use right of that not receiving the property certificate Unit: Yuan Item Book value Reason for not receiving the property certificate A-49 Residential Area, YEDA 23,216,200 Under transaction 7.15 Goodwill 7.15.1 Original book value of goodwill Unit: Yuan Name of the invested Increase in this period Decrease in this period Beginning unit or matter forming Formed by business Ending balance balance Other Disposal Other goodwill merger Etablissements Roullet 13,112,525 13,112,525 Fransac Dicot Partners, S.L 92,391,901 92,391,901 Societe Civile Argricole Du Chateau 15,761,440 15,761,440 De Mirefleurs Total 121,265,866 121,265,866 7.16 Long-term unamortized expenses Unit: Yuan Increase in this Amortization in this Item Beginning balance Other decrease Ending balance period period Land lease fees 57,846,986 719,453 57,127,533 Land acquisition 45,192,900 569,651 44,623,249 fees Afforestation fees 54,460,971 2,564,214 51,896,757 Renovation costs 1,091,579 109,158 982,421 90 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Other 3,613,793 36,571 1,259,413 2,390,951 Total 162,206,229 36,571 5,221,889 157,020,911 7.17 Deferred income tax assets/liabilities 7.17.1 Un-offset deferred income tax assets Unit: Yuan Ending Balance Beginning Balance Deductible Deductible Item Deferred income Deferred income temporary temporary tax assets tax assets difference difference Asset impairment provision 25,573,180 6,393,295 31,426,756 7,856,689 Unrealized profits from inter-company 581,720,137 145,430,034 676,375,006 169,093,751 transactions Deductible loss 201,373,978 50,343,495 176,273,380 44,068,345 Unpaid bonus 121,373,855 30,343,464 154,895,784 38,723,946 Dismission welfare 12,102,449 3,025,612 13,115,948 3,278,987 Deferred income 108,512,201 24,308,890 112,939,126 25,230,521 Dealer‘s rebate withdrawn in advance 30,739,192 7,684,798 Total 1,050,655,800 259,844,790 1,195,765,192 295,937,037 7.17.2 Un-offset deferred income tax liabilities Unit: Yuan Ending Balance Beginning Balance Taxable Taxable Item Deferred income Deferred income temporary temporary tax liabilities tax liabilities difference difference Assets appraisal appreciation in business 79,944,206 21,852,738 90,877,162 24,908,410 merger under non-common control Changes in fair value of available-for-sale financial assets Total 79,944,206 21,852,738 90,877,162 24,908,410 7.17.3 Details of unconfirmed deferred income tax assets Unit: Yuan Item Ending balance Beginning balance 91 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Deductible loss 163,790,074 135,957,252 Total 163,790,074 135,957,252 7.17.4 Deductible losses of unconfirmed deferred income tax assets will expire in: Unit: Yuan Year Ending sum Beginning sum Remark 2019 7,311,273 7,311,273 2020 45,960,766 45,960,766 2021 82,685,213 82,685,213 2022 27,832,822 Total 163,790,074 135,957,252 -- 7.18 Other non-current assets Unit: Yuan Item Ending balance Beginning balance Accounts receivable due to transfer of 17,590,912 17,352,239 biological assets Prepaid investments 317,654,642 Total 335,245,554 17,352,239 7.19 Short-term loans 7.19.1 Classification of short-term loans Unit: Yuan Item Ending balance Beginning balance Pledge loan Mortgage loan 29,248,895 30,732,944 Guaranteed loan Fiduciary loan 817,632,180 631,655,938 Total 846,881,075 662,388,882 As at June 30, 2017, the pledge loan referred to the factoring business for accounts receivable of EUR 3,783,558 (equivalent to RMB 29,248,895 Yuan) that Hacienda y Vinedos Marques del Atrio, S.L.U. (―Marques del Atrio‖) transacted in such banks as Banco de Sabadell, S.A. (December 31, 2016: RMB 30,732,944 Yuan). There was no loan borrowed by pledge of fixed assets (December 31, 2016: RMB 0 Yuan). 92 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 7.20 Bills payable Unit: Yuan Type Ending balance Beginning balance Trade acceptance Bank acceptance 8,000,000 38,900,000 Total 8,000,000 38,900,000 7.21 Accounts payable 7.21.1 List of accounts payable Unit: Yuan Item Ending balance Beginning balance Within one year 396,891,500 544,128,280 From one year to two years 2,426,987 1,103,039 From two years to three years Over three years Total 399,318,487 545,231,319 7.21.2 Significant accounts payable aged more than one year As at June 30, 2017, there were no significant accounts payable aged more than one year. 7.22 Advances from customers 7.22.1 List of advances from customers Unit: Yuan Item Ending sum Beginning sum Within one year 312,184,976 419,382,071 From one year to two years 3,496,490 2,046,166 From two years to three years 2,031,043 108,748 Over three years 3,818,184 3,709,436 Total 321,530,693 425,246,421 7.22.2 Advances from customers of significant amount aged more than one year As at June 30, 2017, the Company had no advances from customers of significant amount 93 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report aged more than one year. 7.23 Employee remunerations payable 7.23.1 List of employee remunerations payable Unit: Yuan Increase in this Decrease in this Item Beginning balance Ending balance period period 1. Short-term remuneration 193,300,619 168,650,584 215,863,664 146,087,539 2. Post-employment welfare – defined 15,167 23,191,201 22,418,536 787,832 contribution plan 3. Dismission welfare 13,115,948 509,648 1,523,147 12,102,449 4.Other welfare due within one year Total 206,431,734 192,351,433 239,805,347 158,977,820 7.23.2 List of short-term remunerations Unit: Yuan Increase in this Decrease in this Item Beginning balance Ending balance period period 1. Salaries, bonuses, allowances 197,486,176 145,975,433 192,297,973 151,163,636 and subsidies 2. Staff welfare 622,735 8,323,393 8,728,238 217,890 3. Social insurance charges 257,249 7,150,754 7,349,717 58,286 Including: Medical insurance 257,249 6,051,156 6,250,119 58,286 Injury insurance 731,205 731,205 Maternity insurance 368,393 368,393 4. Housing fund 37,672 5,527,361 5,551,521 13,512 5. Union fee and staff education 2,593,009 1,673,643 1,936,215 2,330,437 fee 6. Short-term compensated absences 7. Short-term profit-sharing plan 8. Those divided into non-current -7,696,222 -7,696,222 liabilities Total 193,300,619 168,650,584 215,863,664 146,087,539 94 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 7.23.3 List of defined contribution plan Unit: Yuan Item Beginning balance Increase Decrease Ending balance 1. Basic endowment insurance 14,978 22,637,707 21,865,042 787,643 2. Unemployment insurance 189 553,494 553,494 189 3. Enterprise annuity payment Total 15,167 23,191,201 22,418,536 787,832 7.23.4 Dismission welfare Unit: Yuan Item Beginning balance Increase Decrease Ending balance 1. Compensation for server of labor relation 2. Compensation for early retirement 13,115,948 509,648 1,523,147 12,102,449 Total 13,115,948 509,648 1,523,147 12,102,449 7.24 Taxes payable Unit: Yuan Item Ending balance Beginning balance Value added tax 22,378,198 23,496,328 Consumption tax 14,378,343 30,361,471 Corporate income tax 26,129,549 69,388,730 Individual income tax 6,598,508 7,811,301 Urban maintenance and construction tax 2,503,846 4,248,115 Property tax 435,805 1,071,223 Urban land use tax 2,488,965 2,651,262 Other 2,199,905 5,014,170 Total 77,113,119 144,042,600 7.25 Dividends payable Unit: Yuan Item Ending balance Beginning balance Ordinary stock dividends Preferred stock dividends/sustainable debt dividends 95 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report divided into equity instruments Other 703,430 Total 703,430 7.26 Other payables 7.26.1 Other payables listed by nature Unit: Yuan Item Ending balance Beginning balance Distributor‘s deposit payable 157,985,200 128,539,352 Equipment purchase and construction costs 101,721,932 77,261,072 payable Transportation charges payable 12,110,825 36,690,764 Trademark use fees payable for Changyu Group 44,428,033 78,572,540 Company Advertising expenses payable 221,724,475 79,414,075 Dealer‘s rebate withdrawn in advance 30,739,192 Increased capital of minority shareholders 29,847,320 29,847,320 (Note) Employee cash deposit 19,226,564 16,296,186 Supplier‘s deposit payable 11,517,176 2,206,379 Contracting fees payable 37,079,817 31,011,929 Other 17,549,069 35,726,501 Total 653,190,411 546,305,310 7.26.2 Other significant accounts payable aged more than one year Unit: Yuan Item Ending balance Cause of unpayment or carry-over Beijing Qinglang Ecological Agriculture The procedures for capital increase 23,983,072 Technology Development Co., Ltd. haven‘t been completed Beijing Qinglang Ecological Agriculture 13,766,549 The contracting fess haven‘t been settled Technology Development Co., Ltd. The procedures for capital increase Yantai De‘an Investment Co., Ltd. 5,864,248 haven‘t been completed Yantai De‘an Investment Co., Ltd. 5,716,524 The contracting fess haven‘t been settled Total 49,330,393 -- 96 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 7.27 Non-current liabilities due within one year Unit: Yuan Item Ending balance Beginning balance Long-term loans due within one 70,975,215 59,799,093 year Long-term accounts payable due 36,000,000 12,000,000 within one year Total 106,975,215 71,799,093 7.28 Other current liabilities Unit: Yuan Item Ending balance Beginning balance Deferred income 11,163,882 11,163,883 Total 11,163,882 11,163,883 7.29 Long-term loans 7.29.1 Classification of long-term loans Unit: Yuan Item Ending balance Beginning balance Pledge loan Mortgage loan 7,995,615 8,835,744 Guaranteed loan Fiduciary loan 167,274,965 40,304,811 Total 175,270,580 49,140,555 Description of the classification of long-term loans: Item Ending balance Long-term loan due within one Long-term loan due over one year year Pledge loan Mortgage loan 10,778,415 2,782,800 7,995,615 Guaranteed loan Fiduciary loan 235,467,380 68,192,415 167,274,965 Total 246,245,795 70,975,215 175,270,580 As at June 30, 2017, the mortgage loan referred to the loan of EUR 1,394,361.55 (equivalent to RMB 10,778,415 Yuan) borrowed from Popular Espaol by Marques del Atrio which 97 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report mortgaged its fixed assets of EUR 3,812,130.38 (equivalent to RMB 29,467,767 Yuan) (December 31, 2016: RMB 11,466,192 Yuan). 7.30 Long-term accounts payable 7.30.1 Long-term accounts payable listed by nature Unit: Yuan Item Ending balance Beginning balance China Agricultural Development Key Construction Fund 269,000,000 293,000,000 In 2016, Agricultural Development Fund invested RMB 305,000,000 Yuan in the R&D Company, accounting for 37.9% of the registered capital. According to the investment agreement, it is agreed that Agricultural Development Fund will take back the investment fund in ten years and obtain fixed income according to year, which is 1.2% of the remaining principal. Except for the above fixed income, the Agricultural Development Fund shall not enjoy other profits of the R&D Company or bear the losses of the R&D Company. Accordingly, the investment of the Agricultural Development Fund in the R&D Company is equity investment nominally, which is debt investment in deed. This Company shall include the investment of the Agricultural Development Fund in long-term accounts payable measured by amortized cost. 7.31 Deferred income Unit: Yuan Increase in this Decrease in this Item Beginning balance Ending balance Forming reason period period Governmental 112,939,126 1,300,000 5,726,925 108,512,201 subsidy Minus: Those included in current 11,163,883 11,163,882 -- liabilities Non-current 101,775,243 97,348,319 -- liabilities Projects related to governmental subsidy Unit: Yuan 98 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Amount Amount of subsidy included in Beginning newly Other Ending Item of liabilities non-operating Related to assets/income balance increased changes balance revenue in in this this period period Transferred fund of Propaganda Department, 1,777,890 444,473 1,333,417 Related to assets Miyun County Committee Grape bulk wine brewing 6,174,300 717,942 5,456,358 Related to assets project Reward of investment in fixed 11,556,600 1,140,000 10,416,600 Related to assets assets Industrial revitalization and technical transformation 18,486,000 711,000 17,775,000 Related to assets project in Xinjiang Industrial revitalization and technical transformation 4,381,000 1,647,500 2,733,500 Related to assets project in Ningxia Subsidy payment for wine 376,000 376,000 Related to income grapes Modern agriculture-produced 259,200 259,200 Related to income grape development subsidy Tourism development fund 500,000 500,000 Related to assets subsidy Infrastructure construction 1,468,750 500,000 62,500 1,906,250 Related to assets fund Construction project of Liaonong Changyu (Huanren) Pioneer Wine Co., Ltd. with 4,000,000 4,000,000 Related to assets the annual output of 10,000 tons of wine Fund for water pollution 133,733 300,000 56,801 376,932 Related to income treatment project Supporting fund for industrial 41,000,000 41,000,000 Related to assets development Subsidy for economic and energy-saving technical 1,283,000 1,283,000 Related to assets transformation project Electronic traceability system 3,859,365 333,527 3,525,838 Related to assets project of wine 99 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Amount Amount of subsidy included in Beginning newly Other Ending Item of liabilities non-operating Related to assets/income balance increased changes balance revenue in in this this period period Wine industry development 930,000 930,000 Related to assets project Peninsula blue economic zone 10,000,000 10,000,000 Related to assets construction project Scientific research fund 343,090 343,090 Related to income subsidy of National 863 Plan Technical transformation project of information-based 4,060,000 290,000 3,770,000 Related to assets system construction engineering Subsidy for project integrating IT application with 28,800 28,800 Related to income industrialization Cross-border e-commerce 1,485,797 63,182 1,422,615 Related to income project Auxiliary coloration research project of red wine phenolic 295,601 295,601 Related to income substances Grape base construction 1,040,000 260,000 780,000 Related to assets project Total 112,939,126 1,300,000 5,726,925 108,512,201 -- Minus: Those included in 11,163,883 11,163,882 current liabilities Non-current liabilities 101,775,243 97,348,319 7.32 Other non-current liabilities Unit: Yuan Item Ending balance Beginning balance Employee remunerations payable 7,696,222 7,696,222 Total 7,696,222 7,696,222 As at June 30, 2017, the employee remunerations payable referred to the job security deposit deducted from the year-end bonus of the employees higher than sales manager of the Company in proportion, which will be paid from 2018 to 2020 as predicted. 100 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 7.33 Share capital Unit: Yuan Increase or decrease (+,-) in this period Share Beginning transferred Ending Newly issued Allocated balance from Other Subtotal balance shares shares accumulation fund Total shares 685,464,000 685,464,000 7.34 Capital reserves Unit: Yuan Decrease in this Item Beginning balance Increase in this period Ending balance period Capital premium (Share 560,038,853 560,038,853 capital premium) Other capital reserves 5,916,588 5,916,588 Total 565,955,441 565,955,441 7.35 Other comprehensive income Unit: Yuan Amount incurred in this period Minus: profit Amount or loss in this incurred Minus: Attributable Attributable Beginning period Ending Item before income to parent to minority balance transferred balance income tax tax company shareholders from other in this expenses after tax after tax comprehensive period income before 1. Other comprehensive income not to be reclassified into profit and loss later Including: change in net liabilities and net assets from recalculated defined benefit plan Share enjoyed in other comprehensive income not to be reclassified into profit and loss in 101 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Amount incurred in this period Minus: profit Amount or loss in this incurred Minus: Attributable Attributable Beginning period Ending Item before income to parent to minority balance transferred balance income tax tax company shareholders from other in this expenses after tax after tax comprehensive period income before invested unit under equity law 2. Other comprehensive income to be reclassified into profit and loss -5,259,014 1,767,741 1,458,809 308,932 -3,800,205 later Including: share enjoyed in other comprehensive income to be reclassified into profit and loss in invested unit under equity law Profit and loss from changes in fair value of financial assets for sale Profit and loss from reclassification of held-to-maturity investment into fair value of financial assets for sale Effective part of profit and loss of cash-flow hedge Difference in translation of Foreign Currency Financial -5,259,014 1,767,741 1,458,809 308,932 -3,800,205 Statement Total other comprehensive income -5,259,014 1,767,741 1,458,809 308,932 -3,800,205 7.36 Surplus reserves Unit: Yuan Decrease in this Item Beginning balance Increase in this period Ending balance period Legal surplus reserves 342,732,000 342,732,000 Free surplus reserves Reserve fund Enterprise expansion fund Other 102 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Total 342,732,000 342,732,000 7.37 Undistributed profit Unit: Yuan Item This period Prior period Undistributed profit at the end of prior period before adjustment 6,620,118,562 5,980,390,074 Total Undistributed profit at the beginning of the period before adjustment (increase listed with+ , and decrease listed with -) Undistributed profit at the beginning of the period after adjustment 6,620,118,562 5,980,390,074 Plus: Net profit for owner of the parent company 670,069,054 982,460,488 Minus: Drawn legal surplus Drawn free surplus Drawn common risk provision Common dividend payable 342,732,000 Common dividend transferred to share capital Undistributed profit at the end of period 7,290,187,616 6,620,118,562 7.38 Operating income and operating cost Unit: Yuan Amount incurred in this period Amount incurred in prior period Item Income Cost Income Cost Main business 2,761,797,479 921,629,225 2,748,285,416 899,973,878 Other business 5,300,718 4,124,908 4,747,383 2,760,226 Total 2,767,098,197 925,754,133 2,753,032,799 902,734,104 7.39 Taxes and surcharges Unit: Yuan Item Amount incurred in this period Amount incurred in prior period Consumption tax 87,580,364 105,763,800 Urban maintenance and construction tax 30,288,028 24,721,309 Education surcharges 21,968,359 18,089,897 Building tax 9,993,265 Land use tax 5,092,473 103 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Stamp duty 1,970,707 Business Tax 1,175,187 Other 3,580,802 3,331,599 Total 160,473,998 153,081,792 7.40 Selling expenses Unit: Yuan Item Amount incurred in this period Amount incurred in prior period Advertising promotion expenses 353,792,438 332,116,022 Employee remunerations 115,463,193 104,719,946 Transportation expenses 64,053,872 66,063,407 Trademark use fees 44,428,033 46,273,367 Storage and lease expenses 27,357,293 39,026,546 Depreciation expenses 19,740,726 18,364,965 Service charges 6,734,393 5,651,106 Travel expenses 10,036,717 11,904,193 Water, electricity and gas charges 3,572,499 3,929,596 Office & postage costs 2,479,541 2,485,039 Packing expenses 3,140,528 3,114,989 Public security & clean-keeping 2,532,418 1,883,752 expenses Business entertainment expenses 1,190,071 761,988 Afforestation fees 1,342,117 1,571,035 Property management expenses 1,348,857 1,129,106 Other 11,523,030 11,742,177 Total 668,735,726 650,737,234 7.41 Management expenses Unit: Yuan Item Amount incurred in this period Amount incurred in prior period Employee remunerations 45,732,792 42,548,604 Depreciation expenses 28,996,760 21,005,970 Contracting expenses 10,086,436 9,241,885 Repair expenses 5,768,634 5,623,236 Office expenses 8,693,956 8,197,736 104 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Amortization expenses 9,569,693 7,782,091 Afforestation fees 3,893,103 3,636,852 Rental expenses 5,095,023 4,259,474 Business entertainment expenses 2,562,180 2,639,867 Public security & clean-keeping 2,787,735 2,574,552 expenses Travel expenses 2,650,716 2,312,625 Other 4,705,358 12,872,953 Total 130,542,386 122,695,845 7.42 Financial expenses Unit: Yuan Item Amount incurred in this period Amount incurred in prior period Interest expenditure 15,042,038 15,830,699 Minus: Interest income 4,849,166 7,189,121 Plus: Commission charges 754,300 859,954 Exchange gain or loss 200,777 1,486,701 Total 11,147,949 10,988,233 7.43 Loss on impairment of assets Item Amount incurred in this period Amount incurred in prior period 1. Loss on bad debts 2. Inventory falling price loss -5,853,576 3. Loss on impairment of available-for-sale financial assets 4. Loss on impairment of held-to maturity investment 5. Loss on impairment of long-term equity investment 6. Loss on impairment of investment real estate 7. Loss on impairment of fixed assets 8. Loss on impairment of engineering materials 9. Loss on impairment of construction in progress 10. Loss on impairment of productive biological assets 11. Loss on impairment of oil and gas assets 105 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Item Amount incurred in this period Amount incurred in prior period 12. Loss on impairment of intangible assets 13. Loss on impairment of goodwill 14. Other Total -5,853,576 0 7.44 Non-operating income Unit: Yuan Amount incurred in Amount incurred in Amount included in the current Item this period prior period non-recurring profits/losses Total gains on disposal of non-current 156,600 94,567 156,600 assets Including: Gains on disposal of fixed 156,600 94,567 156,600 assets Gains on disposal of intangible assets Gains on debt recombination Gains on exchange of non-monetary assets Grains on donations Governmental subsidy 19,735,204 18,145,874 19,735,204 Other 3,412,401 3,693,085 3,412,401 Total 23,304,205 21,933,526 23,304,205 Governmental subsidies included in the current profit/loss: Unit: Yuan Amount incurred in Amount incurred in Item of subsidy Related to assets/income this period prior period Funds to support major projects 3,520,914 3,567,401 Related to assets Funds to support small and medium-sized 2,086,027 1,832,402 Related to assets Enterprises Tax returns 12,737,950 12,116,257 Related to income Other 1,390,313 629,814 Related to income Total 19,735,204 18,145,874 -- 106 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 7.45 Non-operating expenses Unit: Yuan Amount incurred in Amount incurred in Amount included in the current Item this period prior period non-recurring profits/losses Total loss on disposal of 651,671 110,052 651,671 non-current assets Including: Loss on disposal of 651,671 110,052 651,671 fixed assets Loss on disposal of intangible assets Loss on debt recombination Loss on exchange of non-monetary assets Donation 15,000 Fine, penalty and overdue fine 170,997 165,589 170,997 paid due to violation of laws and administrative regulations Other 15,571 53,135 15,571 Total 838,239 343,776 838,239 7.46 Income tax expenses 7.46.1 List of income tax expenses Unit: Yuan Item Amount incurred in this period Amount incurred in prior Current income tax expenses 195,716,215 period196,893,915 Deferred income tax expenses 33,036,575 41,821,566 Total 228,752,790 238,715,481 7.46.2 Adjustment process of accounting profit and income tax expenses Unit: Yuan Item Amount incurred in this Total profit period898,763,547 Income tax expenses calculated according to the legal/applicable tax rate 224,690,887 Influence of different tax rates applicable to subsidiary -4,533,247 Influence of income tax in the term before adjustment Influence of nontaxable income Influence of non-deductible costs, expenses and losses 1,636,945 107 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Influence of deductible loss from use of unconfirmed deferred income tax assets in prior period Influence of deductible temporary difference or deductible loss of unconfirmed deferred 6,958,205 income tax assets in this period Income tax expense 228,752,790 7.47 Other comprehensive income See details in Note 7.35. 7.48 Items of cash flow statement 7.48.1 Other cash received related to operating activities Unit: Yuan Item Amount incurred in this period Amount incurred in prior period Governmental subsidy income 1,570,329 506,015 Withdrawal of cash deposit for bills payable 30,900,000 21,870,000 Other 6,419,583 5,457,993 Total 38,889,912 27,834,008 7.48.2 Other cash paid related to operating activities Unit: Yuan Item Amount incurred in this period Amount incurred in prior period Selling expenses 352,845,674 403,264,891 Administrative expenses 43,700,254 37,642,759 Refundable deposits 35,030,980 Other 940,870 1,595,101 Total 432,517,778 442,502,751 7.48.3 Other cash paid related to investment activities Unit: Yuan Item Amount incurred in this period Amount incurred in prior period Prepaid investment fund 317,654,642 Total 317,654,642 7.48.4 Other cash received related to financial activities Unit: Yuan 108 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Item Amount incurred in this period Amount incurred in prior period Government subsidies received related 1,000,000.00 to assets Interest income from pledge of fixed 303,473.00 deposits by the R&D Company Total 1,303,473.00 7.48.5 Other cash paid related to financial activities Unit: Yuan Item Amount incurred in this period Amount incurred in prior period R&D Company‘ long-term loans pledged by 20,000,000 fixed-term deposits Total 20,000,000 7.49 Supplementary information to cash flow statement 7.49.1 Supplementary information to cash flow statement Unit: Yuan Supplementary materials Amount incurred in this period Amount incurred in prior period 1. Cash flows from operating activities calculated by -- -- adjusting the net profit: Net profit 670,010,757 695,669,860 Plus: Provision for impairment of assets -5,853,576 Depreciation of fixed assets, oil-and-gas assets and 132,923,630 93,458,092 productive biological assets Intangible assets amortization 9,588,347 6,945,803 Amortization of long term prepaid expenses 5,221,889 11,179,121 Losses on disposal of fixed assets, intangible assets and 495,071 15,486 other long-term assets (profit listed with ―-‖) Losses on retirement of fixed assets (profit listed with ―-‖) Losses on fair value change (profit listed with ―-‖) Financial costs (profit listed with ―-‖) 15,086,410 11,808,339 Investment losses (profit listed with ―-‖) Decrease in deferred income tax assets (increase listed 36,092,247 42,610,501 with ―-‖) Increase of deferred income tax liabilities (decrease -3,055,672 -788,935 109 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Supplementary materials Amount incurred in this period Amount incurred in prior period listed with ―-‖) Decrease in inventories (increase listed with ―-‖) 230,160,387 413,879,818 Decrease in operating receivables (increase listed with -345,259,383 -395,702,109 ―-‖) Increase in operating payable (decrease listed with ―-‖) -325,049,788 -196,327,607 Other Net cash flows from operating activities 420,360,319 682,748,369 2. Significant investment and financing activities not -- -- involving cash deposit and withdrawal: Debt transferred into assets Convertible corporate bond due within 1 year Fixed assets under financing lease 3. Net changes of cash and cash equivalent: -- -- Ending balance of cash 1,229,487,903 1,643,935,054 Minus: Beginning balance of cash 1,256,942,304 1,092,241,661 Plus: Ending balance of cash equivalent Minus: Beginning balance of cash equivalent Net increase amount of cash and cash equivalent -27,454,401 551,693,393 7.49.2 Composition of cash and cash equivalents Unit: Yuan Item Ending balance Beginning balance 1. Cash 1,229,487,903 1,643,935,054 Including: Cash on hand 112,832 189,184 Bank deposits on demand 1,229,375,071 1,643,745,870 Other monetary capital on demand Due from central bank available for payment Due from the industry Inter-bank lending 2. Cash equivalents Including: Bond investment due within three months 3. Balance of cash and cash equivalents at the end of 1,229,487,903 1,643,935,054 period Including: Restricted use of parent company or subsidiaries in the group 110 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 7.50 Assets with ownership or use right restrictions Unit: Yuan Item Ending book value Reason for restriction Loan deposit, bill deposit, L/C deposit, frozen balance Monetary capital 119,579,877 of Alipay, housing fund and guaranty money for deposit in unit card Accounts receivable 29,248,895 Pledge of short-term loans Pledge of long-term loans and long-term accounts Fixed assets 69,535,906 payable Intangible assets 143,892,516 Pledge of long-term accounts payable Total 362,257,194 -- 7.51 Foreign currency monetary items 7.51.1 Foreign currency monetary items Unit: Yuan Item Ending foreign currency balance Translation exchange rate Ending converted RMB balance Monetary capital -- -- 7,606,956 Including: USD 675,534 6.7744 4,576,338 EUR 249,323 7.7496 1,932,154 HKD 1,265,657 0.8679 1,098,464 Long-term loans due -- -- 15,499,200 within one year Including: USD EUR 2,000,000 7.7496 15,499,200 HKD 7.51.2 Overseas operational entities The currency adopted by the overseas subsidiaries of the Company according to the main economic environment where the operation is located shall be chosen as the recording currency. Atrio Group and Francs Champs Participations SAS (―Francs Champs‖) both use euro as the recording currency, and Indomita Chile uses peso as the recording currency. Atrio Group, Francs Champs and Indomita Chile didn‘t have foreign currency assets and liabilities at the end of this period. 111 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 8. Changes in scope of consolidation 8.1 Changes in scope of consolidation due to other reasons The new subsidiary company established in this period is listed as follows: Full name of Registration and Legal Business Investment the invested establishment date Registered capital representative nature amount unit and place January 18, 2017 Yantai Yantai City, Changyu Wine Zhou Hongjiang Sales RMB 5,000,000 Yuan Shandong Province, Sales Co., Ltd. China Indomita Wine WILFRED April 6, 2017 Manufacturing USD Company CHARLES LEIGH USD 1,000,000 Santiago, Chile industry 40,110,000 Chile, SpA NIELSEN 9. Equity in other entities 9.1 Equity in the subsidiaries 9.1.1 Constitution of enterprise group Proportion of Business Name of subsidiary Principal business location Registration place shareholding Acquisition mode nature Direct Indirect Acquired from a Shihezi City, Xinjiang Shihezi City, Xinjiang Uygur Manufacturing business combination Xinjiang Tianzhu (a) Uygur Autonomous Region, 60% Autonomous Region, China industry under non-common China control Acquired from a Francs Champs business combination Cognac, France Cognac, France Trading 100% Participations under non-common control Acquired from a business combination Mirefleurs Bordeaux, France Bordeaux, France Trading 100% under non-common control Acquired from a business combination Marques del Atrio (b) Navarra, Spain Navarra, Spain Sales 75% under non-common control Beijing Changyu Wine Acquired by Beijing City, China Beijing City, China Sales 100% Marketing Co., Ltd. establishment or 112 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Proportion of Business Name of subsidiary Principal business location Registration place shareholding Acquisition mode nature Direct Indirect (―Beijing Marketing‖) investment Yantai Kylin Packaging Acquired by Yantai City, Shandong Yantai City, Shandong Manufacturing Co., Ltd. (―Kylin 100% establishment or Province, China Province, China industry Packaging‖) investment Yantai Chateau Acquired by Yantai City, Shandong Yantai City, Shandong Manufacturing Changyu-Castel Co., Ltd. 70% establishment or Province, China Province, China industry (―Chateau Changyu‖) (c) investment Changyu (Jingyang) Acquired by Xianyang City, Shaanxi Xianyang City, Shaanxi Manufacturing Pioneer Wine Co., Ltd. 90% 10% establishment or Province, China Province, China industry (―Jingyang Wine‖) investment Yantai Changyu Pioneer Acquired by Yantai City, Shandong Yantai City, Shandong Wine Sales Co., Ltd. Sales 100% establishment or Province, China Province, China (―Sales Company‖) investment Langfang Development Acquired by Zone Castel-Changyu Wine Langfang City, Hebei Langfang City, Hebei Manufacturing 39% 10% establishment or Co., Ltd. (―Langfang Province, China Province, China industry investment Castel‖) (d) Changyu (Jingyang) Acquired by Xianyang City, Shaanxi Xianyang City, Shaanxi Pioneer Wine Sales Co., Sales 10% 90% establishment or Province, China Province, China Ltd. (―Jingyang Sales‖) investment Langfang Changyu Pioneer Acquired by Langfang City, Hebei Langfang City, Hebei Wine Sales Co., Ltd. Sales 10% 90% establishment or Province, China Province, China (―Langfang Sales‖) investment Shanghai Changyu Wine Acquired by Marketing Co., Ltd. Shanghai City, China Shanghai City, China Sales 30% 70% establishment or (―Shanghai Marketing‖) investment Beijing Changyu AFIP Eco-agriculture Acquired by Miyun County, Beijing City, Miyun County, Beijing City, Development Co., Ltd. Sales 100% establishment or China China (―Eco-agriculture investment Development‖) Beijing Changyu AFIP Acquired by Manufacturing Wine Chateau Co., Ltd. Beijing City, China Beijing City, China 70% establishment or industry (―Beijing Chateau‖) (e) investment Acquired by Yantai Changyu Wine Sales Yantai City, Shandong Yantai City, Shandong Sales 90% 10% establishment or Co., Ltd. ( ―Wine Sales‖) Province, China Province, China investment Yantai Changyu Pioneer Yantai City, Shandong Yantai City, Shandong Sales 70% 30% Acquired by 113 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Proportion of Business Name of subsidiary Principal business location Registration place shareholding Acquisition mode nature Direct Indirect International Wine Co., Province, China Province, China establishment or Ltd. (―Pioneer investment International‖) Hangzhou Changyu Wine Acquired by Hangzhou City, Zhejiang Hangzhou City, Zhejiang Sales Co., Ltd. (―Hangzhou Sales 100% establishment or Province, China Province, China Changyu‖) investment Acquired by Yinchuan City, Ningxia Hui Yinchuan City, Ningxia Hui Planting Ningxia Growing 100% establishment or Autonomous Region, China Autonomous Region, China industry investment Huanren Changyu National Acquired by Benxi City, Liaoning Benxi City, Liaoning Province, Wine Sales Co., Ltd. Sales 100% establishment or Province, China China (―National Wine‖) investment Liaoning Changyu Icewine Acquired by Benxi City, Liaoning Benxi City, Liaoning Province, Manufacturing Chateau Co., Ltd. 51% establishment or Province, China China industry (―Icewine Chateau‖) (f) investment Yantai Development Zone Acquired by Changyu Trading Co., Ltd. Yantai City, Shandong Yantai City, Shandong Sales 100% establishment or (―Development Zone Province, China Province, China investment Trading‖) Shenzhen Changyu Wine Acquired by Shenzhen City, Guangdong Shenzhen City, Guangdong Marketing Co., Ltd. Sales 100% establishment or Province, China Province, China (―Shenzhen Marketing‖) investment Yantai Fushan District Acquired by Yantai City, Shandong Yantai City, Shandong Changyu Trading Co., Ltd. Sales 100% establishment or Province, China Province, China (―Fushan Trading‖) investment Beijing Changyu AFIP Acquired by International Conference Miyun County, Beijing City, Miyun County, Beijing City, Service 100% establishment or Center Co., Ltd. China China industry investment (―Conference Center‖) Beijing Changyu AFIP Acquired by Miyun County, Beijing City, Miyun County, Beijing City, Tourist Tourism and Culture Co., 100% establishment or China China industry Ltd. (―AFIP Tourism‖) investment Changyu (Ningxia) Pioneer Acquired by Yinchuan City, Ningxia Hui Yinchuan City, Ningxia Hui Manufacturing Wine Co., Ltd. (―Ningxia 100% establishment or Autonomous Region, China Autonomous Region, China industry Wine‖) investment Yantai Changyu Tinlot Acquired by Yantai City, Shandong Yantai City, Shandong Wholesale and Chateau Co., Ltd. (―Tinlot 65% establishment or Province, China Province, China retail Chateau‖) investment 114 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Proportion of Business Name of subsidiary Principal business location Registration place shareholding Acquisition mode nature Direct Indirect Changyu (Qingtongxia) Qingtongxia City, Ningxia Acquired by Qingtongxia City, Ningxia Hui Wine Sales Co., Ltd. Hui Autonomous Region, Sales 35% establishment or Autonomous Region, China (―Qingtongxia Sales‖) China investment Shihezi City, Xinjiang Acquired by Shihezi City, Xinjiang Uygur Manufacturing Shihezi Chateau Uygur Autonomous Region, 100% establishment or Autonomous Region, China industry China investment Chateau Changyu Moser Acquired by Yinchuan City, Ningxia Hui Yinchuan City, Ningxia Hui Manufacturing XV Ningxia Co., Ltd. 100% establishment or Autonomous Region, China Autonomous Region, China industry (―Ningxia Chateau‖) investment Chateau Changyu Rena Acquired by Xianyang City, Shaanxi Xianyang City, Shaanxi Manufacturing Shaanxi Co., Ltd. 100% establishment or Province, China Province, China industry (―Chang‘an Chateau‖) investment Acquired by Yantai City, Shandong Yantai City, Shandong Manufacturing R&D Company (g) 100% establishment or Province, China Province, China industry investment Changyu (Huanren) Acquired by Benxi City, Liaoning Benxi City, Liaoning Province, Pioneer Wine Co., Ltd. Wine making 62% establishment or Province, China China (―Huanren Wine‖) investment Xinjiang Changyu Wine Shihezi City, Xinjiang Acquired by Shihezi City, Xinjiang Uygur Sales Co., Ltd. (―Xinjiang Uygur Autonomous Region, Sales 100% establishment or Autonomous Region, China Sales‖) China investment Xinjiang Changyu Pioneer Shihezi City, Xinjiang Shihezi City, Xinjiang Uygur Manufacturing Wine Co., Ltd. (―Xinjiang Uygur Autonomous Region, 100% Autonomous Region, China industry Wine‖) China Ningxia Changyu Trading Acquired by Yinchuan City, Ningxia Hui Yinchuan City, Ningxia Hui Co., Ltd. (―Ningxia Sales 100% establishment or Autonomous Region, China Autonomous Region, China Trading‖) investment Shaanxi Changyu Rena Acquired by Xianyang City, Shaanxi Xianyang City, Shaanxi Wine Sales Co., Ltd. Sales 100% establishment or Province, China Province, China (―Shaanxi Sales‖) investment Penglai Changyu Wine Acquired by Penglai City, Shandong Penglai City, Shandong Sales Co., Ltd. (―Penglai Sales 100% establishment or Province, China Province, China Wine‖) investment Laizhou Changyu Wine Acquired by Laizhou City, Shandong Laizhou City, Shandong Sales Co., Ltd. (―Laizhou Sales 100% establishment or Province, China Province, China Sales‖) investment Francs Champs Investment Cognac, France Cognac, France 100% Participations SAS trade 115 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Proportion of Business Name of subsidiary Principal business location Registration place shareholding Acquisition mode nature Direct Indirect Lanzhou Changyu Wine Acquired by Lanzhou City, Gansu Lanzhou City, Gansu Province, Marketing Co., Ltd. Sales 100% establishment or Province, China China (―Lanzhou Marketing‖) investment Beijing Changyu Trading Acquired by Co., Ltd. (―Beijing Beijing City, China Beijing City, China Sales 100% establishment or Trading‖) investment Tianjin Changyu Pioneer Acquired by Wine Sales Co., Ltd. Tianjin City, China Tianjin City, China Sales 100% establishment or (―Tianjin Pioneer‖) investment Fuzhou Changyu Pioneer Acquired by Fuzhou City, Fujian Fuzhou City, Fujian Province, Wine Co., Ltd. (―Fuzhou Sales 100% establishment or Province, China China Pioneer‖) investment Nanjing Changyu Pioneer Acquired by Nanjing City, Jiangsu Nanjing City, Jiangsu Wine Co., Ltd. (―Nanjing Sales 100% establishment or Province, China Province, China Pioneer‖) investment Xianyang Changyu Pioneer Acquired by Xianyang City, Shaanxi Xianyang City, Shaanxi Wine Sales Co., Ltd. Sales 100% establishment or Province, China Province, China (―Xianyang Pioneer‖) investment Shenyang Changyu Pioneer Acquired by Shenyang City, Liaoning Shenyang City, Liaoning Wine Co., Ltd. (―Shenyang Sales 100% establishment or Province, China Province, China Pioneer‖) investment Jinan Changyu Pioneer Acquired by Jinan City, Shandong Jinan City, Shandong Province, Wine Co., Ltd. (―Jinan Sales 100% establishment or Province, China China Pioneer‖) investment Shanghai Changyu Pioneer Acquired by Wine Co., Ltd. (―Shanghai Shanghai City, China Shanghai City, China Sales 100% establishment or Pioneer‖) investment Fuzhou Changyu Pioneer Acquired by Fuzhou City, Jiangxi Fuzhou City, Jiangxi Province, Wine Co., Ltd. (―Fuzhou Sales 100% establishment or Province, China China Pioneer‖) investment Shijiazhuang Changyu Acquired by Pioneer Wine Sales Co., Shijiazhuang City, Hebei Shijiazhuang City, Hebei Sales 100% establishment or Ltd. (―Shijiazhuang Province, China Province, China investment Pioneer‖) Hangzhou Yuzefeng Acquired by Hangzhou City, Zhejiang Hangzhou City, Zhejiang Trading Co., Ltd. Sales 100% establishment or Province, China Province, China (―Hangzhou Yuzefeng‖) investment Jilin Changyu Pioneer Wine Changchun City, Jilin Changchun City, Jilin Sales 100% Acquired by 116 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Proportion of Business Name of subsidiary Principal business location Registration place shareholding Acquisition mode nature Direct Indirect Co., Ltd. (―Jilin Pioneer‖) Province, China Province, China establishment or investment Beijing Changyu Pioneer Acquired by Wine Sales Co., Ltd. Beijing City, China Beijing City, China Sales 100% establishment or (―Beijing Pioneer‖) investment Harbin Changyu Pioneer Acquired by Harbin City, Heilongjiang Harbin City, Heilongjiang Wine Sales Co., Ltd. Sales 100% establishment or Province, China Province, China (―Harbin Pioneer‖) investment Hunan Changyu Pioneer Acquired by Changsha City, Hunan Changsha City, Hunan Wine Co., Ltd. (―Hunan Sales 100% establishment or Province, China Province, China Pioneer‖) investment Yinchuan Changyu Pioneer Acquired by Yinchuan City, Ningxia Hui Yinchuan City, Ningxia Hui Wine Co., Ltd. (―Yinchuan Sales 100% establishment or Autonomous Region, China Autonomous Region, China Pioneer‖) investment Kunming Changyu Pioneer Acquired by Kunming City, Yunnan Kunming City, Yunnan Wine Co., Ltd. (―Kunming Sales 100% establishment or Province, China Province, China Pioneer‖) investment Chongqing Changyu Acquired by Pioneer Wine Sales Co., Chongqing City, China Chongqing City, China Sales 100% establishment or Ltd. (―Chongqing Pioneer‖) investment Zhengzhou Changyu Acquired by Zhengzhou City, Henan Zhengzhou City, Henan Pioneer Wine Co., Ltd. Sales 100% establishment or Province, China Province, China (―Zhengzhou Pioneer‖) investment Wuhan Changyu Pioneer Acquired by Wuhan City, Hubei Wuhan City, Hubei Province, Wine Co., Ltd. (―Wuhan Sales 100% establishment or Province, China China Pioneer‖) investment Taiyuan Changyu Pioneer Acquired by Taiyuan City, Shanxi Taiyuan City, Shanxi Province, Wine Co., Ltd. (―Taiyuan Sales 100% establishment or Province, China China Pioneer‖) investment Hohhot Changyu Pioneer Hohhot City, Inner Acquired by Hohhot City, Inner Mongolia Wine Co., Ltd. (―Hohhot Mongolia Autonomous Sales 100% establishment or Autonomous Region , China Pioneer‖) Region , China investment Chengdu Changyu Pioneer Acquired by Chengdu City, Sichuan Chengdu City, Sichuan Wine Co., Ltd. (―Chengdu Sales 100% establishment or Province, China Province, China Pioneer‖) investment Nanning Changyu Pioneer Nanning City, Guangxi Acquired by Nanning City, Guangxi Zhuang Wine Co., Ltd. (―Nanning Zhuang Autonomous Sales 100% establishment or Autonomous Region, China Pioneer‖) Region, China investment 117 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Proportion of Business Name of subsidiary Principal business location Registration place shareholding Acquisition mode nature Direct Indirect Lanzhou Changyu Pioneer Acquired by Lanzhou City, Gansu Lanzhou City, Gansu Province, Wine Co., Ltd. (―Lanzhou Sales 100% establishment or Province, China China Pioneer‖) investment Yantai Roullet-Fransac Acquired by Imported Wine Sales Co., Yantai City, Shandong Yantai City, Shandong Sales 100% establishment or Ltd. (―Yantai Province, China Province, China investment Roullet-Fransac‖) Hefei Changyu Pioneer Acquired by Hefei City, Anhui Province, Hefei City, Anhui Province, Wine Co., Ltd. (―Hefei Sales 100% establishment or China China Pioneer‖) investment Urumchi Changyu Pioneer Urumchi City, Xinjiang Acquired by Urumchi City, Xinjiang Uygur Wine Co., Ltd. (―Urumchi Uygur Autonomous Region, Sales 100% establishment or Autonomous Region, China Pioneer‖) China investment Guizhou Changyu Pioneer Acquired by Guiyang City, Guizhou Guiyang City, Guizhou Wine Co., Ltd. (―Guizhou Sales 100% establishment or Province, China Province, China Pioneer‖) investment Acquired by Guangzhou City, Guangzhou City, Guangdong Guangzhou Pioneer Sales 100% establishment or Guangdong Province, China Province, China investment Acquired by Yantai Changyu Wine Sales Yantai City, Shandong Yantai City, Shandong Sales 100% establishment or Co., Ltd. Province, China Province, China investment Indomita Wine Company Acquired by Manufacturing Chile, SpA (―Indomita Santiago, Chile Santiago, Chile 85% establishment or industry Chile‖) investment Explanation for difference between the proportion of shareholding and proportion of voting power in the subsidiaries: (a) Xinjiang Tianzhu is a subsidiary of the Company obtained by merger and acquisition, whose 60% of the shares are held by the Company. The Company exercises full control over the operation, investment and financing policies of Xinjiang Tianzhu by contract arrangement. (b) On September 12, 2016, Atrio Group completed the internal reorganization, and Marques del Atrio absorbed and merged Atrio Group and its subsidiaries Enotec S.L., Hostaler I S.L., and Faustino Rivero Ulecia S.L. After the reorganization was completed, Marques del Atrio becomes the only existing company. 118 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report (c) Changyu Chateau is a Sino-foreign joint venture established by the Company and a foreign investor, whose 70% of the shares are held by the Company. The Company exercises full control over the operation, investment and financing policies of Changyu Chateau by contract arrangement. The contract arrangement will expire on December 31, 2022. (d) Langfang Castel is a Sino-foreign joint venture established by the Company and a foreign investor, whose 49% of the shares are held by the Company and its subsidiaries. The Company exercises full control over the operation, investment and financing policies of Langfang Castel by contract arrangement. The contract arrangement will expire on December 31, 2022. (e) Beijing Chateau is a limited liability company established by the Company and a domestic investor, whose 70% of the shares are held by the Company. The Company exercises full control over the operation, investment and financing policies of Beijing Chateau by contract arrangement. The contract arrangement will expire on September 2, 2019. (f) Icewine Chateau is a Sino-foreign joint venture established by the Company and a foreign investor, whose 51% of the shares are held by the Company. The Company exercises full control over the operation, investment and financing policies of Icewine Chateau by contract arrangement. The contract arrangement will expire on December 31, 2021. (g) The R&D Company is a joint venture established by the Company and Agricultural Development Fund, whose 62% of the shares were held by the Company on December 31, 2016. As stated in Note 6.29, Agricultural Development Fund invested RMB 305,000,000 Yuan in the R&D Company in 2016, accounting for 37.9% of the registered capital. According to the investment agreement, it is agreed that Agricultural Development Fund will take back the investment fund in ten years and obtain fixed income according to year, which is 1.2% of the remaining principal. Except for the above fixed income, the Agricultural Development Fund shall not enjoy other profits of the R&D Company or bear the losses of the R&D Company. Accordingly, the investment of the Agricultural Development Fund in the R&D Company is equity investment nominally, which is debt investment in deed. This Company shall include the investment of the Agricultural Development Fund in long-term accounts payable measured by amortized cost. The Company exercises full control over the operation, investment and financing policies of the R&D Company by contract arrangement. The contract arrangement will expire on May 22, 2026. 9.1.2 Important non-wholly-owned subsidiaries Unit: Yuan Dividend declared to be Shareholding Profit/loss attributable Balance of minority distributed to minority Name of subsidiary proportion of minority to minority shareholders shareholder‘s interest at shareholders in this shareholders in this period the end of period period Xinjiang Tianzhu 40% 56,093,912 119 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Dividend declared to be Shareholding Profit/loss attributable Balance of minority distributed to minority Name of subsidiary proportion of minority to minority shareholders shareholder‘s interest at shareholders in this shareholders in this period the end of period period Marques del Atrio 25% 999,164 703,430 30,995,051 Changyu Chateau 30% 12,365,016 Langfang Castel 51% 22,702,522 Beijing Chateau 30% 35,293,868 Icewine Chateau 49% 33,319,062 Explanation for difference between the proportion of shareholding and proportion of voting power of the minority shareholders in the subsidiaries: See details in Note 9.1. 9.1.3 Main financial information of important non-wholly-owned subsidiaries Unit: Yuan Ending balance Name of Non-current Non-current subsidiary Current assets Total assets Current liabilities Total liabilities assets liabilities Xinjiang 97,483,520 73,823,603 171,307,123 42,113,184 5,336,114 47,449,297 Tianzhu Changyu 131,258,800 115,227,528 246,486,329 166,841,868 166,841,868 Chateau Langfang 26,252,091 19,508,777 45,760,868 9,423,027 9,423,027 Castel Beijing 48,208,788 493,716,806 541,925,594 369,185,634 444,473 369,630,106 Chateau Icewine 52,324,870 26,837,947 79,162,817 29,226,979 100,000 29,326,979 Chateau Marques del 310,540,839 125,052,023 435,592,862 212,482,019 98,966,712 311,448,731 Atrio Unit: Yuan Beginning balance Name of Non-current Non-current subsidiary Current assets Total assets Current liabilities Total liabilities assets liabilities 120 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Beginning balance Name of Non-current Non-current subsidiary Current assets Total assets Current liabilities Total liabilities assets liabilities Xinjiang 80,126,247 77,008,886 157,135,133 23,266,974 5,336,114 28,603,088 Tianzhu Changyu 173,934,285 116,396,690 290,330,975 210,904,481 210,904,481 Chateau Langfang 26,528,622 19,890,293 46,418,915 10,233,932 10,233,932 Castel Beijing 88,294,417 502,368,404 590,662,821 431,222,472 888,945 432,111,417 Chateau Icewine 38,239,653 27,545,615 65,785,268 13,756,944 100,000 13,856,944 Chateau Marques del 333,455,551 131,921,130 465,376,681 272,843,155 69,572,335 342,415,490 Atrio Unit: Yuan Amount incurred in this period Amount incurred in prior period Name of Total Total Operating Operating Operating Operating subsidiary Net profit comprehensive Net profit comprehensive income cash flow income cash flow income income Xinjiang 115,904,168 22,453,715 22,453,715 -7,275,404 71,414,395 8,855,720 8,855,720 10,345,022 Tianzhu Changyu 20,668,538 -106,018 -106,018 12,978,276 25,120,685 -1,835,054 -1,835,054 16,363,694 Chateau Langfang 23,732,778 161,088 161,088 -137,422 23,893,566 1,141,604 1,141,604 8,003,926 Castel Beijing 75,491,933 12,511,172 12,511,172 -37,040,335 96,780,881 22,140,264 22,140,264 19,711,484 Chateau Icewine 16,724,881 -2,063,324 -2,063,324 -1,416,775 16,400,216 -3,220,773 -3,220,773 -2,213,030 Chateau Marques 131,223,890 -233,187 3,996,659 -31,616,566 138,454,701 2,677,035 4,336,228 -10,296,603 del Atrio 10. Risks related to financial instruments The main financial instruments of the Group include monetary capital, bills receivable, accounts receivable, interest receivable, other receivables, available-for-sale financial assets, other non-current assets, short-term loans, bills payable, accounts payable, other payables, interest payable, 121 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report long-term accounts payable and long-term loans. Please refer to Note 6 of each financial instrument for the details. The risks related to these financial instruments and risk management policies adopted by the Group to reduce these risks are shown as follows. The management of the Group manages and monitors these risk exposures to ensure that the above-mentioned risks are controlled within a defined scope. The Group adopts sensitivity analysis techniques to analyze the possible influence of possible reasonable changes of risk variables on the current profit and loss and shareholders‘ equity. Since any risk variable merely changes independently and the final influence of relevance between variables on the change of certain risk variable will exert a great effect, the following content is carried out under the hypothesis that each variable changes independently. 10.1 Risk management objective and policy The risk management objective of the Group is to achieve proper balance between risks and benefits, to minimize the negative influence of the risks on the business performance of the Group and to maximize the shareholders‘ benefit. Based on this risk management objective, the basic risk management strategy of the Group is to determine and analyze various risks faced by the Group, to set up proper risk tolerance bottom line and to carry out risk management, and to supervise various risks timely and reliably to control the risks within a defined scope. 10.1.1 Market risk ① Foreign exchange risk Foreign exchange risk refers to the risk that causes loss due to exchange rate fluctuation. The foreign exchange risk borne by the Group is mainly relevant to EUR, HKD and USD. Except that the overseas subsidiaries of the Group purchase and sale in EUR and except for loans of domestic subsidiaries in EUR, other main business activities of the Group are priced and settled in RMB. As at June 30, 2017, except that the assets and liabilities mentioned in the table below were the balance shown in EUR, HKD and USD, other assets and liabilities of the Group were all the balance shown in RMB. The foreign exchange risk caused by the assets and liabilities of such foreign currency balance may exert an influence on the business performance of the Group. 122 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Unit: Yuan Item Ending balance Beginning balance Monetary capital (EUR) 1,932,154 566,182 Monetary capital (HKD) 1,098,464 192 Monetary capital (USD) 4,576,338 Long-term loans due within one year (EUR) 15,499,200 29,227,200 The Group pays close attention to the influence of exchange rate fluctuation on the foreign exchange risk of the Group. The Group has not taken any measures to avoid the foreign exchange risk at present. Sensitivity analysis of foreign exchange risk With the other variables unchanged, the pre-tax influence of possible reasonable exchange rate fluctuation on current profit and loss and shareholders‘ equity is shown as follows: Unit: Yuan This period Item Exchange rate fluctuation Influence on profit of this period Influence on shareholders‘ equity HKD 5% appreciation against RMB 54,923 54,923 HKD 5% depreciation against RMB -54,923 -54,923 EUR 5% appreciation against RMB -678,352 -678,352 EUR 5% depreciation against RMB 678,352 678,352 USD 5% appreciation against RMB 228,817 228,817 USD 5% depreciation against RMB -228,817 -228,817 ② Interest rate risk – risk of change in cash flow The risk of change in cash flow of financial instruments caused by interest rate change of the Group is mainly relevant to the monetary capital and long-term loan at floating interest rate. The policy of the Group is to maintain the floating interest rate of these loans to eliminate the risk of change in fair value of the interest rate. 123 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Sensitivity analysis of interest rate risk Sensitivity analysis of interest rate risk is based on the hypothesis that the change in market interest rate influences the interest income or expense of financial instruments at variable rate. The management of the Group thinks that the interest rate risk of deposit in bank borne by the Group is not significant, and therefore the sensitivity analysis of interest rate of deposit in bank is not disclosed here. On the basis of the above-mentioned hypothesis, with the other variables unchanged, the pre-tax influence of possible reasonable exchange rate fluctuation on current profit and loss and shareholders‘ equity is as follows: Unit: Yuan This period Item Interest rate change Influence on profit of this period Influence on shareholders‘ equity Bank loan Increase by 50 BP -755,415 -755,415 Bank loan Decrease by 50 BP 755,415 755,415 10.1.2 Credit risk As at June 30, 2017, the largest credit risk exposure possibly causing the financial loss of the Group was mainly caused by the loss generated by the financial assets of the Group due to failure of another party of the contract in fulfilling obligations. To lower the credit risk, the Group only trades with the recognized and reputable third party. In accordance with the policy of the Group, credit check shall be carried out for all customers requiring to adopt form of credit to trade. In addition, the Group conducts continuous monitoring on the balance of accounts receivable to ensure that the Group will not face major risk of bad debts. For transactions not settled with recording currency of relevant business units, unless the credit control department of the Group specially approves, the Group will not provide credit trade terms. In addition, the Group audits the collection of each single 124 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report significant account receivable on each date of balance sheet to ensure that sufficient bad-debt provision is accrued for accounts unable to be collected. Therefore, the management of the Group thinks the credit risk borne by the Group is greatly reduced. Since the Group only trades with the recognized and reputable third party, no collateral is required. The credit risk is managed centrally according to the customer/counter-party, geographic area and industry. As at June 30, 2017, 28.0% of accounts receivable of the Group came from top five borrowers in accounts receivable of the Group (December 31, 2016: 26.3%). The Group holds no collateral or other credit enhancement for the balance of accounts receivable. 10.1.3 Liquidity risk When managing the liquidity risk, the Group reserves and monitors the cash and cash equivalents the management considers sufficient to satisfy the operation need of the Group and reduce the influence of fluctuation in cash flow. The management of the Group monitors the use of bank loans and ensures to abide by the loan agreement. 10.1.4 Disclosure of fair value – fair value of financial assets and liabilities not measured by fair value The management of the Group thinks that, as at June 30, 2017, the book value of financial assets and liabilities measured by amortized cost was close to the fair value thereof. 11. Related parties and related transactions 11.1 Particulars of the parent company of the Company Proportion of Proportion of Name of parent shareholding of the voting powers of Registration place Business nature Registered capital company parent company in the parent company the Company in the Company Changyu Group Manufacturing Yantai City 50,000,000 50.40% 50.40% Company industry From January to June 2017, there was no fluctuation in the registered capital of the parent company and its share in equity interest and voting right. 125 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 11.2 Particulars of the subsidiaries of the Company See particulars of the subsidiaries of the Company in Note 9. 11.3 Particulars of other related parties Name of other related parties Relationship between other related parties and the Company Yantai Changyu Wine Culture Museum Co., Ltd. (―Wine A company controlled by the same parent company Culture Museum‖) Yantai Changyu Window of International Wine City Co. Ltd. A company controlled by the same parent company (―Window of Wine City‖) Yantai God Horse Packing Co., Ltd. (―God Horse Packing‖) A company controlled by the same parent company Yantai Zhongya Medical Health Wine Co., Ltd. (―Zhongya A company controlled by the same parent company Medical‖) 11.4 Related transactions 11.4.1 Related transactions of purchasing and selling goods and providing and receiving services List of purchasing goods/receiving services Unit: Yuan Amount incurred in this Related parties Related transactions Amount incurred in prior period period God Horse Packing Purchasing goods 64,896,342 71,912,485 Zhongya Medical Purchasing goods 10,700,788 5,550,205 Wine Culture Museum Purchasing goods 6,319,776 4,636,495 Window of Wine City Purchasing goods 231,879 296,652 List of selling goods/providing services Unit: Yuan Amount incurred in this Related parties Related transactions Amount incurred in prior period period Wine Culture Museum Selling goods 4,252,962 7,663,340 Window of Wine City Selling goods 5,642,914 5,002,597 Zhongya Medical Selling goods 1,956,658 2,057,616 God Horse Packing Selling goods 829,977 772,037 The price of transactions between the Group and the related parties are based on the negotiated price. 11.4.2 Related trusteeship/contracting and mandatory administration/outsourcing Nil 126 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 11.4.3 Leasing with related parties The Company as a leasee: Unit: Yuan Rent recognized in prior Name of the lessor Type of leased assets Rent recognized in this period period Changyu Group Company Warehouse and office building 3,775,362 2,929,000 Pursuant to a lease contract dated January 1, 2017 signed between the Company and Changyu Group Company, starting from January 1, 2017, the Company rents properties to Changyu Group Company for operation purposes at a basic annual rental of RMB 1,464,500 Yuan, and the expired date of the contract is December 31, 2021. From January to June 2017, the rental expenses recognized by the Company to Changyu Group Company amounted to RMB 732,250 Yuan. Pursuant to a lease contract dated January 1, 2017 signed between the Group and Changyu Group Company, starting from January 1, 2017, the Company rents properties to Changyu Group Company for operation purposes at a basic annual rental of RMB 4,393,500 Yuan, and the expired date of the contract is December 31, 2021. From January to June 2017, the rental expenses recognized by the Group to Changyu Group Company amounted to RMB 2,196,750 Yuan. Pursuant to a lease contract dated January 1, 2016 signed between the Group and Changyu Group Company, starting from January 1, 2016, the Group rents properties to Changyu Group Company for operation purposes at a basic annual rental of RMB 1,692,724 Yuan, and the expired date of the contract is December 31, 2020. From January to June 2017, the rental expenses recognized by the Group to Changyu Group Company amounted to RMB 846,362 Yuan. 11.4.4 Guarantee with related parties Nil 11.4.5 Inter-bank borrowing and lending of related parties Nil 11.4.6 Asset transfer and debt recombination of related parties Nil 11.4.7 Other related transactions Item Note Amount incurred in this period Amount incurred in prior period Trademark use (a) 44,428,033 46,273,367 fee Patent fee (b) 25,000 25,000 127 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report The price of transactions between the Group and the related parties is based on the negotiated price. (a) Trademark royalty contract Pursuant to a trademark royalty contract dated May 18, 1997 signed between the Company and Changyu Group Company, starting from September 18, 1997, the Company may use certain trademark of Changyu Group Company, which has been registered with the PRC Trademark Office. An annual royalty fee at 2% of the Company‘s annual specific sales is payable to Changyu Group Company by the Company. The contract is effective until the expiry of the registration of the trademark. From January to June 2017, the trademark royalty fee paid to related parties by the Group accounted for 100% of the trademark royalty fee in the Group. (b) Patent implementation license contract Pursuant to a patent implementation license contract dated May 18, 1997 signed between the Company and Changyu Group Company, starting from September 18, 1997, the Company may use the patented technologies of Changyu Group Company. The annual patent usage fee payable by the Company to Changyu Group Company was RMB 50,000 Yuan. The contract was expired on December 20, 2005. After the patent implementation license contract signed on August 20, 2006 expires, the Company renewed the contract on August 20, 2016 for 10 year, which should pay the patent royalty of RMB 50,000 Yuan to Changyu Group Company annually as before. From January to June 2017, the patent royalty payable by the Company to Changyu Group Company amounted to RMB 25,000 Yuan. From January to June 2017, the patent fees paid to related parties by the Group accounted for 100% of the patent fees in the Group. 11.5 Accounts receivable and payable of the related parties 11.5.1 Accounts receivable Unit: Yuan Ending balance Beginning balance Item Related parties Book Bad debt Bad debt Book balance balance provision provision Accounts receivable Zhongya Medical 4,719,638 3,913,997 Accounts receivable God Horse Packing 292,284 50,700 Accounts receivable Window of Wine City 908,898.20 1,833,273 Accounts receivable Wine Culture Museum 218,054 876,724 128 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 11.5.2 Accounts payable Unit: Yuan Item Related parties Ending book balance Beginning book balance Accounts payable God Horse Packing 26,294,501 59,058,023 Accounts payable Zhongya Medical 3,614,343 4,328,184 Accounts payable Wine Culture Museum 2,011,234 3,038,520 Accounts payable Window of Wine City 131,531 619,578 Other accounts payable Changyu Group Company 42,324,395 78,572,540 12. Commitment and contingency 12.1 Significant commitment Unit: Yuan Item Ending balance Beginning balance Capital commitment 1,134,630,000 1,508,310,000 12.2 Contingency By the balance sheet date, the Group and the Company didn‘t have any undisclosed contingency to be disclosed. 13. Matters after balance sheet 13.1 Important non-adjusting events Nil 13.2 Profit distribution Unit: Yuan Profits or dividends to be distributed 342,732,000 Allocated profits or dividends approved to declare upon 342,732,000 discussion According to the decision of the Shareholders‘ Meeting dated June 15, 2017, based on the issued capital stock of 685,464,000 shares in 2016, the Company allocated RMB 5 Yuan in cash (including tax) for every 10 shares to all shareholders with the total cash dividends of RMB 342,732,000 Yuan. Such cash dividends were distributed on July 11, 2017. 14. Other important matters Nil 15. Notes on major items in financial statements of the parent company 15.1 Accounts receivable 15.1.1 Accounts receivable disclosed by type Unit: Yuan Type Ending balance Beginning balance 129 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Book balance Bad debt provision Book balance Bad debt provision Accrued Book value Accrued Book value Amount Proportion Amount Amount Proportion Amount proportion proportion Accounts receivable of significant single amount and single accrued bad debt provision Accounts receivable accrued bad debt provision by credit risk features Accounts receivable of insignificant single amount and single 1,838,244 100% 1,838,244 3,326,683 100% 3,326,683 accrued bad debt provision Total 1,838,244 100% 1,838,244 3,326,683 100% 3,326,683 15.1.2 Bad debt provision accrued, received or transferred back in this period The bad debt provision accrued in this period was RMB 0 Yuan; and that received or transferred back in this period was RMB 0 Yuan. 15.1.3 Accounts receivable actually canceled after verification in this period Nil 15.1.4 Accounts receivable collected by the borrower of top 5 units ranked by the ending balance Unit: Yuan Percentage in Relationship with Unit Amount Age total accounts the Company receivable (%) Yantai Zhongya Medical Health Wine Other related party 1,516,026 82.5% Co., Ltd. (merged) of the Company Yantai Huibao Artware Manufacturing Third party 322,218 17.5% Co., Ltd. Total 1,838,244 100.0% 15.1.5 Accounts receivable derecognized due to transfer of financial assets Nil 130 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 15.1.6 Accounts receivable transferred and included in assets and liabilities Nil 15.2 Other accounts receivable 15.2.1 Other accounts receivable disclosed by type Ending balance Beginning balance Book balance Bad debt provision Book value Book balance Bad debt provision Book value Type Accrued Accrued Amount Proportion Amount Amount Proportion Amount proportion proportion Other accounts receivable of significant single 3,529,544,186 99.7% 3,529,544,186 3,572,802,092 99.7% 3,572,802,092 amount and single accrued bad debt provision Other accounts receivable accrued bad debt provision by credit risk features Other accounts receivable of insignificant single 10,166,247 0.3% 10,166,247 9,730,770 0.3% 9,730,770 amount and single accrued bad debt provision Total 3,539,710,433 100% 3,539,710,433 3,582,532,862 100% 3,582,532,862 15.2.2 Bad debt provision accrued, received or transferred back in this period The bad debt provision accrued in this period was RMB 0 Yuan; and that received or transferred back in this period was RMB 0 Yuan. 15.2.3 Other accounts receivable classified by nature Unit: Yuan Nature of fund Ending book balance Beginning book balance Accounts receivable of subsidiaries 3,538,441,877 3,580,805,532 Deposit and guaranty money receivable 8,000 Other 1,268,556 1,719,330 Total 3,539,710,433 3,582,532,862 131 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 15.2.4 Other accounts receivable collected by the borrower of top 5 units ranked by the ending balance Unit: Yuan Percentage in the Ending balance Nature of total ending Unit Ending balance Age of bad debt fund balance of other provision accounts receivable Internal Chang‘an Chateau incomings 755,392,258 Within 2 years 21.3% and outgoings Internal Sales Company incomings 618,992,851 Within 2 years 17.5% and outgoings Internal Ningxia Chateau incomings 439,733,913 Within 2 years 12.4% and outgoings Internal R&D Company incomings 418,182,216 Within 2 years 11.8% and outgoings Internal Beijing Chateau incomings 300,371,955 Within 2 years 8.5% and outgoings Total -- 2,532,673,193 -- 71.5% 15.2.5 Accounts receivable related to governmental subsidy Nil 15.2.6 Other accounts receivable derecognized due to transfer of financial assets Nil 15.2.7 Other accounts receivable transferred and included in assets and liabilities Nil 15.3 Long-term equity investment Unit: Yuan Ending balance Beginning balance Item Impairment Impairment Book balance Book value Book balance Book value reserve reserve Investment in 2,108,589,655 2,108,589,655 1,834,341,541 1,834,341,541 subsidiaries Investment in associated enterprises and joint ventures Total 2,108,589,655 2,108,589,655 1,834,341,541 1,834,341,541 15.3.1 Investment in subsidiaries Unit: Yuan 132 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Provision for Ending balance Beginning Increase in this Decrease in this Invested unit Ending balance impairment in of impairment balance period period this period provision Xinjiang Tianzhu 60,000,000 60,000,000 (a) Kylin Packaging 23,176,063 23,176,063 Changyu Chateau 28,968,100 28,968,100 (a) Pioneer 3,500,000 3,500,000 International (b) Ningxia Growing 1,000,000 1,000,000 National Wine 2,000,000 2,000,000 Icewine Chateau (a) 30,440,500 30,440,500 Beijing Chateau (a) 77,000,000 77,000,000 Sales Company 7,200,000 7,200,000 Langfang Sales (b) 100,000 100,000 Langfang Castel (a) 19,835,730 19,835,730 Wine Sales 4,500,000 4,500,000 Shanghai Marketing 300,000 300,000 (b) Beijing Marketing 850,000 850,000 Jingyang Sales (b) 100,000 100,000 Jingyang Wine (b) 900,000 900,000 Ningxia Wine 1,000,000 1,000,000 Ningxia Chateau 2,000,000 2,000,000 Tinlot Chateau (b) 80,000,000 80,000,000 Shihezi Chateau 550,000,000 550,000,000 Chang‘an Chateau 20,000,000 20,000,000 R&D Company (a) 500,000,000 500,000,000 Huanren Wine 11,000,000 11,000,000 Francs Champs 220,320,604 220,320,604 Marques del Atrio 190,150,544 190,150,544 Indomita Chile 274,248,114 274,248,114 Total 1,834,341,541 274,248,114 2,108,589,655 133 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 15.4 Operating income and operating cost Unit: Yuan Amount incurred in this period Amount incurred in prior period Item Income Cost Income Cost Main business 445,339,324 387,600,176 648,652,597 495,598,413 Other business 386,481,179 350,350,202 6,646,403 5,714,186 Total 831,820,503 737,950,378 655,299,000 501,312,599 15.5 Investment income Unit: Yuan Amount incurred in this Amount incurred in prior Item period period Income from long-term equity investment by cost method 66,127,980 683,891,453 Income from long-term equity investment by equity method Investment income from disposal of long-term equity investment Investment income of the financial assets measured at their fair values and the variation of which is recorded into the current profit and loss during the holding period Investment income gained from disposal of the financial assets measured at their fair values and the variation of which is recorded into the current profit and loss Investment income of held-to-maturity investment during the holding period Investment income of financial assets held for sale during the holding period Investment income gained from disposal of financial assets held for sale Gains generated from the remaining equity remeasured as per fair value after the loss of control Total 66,127,980 683,891,453 134 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report 16. Supplementary materials 16.1 List of non-current profits/losses in this period Unit: Yuan Item Amount Remark Profits/losses on disposal of non-current assets -495,071 Tax return, deduction and exemption approved beyond the 12,737,950 authority or without formal approval document Governmental subsidy included in the current profits/losses (excluding those closely related to the enterprise business and 6,997,254 enjoyed in accordance with the unified standard quota or ration of the state) Payment for use of funds by non-financial enterprises included in the current profits/losses Income obtained when the investment cost obtained by the enterprise from subsidiaries, joint-run business and joint venture is less than the fair value of the net identifiable assets obtained from the invested units when the investment is made Profits/losses on exchange of non-monetary assets Profits/losses on entrusting other people to make investment or manage assets Asset impairment provision accrued due to force majeure such as natural disaster Profits/losses on debt restructuring Enterprise reorganization expenses such as staffing expenditure and integration expenses, etc. Profits/losses on those beyond the fair value generated from transactions with unfair transaction price Current net profits/losses on subsidiaries acquired from a business combination under common control from the beginning to the consolidation date Profits/losses on contingencies irrelated to the normal business of the Company Profits/losses on changes of fair value of financial assets and liabilities held for trading, and investment income from disposal of financial assets and liabilities held for trading and 135 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report Item Amount Remark financial assets held for sale, excluding effective hedging operations relevant to the normal business of the Company Returns of provision for impairment of accounts receivable with single impairment test Profits/losses on external entrusted loans Profits/losses on fair value changes of investment real estate with fair value mode for follow-up measurement Influence of the one-time adjustment of the current profits/losses in accordance with tax and accounting laws and regulations on the current profits/losses Trustee fee income from entrusted operation Other non-operating income and expenditure besides the 3,225,833 above items Other profits/losses conforming to the definition of non-current profits/losses Minus: Influenced amount of income tax 5,303,287 Influenced amount of minority shareholders‘ equity Total 17,162,679 -- 16.2 Return on net assets and earnings per share Earnings per share Weighted average return on Profit incurred in this period Basic EPS Diluted EPS net assets (Yuan/Share) (Yuan/Share) Net profit attributable to common 7.84% 0.98 0.98 shareholders of the Company Net profit attributable to common shareholders of the Company deducting 7.64% 0.95 0.95 non-incidental profits/losses 16.3 Accounting data difference under domestic and foreign accounting standard 16.3.1 Net profits & net assets difference disclosed in the financial report according to the international accounting standard and Chinese accounting standard Unit: Yuan Net profits Net assets Amount incurred in Amount incurred in prior Ending balance Beginning balance this period period 136 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report In accordance with the 670,069,054 695,021,847 8,880,538,852 8,209,010,989 Chinese accounting standard Item & amount adjusted in accordance with the international accounting standard: In accordance with the international accounting 670,069,054 695,021,847 8,880,538,852 8,209,010,989 standard 137 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Semi-annual Report XI. Reference Documents (1)The original of 2017 Semi-annual Report autographed by the chairman. (2)The Financial Statements autographed and signed by the chairman, chief accountant and accountants in charge. (3)The Prospectus and Public Offering Announcement for Stock B in 1997; The Prospectus and The Shares’ Change & Public Offering Announcement for Stock A in 2000. (4) The originals of all documents and announcements that the Company made public during the report period in the newspapers designated by China Securities Regulatory Commission. Yantai Changyu Pioneer Wine Co. Ltd. Board of Directors 29th August, 2017 138