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个股公告正文

张 裕B:2014年年度报告(英文版)

日期:2015-04-28附件下载

                     Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report




Yantai Changyu Pioneer Wine Co. Ltd.

         2014 Annual Report



              2015 Final 01




             April, 2015
                                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report



Contents
I、Important Notice and Definition................................................................................................. 3

II、Brief Introduction for the Company ....................................................................................... 6

III、Summary of Accounting Datas and Financial Indicators ....................................................9

IV、Board of Directors’ Report ................................................................................................... 12

V、Major Issues ............................................................................................................................. 36

VI、Changes in Shares and the Shareholders’ Situation ...........................................................44

VII、Related Situation for perferred shares ...............................................................................53

VIII、Situation for Directors, Supervisors, Senior Managers and staffs...................................54

IX、Corporate Governance .......................................................................................................... 63

X、Internal Control .......................................................................................................................72

XI、Financial Report .....................................................................................................................75

XII、Reference Documents .........................................................................................................178




                                                                                                                                              2
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                         I. Important Notice and Definition

The Board of Directors,the Board of Supervisors,directors, supervisors & senior managers
of the Company collectively and individually accept full responsibility for the truthfulness ,
accuracy and completeness of the information contained in this report and confirm that to the
best of their knowledge and belief there are no unfaithful facts, significant omissions or
misleading statements.


Except the following directors, other directors all personally attended the meeting for
deliberating the annual report.


Absent directors         Directors’ post      Absent reason           Authorized person
Mr. Augusto Reina        Director              Due to working          Mr. Sun Liqiang
Mr. Aldino Marzorati     Director              Due to working          Mr. Zhou Hongjiang
Mr.AntonioAppignani Director                   Due to working          Mr. Leng Bin
Mr. Xiao Wei             Independent           Due to working          Mr. Wang Zhuquan
                         Director




The Company’s preliminary scheme of profit distribution deliberated and passed by the
board of the directors is as following: “Based on 685,464,000 shares,we plan to pay CNY 4.40
in cash as dividends for every 10 shares (including tax) to the Company’s all shareholders,
send 0 bonus(including tax) and capital reserve will not be transferred to equity. ”


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.




                                                                                                       3
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Definition


Definition Item             Refers to Definition Content
Company/The Company         Refers to Yantai Changyu Pioneer Wine Co. Ltd.
Changyu Group/Controlling   Refers to
                                      Yantai Changyu Group Co. Ltd.
Shareholder
CSRC                        Refers to China Securities Regulatory Commission
SSE                         Refers to Shenzhen Stock Exchange
                            Refers to Deloitte Hua Yong Certified Public Accountants
Deloitte Hua Yong
                                      Co., LTD (special general partnership)
CNY                         Refers to Chinese Yuan




                                                                                              4
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Significant Risk Warning

   1. The Company may face significant risks in production and operation, please refer to

      “8.expectation for the Company’s future development” sector of “5. Risks likely to occur”

      part in the chapter four named “Board of Directors’ Report”. We advise investors to read

      carefully and pay attention to the investment risks.

   2. The business plan and target in the report do not represent the earnings forecast of the

      listed company in 2015, which 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.




                                                                                                          5
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                    II、Brief Introduction for the Company

1、Company’s information

Abbreviation of the                                Code number of the
                        Changyu A、Changyu B                          000869、200869
Shares:                                            Shares
Abbreviation of the
Shares after alteration _
(if have)
Place of listing of the
                        Shenzhen Stock Exchange
Shares
Legal     Name       in
                        烟台张裕葡萄酿酒股份有限公司
Chinese
Abbreviation         of
                        张裕
Chinese name
Legal Name in English YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
Abbreviation         of
                        CHANGYU
English name
Legal Representative Mr. Sun Liqiang
Registered Address      56 Dama Road, Yantai, Shandong, China
Postal Code             264000
Office Address          56 Dama Road, Yantai, Shandong, China
Postal Code             264000
Website                 http://www.changyu.com.cn
E-mail                  webmaster@changyu.com.cn

2、Contact person and information

                             Secretary to the Board        of Authorized Representative of
                             Directors                        the Securities Affairs
Name                         Mr. Qu Weimin                    Mr. Li Tingguo
                             56 Dama Road, Yantai,            56 Dama Road, Yantai,
Address
                             Shandong, China                  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




                                                                                                  6
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3、Information disclosure and filing location

The newspapers in which the “China Securities Newspaper” , “Securities Times” and
Company’s information is disclosed “Hong Kong Commercial Daily”
Web Site assigned by CSRC to carry
                                    http://www.cninfo.com.cn
the annual report
                                    Board of Directors’ Office of the Company,
Filing location
                                    56 Dama Road, Yantai, Shandong

4、Registration changes

              Registration   Registration      Business    License                          Organization
                                                                     Tax No.
              Date           Place             No.                                          Code
                                                                State    Taxation
                             the    Business
                                                                Bureau
                             Administration
First           September                                       37060216500338-1
                    th       Bureau        of 3700001806012                       26710003-5
registration 18 , 1997                                          Local    Taxation
                             Shandong
                                                                Bureau
                             Province
                                                                370601267100035
                                                                State    Taxation
                               the    Business
Registration                                                    Bureau
                 st            Administration
at the end of 1        August,                                  37060216500338-1
                               Bureau        of 370000018060122                   26710003-5
the      report 2012                                            Local    Taxation
                               Shandong
period                                                          Bureau
                               Province
                                                                370601267100035
                             On 18th September 1997 the Company’s operating scope was the
                             production, processing and sales of wine, distilled liquor, healthy liquor,
                             fruit liquor, non-alcohol beverages, fruit jam, packing materials and
                             winemaking machines.
                        On 17th April 2008, after the deliberation of 2007 shareholders’ meeting,
                        the Company’s operating scope is amended to “the Company, legally
Changes for the main registered, is in business of production, processing and sales of wine,
                        distilled liquor, medicated liquor, fruit liquor, non-alcohol beverages,
business of the Company fruit jam, packing materials and winemaking machines; licensed import
since it was listed     and export.”
(if have)               On 12th May 2010, after the deliberation of 2009 shareholders’ meeting,
                        the Company revised its operating scope to “the Company, legally
                        registered, is in business of production, processing and sales of wine,
                        distilled liquor, medicated liquor, fruit liquor, non-alcohol beverages,
                        fruit jam, packing materials and its products, winemaking machines;
                        licensed import and export; external investments according to
                        governmental policies.

Changes for all previous
controlling shareholders No.
(if have)

                                                                                                        7
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5、Other documents

The accountant appointed by the Company
                           Deloitte Hua Yong Certified Public Accountants Co., LTD (special
Name
                           general partnership)
Address                    No. 1 East Chang'an Avenue, Dongcheng District, Beijing
Name      of     signatory
                           Xu Zhaohui, Li Xu
accountants
The sponsor agency the Company appointed to perform the duty of continuous supervision during
the report period
□Available     V Not available
The financial adviser the Company appointed to perform the duty of continuous supervision during
the report period
□Available     V Not available




                                                                                                      8
                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.




         III、Summary of Accounting Datas and Financial Indicators

1、Key accounting data and financial indicators

Whether the Company makes retroactive adjustments or restates the accounting data of previous
fiscal years because of changes of accounting policy and/or accounting errors.
□Yes V No
                                                                                 Unit:CNY
                                                               More      or
                                                               less than
Item                       2014       2013                                  2012
                                                               Last year
                                                               (%)
Business revenue           4,156,727,525         4,320,948,572                   -3.80%          5,643,530,553

Net profit attributed to
the shareholders of the     977,707,711          1,048,185,927                   -6.72%          1,700,928,117
listed company
Net profit attributed to
the shareholders of the
listed company after        950,191,379          1,017,348,285                   -6.60%          1,675,956,428
deducting the irregular
profit and loss
Net cash flows from the
                           1,070,083,296          735,074,307                    45.57%          1,302,041,322
operating activities
Basic earnings per share            1.43              1.53                       -6.54%               2.48

Diluted earnings per
                                    1.43              1.53                       -6.54%               2.48
share
Weighted average for
earning rate of the net           13.96%            16.45%                       -2.49%             31.13%
assets
                                                                          More or less
                           Dec.     31st                                  than
                                           Dec. 31st 2013                              Dec. 31st 2012
                           2014                                           Last   year
                                                                          (%)
Total assets               8,912,232,640         7,997,930,542                   11.43%          8,123,134,580

Net Assets attributed to
the shareholders of the    6,840,452,145         6,208,279,705                   10.18%          5,913,104,178
listed company




                                                                                                                        9
                                                                  Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


2 、 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     V Not available
There are no differences of net profit and net asset in the financial report disclosed according to
both international accounting standards and PRC accounting standards during the report period.


(2) Differences of net profit and net asset in the financial report disclosed according to both foreign
accounting standards and PRC accounting standards
□Available     V 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、Item and amount of irregular profit and loss
V Available □Not available
                                                                                                             Unit:CNY
Item                                         2014                2013                2012               Explanation
Gain on disposal of non-current
assets, including the reversal of              -5,086,545.00            271,989.00     -1,940,260.00
accrued impairment provision
Tax refund or exemption that is either
non-recurring or without proper                13,405,520.00                     -                  -
approval
Government grants credited in profit
and loss (except for those recurring
government grants that are closely
                                               27,140,194.00       36,659,754.00       23,393,756.00
related to the entity's operation, in line
with related regulations and have
proper basis of calculation)
Other non-operating income and
non-operating expenses except the                   166,987.00      3,302,760.00       10,953,355.00
aforementioned items
Reversal of impairment loss for
receivables which was separately                    192,908.00
undertaken impairment test
Less. Income tax effect                         8,302,732.00        9,396,861.00        7,435,162.00
Total                                          27,516,332.00       30,837,642.00       24,971,689.00 --


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 Announcement on Public Company’s Information


                                                                                                                         10
                                                      Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


Disclosure No.1 - Irregular Profit and Loss and as to regarding the irregular profit and loss as
recurrent profit and loss as specified in the Explanatory Announcement on Public Company’s
Information Disclosure No.1 - Irregular Profit and Loss.
□Available     V 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 Announcement on Public Company’s Information
Disclosure No.1 - Irregular Profit and Loss during the report period.




                                                                                                             11
                                                        Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.




                                 IV、Board of Directors’ Report

     1、Summarization
     In 2014,continuously influenced by the multiple negative factors such as the slowdown of domestic
     economic growth, overwhelming flow of foreign wine into Chinese market and the relative national
     policies as so on, the effective demands for premium wine products in domestic wine is weakness,
     the medium level wine suitable for mass consumption maintains a sound momentum of growth. But
     the whole market competition is still fierce, which brought a strong pressure to the Company’s
     operation 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 medium and low level
     products, optimize the market layout, perfect the marketing channels and effort to promote product
     sales, Preliminary control the unfavorable situation of the sharp decline in sales revenue
     year-on-year. In the year, the Company realized business income of CNY 4156.73 million, 3.8%
     down on year-on-year basis; but due to the impact of decreasing the proportion of the sales in the
     products with high gross profit margin and increasing the proportion of the sales in the products
     with the low profit margin, the Company realized net profit of CNY 977.71 million, 6.72% down on
     year-on-year basis.

     2、Analysis to main business

     (1)、Summarization

Description                    Increase or decrease of Cause of major changes
                               the end of the period
                               over the end of last year
Operating revenue                               -0.38%Mainly because of decline of sales volume in the high
                                                      price products
Operating cost                                   1.07%Mainly because of the increase of sales volume,
                                                      especially the proportion of sales in medium-low
                                                      price products increased
Sales expense                                  -11.82%Mainly because of reduction of advertising expense in
                                                      2014
Management expense                               4.68%Mainly because of increase of wage & welfare,
                                                      depreciation and Property tax in 2014 over the last
                                                      year before
R&D investment                                   7.47%Mainly because of increase of expenses for the
                                                      development of technology research in 2014
Financial expense                                7.72%Mainly because of reduction of interest income due to
                                                      decrease of time deposit balance, and the increase

                                                                                                               12
                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


                                                          of loan interest expenditure.
Net amount of cash flow                           45.57%Mainly because of the decline of sales expenditure
generated in operating activities                       that makes inflow of cash in operating activities
                                                        decrease
Net amount of cash flow                          -75.53%Mainly because of increase of cash expenditure for
generated in investment                                 the investment projects
activities
Net amount of cash flow                           90.22%Mainly because of the increase of cash received
generated in capital-raising                            which gains via debt
activities

      Review and summary for the early disclosed development strategy and the progress of the
      Company’s business plan during the report period.
      During the report period, influenced by the decelerated growth on the demand for domestic wine,
      market competition intensifies and the great recession on the demand for the premium wines, the
      business income of the Company completed CNY 4.2 billion, decreased by 3.8 % compared by last
      year, and far from the target fixed in the beginning of the year of realizing business income no less
      than CNY 4.6 billion. In order to deal with the unfavorable business environment, the Company
      carried out the operation strategy of steady development in the medium and high-end wines, and
      vigorous expansion for the low-level wines, brandy and imported wines with own brands. While
      making efforts to promote the development of medium and high-end wines, the Company made an
      appropriate tilt on marketing resources to the medium and low level wines, brandy and imported
      wines with own brands for meeting the market demand, which played an important part in
      reversing the decline on the business income. The main work in the report period is as following:

      Firstly, to adjust and neaten sales system, optimize and perfect marketing modes. The Company
      established three-level human recourses management system, regulate and establish the
      management system of classification and decentralization of authority. To perfect the assessment
      methods of Province manager, city manager, and professional manager, basic formations for
      Dynamic management mechanism ‘selected, promotion, talent pool, quit’. External assignment
      marketers being fully neatened and readjusted, a part of staffs being settled down via the
      distributaried method. To further perfect the sales organization system consisted by three channels
      such as medium-high channel, medium-small channel, county-level channel and some companies
      such as direct-supplying company, pioneer monopoly shops, VIP Group purchase Company,
      tourism sales company, E-commerce, medium-small restaurant sales company as so on. To strive to
      develop various sales modes such as direct-supplying and semi-direct supplying etc. To reinforce
      the terminal development and control abilities, promote terminal sales. to further clear and definite
      the main push area and channels of different liquor, improve the pertinence and effectiveness of
      marketing. To strengthen the efforts for each basic management assessment, to evaluate the
      professional management work for different channel, company and province which focus on
      ‘terminal work’, ‘marketing program’ , and ‘the team construction of distributors and delivery
      dealers’, to promote every marketing strategy and measure being implement faster and better.

                                                                                                                  13
                                                      Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


Secondly, to accelerate the informatization, standardization construction and management
innovation. The Company has implemented the second phase of SAP system project, which has
been completely constructed and used in the sales system, in order to reinforce the abilities of
marketing prediction, response and controlling. Logistic management has achieved products’
palletization for warehouse, management and transport, improve and optimize warehouse materials,
and achieved the target of unified storage and delivery all over the country. Open video conference
system coverage of the provincial areas, improve conference efficiency, save conference cost.
Continuous to around the future development purpose and current major issue to be addressed in
management, production, technology and marketing, proposed and completed over 500 items of the
innovative and reasonable projects, which brought the related works and management level to a
new step.
Thirdly, to reinforce the construction of the vineyard bases, regulate the vineyard bases
management, the successful completion of the work on grape purchase, further improve the
research and development ability on new product and new technology. the Company purchased 37
sets of machinery equipments, took construction and management for Yantai vineyard bases in
accordance with the criterion of scalization, standardization and mechanization. In accordance with
different vineyard bases, which implement the classified management, make the vineyard
management more scientisfic and standards. Strictly follow the price forming mechanism for raw
material of grape as the market-set price, better quality better price, price on quality and the linkage
mechanism for grape price to integrate with the world market and domestic market, which brought
more fair and reasonable price for the Company’s purchased grapes. Not only to make sure that the
Company can purchases enough raw material of grape with best quality, further improve the
Company’s products’ cost performance and competitiveness, but also to promote the technology
upgrading of grape cultivating in the domestic vineyards which helps lower cultivated cost and
achieve better economic benefit. During the report period, the Company carried out over 20 items
for new technology and new processes and technologies, applied for three key Provincial
Technology Innovation project, obtained one item for Scientific and Technological Progress Award
issued by China National Light Industry in 2014 annual year. Newly-introduced products of
‘zuishixian’serial have been generally welcomed by consumers, the market reflects well.
Fourthly, to steadily carry out the capital investment projects, increase development’s aftereffect.
During the report period, the Company has overcome the various problems and difficulties, steadily
carry forward the construction of 10 investment projects which were defined at the beginning of the
year, the key investment projects run smoothly.

The cause of difference that the Company’s actual operating result is 20% lower or higher than the
already disclosed annual profiting estimates.
□ Available √ Not available
the situation changes of main operation model
□ Available √ Not available
(2)、Incomes
During the report period, the sales from brandy products is at a relatively stable; both sales volume
and sales revenue of ordinary red wine, sweet wine and sparkling wine has a slight increase on


                                                                                                             14
                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


year-on-year basis. The sales volume and sales revenue of chateau wine with high selling-price
continues to decrease in different degree. Comprehensively Influenced by the aforementioned
factors, the operating revenue of the Company has a slight drop on year-on-year basis.

Whether the Company’s sales revenue for material object is more than labor income
√Yes □ No

                                                                                                       Unit: Ton
                                                                                     Year-on-year        increase
Sector               Description       2014                  2013
                                                                                     or decrease (%)

Wine                 Sales volume                   71,854                  67,978                         5.70%

Brandy               Sales volume                   37,462                  37,713                        -0.67%
Explanation on the causes of over 30% year-on-year changes of the related comparison data.
□Available√ Not available
The Company’s big orders in hand
□ Available √ Not available
Major changes or adjustments of the Company’s products or services during the report period.
□ Available √ Not available
The Company’s important customers

The total sales amount of the top five customers(CNY)                                            142,440,887
Total sales of the top five customers accounting for the
                                                                                                           3.43%
proportion in total sales for the year(%)

Information on the Company’s 5 biggest customers
√available □Not available
                                                     Sales Amount            Proportion in Total Sales for
No.      Customer Name
                                                     (CNY)                 the year(%)
         ChangyueXin trade company in Shenzhen
1                                                             36,611,149                                   0.88%
         city

         Dali Qianxingrong wine shop at Nanhai
2                                                             35,104,002                                   0.84%
         district of Foshan city

         Quanxing wine shop in Luocheng village,
3                                                             26,583,492                                   0.64%
         Hui’an town

4        Xiyu trade company in Nanjing city                   22,961,125                                   0.55%

5        Chuxin trade company in Guangzhou city               21,181,120                                   0.51%

                                                                                                           15
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.



Total     —                                                            142,440,887                                   3.43%

Other situation explanation of main customers
 □ Available √ Not available



(3)、 Costs
Sector category
                                                                                                          Unit: CNY
                                     2014                             2013
                                                    Proportion in                      Proportion in Year-on-year
Sector             Description                                                                       increase or
                                     Amount         the operating Amount               the operating
                                                                                                     decrease(%)
                                                    cost (%)                           cost (%)

                   Liquor      for

                   bottling           749,104,077         55.29% 681,263,276                  51.27%             4.02%
Liquor         and Packing

alcoholic          material           446,560,533         32.96% 500,978,025                  37.70%            -4.74%
beverages          Wages               53,632,561             3.96%      50,892,703             3.83%            0.13%
                   Production

                   cost               105,480,406             7.79%      95,663,454             7.20%            0.59%

Product category
                                                                                                          Unit: CNY
                                    2014                             2013
                                                   Proportion
                                                                                     Proportion in Year-on-year
Product         Description                        in          the                                 increase or
                                    Amount                           Amount          the operating
                                                   operating                                       decrease(%)
                                                                                     cost (%)
                                                   cost (%)

                Liquor        for
                                     537,755,135        53.20%        475,798,429            49.57%             3.63%
                bottling
Wine
                Packing
                                     344,532,740        34.08%        365,596,609            38.09%            -4.00%
                material



                                                                                                                      16
                                                            Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.



                Wages                 39,214,439         3.88%      37,909,423             3.95%            -0.07%

                Production
                                      89,361,588         8.84%      80,584,406             8.40%             0.44%
                cost

                Liquor     for
                                  161,946,222           58.37%    168,174,140             56.48%             1.88%
                bottling

                Packing
                                      88,601,388        31.93%    103,136,386             34.64%            -2.71%
Brandy          material

                Wages                 13,099,354         4.72%      12,262,608             4.12%             0.60%

                Production
                                      13,822,841         4.98%      14,181,985             4.76%             0.22%
                cost
Note:
Comparing with the same period of last year, there is no great changes for the products’ cost
structure.

Information on the Company’s important suppliers
The total purchase amount of the top 5 suppliers                                                      451,075,314
The proportion of the total purchase amount of the top 5 suppliers in the annual
                                                                                                            33.28%
purchase amount

Information on the Company’s top 5 biggest suppliers
√Available □Not available
                                                       Purchase Amount       Proportion in Total Purchase
No.       Supplier Name
                                                       (CNY)                 for the year(%)

1         Yantai Shenma Packaging Co., Ltd.                    149,536,913                                 11.03%

2         Yantai Changyu Glass Co.,Ltd.                        126,295,616                                  9.32%

          152     regiment       of     the   eighth
3                                                               67,846,664                                  5.01%
          agriculture production division

          Liquan subsidiary of Shandong
4                                                               55,142,494                                  4.07%
          Yantai Winery Co.,Ltd.

5         Yantai Wanfutai Winery Co., Ltd                       52,253,626                                  3.86%

Total                                                          451,075,314                                 33.28%

Other situation explanation of main customers

                                                                                                                   17
                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


 □ Available √ Not available

(4)、Expenses

During the report period, the Company’s sales expense reduced 11.82% on year-on-year basis,
mainly due to the decrease of advisement promotion,the management expenses with a year-on-year
growth of 4.68%,mainly due to the increase on wages and welfare, depreciation and administration;
financial expense rises 7.72%, mainly due to the reduction of deposit interest income and the
increase of loan interest expenditure.

(5)、R&D expenditure

In 2013 the Company’s R&D expenditure was totally CNY 13.23 million, respectively take up
0.19% of net asset and 0.31% of operating revenue which are the latest financial data being audited ,
there are no major changes generated on year-on-year basis.

(6)、 Cash flow

                                                                                                    Unit: CNY
                                                                                               Year-on-year
Item                                     2014                      2013                        increase        or
                                                                                               decrease (%)
Subtotal    of   cash    inflow     in
                                                4,830,092,384.00          4,836,656,367.00              -0.14%
operating activities
Subtotal   of    cash   outflow     in
                                                3,760,009,088.00          4,101,582,060.00              -8.33%
operating activities
Net    amount      of   cash      flow
                                                1,070,083,296.00            735,074,307.00              45.57%
generated in operating activities
Subtotal    of   cash    inflow     in
                                                 333,107,299.00           1,326,601,601.00             -74.89%
investment activities
Subtotal   of    cash   outflow     in
                                                1,315,841,068.00          1,886,457,048.00             -30.25%
investment activities
Net    amount      of   cash      flow
                                                -982,733,769.00            -559,855,447.00             -75.53%
generated in investment activities
Subtotal    of   cash    inflow     in
                                                 644,550,372.00             259,530,444.00            148.35%
capital-raising activities
Subtotal   of    cash   outflow     in
                                                 720,926,810.00           1,040,484,398.00             -30.71%
capital-raising activities


                                                                                                                18
                                                        Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.



Net    amount       of     cash    flow
generated      in        capital-raising       -76,376,438.00             -780,953,954.00              90.22%
activities
Net increase of cash and cash
                                                 3,913,342.00             -605,735,094.00            100.65%
equivalents
Explanation on the causes of over 30% year-on-year changes of the related data.

√Available   □Not available



Comparing with the same period of last year, subtotal of cash inflow in investment activities was

reduced by 74.89%, mainly due to the significant decrease in the fixed deposit whose duration is

more than 3 months; subtotal of cash outflow in investment activities was reduced by 30.25%,

mainly due to the significant decrease in cash paid for purchasing fixed deposit whose duration is

more than 3 months; net amount of cash flow generated in investment activities was reduced by

75.53%, mainly due to the increase of cash paid for purchasing and constructing fixed assets,

intangible assets and other long-term assets; subtotal of cash inflow in financing activities increased

by 148.35%, mainly due to the increase of cash received from borrowing, net amount of cash

outflow generated in financing activities was reduced by 30.71%, mainly due to the decrease in

cash paid for dividends distribution; Net amount of cash flow generated in financing activities was

increased 90.22%, mainly due to the growth of cash inflow but the decrease in cash outflow in

investment activities; net increased amount of cash and cash equivalents increased by 100.65%,

mainly due to the significant growth of net amount of cash flow generated both in operating

activities and in financing activities.



Explanation on the causes of the major differences between the cash inflow in the Company’s

operating activities and the years’ net profit during the report period.

□Available      √Not available




                                                                                                               19
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


3、Structure of main businesses

                                                                                                           Unit: CNY

                                                              Increase or Increase or
                                                                                         Increase or
                                                              decrease of decrease of
                                                                                         decrease of
              Operating          Operating       Gross profit operating     operating
                                                                                         gross profit
              revenue            cost            (%)          revenue over cost over the
                                                                                         over the year
                                                              the      year year before
                                                                                         before (%)
                                                              before (%) (%)
Sector
Liquor and
alcoholic
beverages     4,113,169,270 1,354,777,577 67.06%           -3.76%         1.36%          -1.66%
Product
Wine          3,201,368,831 1,010,863,902 68.42%           -3.91%         5.31%          -2.76%
Brandy        813,417,868    277,469,806    65.89%         -0.64%         -6.81%         3.55%
Region
Domestic      4,072,037,577 1,342,584,579 67.03%           -4.33%         1.14%          -1.78%
In case the Company’s statistical calibre of main business data is adjusted during the report period,
the main business data adjusted at the end of the report period will be taken for the recent one year.
□ Available √Not available

4、Analysis to assets and liabilities

(1)、Major changes of assets

                                                                                                          Unit: CNY
              At the end of 2014              At the end of 2013            Proportion
                                                                            increase
                                 Proportion                    Proportion              Explanation on major
                                                                            or
              Amount             in the total Amount           in the total            changes
                                                                            decrease
                                 assets (%)                    assets (%)
                                                                            (%)
Monetary
                 1,145,365,071       12.85%    1,367,818,182         17.10%        -4.25%                             —
funds
Receivables       145,672,411         1.63%      177,109,516          2.21%        -0.58%                             —

Inventory        2,087,376,398       23.42%    2,121,117,437         26.52%        -3.10%                             —

Investment                 —            —              —               —           —                             —

real estate
Long-term                  —            —              —               —           —                             —

equity
investments


                                                                                                                      20
                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


Fixed assets      2,532,682,355     28.42%   1,917,641,344         23.98%         4.44%                             —

Construction                                                                                                        —
                  1,700,466,500     19.08%   1,423,654,530         17.80%         1.28%
in progress

(2)、Major changes of liabilities
                                                                                                        Unit: CNY
               2014                      2013                       Proportion
                             Proportion                Proportion increase or Explanation                on      major
               Amount        in the total Amount       in the total decrease changes
                             assets (%)                assets (%) (%)
Short-term     300,000,000 3.37%         243,170,674 3.04%              0.33%
                                                                                       --
borrowings
Long-term      209,380,000 2.35%         0             0%               2.35%
                                                                                       --
borrowings


(3)、 Measuring assets and Liabilities at Fair Value
□Available    √Not available


(4)、Main oversea assets situation
□ Available √ Not available




                                                                                                                    21
                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.




5、Analysis to core competitiveness
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” ,“Jiebaina” 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 Sha’anxi, 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 and brandy 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.

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.


6、 Investment situation analysis

(1)、Information on Oversea equity investment situation

a) Information on Oversea investment
√Available    □Not available

                                                                                                            22
                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.



                                 Information on Oversea equity investment
Investment amount during the Investment amount compared Amount of variation
report period                        with the same period of last
                                     year
69,216,634.00                                                       0.00                                100.00%
                                  Information on     the invested company
Company Name                         Main business                          The listed Company occupied
                                                                            by the equity proportion of the
                                                                            invested company
Francs Champs Participations         Engage in investment, merger 100%
                                     &acquisition,     production      &
                                     distribution of liquor such as
                                     wine and brandy, as well as
                                     import and export trade



b) the situation of holding financial company equity
□Available     √Not available

There is no holding financial company equity for the Company during the report period.

c) Security Investment situation

□Available     √Not available

There is no security investment for the Company during the report period.

d) The explanation of the situation which related to hold other listed company’s equity.

□Available     √Not available

There is no holding other listed company’s equity for the Company during the report period.

(2)、The situation of Entrust financing, derivatives investment and entrust loans

a) Entrust financing situation

□Available     √Not available

There is no entrust financing for the Company during the report period.

b) Derivatives investment

□Available     √Not available


                                                                                                                23
                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.



There is no derivatives investment for the Company during the report period.

c) Entrust loans

□Available    √Not available

There is no entrust loans for the Company during the report period.

(3)、The usage situation of the raised capital

□Available    √Not available

There is no usage situation of the raised capital for the Company during the report period.

(4)、Analysis to the major subsidiaries and joint stock companies
√Available    □Not available
Information about the major subsidiaries and joint stock companies




                                                                                                            24
                                                                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.



                                                                                                                                                Unit: CNY
                                                                                                     Operating
                    Company                    Main products or Registered Total assets Net    asset               Operating Net profit
Company name                Industry                                                                 revenue
                    type                       services            capital   (CNY)       (CNY)                     profit (CNY) (CNY)
                                                                                                     (CNY)
Yantai                                         To research,                   170,314,549 82,093,628 110,684,738       2,666,152 1,887,415
                               Wine and
Changyu-Castle                                 produce and sell
                               alcoholic                           USD 5
Wine Chateau Co.    Subsidiary                 wine and sparkling
                               beverages                           million
LTD.                                           wine as well as the
                               industry
                                               tourism service
Langfang Castel-                  Wine and                                     54,216,381 46,463,060    50,335,802    -2,073,597 -507,895
Changyu Wine Co.    Joint stock   alcoholic    To produce and sell USD
LTD.                company       beverages    wine                6,108,818
                                  industry
Chateau Changyu     Subsidiary    Wine and                                        658,167,387 105,905,166     160,547,230         23,833,92320,881,532
                                               To research,
AFIP Global                       alcoholic                        CNY 110
                                               produce and sell
                                  beverages                        million
                                               brandy and wine
                                  industry
Chateau Liaoning    Subsidiary    Wine and                                         74,220,870   64,046,876      51,973,176         -1,607,474 1,599,580
Changyu Ice Wine                  alcoholic    To produce ice      CNY 26.30
Co., Ltd.                         beverages    wine                million
                                  industry
Xinjiang    Tianzhu Subsidiary    Wine and     To plant grape,                    176,011,481 163,510,352       86,483,652          2,223,269 1,470,239
Winery Co., Ltd.                  alcoholic    produce and sell    CNY       75
                                  beverages    grape juice, bulk   million
                                  industry     wine and fruit wine

Explanation on the major subsidiaries and joint stock companies

                                                                                                                                                           25
                                                                                                      Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.




During the report period, the operating income and net profit of Yantai Changyu Castel Chateau Co. Ltd. respectively increased 30.43% and 49.53%
over the same period last year; the operating income and net profit of Chateau Changyu AFIP Global respectively increased 99.36% and 161.99% over
the same period last year; the operating income and net profit of Chateau Liaoning Changyu Ice Wine Co., Ltd. respectively increased 109.55% and
144.52% over the same period last year; the operating income and net profit of Xinjiang Tianzhu Winery Co., Ltd. respectively increased 32.52% and
88.95% over the same period last year; operating income of the aforementioned companies were increased, mainly because of the increase of internal
sales volume, the growth reason of net profit is mainly due to the increase of internal sales volume and internal clearing price. The operating income
and net profit of Langfang Castel-Changyu Wine Co. respectively decreased by 17.05% and 451.36% over the same period last year, its operating
income was decreased, mainly because of the reduction of internal sales volume, the reduction reason of net profit is mainly due to the decrease of
internal sales volume and internal clearing price. Because of the aforementioned companies belonging to productive organization, its products need to
be firstly sold to internal sales organization in the Company, then the internal sales organization will sale those products to external customers via
internal sales organization in the Company, therefore, theirs operating income and net profit come from internal sales only.



Acquisition and disposal of subsidiaries during the report period
□Available    √Not available




                                                                                                                                                             26
                                                                                                                      Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


 (5)、Important projects financed with non-raised capital
 √Available          □Not available

                                                                                                                                                          Unit: CNY’0000

                                             Total      Investment Actual investment
                                                                                        Project
Project Name                                 Investm in the repo until the end of the              Project benefits       Disclosure date         Disclosure index(if have)
                                                                                        progress
                                             ent        period     report period
Changyu Reina Chateau Sha'anxi               31,074     2,655      31,655               97%        Being completed 2014.04.26                 http://www.cninfo.com.cn/finalpage
                                                                                                   and put into                               /
Changyu Moser XV Chateau Ningxia             24,415     6,503      30,503               98%                             2014.04.26
                                                                                                   production for the                         2014-04-26/63928624.PDF
Changyu Baron Balboa Chateau XinJiang        23,343     4,097      31,097               98%                             2014.04.26
                                                                                                   main building
Changyu International Wine City blending and 65,331     13,863     40,863               57%                             2014.04.26
                                                                                                   0
cooling Center
Changyu International Wine City Bottling 46,736         3,669      29,169               60%                             2014.04.26
                                                                                                   0
Center

Changyu International Wine City Logistics Cente12,095   5,544      11,344               85%        0                    2014.04.26


Changyu Vine and Wine Research Institute     20,000     882        4,082                20%        0                    2014.04.26


Treasure Wine Chateau                        14,545     473        3,078                20%        0                    2014.04.26


Koyac brandy chateau                         16,530     7,300      9,800                40%        0

Greening investment                          5,000      2,597      3,690                70%        0                    2014.04.26

Pioneer Monopoly Shop                        10,000     1,755      1,755                50%        0                    2014.04.26
Total                                        269,069 49,338        197,036                    --   --



                                                                                                                                                                             27
Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.




                                                       28
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
7、Forecast on the business achievement from January to March of 2015
Caution and explanation for the forecast on the accumulated net profit from the beginning of
the year to the end of the next report period, which could probably be in a loss or in a great
change comparing with the same period of last year.
□Available    √Not available
8、Main part situation of the special purpose being controlled by the Company
□Available    √Not available
9、Expectation for the Company’s future development
On the basis of our limited experience and special skills, we make the following estimation of
the wine sector and the Company’s future development.
(1)The sector competition setup and development trend
Due to the continuous limitation for the domestic consumption of premium wine in the future
long time, the continuing entrance of imported wines to Chinese market, and the great impact
for the traditional sales channels caused by the new channels such as E-commerce, the
competition in the domestic wine industry will still be awfully fierce in the current and future
long time, the consumption for high-end wine maybe continue to remain weak. But in the
long run, thanks to increase of their incomes, people’s pursuits to health and fashion life, the
people are favoring wines which fit well with the trend of consumption, it will ceaselessly
stimulate their demand for quality wine. That’s to say, the Chinese wine sector still has huge
potential to tap. Especially the medium-low level wine with high performance-to-price ratio
can have a faster growth. In such a case of long-term coexistence of opportunities and
challenges, only those enterprises that possess strong branding influence and marketing
ability, catch the opportunities, actively take adjustments and make full use of oncoming and
traditional sales channels, can timely get the run of the consumers’ demands and provide
products of high performance-to-price ratio will have an opportunity to be the final winners
of competition and form a new structure of the future Chinese wine market.
(2)The Company’s development strategy
The Company will continue to adhere to the strategy of taking wine as pillar product while
developing all kinds of products, actively expand the scope of consumption and marketing mode,
revise the sales decreased trend of high-end wine; develop middle-level wines and brandy,
strengthen the promotion of sparkling wine, make efforts to provide consumers with a rich
variety of products in high cost performance.
(3) Management plan in a new year
In 2015, the Company will try its best to realize business income of not less than CNY4.4 billion
and control the main operating costs and three period charges below CNY2.9 billion.
(4) The measures the Company will take
The Company will emphasize the following aspects in 2015, so as to better catch the
opportunities and face with the challenges:
Firstly, to focus on the market, perform every marketing jobs effectively, strengthen
marketing ability. The Company will further perfect the marketing system for chateau wine,
enhance the marketing for chateau wine, the Company will cement the high ground position
of brands in the domestic wine market. Increase the media publicity and marketing promotion
efforts of medium-low level brands such as ‘jiebaina’, ‘zuishixian’ and ‘Nobel Wine’ as so
on, improve the market share of medium-low level products. Accelerate the construction of
brandy extension system, assure to put in place for ‘two teams’, ‘marketing plan’, ‘terminal
                                                                                                      29
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
construction’ in brandy’s major channels, further expand brandy’s market-coverage and
brand awareness, promote the sales of brandy in the national market. Combine their own
characteristics of distributors and delivery dealer, establish and improve the access institution
of distributors and delivery dealer, the institution of communication, motivation and quit,
continue to push the construction of Pioneer monopoly shops forward, strengthen the training,
communication and assessment jobs of each level marketers, promote the overall quality of
cradres, reinforce the marketing ability of sales system.
Secondly, to further strengthen the control for production cost and major operation expenses,
further compress production cost. The Company will optimize pricing mechanism of grapes
purchase price, in order that gradually make the wine-making grapes price convergence
between domestic market and international market. Continue to adhere the centralized
purchase for the main raw materials, control purchase cost of bulk raw material. Reinforce to
monitor the production in the warehouse, reduce capital charges. Perfect productions’
identification system, ensure the trouble-free operation in the palletization system applied to
the processes of producing, transporting, and storage. Strengthen the management of fuel cost,
transport cost, maintenance cost and landscaping cost, perfect wage system for every ton of
wine, improve producing efficiency, reduce production cost.
Thirdly, to strengthen the construction and management for vineyards, continually increase
the research & development ability and products quality. The Company will carry out the
normalization construction and management for the vineyards in accordance with the
criterion of scalization, standardization and mechanization, continue to practice the tracking
and management of winemakers for the vineyards, build the vineyards at Xinjiang and Yantai
for promotion and demonstration on mechanization management, greatly promote the
machinery works. Continue to neaten contract vineyard and the training of grape’s growers,
strictly control the area of contract vineyards, constantly generalize advanced planting
technology. Perfect project management, prediction management and assessment system of
the vineyards, strengthen the assessment and management of the person in charge of special
area, try to reduce the cost on planting grapes and improve the grape quality. The Company
will perfect the classification standards for bulk wine, the quality tracking of bulk wine whole
usage process and assessment mechanization, optimize winemaking technology, reinforce the
applied research on oak barrels, further improve production quality, strengthen to develop
new products, constantly enrich products variety. Further distinguish and clear the products
characteristic of general wine in different varieties, form the products line with distinctive
and unique style.
Fourthly, to steadily carry forwards investment projects construction, scientific arrange the
progress of construction, guarantee the engineering quality. The Company will continuously
promote the projects of Yantai Changyu International Wine City (namely Yantai Changyu
Industrial Park) and the construction for pioneer monopoly shops, reinforce the management
of construction budget to investment projects, strengthen projects’ cost review and
completion audit, strictly control the investment amount on projects, make sure to finish the
construction for all projects and put them into operation on the basis of scheduled progress
and quality.
(5) Risks likely to occur
A) 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
                                                                                                      30
                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
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.
B) 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.
C) 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.
D) 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.

10 、 The Board of Directors’ and the Board of Supervisor give the explanation for ‘no
standard auditing report’ issued by the accounting firm during this report period.
□Available   √Not available
11、Compared with the previous year’s financial report, explanation for the changes of
accounting policy , accounting estimation and accounting method.
√Available □Not available
During the report period, the Company changes the accounting policy about Long-term
Equity Investment. About the detailed contents, please see ‘‘25. Changes in significant
                                                                                                        31
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accounting policy’’ in ‘‘3. Significant accounting policy and accounting estimate’’ of
foot-notes to financial statements in this report.
12. During the report period, the situation explanation for the correction of major accounting
errors which need to be retrospect and restated.
□Available      √Not available
There is no situation for the correction of major accounting errors which need to be retrospect and
restated.
13、Compared with the previous year’s financial report, explanation for the changes of
the consolidated statements scope.
□Available      √Not available
There is no situation for the changes of the consolidated statement scope.
14、The Company’s profit and dividend distribution
Promulgation, implementation or adjustment of profit distribution policies during the report
period.

V Available    □Not available

According to the auditing result made by Ernst & Young Hua Ming Certified Public
Accounts Co. Ltd., the net profit that the Company made in 2013 was
CNY1,048.185927million. After deducting the minority shareholders’ profit and loss, the net
profit belong to the Company’s shareholders is CNY 1,048.185927 million. After the
deliberation of the Company’s Board of Directors and the Shareholders’ Meeting, the profit
plan of 2013 is as following: Because the left amount of legal earned surplus reserve is less
than 50% of the registered capital, while making profit distribution, the legal earned surplus
reserve will not be drawn. Then based on the Company’s 685,464,000 shares at total up to
December 31, 2013, we plan to pay CNY 5 in cash as dividends for every ten shares
(including tax) to the Company’s all shareholders, totaling up to CNY342.732 million,
accounting for 32.7% of the net profit CNY 1048.185927 million attributable to the
shareholders of the parent company in the consolidated statement, the retained and
undistributed profit of CNY 705.453927 million will be reserved for the distribution of next
year. This plan is in line with the provisions of the Company’s Articles of Association. On
July 5, 2014, the Company released the Implementation Announcement of 2013 Annual
Equity Distribution, determining that the share registration day of A Stock was on July 10,
2014 and the ex-dividend day was on July 11, 2014, the last trading day of B Stock was on
July 10, 2014, the share registration day was on July 15, 2014 and the ex-dividend day was
on July 11, 2014. The Company also distributed equity before July 30, 2014 to the
Company’s all A Stock holders registered after closing of Shenzhen Stock Exchange on the
afternoon of July 10, 2014 at China Securities Depository and Clearing Corporation Limited
Shenzhen Company and the Company’s all B Stock holders registered after closing of
Shenzhen Stock Exchange on the afternoon of July 15, 2014 at China Securities Depository
and Clearing Corporation Limited Shenzhen Company.


Special explanation
Whether it is in accordance with the requirements of the regulation in the Articles Yes
of Association and the resolution of shareholders
Whether the distribution standard and proportion is clear and definite              Yes
Whether the relative decision process and mechanism is complete                     Yes
                                                                                                       32
                                              Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.

Whether the independent directors perform their responsibilities and play the roles. Yes
Whether the small and middle shareholders have the chance to express their Yes
advices and appeals, as well as their lawful right and interest is in an enough
protection.
Whether it is legal and transparent for the condition and process while adjusting Yes
and amending the cash dividends distribution policy.

The Company’s preliminary scheme of profit distribution and preliminary scheme of
increasing equity with capital reserve in the recent three years (including the report period).
The profit distribution plan of 2012 is as following: Because the left amount of legal earned
surplus reserve is less than 50% of registered capital, while making profit distribution, the
legal earned surplus reserve of CNY46.78937 million will be drawn firstly. Based on the
Company’s 685.464 million shares at total up to December 31, 2012, we plan to pay CNY 11
in cash as dividends for every ten shares (including tax) to the Company’s all shareholders,
totaling up to CNY 754.0104 million, take up 44.33% of net profits CNY1700.928117
million attributable to shareholders of parent company in the consolidated statements. The
retained and undistributed profit of CNY 900.128347 million will be reserved for distribution
in the next year.
The Company’s profit distribution plan in 2013 is as following: Because the left amount of
legal earned surplus reserve reaches 50% of the registered capital, while making profit
distribution, the legal earned surplus reserve will not be drawn. Then based on the
Company’s 685,464,000 shares at total up to December 31, 2013, we plan to pay CNY 5 in
cash as dividends for every ten shares (including tax) to the Company’s all stockholders,
totaling up to CNY 342.732 million, accounting for 32.70% of the net profit CNY
1048.185927 million attributable to the shareholders of the parent company in the
consolidated statement, the retained and undistributed profit of CNY 705.453927 million will
be reserved for the distribution of next year.
The Company’s preliminary scheme of profit distribution in 2014 is as following: Because
the left amount of legal earned surplus reserve reaches 50% of registered capital, while
making profit distribution, the legal earned surplus reserve will be not drawn. Based on the
Company’s 685.464 million shares at total up to December 31, 2014, we plan to pay CNY 4.4
in cash as dividends for every ten share (including tax) to the Company’s all shareholders,
totaling up to CNY 301.60416 million accounted for 30.85% of net profits CNY977.707711
million attributable to shareholders of parent company in the consolidated statements. The
retained and undistributed profit of CNY 676.103551 million will be reserved for distribution
in the next year.
The Company’s cash dividend record in recent three years

                                                                                          Unit: CNY
                                            Net profit belonging to Proportion in the net
                       Amount     of   cash the   listed    company’s profit belonging to the
Year of distribution   dividend (including stockholders        in    the listed            company’s
                       tax)                 consolidated statement stockholders              in     the
                                            of the distribution year consolidated           statement

                                                                                                     33
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.

                                                                            (%)
2014                    301,604,160           977,707,711                   30.85%
2013                    342,732,000           1,048,185,927                 32.70%

2012                    754,010,400           1,700,928,117                 44.33%


During the report period the Company earned profit, the undistributed profit of the parent
company was positive but without proposing cash dividend distribution.
□Available   V Not available


15、The Company’s preliminary scheme of profit distribution and preliminary scheme of
increasing equity with capital reserve

V Available    □Not available
Number of sending bonus shares per ten shares (share)                                                      0
Number of dividend payout per ten shares (CNY) (including tax)                                       4.40
Number of transferring per ten shares(share)                                                               0
The cardinal number of the capital stocks for the preliminary distribution                  685,464,000
scheme (shares)
Total cash dividend distribution (CNY)(including tax)                                     301,604,160
Distributable profit (CNY)                                                                  977,707,711
The proportion of cash dividend distribution in the total profit distribution                      100%
Cash dividend distribution policy
Others
                                 Policy of cash dividend
The stage of Company development belongs to growth period, while making profit
distribution, Distribute dividends in cash takes up not less than 20% proportion in the
distributable profit.
  Detailed explanation for the profit distribution or preliminary scheme of increasing equity
                                      with capital reserve
According to the audit result from Deloitte Hua Yong, The net profit belonging to the parent
company’s stockholders in the consolidated statement is CNY977.707711million, the net
profit of the parent company in financial statement is CNY 1151.762045 million in 2014.
According to PRC accounting standard, the situation for the attributable profit of
consolidation and parent company in 2014 is as following:
                                                                                Unit: CNY
                                                 Consolidation         Parent company
    Undistributable profit at the end the year           5,251,920,374       4,620,476,137
    Including: net profit in 2014                          977,707,711       1,151,762,045

                                                                                                       34
                                              Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.

   Distributable profit carried over to the               4,616,944,663             3,811,446,092
   beginning of the year
   Distribution for 2013 dividend                           342,732,000               342,732,000
   Withdrawing for the legal earned surplus                             0                         0
   reserve

According to regulation of 157th item in the Articles of Association, which is that the
Company can distribute dividends either in cash or by stock, the profit to be distributed each
year is not less than 25% of the distributable profit realized in the same year and the
accumulated sum of profit to be distributed in cash in the next three years is not less than 30%
of the yearly average distributable profit to be realized in the next three years, meanwhile,
considering the large amount on the capital expenditure in 2015, under the condition of not
influencing the normal production and operation, the Company put forward preliminary
scheme on profit distribution in 2014 as following:
Because the left amount of legal earned surplus reserve reaches 50% of registered capital,
while making profit distribution, the legal earned surplus reserve will be not drawn. Based on
the Company’s 685.464 million shares at total up to December 31, 2014, we plan to pay CNY
4.4 in cash as dividends for every ten share (including tax) to the Company’s all shareholders,
totaling up to CNY 301.60416 million accounted for 30.85% of net profits CNY977.707711
million attributable to shareholders of parent company in the consolidated statements. The
retained and undistributed profit of CNY 676.103551 million will be reserved for distribution
in the next year. The cash dividend for the shareholders of B share listed overseas was paid in
Hongkong dollar according to the middle rate between CNY and Hongkong dollar issued by
the People’s Bank of China on the first working day after the resolution date of 2014
shareholders’ meeting.

16、Social Responsibility
V Available □Not available
During the report period, considering the fulfillment of the Company’s social responsibility,
please see 2014 Annual Social Responsibility Report disclosed on www.cninfo.com.cn on
28th April 2015.

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     V Not available

The listed company and its subsidiaries are whether or not to exist major social security
problems.
Yes      No   V Not available

The Company is whether or not to be in an administrative penalty.
Yes    No    V Not available

17、The Company’s Receptions, Studies and Visits

V Available   □Not available
                                                                                                      35
                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.




                 Reception     Reception   Reception                                       Main context of
Reception        place         method      object type                                     communication
                                                          Reception object
Time                                                                                       and         supplied
                                                                                           material
                 Meeting       Field       Others                                          E-commerce
                 room of the   survey                                                      advanced
                 Company                                                                   experience
                                                          Huangwei       from     CITIC
2014.03.06                                                                                 introduction and
                                                          Securities
                                                                                           communication for
                                                                                           consumer
                                                                                           products’ industry
                 Meeting       Field       Institution    Shuaihu        from    China
                 room of the   survey                     International           Fund
                 Company                                  management Co.Ltd Chenyu         current business
                                                          from                             operation
2014.05.20
                                                          AEGON-INDUSTRIAL                 situation and
                                                          Fund Management Co.Ltd           other issues
                                                          Cao Liyan from BOCI
                                                          Securities Limited
                 Meeting       Field       Institution    Wang        Jiandong    from
                 room of the   survey                     Sunshine Insurance Group         current business
                 Company                                  Sunshine Asset Management        operation
2014.09.19
                                                          Corporation Limited Jia          situation
                                                          tingting from Springs Capital
                                                          (Beijing) Co.Ltd
                 Shanghai      other       Institution    Deng       Xiaofeng     from
                                                          BOSERA               FUNDS
                                                          management limited Ai jing
                                                                                           current business
                                                          from BOCOM & Schroders
                                                                                           operation
2014.11.25                                                fund management limited Li
                                                                                           situation and
                                                          Yan from China Asset
                                                                                           other issues
                                                          Management Co.,Ltd Qi
                                                          Ying from China Pacific
                                                          Insurance Company Ltd
Number of        4
Reception
Number of        9
institution
Number of        1
other object
Whether          No
disclose,
reveal      or
betray
no-public
import
information



                                                                                                              36
                                                                                                        Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.




                                                                  V、Major Issues


1、Material litigation and arbitration
□ Available         √Not Available
There are no material litigation and arbitration during the report period.


2、Media’s doubts
□ Available         √Not Available
There are no common doubts issued by Media during the report period.


3、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.


4、Bankruptcy reorganization
□ Available         √Not Available
There is no bankruptcy reorganization during the report period.


5、Transaction in assets
(1)、Acquisition of assets


                                                                                                                                                               37
                                                                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.



     □ Available         √Not Available
   There is no acquisition of assets during the report period.
   (2)、Sale of assets
   □ Available          √Not Available
   There is no sale of assets during the report period.
   (3)、Combination of enterprises
   □ Available          √Not Available
   There is no combination of enterprises during the report period.


   6、Implementation and its influence of Company’s share incentive
   □ Available          √Not Available
   There are no share incentive plan and its implementation situation during the report period.


   7、Significant related transactions
   (1)、Related transactions in relation to routine operations
   √ Available        □ Not Available
                                                                                                 Proportion
                                                          Pricing                   Amount of                   Settlement
                                Type       of Content of               Price     of              in the same
                 Interrelation                            principle of              related                     method of Market Date       of Disclosure
Related party                   related       related                  related                   kind        of
                 ship                                     related                   transaction                 related     price disclosure index
                                transaction transaction                transaction               transaction
                                                          transaction               (CNY ‘0000)                transaction
                                                                                                 (%)
Yantai Shenma Under         the Related       Procurement
                                                          Agreement                 14,954
Packing     Co., same parent party’s         of                       -                        10.76%         Check       -
                                                          price
Ltd.             company        commodity commodity

                                                                                                                                                                  38
                                                                                                          Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


                                and     labor and
                                transaction acceptance
                                              of     labor
                                              from related
                                              party
Total                                                     --          --           14,954         --           --           --       --       --
Details of rejection of big sales                         No
                                                          The Company will sign a processing contract with and purchase packing materials from Yantai
Necessity and continuity as well as cause to transact Shenma Packing Materials Co., Ltd. under Changyu Group, which is helpful for the Company, as a
with related party (but not with other dealer in the prerequisite of fair price, to acquire sustainable, quality and stable supply of packing materials and to
market)                                                   save the Company’s procurement and transport costs of packing materials so as to strengthen its
                                                          product competitiveness.
                                                          The Company’s independency will not be affected by related transactions because the Company has
Influence of related transaction on listed company’s
                                                          lower requirements for production technology of packing materials and there are too many qualified
independency
                                                          producers ready for selection.
The level of Company’s dependency on related party as
                                                          No
well as solutions
If a prediction is made to the total amount of routine
related transactions to occur during this period by type,
                                                          No
what is the actual implementation result during the
report period.
Cause of bigger differences in between transaction price
                                                          The transaction price is fixed in reference to market price, no obvious difference.
and market reference price

    (2)、Related transactions in relation to acquisition and sales of assets
    □ Available          √Not Available


                                                                                                                                                                 39
                                                                                                            Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.



There are no related transactions in relation to acquisition or sales of assets during the report period.
(3)、Related transactions in relation to common foreign investment
□ Available         √Not Available
There are no related transactions in relation to common foreign investment during the report period.
(4)、Related current credit and debt
√ Available        □ Not Available
Whether or not to exist non-business related current credit and debt
□ yes        √no
There are no non-business related current credit and debt.
(5)、Other related transactions
√ Available         □ Not Available
Detailed information about other related routine transactions among Company, Company’s controlling shareholder Yantai Changyu Group Company

Limited and its subsidiaries, please see Part 7 ‘‘Relation Among Related Parties and Their Transactions’’ in the financial statement of this report.




                                                                                                                                                                   40
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8. Major and important contracts and execution results

(1)、Trusteeship, contract and leasehold issues
A) Trusteeship situation
□ Available         √Not Available
There is no trusteeship situation during the report period.

B) Contract situation
√ Available          □ Not Available
Contract situation description
During the report period, about the Company’s contract operation situation, please see ‘‘1.
Subsidiary’’ in Annex 5 ‘‘The Consolidation Scope of Consolidated Financial Statements’’ 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.

C) Leasehold situation
√ Available          □ Not Available
Leasehold situation description
On 1st January 2012, 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 1st
January 2012 to 31st December 2016.
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)、Guarantee situation
□ Available √ Not Available
There is no guarantee situation during the report period.

(3)、Other important contracts
□ Available √ Not Available
There are no other important contracts during the report period.

(4)、Other important deals
□ Available √ Not Available
There are no other important deals during the report period.

9. Implementation of commitments


                                                                                                             41
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(1) 、 The commitments of the Company or its shareholders holding more than 5% in the report
period or until the report period
√ Available          □ Not Available
                              Commitment Commitment            Commitment Commitment
Commitments                                                                          Implementation
                              party      content               time       period
Commitments at share reform   -              -               -              -              -
Commitments       made    in -               -               -              -              -
acquisition report or equity
changes report
Commitments       at   asset -               -               -              -              -
restructuring
                              Yantai          Non-horizontal 18thMay 1997                      Has               been
                                                                                               performing
                              Changyu         competition                                      strictly
Commitments at the initial                                                     Forever
public offering or refinancing Group    Co.

                              Ltd.
                              Yantai      According         to
                              Changyu     Trademark
                              Group   Co. License
                              Ltd.        Contract,        the
                                          Company will
                                          pay trademark
                                          royalty for the
                                          ‘‘Changyu’’
                                          products          of
                                          Yantai Changyu
                                          Group Co., Ltd                                       Has               been
                                          every          year, 18thMay 1997 Forever            performing
                                          Yantai Changyu                                       strictly
                                          Group Co., Ltd
                                          will            use
                                          trademark
                                          royalty           to
                                          advertise
                                          ‘‘Changyu’’
                                          trademarks and
                                          Contracted
                                          products in this
                                          contract.
Commitments at middle and
small shareholders of the -                  -                               -              -
Company
Commitment    under  timely Yes

                                                                                                            42
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implementation or not
Whether or not to have specific
reasons of the unimplemented
                                No
commitment and next steps(if
any)

(2) 、 The Company should make a statement on the achieved original profit forecast of assets or
projects and its reason if there is profit forecast of Company’s assets or projects and the report
period is still in the profit forecast period.
□ Available √ Not Available

10、The appointment and dismissal of certified public accountants
Currently appointed accounting firm
                                     Deloitte Hua Yong Certified Public Accountants Co., Ltd.
Domestic accounting firm name
                                     (special general partnership)
Reward for domestic accounting firm
                                     190
(CNY‘0000)
Consecutive period for the audit
                                     2
services of domestic accounting Firm
Name of Certified public accountant
for the audit services of domestic Xu Zhaohui, Li Xu
accounting Firm

Whether or not to dismiss the accounting firm during the report period
□Yes √ No
To employ internal control audit accounting firms, financial adviser or sponsor.
√ Available   □Not Available
The Company will appoint Deloitte Hua Yong as certified public accountants of the Company’s
2014 internal control, and continue appointing this company as certified public accountants of the
Company’s 2015 internal control.

11、Explanation of Non-standard Audit Report given by accounting firm in the report period
from Board of Supervisors and independent directors (where applicable)
□ Available √ Not Available

12 、Penalty and rectification
□ Available √ Not Available
There are no penalty or rectification during the report period.

13、 Face of suspension and termination of listing after the disclosure of annual report
□ Available √ Not Available

14 、Other explanation of major issues
□ Available √ Not Available

                                                                                                             43
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There are no other major issues need to be explained during the report period.

15 、Major issues of Company’s subsidiary
□ Available √ Not Available

16 、Corporation bonds issued by the Company
□ Available √ Not Available




                                                                                                           44
                                                                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2014 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 bonus other to others Sub total                                 Percentage
                               Amount                         new                      capital                                Amount
                                                   %                  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


                                                                                                                                                            45
                                                                                                       Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.



□ Available   √ Not Available
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
(1)、Securities issuance in the recent three years at the end of report period
□ Available   √ Not Available
(2)、Explanation of change in Company’s total shares and shareholding structure and change in Company’s assets and liability structure
□ Available   √ Not Available
(3)、Current employee shares
□ Available   √ Not Available


3、Situation for shareholders and the actual controllers
(1)、The number of shareholders of the Company and the shareholdings
                                                                                                                                                  Unit:share

                                                                                                                                                              46
                                                                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


                                 43,151, including
                                                    Total number of shareholders 43,593, including         Total number of preferred
                                 28,531
Total shareholders in the report                    until the end of the 5th trading 29,146 A sharehold shareholder recovering
                                 A shareholders                                                                                          0
period                                              days before the disclosure day ers, and 14,447 B voting power at the end of
                                 and 14,620
                                                    of the annual report             Shareholders          report period
                                 B shareholders
                                 Shareholders holding more than 5% or the top 10 shareholders holding situation
                                                                                                          Number                  Pledged or frozen
                                                                                            Changes                  Number of
                                 Character         of Percentage Shares held until the end                of
Name of Shareholders             shareholders         (%)        of the report period       during the               unrestricted Share
                                                                                                          restricted                        Amount
                                                                                            report period            shares       status
                                                                                                          shares
                                 Domestic
YANTAI CHANGYU GROUP
                                 non-state-owned      50.4%      345,473,856                0             0          345,473,856            0
CO. LTD.
                                 legal person
GAOLING FUND,L.P.                Foreign shareholder 3.53%       24,176,997                 0             0          24,176,997             0
BBH BOS S/A FIDELITY FD -
                                 Foreign shareholder 2.35%       16,106,326                 0             0          16,106,326             0
CHINA FOCUS FD
GIC PRIVATE LIMITED              Foreign shareholder 1.45%       9,913,484                  -9307489      0          9,913,484              0
NORGES BANK                      Foreign shareholder 0.66%       4,511,246                  2823258       0          4,511,246
VALUE                PARTNERS
HIGH-DIVIDEND          STOCKS Foreign shareholder 0.62%          4,280,146                  -1686735      0          4,280,146              0
FUNDS
FIDELITY FUNDS                   Foreign shareholder 0.58%       3,997,933                  3997933       0          3,997,933
BBH       A/C      VANGUARD
EMERGING MARKETS STOCK Foreign shareholder 0.58%                 3,950,987                  -756079       0          3,950,987
INDEX FUND
FIDELITY CHINA SPECIAL
                                 Foreign shareholder 0.55%       3,779,202                  3779202       0          3,779,202
SITUATIONS PLC

                                                                                                                                                            47
                                                                                                          Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


AGRICULTURAL BANK OF
                        Domestic
CHINA-HUAXIA STEADY
                        non-state-owned                   0.53%      3,624,745                  2324745        0           3,624,745
GROWTH MIXED SECURITIES
                        legal person
INVESTMENT FUND

Strategic investors or legal result of the placement of new
                                                            NO
shares to become a top 10 shareholders(if have)(see note3)
                                                            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 shareholders,
accordant action
                                                            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
                                                                                                                Type of share             Amount
                                                                                       end of the year
YANTAI CHANGYU GROUP CO. LTD.                                                          345,473,856              A                         345,473,856
GAOLING FUND,L.P.                                                                      24,176,997               B                         24,176,997
BBH BOS S/A FIDELITY FD - CHINA FOCUS FD                                               16,106,326               B                         16,106,326
GIC PRIVATE LIMITED                                                                    9,913,484                B                         9,913,484
NORGES BANK                                                                            4,511,246                B                         4,511,246
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUNDS                                              4,280,146                B                         4,280,146
FIDELITY FUNDS                                                                         3,997,933                B                         3,997,933
BBH A/C VANGUARD EMERGING MARKETS STOCK INDEX FUND                                     3,950,987                B                         3,950,987
FIDELITY CHINA SPECIAL SITUATIONS PLC                                                  3,779,202                B                         3,779,202
AGRICULTURAL BANK OF CHINA-HUAXIA STEADY GROWTH MIXED
                                                                                       3,624,745                A                         3,624,745
SECURITIES INVESTMENT FUND
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 accordant Company Limited has no associated relationship or accordant

                                                                                                                                                                 48
                                                                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


action between the top 10 shareholders with unrestricted shares and the top 10 action relationship with the other 9 listed shareholders, and the
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
stock trading business                                                           and 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.

(2)、Situation for the controlling shareholders of the Company

Legal representative
                                             Legal            Establishment Organization
Name of controlling shareholder                                                                Registered capital Main business
                                             representative   date          code
                                                                                                                  Production and distribution of wine,
                                                                                                                  healthy liquor, distilled liquor and
                                                                                                                  non-alcohol beverages, planting of
Yantai Changyu Group Co. Ltd.                Sun Liqiang      1997.04.27     26564582-4        CNY 50 million
                                                                                                                  agricultural products and export
                                                                                                                  business under the scope of
                                                                                                                  permission.
                                             Continue centralizing superior resources, focusing on wine business, reasonably developing relevant
Future development strategy
                                             supporting industries and industriously promoting harmonious development of various of industries
                                             Through the audit, at the end of 2014, total asset of controlling shareholder Yantai Changyu Group Co.
Operating results, financial condition, cash Ltd. amounts to CNY 9.5 billion, net liability amounts to CNY 2.1 billion, net asset amounts to CNY

flow and future development strategy etc.    7.4 billion, 2014 operating income amounts to CNY 4.2 billion, net profit amounts to CNY 1.1 billion,
                                             net cash flows generated from operating activities amount to CNY1.2 billion.

                                                                                                                                                            49
                                                                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.



     Equity situation for the other domestic listed

     companies controlled or shared by the
                                                      No.
     controlling shareholders during the report

     period

     Changes in the controlling shareholder during the report period

     □ Available     √ Not Available

     There are no changes in the controlling shareholder during the report period.

     (3)、Situation for the actual controllers of the Company

      Legal representative
Name        of      actual Legal          Establishment Organization Registered
                                                                                Main business
controllers                representative date          code         capital
                                                                                Under state permission, property investment, tenancy of machine and facility,
                                                                     CNY
Yantai Yuhua Investment                                                         wholesale and retail of construction material, chemical products (chemical
                           Jiang Hua      2004.10.28    76779294-7 387.995
& Development Co. Ltd                                                           hazard products excluded), hardware and electronical products, grape
                                                                     million
                                                                                plantation.
                                                                                Directly or indirectly conduct the production and distribution of food
ILLVA             Saronno Augusto                                    EUR        products (alcoholic products included) as well as industrial, commercial,
                                          1984.07.25    -
Investment Italy           Reina                                     50,416,000 financial and service activities of any other kinds through joint-stock
                                                                                companies and organizations
International     Finance                                                       International Finance Corporation is one of the members of World Bank,
                                                                     USD 2.36
Corporation                Cai Jinyong 1956.07.25       -                      mainly dedicated to investment in private sectors of developing countries
                                                                     billion
                                                                                while providing technical support and consultation service. The corporation

                                                                                                                                                                50
                                                                                                      Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


                                                                           is a multilateral financial institution that ranks first in the world in terms of
                                                                           providing capital stock and loans to developing countries. Its purpose is to
                                                                           promote sustainable investments of private sectors of developing countries in
                                                                           order to alleviate poverty and improve people’s life.
                                                                           Operating management of state-owned property right (stock right) authorized
                                                                           by State-owned Assets Supervision and Administration Commission of
                                                                           Yantai Municipal Government; Financing, investment and operating
                                                                           management of government projects, such as strategic investment and
                                                                           industrial investment and so on; Capital operation (including acquisition,
                                                                           reintegration and transfer, etc) of state-owned property right and state-owned
                                                                           stock right within the scope of authorization; Venture capital investment
Yantai          Guofeng
                                                                CNY        business; Agency of venture capital investment business of other venture
Investment Holdings Co., Chen Dianxin 2009.02.12   00426068-6
                                                                220million investment enterprises or individuals; Participation in the establishment of
Ltd
                                                                           venture capital investment enterprises and venture capital investment
                                                                           management consultant institutions; Investment and financing service
                                                                           business; Investment and financing consultant business; Other business
                                                                           authorized by State-owned Assets Supervision and Administration
                                                                           Commission of Yantai Municipal Government.(Projects need to be
                                                                           authorized in accordance with the law could carry out business activities only
                                                                           after the approval of relevant departments )
Future      development
                           No
strategy
Operating         results,
financial condition and No
cash flow and so on
Equity situation for the
                           No
other domestic listed

                                                                                                                                                             51
                                                                                                        Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


companies controlled by
the actual controller
during the report period
     Changes of the actual controllers during the report period

     √Available     □Not Available

     Names of new actual controllers             ILLVA Saronno Investment Italy and Yantai Guofeng Investment Holdings Co., Ltd

     Changing date                               2014.04.30

     Query indexes on the appointed website      http://www.cninfo.com.cn/finalpage/2014-05-06/63971775.PDF

     Disclosure date on the appointed website    2014.05.06




                                                                                                                                                               52
                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.



Introduction for property right and control relations between the Company and its actual controllers




Actual controller controls the Company through a trust or other asset management ways
□ Available    √ Not Available
(4)、Other institutional shareholders holding more than 10% shares
□ Available    √ Not Available
4 、 Situation of plan to increase held shares proposed or implemented by the Company’s
shareholders and its persons acting in concert during the report period
□ Available    √ Not Available
Within the scope known by the Company, there are no Company’s shareholders or its persons
acting in concert proposing or implementing the plan to increase held shares during the report
period.




                                                                                                           53
                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.



                      VII、Related situation of preferred shares
□ Available     √ Not Available
There are no preferred shares during the report period.




                                                                                                            54
                                                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.




                        VIII、Situation for Directors, Supervisors, Senior Management and Staffs

1、Changes in shareholdings of directors, supervisors and senior management

                                                                                            Shares held                 Decreased Shares held
                                                                    Beginning                             Increased
                                                                                Ending date at        the               shares     at the end
Name            Post                      Status       Gender Age   date of the                           shares during
                                                                                of the post beginning of                during the of     the
                                                                    post                                  the period
                                                                                            the period                  period     period
                 Chairman to the Board of present
Sun Liqiang                                            M     67     2013.05.14. 2016.05.13 0                0                 0                0
                 Directors                 incumbent
                 Vice-chairman to the present
Zhou Hongjiang Board of Directors and                  M     50     2013.05.14. 2016.05.13 0                0                 0                0
                 general manager           incumbent
                 Director and vice-general present
Leng Bin                                               M     52     2013.05.14. 2016.05.13 0                0                 0                0
                 manager                   incumbent
                 Director,    Vice-general present
Qu Weimin        manager and Secretary to              M     57     2013.05.14. 2016.05.13 0                0                 0                0
                 the Board of Directors    incumbent
                                           present
Chen Jizong      Director                              M     39     2013.05.14. 2016.05.13 0                0                 0                0
                                           incumbent
                                           present
Augusto Reina Director                                 M     74     2013.05.14. 2016.05.13 0                0                 0                0
                                           incumbent
                                           present
Aldino Marzorati Director                              M     62     2013.05.14. 2016.05.13 0                0                 0                0
                                           incumbent
Antonio                                    present
                 Director                              M     76     2013.05.14. 2016.05.13 0                0                 0                0
Appignani                                  incumbent

                                                                                                                                                      55
                                                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


Jean Paul Pinard Director                  leave post   M    65   2013.05.14. 2014.05.23 0                  0                 0                0
                                           present
Dai Hui          Director                               F    49   2014.05.23 2016.05.13 0                   0                 0                0
                                           incumbent
                                           present
Xiao Wei         Independent director                   M    54   2013.05.14. 2016.05.13 0                  0                 0                0
                                           incumbent
                                           present
Wang Zhuquan     Independent director                   M    50   2014.05.23 2016.05.13 0                   0                 0                0
                                           incumbent
                                           Present
Wang Shigang     Independent director                   M    49   2013.05.14. 2016.05.13 0                  0                 0                0
                                           incumbent
                 Chairman for the Board of present
Kong Qingkun                                            M    42   2013.05.14. 2016.05.13
                 Supervisors               incumbent
                                           present
Zhang Lanlan     Supervisor                             F    45   2013.05.14. 2016.05.13
                                           incumbent
                                           present
Guo Ying         Supervisor                             F    40   2013.05.14. 2016.05.13
                                           incumbent
                                           present
Yang Ming        Vice-general manager                   M    56   -          -           0                0                 0                0
                                           incumbent
                                           present
Li Jiming        Chief engineer                         M    48   -          -           0                0                 0                0
                                           incumbent
                                           present
Jiang Hua        Vice-general manager                   M    51   -          -           0                0                 0                0
                                           incumbent
                                           present
Sun Jian         Vice-general manager                   M    48   -          -           0                0                 0                0
                                           incumbent
                                           present
Jiang Jianxun    Finance manager                        M    48   -          -           0                0                 0                0
                                           incumbent
Total            -                        -           -   -   -          -           0                0                 0                0


                                                                                                                                                      56
                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


2、Situation for work experience
The main work experiences of the Company’s directors, supervisors and senior management in the
recent 5 years.
(1)、Members of Board of Directors
Mr. Sun Liqiang, a college graduate and senior economist, was the representative of 10th and 11th
National People’s Congress. Now he is the Party Secretary, Chairman and General Manager of
Changyu Group. He began serving as chairman of the Company on September 18th , 1997 and has
held the position ever since.
Mr. Zhou Hongjiang, a doctoral graduate and senior engineer, now is the vice chairman of Changyu
Group ,and the representative of 12th National People’s Congress. He began serving as general
manager of the Company on December 28th , 2001, Director, Vice Chairman and concurrently as
General Manager of the Company on May 20th , 2002, he has held the position ever since.
Mr. Leng Bin, a postgraduate and senior accountant and now is the Director of Changyu Group. He
began serving as a director of the Company on June 15th, 2000 and held the position ever since.
Mr. Qu Weimin, a bachelor of engineering and senior economist, has been serving as director, vice
General Manager and concurrently as Secretary to the board of directors of the Company since
September 18th , 1997.
Mr. Chen Jizong, a university graduate, the qualifications of statistician and accountant, now is the
union director of property management department of SASAC Yantai and Director of Changyu
Group. He has been director of the Company since May 13th 2010.
Mr. Augusto Reina is serving as chief executive officer of several companies including Illva
Saronno Holding SpA and Illva Saronno Investment SRL, member of the board of directors of
Barberini Spa, director of Federvini (Italian Alcohols Production and Export Association), director
of Istituto Del Liquore (Wine Research Institute), director of Assovini (Sicily Viniculture and Wine
Production Association) and director of Changyu Group. He has been director of the Company
since April 27th, 2006.
Mr. Aldino Marzorati, a university graduate, is the General Manager of Illva Saronno Holding SpA
and director of the board of directors of some branches under the group company and the director of
Changyu Group. He has been director of the Company since April 27th, 2006.
Mr. Antonio Appignani, a university graduate, is vice chairman of Italian Business Consultation
Committee, chief of Professional Ethics Committee, teacher of vocational training course of
Industrial and Commercial Consultation Committee, member of Economic and Commercial
Committee of the public university “G. D Annunzio” and concurrently serving as member of the
board of directors of different companies and member of the board of directors of several
companies under Illva Group and the director of Changyu Group. He has been director of the
Company since April 27th, 2006.
Mr. Dai Hui, born in 1965, MBA, former project manager of Government Transfer Loan
Department in China FOTIC (staying in Beijing), former manager assistant of High Net Worth
Center in First Pacific Bank (staying in Hongkong), representative of Rabobank Beijing Office
(staying in Beijing) and chief representative of Rabobank Beijing Office (staying in Beijing), is now
consultant of IFC, director of Changyu Group Company and director of Listed Company.
Mr. Xiao Wei, a postgraduate and a lawyer, now is the partner of Jun He Law Office. He has been
serving as independent director of the Company since September 1st, 2010.


                                                                                                           57
                                                  Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


Mr. Wang Zhuquan, doctor of management (accountancy), first batch of national accounting
academic leading personals of Financial Department, top-notch personal in Qingdao, consultant
expert of Enterprise Internal Control Standard Committee of Financial Department, Government
Special Allowance expert, acted as independent director from13th May 2010 to 12th May 2013. Now
he is the vice-president of School of Management and the accounting department head in the Ocean
University of China as well as independent director of some listed companies which could be
exemplified as Qingdao TGOOD electric Co., Ltd. He acts as the independent director again from
23rd May 2014.
Mr. Wang Shigang, MBA and qualification of China Certified Public Accountant, now is the board
chairman of Shandong Tianhengxin Construction Cost Consultion Co. Ltd., He previously served as
independent director of the Company. He acts as the independent director again from 14th May
2013.

(2)、 Members of board of supervisors
Mr. Kong Qingkun, MBA and economist, used to be the section member of production department
in the healthy liquor branch; the clerk and vice manager of general manager office, now he is the
manager of general manager office.
Ms. Zhang Lanlan, a university graduate and economist, used to be vice-manager of import/export
company, manager of import department; she is manager of board of directors office now.
Ms. Guo Ying, a university graduate and senior accountant, used to be the member of financial
audit department of Yantai Yiqing Industry Company; senior staff of operating supervision
department of SASAC Yantai, senior staff and vice director of directors & supervisor office; now
she is vice director of directors & supervisor office of SASAC Yantai.

 (3)、Other senior managers
Mr. Yang Ming, a university graduate and applied researcher, has been serving as Vice General
Manager of the Company since August 12th, 1998.
Mr. Li Jiming, a doctor and applied researcher, has been serving as Chief Engineer of the Company
since September 14th, 2001.
Mr. Jiang Hua, a postgraduate and senior engineer has been serving as Vice General Manager of the
Company since September 14th, 2001.
Mr. Sun Jian, an MBA and economist, has been serving as Vice General Manager of the Company
since March 22nd, 2006.
Mr. Jiang Jianxun, an MBA and accredited accountant, has been serving as Financial Manager of
the Company since May 20th, 2002.




                                                                                                         58
                                                                                                  Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.



Post in the shareholder’s company

  √ Available     □ Not Available
                                                                                                                  Paid           by
                                                                                    Beginning date Ending date of
Name                                  Shareholder’s Company        Post                                          shareholder’s
                                                                                    of the post    the post
                                                                                                                  company or not
                                                                    Chairman     and
Sun Liqiang                           Yantai Changyu Group Co. Ltd. general manager 2013.10.08     2017.10.07          No

Zhou Hongjiang                        Yantai Changyu Group Co. Ltd. Vice chairman   2013.10.08     2017.10.07          No

Li Jiming                             Yantai Changyu Group Co. Ltd. Director        2013.10.08     2017.10.07          No

Sun Jian                              Yantai Changyu Group Co. Ltd. Director        2013.10.08     2017.10.07          No

Chen Jizong                           Yantai Changyu Group Co. Ltd. Director        2013.10.08     2017.10.07          No

Augusto Reina                         Yantai Changyu Group Co. Ltd. Director        2013.10.08     2017.10.07          No

Aldino Marzorati                      Yantai Changyu Group Co. Ltd. Director        2013.10.08     2017.10.07          No

Antonio Appignani                     Yantai Changyu Group Co. Ltd. Director        2013.10.08     2017.10.07          No

Dai Hui                               Yantai Changyu Group Co. Ltd. Director        2014.03.06     2017.10.07          No

Explanation for the post in the
                                      No.
shareholder’s company

Post at other companies

 √ Available    □ Not Available
Name                                  Other’s Company              Post at other company Beginning Ending date of Paid          by    other


                                                                                                                                                         59
                                                                                                       Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


                                                                                           date of the the post             company or not
                                                                                           post
                                   Yantai   Changyu     Zhongya
                                                                  Director and
Leng Bin                           Medicine & Healthy Liquor Co.,                          2012.09.10                       No
                                                                  legal representative
                                   Ltd
Explanation for the post in the
                                   No.
shareholder’s company
3、Salary of directors, supervisors and senior management
Decision-making process, the basis for determining, the actual payments of directors, supervisors and senior management
The salary for the independent directors is paid according to the resolution of shareholders’ meeting. The salary for the chairman, directors with
administration duty, supervisors, managers and other senior management should be paid on basis of the evaluation result according to the Evaluation
and Incentives Scheme for Senior Management of the Company which was passed during the Board of Directors’ meeting.

Salary of directors, supervisors and senior management during the report period.
                                                                                                                                            Unit: CNY’0000
                                                                                                              Total    reward
                                                                                               Total   reward                    Actual reward at
                                                                                                              from           the
Name                      Post                           Gender       Age      Status          from       the                    the end of the
                                                                                                              shareholder’s
                                                                                               company                           report period
                                                                                                              company
                          Chairman to the Board of M                           present
Sun Liqiang                                                           67                       120.8                                      90
                          Directors                                            incumbent
                          Vice-chairman to the Board                           present
Zhou Hongjiang            of Directors and general M                  50                       117.9                                      87.8
                          manager                                              incumbent
                          Director and vice-general M                          present
Leng Bin                                                              52                       84.1                                       55.6
                          manager                                              incumbent
                          Director,      Vice-general
Qu Weimin                 manager and Secretary to the M              57       present         86.5                                       66.7

                                                                                                                                                              60
                                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


                    Board of Directors                 incumbent
                                                       present
Chen Jizong         Director                 M    39
                                                       incumbent
                                                       present
Augusto Reina       Director                 M    74
                                                       incumbent
                                                       present
Aldino Marzorati    Director                 M    62
                                                       incumbent
                                                       present
Antonio Appignani   Director                 M    76
                                                       incumbent
Jean Paul Pinard    Director                 M    65   leave post
                                                       present
Dai Hui             Director                 F    49
                                                       incumbent
                                                       present
Xiao Wei            Independent Director     M    54                5                                         5
                                                       incumbent
                                                       present
Wang Zhuquan        Independent Director     M    50                5                                         5
                                                       incumbent
                                                       present
Wang Shigang        Independent Director     M    49                5                                         5
                                                       incumbent
                    Chairman for the Board of M        present
Kong Qingkun                                      42                59.9                                      47.9
                    supervisors                        incumbent
                                                       present
Zhang Lanlan        supervisor               F    45                18.5                                      17.3
                                                       incumbent
                                                       present
Guo Ying            supervisor               F    40
                                                       incumbent
                                                       present
Yang Ming           Vice-general manager     M    56                75.3                                      56.6
                                                       incumbent


                                                                                                                                  61
                                                                                                      Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


                                                                               present                                                   56.6
Li Jiming                  Chief Engineer               M           48                        83.3
                                                                               incumbent
                                                                               present                                                   56.6
Jiang Hua                  Vice-general manager         M           51                        86
                                                                               incumbent
                                                                               present                                                   56.6
Sun Jian                   Vice-general manager         M           48                        79.6
                                                                               incumbent
                                                                               present
Jiang Jianxun              Finance manager              M           48                        61.5                                       38.8
                                                                               incumbent
Total                      --                           --          --         --             888.4                                      645.5

The awarded equity incentives for the directors, supervisors and senior management of the Company during the report period

□Available     √ Not Available

4、Changes in Company’s directors, supervisors, Senior Management


Name                      Post                                    Type                       Date               Reason

                                                                                                                Application for resign
Jean Paul Pinard          Director                                Leave post                 2014.05.23
                                                                                                                from director

Dai Hui                   Director                                Be elected                 2014.05.23

Wang Zhuquan              Independent director                    Be elected                 2014.05.23


5、Changes in core technical team or key technical personnel during the report period (non-directors, supervisors and senior management)
During the report period, there are no changes in core technical team or key technical personnel.



                                                                                                                                                             62
                                                                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


6、Staff of the Company
Up to December 31st 2014, the total registered staff number of the Company (including the Company’s headquarter and main controlling subsidiary
companies) was 4868, consisting of :


Classification                  Category                                                   Number             Percentage of total staff

Specialty constitution          Production and service staff                               1,445               29.68%

                                Sales staff                                                2,286              46.97%

                                Technical staff                                            157                3.22%

                                Financial and administrative staff                         980                 20.13%

Education degree                Bachelor or above                                          1,329              27.3%

                                College graduate                                           2,136               43.88%

                                Vocational school                                          768                15.78%

                                Senior high school diploma or below                        635                13.04%




                                                                                                                                                          63
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                         IX、Corporate Governance

1. Current Corporate Governance Situation of the Company
The Company has, according to relevant national laws and rules including the
Company Law of the People’s Republic of China, Securities Law of the People’s
Republic of China, Guidelines on Corporate Governance of Listed Companies,
Listing Guidelines at Shenzhen Stock Exchange and also other laws and rules issued
by CSRC and Shenzhen Stock Exchange, and combining the own actual situation,
established Articles of Associations and other internal governance regulations,
constantly improved its legal entity structure and internal management rules, legally
conducted its activities and strengthened the information disclosure. The Company’s
governance structure is in accord with requirements of relevant regulatory documents
on listing company’s governance issued by CSRC.
(1)、About shareholders and shareholders’ meeting
The Company has already set up the Deliberation Rules of Shareholders’ Meeting,
and convened the shareholders’ meetings in strict accordance with requirements of
standard opinion of shareholders’ meeting, made the great effort to provide
convenient conditions for more shareholders to participate the shareholders’ meeting,
and ensured all shareholders to enjoy same equity and well exercised their rights. The
Company drew great attention to the communication and exchange with shareholders,
actively responded the shareholders’ inquiry and questions, and widely listened to the
suggestions and comments from shareholders.
(2)、About the Company and holding shareholder
The Company has independent power on business and self-management, and also be
independent of its holding shareholder on business, staff, assets, organization and
finance. The Board of Directors, Board of Supervisors, management team and also
internal organizations operated independently in the Company. The holding
shareholder of the Company could regulate its activities, no other behavior was found
that surpassed the shareholders’ meeting to directly or indirectly interfere with the
decision-making and business activities of the Company, or occupied any assets of
the Company which damaged the Company’s and medium & small shareholders’
interests.
(3)、About the director and board of directors
The Company strictly appoints all directors in light of Company Law and Articles of
Associations. The qualifications of all directors are in line with the requirements of
laws and regulations. In accordance with the requirements of Corporate Governance
Guidelines, the Company has already carried out the cumulative voting system. At
present, the Company has three independent directors accounting for one fourth of all
directors, and the number and composition of board of directors was basically in
accord with requirements of regulations and also Articles and Associations. All
directors of the Company could work in the light of regulations including Rules of
Board of Directors’ Procedure and Working Rules for Independent Directors,
punctually attended board of directors’ and shareholders’ meetings, actively took part
in relevant knowledge training, knew very well about the laws and regulations
concerned, had a deep knowledge and long experience of practitioners, and

                                                                                              64
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performed their duties according to the law and regulations. The Board of Directors
convened the meetings in accordance with related rules and regulations.
(4)、About supervisor and board of supervisors
The Company strictly elected all supervisors in light of Company Laws and Articles
of Associations. At present, board of supervisors has three people among which one
supervisor is representative for staff, the number and composition of board of
supervisor was in accord with requirements of regulations and rules. All supervisors
of the Company could follow the requirement of Rules of Board of Supervisors’
Procedure, insist the principle of responsibility to all shareholders, seriously perform
their duties, effectively supervise and present their independent opinion on important
issues, interrelated deals, financial status, the duty performance of directors and
managers of the Company.
(5)、 About performance evaluation and incentive system
The engagement of managers was open and transparent, and accorded with laws and
regulations. The Company has established and gradually improved the performance
evaluation standard and formed efficient incentive system, so as to ensure the salary
of staff to be linked with job performance.
(6)、 About the party with relevant benefit
The Company could fully respect and safeguard the legal rights of the party with
relevant benefit, cooperate actively with the stakeholders, jointly drive the Company
to develop continually and stably, pay great attention to the issues such as local
environmental protection and public utilities etc., and assume full responsibilities for
the social responsibility.
(7)、 About the information disclosure and transparency
The Company has appointed the secretary to Board of Directors to be responsible for
investor relation management including information disclosure, investor relations
management and reception of shareholders’ visit and consultation. The Company has
also assigned China Securities Newspaper, Securities Times, Honkong Commercial
Daily and web site http://www.cninfo.com.cn/ to disclose information, punctually,
accurately and truly disclosed any information in the light of requirement of relevant
laws and rules, and also ensured all shareholders to have same opportunity to acquire
any information.
In order to further perfect the Company’s governance system, during the report
period, the Company formulates Opinion about Strengthening Sales Human Resource
Management, Opinion about Financial Management of Sales Secondary Enterprise,
Opinion about Strengthening the Products’ Internal Cost, 2014 Annual Assessment
Management Methods for Bulk Wine Consumption in the Bulk Wine Warehouse, in
the Oak Aging Warehouse and in the Bottle Wine Warehouse, 2014 Annual
Assessment Methods for Liquor Yield of Bulk Wine Fermentation, Reasonable
Suggestion for Methods of Project Approval, Implementation, Examination and
Assessment and Management Methods for Acquisition of Oversea Enterprises. In
addition, the Company also modify and perfect some management systems, such as
Assessment Methods for Innovation Projects of More Than Middle-level Managers
and Examination and Assessment Methods for Innovation Work of Every Secondary
Enterprise and so on .


                                                                                              65
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          Whether the Company’s corporate governance is not in compliance with the Company
          Law and the relevant provisions of China Securities Regulatory Commission
          □ Yes    √ No
          The Company’s corporate governance is in compliance with the Company Law and
          the relevant provisions of China Securities Regulatory Commission.

          Progress of the Company’s special activities in terms of corporate governance as well
          as formulation and implementation of inside information source registration and
          management rules
          In order to strengthen management of inside information source and prevent
          occurrence of backstage deals, the Company’s 5th session of Board of Directors’ 10th
          meeting deliberated and passed the Inside Information Source Registration and
          Management Rule on April 18, 2012. The founding of the system standardized the
          approval process of insid      e information reporting, defined the scope of inside
          information source, and set up a prevention and punishment mechanism of inside
          information. During the report period, the Company has strictly managed staffs who
          contact with inside information Source against material inside information of the
          sensitive disclosure etc such as reporting information insiders’ registration, and
          informing timely to supervisory department. During the report period, there were no
          in the Company the information insiders’ transactions of the Company’s shares by
          taking advantage of the sensitive inside information that affects the Company’s share
          price before it was disclosed and no supervisory departments’ punishment records,
          either.

          2、Information for the shareholders’ meeting and temporary shareholders’
             meeting held during the report period
          (1)、Information for the shareholders’ meeting during the report period
                                                                   Disclosure
Session          Date Proposals name             Resolution                       Disclosure Index
                                                                   date
                    2013 Annual Board of
                    Directors’     Working
                    Report,
                    2013 Annual Board of
                    Supervisors     Working
                    Report,
2013 Annual 23rd 2013Annual Report,
                    2013     Annual    Profit
                                                 All               24th     May http://www.cninfo.com.cn/final
Shareholders’ May                               deliberated                      page/2014-05-24/64059965.PD
                    Distribution                                   2014
                                                 and passed                       F
Meeting        2014 Scheme,
                    Proposal     on        the
                    Appointment             of
                    Directors,
                    Proposal     on        the
                    Appointment             of
                    Independent Directors,

                                                                                                        66
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              Proposal on Renewal of
              Accounting Firm
(2)、Information for the temporary shareholders’ meeting during the report period
There is no temporary shareholders’ meeting during the report period.
(3)、Request for convening temporary shareholders’ meeting by priority shareholders
owing recovered voting right
□Available    √ Not Available

3、Performance of independent directors during the report period

(1) 、 Attendance of independent directors for the board of directors and the
shareholders’ meeting

Attendance of independent directors for the board of directors
                                                                                      Whether       or
                                                                                      not to attend
              Required                                                                the meetings
                              Personal   Communication Authorized
Name          attendance                                                   Absence personally
                              attendance attendance          attendance
              time                                                                    for
                                                                                      successive
                                                                                      twice
Wang
              2               1          1                   0             0          No.
Zhuquan
Xiao Wei      4               3          1                   0             0          No.
Wang
              4               3          1                   0             0          No.
Shigang
Attendance        time   of
independent       directors
                              1
for the shareholders’
meeting
Explanation for not personally attending the Board of Directors’ meetings for
successive twice.
There are no independent directors absent of personally attending the Board of
Directors’ meetings for successive twice.


                                                                                                    67
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(2)、Any objections for the Company’s projects from the independent directors
Whether or not the independent directors raised any objections for the Company’s
projects.
□Yes       √No.
During the report period, the independent directors did not raise any objections for the
Company’s projects.
(3)、Other explanations on independent directors’ performance
The independent directors’ propositions are accepted by the Company or not
√ Yes      □ No
Explanation on acceptance or refusal of the independent directors’ propositions
Regarding the investment project involved in the industrial tourism, the independent
director raised a suggestion ‘Taking full advantage of existing production and
management facilities and avoiding overlapping investment’ and the Company adopted
this suggestion.


4、Performance of the special committees under the Board of Directors during
the report period
(1)、Summary report of the Board of Directors’ Audit Committee
(A) On March 18th , 2014, after the certified public accountants responsible for annual
audits had introduced their preliminary opinions, the independent directors on behalf
of the Audit Committee communicated with them and made written comments which
read that “we communicated in detail with the certified public accountants responsible
for auditing of the Company’s 2013 Annual Report who expounded the main
standards, main emphasis audited field,       the problems and the matters necessary to
adjust that were found during the auditing. We’ve noticed that the Company has
adjusted the matters as the accountants suggested. On the basis of our communication
with the accountants, the production and operation results that the Company’s
management reported to us as well as the progress of important events, we believe
that we have no objection to the Company’s 2013 Annual Financial Statement
preliminarily examined by Deloitte Hua Yong Certified Public Accounts Co., Ltd. and
the preliminary audit opinions of that Services.”
(B) On 23rd April 2014, the Board of Directors’ Audit Committee deliberated and
passed 2013 Annual Auditing Report issued by Deloitte Hua Yong Certified Public
Accounts Co., Ltd., Proposal on 2013 Annual Profit Distribution, Proposal on


                                                                                               68
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Appointment for Certified Public Accountants Firm, 2013 Annual Self Assessment
Report on the Company's Internal Control and 2014 Annual Internal Audit Plan.
All of committee members unanimously agree to submit the above proposals to the
Company’s 6th Session Board of Directors’ 4th Meeting for deliberation.
The meeting reached the following consensus:
1   The clean-opinion auditing report on the Company’s 2013 Annual Financial
Statement issued by Deloitte Hua Yong Certified Public Accounts Co., Ltd reflects
the Company’s financial condition, operating results and cash flow truly, objectively
and correctly.
2   The profit distribution scheme that the Company formulated is relatively
acceptable, taking the shareholders’ interest into account while paying attention to the
Company’s long-term development.
③ Considering the strict maintenance of objective and fair standpoint as well as the
high audit quality and reasonable arrangement for audit progress during the process of
the Company’s 2013 annual financial audit and internal control audit taken by
Deloitte Hua Yong Certified Public Accounts Co., Ltd, it is proposed that the
Company will reappoint Deloitte Hua Yong Certified Public Accounts Co., Ltd as the
2014 annual auditor of the Company. The employment period is one year and the
audit will be taken from two aspects shown as follows.
On one hand, Deloitte will take the audit of 2014 annual financial report and issue a
Financial Audit Report. On the other hand, Deloitte will take the audit of 2014 annual
internal control audit and issue an Internal Control Audit Report.
The annual auditing fee for the above parts are CNY 1.9million, including travel
expense and all service charges.
④ The Company’s 2013 Annual Self Assessment Report on the Company's Internal
Control has truly and objectively mirrored out the present standing of the Company’s
internal control and can basically ensure the effective implementation of its policies
and realization of its strategic goals.
⑤ The Company’s 2014 Annual Internal Audit Plan is comparatively perfect and
practicable, based on which the Company’s Audit Department will conduct the 2014
annual internal audit.
(C) On 25th August 2014, the Board of Directors’ Audit Committee deliberated and
passed 2014 Semiannual Report and 2014 Semiannual Profit Distribution. The
meeting reached the following consensus:


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① The Company’s 2014 Semiannual Financial Statements reflected the Company’s
financial condition, operating results and cash flow truly, objectively and correctly.
② As the Company just realized 2013 Annual Profit Distribution Scheme in middle
July, we propose neither to distribute profits for the first half of 2014 nor to increase
the Company’s capital stock with accumulated public fund. The net profit made in the
first half of this year will be reserved and distributed at the end of the year. Our
Auditing Committee considers the suggestion to be reasonable.
③All of Committee members unanimously agree to submit the above proposals to the
Company’s 6th Session Board of Directors’ 6th Meeting for deliberation.
(2)、Summary report of the Board of Directors’ Emolument Committee
The Board of Directors’ Emolument Committee is responsible for assessment of the
economic responsibilities of the directors and the senior managers who receive
salaries from the Company and examination of the salary policy and scheme designed
for the Company’s directors and senior managers.
Propose on Company’s 2013 Annual Senior Executive’s Performance Assessment
Results and Performance Assessment Methods for Company’s Senior Executive from
2014 to 2017 were deliberated and passed by the Board of Directors’ Emolument
Committee on 23th April 2014, who thought that these two documents were in
compliance with assessment methods stipulated in the Incentive Scheme for the
Company’s Senior Executive approved by the Company’s 4th Session Board of
Directors’ 20th Meeting. All committee members unanimously agree to submit the
above proposals to the Company’s 6th Session Board of Directors’ 4th Meeting for
deliberation.
During the report period, the Board of Directors’ Emolument Committee also
examined the 2013 annual payroll records of the directors and the senior managers
who receive salaries from the Company. The committee believes that the Company’s
directors, supervisors and senior managers got paid completely in line with the
processes of the Company’s economic responsibility assessment system and the
salaries the Company made public were in conformity with the actually paid amount.


5、The work of the Board of Supervisors
During the report period, whether the board of supervisors found any existence of risk
for the Company during their oversight activities.
□Yes     √No


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During the report period, the board of supervisors has no objection during their
oversight activities.


6、Relative to the controlling shareholder, independence and completeness of the
Company on business, personnel, assets, organization and finance
(1)、Personnel Arrangement: the Company’s general manager, vice general managers
and other senior officers, all of whom were paid by the Company did not hold any
post in the controlling parties. The Company was entirely independent in personnel
arrangement, conclusion and adjustment of labor contracts thanks to its sound and
independent system for labor, personal and salary management.
(2) 、 Assets: Tangible assets and Intangible assets including trademark, industrial
property right and non-patent technologies were all clearly divided between the
Company and the controlling shareholder, and all legal formalities were completed.
The Company being a legal independent entity consistently conducted business
activities legally and provided no guarantee in any form with its assets for its
shareholders or individuals’ liabilities or any other legal persons or natural persons.
The Company has already transferred free the trademarks to the Company including
‘‘黄金冰谷’’, ‘‘爱斐堡’’, ‘‘爱菲堡’’, ‘‘爱斐’’ and ‘‘AFIP’’ etc trademarks. However,
due to some issues from the past, the Company permitted to use “Changyu” etc the
intangible assets such as part of trademark ownership and patent still held by the
controlling shareholders.
(3)、Finance: The Company has independent finance department, chief account and
financial staff, and also complete, independent and standardized accounting system.
The Company has also established its own bank accounts, duly and legally paying
taxes, workers insurance fund. All financial individuals do not hold any concurrent
posts in associated companies and are able to make financial decisions independently.
The Company has its own audit department, which is especially responsible for the
internal audit work of the Company.
(4)、Offices: The Company has set up a sound organizational framework, in which the
Board of Directors and Board of Supervisors operate independently, no superior and
subordinate relationship exists between the functional departments of the controlling
shareholder. The Company has its own independent production & business offices, all
functional departments are independent to exercise their powers and carry out the
production and business activities independently.


                                                                                                     71
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(5) 、 Operations: the operations of the Company are independent of the controlling
shareholder, the Company owns itself completely independent systems covering
research and development, accounting, workforce and labor, quality control, raw
materials purchase, production and sales, and is possessed of self-run capabilities, and
has neither relationship with the controlling shareholder in terms of supply and sales
by proxy nor competition with the other.


7、Situation for Horizontal Competition
□Available   √ Not Available


8、Performance Evaluation and Incentive to Senior Management
The Company has already established a sound system for evaluation of achievement
of senior management and the related incentive system which linked the reward with
the Company’s benefit and personal achievement. The Emolument Committee under
Board of Directors assumed the responsibility of stipulating the policy and appraising
the scheme for salaries and rewards. Based on the Company’s annual production and
business goals, this committee examined senior personals and also their responsible
subsidiaries or departments according to their management achievement and index,
and took these as a criteria of awards or penalties. During the report period, because
of not finishing the annual business plan deliberated and passed in the Board of
Directors’ meeting at the beginning of the year, the total salaries and rewards of the
senior management will be 6.6 % less than last year.




                                                                                              72
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                              X、Internal Control

1、Internal control construction
During the report period and as the requirement of General Criteria of Company’s
Internal Control and its corresponding guidelines jointly issued by the Ministry of
Finance and other four ministries, the Company confirms its strategic development
target and internal control target. Based on the internal and external surroundings,
through the comprehensive and systemic risk assessment in combination with
characteristics of wine industry, the Company keeps perfecting and deepening internal
control construction. The Company mainly formulates and perfects the rules and
regulations about marketing, overseas acquisition as well as grape base construction
and management. The Company also takes many measures to ensure the
implementation of every internal control system.
Based on the relevant law and regulations, such as Corporation Law, Securities Law
and Rules Governing the Listing of Stocks on Shenzhen Stock Exchange, the Company
has already built an intact and effective internal control system covering the company
and each critical business circulation, which is in accordance with the requirements of
General Criteria of Company’s Internal Control and its corresponding guidelines.
The built system provides essential theoretical foundation and institutional guarantee
for the legal compliance of operating management, safety of assets, authenticity and
integrity of Financial Report and relevant information as well as the accomplishment
of strategic target.


2、The Board of Directors’ statement on the internal control responsibilities
It is the responsibility of the Board of Directors to establish, perfect and effectively
execute the internal control, evaluate its efficiency and disclose truthfully the
assessment report on internal control as requested by Company’s internal control
standard system. The board of supervisors should supervise the establishment and
implementation of board of directors on the internal control. Managers should take in
charge of organizing and leading the daily operation of Company’s internal control.
The board of directors , the board of supervisors , directors, supervisors & senior
management of the Company collectively and individually accepted full responsibility
for the truthfulness,accuracy and completeness of the information contained in the
report and confirm that to the best of their knowledge and belief there are no

                                                                                              73
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unfaithful facts, significant omissions or misleading statements. The target of the
Company’s internal control is to reasonably guarantee the lawfulness and compliance
on operation management, the safety of assets, the truthfulness and completeness of
financial report and its related information, so as to improve business efficiency and
result and promote the realization of development strategy. Due to the inherent
limitations, internal control only can provide the reasonable guarantee for realizing
the above mentioned targets. Besides, owing to the changed situation which could
probably cause the irrelevancy of internal control or reduce the compliance for the
control policy and formality, there is a certain risk to calculate the efficiency of the
future internal control according to the assessment result of internal control.


3、Basis of establishing internal control for financial report
Basis of establishing internal control for financial report is in accordance with the
rules of General Criteria of Company’s Internal Control with its corresponding
guidelines and Internal Control Guideline of Listed Company on Shenzhen Stock
Exchange.


4、Self-assessment report on internal control
The specific circumstances for the significant defects of the internal control found during the report
period in the internal control self assessment report.
During the report period, the significant defects of internal control haven’t been found.
Disclosure date for the full text of the
                                                28th April 2015
internal control self assessment report
Disclosure index for the full text of the
                                                www.cninfo.com.cn
internal control self assessment report

5、Internal control audit report or authentication report
Internal control audit report issued by Deloitte Hua Yong certified public accountants
Co., Ltd.
  Audit opinions of the internal control audit report
We believe that Yantai Changyu Pioneer Wine Co., Ltd. is in accordance with the rules of General
Criteria of Company’s Internal Control and other related rules, all significant aspects keep effective
internal control in the financial report.
Disclosure date for the full text of the
                                                28th April 2015
internal control audit report


                                                                                                 74
                                       Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.



Disclosure index for the full text of the Document name: 2014 Annual Internal Control Report
internal control audit report                on Self Assessment. Website address: www.cninfo.com.cn

Whether or not the certified public accountants issued a non-standard advice for the
audit report of internal control.
□Yes     √ No.
Whether the audit report of internal control issued by the certified public accountants
is in consistency with the self-assessment report of the board of directors.
√ Yes    □ No.

6 、 The establishment and implementation of responsibility ascertainment rules
for the significant errors in the annual report

Accountability System for Significant Errors in the Annual Report of the Company
has already been deliberated and passed by the 5th session of Board of Directors’ 4th
meeting on 7th April, 2011 and also been in strict performance. During the report
period, there are no big errors in 2013 Annual Report and 2014 Semi-annual Report
issued and disclosed by the Company.




                                                                                              75
                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.


                                       XI、Financial Report



1、Audit Report

  Type of audit opinion                             Standard unqualified audit opinion
  Date signed on audit report                       25th April, 2015
                                                    Deloitte Hua Yong certified public accountants co.,
  Audit agency name
                                                    Ltd. (special general partnership)
  Certified public accountant's name                Xu Zhaohui         Li Xu


                                                                     De Shi Bao (Shen) Zi (15) No. P1560

      AUDITOR'S REPORT

      TO THE SHAREHOLDERS OF
      YANTAI CHANGYU PIONEER WINE COMPANY LIMITED

      We have audited the accompanying financial statements of Yantai Changyu Pioneer Wine
      Company Limited and its subsidiaries which comprise the consolidated and company's balance
      sheets as at 31 December 2014, and the consolidated and company's income statements, the
      consolidated and company's cash flow statements and the consolidated and company's statements
      of changes in shareholders' equity for the year then ended, and the notes to the financial
      statements.

      1. Management' responsibility for the financial statements

      Management of the Company is responsible for the preparation and fair presentation of these
      financial statements. This responsibility includes: (1) preparing the financial statements in
      accordance with Accounting Standards for Business Enterprises to achieve fair presentation of the
      financial statements; (2) designing, implementing and maintaining internal control which is
      necessary to enable that the financial statements are free from material misstatement, whether due
      to fraud or error.

      2. Auditor's responsibility

      Our responsibility is to express an audit opinion on these financial statements based on our audit.
      We conducted our audit in accordance with China Standards on Auditing. China Standards on
      Auditing require that we comply with the Code of Ethics for Chinese Certified Public
      Accountants and plan and perform the audit to obtain reasonable assurance about whether the
      financial statements are free from material misstatement.

      An audit involves performing audit procedures to obtain audit evidence about the amounts and
      disclosures in the financial statements. The procedures selected depend on the auditor's
      judgment, including the assessment of the risks of material misstatement of the financial
      statements, whether due to fraud or error. In making those risk assessments, Certified Public
      Accountants consider the internal control relevant to the preparation and fair presentation of the
      financial statements in order to design audit procedures that are appropriate in the circumstances,
      but not for the purpose of expressing an opinion on the effectiveness of the internal control. An
                                                                                                                76
                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.




                                                                                                          77
                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
AUDITOR'S REPORT

TO THE SHAREHOLDERS OF
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED - continued


3. Opinion

In our opinion, the financial statements of Yantai Changyu Pioneer Wine Company Limited
present fairly, in all material respects, the consolidated and company's financial position as of 31
December 2014, and the consolidated and company's results of operations and cash flows for the
year then ended in accordance with Accounting Standards for Business Enterprises.


Deloitte Touche Tohmatsu                                      Chinese Certified Public Accountant
Certified Public Accountants LLP                               Xu Zhao Hui (Signature and seal)
Shanghai, China                                                   Li Xu (Signature and seal)
                                                                        25 April 2015




                                                                                                          78
                                                      Yantai Changyu Pioneer Wine Co. Ltd. 2013 Annual Report.


CONSOLIDATED BALANCE SHEETS
YEAR ENDED 31 DECEMBER 2014

ASSETS                                        Notes                   2014                      2013
                                                                      RMB                       RMB
CURRENT ASSETS
 Cash and bank balances                       VI-1               1,145,365,071             1,367,818,182
 Notes receivable                             VI-2                 138,315,319                79,702,753
 Accounts receivable                          VI-3                 145,672,411               177,109,516
 Prepayments                                  VI-4                   8,073,786                45,997,863
 Interest receivable                          VI-5                   3,619,429                 8,417,995
 Other receivables                            VI-6                  31,362,302                99,331,794
 Inventories                                  VI-7               2,087,376,398             2,121,117,437
 Other current assets                                               29,662,076
                                                                ____________                        -
                                                                                          ____________
Total current assets                                             3,589,446,792
                                                                ____________               3,899,495,540
                                                                                          ____________
NON-CURRENT ASSETS
 Available-for-sale financial assets          VI-8                        -                         -
 Fixed assets                                 VI-9               2,532,682,355             1,917,641,344
 Construction in progress                     VI-10             1,700,466,500             1,423,654,530
 Materials for construction of fixed assets                               -                      676,539
 Bearer biological assets                     VI-11                151,723,241               101,794,515
 Intangible assets                            VI-12                452,951,194               296,129,754
 Goodwill                                     VI-13                 13,112,525                13,112,525
 Long-term prepaid expenses                   VI-14                201,911,605               165,521,803
 Deferred tax assets                          VI-15                254,186,823               158,533,090
 Other non-current assets                     VI-16                 15,751,605
                                                                ____________                  21,370,902
                                                                                          ____________
Total non-current assets                                         5,322,785,848
                                                                ____________               4,098,435,002
                                                                                          ____________
Total assets                                                     8,912,232,640             7,997,930,542
                                                                ____________              ____________




                                                                                                             79
                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
CONSOLIDATED BALANCE SHEETS
YEAR ENDED 31 DECEMBER 2014 - continued

LIABILITIES AND EQUITY                           Notes                    2014                     2013
                                                                          RMB                      RMB
CURRENT LIABILITIES
 Short-term borrowings                           VI-17               300,000,000               243,170,674
 Notes payable                                   VI-18                10,000,000                 5,765,694
 Accounts payable                                VI-19              357,811,822                258,116,331
 Receipts in advance                             VI-20              215,127,598                188,651,254
 Employee benefits payable                       VI-21               158,948,592               130,720,235
 Taxes payable                                   VI-22               87,504,048                194,413,430
 Interest payable                                                      3,475,641                 2,152,059
 Deferred income                                 VI-23                12,398,718                12,915,801
 Other payables                                  VI-24               469,804,317
                                                                   ____________                497,301,630
                                                                                             ____________
Total current liabilities                                          1,615,070,736
                                                                   ____________               1,533,207,108
                                                                                             ____________
NON-CURRENT LIABILITIES
 Long-term borrowings                            VI-25               209,380,000                      -
 Deferred income                                 VI-23                76,024,992                83,611,041
 Deferred tax liabilities                        VI-15                 4,565,636                 5,336,115
 Other non-current liabilities                   VI-26                 3,998,352
                                                                   ____________                  4,755,794
                                                                                             ____________
Total non-current liabilities                                        293,968,980
                                                                   ____________                 93,702,950
                                                                                             ____________
Total liabilities                                                   1,909,039,716
                                                                   ____________               1,626,910,058
                                                                                             ____________
EQUITY
  Share capital                                  VI-27                685,464,000               685,464,000
  Capital reserve                                VI-28                563,139,042               563,139,042
  Other comprehensive income                     VI-29                 (2,803,271)                     -
  Surplus reserve                                VI-30                342,732,000               342,732,000
  Retained earnings                              VI-31              5,251,920,374
                                                                   ____________               4,616,944,663
                                                                                             ____________
  Equity attributable to shareholders
    of the Company                                                  6,840,452,145             6,208,279,705
  Non-controlling interests                                           162,740,779
                                                                   ____________                 162,740,779
                                                                                             ____________
Total equity                                                        7,003,192,924
                                                                   ____________               6,371,020,484
                                                                                             ____________
Total liabilities and equity                                       8,912,232,640              7,997,930,542
                                                                   ____________              ____________


The accompanying notes form an integral part of these financial statements.

The financial statements on pages 3 to 95 were signed by the following:



Legal Representative: _________________________________

Person in Charge of the Accounting Body: _________________

Chief Accountant: ____________________________________



                                                                                                                80
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
BALANCE SHEET OF THE COMPANY
YEAR ENDED 31 DECEMBER 2014

ASSETS                                 Notes                    2014                      2013
                                                                RMB                       RMB
CURRENT ASSETS
  Cash and bank                        XIV-1                 496,138,263               602,444,243
  Notes receivable                     XIV-2                  98,158,251                32,594,381
 Accounts receivable                   XIV-3                   1,516,518                 1,600,968
 Prepayments                           XIV-4                   1,710,787                24,824,672
  Interest receivable                  XIV-5                   3,580,811                 8,417,995
  Dividend receivable                  XIV-6                 402,596,884               752,595,884
  Other receivables                    XIV-7               4,708,836,276             3,709,583,949
  Inventories                          XIV-8                 681,696,774               781,284,189
  Other current assets                                        14,996,807
                                                          ____________                        -
                                                                                    ____________
Total current assets                                       6,409,231,371
                                                          ____________               5,913,346,281
                                                                                    ____________
NON-CURRENT ASSETS
 Available-for-sale financial assets    VI-8                        -                         -
 Long-term equity investments          XIV-9               1,093,437,027             1,048,208,923
 Fixed assets                          XIV-10                403,210,655               425,294,116
 Construction in progress              XIV-11                    182,765                   269,802
 Bearer biological assets              XIV-12                 83,631,722                60,851,409
 Intangible assets                     XIV-13                 76,760,678                79,139,831
 Deferred tax assets                   XIV-14                 27,053,571
                                                          ____________                  22,956,747
                                                                                    ____________
Total non-current assets                                   1,684,276,418
                                                          ____________               1,636,720,828
                                                                                    ____________
Total assets                                               8,093,507,789             7,550,067,109
                                                          ____________              ____________




                                                                                                       81
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
BALANCE SHEET OF THE COMPANY
YEAR ENDED 31 DECEMBER 2014 - continued

LIABILITIES AND EQUITY                Notes                    2014                      2013
                                                               RMB                       RMB
CURRENT LIABILITIES
 Short-term borrowings                VI-17                 300,000,000               243,170,674
 Accounts payable                    XIV-15                 228,052,722               166,453,563
 Employee benefits payable           XIV-16                  70,233,251                66,416,387
 Taxes payable                       XIV-17                  18,205,124                37,578,670
 Interest payable                                             3,475,641                 2,152,059
 Deferred income                                              3,017,898                 2,559,227
 Other payables                      XIV-18               1,030,604,819
                                                         ____________               1,612,596,521
                                                                                   ____________
Total current liabilities                                 1,653,589,455
                                                         ____________               2,130,927,101
                                                                                   ____________
NON-CURRENT LIABILITIES
 Long-term borrowings                 VI-25                209,380,000                      -
 Deferred income                                            22,747,915                20,095,300
 Other non-current liabilities                               1,895,828
                                                         ____________                  2,180,162
                                                                                   ____________
Total non-current liabilities                              234,023,743
                                                         ____________                 22,275,462
                                                                                   ____________
Total liability                                           1,887,613,198
                                                         ____________               2,153,202,563
                                                                                   ____________
EQUITY
  Share capital                       VI-27                 685,464,000               685,464,000
  Capital reserve                    XIV -19                557,222,454               557,222,454
  Surplus reserve                     VI-30                 342,732,000               342,732,000
  Retained earnings                                       4,620,476,137
                                                         ____________               3,811,446,092
                                                                                   ____________
Total equity                                              6,205,894,591
                                                         ____________               5,396,864,546
                                                                                   ____________
Total liabilities and equity                              8,093,507,789             7,550,067,109
                                                         ____________              ____________




                                                                                                      82
                                                          Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
CONSOLIDATED INCOME STATEMENT
YEAR ENDED 31 DECEMBER 2014

                                                  Notes                   2014                      2013
                                                                          RMB                       RMB

I. Revenue                                        VI-32              4,156,727,525             4,320,948,572
    Less: Cost of sales                           VI-32              1,372,444,612             1,357,897,999
          Taxes and surcharges                    VI-33                269,446,774               236,394,164
          Selling expenses                        VI-34              1,006,009,364             1,140,836,150
          Administrative expenses                 VI-35                256,980,018               245,498,950
          Impairment loss of assets               VI-36                  1,995,877                 2,149,438
                Financial expenses                VI-37               (17,256,721)
                                                                    ____________                (18,700,357)
                                                                                              ____________
II. Operating profit                                                 1,267,107,601             1,356,872,228
      Add: Non-operating income                   VI-38                 43,996,405                42,108,726
            Including: gains from disposal
                                          of non-current assets                                       121,113
                                                271,989
      Less: Non-operating expenses               VI-39                     8,370,249                1,874,223
            Including: losses from disposal
                                    of non-current assets                                         5,207,658
                                                678,016             ____________              ____________
III. Profit before tax                                               1,302,733,757             1,397,106,731
        Less: Income tax                          VI-40                325,026,046
                                                                    ____________                 348,920,804
                                                                                              ____________
IV. Profit for the year and attributable
           to shareholders of the Company                             977,707,711              1,048,185,927
                                                                    ____________              ____________
V. Other comprehensive income (post-tax)
      Other comprehensive income
        to be reclassified to profit and loss
      Foreign currency statement
        translation difference                                         (2,803,271)
                                                                    ____________                      -
                                                                                              ____________
      Other comprehensive income (post-tax)                            (2,803,271)
                                                                    ____________                      -
                                                                                              ____________
VI. Total comprehensive income
          attributable to owners of the Company                       974,904,440              1,048,185,927
                                                                    ____________              ____________
VII. Earnings per share
          (I) Basic earnings per share            VI-41                      1.43                      1.53
                                                                    ____________              ____________
         (II) Diluted earnings per share          VI-41                      N/A                       N/A
                                                                    ____________              ____________




                                                                                                                 83
                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
INCOME STATEMENT OF THE COMPANY
YEAR ENDED 31 DECEMBER 2014

                                                  Notes                    2014                      2013
                                                                           RMB                       RMB

I. Revenue                                       XIV -20              1,647,825,652             1,730,694,774
     Less: Cost of sales                         XIV -20              1,406,987,744             1,473,772,762
           Taxes and surcharges                  XIV -21                157,026,901               135,046,585
           Administrative expenses               XIV -22                112,051,545               109,664,952
           Impairment loss/(reverse) of assets   XIV -23                  (192,908)                 4,392,429
                 Financial expenses              XIV -24               (11,053,553)              (25,948,141)
            Investment income                    XIV -25              1,164,089,666
                                                                     ____________               1,126,019,415
                                                                                               ____________
II. Operating Profit                                                 1,147,095,589              1,159,785,602
      Add: Non-operating income                                          6,371,028                  4,266,595
            Including: gains from disposal
                                          of non-current assets                                        105,236
                                                  1,374
             Less: Non-operating expenses                                5,801,396                   1,019,467
                       Including: losses from disposal
                                                     of non-current assets                         5,181,727
                                                 663,565            ____________               ____________
III. Profit before tax                                                1,147,665,221             1,163,032,730
        Less: Income tax                                                 (4,096,824)
                                                                     ____________                   8,345,452
                                                                                               ____________
IV. Profit for the year
           and total comprehensive income                             1,151,762,045             1,154,687,278
                                                                     ____________              ____________




                                                                                                                  84
                                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 DECEMBER 2014

                                                                  Notes             2014                     2013
                                                                                    RMB                      RMB
CASH FLOWS FROM OPERATING ACTIVITIES
 Cash receipts from the sale of goods
   and the rendering of services                                               4,787,289,147            4,766,532,032
 Receipts of tax refunds                                                          18,259,690               22,163,624
 Other cash receipts relating to operating activities            VI-42(1)         24,543,547
                                                                               __________                  47,960,711
                                                                                                        __________
Sub-total of cash inflows from operating activities                            4,830,092,384
                                                                               __________               4,836,656,367
                                                                                                        __________
Cash payments for goods purchased and services received                       (1,255,567,298)          (1,293,320,336)
Cash payments to and on behalf of employees                                     (358,415,330)            (379,880,613)
Payment of various types of taxes                                             (1,301,077,872)          (1,368,825,802)
Other cash payments relating to operating activities             VI-42(2)       (844,948,588)
                                                                               __________              (1,059,555,309)
                                                                                                        __________
Sub-total of cash outflows from operating activities                          (3,760,009,088)
                                                                               __________              (4,101,582,060)
                                                                                                        __________
Net cash flows from operating activities                         VI-43(1)      1,070,083,296
                                                                               __________                 735,074,307
                                                                                                        __________
CASH FLOWS FROM INVESTING ACTIVITIES
 Decrease in term deposits over 3 months                                         307,694,951            1,292,524,719
 Proceeds from return on investments                                              24,230,453               33,050,471
 Proceeds from disposal of fixed assets                                            1,181,895
                                                                               __________                   1,026,411
                                                                                                        __________
Sub-total of cash inflows from investing activities                              333,107,299
                                                                               __________               1,326,601,601
                                                                                                        __________
Cash paid for acquisition of properties, plants and equipment,
  intangible assets and other long-term assets                                (1,238,293,585)            (962,180,456)
Cash paid for term deposits over 3 months                                        (77,547,483)            (907,392,728)
Other cash paid for the purchase of non-controlling interest                   __________-                (16,883,864)
                                                                                                        __________
Sub-total of cash outflows from investing activities                          (1,315,841,068)
                                                                               __________              (1,886,457,048)
                                                                                                        __________
Net cash flows from investing activities                                        (982,733,769)
                                                                               __________                (559,855,447)
                                                                                                        __________
CASH FLOWS FROM FINANCING ACTIVITIES
 Cash received from Non-controlling interest                                            -                  16,359,770
 Cash receipts from borrowings                                                   515,368,080              243,170,674
 Other cash received from financing activities                                   129,182,292
                                                                               __________                        -
                                                                                                        __________
Sub-total of cash inflows from financing activities                              644,550,372
                                                                               __________                 259,530,444
                                                                                                        __________
Cash paid for dividends, profits and interests                                  (353,707,371)            (764,539,398)
Cash paid for borrowings                                                        (242,219,439)
Cash paid from other financing activities                        VI-42(3)       (125,000,000)
                                                                               __________                (275,945,000)
                                                                                                        __________
Sub-total of cash outflows from financing activities                            (720,926,810)
                                                                               __________              (1,040,484,398)
                                                                                                        __________
Net cash flows from financing activities                                        (76,376,438)
                                                                               __________                (780,953,954)
                                                                                                        __________
Effect of foreign exchange rate changes
  on cash and cash Equivalents                                                    (7,059,747)                     -
NET INCREASE OF CASH AND CASH EQUIVALENTS                                           3,913,342            (605,735,094)
ADD: CASH AND CASH EQUIVALENTS
          AT BEGINNING OF THE YEAR                               VI-43(2)        956,558,932
                                                                               __________               1,562,294,026
                                                                                                        __________
CASH AND CASH EQUIVALENTS AT END OF THE YEAR                     VI-43(2)        960,472,274               956,558,932
                                                                               __________               __________




                                                                                                                          85
                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
CASH FLOW STATEMENT OF THE COMPANY
YEAR ENDED 31 DECEMBER 2014

                                                          Notes             2014                     2013
                                                                            RMB                      RMB
CASH FLOWS FROM OPERATING ACTIVITIES
 Cash receipts from the sale of goods
   and the rendering of services                                        1,827,219,301            1,993,219,656
 Other cash receipts relating to operating activities                     12,168,205
                                                                       __________                   9,194,891
                                                                                                 __________
Sub-total of cash inflows from operating activities                    1,839,387,506
                                                                       __________                2,002,414,547
                                                                                                 __________
Cash payments for goods purchased and services received               (1,302,377,275)           (1,385,474,499)
Cash payments to and on behalf of employees                             (151,732,255)             (162,425,829)
Cash payment of various types of taxes                                  (257,237,660)             (206,446,458)
Other cash payment relating to operating activities                   (1,594,026,341)
                                                                       __________               (1,459,407,016)
                                                                                                 __________
Sub-total of cash outflows from operating activities                  (3,305,373,531)
                                                                       __________               (3,213,753,802)
                                                                                                 __________
Net cash flows from operating activities                  XIV-26      (1,465,986,025)
                                                                       __________               (1,211,339,255)
                                                                                                 __________
CASH FLOWS FROM INVESTING ACTIVITIES
 Cash receipts from deposits over 3 months                               295,694,951             1,292,524,719
 Cash receipts from return on investments                              1,530,610,338             1,395,495,286
 Cash receipts from disposals of fixed assets                                550,824
                                                                       __________                        4,000
                                                                                                 __________
Sub-total of cash inflows from investing activities                    1,826,856,113
                                                                       __________                2,688,024,005
                                                                                                 __________
Cash payments for acquisition of fixed assets,
  intangible assets and other long-term assets                          (52,003,088)              (131,396,826)
Cash payments for term deposits over 3 months                           (53,547,483)              (907,392,728)
Cash payments for subsidiary investment                                 (37,980,500)
                                                                       __________                  (29,988,530)
                                                                                                 __________
Sub-total of cash outflows from investing activities                    (143,531,071)
                                                                       __________               (1,068,778,084)
                                                                                                 __________
Net cash flows from investing activities                               1,683,325,042
                                                                       __________                1,619,245,921
                                                                                                 __________
CASH FLOWS FROM FINANCING ACTIVITIES
 Cash receipts from borrowings                                           515,368,080               243,170,674
 Other cash received from financing activities                           129,182,292
                                                                       __________                         -
                                                                                                 __________
Cash inflows from financing activities                                   644,550,372
                                                                       __________                  243,170,674
                                                                                                 __________
Cash paid for dividends, profits and interests                          (351,636,158)             (754,010,400)
Cash paid for borrowings                                                (242,219,439)                      -
Cash paid from other financing activities                               (125,000,000)
                                                                       __________                 (125,000,000)
                                                                                                 __________
Cash outflows from financing activities                                 (718,855,597)
                                                                       __________                 (879,010,400)
                                                                                                 __________
Net cash flows from financing activities                                (74,305,225)
                                                                       __________                 (635,839,726)
                                                                                                 __________
Effect of foreign exchange rate changes
  on cash and cash Equivalents                                             (6,939,315)            (635,839,726)
INCREASE/(DECREASE) OF CASH
  AND CASH EQUIVALENTS                                                    136,094,477             (227,933,060)
ADD: CASH AND CASH EQUIVALENTS
          AT BEGINNING OF THE YEAR                        XIV-27         197,150,989
                                                                       __________                  425,084,049
                                                                                                 __________
CASH AND CASH EQUIVALENTS AT END OF THE YEAR              XIV-27          333,245,466              197,150,989
                                                                       __________                __________




                                                                                                                  86
                                                                                            Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
CONSOLIDATED SATATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 DECEMBER 2014
                                                                                                  2014
                                                          Attributable to shareholders of the Company
                                         Issued         Capital       Other comprehensive        Surplus        Retained       Non-controlling
                                         capital        surplus              income              reserve        earnings          interests          Total
                                         RMB             RMB                  RMB                 RMB            RMB                RMB              RMB

I. Opening balance
       of the current year            _______
                                       685,464,000   _______
                                                      563,139,042        _______ ________ ________
                                                                              -    342,732,000 4,616,944,663                   _______
                                                                                                                                162,740,779      ________
                                                                                                                                                  6,371,020,484

II. Changes for the year
(I) Total comprehensive income                 -              -             (2,803,271)                    -    977,707,711              -         974,904,440
(II) Profit distribution
        Distributions to
             shareholders (VI-31)     _______
                                           -         _______
                                                          -              _______ ________ ________
                                                                              -        -   (342,732,000)                       _______
                                                                                                                                    -            ________
                                                                                                                                                  (342,732,000)

III. Closing balance of
            the current year           685,464,000    563,139,042          (2,803,271) 342,732,000 5,251,920,374                162,740,779       7,003,192,924
                                      _______        _______             _______ ________ ________                             _______           ________

                                                                                                  2013
                                                          Attributable to shareholders of the Company
                                         Issued         Capital       Other comprehensive        Surplus        Retained       Non-controlling
                                         capital        surplus              income              reserve        earnings          interests          Total
                                         RMB             RMB                  RMB                 RMB            RMB                RMB              RMB

I. Opening balance
       of the current year            _______
                                       685,464,000   _______
                                                      562,139,042         _____
                                                                            -              ________ ________
                                                                                             342,732,000 4,322,769,136         _______
                                                                                                                                146,381,009      ________
                                                                                                                                                  6,059,485,187

II. Changes for the year
(I) Total comprehensive income                 -              -                -                           -   1,048,185,927             -         1,048,185,927
(II)Shareholders' injection
       Injection of non-controlling
          interest                             -              -                -                           -           -          16,359,770         16,359,770
(III) Profit distribution
           Distributions to
              shareholders (VI-31)             -              -                -                           -   (754,010,400)             -         (754,010,400)
(IV) Others (Notes VI-28)             _______
                                           -         _______
                                                       1,000,000          _____
                                                                            -              ________ ________
                                                                                                 -        -                    _______
                                                                                                                                    -            ________
                                                                                                                                                    1,000,000

III. Closing balance
            of the current year        685,464,000    563,139,042           -                342,732,000 4,616,944,663          162,740,779       6,371,020,484
                                      _______        _______              _____            ________ ________                   _______           ________




                                                                                                                                                                 87
                                                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
STATEMENT OF CHANGES IN EQUITY OF THE COMPANY
YEAR ENDED 31 DECEMBER 2014

                                                                                           2014
                                                Issued capital   Capital reserve      Surplus reserve   Retained earnings       Total
                                                    RMB              RMB                  RMB                 RMB               RMB

I. Opening balance
     of the current year                         685,464,000
                                                ________          557,222,454
                                                                 ________               342,732,000
                                                                                       ________          3,811,446,092
                                                                                                         _________          5,396,864,546
                                                                                                                            _________
II. Changes for the year
(I) Total comprehensive income                          -                 -                    -         1,151,762,045      1,151,762,045
(II) Profit distribution
        Distributions to shareholders (VI-31)        -
                                                ________              -
                                                                 ________                   -
                                                                                       ________           (342,732,000)
                                                                                                         _________           (342,732,000)
                                                                                                                            _________
III. Closing balance
           of the current year                   685,464,000      557,222,454           342,732,000     4,620,476,137       6,205,894,591
                                                ________         ________              ________          _________          _________

                                                                                           2013
                                                Issued capital   Capital reserve      Surplus reserve   Retained earnings       Total
                                                    RMB              RMB                  RMB                 RMB               RMB

I. Opening balance
     of the current year                         685,464,000
                                                ________          557,222,454
                                                                 ________               342,732,000
                                                                                       ________          3,410,769,214
                                                                                                         _________          4,996,187,668
                                                                                                                            _________
II. Changes for the year
(I) Total comprehensive income                          -                 -                    -         1,154,687,278      1,154,687,278
(II) Profit distribution
        Distributions to shareholders (VI-31)        -
                                                ________              -
                                                                 ________                   -
                                                                                       ________           (754,010,400)
                                                                                                         _________           (754,010,400)
                                                                                                                            _________
III. Closing balance
           of the current year                   685,464,000      557,222,454           342,732,000      3,811,446,092      5,396,864,546
                                                ________         ________              ________          _________          _________




                                                                                                                                             88
                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2014


I.   CORPORATE INFORMATION

        Yantai Changyu Pioneer Wine Co., Ltd. (the "Company") was incorporated as a joint stock
        limited company in accordance with the Company Law of the People's Republic of China (the
        "PRC") in a reorganization carried out by Yantai Changyu Group Co., Ltd. ("Changyu Group
        Company"), in which Changyu Group Company injected certain assets and liabilities in relation to
        the brandy, wine, and sparkling wine production and sales businesses to the Company. The
        Company and its subsidiaries (the "Group") are principally engaged in the production and sales of
        wine, brandy, sparkling wine. Registration place of the Company is Yantai, Shandong.
        Headquarter of the Company is located at No. 56 Da Ma Lu, Zhifu District, Yantai, Shandong,
        PRC.

        As at 31 December 2014, the total shares issued by the Company amounts to 685,464,000 shares.
        Please refer to Notes VI-27 in detail.

        The holding company of the Group is Changyu Group Company, which is jointly controlled by
        Yantai SASAC, ILLVA Saronno Investment Italy, International Finance Corporation and Yantai
        Yuhua Investment and Development Company Limited.

        The financial statements have been authorized by the board of directors on 25 April 2015.
        According to the Company's articles of association, the financial statements will be reviewed by
        shareholders on the shareholder's meeting.

        For consolidation scope of the year, please refer to Notes VIII "Equity in other entities" in detail.
        For detail of changes in consolidation scope of the year, please refer to Notes VII "Change in
        consolidation scope".


II. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

1.   Basis of preparation

        The Group has adopted the Accounting Standards for Business Enterprises ("ASBE") issued by
        the Ministry of Finance ("MoF") (also including the 2014 new issued and revised accounting
        standards). In addition, the Group has disclosed relevant financial information in accordance
        with Information Disclosure and Presentation Rules for Companies Offering Securities to the
        Public No. 15 - General Provisions on Financial Reporting (Revised in 2014).




                                                                                                                    89
                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
II.     BASIS OF PREPARATION OF FINANCIAL STATEMENTS - continued

2.    Basis of accounting and principle of measurement

        The Group has adopted the accrual basis of accounting. The Group adopts the historical cost as
        the principle of measurement in the financial statements. Where assets are impaired, provisions
        for asset impairment are made in accordance with relevant requirements.

        Under the historical cost measurement, an asset is measured at the fair value of consideration paid
        in cash and cash equivalents at the date of the purchase. Liability is measured at the value of asset
        received through taking current obligation, the contract value for taking current obligation, or the
        cash and cash equivalents value estimated for repaying debt in daily business activity.

        Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
        orderly transaction between market participants at the measurement date, regardless of whether
        that price is directly observable or estimated using another valuation technique. Fair value for
        measurement and/or disclosure purposes in these consolidated financial statements is determined
        on such a basis.

        Fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the
        inputs to the fair value measurements are observable and the significance of the inputs to the fair
        value measurement in its entirety, which are described as follows:

        1)    Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
               liabilities that the entity can access at the measurement date;

        2)    Level 2 inputs are inputs, other than quoted prices included within Level 1, that are
               observable for the asset or liability, either directly or indirectly; and

        3)    Level 3 inputs are unobservable inputs for the asset or liability.

3.    Going concern

        As at 31 December 2014, the Group evaluated the profitability ability in the foreseeable 12
        months and did not notice any event or circumstance that would constitute significant doubt on
        going concern ability of the Group. Therefore, the financial statements have been prepared on a
        going concern basis.




                                                                                                                    90
                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING

1.   Declaration for implementing CAS

       The financial statements are prepared in accordance with CAS, which showing a true and fair
       view of the financial position on 31 December 2014, financial performance and cash flow in 2014
       of the Company and the Group.

2.   Accounting year

       The accounting year of the Group is from 1 January to 31 December of each calendar year.

3.   Business cycle

       Business cycle refers to the period from purchasing assets to be processed to receiving cash or
       cash equivalents by the Company. The business cycle of the Company is 12 months.

4.   Reporting currency

       Renminbi ("RMB") is the currency of the primary economic environment in which the Company
       and its domestic subsidiaries operate. Therefore, the Company and its domestic subsidiaries
       choose RMB as their functional currency. The Company's foreign subsidiary chooses Currency
       Euro as its functional currency on the basis of the primary economic environment in which it
       operates. The Group adopts RMB to prepare its financial statements.

5.   Business combination

       5.1Business combinations not involving enterprises under common control and goodwill

       A business combination not involving enterprises under 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 cost of combination is the aggregate of the fair values, at the acquisition date, of the assets
       given, liabilities incurred or assumed, and equity securities issued by the acquirer in exchange for
       control of the acquiree. The intermediary expenses incurred by the acquirer in respect of
       auditing, legal services, valuation and consultancy services, etc. and other associated
       administrative expenses attributable to the business combination are recognised in profit or loss
       when they are incurred.

       Qualified identifiable assets, liabilities and contingent liabilities obtained by acquirer in the
       acquisition are measured using fair value at the acquisition date.

       The cost of combination exceeds the acquirer's interest in the fair value of the acquiree's
       identifiable net assets, the difference is treated as an asset and recognised as goodwill, which is
       measured at cost on initial recognition.

       Goodwill arising on a business combination is measured at cost less accumulated impairment
       losses, and is presented separately in the consolidated financial statements. It is tested for
       impairment at least at the end of each year.




                                                                                                                    91
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
III.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
           - continued

6.     Preparation of consolidated financial statements

          6.1 Preparation of consolidated financial statements

          The scope of consolidation in the consolidated financial statements is determined on the basis of
          control. Control is the power to govern the financial and operating policies of an enterprise so as
          to obtain benefits from its operating activities. The Group will reevaluate if changes in relevant
          facts and circumstances results in changes in relevant factors involved in the above definition of
          control.

          Consolidation of subsidiary starts from the control on the subsidiary by the Group and ends at the
          loss of control on the subsidiary by the Group.

          For a subsidiary disposed of by the Group, the operating results and cash flows before the date of
          disposal (the date when control is lost) are included in the consolidated income statement and
          consolidated statement of cash flows, as appropriate.

          For a subsidiary acquired through a business combination not involving enterprises under
          common control, the operating results and cash flows from the acquisition date (the date when
          control is obtained) are included in the consolidated income statement and consolidated statement
          of cash flows, as appropriate, and no adjustment is made to the opening balances and comparative
          figures in the consolidated financial statements.

          The significant accounting policies and accounting periods adopted by the subsidiaries are
          determined based on the uniform accounting policies and accounting periods set out by the
          Company.

          All significant intra-group balances and transactions are eliminated on consolidation.

          The portion of subsidiaries' equity that is not attributable to the Company is treated as
          non-controlling interests and presented as "non-controlling interests" in the consolidated balance
          sheet within shareholders' equity. The portion of net profits or losses of subsidiaries for the
          period attributable to non-controlling interests is presented as "non-controlling interests" in the
          consolidated income statement below the net profit line item.

          When the amount of loss for the period attributable to the non-controlling shareholders of a
          subsidiary exceeds the non-controlling shareholders' portion of the opening balance of owners'
          equity of the subsidiary, the excess amount are still allocated against non-controlling interests.

7.     Cash and cash equivalents

          Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash
          equivalents are the Group's short-term, highly liquid investments that are readily convertible to
          known amounts of cash and which are subject to an insignificant risk of changes in value.




                                                                                                                     92
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
III.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
           - continued

8.     Translation of transactions and financial statements denominated in foreign currencies

          8.1 Transactions denominated in foreign currencies

          A foreign currency transaction is recorded, on initial recognition, by applying the spot exchange
          rate on the date of the transaction.

          At the balance sheet date, foreign currency monetary items are translated into RMB using the spot
          exchange rates at the balance sheet date. Exchange differences arising from the differences
          between the spot exchange rates prevailing at the balance sheet date and those on initial
          recognition or at the previous balance sheet date are recognised in profit or loss for the period,
          except that (1) exchange differences related to a specific-purpose borrowing denominated in
          foreign currency that qualify for capitalisation are capitalised as part of the cost of the qualifying
          asset during the capitalisation period; (2) exchange differences related to hedging instruments for
          the purpose of hedging against foreign currency risks are accounted for using hedge accounting;
          (3) exchange differences arising from available-for-sale non-monetary items denominated in
          foreign currencies and changes in the carrying amounts of available-for-sale monetary items are
          recognised as other comprehensive income and included in capital reserve.

          Foreign currency non-monetary items measured at historical cost are translated to the amounts in
          functional currency at the spot exchange rates on the dates of the transactions and the amounts in
          functional currency remain unchanged. Foreign currency non-monetary items measured at fair
          value are re-translated at the spot exchange rate on the date the fair value is determined.
          Difference between the re-translated functional currency amount and the original functional
          currency amount is treated as changes in fair value (including changes of exchange rate) and is
          recognised in profit and loss or as other comprehensive income included in capital reserve.

          8.2 Translation of financial statements denominated in foreign currencies

          For the purpose of preparing the consolidated financial statements, financial statements of a
          foreign operation are translated from the foreign currency into RMB using the following method:
          assets and liabilities on the balance sheet are translated at the spot exchange rate prevailing at the
          balance sheet date; shareholders' equity items except for retained earnings are translated at the
          spot exchange rates at the dates on which such items arose; all items in the income statement as
          well as items reflecting the distribution of profits are translated at the spot exchange rates on the
          dates of the transactions; the opening balance of retained earnings is the translated closing balance
          of the previous year's retained earnings; the closing balance of retained earnings is calculated and
          presented on the basis of each translated income statement and profit distribution item. The
          difference between the translated assets and the aggregate of liabilities and shareholders' equity
          items is separately presented as the exchange differences arising on translation of financial
          statements denominated in foreign currencies of other comprehensive income under the
          shareholders' equity in the balance sheet.

          Cash flows arising from a transaction in foreign currency and the cash flows of a foreign
          subsidiary are translated at the spot exchange rate on the date of the cash flows. The effect of
          exchange rate changes on cash and cash equivalents is regarded as a reconciling item and
          presented separately in the cash flow statement as "effect of exchange rate changes on cash and
          cash equivalents".

          The opening balances and the comparative figures of previous year are presented at the translated
          amounts in the previous year's financial statements.



                                                                                                                     93
                                                                Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
III.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
           - continued

9.     Financial instruments

          Financial assets and financial liabilities are recognised when the Group becomes a party to the
          contractual provisions of the instrument. Financial assets and financial liabilities are initially
          measured at fair value. For other financial assets and financial liabilities, transaction costs are
          included in their initial recognised amounts.

          9.1 Effective interest method

          The effective interest method is a method of calculating the amortised cost of a financial asset or a
          financial liability (or a group of financial assets or financial liabilities) and of allocating the
          interest income or interest expense over the relevant period, using the effective interest rate. The
          effective interest rate is the rate that exactly discounts estimated future cash flows through the
          expected life of the financial asset or financial liability or, where appropriate, a shorter period to
          the net carrying amount of the financial asset or financial liability.

          When calculating the effective interest rate, the Group estimates future cash flows considering all
          contractual terms of the financial asset or financial liability (without considering future credit
          losses), and also considers all fees paid or received between the parties to the contract giving rise
          to the financial asset and financial liability that are an integral part of the effective interest rate,
          transaction costs, and premiums or discounts, etc.

          9.2 Classification, recognition and measurement of financial assets

          On initial recognition, the Group's financial assets are classified into one of the four categories,
          including financial assets at fair value through profit or loss, held-to-maturity investments, loans
          and receivables, and available-for-sale financial assets. All regular way purchases or sales of
          financial assets are recognised and derecognised on a trade date basis. Financial assets of the
          Group are loans and receivables and available-for-sale financial assets.

          9.2.1 Loans and receivables

          Loans and receivables are non-derivative financial assets with fixed or determinable payments
          that are not quoted in an active market. Financial assets classified as loans and receivables by
          the Group include cash and bank, notes receivable, accounts receivable, interest receivable,
          dividends receivable, and other receivables.

          Loans and receivables are subsequently measured at amortised cost using the effective interest
          method. Gain or loss arising from derecognition, impairment or amortisation is recognised in
          profit or loss.

          9.2.2 Available-for-sale financial assets

         Available-for-sale financial assets include non-derivative financial assets that are designated on
         initial recognition as available for sale, and financial assets that are not classified as financial
         assets at fair value through profit or loss, loans and receivables or held-to-maturity investments.

         For investments in equity instruments that do not have a quoted market price in an active market and
         whose fair value cannot be reliably measured, they are measured at cost.




                                                                                                                       94
                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
        - continued

9.     Financial instruments - continued

       9.3 Impairment of financial assets

       The Group assesses at each balance sheet date the carrying amounts of financial assets other than
       those at fair value through profit or loss. If there is objective evidence that a financial asset is
       impaired, the Group determines the amount of any impairment loss. Objective evidence that a
       financial asset is impaired is evidence that, arising from one or more events that occurred after the
       initial recognition of the asset, the estimated future cash flows of the financial asset, which can be
       reliably measured, have been affected.

       Objective evidence that a financial asset is impaired includes the following observable events:

       (1)   Significant financial difficulty of the issuer or obligor;
       (2)   A breach of contract by the borrower, such as a default or delinquency in interest or
                principal payments;
       (3)   The Group, for economic or legal reasons relating to the borrower's financial difficulty,
                granting a concession to the borrower;
       (4)   It becoming probable that the borrower will enter bankruptcy or other financial
                reorganisations;
       (5)   The disappearance of an active market for that financial asset because of financial
                difficulties of the issuer;
       (6)   Upon an overall assessment of a group of financial assets, observable data indicates that
                there is a measurable decrease in the estimated future cash flows from the group of
                financial assets since the initial recognition of those assets, although the decrease cannot
                yet be identified with the individual financial assets in the group. Such observable data
                includes:
                - Adverse changes in the payment status of borrower in the group of assets;
                - Economic conditions in the country or region of the borrower which may lead to a
                        failure to pay the group of assets;
       (7)   Significant adverse changes in the technological, market, economic or legal environment in
                which the issuer operates, indicating that the cost of the investment in the equity
                instrument may not be recovered by the investor;
       (8)   A significant or prolonged decline in the fair value of an investment in an equity instrument
               below its cost;
       (9)   Other objective evidence indicating there is an impairment of a financial asset.




                                                                                                                  95
                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
        - continued

9.     Financial instruments - continued

       9.3 Impairment of financial assets - continued

       - Impairment of financial assets measured at amortised cost

       If financial assets carried at amortised cost are impaired, the carrying amounts of the financial
       assets are reduced to the present value of estimated future cash flows (excluding future credit
       losses that have not been incurred) discounted at the financial asset's original effective interest
       rate. The amount of reduction is recognised as an impairment loss in profit or loss. If,
       subsequent to the recognition of an impairment loss on financial assets carried at amortised cost,
       there is objective evidence of a recovery in value of the financial assets which can be related
       objectively to an event occurring after the impairment is recognised, the previously recognised
       impairment loss is reversed. However, the reversal is made to the extent that the carrying
       amount of the financial asset at the date the impairment is reversed does not exceed what the
       amortised cost would have been had the impairment not been recognised.

       For a financial asset that is individually significant, the Group assesses the asset individually for
       impairment. For a financial asset that is not individually significant, the Group assesses the asset
       individually for impairment or includes the asset in a group of financial assets with similar credit
       risk characteristics and collectively assesses them for impairment. If the Group determines that
       no objective evidence of impairment exists for an individually assessed financial asset (whether
       significant or not), it includes the asset in a group of financial assets with similar credit risk
       characteristics and collectively reassesses them for impairment. Assets for which an impairment
       loss is individually recognised are not included in a collective assessment of impairment.

       - Impairment of available for sale assets measured at cost

       If an impairment loss has been incurred on an investment in unquoted equity instrument (without
       a quoted price in an active market) whose fair value cannot be reliably measured, or on a
       derivative financial asset that is linked to and must be settled by delivery of such an unquoted
       equity instrument, the carrying amount of the financial asset is reduced to the present value of
       estimated future cash flows discounted at the current market rate of return for a similar financial
       asset. The amount of reduction is recognised as an impairment loss in profit or loss. The
       impairment loss on such financial asset is not reversed once it is recognised.




                                                                                                                  96
                                                            Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
        - continued

9.     Financial instruments - continued

       9.4 Transfer of financial assets

       The Group derecognises a financial asset if one of the following conditions is satisfied: (1) the
       contractual rights to the cash flows from the financial asset expire; or (2) the financial asset has
       been transferred and substantially all the risks and rewards of ownership of the financial asset is
       transferred to the transferee; or (3) although the financial asset has been transferred, the Group
       neither transfers nor retains substantially all the risks and rewards of ownership of the financial
       asset but has not retained control of the financial asset.

       For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, the
       difference between (1) the carrying amount of the financial asset transferred; and (2) the sum of
       the consideration received from the transfer and any cumulative gain or loss that has been
       recognised in other comprehensive income, is recognised in profit or loss.

       9.5 Classification, recognition and measurement of financial liabilities

       Debt and equity instruments issued by the Group are classified into financial liabilities or equity
       on the basis of the substance of the contractual arrangements and definitions of financial liability
       and equity instrument.

       On initial recognition, financial liabilities are classified into financial liabilities at fair value
       through profit or loss and other financial liabilities. The financial liabilities in group are other
       financial liabilities, including short-term borrowings, notes payables, account payables, interest
       payables, other payables and long-term borrowings etc.

       9.5.1 Other financial liabilities

       Other financial liabilities are subsequently measured at amortised cost using the effective interest
       method, with gain or loss arising from derecognition or amortisation recognised in profit or loss.

       9.6 Derecognition of financial liabilities

       The Group derecognises a financial liability (or part of it) only when the underlying present
       obligation (or part of it) is discharged. An agreement between the Group (an existing borrower)
       and an existing lender to replace the original financial liability with a new financial liability with
       substantially different terms is accounted for as an extinguishment of the original financial
       liability and the recognition of a new financial liability.

       When the Group derecognises a financial liability or a part of it, it recognises the difference
       between the carrying amount of the financial liability (or part of the financial liability)
       derecognised and the consideration paid (including any non-cash assets transferred or new
       financial liabilities assumed) in profit or loss.




                                                                                                                   97
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III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
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9.     Financial instruments - continued

       9.7 Offsetting financial assets and financial liabilities

       Where the Group has a legal right that is currently enforceable to set off the recognised financial
       assets and financial liabilities, and intends either to settle on a net basis, or to realise the financial
       asset and settle the financial liability simultaneously, a financial asset and a financial liability shall
       be offset and the net amount is presented in the balance sheet. Except for the above circumstances,
       financial assets and financial liabilities shall be presented separately in the balance sheet and shall
       not be offset.

       9.8 Equity instruments

       An equity instrument is any contract that evidences a residual interest in the assets of the Group
       after deducting all of its liabilities. The Group does not recognise any changes in the fair value of
       equity instruments. The equity instruments transaction expenses deducted from equity.

       The Group treats distribution to equity instrument holders as profit distributions. Shareholder
       equity is not affected by share dividend distributed.

10. Account Receivables

       10.1 Receivables that are individually significant and for which bad debt provision is individually
       assessed

       A receivable that exceeds RMB 3,000,000 is deemed as an individually significant receivable by
       the Group.

       For receivables that are individually significant, the Group assesses the receivables individually
       for impairment. For a financial asset that is not impaired individually, the Group includes the asset
       in a group of financial assets with similar credit risk characteristics and collectively assesses them
       for impairment. Receivables for which an impairment loss is individually recognised are not
       included in a collective assessment of impairment.

       10.2 Receivables that are not individually significant but for which bad debt provision is
       individually assessed

       For receivables that are not individually significant but for which bad debt provision is
       individually assessed, when objective evidence suggests that the Group cannot collect receivables
       in accordance with original clauses, the Group would recognize impairment loss and provide bad
       debts according to the difference between carrying amount and present value of future cash flows.




                                                                                                                    98
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III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
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11. Inventories

       11.1 Categories of inventories

       The Group's inventories mainly include raw materials, work in progress and finished goods.
       Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase,
       costs of conversion and other expenditures incurred in bringing the inventories to their present
       location and condition.

       11.2 Valuation method of inventories upon delivery

       The actual cost of inventories upon delivery is calculated using the weighted average method.

       Agricultural products harvested are reported in accordance with the CAS 1 Inventories.

       11.3 Basis for determining net realisable value of inventories and provision methods for decline in
       value of inventories

       At the balance sheet date, inventories are measured at the lower of cost and net realisable value.
       If the net realisable value is below the cost of inventories, a provision for decline in value of
       inventories is made. Net realisable value is the estimated selling price in the ordinary course of
       business less the estimated costs of completion, the estimated costs necessary to make the sale and
       relevant taxes. Net realisable value is determined on the basis of clear evidence obtained, and
       takes into consideration the purposes of holding inventories and effect of post balance sheet
       events.

       Provision for decline in value of other inventories is made based on the excess of cost of
       inventory over its net realisable value on an item-by-item basis.

       After the provision for decline in value of inventories is made, if the circumstances that
       previously caused inventories to be written down below cost no longer exist so that the net
       realisable value of inventories is higher than their cost, the original provision for decline in value
       is reversed and the reversal is included in profit or loss for the period.

       11.4 Inventory count system

       The perpetual inventory system is maintained for stock system.

       11.5 Amortisation method for low cost and short-lived consumable items and packaging materials

       Packaging materials and low cost and short-lived consumable items are amortised using the
       immediate write-off method.




                                                                                                                  99
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III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
        - continued

12. Long term equity investments

       12.1 Basis for determining control, joint control and significant influence

       Control is the power to govern the financial and operating policies of an entity so as to obtain
       benefits from its activities. Joint control is the contractually agreed sharing of control over an
       economic activity, and exists only when the strategic financial and operating policy decisions
       relating to the activity require the unanimous consent of the parties sharing control. Significant
       influence is the power to participate in the financial and operating policy decisions of the investee
       but is not control or joint control over those policies. When determining whether an investing
       enterprise is able to exercise control or significant influence over an investee, the effect of
       potential voting rights of the investee (for example, warrants and convertible debts) held by the
       investing enterprises or other parties that are currently exercisable or convertible shall be
       considered.

       12.2 Determination of initial investment cost

       For a long-term equity investment acquired not involving enterprises under common control, the
       investment cost of the long-term equity investment is the cost of acquisition.

       Audit fee, legal services, consulting fees and other related management costs in acquisition are
       expensed in profits and losses when happened.

       Other long-term equity investments acquired from other than acquisitions are recognised using
       original cost.

       12.3 Subsequent measurement and recognition of profit or loss

       12.3.1 Long-term equity investment accounted for using the cost method

       The Group accounts for long-term equity investment using the cost method.              A subsidiary is an
       investee that is controlled by the Group.

       Under the cost method, a long-term equity investment is measured at initial investment cost.
       Long-term equity investment is adjusted when capital is added or recollected. Investment income
       is recognised in the period in accordance with the attributable share of cash dividends or profit
       distributions declared by the investee.

       12.4 Disposal of long-term equity investments

       On disposal of a long term equity investment, the difference between the proceeds actually
       received and receivable and the carrying amount is recognised in profit or loss for the period.




                                                                                                                 100
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III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
        - continued

13. Fixed assets

       13.1 Recognition criteria for fixed assets

       Fixed assets are tangible assets that are held for use in the production or supply of goods or
       services, for rental to others, or for administrative purposes, and have useful lives of more than
       one accounting year. A fixed asset is recognised only when it is probable that economic benefits
       associated with the asset will flow to the Group and the cost of the asset can be measured reliably.
       Fixed assets are initially measured at cost.

       Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and
       if it is probable that economic benefits associated with the asset will flow to the Group and the
       subsequent expenditures can be measured reliably. Meanwhile the carrying amount of the
       replaced part is derecognised. Other subsequent expenditures are recognised in profit or loss in
       the period in which they are incurred.

       13.2 Depreciation of each category of fixed assets

       A fixed asset is depreciated over its useful life using the straight-line method since the month
       subsequent to the one in which it is ready for intended use. The useful life, estimated net
       residual value rate and annual depreciation rate of each category of fixed assets are as follows:

                                                Estimated                  Estimated                   Annual
                                                useful life               residual rate            depreciation rate

       Buildings                               20-40years                     0-5%                      2.4%-5.0%
       Machinery                               10-20years                     0-5%                     4.8%-10.0%
       Motor Vehicles                           4-12years                     0-5%                     7.9%-25.0%

       Estimated net residual value assumes the situation where a fixed asset expire for its estimated
       useful life and is in its expected final status. Estimated net residual value is the amount that the
       Group can obtain from the disposal less expected disposal fees.

       13.3 Other explanations

       If a fixed asset is upon disposal or no future economic benefits are expected to be generated from
       its use or disposal, the fixed asset is derecognised. When a fixed asset is sold, transferred, retired
       or damaged, the amount of any proceeds on disposal of the asset net of the carrying amount and
       related taxes is recognised in profit or loss for the period.

       The Group reviews the useful life and estimated net residual value of a fixed asset and the
       depreciation method applied at least once at each financial year-end, and account for any change
       as a change in an accounting estimate.

14. Construction in progress

       Construction in progress is measured at its actual costs.          The actual costs include various
       construction expenditures during the construction period, borrowing costs capitalised before it is
       ready for intended use and other relevant costs. Construction in progress is not depreciated.
       Construction in progress is transferred to a fixed asset when it is ready for intended use.


                                                                                                                    101
                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
        - continued

15. Borrowing costs

       Borrowing costs directly attributable to the acquisition, construction or production of qualifying
       asset are capitalised when expenditures for such asset and borrowing costs are incurred and
       activities relating to the acquisition, construction or production of the asset that are necessary to
       prepare the asset for its intended use or sale have commenced. Capitalisation of borrowing costs
       ceases when the qualifying asset being acquired, constructed or produced becomes ready for its
       intended use or sale. Capitalisation of borrowing costs is suspended during periods in which the
       acquisition, construction or production of a qualifying asset is suspended abnormally and when
       the suspension is for a continuous period of more than 3 months. Capitalisation is suspended
       until the acquisition, construction or production of the asset is resumed. Other borrowing costs
       are recognised as an expense in the period in which they are incurred.

16. Biological assets

       The biological assets of the Group are bearer biological assets.

       16.1 Bearer biological assets

       Bearer biological assets are biological assets, for example, held for the production of agricultural
       produce, provision of services or rental, Bearer biological assets in the Group are vines. A bearer
       biological asset is initially measured at cost. The cost of a bearer biological asset self-grown or
       self-bred comprises those costs necessarily incurred and directly attributable to the asset before
       the asset becomes available for its intended production and operating purposes, and any
       borrowing cost meeting the capitalisation criteria.

       The Group charge deprecation for productive biological assets which satisfy expected production,
       and record the deprecation in balance sheet and income statement. The Group uses straight line
       method to calculate the deprecation, and details as follows:

                                               Estimated                  Estimated                   Annual
       Category                                useful life               residual rate            depreciation rate

       Vines                                    20 years                        -                         5%

       The Group evaluates the useful life and expected net salvage value by considering the normal
       producing life of the bearer biologial assets.

       The Group reviews the useful life and estimated net residual value of bearer biological assets and
       the depreciation method applied at least once at each financial year-end, and account for any
       change as a change in an accounting estimate.

       On the sale, identification of any shortages during stocktaking, death or damage of biological
       asset, the proceeds on disposal net of the carrying amount and relevant taxes is recognised in
       profit or loss for the current period.




                                                                                                                   102
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III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
        - continued

17. Intangible assets

       17.1 Intangible assets

       Intangible assets include land use rights, software, etc.

       An intangible asset is measured initially at cost. When an intangible asset with a finite useful
       life is available for use, its original cost less net residual value and any accumulated impairment
       losses is amortised over its estimated useful life using the straight-line method. An intangible
       asset with an indefinite useful life is not amortised. The useful lives of the intangible assets are as
       follows:
                                                                                             Annual
       Item                               Useful life         Net residual value        amortization rate

       Land use rights                  40-50 years                   -                           2-2.5%
       Software                          5-10 years                   -                           10-20%

       For an intangible asset with a finite useful life, the Group reviews the useful life and amortisation
       method at the end of the period, and makes adjustments when necessary.

18. Impairment of long-term assets

       The Group and the Company review the impairment status of long-term equity investments, fixed
       assets, construction in progress, bearer biological asset and intangible assets with finite useful life
       at the end of each year. If the assets exist impairment, the Group estimates the recoverable amount
       of the assets. An intangible asset with an indefinite useful life and intangible assets not yet
       available for use are tested for impairment annually, irrespective of whether there is any
       indication that the assets may be impaired.

       Recoverable amount is estimated on individual basis. If it is not practical to estimate the
       recoverable amount of an individual asset, the recoverable amount of the asset group to which the
       asset belongs will be estimated. The recoverable amount of an asset is the higher of its fair value
       less costs of disposal and the present value of the future cash flows expected to be derived from
       the asset.

       If recoverable amount of assets is less than book value, the difference is recognised as impairment
       provision and expensed in current period.

       Goodwill is tested for impairment at least at the end of each year. For the purpose of impairment
       testing, goodwill is considered together with the related assets group (s), i.e., goodwill is
       reasonably allocated to the related assets group (s) or each of assets group (s) expected to benefit
       from the synergies of the combination. An impairment loss is recognised if the recoverable
       amount of the assets group or sets of assets groups (including goodwill) is less than its carrying
       amount. The impairment loss is firstly allocated to reduce the carrying amount of any goodwill
       allocated to such assets group or sets of assets groups, and then to the other assets of the group
       pro-rata on the basis of the carrying amount of each asset (other than goodwill) in the group.

       The impairment is recognised in profit or loss for the period in which it is incurred and will not be
       reversed in any subsequent period.



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III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
        - continued

19. Long term prepaid expenses

       Long-term prepaid expenses represent expenses incurred that should be borne and amortised over
       the current and subsequent periods (together of more than one year).          Long-term prepaid
       expenses are amortised using the straight-line method over the expected periods in which benefits
       are derived.

       Long term prepaid expenses of the Group are amortized over the following period:

                                                                                           Amortization period

       Land requisition fee                                                                              50 years
       Land lease prepayment                                                                             50 years
       Greening fee                                                                                       5 years
       Leasehold improvement                                                                             3-5years
       Others                                                                                             3 years

20. Employee benefits

       20.1 Short-term employee benefits

       In an accounting period in which an employee has rendered service to the Group, the Group
       recognises the actual employee benefits for that service as a liability. The employee benefits of
       the Group are either included in cost of related assets or charged to profit or loss in the period
       when they are incurred. Non-monetary employee benefits are measured at fair value.

       Social insurances such as medical insurance, injury insurance and pregnancy insurance, housing
       funds, labor union and employee education fees paid by the Group for employees, are recognised
       as relevant liability in the period in which the employees provide service, in accordance with the
       regulated recognition basis and percentage. The related expenditures are either included in cost of
       related assets or charged to profit or loss in the period when they are incurred.

       20.2 Accounting treatments of retired benefits

       Retired benefits of the Group are all predetermined provision plan.

       In the period in which the employees provide service, the Group recognise liability in accordance
       with the amounts to be paid calculated according to the predetermined provision plan, and the
       related expenditures are either included in cost of related assets or charged to profit or loss in the
       period when they are incurred.

       20.3 Accounting treatments of termination benefits

       When providing termination benefits to employees, the Group recognise employee benefits
       payroll resulting from termination benefits at the earlier of: the Group cannot unilaterally
       withdraw from the termination plan or the redundancy offer; the Group recognise relevant costs
       and expenses related to the payment of termination benefits in reconstructuring.




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III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
        - continued

21. Revenue

       21.1 Revenue from sale of goods

       Revenue from sale of goods is recognised when the Group has transferred to the buyer the
       significant risks and rewards of ownership of the goods. The Group retains neither continuing
       managerial involvement to the degree usually associated with ownership nor effective control
       over the goods sold. The amount of revenue can be measured reliably and it is probable that the
       associated economic benefits will flow to the Group. The associated costs incurred or to be
       incurred can be measured reliably.

       21.2 Revenue from rendering of services

       When the outcome of a transaction involving the rendering of services can be estimated reliably,
       revenue associated with the transaction shall be recognized by reference the stage of completion
       of the transaction at the reporting date. The outcome of a transaction can be estimated reliably.

       When the outcome of the transaction involving the rendering of services cannot be estimated
       reliably, revenue is recognised only to the extent of the costs incurred that will be recoverable,
       and the costs incurred are recognised as expenses for the period. When it is not probable that the
       costs incurred will be recovered, revenue is not recognised.

22. Government grants

       Government grants are transfer of monetary assets and non-monetary assets from the government
       to the Group at no consideration. The income is accounted for as either a government grant related
       to an asset or a government grant related to income based on its nature.

       A government grant is recognised only when the Group can comply with the conditions attaching
       to the grant and the Group will receive the grant. Monetary government grants are measured by
       the amount received or receivable.

       22.1 Government grant related to an asset

       A government grant related to an asset is recognised as deferred income, and evenly amortised to
       profit or loss over the useful life of the related asset.

       22.2 Government grant related to income

       For a government grant related to income, if the grant is a compensation for related expenses or
       losses to be incurred in subsequent periods, the grant is recognised as deferred income, and
       recognised in profit or loss over the periods in which the related costs are recognised. If the grant
       is a compensation for related expenses or losses already incurred, the grant is recognised
       immediately in profit or loss for the period.




                                                                                                                 105
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III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
        - continued

23. Deferred tax assets/deferred tax liabilities

       The income tax expenses include current income tax and deferred income tax.

       23.1 Current income tax

       At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods
       are measured at the amount expected to be paid (or recovered) according to the requirements of
       tax laws.

       23.2 Deferred tax assets and deferred tax liabilities

       For temporary differences between the carrying amounts of certain assets or liabilities and their
       tax base, or between the nil carrying amount of those items that are not recognised as assets or
       liabilities and their tax base that can be determined according to tax laws, deferred tax assets and
       liabilities are recognised using the balance sheet liability method.

       Deferred tax is generally recognised for all temporary differences. Deferred tax assets for
       deductible temporary differences are recognised to the extent that it is probable that taxable
       profits will be available against which the deductible temporary differences can be utilised.
       However, for temporary differences associated with the initial recognition of goodwill and the
       initial recognition of an asset or liability arising from a transaction (not a business combination)
       that affects neither the accounting profit nor taxable profits (or deductible losses) at the time of
       transaction, no deferred tax asset or liability is recognised.

       For deductible losses and tax credits that can be carried forward, deferred tax assets are
       recognised to the extent that it is probable that future taxable profits will be available against
       which the deductible losses and tax credits can be utilised.

       Deferred tax liabilities are recognised for taxable temporary differences associated with
       investments in subsidiaries and associates, and interests in joint ventures, except where the Group
       is able to control the timing of the reversal of the temporary difference and it is probable that the
       temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from
       deductible temporary differences associated with such investments and interests are only
       recognised to the extent that it is probable that there will be taxable profits against which to utilise
       the benefits of the temporary differences and they are expected to reverse in the foreseeable
       future.

       At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates,
       according to tax laws, that are expected to apply in the period in which the asset is realised or the
       liability is settled.




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III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
        - continued

23. Deferred tax assets/ deferred tax liabilities - continued

       23.2 Deferred tax assets and deferred tax liabilities - continued

       Current and deferred tax expenses or income are recognised in profit or loss for the period, except
       when they arise from transactions or events that are directly recognised in other comprehensive
       income or in shareholders' equity, in which case they are recognised in other comprehensive
       income or in shareholders' equity; and when they arise from business combinations, in which case
       they adjust the carrying amount of goodwill.

       At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it
       is no longer probable that sufficient taxable profits will be available in the future to allow the
       benefit of deferred tax assets to be utilised. Such reduction in amount is reversed when it
       becomes probable that sufficient taxable profits will be available.

       23.3 Net off of income taxes

       When the Group has a legal right to settle on a net basis and intends either to settle on a net basis
       or to realise the assets and settle the liabilities simultaneously, current tax assets and current tax
       liabilities are offset and presented on a net basis.

       When the Group has a legal right to settle current tax assets and liabilities on a net basis, and
       deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation
       authority on either the same taxable entity or different taxable entities which intend either to settle
       current tax assets and liabilities on a net basis or to realise the assets and liabilities simultaneously,
       in each future period in which significant amounts of deferred tax assets or liabilities are expected to
       be reversed, deferred tax assets and deferred tax liabilities are offset and presented on a net basis.

24. Leases

       Leases are classified as finance leases whenever the terms of the lease transfer substantially all the
       risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

       24.1 Operating leases

       24.1.1 The Group as lessee under operating leases

       Operating lease payments are recognised on a straight-line basis over the term of the relevant
       lease, and are either included in the cost of related asset or charged to profit or loss for the period.
       Initial direct costs incurred are charged to profit or loss for the period. Contingent rents are
       charged to profit or loss in the period in which they are actually incurred.




                                                                                                                   107
                                                          Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
        - continued

25. Other significant accounting policies, accounting estimates and preparation of financial statements

       From 1 July 2014, the Group has adopted a series of new accounting standards issued by The
       Ministry of Finance, including Accounting Standard for Business Enterprises No.39-Fair value
       measurement, Accounting Standard for Business Enterprises No.40-Joint Arrangements,
       Accounting Standard for Business Enterprises No.41-Disclosure of interests in other entities,
       Accounting Standard for Business Enterprises No.2-Long-term equity investment, Accounting
       Standard for Business Enterprises No.9-Employee benefit, Accounting Standard for Business
       Enterprises No.30- Presentation of financial statement, Accounting Standard for Business
       Enterprises No.33-Consolidated Financial Statements Accounting Standard for Business
       Enterprises No.37-Financial instrument disclosures.These changes in accounting policies were
       approved in the No.8meeting by the No.6 board of directors of the Company.

       Long-term equity investment

       Before adopting Accounting Standard for Business Enterprises No.2-Long-term equity investment
       (Revised), the Group treated as long-term investment for investment with neither control nor
       significant influence to investee, no quoted market price in an active market and whose fair value
       cannot be reliably measured at cost.

       After adopting Accounting Standard for Business Enterprises No.2-Long-term equity investment
       (Revised), the Group treated as available-for-sale financial assets for the investment with neither
       control nor significant influence to investee, no quoted market price in an active market and
       whose fair value cannot be reliably. The Group undertakes retrospective adjustments for the
       changes in accounting policy, resulting the change from long-term equity investment to as
       available-for-sale financial assets for investment with neither control nor significant influence to
       investee, no quoted market price in an active market and whose fair value cannot be reliably. As
       full bad debts provision has been made for the asset on 31 December 2013, the amount in blance
       sheet is not affected.

       Employee benefit

       Before adopting Accounting Standard for Business Enterprises No.9-Employee benefit (Revised),
       for retired benefits, when the Group terminates employment relationship with employees before
       the expiry of the employment contracts or provides compensation as an offer to encourage
       employees to accept voluntary redundancy, if the Group has a formal plan for termination of
       employment relationship or has made an offer for voluntary redundancy which will be
       implemented immediately, and the Group cannot unilaterally withdraw from the termination plan
       or the redundancy offer, a provision for the compensation payable arising from the termination of
       employment relationship with employees is recognised with a corresponding charge to the profit
       or loss for the period.

       After adopting Accounting Standard for Business Enterprises No.9-Employee benefit (Revised),
       please see Notes III 20(3)-Accounting treatments for retired benefits for its accounting policies.
       Management of the Group believes that adopting the accounting standard does not have a material
       impact on the financial statements.




                                                                                                                108
                                                            Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
        - continued

25.    Other significant accounting policies, accounting estimates and preparation of financial statements
        - continued

       Joint Arrangements

       Accounting Standard for Business Enterprises No.40-Joint Arrangement classifies joint
       arrangements as joint operations and joint ventures. An entity determines the type of joint
       arrangement in which it is involved by considering its rights and obligations. An entity assesses its
       rights and obligations by considering the structure and legal form of the arrangement, the
       contractual terms agreed to by the parties to the arrangement. A joint operation is a joint
       arrangement whereby the parties that have joint control of the arrangement have rights to the assets,
       and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement
       whereby the parties that have joint control of the arrangement have rights to the net assets of the
       arrangement. Management of the Group believes that adopting the accounting standard does not
       have a material impact on the financial statements.

       Consolidated Financial Statements

       Accounting Standard for Business Enterprises No.33-Consolidated Financial Statements (Revised)
       has revised the definition of control, the "control" is defined as "investor owns the power to
       investee, earns changeable return through participating relevant activities of the investee, has the
       power to affect the changeable return through utilizing the power to the investee and makes
       explicit accounting rules about the special transaction. Management of the Group believes that
       adopting the accounting standard does not have a material impact on the financial statements.

       Financial instrument disclosures

       Accounting Standard for Business Enterprises No.37-Financial instrument disclosures (Revised)
       adds rules relating to offset and disclosure requirements, adds disclosure requirements about
       financial asset transfer and modifies disclosure requirements about the maturity of financial assets
       and liabilities. This financial statement has been prepared in accordance with the standard, and
       with comparable annual financial statements disclosure adjusted accordingly.

       Presentation of financial statement

       Accounting Standard for Business Enterprises No.30- Presentation of financial statement (Revised)
       separates other comprehensive income into following two categories: (1) Other comprehensive
       income items which will not be reclassified subsequently to profit or loss; (2) Other
       comprehensive income items which will be reclassified subsequently to profit or loss when
       specific conditions are met. This financial statement has been prepared in accordance with the
       standard, and with comparable annual financial statements disclosure adjusted accordingly.




                                                                                                                  109
                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
        - continued

25.    Other significant accounting policies, accounting estimates and preparation of financial statements
        - continued

       Fair value measurement

       Accounting Standard for Business Enterprises No.39-Fair value measurement regulates
       measurement and disclosure of fair value. Adopting the standard does not have a significant impact
       on measurement of financial statement items, but will lead to more extensive disclosures on fair
       value by the Group. This financial statement has been prepared in accordance with the standard.

       Disclosure of interests in other entities

       Accounting Standard for Business Enterprises No.41-Disclosure of interests in other entities
       applies to the disclosure of an enterprise's interest in subsidiaries, joint arrangements, associates
       and unconsolidated structured entities. Adopting the standard will lead to more extensive
       disclosures on financial statements by the Group. This financial statement has been prepared in
       accordance with the standard, and with comparable annual financial statements disclosure adjusted
       accordingly.


IV. CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES                                               AND      KEY
      ASSUMPTIONS AND UNCERTAINTIES IN ACCOUNTING ESTIMATES

       In the application of accounting policies as set out in Note III, the Group is required to make
       judgments, estimates and assumptions about the carrying amounts of items in the financial
       statements that cannot be measured accurately, due to the internal uncertainties of the operating
       activities. These judgments, estimates and assumptions are based on historical experience of the
       Group's management as well as other factors that are considered to be relevant. Actual results
       may differ from these estimates.

       The Group periodically review the judgments, estimates and assumptions above on a going
       concern basis.      For those changes in accounting policies that only affect current financial
       statements, the influences are recognized in current period. For those changes in accounting
       policies that affect both current and future financial statements, the influences are recognized in
       both current and prospective periods.

       Significant accounting judgments and accounting estimates

       The following are key assumptions for after balance sheet date event and other factors of
       uncertain estimation. They may cause material adjustment on balance sheet in following
       accounting period.

       Deferred tax assets

       Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that
       taxable profit will be available against which the losses can be utilized. Significant management
       judgment is required to determine the amount of deferred tax assets that can be recognized, based
       upon the likely timing and level of future taxable profits together with future tax planning
       strategies.



                                                                                                                 110
                                                          Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
IV.   CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES AND KEY
      ASSUMPTIONS AND UNCERTAINTIES IN ACCOUNTING ESTIMATES - continued

      Significant accounting judgments and accounting estimates - continued

      Depreciation

      As set out in Note III-13, the depreciation is calculated on the straight line basis to write-off the
      cost of each item of fixed assets to its residual value over its estimated useful life. The Group's
      management determines the estimated useful lives for its fixed assets. This estimate is based on
      the historical experience of the actual useful lives of fixed assets of similar nature and functions.
      If the previous estimates have significant changes, and depreciation expenses will be adjusted in
      the future periods.

      Useful life of intangible assets

      The estimated useful lives of the intangible assets are determined based on the historical
      experience of the actual useful lives of intangible assets of similar nature and functions as well as
      considering the contractual rights and statutory rights applicable to the intangible assets.

      When the estimated useful lives of finite intangible assets are shortened or extended, the
      amortization periods should be adjusted accordingly. When there is evidence indicating the
      useful lives of intangible assets with indefinite useful lives becomes finite, the useful lives should
      be estimated and the intangible assets should be accounted for in accordance with the standards
      for the intangible assets with finite useful lives.

      Impairment of non-current assets

      The Group assesses whether the recoverable amount is lower than the book value. If there are
      any indicators that the book value of non-current assets cannot be fully recoverable, impairment
      losses should be recorded.

      The recoverable amount is the higher of an asset's fair value less costs to sell and the present value
      of the future cash flows expected to be derived from an asset. As it is difficult for the Group to
      obtain the quoted market price of the assets (or assts group), the fair value of the assets cannot be
      reliably estimated. When the management make estimation on the expected future cash flows
      from the asset or cash generating unit, estimates should be made on choosing a suitable
      production volume, selling price and related operating costs discount rate in order to calculate the
      present value of those cash flows. When recoverable amounts are undertaken, management may
      use all available for use information, including the forecast on production volume, selling price
      and related operating costs in reasonable and supportable assumptions.

      Estimated provision for accounts receivable

      A provision for impairment of trade receivables is established when there is objective evidence
      that the Group will not be able to collect all amounts due according to the original terms of
      receivables. Significant financial difficulties of the debtor, probability that the debtor will enter
      bankruptcy are considered indicators that the trade receivable is impaired. The provision is
      reassessed at the end of each year.




                                                                                                                111
                                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
IV.       CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES AND KEY
          ASSUMPTIONS AND UNCERTAINTIES IN ACCOUNTING ESTIMATES - continued

          Significant accounting judgments and accounting estimates - continued

          Inventory provision based on net realizable value

          The inventory are measured on the lower of carrying value and net realizable value, and provision
          should be made for impairment on obsolete and slow moving inventories. The group will
          reassess whether the net realizable value is lower than the carrying cost at the end of each year.


V. TAXES

1.    The main taxes and tax rate are as follows:

          Value added tax                           VAT is levied at 17% on the invoiced amount after deduction
                                                     of eligible input VAT.
          Consumption tax                           The consumption tax of the group is levied on gross revenue
                                                     at rates ranging from 10% to 20%.
          Business tax                              The Group is subject to a business tax of 5% on its taxable revenue.
          City development tax                      Levied at 7% of total business tax payment.
          Corporate income tax                      The Group is subject to a corporate income tax rate of 25% or 33%
                                                     on its taxable income.

          Other than tax incentives stated in Notes-V (2), applicable tax rates of the Group in 2014 and
          2013 are all stated as above.

2.    Tax incentives and relative permit


          Ningxia Changyu Grape Growing Co., Ltd.("Ningxia Growing"), a subsidiary of the Group,
          whose principal activity is grape growing is incorporated in Ningxia Huizu Autonomous Region.
          According to clause 27 of PRC Corporate Income Tax and clause 86 of PRC Corporate Income
          Tax Measures for Implementation, Ningxia Changyu Grape Growing Co., Ltd. enjoys an
          exemption of corporate income tax.

          A subsidiary of the Company, Xinjiang Tianzhu Co., Ltd ("Xinjiang Tianzhu") which is a wine
          production enterprise incorporated in Xinjiang Weizu Autonomous. In accordance with (Caishui
          [2011] No.60) and (Xinzhengfa [2010] No.105), which is from 2012 to 2016, the company enjoys
          a favorable corporate income tax rate of 15% besides the exemption of corporate income tax
          which belongs to local government. The corporate income tax applicable for current year is 9%.

          A subsidiary of the Company, Xinjiang Babao Baron Chateau Co., Ltd. ("Shihezi Chateau")
          which is a wine production enterprise incorporated in Xinjiang Weizu Autonomous.            In
          accordance with (Caishui [2011] No.60) and (Xinzhengfa [2010] No.105), which is from 2011 to
          2015, the company enjoys a favorable corporate income tax rate of 15% besides the exemption of
          corporate income tax which belongs to local government. The corporate income tax applicable
          for current year is 9%.




                                                                                                                               112
                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2014 Annual Report.
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Cash and bank

                                                                   Closing balance          Opening balance
                                                                        RMB                     RMB

       Cash                                                                101,660                  772,817
       Bank balance                                                  1,010,259,393            1,235,788,080
       Other currency fund                                             135,004,018
                                                                    ____________                131,257,285
                                                                                             ____________
       Total                                                        1,145,365,071            1,367,818,182
                                                                    ____________             ____________

       As at 31 December 2014, the balance of restricted cash of the Group is RMB 2,643,519 (31
       December 2013: RMB 2,609,237), which is the Group's housing fund.

       As at 31 December 2014, the Group's other monetary assets include security of RMB125,000,000
       018 (31 December 2013: RMB125,000,000)s pledged for a short-term borrowing from HSBC of
       HKD152,000,000 (translated as RMB119,912,800), refundable deposit for notes payable of Shi
       He Zi Chateau of RMB10,000,000 (31 December 2013: RMB 5,965,996)and company cards
       deposit guarantee of RMB4,018 (31 December 2013: RMB 291,289).

       As at 31 December 2014, the Group's overseas cash and bank deposit is RMB 43,746,008 (31
       December 2013: RMB 13,104,666).

       As at 31 December 2014, The Group's term deposits with original maturity of more than three
       months when acquired is RMB 47,245,260 (31 December 2013: RMB 277,392,728) with interest
       rates ranging from 3.25%-4.13%, which will mature from 3 months to 1 year.


2. Notes receivable

(1) Categories of notes receivable

                                                                   Closing balance          Opening balance
                                                                        RMB                     RMB

       Bank acceptances                                     &