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个股公告正文

张 裕B:2016年年度报告(英文版)

日期:2017-04-22附件下载

                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report




Yantai Changyu Pioneer Wine Co. Ltd.

         2016 Annual Report



              2016 Final 01




             April, 2017




                                                                       1
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report


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

II、Brief Introduction for the Company and Main Financial Indicators .................................. 5

III、Summary of the Company’s Businesses .............................................................................. 10

IV、Management Discussion and Analysis ................................................................................. 13

V、Major issues ............................................................................................................................. 34

VI、Changes in Shares and the Shareholders’ Situation ...........................................................50

VII、Related Situation of Preferred Shares ................................................................................59

VIII、 Situation for Directors, Supervisors, Senior Management and Staffs...........................60

IX、 Corporate Governance ........................................................................................................ 73

X、 Related Situation of Corporation Bonds ............................................................................. 83

XI、Financial Report.......................................................................................................................84

XII、Reference Document .......................................................................................................... 185




                                                                                                                                     2
                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report


               I. Important Notice, Contents 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.

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.

All directors personally attended the meeting for deliberating the annual report.

About significant risks that may be faced in production and operation process, please refer
to“5. Risks likely to occur” part of “9.Expectation for the Company’s Future Development”
in chapter four “Management Discussion and Analysis” of this report. We advise investors to
read carefully and pay attention to the investment risks.

The business plan and target in the report do not represent the earnings forecast of the listed
company to 2017. Whether the Company could achieve that or not depends on several factors
including the changes of market conditions and the effort extent of managing team etc. with a
great uncertainty, so the investors should be in a special attention.

The Company’s preliminary scheme of profit distribution deliberated and passed by the
Board of Directors is shown as following:“Based on the Companys’ total 685,464,000 shares,
we plan to pay CNY5 (including tax) in cash as dividends for every 10 shares to all
shareholders and to send 0 bonus share (including tax) and capital reserve will not be
transferred to equity. ”




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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




II. Brief Introduction for the Company and Main Financial Indicators
                                                                                        4
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
1. Company’s information

                                                            Code number of the
Abbreviation of the Shares:      Changyu A、Changyu B                          000869、200869
                                                            Shares
Abbreviation of the Shares
                                 _
after alteration (if have)
Place of listing of the Shares   Shenzhen Stock Exchange
Legal Name in Chinese            烟台张裕葡萄酿酒股份有限公司
Abbreviation of Chinese
                                 张裕
name
Legal Name in English (if
                                 YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
have)
Abbreviation of English name
                                 CHANGYU
(if have)
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 the
                                             Directors                   Securities Affairs
Name                             Mr. Qu Weimin                   Mr. Li Tingguo
                                 56 Dama Road, Yantai, Shandong, 56 Dama Road, Yantai,
Address
                                 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

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

Organization Code             913700002671000358
                                                                                                          5
                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                            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 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 winemaking
                            machines; licensed import and export.”

                        On 12th May 2010, after the deliberation of 2009 shareholders’
Changes for the main meeting, the Company revised its operating scope to “the Company,
                                            is in                                      and sales
business of the Company legally registered, liquor,business of production, processingnon-alcohol
                        of wine, distilled           medicated liquor, fruit liquor,
since it was listed     beverages, fruit jam, packing materials and its products, winemaking
                        machines; licensed import and export; external investments according
(if have)               to governmental policies. ”

                            On 23rd September 2016, after the deliberation of 2016annual 1st
                            Interim shareholders’ meeting, the Company revised its operating
                            scope to “wine and fruit wine (bulk wine, processing and filling)
                            production; blending liquor and other blending liquors (grape wine)
                            production; other liquors (other distilling liquors) production;
                            production, processing and sales of package materials and
                            winemaking machines; grape plantation and procurement; tourism
                            resources development (excluding tourism); package design; activity
                            of building rental; licensed import and export; warehouse business;
                            external investments according to governmental policies. ”

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

5. Other documents

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

6. 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.

                                                                                                       6
                                                       Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
□Yes    No


                                                               More or less
Item                     2016               2015               than          2014
                                                               Last year (%)
Business revenue              4,717,596,472      4,649,722,368         1.46%      4,156,727,525
Net profit attributed
to the shareholders
                                982,460,488             1,030,073,860              -4.62%               977,707,711
of      the     listed
company
Net profit attributed
to the shareholders
of      the     listed
company          after          941,730,478              993,268,823               -5.19%               950,191,379
deducting          the
irregular profit and
loss
Net cash flows
from the operating              889,911,970             1,143,046,367            -22.15%              1,070,083,296
activities
Basic earnings per
                                          1.43                       1.5           -4.67%                            1.43
share
Diluted     earnings
                                          1.43                       1.5           -4.67%                            1.43
per share
Weighted average
for earning rate of                  12.55%                    14.40%              -1.85%                        13.96%
the net assets
                                                                           More or less
Item                     Dec. 31st 2016          Dec. 31st 2015            than          Dec. 31st 2014
                                                                           Last year (%)
Total assets                 11,528,077,971           10,344,211,461              11.44%              8,912,232,640
Net          Assets
attributed to the
                              8,209,010,989             7,564,099,003               8.53%             6,840,452,145
shareholders of the
listed company


7. Differences in accounting data under PRC accounting standards and international
accounting standards
(1) Differences of net profit and net asset in the financial report disclosed according to
both international accounting standards and PRC accounting standards
□Available      Not available


                                                                                                                 7
                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
  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 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.


  8. Key financial indicators by quarter
                                                                               Unit:CNY
                            1 Quarter
                             st
                                             2 Quarter
                                                  nd
                                                             3 Quarter    rd
                                                                             4 Quarter           th

Business revenue               1,882,230,620     870,802,179   1,010,732,839    953,830,834
Net profit attributed to
the shareholders of the         542,806,719         152,215,128        129,748,790      157,689,851
listed company
Net profit attributed to
the shareholders of the
listed company after            538,762,161         139,716,160        123,011,178      140,240,980
deducting the irregular
profit and loss
Net cash flows from the
                                605,256,456          77,491,913        308,317,385     -101,153,784
operating activities
   Whether there are differences between the above mentioned financial indicators or their sum
   and the related financial indicators in the quarterly reports and semi-annual reports disclosed
   by the Company.
  □Yes     No


  9. Item and amount of irregular profit and loss
  V Available □Not available
                                                                                                 Unit:CNY
Item                                     2016            2015                  2014            Explanation
Gain on disposal of non-current
assets, including the reversal of               14,719           136,061          -5,086,545 -
accrued impairment provision
Tax refund or exemption that is either
non-recurring or without proper                                                   13,405,520 -
approval




                                                                                                                   8
                                                          Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report

Government grants credited in profit
and loss (except for those recurring
government grants that are closely
                                             49,130,643       38,952,919          27,140,194 -
related to the entity's operation, in line
with related regulations and have
proper basis of calculation)
Reversal of impairment loss for
receivables which was separately                                                     192,908 -
undertaken impairment test
Other non-operating income and
non-operating expenses except the             4,656,971        9,071,448             166,987 -
aforementioned items
Less. Income tax effect                      13,072,324       11,355,391           8,302,732 -
Total                                        40,730,009       36,805,037          27,516,332              --

   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 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.




                                                                                                                    9
                                                                                                      Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report



                                          III. Summary of the Company’s Businesses

1. Main businesses during the report period
Whether the Company need to follow the disclosure requirement of special business?
No.

During the report period, the Company’s main business is to produce and operate wine and brandy, thus providing the domestic and foreign
consumers with healthy and fashionable alcoholic drinks. Compared with earlier stage, there are no significant changes happened to the
Company’s main businesses. The wine industry that the Company involved in is still in the growth stage, the whole domestic wine market is on
the rising trend. The Company takes the dominant position in the domestic wine market.

2. Significant changes of main assets

(1) Significant changes of main assets

          Main assets                            Explanation of significant changes
          Equity asset           No significant changes
                                 The book value of fixed assets increases by 51.60% compared
          Fixed asset            with the beginning of the year, owing that parts of construction
                                 projects have transferred to fixed asset during the report period.
        Intangible asset         No significant changes
                                 The book value of construction projects decreases by 32.89%
                                 compared with the beginning of the year, owing to parts of
    Construction in process
                                 construction projects have transferred to fixed asset during the
                                 report period.


                                                                                                                                                            10
                                                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
(2) Main overseas assets condition

Available      □Not available
                                                                                                                               Unit:CNY
Details     Formation     Assets scale   Location   Operation mode    Control measures   Earning    The proportion of     Whether there
of assets   reasons                                                   for                condition overseas assets in the are significant
                                                                      safeguarding of               Company’s net        impairment risks
                                                                      asset security                assets
Equity      Acquisition                  Spain      Wine production                                                       No
asset       of equity     465,376,681               and operation                        -7,484,378               5.54%


Other explanation         No.




                                                                                                                                                     11
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
3. Analysis of core competitiveness
Whether the Company need to follow the disclosure requirement of special business?
No.

Compared with the participants in the arena of the Chinese wine sector, we believe that the
Company is provided with the following advantages:
Firstly, the Company has been enjoying a well-known wine brand since 120-odd years,
“Changyu”, “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 Shanxi, whose
scales and structures have generally met the Company’s needs for development.
Fifthly, the Company has a great variety of products composed of all grades, its wine,brandy
and sparkling wine of over 100 sorts can meet different consumers’ demands. The Company
has taken the lead in the domestic wine sector through rapid development in the past 10-odd
years and has possessed comparative superiority in the future competition.
Sixthly, the Company has a relatively respect motivation system. Most of Company’s
employees indirectly hold the Company’s equity through controlling shareholders. There are
high consistency between employee benefits and shareholders benefits, in favor of motivating
employees to create value for shareholders.
All in all, the Company has built up a strong core competitive edge and obtained and
maintained a relatively dominant position in the long-term market competition.




                                                                                                      12
                                                       Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report

                           IV. Management Discussion and Analysis
        1. Summarization
        In 2016, influenced by the slowdown of domestic economic growth, the overall domestic
        wine industry is relatively stable, the effective demands for top-level products is weakness,
        the medium-and-low-level products suitable for mass consumption maintains a favorable
        growth tendency. Because of the overwhelming flow of foreign wine into Chinese market,
        product price range further decreases, making market competition further intensified and
        bringing bigger challenges for the Company to achieve sustained and steady growth. Facing
        quite a lot of external disadvantages, the Company insists to focus on the market, adjust the
        marketing tactics and product structure, strive to develop brandy and imported wine, optimize
        the market layout, perfect the marketing channels and effort to promote product sales,
        achieving good results and realizing business income of CNY 4717.59 million, an increase of
        1.46% compared with last year; 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 CNY982.46
        million belonging to the parent company’s shareholders, an decrease of 4.62% compared with
        last year.


        2. Analysis of main business

        Whether or not the same as the disclosed summarization in operation situation discussion and
        analysis?
        □Available Not available


        (1) Summarization

Description                    Increase or decrease of Cause of significant changes
                               the end of the period
                               over the end of last year
Operating revenue                                1.46% Mainly because of increase in sales volume
Operating cost                                         Mainly because of increase in sales volume,
                                                 4.18% especially the proportion of sales in medium-low
                                                       price products increased
Sales expense                                          Mainly because of year-on-year increase of wage &
                                                 3.48%
                                                       welfare, transport cost and depreciation in 2016
Management expense                                     Mainly because of year-on-year reduction of property
                                                -1.33% tax, stamp tax, business travel expense and service
                                                       cost in 2016
R&D investment                                         Mainly because of increase in expenses for
                                                 0.34%
                                                       technology research and development in 2016
                                                                                                             13
                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Financial expense                                       Mainly because of reduction of interest income due to
                                                 94.63% decrease of time deposit balance, and the increase
                                                        in loan interest expenditure and exchange loss
Net amount of cash flow                                 Mainly because of decline of received cash from
                                                -22.15%
generated in operating activities                       production sales and rendering of service
Net amount of cash flow                                 Mainly because of the decrease in received cash paid
generated in investment                          26.70% by subsidiary and other business units
activities
Net amount of cash flow                                   Mainly because of increase in received cash from loan
generated in capital-raising                     47.24%
activities

         Review and summary of the process of the Company’s early-disclosed development strategy
         and business plan during the report period
         During the report period, influenced by the decelerated growth on the demand for domestic
         wine and intensified market competition, the Company has realized the business income of
         CNY 4.72 billion, increased by 1.46% compared with last year, exceeding the target fixed at
         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 continuously carried out the
         development strategy of multi-liquor, pushed hard on harmonious development of
         multi-liquor, which played an important part in realizing the increase in the business income.
         The main work in the report period is as following:

         Firstly, the Company further strengthened the construction of marketing system, optimized
         product structure, increased the marketing promotion efforts and enhanced the marketing
         capability. the Company promoted the construction of wine distributor system, especially for
         chateau wine mainly pushed by the Company; quickened the national sales system
         construction and organized brandy-tasting meeting for 450 times. The Company further
         perfected the sales system of multi-channel and multi-corporation, integrated middle-and-low
         channel and middle-and-small hotel companies, and adjusted sales system for imported
         liquor. The Company built independent sales system for imported liquors, making marketing
         promotion more professional and more systematic. the Company conducted accurate
         dissemination for brands through new media platforms and took many activities, such as
         “G20 State Banquet”, “World Cabernet Gernischt Day” and “Grappie Launch” and so on.
         According to Baidu search index, the visibility of Changyu brands in the whole year ranked
         first in the wine industry.
         Secondly, the management of production was enhanced in order to lower the production cost
         and improve the production efficiency. Under the circumstance of raw material shortage, the
         Company fully took the advantage of centralized purchasing to ensure the full and timely
         supply of raw materials as well as the inhibition of increase in raw material price, resulting
         that the purchasing prices of main packaging materials were lower over 5% than average
         price. The Company further strictly controlled various expenses, reinforced the management
         of production process consumption index in order to keep major production expenses within
                                                                                                               14
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
the standard scope of the Company. Owing to the improvement of production efficiency per
capita in production system, the output per capita was increased through mode of production
structure optimization.
Thirdly, the research for new products and new technologies was continued being conducted
and the quality management was strengthened in order to improve technological level and
product quality. The Company confirmed 41 technologies for improving internal quality of
products, such as chateau wine, Jiebaina and brandy and so on, conducted technology
research mainly in the aspects of product anti-oxidation and extension of bulk wine stability,
and promoted steady improvement in internal quality of various products; combined with
North West Agriculture and Forestry University to report a “Innovation and Application of
Key Technology in Chinese Wine Industry Chain” project and won the second prize of 2016
National Scientific and Technological Progress Award; combined with Jiangnan University
to report a “Establishment and Application of Quality Assessment and Management System
for Premium Wine-making Grape Material and Wine” project and won the first prize of
2016 China General Chamber of Commerce Scientific and Technological Progress Award;
its technology center was awarded as 2016 “National Agricultural Products Processing and
Development Center Technological Innovation Top 10 Unit”; applied for 2 national patents
for invention and published 5 academic paper; attended wine and spirit tasting contest owing
international influence, which could be exemplified as Brussels, winning 3 gold awards and 8
silver awards; The Company enhanced product quality testing and mentoring, and
implemented annual quality target, major work and special work, improving the quality
management level.
Fourthly, the procurement of raw materials such as grapes was completed successfully and
the management of grape base was further strengthened. The Company balanced domestic
and international raw material resource, and optimized grape purchase pricing method, so
that grape purchase pricing controlled in reasonable level.
Fifthly, the construction of technological upgrading projects is steadily promoted to
strengthen momentum for future development. During the report period, the 7 projects run
smoothly among 9 projects which planed to be constructed. Another 2 projects (named
Changyu International Wine City Tourism Projects and Pioneer Monopoly Shop) Suspended
implementation owing to the changes of domestic economic situation and consumer
market ,engineering quality of each construction project is excellent.

(2) Revenue and cost

 Composition of operating incomes
                                                                                          Unit: CNY
                           2016                               2015
                               Proportion                       Proportion Year-on-year
                                   in                               in      increase or
                  Amount                           Amount
                               operating                        operating decrease (%)
                                incomes                          incomes
   Total         4,717,596,472      100%          4,649,722,368      100%         1.46%

                                                                                                      15
                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
  operation
   revenue
Industry-classified
Industry of
liquor and
                  4,717,596,472      100%      4,649,722,368               100%              1.46%
alcoholic
beverage
Product-classified
Wine              3,700,806,317    78.45%      3,659,597,234            78.71%              -0.26%
Brandy              905,687,936    19.20%        883,276,247               19%               0.20%
Others              111,102,219     2.36%        106,848,887             2.30%               0.06%
Area-classified
Domestic          4,437,302,746    94.06%      4,481,598,915            96.38%              -2.32%
Abroad              280,293,726     5.94%        168,123,453             3.62%               2.32%

 The condition of sectors, products or areas accounting for over 10% in the
Company’s operating incomes or operating profits
Available □Not available
Whether the Company follow disclosure requirement of special industry?
No.
                                                                              Unit: CNY
                                                                                     Year-on
                                                                Year-on- Year-on-
                                                                                       -year
                                                                   year    year
                                                                                     increase
                                                                increase increase
                                                      Gross                              or
                                                                     or      or
             Operating income    Operating cost       profit                         decrease
                                                                decrease decrease
                                                       rate                           (%) of
                                                                  (%) of  (%) of
                                                                                       gross
                                                               operating operating
                                                                                       profit
                                                                 income     cost
                                                                                        rate
Industry-classified
Industry
of liquor
and               4,717,596,472     1,575,770,979 66.60%            1.46%   4.18% -0.87%
alcoholic
beverage
Product-classified
Wine              3,700,806,317     1,204,784,351 67.45%            1.13%   5.15% -1.24%
Brandy              905,687,936       317,845,705 64.91%            2.54%   3.46% -0.31%
Area-classified
Domestic          4,437,302,746     1,372,112,826 69.08%           -0.99%  -5.77%       1.57%



                                                                                                   16
                                                        Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
   Under the situation that the statistical caliber of the Company’s main business data was
   adjusted during the report period, the Company’s main business data adjusted on the basis of
   caliber at the end of report period in recent one year.
   □Available Not available



    Whether the Company’s sales revenue for material object is more than labor income

   Yes      □No

   Sector             Project            Unit           2016               2015               Year-on-year
                                                                                              increase     or
                                                                                              decrease (%)
                      Sales volume       Ton                   98,958              86,318            14.64%
   Wine
                      Production         Ton                   99,784              84,446            18.16%
                      Sales volume       Ton                   40,171              40,074              0.24%
   Brandy
                      Production         Ton                   43,262              39,432              9.71%

   Explanation on the causes of over 30% year-on-year changes of the related comparison data.

   □Available  Not available

    The fulfillment of major sales contract signed by the Company up to the report
   period

   □Available  Not available

    Composition of operating costs
                                                                                                  Unit: CNY
Sector      Project             2016                        2015                                Year-on-yea
                                Amount          Proportio   Amount              Proportio       r increase or
                                                n in the                        n in the        decrease
                                                operating                       operating       (%)
                                                cost (%)                        cost (%)
            Blending
                                692,570,791        57.49%      608,095,160           53.07%              4.41%
            liquor
            Packing
                                372,613,924        30.93%      408,405,997           35.64%             -4.72%
            material
Wine
            Wages                44,895,195         3.73%        41,930,611           3.66%              0.07%

            manufacturi
                                 94,704,442         7.86%        87,353,461           7.62%              0.24%
            ng cost

                                                                                                              17
                                                  Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
          Blending
                          187,495,081      58.99%        189,302,330           61.62%             -2.63%
          liquor
          Packing
                          105,943,197      33.33%          93,152,552          30.32%              3.01%
          material
Brandy
          Wages            11,965,588        3.76%         12,551,940           4.09%             -0.32%

          manufacturi
                           12,441,839        3.91%         12,206,568           3.97%             -0.06%
          ng cost


   Whether there are changes of consolidation scope during the report period

  Yes     □No

  For the scope of consolidated financial statement in this year, please see Notes VIII "Equity
  in other entities" in detail. For detail of changes in the scope of consolidated financial
  statement in this year, please see Notes VII "Change in consolidation scope".



   Major changes or adjustments of the Company’s products or services during the
  report period

  □Available       Not available

   Information of major customers and major suppliers

  The Company’s important customers


  The total sales amount of the top five customers(CNY)                                               173,506,000
  The proportion that total sales amount of the top five customers                                           3.68%
  accounting for the annual total sales amount(%)
  The proportion that sales amount of the related party in the total
  sales amount of the top five customers accounting for the annual                                              0%
  total sales amount(%)



  Information on the Company’s 5 biggest customers

                                                         Sales Amount            Proportion in Total Sales for
  No.     Customer Name
                                                         (CNY)                 the year(%)
          Chuxin Trade Company Limited in
  1                                                               49,540,846                                 1.05%
          Guangzhou city
  2       New Baicheng Food Trade Company in                      34,594,182                                 0.73%
                                                                                                        18
                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
        Hanjiang district of Putian city
        Huahaipengcheng Liquor Company Limited
3                                                                   31,452,543                                    0.67%
        in Zhuhai city
        Wal-Mart (China) Investment Company
4                                                                   29,012,715                                    0.61%
        Limited
        Dali Qianxingrong Wine Shop in Nanhai
5                                                                   28,905,714                                    0.61%
        district of Foshan city
Total   —                                                         173,506,000                                    3.68%
Available □Not available
There is no associated relationship between top 5 customers and the Company. The
Company’s directors, supervisors, senior management, core technicians, shareholders
holding over 5% shares, actual controller and other related party don’t gain benefits directly
and indirectly in major customers.
Information on the Company’s important suppliers
The total purchase amount of the top 5 suppliers                                        510,981,344
The proportion of the total purchase amount of the top 5 suppliers in the annual
                                                                                              38.32%
purchase amount
Purchase amount of the related party in total purchase amount of the top five five
                                                                                              11.29%
suppliers accounting for annual total purchase amount(%)

Information on the Company’s top 5 biggest suppliers


                                                   Purchase Amount         Proportion in Total Purchase
No.         Supplier Name
                                                   (CNY)                   for the year(%)

1           Yantai Shenma Packaging Co., Ltd.              150,590,287                                    11.29%

2           Yantai Changyu Glass Co.,Ltd.                  128,098,740                                        9.61%

3           Xinjiang Yuyuan Liquor Co.,Ltd.                 85,691,150                                        6.43%

            Liquan    Sales   Department      of
4                                                           85,477,737                                        6.41%
            Shandong Yantai Winery Co.,Ltd.

            152   regiment    of   the   eighth
5                                                           61,123,430                                        4.58%
            agriculture production division

Total                                                      510,981,344                                    38.32%

Other situation explanation of main customers
□Available       Not available

(3) Costs

                                                                                                          19
                                            Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                                                            Unit: CNY
                                                     Year-on-year     Explanation of
                         2016             2015       increase or      significant
                                                     decrease (%)     changes
                                                                      Mainly because
                                                                      of year-on-year
                                                                      increase of
                                                                      wage &
Sales expense          1,253,260,668   1,211,127,163            3.48% welfare,
                                                                      transport cost
                                                                      and
                                                                      depreciation in
                                                                      2016
                                                                      Mainly because
                                                                      of year-on-year
                                                                      reduction of
                                                                      property tax,
Management
                        309,783,548      313,968,409           -1.33% stamp tax,
expense
                                                                      business travel
                                                                      expense and
                                                                      service cost in
                                                                      2016
                                                                      Mainly because
                                                                      of reduction of
                                                                      interest income
                                                                      due to decrease
Financial                                                             of time deposit
                         21,968,859       11,287,685          94.63%
expense                                                               balance, and the
                                                                      increase
                                                                      of loan interest
                                                                      expenditure and
                                                                      exchange loss

(4) Research and development expenditure

□Available     Not available

(5) Cash flow
                                                                                      Unit: CNY
                                                                                          Year-on-year
                Item                      2016                        2015                 increase or
                                                                                          decrease (%)

                                                                                                  20
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report

    Subtotal of cash inflow in
                                            4,525,609,466                5,045,321,545              -10.30%
        operating activities
    Subtotal of cash outflow in
                                            3,635,697,496                3,902,275,178               -6.83%
        operating activities
     Net amount of cash flow
                                              889,911,970                1,143,046,367              -22.15%
 generated in operating activities
    Subtotal of cash inflow in
                                              112,952,925                    70,956,457              59.19%
       investment activities
    Subtotal of cash outflow in
                                              800,394,471                1,008,811,136              -20.66%
       investment activities
     Net amount of cash flow
                                             -687,441,546                  -937,854,679              26.70%
 generated in investment activities
    Subtotal of cash inflow in
                                            1,191,567,445                   602,060,185              97.92%
     capital-raising activities
    Subtotal of cash outflow in
                                            1,232,491,837                   679,633,059              81.35%
     capital-raising activities
     Net amount of cash flow
    generated in capital-raising              -40,924,392                   -77,572,874              47.24%
             activities
   Net increase of cash and cash
                                              164,700,643                   131,769,387              24.99%
            equivalents
Explanation of main influence factors contributing to great changes in related data on

year-on-year basis
Available      □Not available


During the report period, comparing with the same period of last year, net amount of cash

flow generated in operating activities was reduced by 22.15%, mainly due to the decrease in

received cash from selling commodity and providing labor service; subtotal of cash inflow in

investment activities increased by 59.19%, mainly due to the regain of the fixed deposit

whose duration is more than 3 months; subtotal of cash outflow in investment activities was

reduced by 20.66%, mainly due to the decrease in received net amount of cash paid by

subsidiary and other business units; net amount of cash flow generated in investment

activities increased by 26.7%, mainly due to the decrease in received cash paid by subsidiary

and other business units; subtotal of cash inflow in capital-raising activities increased by
                                                                                                     21
                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report

97.92%, mainly due to the increase in received cash from loan; subtotal of cash outflow in

capital-raising activities increased by 81.35%, mainly due to the increase in the cash paid for

debt repayment; net amount of cash flow generated in capital-raising activities increased by

47.24%, mainly due to the increase in the received cash from loan; net increased amount of

cash and cash equivalents increased by 24.99%, mainly due to the significant growth of net

amount of cash flow generated in both operating activities and financing activities.

Explanation on the causes of the major differences between the net cash flow generated by

the Company’s operating activities and this year’s net profit during the report period.


□Available      Not available

3. Analysis to non-main business

□Available      Not available

4. Assets and liabilities situation

(1) Major changes of assets
                                                                                             Unit: CNY
               At the end of 2016              At the end of 2015
                                    Proportio                       Proportio Proportion
                                                                                         Explanation
                                    n in the                        n in the increase or
                                                                                         on    major
               Amount               total     Amount                total     decrease
                                                                                         changes
                                    assets                          assets    (%)
                                    (%)                             (%)
Monetary
                   1,391,517,607      12.07%       1,285,362,414       12.43%         -0.36% -
funds
Receivables          173,062,628       1.50%         197,795,091        1.91%         -0.41% -
Inventory          2,248,609,740      19.51%       2,260,852,964       21.86%         -2.35% -
Investment
                                         0%                                 0%             0% -
real estate
Long-term
equity                                   0%                                 0%             0% -
investments
                                                                                            Significant
                                                                                            increase in
Fixed assets       4,683,187,493      40.62%       3,089,245,185       29.86%        10.76% the book
                                                                                            value of
                                                                                            fixed assets
                                                                                                         22
                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                                                                       compared
                                                                                       with the
                                                                                       beginning
                                                                                       of the year,
                                                                                       owing that
                                                                                       parts of
                                                                                       construction
                                                                                       projects
                                                                                       have
                                                                                       transferred
                                                                                       to fixed
                                                                                       asset during
                                                                                       the report
                                                                                       period.
                                                                                       Significant
                                                                                       decrease in
                                                                                       the book
                                                                                       value of
                                                                                       construction
                                                                                       projects
                                                                                       compared
                                                                                       with the
                                                                                       beginning
Constructio
                                                                                       of the year,
n         in    1,346,281,737    11.68%      2,005,990,308       19.39%         -7.71%
                                                                                       owing to
progress
                                                                                       parts of
                                                                                       construction
                                                                                       projects
                                                                                       have
                                                                                       transferred
                                                                                       to fixed
                                                                                       asset during
                                                                                       the report
                                                                                       period.
Short-term                                                                             No major
                  662,388,882     5.75%       665,581,921         6.43%         -0.68%
borrowings                                                                             changes
Long-term                                                                              No major
                   49,140,555     0.43%         71,686,629        0.69%         -0.26%
borrowings                                                                             changes

(2) Measuring assets and Liabilities at Fair Value

□Available    Not available


                                                                                                   23
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
(3) Assets rights restricted situation up to the end of report period

① In order to ensure the Company and Yantai Economic and Technological Development
Zone Management Council to fulfill debtors obligation, Yantai Changyu Wine Research and
Development Company Limited plans to provide bank receipt of self-owned
CNY46.1million and 365,052.7 ㎡ land with an estimated valuation of CNY127.7684million
to China Agricultural Development Key Construction Fund Company Limited as guarantee
for the debt amount of CNY119.84million including original capital of CNY107million
invested by China Agricultural Development Key Construction Fund Company Limited.

② In order to ensure Yantai Changyu Wine Research and Development Company Limited
and Yantai Economic and Technological Development Zone Management Council to fulfill
debtors obligation, the Company plans to provide two real estate used for warehouse and
office to China Agricultural Development Key Construction Fund Company Limited as
guarantee to provide joint liability for the payment of Yantai Changyu Wine Research and
Development Company Limited and Yantai Economic and Technological Development Zone
Management Council for the debt amount of guarantee is CNY221.76million, including
original capital of CNY198million invested by China Agricultural Development Key
Construction Fund Company Limited. The first real estate provided by the Company as
guarantee locates on Shixue Road in Zhifu District, whose land area, total building area and
the estimated value is respectively 34,888 ㎡ , 10,071.04 ㎡ and CNY42.6514million; the
second real estate locates in the western grape hill factory on Dahaiyang Road in Zhifu
District Yantai, whose land area, total building area and the estimated value is respectively
176,074 ㎡, 89,571.29 ㎡ and CNY330.898million.




                                                                                                     24
                                                                                                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
          5. Investment situation

          (1) Overall situation

          Available          □Not available

          Investment amount during the                Investment amount of the same
                                                                                                         Variation
              report period (CNY)                        period of last year (CNY)
                 929,180,000.00                               842,060,000.00                              10.35%

          (2) Situation of acquired main equity investments during the report period

          □Available        Not available
                                                                                                                                                                               Unit: CNY

          (3) Situation of main ongoing non-equity investments during the report period

          Available          □Not available
                                                                                                                                                                                    Unit: CNY

Project         Investment    Whether      Involved     Investment    Accumulated actual
                                                                                     Capital Process     Estimated profit   Accumulated        Reasons            Disclosure      Disclosure
name            mode          it           sectors      Amount        investment      source   of                           realized           for                date (if        index (if
                              belongs                   during this   amount up                project                      profit up          unreached          have)           have)
                              to fixed                  report period to the end                                            to the end         planning
                              assets                                  of the report                                         of the             schedule
                              investment                              period                                                report             and
                                                                                                                            period             estimated profit



                                                                                                                                                                                              25
                                                                                                        Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Yantai          Self-         Yes   Liquor and                                 Owned                                               2016.04.29        http://www.cninfo.com.cn/
Changyu         constructed         alcoholic                                  funds                                                                 cninfo-new/
International                       beverage                                                                                                         disclosure/szse_main/
Wine City                           sector       349,500,000   1,023,130,000           95%    —   —             —                                 bulletin_detail/true/
Blending and                                                                                                                                         1202265203?
Cooling                                                                                                                                              announceTime=2016-04-29
Center
Yantai          Self-         Yes   Liquor and                                 Owned                                               2016.04.29
Changyu         constructed         alcoholic                                  funds
International                       beverage
                                                 295,000,000    776,690,000            95%    —   —             —
Wine City                           sector
Bottling
Center
Yantai          Self-         Yes   Liquor and                                 Owned                                               2016.04.29
Changyu         constructed         alcoholic                                  funds
International                       beverage
                                                 199,452,000    398,892,000            100%   —   —             —
Wine City                           sector
Logistics
Center
Changyu Vine    Self-         Yes   Liquor and                                 Owned                                               2016.04.29
and Wine        constructed         alcoholic                                  funds
                                                  15,000,000    105,760,000            55%    —   —             —
Research                            beverage
Institute                           sector
Treasure        Self-         Yes   Liquor and                                 Owned                                               2016.04.29
Wine Chateau    constructed         alcoholic                                  funds
                                                  31,000,000     78,990,000            55%    —   —             —
                                    beverage
                                    sector
Koyac Brandy    Self-         Yes   Liquor and    13,928,000    111,928,000    Owned   50%    —   —             —               2016.04.29

                                                                                                                                                               26
                                                                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Chateau           constructed         alcoholic                                  funds
                                      beverage
                                      sector
Greening          Self-         Yes   Liquor and                                 Owned                                                    2016.04.29
Investment        constructed         alcoholic                                  funds
                                                    25,300,000     25,300,000                 100%   —   —             —
                                      beverage
                                      sector
Yantai            Self-         Yes   Liquor and                                 Owned                                   Suspend          2016.04.29
international     constructed         alcoholic                                  funds                                   implementation
                                                            0               0                  0%    —   —
Wine City                             beverage
Tourism project                       sector
Pioneer           Self-         Yes   Liquor and                                 Owned                                   Suspend          2016.04.29
Monopoly          constructed         alcoholic                                  funds                                   implementation
                                                            0      45,140,000                 60%    —   —
Shop                                  beverage
                                      sector
Total             —            —    —           929,180,000   2,565,830,000   —      —          —   —             --               --




                                                                                                                                                                     27
                                                  Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
 (4) Financial assets investment

  Security investment situation

 □Available     Not available

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

  Derivatives investment

 □Available     Not available

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

 (5) 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.

 (6) Sale of major assets and equities

  Sale of major assets

 □Available     Not available

 There is no sale of major assets during the report period.

  Sale of major equities

 □Available     Not available

 (7) Analysis to the major holding and joint stock companies

 Available       □Not available

  Situation of main subsidiaries and joint stock companies affecting over 10% of the
  Company’s net profit
                                                                              Unit: CNY
Company Company Main            Registered Total    Net      Operation Operation Net
name       type      business   capital    asset    asset    revenue   profit      Profit
Xinjiang Subsidia To plant
                                CNY 75 157,135, 128,532, 118,253,4 14,648,47 11,561,9
Tianzhu ry           grape,
                                million         133      045        96         4          69
Winery               produce

                                                                                                        28
                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Co., Ltd.              and sell
                       grape
                       juice, bulk
                       wine and
                       fruit wine
Yantai                 To
Changyu                research,
-Castel                produce
Wine                   and sell
Chateau     Subsidia   wine and      USD 5       290,33      79,426,      102,588,      18,037,9       13,184,
Co.         ry         sparkling     million      0,975          494           593            53           637
LTD.                   wine as
                       well as the
                       tourism
                       service
Langfang
            Joint
Castel-                To produce USD
            stock                                46,418,     36,184,      41,948,3      1,690,04       731,20
Changyu                and sell   6,108,81
            compan                                   915         983            91             2            4
Wine Co.               wine       8
            y
LTD.
Chateau     Subsidia   To
Changyu     ry         research,
                                     CNY
AFIP                   produce                   590,66      158,55       178,662,      40,183,8       29,417,
                                     110
Global                 and sell                   2,821       1,404            315            18           483
                                     million
                       brandy and
                       wine
Chateau     Subsidia
Liaoning    ry                    CNY
                       To produce                65,785,     51,928,      43,742,4       -5,846,1      -5,895,
Changyu                           26.30
                       ice wine                      268         324            12            20           304
Ice Wine                          million
Co., Ltd.
Dicot       Subsidia   To produce
Partners,   ry         and operate EUR2.38
                                                 465,37      122,96       281,328,       -16,244,      -7,484,
S.L.                   o wine and 5732mill
                                                  6,681       1,191            100           067           378
                       other       ion
                       liquor

 Acquisition and disposal of subsidiaries during the report period

 □Available     Not available


 Information of main holding and joint stock companies
 No


                                                                                                       29
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
(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
In 2017, under the slowdown effect of national macroscopic economy growth, the operation
situation of the Company will become more severe, plus the change of the alcohol consumption
environment, leading to difficulties in selling high-end products; Consumers tend to be more
rational, which requires Changyu to make more efforts in improving the cost performance of
products; Owing that influx of plenty of imported wines would further compress the domestic
wine market shares and the new channels such as E-commerce cause great impact on the
traditional sales channels, the competition in the domestic wine industry will still be fierce at
present and in the future long time; Raw material cost, freight and depreciation expense and other
expenses are likely to increase, bringing big pressure to the Company’s profitability. But in the
long run, thanks to increase in their income, more and more people would pursue health and
fashion life mode and the people would be in more favor of wines which fit quite well with the
trend of consumption, ceaselessly stimulating the demands for premium wine. This decides that
the Chinese wine industry owns a huge market development potential, especially that brandy and
wine with high price ratio might have a faster growth. In such a case of long-term coexistence of
opportunities and challenges, those enterprises that possess strong brand influence and marketing
ability, catch the opportunities, actively take adjustments, make full use of newly emerging and
traditional sales channels, timely satisfy the consumers’ demands and provide products with high
price ratio will have the opportunity to be the final winner of competition and then form a new
structure of the future Chinese wine market.
(2)The Company’s development strategy
The Company will continue adhering to the strategy of focusing on wine while fully developing
various products, actively expand the scope of consumption field and marketing mode,
industriously develop middle-and--high-end wines and brandy, strengthen the marketing level of
imported wine and strive to provide consumers with a rich variety of products in high price ratio.
(3) Management plan in new year
In 2017, the Company will try its best to realize business income of not less than CNY4.9 billion
and control the main operating costs and three period expenses below CNY3.5 billion.
(4) The measures the Company will take
In order to better catch the opportunities and face the challenges, the Company will take full
advantage of self-owned advantages, adhere to market-orientation, take profit evaluation as a
means, regard innovations and key work as drives, insist in management and implementation and
would pay attention to following aspects in 2017:
Firstly, the Company will stick to market-orientation, further enhance the construction of
marketing system, optimize the product mix and improve marketing capacity. The Company will
optimize distributor structure of wines such as Changyu Castel, Changyu AFIP and Jiebaina etc,
accelerate marketing system construction of three western chateaux, promote steady growth of

                                                                                                     30
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
sales volume in middle-and-high-level products; will complete upgrade of Brandy products,
further expand Brandy market coverage and increase marketing investment of
middle-and-high-level brandy product in order to ensure the continuous and rapid grow of brandy;
will strengthen marketing effort of middle-and-low-end products and acquired overseas
enterprises’ product and endeavor to develop Zuishixian, Grappie and imported products to Big
Product; will continue enhancing newly-emerging business including direct-supply and
e-commerce etc, enlarging input of e-commerce business and accelerating the development of
e-commerce business; will intensify product price management so as to improve profit ability;
will standardize business of VIP custom-made product and improve service level; will positively
take various measures to enhance market competitiveness of Pioneer Monopoly Shop.
Secondly, the Company will focus on informationization of production system, comprehensively
improve management level and reduce business risk. The Company will build an intelligentialized
manufacturing system to realize systematic control in overall process of production and logistics
as well as the seamless joint of various links including the generation of sales order,
decomposition of production plan, operation on production line, storage and logistics links, build
an efficient and flexible production mode, support “various varieties, small quantity” production
and “order business flexibility”, improve production efficiency and meet the quickly changed
market need; will continue perfecting and implementing the management control and assessment
method of salary per ton, bulk wine consumption and controlled expense, make centralized
purchasing in bulk raw material to reduce production cost and improve production efficiency; will
further perfect capital management system, improve financing mode and reduce capital cost.
Thirdly, the Company will further enhance the management of grape base and reinforce the
guarantee capability of grape material. The Company will integrate the layout of domestic and
foreign raw material resource to form the advantage complementation of domestic and foreign
raw material in the aspects of quality, quantity and price and so on and to ensure the stable supply
of premium raw material; will actively carry out the classification management, classification
processing and pricing in bases special for brandy; will improve grape pricing mechanism and
guide the grape bases to produce as the need; will further enhance the management level of
self-supporting bases and improve the quality of wine grape through increasing the soil fertility
and adopting advanced cultivation technology; will perfect the management system of tracing
grape bases by winemakers to improve the management level and grape quality of bases; will
perfect profit assessment method of bases and enhance the profitability of self-supporting bases;
will further increase contractual base area per contractor, enahnce popularizing rate of
mechanization plantation, improve plantation efficiency and reduce raw material cost.
Fourthly, in order to speed up the pace of internationalization, the Company will continue seeking
for target enterprise in major wine regions, such as Australia and Chile, in order to realize the
comprehensive layout in global major wine regions; will reinforce the management of acquired
enterprise and achieve continuous and rapid development in overseas market in the mean time of
enlarging Chinese market business.
Fifthly, the company will steadily push construction of investment projects forward, reinforce
project management, scientifically arrange construction process and strive for putting into
production on time. The Company will continue conducting construction of various project in
Yantai Changyu International Wine City(Changyu Industry park),do the equipment
commissioning and finishing touches well, intensify project cost audit and auditing of final


                                                                                                      31
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
settlement, strictly control project investment amount and ensure that all projects could be built
and put into operation according to the scheduled process and quality.
(5) Potential risks
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
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 Company’s receptions, studies, communications and visits


                                                                                                      32
                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
 Available        □Not available

                       Reception method   Reception object type        Basic information
Reception Time
                                                                       index of studies
2016.05.05             Field survey       Institution                  -

2016.05.12             Field survey       Individual                   -
2016.05.26             Field survey       Individual                   -
2016.06.24             Field survey       Individual                   -
Number of              4of
Reception
Number of              46
received institution
Number                 0
of received
individual
Number of other        0
object
Whether disclose,      No
reveal or betray
no-public
import information




                                                                                                    33
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report

                                    V. Major issues
1. The Company’s common stock profit distribution and increasing equity with capital
reserve

Promulgation, implementation or adjustment of common stock profit distribution policies
especially cash dividends policies during the report period

Available □Not available
Deliberated and passed by the 2015 Stockholders’ Meeting convened on 26th May, 2016 by
the Company, the Company’s 2015 annual profit distribution scheme is shown as follows:
based on total 685,464,000 shares (including 453,460,800 A shares and 232,003,200 B shares)
up to 31st December, 2015, the Company would pay cash dividend to all shareholders
registered on the share registration day: CNY5 in cash per ten shares. This time the Company
would neither dispatch bonus shares nor increase equity with capital reserve.

On 1st July, 2016, the Company published the Implementation Announcement of 2015
Annual Equity Distribution on China Securities Journal, Securities Times and
www.cninfo.com.cn, determining that the share registration day and the ex-dividend day of A
Share was respectively on 6th July, 2016 and on 7th July, 2016; the last trading day, the share
registration day and the ex-dividend day of B Share was respectively on 6th July, 2016, on
11th July, 2016 and on 7th July.

This time the dispatching objects contain all A Share holders registered at China Securities
Depository and Clearing Corporation Limited Shenzhen Company after closing of Shenzhen
Stock Exchange on the afternoon of 6th July, 2016 and all B Share holders registered at
China Securities Depository and Clearing Corporation Limited Shenzhen Company after
closing of Shenzhen Stock Exchange on the afternoon of 11th July, 2016. This dispatching
has already been completed in July 2016.


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
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 plan (preliminary scheme) of common stock profit distribution and
increasing equity with capital reserve in the recent three years (including the report period).
                                                                                                      34
                                                       Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
       The Company’s 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 685,464,000 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 preliminary scheme of profit distribution plan in 2015 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, 2015, 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 33.27% of the net profit
       CNY 1030.07386 million attributable to the shareholders of the parent company in the
       consolidated statement, the retained and undistributed profit of CNY 687.34186 million will
       be reserved for the distribution of next year.

       The Company’s profit distribution plan in 2016 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, 2016, 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 34.89% of the net profit CNY
       982.460488 million attributable to the shareholders of the parent company in the consolidated
       statement, the retained and undistributed profit of CNY 639.728488 million will be reserved
       for the distribution of next year.

       The Company’s common stock cash dividend record in recent three years (including the
       report period)

                                                                                     Unit: CNY
                           Net            profit Proportion in the Amount of cash Proportion of cash
                           belonging to the net profit belonging dividends in other dividends in other
             Amount     of
                           listed company’s to        the     listed ways          ways
Year      of cash dividend
                           stockholders in the company’s
distribution (including
                           consolidated          stockholders in the
             tax)
                           statement of the consolidated
                           distribution year statement (%)
2016           342,732,000         982,460,488               34.89%               0                0%
2015           342,732,000       1,030,073,860               33.27%               0                0%
2014           301,604,160         977,707,711               30.85%               0                0%



                                                                                                             35
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
During the report period the Company earned profit, the profit of the parent company that
could be distributed to common stock shareholders was positive but without proposing
common stock cash dividend distribution.

□Available       Not available

2. The Company’s preliminary scheme of profit distribution and preliminary scheme of
increasing equity with capital reserve

Available      □Not available

Number of sending bonus shares per ten shares (share)                                         0
Number of dividend payout per ten shares (CNY) (including tax)                                5
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)                              342,732,000
Distributable profit (CNY)                                                          982,460,488
The proportion of cash dividend distribution in the total profit distribution              100%
Cash dividend
If the Company’s development is in growth stage and major capital expenditure is arranged,
while making profit distribution, the proportion of cash dividends should takes up no less
than 20% in this profit distribution
Detailed explanation for the preliminary scheme of profit distribution or 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 CNY982.460488million, the net
profit of the parent company in financial statement is CNY1830.574470 million in 2016.
According to PRC accounting standard, the situation for the attributable profit of
consolidation and parent company in 2016 is as following:
                                                                                      Unit: CNY
                                                  Consolidation            Parent company
    Undistributable profit at the end the year          6,620,118,562          7,360,234,545
   Including: net profit in 2016                          982,460,488             1,830,574,470
   Distributable profit carried over to the             5,980,390,074             5,872,392,075
   beginning of the year
   Distribution for 2015 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

                                                                                                      36
                                                       Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
        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 2017, under the
        condition of not influencing the normal production and operation, the Company put forward
        preliminary scheme on profit distribution in 2016 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, 2016, 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 34.89% of the net profit
        CNY 982.460488million attributable to the shareholders of the parent company in the
        consolidated statement, the retained and undistributed profit of CNY 639.728488 million will
        be reserved for the distribution of 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 2016 shareholders’ meeting.

        3. Implementation of commitments

        (1) Commitments that the Company’s actual controllers, shareholders, related parties,
        acquirers and the Company and other related commitment parties have implemented during
        the report period and have not implemented up to the end of the report period

        Available       □Not available

                   Commitment                 Commitment            Commitment           Commitment Implementat
Commitments                   Commitment type
                   party                      content               time                 period     ion
Commitments at
                       -                                -                                     -                -
share reform
Commitments
made in
acquisition            -                                -                                     -                -
report or equity
changes report
Commitments at
asset                  -                                -                                     -                -
restructuring
                   Yantai      Solve horizontal   Non-horizontal 18thMay 1997                              Has been
Commitments at Changyu         competition        competition                                              performing
                                                                                         Forever
the initial public Group Co.                                                                               strictly
offering or        Ltd.
refinancing        Yantai      Clear the purpose According to
                                                                                                           Has been
                   Changyu     of brand royalty Trademark
                                                                    18 May 1997 Forever
                                                                        th
                                                                                                           performing
                   Group Co.                     License
                                                                                                           strictly
                   Ltd.                          Contract, the
                                                                                                             37
                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                               Company will
                                               pay trademark
                                               royalty for the
                                               ‘‘Changyu’’
                                               products of
                                               Yantai
                                               Changyu
                                               Group Co., Ltd
                                               every year,
                                               Yantai
                                               Changyu
                                               Group Co., Ltd
                                               will use
                                               trademark
                                               royalty to
                                               advertise
                                               ‘‘Changyu’’
                                               trademarks and
                                               Contracted
                                               products in this
                                               contract.
Equity incentive
                     -              -              -                                      -                -
commitments
Commitments at
middle and
small                -              -                                                      -                -
                                                     -
shareholders of
the Company
Commitment       Yes
under timely
implementation
or not
Whether or not No
to have specific
reasons of the
unimplemented
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
                                                                                                          38
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4. 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.

5. Explanation of Non-standard Audit Report given by accounting firm in the report
period from board of directors, board of supervisors and independent directors (if
have)

□Available       Not available

6. Compared with the previous year’s financial report, explanation for the changes of
accounting policy, accounting estimation and accounting method

□Available Not available
There are no changes of accounting policy, accounting estimation and accounting method
during the report period.

7. 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.

8. Compared with the previous year’s financial report, explanation for the changes of
the consolidated statements scope.

Available         □Not available

For the scope of consolidated financial statement in this year, please see Notes VIII "Equity
in other entities" in detail. For detail of changes in the scope of consolidated financial
statement in this year, please see Notes VII "Change in consolidation scope".

9. 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)
                                                                                                          39
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Reward for domestic accounting firm
                                     198
(CNY‘0000)
Consecutive period for the audit
                                     4
services of domestic accounting Firm
Name of Certified public accountant
for the audit services of domestic Li Xu, Li Yangang
accounting Firm
Overseas accounting firm name (if
                                     -
have)
Reward for overseas accounting firm
                                     0
(CNY‘0000) (if have)
Consecutive period for the audit
                                     -
services of overseas accounting Firm
Name of Certified public accountant
for the audit services of overseas -
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 employs Deloitte Hua Yong Certified Public Accountants Co., Ltd. (special
general partnership) as 2016 internal control audit accounting firms.

10. Face of suspension and termination of listing after the disclosure of annual report
□Available Not available

11. Bankruptcy reorganization
□Available Not available
There is no bankruptcy reorganization during the report period.




                                                                                                     40
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12. Material litigation and arbitration

□Available     Not available
There are no material litigation and arbitration during the report period.


13. Penalty and rectification

□Available Not available
There are no penalties or rectifications during the report period.

14. Credit of the Company, holding shareholders and actual controllers

□Available     Not available

15. Implementation of the Company’s equity inventive plan, employee stock ownership plan
or other employee incentive measures

□Available     Not available

There are no implementation of the Company’s equity inventive plan, employee stock ownership
plan and other employee incentive measures.

16. Significant related transactions

(1) Related transactions in relation to routine operations

Available       □Not available

Detailed information about the Company’s 2016 annual routine related transactions, please
refer to Notes X "Related party and Related Transaction" in the Financial Statement of the
report in detail, or could also look up the Company’s related temporary announcement
according to the following index.
Disclosure website of major related transactions’ temporary reports for related query
Name of                           Disclosure       date    of Website of disclosure of
Temporary announcement            temporary announcement temporary announcement
Announcement of 2017
                                                              Cninf
annual routine related            April 22, 2017
                                                              (http://www.cninfo.com.cn)
transaction
Announcement of 2016
                                                              Cninf
annual routine related            April 29,2016
                                                              (http://www.cninfo.com.cn)
transaction




                                                                                                       41
                                                                                                        Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report


(2) Related transactions in relation to acquisition and sales of assets or equity

□Available     Not available

There are no related transactions in relation to acquisition or sales of assets or equity during the report period.

(3) Related transactions in relation to common foreign investment
□Available Not available
There are no related transactions in relation to common foreign investment during the report period.

(4) Related current credit and debt

Available       □Not available

Whether or not to exist non-operating related credit and debt

□Yes     No

(5) Other major related transactions

□Available     Not available

17. Major and important contracts and execution results

(1) Trusteeship, contract and leasehold issues

 Trusteeship situation

                                                                                                                                                              42
                                                                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
□Available     Not available

There is no trusteeship situation during the report period.

 Contract situation

Available       □Not available

Contract situation description
During the report period, about the Company’s contract operation situation, please see ‘‘1. The structure of Enterprise group’’ in
Annex 8 ‘‘Rights and interests of other subject’’ 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.

 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

                                                                                                                                                          43
                                                                                                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report


   □Available           Not available

   There are no leasehold projects in gains and losses for the Company to achieve more than 10% of the total profit during the report period.

   (2) Major guarantee

   Available            □Not available

    Guarantee situation

                                                                                                                                                                            Unit: CNY’0000
                       External guarantee of the Company and its subsidiaries(excluding guarantee to subsidiaries)

                    Disclosure date of
                                                                                                                                  Whether      or
                    related                            Actual date of   Actual                                     Whether or
Guarantee object                         Guarantee                                       Guarantee     Guarantee                   not belong to
                    announcement                       occurrence (date guarantee                                  not complete
name                                     quota                                           type          Period                      related-party
                    about guarantee                    of agreement)    amount                                     implement
                                                                                                                                   guarantee
                    quota

Yantai Economic
and Technological
                                                                                         Mortgage;
Development         2016.12.22                   34160 2016.12.21                34160                 10years     No             No
                                                                                         Pledge
Zone Management
Council.

Total of the external guarantee quota                                   Total of the actual external
approved during the report period                                34160 guarantee amount during                                              34160
(A1)                                                                    the report period (A2)

Total of the external guarantee quota                            34160 Balance of the actual                                                34160


                                                                                                                                                                                                   44
                                                                                                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
approved by the end of the report                                            external guarantee by the
period (A3)                                                                  end of the report period
                                                                             (A4)

                                                   Guarantee between the Company and subsidiaries

                    Disclosure date of                                                                                    Whether Whether        or
                    related                               Actual date of     Actual                                       or not      not belong to
Guarantee object                           Guarantee                                        Guarantee         Guarantee
                    announcement                          occurrence (date guarantee                                      complete    related-party
name                                       quota                                            type              Period
                    about guarantee                       of agreement)      amount                                       implemen guarantee
                    quota                                                                                                 t

Yantai Changyu
Pioneer Wine                                                                                Joint liability
                    2016.10.31             10,000         2016.11.05         10,000                           2years      No         Yes
Sales Limited                                                                               assurance
Company

Yantai Changyu
                                                                                            Mortgage;
Pioneer Wine        2016.12.22             11,984         2016.12.21         11,984                           10years     No         Yes
                                                                                            Pledge
Company Limited

Yantai Changyu
                                                                                            Joint liability
Wine Research
                    2016.12.22             72,176         2016.12.21         72,176         assurance;        10years     No         No
and Development
                                                                                            Mortgage
Company Limited

                                                                             Total of the actual
Total of the guarantee quota approved
                                                                             guarantee amount for
to subsidiaries during the report                                   82,176                                                                  32,176
                                                                             subsidiaries during the
period (B1)
                                                                             report period (B2)

Total of the guarantee quota approved                                        Balance of the actual
                                                                    82,176                                                                  32,176
to subsidiaries by the end of the report                                     guarantee for subsidiaries

                                                                                                                                                                                                     45
                                                                                                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
period (B3)                                                                 by the end of the report
                                                                            period (B4)

                                                        Guarantee between subsidiaries

                    Disclosure date of                                                                               Whether
                                                                                                                                Whether      or
                    related                            Actual date of       Actual                                   or not
Guarantee object                           Guarantee                                       Guarantee     Guarantee               not belong to
                    announcement                       occurrence (date guarantee                                    complete
name                                       quota                                           type          Period                  related-party
                    about guarantee                    of agreement)        amount                                   implemen
                                                                                                                                 guarantee
                    quota                                                                                            t

                                                                            Total of the actual
Total of the guarantee quota approved
                                                                            guarantee amount for
to subsidiaries during the report                                       0                                                                     0
                                                                            subsidiaries during the
period (C1)
                                                                            report period (C2)

                                                                            Balance of the actual
Total of the guarantee quota approved
                                                                            guarantee for subsidiaries
to subsidiaries by the end of the report                                0                                                                     0
                                                                            by the end of the report
period (C3)
                                                                            period (C4)

                                  Total of the Company’s guarantee amount(Total of above three major items)

                                                                            Total of the actual
Total of the approved guarantee quota                                       guarantee amount during
                                                                116,336                                                                 66,336
during the report period(A1+B1+C1)                                        the report period
                                                                            (A2+B2+C2)

Total of the approved guarantee quota                                       Balance of the actual
by the end of the report period                                 116,336 guarantee by the end of the                                     66,336
(A3+B3+C3)                                                                report period(A4+B4+C4)

The proportion of Actual total guarantee amount (A4+B4+C4) in the
                                                                                                                                          8.08%
Company’s net asset

                                                                                                                                                                                                 46
                                                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Among :

The amount of guarantee for shareholders, actual controllers and their
                                                                                   0
related parties(D)

The amount of debt guarantee for the guaranteed objects whose
                                                                                   0
asset-liability ratio is more than 70% directly or indirectly(E)

Total amount of guarantee that exceeds 50% of net assets(F)                      0

Total amount of the above-mentioned three items(D+E+F)                           0

Explanation for undue guarantees that have happened warranty
liability or may take joint payback liabilities during the report period   No
(if have)

Explanation for violating due process to provide external guarantee
                                                                           No
(if have)

   Specific explanation on adopting complex guarantee type
   No.
    Illegal external guarantee

   □Available            Not available

   There is no illegal guarantee situation during the report period.

   (3) Entrusting others to manage cash assets

    Financial management entrustment

   □Available            Not available


                                                                                                                                      47
                                                                                                  Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
There is no financial management entrustment during the report period.

 Loan entrustment

□Available     Not available

There is no loan entrustment during the report period.

(4) Other important contracts

□Available     Not available

There are no other important contracts during the report period.

18.Social Responsibility

(1)Precise poverty
①Summary of annual precise poverty
No.
②Working condition of Listed company’s annual precise poverty
No.
③Subsequent precise poverty plan
No.
(2)Other social responsibility

Please see “China Securities Newspaper” , “Securities Times” and 2016 Annual Social Responsibility Report disclosed on www.cninfo.com.cn .

The listed company and its subsidiaries are whether or not to belong to the heavy pollution industry stipulated by the state environmental
protection department.
                                                                                                                                                        48
                                                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
□Yes    No
Whether or not to public social responsibility
Yes      □No

                                                        Enterprise social responsibility
Enterprise property      Whether     including Whether      including Whether          including Standard of disclosure
                         environmental         social information        information          in Domestic standard      Foreign standard
                         information                                     governance aspect
Private                  Yes                   Yes                       Yes                     Listed      Company other
                                                                                                 social responsibility
                                                                                                 guidance

Detail explaination
1. Whether the Company has passed Environment Management System                     Yes.
Certification(ISO14001)
2. Expenditure of environment protection in the firm-year(CNY‘0000)                630
3.Emission reduction performance of three wastes ‘waste gas, waste water and       All discharges with standards
waste residues’ for the Company
4.Investment of employee career development ability for improvement of employee     220
knowledge and technology
5. Social public donation                                                           186

19. Other Major issues

□Available Not available
There are no other major issues need to be explained during the report period.

20. Major issues of Company’s subsidiaries

□Available     Not available
                                                                                                                                                       49
                                                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report

                                  VI. Changes in Shares and the Shareholders’ Situation

1. Changes in shares

(1) Changes in shares

                                                                                                                              Unit: share
                         Amount before this change                                   Change (+, -)                     Amount after this change
                                                                               Transfer
                                              Percentage Allot   Distribute    other                                                      Percentage
                         Amount                          new     bonus share   capital to others Sub total             Amount             %
                                              %          share                 share
                                                                               capital
1、Unrestricted shares          685,464,000       100%                                                                    685,464,000           100%

(1)、A shares                   453,460,800     66.15%                                                                    453,460,800         66.15%

(2)、B shares                   232,003,200     33.85%                                                                    232,003,200         33.85%

2、Total shares                 685,464,000       100%                                                                    685,464,000           100%

Cause of share change
□Available Not available
Approval of share change
□Available Not available
Transfer of changed shares
□Available Not available



                                                                                                                                                     50
                                                                                                  Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report

The influence of share change on the financial indicators such as basic earnings per share, diluted earnings per share of the latest year and the
latest period, net asset per share belonging to the Company’s common shareholders, etc.
□Available Not available
Other contents the Company thinks necessary or securities regulatory departments ask to make public.
□Available Not available


(2) Changes in restricted shares


□Available     Not available


2. Securities issuance and listing situation


(1) Securities issuance (exclude preferred share) during 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


                                                                                                                                                        51
                                                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
3. Situation for shareholders and the actual controllers

(1) The number of shareholders of the Company and the shareholdings
                                                                                                                                          Unit:share
                                                                                                       Total number of preferred
                             Total      number       of            Total number of preferred
                                                                                                       shareholder recovering
                             shareholders by the end of            shareholder recovering
Total shareholders in                                                                                  voting power by the end of
                      41,984 last month before the 42,254          voting power by the end 0                                            0
the report period                                                                                      last month before the
                             disclosure day of the                  ofreport period (if have)
                                                                                                       disclosure day of the annual
                             annual report                          (see note 8)
                                                                                                       report (if have) (see note 8)
                                Shareholders holding more than 5% or the top 10 shareholders holding situation
                                                                                                    Number                 Pledged or frozen
                                                                                        Changes
Name               of                                Percentag Shares held until the during the of            Number of
                      Character of shareholders      e         end of the report period report      restricte unrestricted
Shareholders                                         (%)                                                                   Share status Amount
                                                                                                    d         shares
                                                                                        period
                                                                                                    shares
YANTAI
                 Domestic       non-state-owned                                                                    345,473,85
CHANGYU GROUP                                          50.40%             345,473,856 0                                                           0
                 legal person                                                                                               6
CO. LTD.
GAOLING          Foreign legal person
                                                           3.11%            21,300,919 0                           21,300,919                     0
FUND,L.P.
CHINA            State-owned legal person
SECURITIES                                                 2.32%            15,924,155 -73,300                     15,924,155                     0
FINANCE CORP
BBH    BOS   S/A
FIDELITY FD - Foreign legal person                         2.22%            15,241,826 -334,300                    15,241,826                     0
CHINA FOCUS FD
TIANAN           Domestic       non-state-owned            1.16%             7,939,166 7,939,166                     7,939,166                    0
                                                                                                                                                       52
                                                                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
PROPERTY        legal person
INSURANCE CO.,
LTD—BAOYING
NO.1
NORGES BANK     Foreign legal person                       0.96%                 6,584,748 886,296                       6,584,748                    0
GUOTAI JUNAN
SECURITIES(HONG Foreign legal person                       0.78%                 5,321,478 651,906                       5,321,478                    0
KONG) LIMITED
CENTRAL HUIJIN
ASSET
                State-owned legal person                   0.69%                 4,761,200 0                             4,761,200                    0
MANAGEMENT
LTD.
BBH A/C
VANGUARD
EMERGING        Foreign legal person                       0.55%                 3,788,487 72,700                        3,788,487                    0
MARKETS STOCK
INDEX FUND
FIDELITY CHINA
SPECIAL         Foreign legal person                       0.55%                 3,779,202 0                             3,779,202                    0
SITUATIONS PLC

Strategic investors or legal result of the placement of new
                                                            No
shares to become a top 10 shareholders(if have)(see note 3)
                                                            Among the top 10 shareholders, Yantai Changyu Group Company Limited has no
The explanation for the associated relationship and
                                                            associated relationship or accordant action relationship with the other 9 listed shareholders,
accordant action
                                                            and the relationship among the other shareholders is unknown.
                                                    The top 10 shareholders with unrestricted shares
Name of Shareholders                                                               Number of unrestricted Type of share
                                                                                                                                                           53
                                                                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                                                                   shares held until the end of
                                                                                                                Type of share           Amount
                                                                                   the year
YANTAI CHANGYU GROUP CO. LTD.                                                                     345,473,856 A                            345,473,856
GAOLING FUND,L.P.                                                                                  21,300,919 B                              21,300,919
CHINA SECURITIES FINANCE CORP                                                                      15,924,155 A                              15,924,155
BBH BOS S/A FIDELITY FD - CHINA FOCUS FD                                                           15,241,826 B                              15,241,826
TIANAN PROPERTY INSURANCE CO., LTD—BAOYING NO.1                                                     7,939,166 A                              7,939,166
NORGES BANK                                                                                          6,584,748 B                              6,584,748
GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED                                                            5,321,478 B                              5,321,478
CENTRAL HUIJIN ASSET MANAGEMENT LTD.                                                                 4,761,200 A                              4,761,200
BBH A/C VANGUARD EMERGING MARKETS STOCK INDEX FUND                                                   3,788,487 B                              3,788,487
FIDELITY CHINA SPECIAL SITUATIONS PLC                                                                3,779,202 B                              3,779,202
The explanation for the associated relationship and accordant action of the top 10 Among the top 10 shareholders, Yantai Changyu Group Company
shareholders with unrestricted shares, the the associated relationship and Limited has no associated relationship or accordant action
accordant action between the top 10 shareholders with unrestricted shares and the relationship with the other 9 listed shareholders, and the relationship
top 10 shareholders                                                                among the other shareholders is unknown.
Explanation for the top 10 shareholders who involved in financing activities and The top 10 shareholders do not involve in financing activities and
stock trading business (if have)(see note 4)                                       stock trade business.
Whether or not the Company’s top 10 common shareholders and shareholders with unrestricted shares take agreed repurchase trading during the
report period
□Yes      No
There is no agreed repurchase trading taken by the Company’s top 10 common shareholders and shareholders with unrestricted shares during the
report period.

(2) Situation for the controlling shareholders of the Company

Property of holding shareholders
Type of holding shareholders: Legal representative
                                                                                                                                                          54
                                                                                                      Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                                   Legal             Establishment Organization
  Name of controlling shareholder                                                                   Main business
                                                   representative    date          code
                                                                                                   Production and distribution of wine,
                                                                                                   healthy liquor, distilled liquor and
                                                                                    91370600265645 non-alcohol beverages, planting of
  Yantai Changyu Group Co. Ltd.                    Sun Liqiang       1997.04.27
                                                                                    8244           agricultural products and export
                                                                                                   business under the scope of
                                                                                                   permission.
  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

  Property of actual controllers: domestic other institutions; foreign other institutions
  Type of actual controllers: Legal representative
Name        of     actual Legal           Establishment Organization
                                                                     Main business
controllers               representative date           code
                                                                     Under state permission, property investment, tenancy of machine and facility,
Yantai Yuhua Investment
                          Jiang Hua       2004.10.28 76779294-7 wholesale and retail of construction material, chemical products (chemical
& Development Co. Ltd
                                                                     hazard products excluded), hardware and electronical products, grape
                                                                                                                                                            55
                                                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                                                plantation.
                                                                Directly or indirectly conduct the production and distribution of food
ILLVA Saronno Holding Augusto                                   products (alcoholic products included) as well as industrial, commercial,
                                     1984.07.25    -
Spa                   Reina                                     financial and service activities of any other kinds through joint-stock
                                                                companies and organizations
                                                                International Finance Corporation is one of the members of World Bank,
                                                                mainly dedicated to investment in private sectors of developing countries
International   Finance Philippe LE                             while providing technical support and consultation service. The corporation
Corporation             HOUEROU 1956.07.25         -           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
                                                                business; Agency of venture capital investment business of other venture
Investment Holdings Co., Chen Dianxin 2009.02.12   00426068-6
                                                                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 )
                                                                                                                                                     56
                                                                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Equity situation for the
other domestic listed
companies controlled by No
the actual controller
during the report period
  Changes of the actual controllers during the report period

  □Available     Not available

  There are no changes in actual controllers during the report period.

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




                                                                                                                                                           57
                                                                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report




                                                                                       Yantai Guofeng Investment
                                                           Illva Saronno Holding Spa   Holdings Co., Ltd




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
                                                                                                                                                                 58
                                                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report

□Available     Not available

(5) Shares reduction situations of holding shareholders, actual controllers, restructuring side and other commitment subjects

□Available     Not available




                                             VII. Related Situation of Preferred Shares
□Available     Not available

There are no preferred shares during the report period.




                                                                                                                                                   59
                                                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report



                         VIII. Situation for Directors, Supervisors, Senior Management and Staff


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

                                                                                  Shares Increased
                                                                                                   Decreased
                                                         Beginning Ending held at the shares                    Other     Shares held at
                                                                                                     shares
   Name              Post            Status   Gender Age date of the date of the beginning during             changes of the end of the
                                                                                                   during the
                                                            post        post       of the   the               shares held    period
                                                                                                     period
                                                                                   period  period
              Chairman to the      present
Sun Liqiang   Board of Directors             M       69   1997.09.18 2019.05.27          0           0             0             0                      0
                                   incumbent
              Vice-chairman to
Zhou          the Board of         present
Hongjiang     Directors and                  M       52   2002.05.20 2019.05.27          0           0             0             0                      0
                                   incumbent
              General manager
              Director and         present
Leng Bin      Vice-general                   M       54   2000.08.22 2019.05.27          0           0             0             0                      0
              manager              incumbent
              Director,
              Vice-general         present
Qu Weimin     manager and                    M       59   1997.09.18 2019.05.27          0           0             0             0                      0
              Secretary to the     incumbent
              Board of Directors
                                   present
Zhang Ming    Director                         M     43   2016.05.26 2019.05.27          0           0             0             0                      0
                                   incumbent
                                   leaving the
Chen Jizong   Director                         M     41   2013.05.14 2016.05.26          0           0             0             0                      0
                                   post
Augusto       Director                        M
Reina                              present           76   2006.12.07 2019.05.27          0           0             0             0                      0
                                                                                                                                                    60
                                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                               incumbent
Aldino                         present
Marzorati    Director                      M   64   2006.12.07 2019.05.27    0          0             0             0                      0
                               incumbent
Antonio                        present
Appignani    Director                      M   78   2006.12.07 2019.05.27    0          0             0             0                      0
                               incumbent
                               present
Dai Hui      Director                      F   51   2010.09.01 2019.05.27    0          0             0             0                      0
                               incumbent
             Independent       leaving the
Xiao Wei     director                      M   56   2010.09.01 2016.05.26    0          0             0             0                      0
                               post
Wang         Independent       present
Zhuquan      director                      M   51   2014.05.23 2019.05.27    0          0             0             0                      0
                               incumbent
                               Present
Wang Shigang Independent
             director                      M   51   2011.05.10 2019.05.27    0          0             0             0                      0
                               incumbent
             Independent       Present
Luo Fei      director                      M   64   2016.09.23 2019.05.27    0          0             0             0                      0
                               incumbent
             Independent       Present
Liu Yan      director                      F   43   2016.09.23 2019.05.27    0          0             0             0                      0
                               incumbent
Kong         Chairman to the   present
Qingkun      Board of                    M     44   2013.05.14. 2019.05.27   0          0             0             0                      0
             Supervisors       incumbent
                               present
Zhang Lanlan Supervisor                    F   47   2013.05.14. 2019.05.27   0          0             0             0                      0
                               incumbent
                               present
Liu Zhijun   Supervisor                    M   36   2016.05.26 2019.05.27    0          0             0             0                      0
                               incumbent
                               leaving the
Guo Ying     Supervisor                    F   42   2013.05.14. 2016.05.26   0          0             0             0                      0
                               post
             Vice-general      present
Yang Ming    manager                       M   58   1998.08.12      -        0          0             0             0                      0
                               incumbent
Li Jiming    Chief engineer    present     M   50   2001.09.14      -        0          0             0             0                      0
                                                                                                                                       61
                                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                incumbent
             Vice-general       present
Jiang Hua    manager                      M      53    2001.09.14   -    0          0             0             0                      0
                                incumbent
             Vice-general       present
Sun Jian     manager                      M      50    2006.03.22   -    0          0             0             0                      0
                                incumbent
                                present
Jiang Jianxun Finance manager             M      50    2002.05.20   -    0          0             0             0                      0
                                incumbent
Total                --              --     --    --       --       --   0          0             0             0                      0




                                                                                                                                   62
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
2. Changes in the Company’s directors, supervisors and senior management

Available      □Not available
     Name          Position              Type                          Date              Reason
                             Leaving the post owing to
 Chen Jizong     Director    expiration of the term of          2016.05.26                   -
                             office
                             Leaving the post owing to
                 Independe
 Xiao Wei                    expiration of the term of          2016.05.26                   -
                 nt director
                             office
                             Leaving the post owing to
 Guo Ying        Supervisor expiration of the term of           2016.05.26                   -
                             office

3. Situation for work experience

The professional background, main work experiences and present positions of the Company’s
directors, supervisors and senior management
(1) Members of Board of Directors
Mr. Sun Liqiang, male, 69, Chinese, with college degree, senior economist, began serving as
chairman of the Company from 18th September, 1997 and has held the position ever since.
Now, he concurrently is party secretary, chairman and general manager of Changyu Group.
He was representative of the 10th and 11th National People’s Congress.
Mr. Zhou Hongjiang, male, 52, Chinese, with doctor degree, senior engineer, began serving
as director, vice-chairman and general manager of the Company from 20th May, 2002 and has
held the position ever since. Now, he concurrently is vice chairman of Changyu Group and
the representative of the 12th National People’s Congress. He was vice general manager of the
Company and general manager of the Sale Company.
Mr. Leng Bin, male, 54, Chinese, with master degree, senior accountant, began serving as
director of the Company from 15th June, 2000 and has held the position ever since. Now, he
concurrently is director of Changyu Group. He was chief accountant and certified accountant
of Yantai Radio Regulatory Commission and vice section chief and section chief of Yantai
Audit Bureau.
Mr. Qu Weimin, male, 59, Chinese, bachelor of engineering,senior economist, began serving
as director, vice general manager and concurrently as secretary to the board of directors of the
Company from 18th September, 1997 and has held the position ever since. He worked at
Yantai Commission for Restructuring the Economic System and Research Office of Yantai
Government and has 20 years of experience in the aspect of macroeconomic study and
enterprise operation and management.
Mr. Zhang Ming, male, 43, Chinese, with bachelor degree, senior engineer, is now chairman
of Yantai Guofeng Investment Holding Co., Ltd. He was planner of Yantai Synthetic Leather
General Factory, plan specialist of business department, deputy section chief of plan and
statistic section in assets management department and section chief of plan and statistic
section in assets management department in Yantai Wanhua Synthetic Leather Group Co.,
                                                                                                      63
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Ltd, risk control section chief of Yantai Guofeng Investment Holding Co., Ltd. and
concurrently director and vice general manager of Yantai Guoyu Finance Lease Co., Ltd, vice
general manager and secretary to the board of directors of Wanhua Efficient Technology
Group Co., Ltd. and general manager of Yantai State-owned Asset Management Co., Ltd.
Mr. Augusto Reina, male, 76, Italian, is now 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 27th April, 2006.
Mr. Aldino Marzorati, male, 64, Italian, with bachelor degree, is now 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 27th April, 2006.
Mr. Antonio Appignani, male, 78, Italian, with bachelor degree, 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.
Ms. Dai Hui, female, 51, Chinese, MBA, is now consultant of IFC, director of Changyu
Group Company and director of Listed Company. She was former project manager of
Government Loan Enlending 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).
Mr. Wang Shigang, male, 51, Chinese, MBA and Certified Public Accountant, is now the
board chairman of Shandong Tianhengxin Construction Cost Consultation Co. Ltd.. He
previously served as independent director of the Company. He acts as the independent
director again from 14th May, 2013.
Mr. Wang Zhuquan, male, 51, Chinese, doctor of management (accountancy), first batch of
national accounting academic leading personals of Financial Department, the entrant of
accountant master cultivation project of Financial Department, outstanding teacher of
Shandong province, Government Special Allowance expert, acted as independent director
from 13th May, 2010 to 12th May, 2013. Now he is the professor and the doctoral supervisors
of the Ocean University of China as well as independent director of the some listed
companies which could be exemplified as Qingdao DoubleStar Co., Ltd. He acts as the
independent director of the Company again from 23rd May, 2014.
Mr. Luo Fei, male, 64, Chinese, with doctor degree, visiting scholar of University of Toronto,
doctoral supervisors, Government Special Allowance expert, first batch of trans-century
subject (academic) leading personals of Financial Department. He successively served as the
dean of accounting college in Zhongnan University of Economics and the dean of accounting
college in Zhongnan University of Economics and Law. He focuses on the study of financial
accounting, cost accounting, financial management, and so on. He has worked in companies

                                                                                                     64
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
for many years and has practical working experience with companies. Now he is serving as
independent director of the Company.
Ms. Liu Yan, female, 43, Chinese, with master degree, was honored as national outstanding
lawyer in 2005. Her main practice areas include issuing and listing of domestic and foreign
stocks, merger and acquisition and foreign investment. She now is the partner of Tian Yuan
Law Firm and serving as independent director of the Company.
(2) Members of board of supervisors
Mr. Kong Qingkun, male, 44, Chinese, MBA and economist, served as the section member of
production department in the healthy liquor branch office, clerk and vice director of general
manager office. He now is director of general manager office.
Ms. Zhang Lanlan, female, with bachelor degree and economist, served as vice-manager of
the Company’s import/export company, manager of import department. She now is director
of board of directors’ office.
Mr. Liu Zhijun, male, 36, Chinese, with bachelor degree, worked in foreign fund section of
Economy and Trade Bureau in Longkou economic development zone, served as news section
member of propaganda department in Longkou Municipal Committee, member of
propaganda and mass work section, member of planning section, vice-director member of
programming development and enterprise distribution section, vice-director member and
deputy chief of programming development section. He now is supervisor of the Company.
(3) Other senior managers
Mr. Yang Ming, male, 58, Chinese, with bachelor degree, application researcher, has been
serving as vice general manager of the Company since 12th August, 1998.
Mr. Li Jiming, male, 50, Chinese, with doctor degree, application researcher, has been
serving as chief engineer of the Company since 14th September, 2001.
Mr. Jiang Hua, male, 53, Chinese, with master degree, senior engineer, has been serving as
vice general manager of the Company since 14th September, 2001.
Mr. Sun Jian, male, 50, Chinese, MBA and economist, has been serving as vice general
manager of the Company since 22nd March, 2006.
Mr. Jiang Jianxun, male, 50, Chinese, MBA and accountant, has been serving as Financial
Manager of the Company since 20th May, 2002.




                                                                                                     65
                                                                                            Yantai Changyu Pioneer Wine Co. Ltd. 2016 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




                                                                                                                                                  66
                                                                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report

Post at other companies

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

Disciplinary actions taken by securities regulators in recent 3 years to the Company’s directors, supervisors and senior management both on the
job and left during the report period
□Available     Not available

4. Salary of directors, supervisors and senior management

Decision-making process, the basis of determination, the actual payment 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
Proposal on Assessment Methods of the Company’s Senior Officers’ Performance from 2014 to 2017 which was passed during the Board of
Directors’ meeting.




                                                                                                                                                          67
                                                                                                      Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report


Salary of directors, supervisors and senior management during the report period
                                                                                                                                  Unit: CNY’0000
                                                                                                                                    Whether get
                                                                                                               Total reward from
                                                                                                                                    reward from
           Name                            Post                   Gender    Age              Status              the Company
                                                                                                                                 related parties of
                                                                                                                   before tax
                                                                                                                                   the Company
Sun Liqiang                 Chairman to the Board of          M
                            Directors                                             69 present incumbent                        126.89 No

Zhou Hongjiang              Vice-chairman to the Board of     M
                            Directors and general manager                         52 present incumbent                        126.77 No

Leng Bin                    Director and vice-general         M
                            manager                                               54 present incumbent                          89.39 No
                            Director, Vice-general manager
Qu Weimin                   and Secretary to the Board of     M                   59 present incumbent                          89.11 No
                            Directors
Zhang Ming                  Director                          M                   43 present incumbent                               0 No

Chen Jizong                 Director                          M                   41 leaving the post                                0 No

Augusto Reina               Director                          M                   76 present incumbent                               0 No

Aldino Marzorati            Director                          M                   64 present incumbent                               0 No

Antonio Appignani           Director                          M                   78 present incumbent                               0 No

Dai Hui                     Director                          F                   51 present incumbent                               0 No

Xiao Wei                    Independent Director              M                   56 leaving the post                                5 No

Wang Zhuquan                Independent Director              M                   52 present incumbent                               5 No

Wang Shigang                Independent Director              M                   51 present incumbent                               5 No


                                                                                                                                                            68
                                                                                                  Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report

Luo Fei                     Independent Director             M                  64 present incumbent                             0 No

Liu Yan                     Independent Director             F                  43 present incumbent                             0 No

Kong Qingkun                Chairman to the Board of         M
                            supervisors                                         44 present incumbent                        60.63 No

Zhang Lanlan                supervisor                       F                  47 present incumbent                        19.26 No

Liu Zhijun                  supervisor                       M                  36 present incumbent                             0 No

Guo Ying                    supervisor                       F                  42 leaving the post                              0 No

Yang Ming                   Vice-general manager             M                  58 present incumbent                        85.79 No

Li Jiming                   Chief Engineer                   M                  50 present incumbent                        79.98 No

Jiang Hua                   Vice-general manager             M                  53 present incumbent                        85.62 No

Sun Jian                    Vice-general manager             M                  50 present incumbent                        77.74 No

Jiang Jianxun               Finance manager                  M                  50 present incumbent                        60.49 No

Total                                        -                    -         -                -                            916.67              -

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

□Available     Not available


5. Staff of the Company

(1) Staff number, specialty constitution and education degree

Incumbent staff number of parent company (people)                                                                                                  1,625
Incumbent staff number of major subsidiary companies (people)                                                                                      3,002
                                                                                                                                                        69
                                                                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Total incumbent staff (people)                                                                                                                       4,627
Total staff getting paid in current period (people)                                                                                                  4,627
Retired staff number whose expenses are undertaken by parent                                                                                             0
company or subsidiary companies (people)
                                                           Specialty constitution
                                 Category                                                       Number of people (people)
Production staff                                                                                                                                     1,331
Sales staff                                                                                                                                          2,780
Technical staff                                                                                                                                        152
Financial staff                                                                                                                                        145
Administrative staff                                                                                                                                   219
Total                                                                                                                                                4,627
                                                             Education degree
                                 Category                                                            Number (People)
Bachelor and above                                                                                                                                   1,387
Junior College                                                                                                                                       1,953
Technical secondary school                                                                                                                             550
Senior high school and below                                                                                                                           737
Total                                                                                                                                                4,627

(2) Remuneration policy

The Company builds and improves the remuneration and welfare system, including salary system, incentive mechanism, social security and
health insurance and so on, to make sure that all staff could be insured. In accordance with the law, the Company buys social old-age insurance,
medical insurance, occupational injury insurance, unemployment insurance and maternity insurance, and pay housing fund for staff. Based on
the principle of “distribution according to work, equal pay for equal work”, the Company pays the staff’s remuneration timely. With the increase
of the Company’s profitability, the Company steadily improves the staff’s remuneration and welfare, and provides the competitive salary income
and development space of equal opportunity for staff.

                                                                                                                                                          70
                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report

(3) Training plan

In order to further improve the employees’ comprehensive quality and professional skill, the
2017 training plan for the Company’s major employee is shown as follows:
① Senior and Middle-level Managers
Firstly, it is commonality training. Training topics related with industrial development,
business orientation and management philosophy would be chosen to open the senior and
middle-level managers’ minds, to promote operation philosophy and also to improve
scientific decision-making capacity and operation capacity. The Company plans to employ
professional lecturers to give lectures in the company or through remote internet videos.
There will be four topics arranged for senior and middle-level managers within the year, one
topic in each quarter and one to two days for each topic.
Secondly, it is professional training. Based on individual work, senior and middle-level
managers would be organized in batches to attend high-end forum and summit of entrepreneur
and to visit domestic and foreign successful enterprises for studying. Middle-level managers
would be encouraged to take participation in MBA and other master degree. The professional
managers related with finance, equipment, safety, technology quality and other professional
fields would be organized to attend vocational qualification test to get vocational qualification
certificate. Senior and middle-level managers would attend special training organized by the
Company’s professional management department for safety, technology, equipment, finance
and tourism and so on, no less than twice a year.
② Section Chief and Ordinary Staff Members
Firstly, it is commonality training. Courses would be arranged in order to improve capability
of management, innovation and execution. In addition, professional lecturers or college
teachers would be employed to give lectures in the company, twice a year and one day for
each time. They would attend commonality trainings about enterprise culture, rules and
regulation and various alcohol products knowledge which should be known and grasped.
Secondly, it is professional training. Professional and responsible senior managers would
choose one book for their subordinate administrative personnel to study on their own. At the
end of the year these administrative personnel should propose suggestion for the Company’s
development on the basis of their own work. Eligible general administrative personnel would
be encouraged to take participation in MBA and other master degree. The professional
administrative personnel related with finance, equipment, safety, technology quality and other
professional fields would be organized to attend vocational qualification test to get vocational
qualification certificate. Based on their undertaking work, they would attend special training
organized by the Company’s professional management department no less than twice a year,
which involve safety, technology, equipment, finance, tourism and comprehensive
management and other special projects.
③ Marketing Personnel
Firstly, it is commonality training. They would study training materials related with the
Company’s management system, product knowledge and sales responsibility system.
Secondly, it is professional training. For personnel whose level is or above manager assistant
in the city marketing management company, the Company would invite professional lecturers

                                                                                                          71
                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report

to the company or by means of remote internet video to give lectures about successful cases
and economic situation research in current domestic and foreign wine industry, once a quarter
and one day for each time. For city marketing manager, the Company would strengthen their
training for marketing skills as well as execution ability of the company’s sales policy. The
Company would invite its professional management cadre or employ professional lecturers to
take closed training for these managers, once at the beginning of each month and one day for
each time. For business directors and other personnel, every marketing management company
should be based on the local business and adopt training methods of employing professional
lecturers combined with going outside for visit and learning so as to make all marketing
personnel within its jurisdiction attend training about successful marketing cases and
marketing management philosophy. The frequency of this training is once a quarter and one
day for each time.

(4) Labor outsourcing

□Available    Not available




                             IX. Corporate Governance


                                                                                                         72
                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
1. Current Corporate Governance Situation of the Company

(1) About shareholders and shareholders’ meeting
The Company has 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 carried out the cumulative voting system. At present, the Company has four
independent directors accounting for about one three of all directors, and the number and
composition of board of directors was basically in accord with requirements of regulations
and also Articles and Associations. All directors of the Company could work in the light of
regulations including Rules of Board of Directors’ Procedure and Working Rules for
Independent Directors, punctually attended board of directors’ and shareholders’ meetings,
actively took part in relevant knowledge training, knew very well about the laws and
regulations concerned, had a deep knowledge and long experience of practitioners, and
performed their duties according to the law and regulations. The Board of Directors
convened the meetings in accordance with related rules and regulations.
(4) About supervisor and board of supervisors
The Company strictly elected all supervisors in light of Company Laws and Articles of
Associations. At present, board of supervisors has three people among which one supervisor
is representative for staff, the number and composition of board of supervisor was in accord
with requirements of regulations and rules. All supervisors of the Company could follow the
requirement of Rules of Board of Supervisors’ Procedure, insist the principle of
responsibility to all shareholders, seriously perform their duties, effectively supervise and
present their independent opinion on important issues, interrelated deals, financial status, the
duty performance of directors and managers of the Company.
(5) About performance evaluation and incentive system


                                                                                                       73
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
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 stakeholders
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 and improves Equipment Management Specification of Self-supporting
Base, Assessment Method of Equipment Management in Self-supporting Base, Changyu
Company Construction Opinions of A Level Material Base, Popularized Technology for
Each Company to Improve Internal Quality of Product in 2016, Daily Assessment Method
of Product Quality in 2016 , Monitoring Method of Quality Safety Risk for Changyu
Products,Implementation Instruction about Management and Control of Risks at Different
Levels for Wine Enterprise, Implementation Scheme about Investigation and Treatment of
Hidden Danger for Wine Enterprise,Specification Opinions of Advancing the Accelerated
Resolution of Market Feedback Problems, Management Methods of Preventing
Infringements of Intellectual Property Rights and Management Methods of Litigation
Warning, etc.

Whether or not there is significant variance between the Company’s actual situation of
corporate governance and the normative documents about listed company governance issued
by China Securities Regulatory Commission.
□Yes     No
There is no significant variance between the Company’s actual situation of corporate
governance and the normative documents about listed company governance issued by China
Securities Regulatory Commission.

2. Relative to the controlling shareholder, independence 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 and did not hold any post in the controlling parties. The

                                                                                                      74
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
 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 owns trademarks including “黄金冰谷”,
 “爱斐堡”, “爱菲堡”, “爱斐” and “AFIP”, etc. 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.
 (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.

 3. Situation for Horizontal Competition

 □Available    Not available

 4. Information for the shareholders’ meeting and temporary shareholders’ meeting held
 during the report period

 (1) Information for the shareholders’ meeting during the report period

                             Participation    Convening         Disclosure
Session     Meeting type                                                             Disclosure Index
                               ratio of         date               date

                                                                                                      75
                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                 investors
                                                                                     http://www.cninfo.com.
2015 Annual       Annual                                                             cn
Shareholders’ shareholders’ 62.28%            2016.05.26        2016.05.27         Notice of 2015 Annual
  Meeting        meeting                                                             Shareholders’ Meeting
                                                                                     Resolution
Notice of 2016                                                                       http://www.cninfo.com.
     First                                                                           cn
               Extraordinary
 Extraordinary                                                                       Notice of 2016 First
               Shareholders’ 63.08%            2016.09.23        2016.09.24
Shareholders’                                                                       Extraordinary
                 Meeting
   Meeting                                                                           Shareholders’ Meeting
  Resolution                                                                         Resolution

     (2) Request for convening temporary shareholders’ meeting by priority shareholders
    owing recovered voting right

    □Available    Not available

    5. 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 the
                    Required
                               Personal Communication Authorized                              meetings
       Name        attendance                                                      Absence
                              attendance  attendance  attendance                           personally for
                       time
                                                                                             successive
                                                                                                twice
 Xiao Wei                      4           3                  1                0         0 No
 Wang Shigang                  6           3                  3                0         0 No
 Wang Zhuquan                  6           3                  3                0         0 No.
 Luo Fei                       2           0                  2                0         0 No.
 Liu Yan                       2           0                  2                0         0 No.
 Attendance time of
 independent directors for the
                                                                                                                2
 shareholders’ meeting
 without voting rights
    Explanation for failed to personally   attend the Board of Directors’ meetings for successive
    two times
    No

    (2) Any objections for the Company’s projects from the independent directors
    Whether or not the independent directors raised any objection for the Company’s projects
                                                                                                           76
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
□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
Whether or not the independent directors’ propositions are accepted by the Company
Yes       □No
Explanation on acceptance or refusal of the independent directors’ propositions to the
Company
During the report period, some independent directors propose suggestions on prudent
investment in tourism project of Changyu International Wine City. They thought that it is a
higher risk in the current background of slower growth of domestic economy. The Company
accepted the independent directors’ opinions and decided to suspend construction of the project.

6. Performance of the special committees under the Board of Directors during the
report period
(1) Summary report of the Board of Directors’ Audit Committee regarding
performance of duties
 On March 26th , 2016, 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 2015 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 results with the accountants, the production and operation
situations 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 2015 Annual Financial
Statement preliminarily examined by Deloitte Hua Yong Certified Public Accounts Co., Ltd.
and the preliminary audit opinions of that services.”
 On 27th April 2016, the Board of Directors’ Audit Committee deliberated and passed 2015
Annual Audit Report, Draft Proposal on 2015 Annual Profit Distribution, Proposal on
Renewal of Contract with the Present Certified Public Accountants firm, 2015 Annual
Self-assessment Report on Internal Control and 2016 Internal Audit Plan issued by Deloitte
Hua Yong Certified Public Accounts Co., Ltd.
All of committee members unanimously agree to submit the above proposals to the
Company’s 6th Session Board of Directors 12th Meeting for deliberation. The meeting reached
the following consensus:
(A) The clean-opinion auditing report on the Company’s 2015 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.
(B) 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.
(C) 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

                                                                                                      77
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Company’s 2015 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 2016 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, it is to take the audit of 2016 annual financial report and issue a Financial Audit
Report. On the other hand, it is to take the audit of 2016 annual internal control and issue an
Internal Control Audit Report.
The annual auditing fee for the above parts is CNY 1.98million, including travel expense and
all service charges.
(D) The Company’s 2015 Self-assessment Report on 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.
(E) The Company’s 2016 Internal Audit Plan is comparatively perfect and practicable, based
on which the Company’s Audit Department will conduct the 2016 annual internal audit.
 On 25th August 2016, the Board of Directors’ Audit Committee deliberated and passed
2016 Semiannual Report and Proposal on 2016 Semiannual Profit Distribution. The meeting
reached the following consensus:
The Company’s 2016 Semiannual Financial Statements reflected the Company’s financial
condition, operating results and cash flow truly, objectively and correctly.
As the Company just realized 2015 Annual Profit Distribution Scheme in middle July, we
propose neither to distribute profits for the first half of 2016 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.
All of Committee members unanimously agree to submit the above proposals to the
Company’s 7th Session Board of Directors 2nd Meeting for deliberation.
(2) Summary report of the Board of Directors’ Emolument Committee regarding
performance of duties
The Board of Directors’ Emolument Committee is responsible for assessment of the economy
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.
 Proposal on 2015 Assessment Results of the Company’s Senior Officers’ Performance was
deliberated and passed by the Board of Directors’ Emolument Committee on 27th April 2016,
who thought that this document was in compliance with Performance Assessment Methods
for Company’s Senior Executive from 2014 to 2017 approved by the Company’s 6th Session
Board of Directors’ 4th Meeting.
All committee members unanimously agree to submit the above proposals to the Company’s
6th Session Board of Directors 12th Meeting for deliberation.
During the report period, the Board of Directors’ Emolument Committee also examined the
2015 annual payroll records of the directors and the senior managers who receive salaries
from the Company and believes that the salaries of the Company’s directors, supervisors and
senior managers received from the Company is strictly assessed and delivered based on the

                                                                                                      78
                                                          Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
       Company’s economic responsibility assessment system. The salaries disclosed by the
       Company are in conformity with the actually paid amount.

       7. The work of the Board of Supervisors
       Whether or not the Board of Supervisors found any existence risk to the Company in
       oversight activities during the report period
       □Yes     No
       The Board of Supervisors has no objections to supervision matters during the report period.

       8. Performance Evaluation and Incentive situations of 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 business planning goals, this committee examined
       senior personals and also their responsible subsidiaries or departments according to their
       management achievement and index and took these as criterion 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 are basically equal to that of last year.


       9. Internal Control

       (1) Specific situations for significant defects of the internal control found during the
       report period

       □Yes       No


       (2) Self-assessment report on internal control

Disclosure date for full text of the
                                           2017.04.22
internal control self-assessment report
Disclosure index for full text of the      2016 Self Assessment Report on Internal Control disclosed on
internal control self-assessment report    China Securities Journal, Securities Times and www.cninfo.com.cn
                                           by the Company on 22nd April, 2017.
Percentage of total unit assets included
in scope of the assessment accounting
                                                                                                                    94.51%
for the Company’s total assets of
consolidated financial statements
Percentage of unit operating income
included in scope of the assessment
                                                                                                                    88.61%
accounting for the Company’s operating
income of consolidated financial

                                                                                                                79
                                                            Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
statements
                                          Standards of Defect Identification
       Category                        Financial report                                  Non-financial report
Qualitative criteria   Significant defects: one defect of internal         Significant defects: Any situations listed
                       control, individually or together with other        below appears, it can be regarded as
                       defects, has the reasonable probability to cause    significant defects.  Operation: Unable to
                       the significant misstatements, which can not be     achieve all operation target or key business
                       promptly prevented, or found and corrected          index, widely out of budget in various
                       timely in the financial report. For example:        aspects.  Safety accident effects: Cause no
                       Company’s Directors, Supervisors and Senior        less than one person death, or more than 3
                       Management have fraudulent practices;  The          person serious injuries.  Major negative
                       Company makes corrections for the published         effects: Negative information frequently
                       financial report;  The audit of external            appears in the medias with involving a wide
                       intermediary      agent      finds    significant   scope in the international and national
                       misstatement existing in the current financial      mainstream media.  Environment effects:
                       report, but the Company does not realize it         Create irreparable damages to environment,
                       during the operation process;  Negative             and cause massive public complains.
                       information frequently appears in the medias        Major defects: Any situations listed below
                       with involving a wide scope;                 The    appears, it can be regarded as major defects.
                       Company’s audit committee and internal audit        Operation: Unable to achieve partly
                       department makes an inefficient supervision for     operation target, a big margin out of budget in
                       internal control;  Other situations maybe           various aspects.  Safety accident effects:
                       cause significant misdirection which guides the     Without reaching the person loss or the
                       report users to make the right judgment.            number of serious injury of significant
                       Major defects : The defect of internal control,    defects.  Major negative effects: Negative
                       individually or together with other defects, has    news appears in the media with influencing a
                       the reasonable probability to cause the             wide scope in the provincial mainstream
                       significant misstatements, which can not be         media.  Environment effects: Cause heavy
                       promptly prevented, or found and corrected          environment damages and massive public
                       timely in the financial report, although the        complains, ought to carry out the significant
                       misstatements neither achieves nor exceeds the      remedial measures.
                       importance level but still arising the attention    General defects: Any situations listed below
                       of Board of Directors and management team.          appears, it can be regarded as general defects.
                        Failure to select and apply accounting              Operation: Other effects unable to
                       regulations in accordance with generally            constitute the significant defects or major
                       accepted accounting principles;  Failure to         defects.  Safety accident effects: Personal
                       establish the anti-fraud procedures and control     injury less than the quantitative standards of
                       measures;  Failure to set up corresponding          major defects.  Major negative effects:
                       control mechanism or to carry out and take          Other defects unable to constitute the
                       corresponding compensating control for the          significant defects or major defects. 
                       accounting treatments with irregular and            Environment effects: Other environment
                       special deal;  Negative news appears in the         effects unable to constitute the significant
                       media with influencing a wide scope;  One or        defects or major defects.
                       more defects exist in the control during the
                       process of the ending financial report, and the

                                                                                                                  80
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                          target of achieving truthfulness and integrality
                          cannot be reasonably guaranteed in the
                          financial report;  General defects refer to the
                          other control defects, which do not constitute
                          the significant and major defects.
Quantitative criterion    For total assets/Owner’s equity:                  For direct property loss:
                           Significant defects: misstatements ≧1%            Significant defects: More than CNY10
                           Major defects: 0.5%≦misstatements<1%             million
                           General defects: misstatements<0.5%                Major defects: CNY1 million-CNY10
                          For operation revenue:                             million (including 1 million)
                           significant defects: misstatements ≧1%            General defects: Less than CNY1 million
                           Major defects: 0.5%≦misstatements<1%
                           General defects: misstatements<0.5%
                          For pretax profit:
                           Significant defects: misstatements ≧5%
                           Major defects: 2%≦misstatements<5%
                           General defects: misstatements<2%
Number of significant                                                                                                    0
defect in financial
report
Number of significant                                                                                                    0
defect in non-financial
report
Number of major                                                                                                          0
defect in financial
report
Number of major                                                                                                          0
defect in non-financial
report




       10. Internal control audit report

       Available          □Not available

                                   Audit opinions of the internal control audit report
       We believe that Yantai Changyu Pioneer Wine Co., Ltd. kept effective internal control to financial
       report in all significant aspects in accordance with General Criteria of Company’s Internal Control
       and other related rules on 31st December, 2016.
       Disclosure of the internal control audit
                                                          Disclosure
       report
       Disclosure date for the full text of the           22ndApril, 2017
                                                                                                                    81
                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report

internal control audit report
                                               Internal Control Audit Report disclosed on China
Disclosure index for the full text of the
                                               Securities Journal, Securities Times and
internal control audit report
                                               www.cninfo.com.cn by the Company on 22nd April, 2017.
Opinion type of the internal control audit
                                               Standard without reserved opinion
report
Whether or not exists significant defects in
                                               No
non-financial reports

Whether or not the accounting firm issued non-standard opinions for the audit report of
internal control
□Yes      No
Whether the audit report of internal control issued by the accounting firm is in consistency
with the self-assessment report of the board of directors
Yes       □No




                   X. Related Situation of Corporation Bonds

Whether or not the Company has the corporation bonds issued in public, listed in the stock
exchange, not due on the annual report’s authorized issue date or failed to pay in full on the
due date.



                                                                                                          82
Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report




                                                      83
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report


                                        XI. Financial Report


1. Audit Report

   Type of audit opinion                             Standard unqualified audit opinion
   Date signed on audit report                       20th April, 2017
                                                     Deloitte Hua Yong certified public accountants co.,
   Audit agency name
                                                     Ltd. (special general partnership)

   Document No. of audit report                      De Shi Bao (Shen) Zi (17) No. P01956

   Certified public accountant's name                Li Xu, Li Yangang



                                             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 which comprise the consolidated and company's balance sheets as at 31st December 2016, 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 audit also includes evaluating the

                                                                                                                  84
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
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.

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 31st December
2016, 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 Hua Yong Certified Public Accountants Co., Ltd            Chinese Certified Public Accountant
(Special General Partnership)                                                      Li Xu
Shanghai, China                                                                 Li Yangang
                                                                             20th April, 2017




2. Financial report
   Unit: CNY
CONSOLIDATED BALANCE SHEETS
YEAR ENDED 31 DECEMBER 2016

ASSETS                                           Notes              Closing balance          Opening balance
                                                                         RMB                     RMB
CURRENT ASSETS
  Cash and bank                                   VI-1               1,391,517,607             1,285,362,414
  Notes receivable                                VI-2                 210,470,027               113,988,122
  Accounts receivable                             VI-3                 173,062,628               197,795,091
  Prepayments                                     VI-4                   2,175,606                 3,591,098
  Interest receivable                             VI-5                      24,200                 8,019,338
  Other receivables                               VI-6                  18,880,800                46,146,487
 Inventories                                      VI-7               2,248,609,740             2,260,852,964
 Non-current assets held for sale                 VI-8                   2,000,197                      -
  Other current assets                            VI-9                 169,522,242
                                                                    ____________                  48,449,551
                                                                                              ____________
Total current assets                                               4,216,263,047
                                                                    ____________               3,964,205,065
                                                                                              ____________
NON-CURRENT ASSETS
                                                                                                                  85
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
  Available-for-sale financial assets   VI-10                340,263                   402,814
  Fixed assets                          VI-11          4,683,187,493             3,089,245,185
  Construction in progress              VI-12          1,346,281,737             2,005,990,308
  Bearer biological assets              VI-13            201,428,980               192,198,283
  Intangible assets                     VI-14            483,815,080               463,899,916
  Goodwill                              VI-15            121,265,866               105,504,426
  Long-term prepaid expenses            VI-16            162,206,229               175,124,167
  Deferred tax assets                   VI-17            295,937,037               302,406,656
  Other non-current assets              VI-18             17,352,239
                                                      ____________                  45,234,641
                                                                                ____________
Total non-current assets                               7,311,814,924
                                                      ____________               6,380,006,396
                                                                                ____________
Total assets                                        11,528,077,971
                                                      ____________             10,344,211,461
                                                                                ____________




                                                                                                    86
                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
CONSOLIDATED BALANCE SHEETS
YEAR ENDED 31 DECEMBER 2016 - continued

LIABILITIES AND EQUITY                           Notes             Closing balance          Opening balance
                                                                        RMB                     RMB
CURRENT LIABILITIES
 Short-term borrowings                          VI-19                662,388,882               665,581,921
 Notes payable                                  VI-20                 38,900,000                29,000,000
 Accounts payable                               VI-21                545,231,319               569,278,368
 Receipts in advance                            VI-22                425,246,421               234,566,504
 Employee benefits payable                      VI-23                206,431,734               190,239,451
 Taxes payable                                  VI-24                144,042,600                41,285,107
 Interest payable                                                        563,613                   977,304
 Deferred income                                VI-25                 11,163,883                11,241,873
 Other payables                                 VI-26                546,305,310               509,226,395
 Non-current liabilities due within one year    VI-27                 71,799,093
                                                                   ____________                156,335,647
                                                                                             ____________
Total current liabilities                                         2,652,072,855
                                                                   ____________               2,407,732,570
                                                                                             ____________
NON-CURRENT LIABILITIES
 Long-term borrowings                           VI-28                 49,140,555                71,686,629
 Long-term payables                             VI-29                293,000,000                      -
  Deferred income                               VI-25                101,775,243                69,836,411
  Deferred tax liabilities                      VI-17                 24,908,410                34,350,349
  Other non-current liabilities                 VI-30                  7,696,222
                                                                   ____________                  4,047,476
                                                                                             ____________
Total non-current liabilities                                        476,520,430
                                                                   ____________                179,920,865
                                                                                             ____________
Total liabilities                                                 3,128,593,285
                                                                   ____________               2,587,653,435
                                                                                             ____________
EQUITY
  Share capital                                 VI-31                 685,464,000               685,464,000
  Capital reserve                               VI-32                 565,955,441               565,955,441
  Other comprehensive income                    VI-33                  (5,259,014)             (10,442,512)
  Surplus reserve                               VI-34                 342,732,000               342,732,000
  Retained earnings                             VI-35               6,620,118,562
                                                                   ____________               5,980,390,074
                                                                                             ____________
  Equity attributable to shareholders
    of the Company                                                  8,209,010,989             7,564,099,003
  Non-controlling interests                                           190,473,697
                                                                   ____________                 192,459,023
                                                                                             ____________
Total equity                                                        8,399,484,686
                                                                   ____________               7,756,558,026
                                                                                             ____________
Total liabilities and equity                                     11,528,077,971
                                                                   ____________             10,344,211,461
                                                                                             ____________

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

The financial statements on pages 3 to 100 were signed by the following:


Legal Representative: _________________________________

Person in Charge of the Accounting Body: _________________

Chief Accountant: ____________________________________



                                                                                                                 87
                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
BALANCE SHEET OF THE COMPANY
YEAR ENDED 31 DECEMBER 2016

ASSETS                                  Notes          Closing balance          Opening balance
                                                            RMB                     RMB
CURRENT ASSETS
  Cash and bank                         XIV-1             269,460,060               280,818,833
  Notes receivable                      XIV-2               1,114,200                38,429,319
 Accounts receivable                    XIV-3               3,326,683                 2,392,870
 Prepayments                            XIV-4                 702,647                   445,619
  Interest receivable                    VI-5                  24,200                 8,019,338
  Dividend receivable                   XIV-5             531,819,113               788,092,349
  Other receivables                     XIV-6           3,582,532,862             5,734,456,129
 Inventories                            XIV-7             792,732,418               728,173,107
 Non-current assets held for sale       VI-8                2,000,197                      -
  Other current assets                                     20,085,058
                                                       ____________                  22,700,317
                                                                                 ____________
Total current assets                                    5,203,797,438
                                                       ____________               7,603,527,881
                                                                                 ____________
NON-CURRENT ASSETS
  Available-for-sale financial assets    VI-10                   -                         -
  Long-term equity investments          XIV-8           1,834,341,541             1,423,725,152
  Fixed assets                          XIV-9             347,481,417               369,506,014
  Construction in progress              XIV-10                500,000                 7,990,777
  Bearer biological assets              XIV-11            123,036,693               110,961,189
  Intangible assets                     XIV-12             72,002,372                74,381,525
 Deferred tax assets                    XIV-13             26,985,252                37,938,692
  Other non-current assets              XIV-14          2,617,457,460
                                                       ____________                        -
                                                                                 ____________
Total non-current assets                                5,021,804,735
                                                       ____________               2,024,503,349
                                                                                 ____________
Total assets                                          10,225,602,173
                                                       ____________               9,628,031,230
                                                                                 ____________




                                                                                                     88
                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
BALANCE SHEET OF THE COMPANY
YEAR ENDED 31 DECEMBER 2016 - continued

LIABILITIES AND EQUITY                          Notes          Closing balance          Opening balance
                                                                    RMB                     RMB
CURRENT LIABILITIES
  Short-term borrowings                         XIV-15           500,000,000               601,297,447
 Accounts payable                               XIV-16           247,568,857               273,091,182
  Receipts in advance                           XIV-17             6,000,000                      -
  Employee benefits payable                     XIV-18            70,812,761                71,058,615
  Taxes payable                                 XIV-19            33,266,225                19,331,311
  Interest payable                                                   563,613                   977,304
  Deferred income                                                  1,767,054                 1,767,054
  Other payables                                XIV-20           368,310,362               994,821,281
  Non-current liabilities due within one year   XIV-21            29,227,200
                                                               ____________                127,345,600
                                                                                         ____________
Total current liabilities                                       1,257,516,072
                                                               ____________               2,089,689,794
                                                                                         ____________
NON-CURRENT LIABILITIES
 Long-term borrowings                           VI-28                   -                   56,761,600
 Deferred income                                                  19,933,699                21,824,352
 Other non-current liabilities                                     2,499,403
                                                               ____________                  1,944,955
                                                                                         ____________
Total non-current liabilities                                     22,433,102
                                                               ____________                 80,530,907
                                                                                         ____________
Total liability                                                 1,279,949,174
                                                               ____________               2,170,220,701
                                                                                         ____________
EQUITY
  Share capital                                  VI-31            685,464,000               685,464,000
  Capital reserve                               XIV-22            557,222,454               557,222,454
  Surplus reserve                                VI-34            342,732,000               342,732,000
  Retained earnings                                             7,360,234,545
                                                               ____________               5,872,392,075
                                                                                         ____________
Total equity                                                    8,945,652,999
                                                               ____________               7,457,810,529
                                                                                         ____________
Total liabilities and equity                                  10,225,602,173
                                                               ____________               9,628,031,230
                                                                                         ____________




                                                                                                             89
                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
CONSOLIDATED INCOME STATEMENT
YEAR ENDED 31 DECEMBER 2016

                                                 Notes                   2016                      2015
                                                                         RMB                       RMB

I. Revenue                                       VI-36              4,717,596,472             4,649,722,368
    Less: Cost of sales                          VI-36              1,575,770,979             1,512,503,035
          Taxes and surcharges                   VI-37                269,716,646               258,013,524
          Selling expenses                       VI-38              1,253,260,668             1,211,127,163
          Administrative expenses                VI-39                309,783,548               313,968,409
          Impairment loss of assets              VI-40                  3,279,266                 2,823,115
                Financial expenses               VI-41                 21,968,859
                                                                   ____________                  11,287,685
                                                                                             ____________
II. Operating profit                                                1,283,816,506             1,339,999,437
      Add: Non-operating income                  VI-42                 55,172,160                50,065,317
            Including: gains from disposal
                                          of non-current assets                                      157,846
                                                192,945
      Less: Non-operating expenses               VI-43                   1,369,826                 1,904,889
            Including: losses from disposal
                                    of non-current assets                                          143,127
                                                 56,884            ____________              ____________
III. Profit before tax                                              1,337,618,840             1,388,159,865
        Less: Income tax                         VI-44                357,029,446
                                                                   ____________                 357,884,235
                                                                                             ____________
IV. Profit for the year                                              980,589,394
                                                                   ____________               1,030,275,630
                                                                                             ____________
          Attribute to shareholders of the Company                   982,460,488              1,030,073,860
          Minority interest income                                    (1,871,094)                   201,770
                                                                   ____________              ____________
V. Other comprehensive income (post-tax)
      Other comprehensive income attributable
        to shareholders of the Company
      Other comprehensive income
        to be reclassified to profit and loss
      Foreign currency statement translation difference                                            5,183,498
                                              (7,639,241)
      Other comprehensive income attributable
        to minority interest                                             432,191
                                                                   ____________                  (102,535)
                                                                                             ____________
      Other comprehensive income (post-tax)                            5,615,689
                                                                   ____________                 (7,741,776)
                                                                                             ____________
VI. Total comprehensive income
        Attribute to shareholders of the Company                      987,643,986             1,022,434,619
        Attribute to minority interest of the Company                                            (1,438,903)
                                                 99,235            ____________              ____________
       Total comprehensive income                                    986,205,083
                                                                   ____________               1,022,533,854
                                                                                             ____________
VII. Earnings per share
          (I) Basic earnings per share           VI-45                      1.43
                                                                   ____________                       1.50
                                                                                             ____________
         (II) Diluted earnings per share         VI-45                      N/A
                                                                   ____________                       N/A
                                                                                             ____________



                                                                                                                 90
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
INCOME STATEMENT OF THE COMPANY
YEAR ENDED 31 DECEMBER 2016

                                                 Notes                    2016                      2015
                                                                          RMB                       RMB

I. Revenue                                      XIV-23               1,415,104,946             1,383,184,483
     Less: Cost of sales                        XIV-23               1,152,076,500             1,154,834,509
           Taxes and surcharges                 XIV-24                 106,469,217               128,127,130
           Administrative expenses              XIV-25                  85,962,137               131,187,795
                 Financial expenses             XIV-26                  34,226,452                18,852,697
            Investment income                   XIV-27               1,798,129,418
                                                                    ____________               1,587,303,643
                                                                                              ____________
II. Operating Profit                                                  1,834,500,058            1,537,485,995
      Add: Non-operating income                                           7,433,751                5,229,734
            Including: gains from disposal
                                          of non-current assets                                       157,846
                                                 160,609
        Less: Non-operating expenses                                        405,899                   921,076
                  Including: losses from disposal
                                               of non-current assets                                 46,484
                                                  44,269             ____________             ____________
III. Profit before tax                                               1,841,527,910             1,541,794,653
        Less: Income tax                                                10,953,440
                                                                    ____________                (11,725,445)
                                                                                              ____________
IV. Profit for the year
           and total comprehensive income                            1,830,574,470
                                                                    ____________               1,553,520,098
                                                                                              ____________




                                                                                                                  91
                                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 DECEMBER 2016

                                                                    Notes             2016                     2015
                                                                                      RMB                      RMB
CASH FLOWS FROM OPERATING ACTIVITIES
 Cash receipts from the sale of goods
   and the rendering of services                                                4,441,041,101             5,005,115,064
 Receipts of tax refunds                                                           17,860,500                17,833,465
 Other cash receipts relating to operating activities              VI-46(1)        66,707,865
                                                                                __________                   22,373,016
                                                                                                          __________
Sub-total of cash inflows from operating activities                             4,525,609,466
                                                                                __________                5,045,321,545
                                                                                                          __________
  Cash payments for goods purchased and services received                         961,128,796             1,106,430,193
  Cash payments to and on behalf of employees                                     435,621,220               400,245,285
  Payment of various types of taxes                                             1,133,232,957             1,312,212,563
  Other cash payments relating to operating activities             VI-46(2)     1,105,714,523
                                                                                __________                1,083,387,137
                                                                                                          __________
Sub-total of cash outflows from operating activities                            3,635,697,496
                                                                                __________                3,902,275,178
                                                                                                          __________
Net cash flows from operating activities                           VI-47(1)       889,911,970
                                                                                __________                1,143,046,367
                                                                                                          __________
CASH FLOWS FROM INVESTING ACTIVITIES
 Decrease in term deposits over 3 months                                           98,021,025                58,245,260
 Proceeds from return on investments                                                7,723,126                 9,337,943
 Proceeds from disposal of fixed assets                                             7,208,774
                                                                                __________                    3,373,254
                                                                                                          __________
Sub-total of cash inflows from investing activities                               112,952,925
                                                                                __________                   70,956,457
                                                                                                          __________
  Cash paid for acquisition of properties, plants and equipment,
    intangible assets and other long-term assets                                  704,834,302               775,468,190
  Cash paid for term deposits over 3 months                                        92,021,025                20,000,000
  Cash paid for the purchase subsidiaries and other equity         VI-46(3)       3,539,144                 207,868,406
  Other cash payment relating to investing activities                                    -
                                                                                __________                    5,474,540
                                                                                                          __________
Sub-total of cash outflows from investing activities                              800,394,471
                                                                                __________                1,008,811,136
                                                                                                          __________
Net cash flows from investing activities                                         (687,441,546)
                                                                                __________                 (937,854,679)
                                                                                                          __________
CASH FLOWS FROM FINANCING ACTIVITIES
 Cash receipts from borrowings                                                  1,011,089,858               598,060,185
 Other cash received from financing activities                     VI-46(4)       180,477,587
                                                                                __________                    4,000,000
                                                                                                          __________
Sub-total of cash inflows from financing activities                             1,191,567,445
                                                                                __________                  602,060,185
                                                                                                          __________
  Cash paid for dividends, profits and interests                                  372,529,256               326,060,259
  Cash paid for borrowings                                                        839,962,581               325,272,800
  Cash paid for acquisition minority interest                                            -                      150,000
  Cash paid from other financing activities                        VI-46(5)        20,000,000
                                                                                __________                   28,150,000
                                                                                                          __________
Sub-total of cash outflows from financing activities                            1,232,491,837
                                                                                __________                  679,633,059
                                                                                                          __________
Net cash flows from financing activities                                         (40,924,392)
                                                                                __________                 (77,572,874)
                                                                                                          __________
Effect of foreign exchange rate changes
  on cash and cash equivalents                                                      3,154,611                 4,150,573
NET INCREASE OF CASH AND CASH EQUIVALENTS                                         164,700,643              131,769,387
Add: cash and cash equivalents at beginning of the year            VI-47(3)     1,092,241,661
                                                                                __________                  960,472,274
                                                                                                          __________
CASH AND CASH EQUIVALENTS AT END OF THE YEAR                       VI-47(3)     1,256,942,304
                                                                                __________                1,092,241,661
                                                                                                          __________




                                                                                                                             92
                                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
CASH FLOW STATEMENT OF THE COMPANY
YEAR ENDED 31 DECEMBER 2016

                                                            Notes            2016                     2015
                                                                             RMB                      RMB
CASH FLOWS FROM OPERATING ACTIVITIES
 Cash receipts from the sale of goods
   and the rendering of services                                        1,260,184,309             1,407,696,475
 Other cash receipts relating to operating activities                     232,328,473
                                                                        __________                    1,050,628
                                                                                                  __________
Sub-total of cash inflows from operating activities                     1,492,512,782
                                                                        __________                1,408,747,103
                                                                                                  __________
  Cash payments for goods purchased and services received                 887,413,606               944,400,045
  Cash payments to and on behalf of employees                             121,662,409               149,896,172
  Cash payment of various types of taxes                                  132,372,497               191,387,102
  Other cash payment relating to operating activities                     805,127,368
                                                                        __________                1,128,236,602
                                                                                                  __________
Sub-total of cash outflows from operating activities                    1,946,575,880
                                                                        __________                2,413,919,921
                                                                                                  __________
Net cash flows from operating activities                    XIV-28       (454,063,098)
                                                                        __________               (1,005,172,818)
                                                                                                  __________
CASH FLOWS FROM INVESTING ACTIVITIES
 Cash receipts from equity investment                                            -                      350,000
 Cash receipts from deposits over 3 months                                 18,021,025                46,245,260
 Cash receipts from return on investments                               1,530,872,587             1,211,082,256
 Cash receipts from disposals of fixed assets                               9,705,026
                                                                        __________                      190,205
                                                                                                  __________
Sub-total of cash inflows from investing activities                     1,558,598,638
                                                                        __________                1,257,867,721
                                                                                                  __________
  Cash payments for acquisition of fixed assets,
    intangible assets and other long-term assets                           28,351,843                42,104,159
  Cash payments for term deposits over 3 months                            12,021,025                20,000,000
  Cash payments for subsidiary investment                                 468,882,418               325,163,585
  Other cash payment relating to investing activities                           -
                                                                        __________                    5,474,540
                                                                                                  __________
Sub-total of cash outflows from investing activities                      509,255,286
                                                                        __________                  392,742,284
                                                                                                  __________
Net cash flows from investing activities                                1,049,343,352
                                                                        __________                  865,125,437
                                                                                                  __________
CASH FLOWS FROM FINANCING ACTIVITIES
 Cash receipts from borrowings                                            500,000,000               595,268,270
 Cash inflows from financing activities                                   135,584,347
                                                                        __________                         -
                                                                                                  __________
Sub-total of cash inflows from financing activities                      635,584,347
                                                                       __________                  595,268,270
                                                                                                 __________
  Cash paid for dividends, profits and interests                           372,039,591              325,424,652
  Cash paid for borrowings                                                764,619,892
                                                                        __________                  323,051,320
                                                                                                  __________
Sub-total of Cash outflows from financing activities                    1,136,659,483
                                                                        __________                  648,475,972
                                                                                                  __________
Net cash flows from financing activities                                 (501,075,136)
                                                                        __________                 (53,207,702)
                                                                                                  __________
Effect of foreign exchange rate changes
  on cash and cash equivalents                                                      -                  3,807,697
NET INCREASE/(DECREASE) OF CASH
  AND CASH EQUIVALENTS                                                     94,205,118              (189,447,386)
Add: cash and cash equivalents at beginning of the year     XIV-29        143,798,080
                                                                        __________                   333,245,466
                                                                                                  __________
CASH AND CASH EQUIVALENTS AT END OF THE YEAR                XIV-29        238,003,198
                                                                        __________                  143,798,080
                                                                                                  __________




                                                                                                                    93
                                                                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
CONSOLIDATED SATATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 DECEMBER 2016
                                                                                                    2016
                                                            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   _______
                                                        565,955,441         _____
                                                                           (10,442,512)      ________ ________
                                                                                               342,732,000 5,980,390,074         _______
                                                                                                                                  192,459,023      ________
                                                                                                                                                    7,756,558,026

II. Changes for the year
(I) Total comprehensive income
1. Net Profit                                    -              -                -                           -    982,460,488       (1,871,094)       980,589,394
2. Other comprehensive income (VI-33)            -              -            5,183,498                       -           -              432,191         5,615,689
(II) Profit distribution
       Distributions to
          shareholders (VI-35)          _______
                                             -         _______
                                                            -               _____
                                                                              -              ________ ________
                                                                                                   -   (342,732,000)             _______
                                                                                                                                  (546,423)        ________
                                                                                                                                                    (343,278,423)

III. Closing balance
            of the current year
                                        _______
                                         685,464,000
                                                       _______
                                                        565,955,441
                                                                            _____
                                                                            (5,259,014)
                                                                                             ________ ________
                                                                                               342,732,000 6,620,118,562
                                                                                                                                 _______
                                                                                                                                  190,473,697
                                                                                                                                                   ________
                                                                                                                                                    8,399,484,686



                                                                                                    2015
                                                            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        _______ ________ ________
                                                                             (2,803,271) 342,732,000 5,251,920,374               _______
                                                                                                                                  162,740,779      ________
                                                                                                                                                    7,003,192,924

II. Changes for the year
(I) Total comprehensive income
1. Net Profit                                    -              -                -                           -   1,030,073,860          201,770      1,030,275,630
2. Other comprehensive income (VI-33)            -              -           (7,639,241)                      -            -           (102,535)         (7,741,776)

(II) Shareholders investment and
          Divestment
  1. Acquisition subsidiary (VII-1)              -              -                    -                       -           -          32,585,408          32,585,408
  2. Transaction with non-controlling
        interests                                -     2,816,399                     -                       -           -          (2,966,399)          (150,000)
(III) Profit distribution
        Distributions to
             shareholders (VI-35)       _______
                                             -         _______
                                                            -              _______ ________ ________
                                                                                -        -   (301,604,160)                       _______
                                                                                                                                      -            ________
                                                                                                                                                    (301,604,160)

III. Closing balance of
            the current year
                                        _______
                                         685,464,000
                                                       _______
                                                        565,955,441
                                                                           _______ ________ ________
                                                                            (10,442,512) 342,732,000 5,980,390,074
                                                                                                                                 _______
                                                                                                                                  192,459,023
                                                                                                                                                   ________
                                                                                                                                                    7,756,558,026




                                                                                                                                                                  94
                                                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
STATEMENT OF CHANGES IN EQUITY OF THE COMPANY
YEAR ENDED 31 DECEMBER 2016

                                                                                        2016
                                                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
                                                                                   ________           5,872,392,075
                                                                                                      _________          7,457,810,529
                                                                                                                         _________
II. Changes for the year
(I) Total comprehensive income                          -                 -                 -         1,830,574,470      1,830,574,470
(II) Profit distribution
        Distributions to shareholders (VI-35)        -
                                                ________              -
                                                                 ________               -
                                                                                   ________            (342,732,000)
                                                                                                      _________           (342,732,000)
                                                                                                                         _________
III. Closing balance
           of the current year                   685,464,000
                                                ________          557,222,454
                                                                 ________           342,732,000
                                                                                   ________           7,360,234,545
                                                                                                      _________          8,945,652,999
                                                                                                                         _________

                                                                                        2015
                                                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
                                                                                   ________          4,620,476,137
                                                                                                     _________           6,205,894,591
                                                                                                                         _________
II. Changes for the year
(I) Total comprehensive income                          -                 -                 -         1,553,520,098      1,553,520,098
(II) Profit distribution
        Distributions to shareholders (VI-35)        -
                                                ________              -
                                                                 ________               -
                                                                                   ________            (301,604,160)
                                                                                                      _________           (301,604,160)
                                                                                                                         _________
III. Closing balance
           of the current year                   685,464,000
                                                ________          557,222,454
                                                                 ________           342,732,000
                                                                                   ________           5,872,392,075
                                                                                                      _________          7,457,810,529
                                                                                                                         _________




                                                                                                                                          95
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016


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, grape growing and acquisition, as well as travel resource
        development, etc. . Registration place of the Company is Yantai, Shandong. Headquarter of the
        Company is located at No. 56 Da Ma Lu, Zhifu District, Yantai, Shandong, PRC.

        As at 31 December 2016 the total shares issued by the Company amounts to 685,464,000 shares.
        Please refer to Note VI-31 in detail.

        The holding company of the Group is Changyu Group Company, which is jointly controlled by
        Yantai GuoFeng Investment Holding Ltd, ILLVA SARONNO HOLDING SPA, International
        Finance Corporation and Yantai Yuhua Investment and Development Company Limited.

        The financial statements have been authorized by the board of directors on 20 April 2017.
        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”). 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).

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.



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II. BASIS OF PREPARATION OF FINANCIAL STATEMENTS - continued

2.   Basis of accounting and principle of measurement - continued

        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 2016, 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.


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 2016, financial performance and cash flow in 2016
        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.




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III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued

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 Company 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. Within the 12 month after acquisition, adjustment for the
        provisional recognised value will be regarded as the recognition and measurement at acquisition
        date.

        At the end of the year for acquisition, if the fair value for qualified identifiable assets, liabilities
        and contingent liabilities can be determined temporarily, temporally determined fair value will be
        recognised as consideration for recognition and measurement of acquisition.

        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.

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 re-evaluate if changes in relevant
        facts and circumstances results in changes in relevant factors involved in the above definition of
        control.


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III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued

6.   Preparation of consolidated financial statements - continued

        6.1 Preparation of consolidated financial statements - continued

        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.

        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.

        For the transaction that Purchase minority interest or disposal part of the equity does not loss the
        control of the subsidiaries, it should treated as equity transaction, and adjust the equity attributable
        to shareholders and minority interest in order to reflex the changes of equity in subsidiaries. The
        difference between minority interest adjustment and fair value of received/paid consideration will
        adjust in capital reserve, and if capital reserve is not enough for offset, will adjust surplus reserve.

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.

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.




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III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued

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

        8.1 Transactions denominated in foreign currencies - continued

        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.




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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&ens