Yantai Changyu Pioneer Wine Co. Ltd.

2015 Annual Report

2016 Final 01

April, 2016

I. ImportantNotice, Contents and Definition

The Board of Directors，the Board of Supervisors，directors, supervisors & senior managers of the Company collectively and individually accept fullresponsibility for the truthfulness，accuracy and completeness of the information contained in thisreport and confirm that to the best of their knowledge and belief there are nounfaithful facts, significant omissions or misleading statements.

Mr. Sun Liqiang (Chairman of the Company), Mr. Leng Bin (ChiefFinancial Officer) and Mr. Jiang Jianxun (Financial Director) assure thetruthfulness, accuracy and completeness of the financial report in the annualreport.

All directors personally attended the meeting for deliberating theannual report.

1. The Company may face significant risks in production andoperation, please refer to “8.expectation for the Company’s future development”sector of “5. Risks likely to occur” part in the chapter four named “Board ofDirectors’ Report”. We advise investors to read carefully and pay attention tothe investment risks. 2. The business plan and target in the report do notrepresent the earnings forecast of the listed company in 2016, which depends onseveral factors including the changes of market conditions and the effortextent of managing team etc. with a great uncertainty, so the investors shouldbe in a special attention.

The Company’s preliminary scheme of profit distribution deliberated andpassed by the board of the directors is as following: “Based on the Company total685,464,000 shares on 31 December 2015，we plan to pay CNY 5 in cash as dividends for every 10 shares(including tax) to the Company’s all shareholders, send 0 bonus(including tax)and capital reserve will not be transferred to equity. ”

Contents

I、Important Notice，Contents and Definition. 2

II、Brief Introduction for the Company and Main FinancialIndicators 5

III、Summary of the Company’s Businesses 10

IV、Management Discussion and Analysis 13

V、Major issues 33

VI、Changes in Shares and the Shareholders’ Situation 50

VII、Related Situation of Preferred Shares 59

VIII、 Situation for Directors, Supervisors, SeniorManagement and Staffs. 60

IX、 Corporate Governance 70

X、 Financial Report 80

XI、Reference Documents. 180

Definition

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

II.Brief Introduction for the Company and Main Financial Indicators

1. Company’s information

Abbreviation of the Shares:	Changyu A、Changyu B	Code number of the Shares	000869、200869
Abbreviation of the Shares after alteration (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 name	张裕
Legal Name in English (if have)	YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
Abbreviation of English name (if have)	CHANGYU
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 Directors	Authorized Representative of the Securities Affairs
Name	Mr. Qu Weimin	Mr. Li Tingguo
Address	56 Dama Road, Yantai, Shandong, China	56 Dama Road, Yantai, Shandong, China
Tel	0086-535-6633656	0086-535-6633656
Fax	0086-535-6633639	0086-535-6633639
E-mail	quwm@changyu.com.cn	stock@changyu.com.cn

3. Information disclosure and filing location

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

4. Registration changes

Organization Code	26710003-5
Changes for the main business of the Company since it was listed (if have)	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’ meeting, the Company revised its operating scope to “the Company, legally registered, is in business of production, processing and sales of wine, distilled liquor, medicated liquor, fruit liquor, non-alcohol beverages, fruit jam, packing materials and its products, winemaking machines; licensed import and export; external investments according to governmental policies.
Changes for all previous controlling shareholders (if have)	No.

5. Other documents

The accountant appointed by the Company

Name	Deloitte Hua Yong Certified Public Accountants Co., LTD (special general partnership)
Address	No. 1 East Chang'an Avenue, Dongcheng District, Beijing
Name of signatory accountants	Xu Zhaohui, Li Xu

The sponsor agency the Company appointed toperform the duty of continuous supervision during the report period

□Available RNotavailable

The financial adviser the Company appointedto perform the duty of continuous supervision during the report period

□Available RNotavailable

6. Key accountingdata and financial indicators

Whether the Company makes retroactiveadjustments or restates theaccounting data of previous fiscal years because of changes of accountingpolicy and/or accounting errors.

□Yes RNo

Item	2015	2014	More or less than Last year (%)	2013
Business revenue	4,649,722,368.00	4,156,727,525.00	11.86%	4,320,948,572.00
Net profit attributed to the shareholders of the listed company	1,030,073,860.00	977,707,711.00	5.36%	1,048,185,927.00
Net profit attributed to the shareholders of the listed company after deducting the irregular profit and loss	993,268,823.00	950,191,379.00	4.53%	1,017,348,285.00
Net cash flows from the operating activities	1,143,046,367.00	1,070,083,296.00	6.82%	735,074,307.00
Basic earnings per share	1.50	1.43	4.90%	1.53
Diluted earnings per share	1.50	1.43	4.90%	1.53
Weighted average for earning rate of the net assets	14.40%	13.96%	0.44%	16.45%
	Dec. 31st 2015	Dec. 31st 2014	More or less than Last year (%)	Dec. 31st 2013
Total assets	10,344,211,461.00	8,912,232,640.00	16.07%	7,997,930,542.00
Net Assets attributed to the shareholders of the listed company	7,564,099,003.00	6,840,452,145.00	10.58%	6,208,279,705.00

7.Differences in accounting data under PRC accounting standards and internationalaccounting standards

(1) Differences of net profitand net asset in the financial report disclosed according to both internationalaccounting standards and PRC accounting standards

□Available RNotavailable

There are no differences of netprofit and net asset in the financial report disclosed according to bothinternational accounting standards and PRC accounting standards during thereport period.

(2) Differences of net profitand net asset in the financial report disclosed according to both foreignaccounting standards and PRC accounting standards

□Available RNot available

There are no differences of netprofit and net asset in the financial report disclosed according to bothforeign accounting standards and PRC accounting standards during the reportperiod.

8. Key financial indicatorsby quarter

Unit：CNY

Whether there are differencesbetween the above mentioned financial indicators or their sum and the relatedfinancial indicators in the quarterly reports and semi-annual reports disclosedby the Company.

□Yes RNo

9. Item and amount ofirregular profit and loss

V Available □Not available

Unit：CNY

The reasons shall be made clear anddefinitely as to the irregular profit and loss that the Company has defined by virtue of the Explanatory Announcementon Public Company’s Information Disclosure No.1 - Irregular Profit and Lossand as to regarding theirregular profit and loss as recurrent profit and loss as specified in the ExplanatoryAnnouncement on Public Company’s Information Disclosure No.1 - Irregular Profitand Loss.

□Available V Not available

There is no situation that the irregularprofit and loss is defined and specified as recurrent profit and loss inaccordance with the Explanatory Announcement on Public Company’s InformationDisclosure No.1 - Irregular Profit and Loss during the report period.

III. Summary of theCompany’s Businesses

1. Main businesses during the reportperiod

During the report period, the Company’s main businesses is toproduce and operate wine and brandy, thus providing the domestic and foreignconsumers with healthy and fashionable alcoholic drinks. Compared withearlier stage, there are no significant changes happened to the Company’s mainbusinesses. The wine industry that the Company involve in is still in thegrowth stage, the whole domestic wine market is on the rising trend. TheCompany 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
Fixed asset	A year-on-year growth of 21.98% owing that parts of construction projects have completed construction and put into production and hence related investment is turned from construction in process to fixed asset
Intangible asset	No significant changes
Construction in process	An increase of 17.97% owing to the increased investment in construction in process, such as Changyu International Wine City and so on

(2) Main overseas assets condition

RAvailable □Not available

Details of assets	Formation reasons	Assets scale	Location	Operation mode	Control measures for safeguarding of asset security	Earning condition	The proportion of overseas assets in the Company’s net assets	Whether there are significant impairment risks
Equity asset	Acquisition of equity	435,177,537	Spain	Wine production and operation		807,079	5.84%	No

3. Analysis ofcore competitiveness

Compared with theparticipants in the arena ofthe 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 Chinesefamous trademarks that have strong influence and good reputation.

Secondly, the Company has set up anationwide marketing network, formed a “three-level” marketing network systemmainly composed of the company’s salesmen and distributors, possessed thestrong marketing ability and market exploitation ability.

Thirdly, the Company has already hadstrong research strength and a product R&D system, owned a one and only“State-level Wine R&D Center”, made mastery of advanced winemakingtechnology and production processes, been powerful enough in product innovationand established a perfect quality control system.

Fourthly, the Company is in possession ofa lot of grape-growing bases to meet its future development, having developed agreat deal of vineyards in the most suitable areas for wine grape growing suchas in Shandong, Ningxia, Xinjiang, Liaoning, Hebei and Shanxi, whose scales andstructures have generally met the Company’s needs for development.

Fifthly, the Company has a great variety of productscomposed of all grades, its wine and brandy of over 100 sorts can meetdifferent consumers’ demands. The Company has taken the lead in the domestic wine sector through rapiddevelopment in the past 10-oddyears and has possessed comparative superiority in the future competition.

All in all, the Company has built up a strong core competitive edge and obtained andmaintained a relatively dominant position in the long-term market competition.

IV. Management Discussion and Analysis

1. Summarization

In 2015, influenced by the slowdown ofdomestic economic growth, the overall domestic wine industry is relativelystable, the effective demands for top-level products is weakness, themedium-and-low-level products suitable for mass consumption maintains afavorable growth tendency. Because of the overwhelming flow of foreign wineinto Chinese market, the market competition is further intensified, which hasbrought bigger challenges for the Company to achieve sustained and steadygrowth. 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 mediumand low level products, optimize the market layout, perfect the marketingchannels and effort to promote product sales, achieving good results andrealizing business income of CNY 4649.72 million, an increase of 11.86%compared with last year; but due to the impact of decreasing the proportion ofthe sales in the products with high gross profit margin and increasing theproportion of the sales in the products with the low profit margin, the Companyrealized net profit of CNY 1030.07 million belonging to the parent company’sshareholders , an increase of 5.36% compared with last year.

2. Analysis of main business

(1)Summarization

Review and summary of the process of theCompany’s early-disclosed development strategy and business plan during thereport period

During the report period, influenced by the deceleratedgrowth on the demand for domestic wine and intensified market competition, theCompany has realized the business income of CNY 4.65 billion, increased by11.86 % compared with the last year, exceeding the target fixed in thebeginning of the year of realizing business income no less than CNY 4.4billion. In order to deal with the unfavorable business environment, theCompany carried out the operation strategy of steady development in the mediumand high-end wines, and vigorous expansion for the low-level wines, brandy andimported wines with own brands. While making efforts to promote the developmentof medium and high-end wines, the Company made an appropriate tilt on marketingresources to the medium and low level wines, brandy and imported wines with ownbrands for meeting the market demand, which played an important part inrealizing the increase on the business income. The main work in the reportperiod is as following:

Firstly, the Company further strengthened theconstruction of marketing system, optimized product structure, increasedthe marketing promotion efforts and enhanced the marketing capability. The Company further improved the multi-channeland multi-company marketing framework, making the sales system more smoothlyfrom the top down; By increasing the investment in the wine market,strengthening the inspection of terminal work, and strongly pushing theincrease in sales of medium-and-low level wines and the promotion of brandy,the Company accelerated the sales of terminal and acquiredgreater improvement in marketing capability.

Secondly, the production management wasstrengthened and the production cost was reduced constantly. The control ofmajor production costs was strengthened and the management methods of bothequipment repairing fee and fuel-power fee were improved. The Companystrengthened the management of quota funds, perfected the examination andevaluation system to occupied funds, and realized dynamic management and paiduse to fund occupation of each unit within the company. The procurement cost ofraw materials was further reduced by increasing the centralized procurement.Based on above measures, cost per ton of comparable products reduced CNY 181over the same period of previous year.

Thirdly, the research for new products andnew technologies was continued being conducted and the quality management wasstrengthened in order to improve technological level and product quality. In2015, the Company implemented 14 key technologies and conducted 57 technologicaldevelopment projects; focused on ‘Quality Day’ in every month to furtherintensify the examination and supervision of quality system construction; furtherdeepened the quality control of package materials, standardized the legality ofpackage materials in combination with newly-implemented ‘Food Safety Law’ and‘Advertisement Law’. Based on above measures, the inner quality of thecompany’s products got a stable improvement. Koyac XO Porcelain Barrel Brandywon Gold medal in Conours Mondial de Bruxelles 2015-Spirits Selection and theIcewine won Gold medal in ‘Quality Wine-Producing Areas of InternationalLeaders Contest’.

Fourthly, the procurement of raw materialssuch as grapes was completed successfully and the management of grape base wasfurther strengthened. The Company completed the whole year work of grapesprocurement and processing according to the plan, which provides a reliableguarantee of raw material for adapting the development of market; stregnthentedthe budget management of various expense in self-supporting bases, tookcomprehensive professional training for farmers and strengthened the classifiedmanagement and classified evaluation of contractual bases; imported 102mechanized equipment, further improving the machinery utilization rate ofYantai self-supporting bases and each chateau base. By taking above mentionedmeasures, the Company’s grape base management has become more standardized andthe quality of grape has been much improved.

Fifthly, the construction of technologicalupgrading projects is steadily promoted to strengthen momentum forfuture development. During the report period, the Company has overcomed thevarious problems and difficulties, steadily carry forward the construction of 9investment projects which were defined at the beginning of the year, the keyinvestment projects run smoothly with good engineering quality.

(2) Revenue and cost

Composition of operating incomes

Unit: CNY

	2015		2014		Year-on-year increase or decrease (%)
	Amount	Proportion in operating incomes	Amount	Proportion in operating incomes
Total operation revenue	4,649,722,368.00	100%	4,156,727,525.00	100%	11.86%
Industry-classified
Industry of liquor and alcoholic beverage	4,649,722,368.00	100.00%	4,156,727,525.00	100.00%	11.86%
Product-classified
Wine	3,659,597,234.00	78.71%	3,201,368,831.00	77.02%	14.31%
Brandy	883,276,247.00	19.00%	813,417,868.00	19.57%	8.59%
Others	106,848,887.00	2.30%	141,940,826.00	3.41%	-24.72%
Area-classified
Domestic	4,481,598,915.00	96.38%	4,072,037,577.00	97.96%	10.06%
Abroad	168,123,453.00	3.62%	84,689,948.00	2.04%	98.52%

‚ The condition of sectors, products or areas accounting for over 10%in the Company’s operating incomes or operating profits

RAvailable □Not available

Unit: CNY

	Operating income	Operating cost	Gross profit rate	Year-on-year increase or decrease (%) of operating income	Year-on-year increase or decrease (%) of operating cost	Year-on-year increase or decrease (%) of gross profit rate
Industry-classified
Industry of liquor and alcoholic beverage	4,649,722,368.00	1,512,503,035.00	67.47%	11.86%	10.21%	0.49%
Product-classified
Wine	3,659,597,234.00	1,145,785,230.00	68.69%	14.31%	13.35%	0.27%
Brandy	883,276,247.00	307,213,390.00	65.22%	8.59%	10.72%	-0.67%
Area-classified
Domestic	4,481,598,915.00	1,456,071,487.00	67.51%	10.06%	8.45%	0.48%

ƒ Whether the Company’s sales revenue for material object is morethan labor income

RYes □No

Sector	Project	Unit	2015	2014	Year-on-year increase or decrease (%)
Wine	Sales volume	Ton	86,318	71,854	20.13%
Brandy	Sales volume	Ton	40,074	37,462	6.97%

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

□Available R Not available

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

□Available R Not available

… Composition of operating costs

Unit: CNY

Sector	Project	2015		2014		Year-on-year increase or decrease (%)
		Amount	Proportion in the operating cost (%)	Amount	Proportion in the operating cost (%)
Liquor and alcoholic beverage	Blending liquor	813,179,854.00	54.76%	749,104,077.00	55.29%	-0.53%
	Packing material	515,456,922.00	34.71%	446,560,533.00	32.96%	1.75%
	Wages	55,456,767.00	3.73%	53,632,561.00	3.96%	-0.22%
	Production cost	100,900,541.00	6.79%	105,480,406.00	7.79%	-0.99%

Explanation

No

† Whether there are changes of consolidation scope during the reportperiod

RYes □No

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

‡ Major changes or adjustments of the Company’s products or servicesduring the report period

□Available RNot available

ˆ Information of major customers and major suppliers

The Company’s important customers

The total sales amount of the top five customers（CNY）	162,300,452.00	142,440,887
Total sales of the top five customers accounting for the proportion in total sales for the year（%）	3.49%	3.43%

Information on the Company’s5 biggest customers

No.	Customer Name	Sales Amount （CNY）	Proportion in Total Sales for the year（%）
1	ChangyueXin Trade Company in Shenzhen city	35,452,036.00	0.76%
2	Baicheng Trade Distribution Center in Hanjiang district of Putian city (New Baicheng Food Trade Company in Hanjiang district of Putian city, Zhongheng Food Trade Company in Chengxiang district of Putian city, Baicheng Commerce and Trade Company Limited in Putian city )	33,579,353.00	0.72%
3	Dali Qianxingrong Wine Shop in Nanhai district of Foshan city (Xiqiaolizhi Shop in Nanhai district of Foshan city )	32,892,494.00	0.71%
4	Wal-Mart (China) Investment Company Limited	31,879,636.00	0.69%
5	Huhaipengcheng Liquor Industry Company Limited in Zhuhai city	28,496,932.00	0.61%
Total	—	162,300,452.00	3.49%

Other situation explanation of maincustomers

□Available RNot available

Information on the Company’s important suppliers

The total purchase amount of the top 5 suppliers	57,512,952.00	451,075,314
The proportion of the total purchase amount of the top 5 suppliers in the annual purchase amount	3.56%	33.28%

Information on the Company’s top 5biggest suppliers

No.	Supplier Name	Purchase Amount (CNY)	Proportion in Total Purchase for the year（%）
1	Yantai Shenma Packaging Co., Ltd.	153,891,013.00	9.52%
2	Yantai Changyu Glass Co.,Ltd.	136,649,691.00	8.46%
3	Liquan Sales Department of Shandong Yantai Winery Co.,Ltd.	102,003,625.00	6.31%
4	152 regiment of the eighth agriculture production division	79,434,236.00	4.92%
5	Yantai Wanfutai Winery Co., Ltd	57,512,952.00	3.56%
Total		529,491,518.00	32.77%

Other situation explanation of maincustomers

□Available RNot available

(3) Costs

Unit: CNY

	2015	2014	Year-on-year increase or decrease (%)	Explanation of significant changes
Sales expense	1,211,127,163.00	1,006,009,364.00	20.39%	Mainly because of increased advertising expense in 2015
Management expense	313,968,409.00	256,980,018.00	22.18%	Mainly because of increased wage, welfare expense， depreciation and building tax
Financial expense	11,287,685.00	-17,256,721.00	165.41%	Mainly because of decreased interest income resulting from the decline of fixed deposit balance and increased loan interest expenditure

(4) Research and development expenditure

□Available RNot available

(5) Cash flow

Unit: CNY

Item	2015	2014	Year-on-year increase or decrease (%)
Subtotal of cash inflow in operating activities	5,045,321,545.00	4,830,092,384.00	4.46%
Subtotal of cash outflow in operating activities	3,902,275,178.00	3,760,009,088.00	3.78%
Net amount of cash flow generated in operating activities	1,143,046,367.00	1,070,083,296.00	6.82%
Subtotal of cash inflow in investment activities	70,956,457.00	333,107,299.00	-78.70%
Subtotal of cash outflow in investment activities	1,008,811,136.00	1,315,841,068.00	-23.33%
Net amount of cash flow generated in investment activities	-937,854,679.00	-982,733,769.00	-4.57%
Subtotal of cash inflow in capital-raising activities	604,498,188.00	644,550,372.00	-6.21%
Subtotal of cash outflow in capital-raising activities	679,633,059.00	720,926,810.00	-5.73%
Net amount of cash flow generated in capital-raising activities	-75,134,871.00	-76,376,438.00	-1.63%
Net increase of cash and cash equivalents	134,207,390.00	3,913,342.00	3,329.48%

Explanation of main influence factors contributing to great changes in related data onyear-on-year basis

RAvailable □Not available

During the report period, comparing with the same period of last year, subtotal of cash inflowin investment activities was reduced by 78.7%, mainly due to the significant decrease in the fixed deposit whoseduration is more than 3 months; subtotal of cash outflow in investmentactivities was reduced by 23.33%,mainly due to the significant decrease in cash paid forpurchasing and constructing fixed assets, intangible assets and other long-termassets; net increased amount of cash and cash equivalents increased by 3329.48%, mainly due to the significantgrowth of net amount of cash flow generated both in operating activities and ininvestment activities.

Explanation on the causes of the majordifferences between the net cashflow generated by the Company’s operating activities and this year’s net profit during the report period.

RAvailable □Not available

3. Analysis to non-main business

□Available RNot available

4. Assetsand liabilities situation

(1) Majorchanges of assets

Unit: CNY

	At the end of 2015		At the end of 2014		Proportion increase or decrease (%)	Explanation on major changes
	Amount	Proportion in the total assets (%)	Amount	Proportion in the total assets (%)
Monetary funds	1,285,362,414.00	12.43%	1,145,365,071.00	12.85%	-0.42%	No major changes
Receivables	197,795,091.00	1.91%	145,672,411.00	1.63%	0.28%	No major changes
Inventory	2,260,852,964.00	21.86%	2,087,376,398.00	23.42%	-1.56%	No major changes
Investment real estate		0.00%		0.00%	0.00%	No major changes
Long-term equity investments		0.00%		0.00%	0.00%	No major changes
Fixed assets	3,089,245,185.00	29.86%	2,532,682,355.00	28.42%	1.44%	No major changes
Construction in progress	2,005,990,308.00	19.39%	1,700,466,500.00	19.08%	0.31%	No major changes
Short-term borrowings	665,581,921.00	6.43%	300,000,000.00	3.37%	3.06%	No major changes
Long-term borrowings	71,686,629.00	0.69%	209,380,000.00	2.35%	-1.66%	No major changes

(2) Measuring assets and Liabilities atFair Value

□Available RNot available

5. Investment situation

(1) Overall situation

RAvailable □Not available

Investment amount during the report period (CNY)	Investment amount of the same period of last year (CNY)	Variation
842,060,000.00	562,596,634.00	49.67%

(2) Situation of acquired main equityinvestments during the report period

RAvailable □Not available

Unit: CNY

Invested company name

Main business

Investment mode

Investment amount

Shareholding rate

Capital source

Partner

Investment period

Product type

Progress up to the balance sheet date

Estimated profit

Profit and loss of investment during this period

Whether involved in lawsuits

Disclosure date if have

Disclosure index (if have

Discot Partners, S.L

Production and operation of wine and other alcoholic products

Acquisition

18625.00

75%

Self-owned capital

Comercial Gatar, S.L. and estion Ganuza, S.L.

50 years

wine

completed

5,800,00.00

807,079.00

no

2015.08.28

http://www.cninfo.com.cn/finalpage/2015-08-28/1201509186.PDF

Société Civile Agricole du Château de Mirefleurs

Production of top-level Bordeaux wine

Acquisition

2363.00

90%

Self-owned capital

Vignobles et Domaines Castel

50 years

wine

completed

1,400,000.00

0.00

no

2015.11.25

http://www.cninfo.com.cn/finalpage/2015-11-25/1201786784.PDF

Total

20,988.00

7,200,000.00

807,079.00

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

RAvailable □Not available

Unit: CNY

Project name	Investment mode	Whether it belongs to fixed assets investment	Involved sectors	Investment Amount during this report period	Accumulated actual investment amount up to the end of the report period	Capital source	Process of project	Estimated profit	Accumulated realized profit up to the end of the report period	Reasons for unreached planning schedule and estimated profit	Disclosure date (if have)	Disclosure index (if have)
Yantai Changyu International Wine City Blending and Cooling Center	Self- constructed	Yes	Liquor and alcoholic beverage sector	265,000, 000.00	673,630,000. 00	Owned funds	75.00%	0.00	0.00	—	2015.04.28	http://www.cninf o.com.cn/finalpa ge/2015-04-28/ 1200918766.PDF
Yantai Changyu International Wine City Bottling Center	Self- constructed	Yes	Liquor and alcoholic beverage sector	190,000, 000.00	481,690,000. 00	Owned funds	85.00%	0.00	0.00	—	2015.04.28	http://www.cninf o.com.cn/finalpa ge/2015-04-28/ 1200918766. PDF
Yantai Changyu International Wine City Logistics Center	Self- constructed	Yes	Liquor and alcoholic beverage sector	86,000, 000.00	199,440,000. 00	Owned funds	95.00%	0.00	0.00	—	2015.04.28	http://www.cninf o.com.cn/finalpa ge/2015-04-28/ 1200918766. PDF
Changyu Vine and Wine Research Institute	Self- constructed	Yes	Liquor and alcoholic beverage sector	49,940, 000.00	90,760,000. 00	Owned funds	40.00%	0.00	0.00	—	2015.04.28	http://www.cninf o.com.cn/finalpa ge/2015-04-28/ 1200918766. PDF
Treasure Wine Chateau	Self- constructed	Yes	Liquor and alcoholic beverage sector	17,210, 000.00	47,990,000. 00	Owned funds	40.00%	0.00	0.00	—	2015.04.28	http://www.cninf o.com.cn/finalpa ge/2015-04-28/ 1200918766. PDF
Koyac Brandy Chateau	Self- constructed	Yes	Liquor and alcoholic beverage sector	0.00	98,000,000. 00	Owned funds	40.00%	0.00	0.00	—	2015.04.28	http://www.cninf o.com.cn/finalpa ge/2015-04-28/ 1200918766. PDF
Changyu International Wine City Grape Base	Self- constructed	Yes	Liquor and alcoholic beverage sector	4,290,00	43,700,000. 00	Owned funds	80.00%	0.00	0.00	—	2015.04.28	http://www.cninf o.com.cn/finalpa ge/2015-04-28/ 1200918766. PDF
Greening Investment	Self- constructed	Yes	Liquor and alcoholic beverage sector	1,740,000. 00	38,640,000. 00	Owned funds	70.00%	0.00	0.00	—	2015.04.28	http://www.cninf o.com.cn/finalpa ge/2015-04-28/ 1200918766. PDF
Pioneer Monopoly Shop	Self- constructed	Yes	Liquor and alcoholic beverage sector	18,000, 000.00	35,550,000. 00	Owned funds	60.00%	0.00	0.00	—	2015.04.28	http://www.cninf o.com.cn/finalpa ge/2015-04-28/ 1200918766. PDF
Total	--	--	--	632,180, 000.00	1,709,400, 000.00	--	--	0.00	0.00	--	--	--

(4) Financial assets investment

 Security investment situation

□Available RNot available

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

‚ Derivatives investment

□Available RNot available

There is no entrustfinancing for the Company during the report period.

(5) The usagesituation of the raised capital

□Available RNot available

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

(6) Sale of major assets and equities

 Sale of major assets

□Available RNot available

There is no sale of major assets during thereport period.

‚ Sale of major equities

□Available RNot available

(7) Analysisto the major holding and joint stock companies

RAvailable □Not available

Situation of main subsidiaries and jointstock companies affecting over 10% of the Company’s net profit

Unit: CNY

Company name	Company type	Main business	Registered capital	Total asset	Net asset	Operation revenue	Operation profit	Net Profit
Yantai Changyu-Castle Wine Chateau Co. LTD.	Subsidiary	To research, produce and sell wine and sparkling wine as well as the tourism service	USD 5 million	274,795,419.00	82,896,983.00	98,894,499.00		7,573,641.00
Langfang Castel- Changyu Wine Co. LTD.	Joint stock company	To produce and sell wine	USD 6,108,818	53,339,634.00	45,425,677.00	51,602,897.00		862,103.00
Chateau Changyu AFIP Global	Subsidiary	To research, produce and sell brandy and wine	CNY 110 million	739,795,780.00	149,283,921.00	170,037,611.00		25,424,015.00
Chateau Liaoning Changyu Ice Wine Co., Ltd.	Subsidiary	To produce ice wine	CNY 26.30 million	72,547,094.00	59,823,627.00	51,657,543.00		-4,223,249.00
Xinjiang Tianzhu Winery Co., Ltd.	Subsidiary	To plant grape, produce and sell grape juice, bulk wine and fruit wine	CNY 75 million	182,728,427.00	161,838,245.00	107,683,230.00		-37,548.00

Acquisition anddisposal of subsidiaries during the report period

RAvailable □Not available

Company name	Acquisition and disposal Mode of subsidiaries during the report period	Influence to overall production and Operation as well as performance
Dicot Partners, S.L.	Equity Acquisition	Beneficial for enriching the Company’s product structure and improving profitability
Société Civile Agricole du Château de Mirefleurs	Equity Acquisition	Beneficial for enriching the Company’s product structure and improving profitability

Information of main holding and joint stockcompanies

No

(8) Main part situation of the specialpurpose being controlled by the Company

□Available RNot available

(9) Expectation for the Company’s futuredevelopment

On the basis of our limited experience andspecial skills, we make the following estimation of the wine sector and theCompany’s future development:

(1)The sector competition setup anddevelopment trend

Due to the continuous limitation for thedomestic consumption of premium wine in the future long time, the continuingentrance of imported wines to Chinese market, and the great impact for thetraditional sales channels caused by the new channels such as E-commerce, thecompetition in the domestic wine industry will still be awfully fierce in thecurrent and future long time, the consumption for high-end wine maybe continueto remain weak. But in the long run, thanks to increase of their incomes,people’s pursuits to health and fashion life, the people are favoring wineswhich fit well with the trend of consumption, it will ceaselessly stimulatetheir demand for quality wine. That’s to say, the Chinese wine sector still hashuge potential to tap. Especially the medium-low level wine with highperformance-to-price ratio can have a faster growth. In such a case oflong-term coexistence of opportunities and challenges, only those enterprisesthat possess strong branding influence and marketing ability, catch theopportunities, actively take adjustments and make full use of oncoming andtraditional sales channels, can timely get the run of the consumers’ demandsand provide products of high performance-to-price ratio will have an opportunityto be the final winners of competition and form a new structure of the futureChinese wine market.

(2)The Company’s development strategy

The Company will continue to adhere to thestrategy of taking wine as pillar product while developing all kinds ofproducts, actively expand the scope of consumption and marketing mode, revisethe sales decreased trend of high-end wine; develop middle-level wines andbrandy, strengthen the promotion of sparkling wine, make efforts to provideconsumers with a rich variety of products in high cost performance.

(3) Management plan in a new year

In 2016, the Company will try its best torealize business income of not less than CNY4.6 billion and control the mainoperating costs and three period charges below CNY3.0 billion.

(4) The measures the Company will take

The Company will emphasize the followingaspects in 2016, so as to better catch the opportunities and face thechallenges:

Firstly, it is to stick to market-orientationand promote the integrated development of various kinds of wine. The Companywill continue adhering to wine-based development strategy firmly, improve the constructionof sales system for chateau wines, as well as the incentive measures to dealersand the company’s staff, so as to promote the sales volume of chateau wines. Thegovernance of market order will be enhanced to consolidate the brand advantagesof middle-end wines (represented as Jiebaina). The market promotion of low-endwines will be strengthened to increase the market shares. The appearance ofsparkling wine with low alcohol and Tinlot Reserva products on the market willbe completed and the appearance of wines in small package on the market will bequickened. The company will strengthen the construction of Brandy sales systemand improve its market promotion. The Koyac Brandy products will be improvedand their sales system will be built. In the meantime thatthe company pay attention to domestic brands, the sales of imported products bythe company acting as agency in China, especially products whose brands areacquired by the company, will be boosted to satisfy the demands of customers.

Secondly, it is to strengthen the control formajor production costs and expenses, further compressing production cost andreducing expenses. The Company will further reinforce financial management andaudit supervision, improve management methods of major expenses in productionsystem, improve centralized procurement rules, improve profit accounting systemin subordinate production and operation units, make a good fund plan, enhancefund occupation management and make efforts to reduce production costs andexpenses; establish and improve the financial management and auditing system ofindustrial park, grape bases and overseas investment companies; improve andperfect financial early warning analysis system to prevent operating risks;optimize products’ pricing mechanism and strive to improve products’ grossprofit margin.

Thirdly, it is to strengthen the managementfor vineyards, continually increase the products quality. The Company willcarry out the normalization construction and management for the vineyards inaccordance with the criterion of scalization, standardization andmechanization, continue to practice the tracking and management of winemakersfor the vineyards. For self-supporting bases, the companywill enhance the corresponding simulation profit evaluation, build theinformatization management system in self-supporting bases, and improve themanagement level of bases. Besides, the company will fully push themechanization planting pattern to further reduce the planting cost. For contractual bases, in order to improve the management level ofbases, the classified management of grape bases will be continued beingimplemented and the advanced planting technical training for contracted farmerswill also be continued being enhanced. In addition, the company will strengthenthe legal education of quality and safety to improve farmers’ consciousness offood safety. The layout of raw material bases will be implemented worldwide toform the pattern that the quality and quantity of raw materials in domesticbases could be complementary with that in foreign bases. The Company willperfect the classification standards for bulk wine, the quality tracking ofbulk wine whole usage process and assessment mechanization, optimize winemakingtechnology, reinforce the applied research on oak barrels, further improveproduction quality, strengthen to develop new products, constantly enrichproducts variety. Further distinguish and clear the products characteristic ofgeneral wine in different varieties, form the products line with distinctiveand unique style.

Fourthly, it is to steadily carry forwardsinvestment projects construction, scientific arrange the progress ofconstruction, guarantee the engineering quality. The Company will continuouslypromote the projects of Yantai Changyu International Wine City (namely YantaiChangyu Industrial Park) and the construction for pioneer monopoly shops,reinforce the management of construction budget to investment projects,strengthen projects’ cost review and completion audit, strictly control theinvestment amount on projects, make sure to finish the construction for allprojects and put them into operation on the basis of scheduled progress andquality.

(5) Potential risks

A) Risks in price fluctuation of rawmaterials

Grapes are the Company’s main raw materials.The grape’s yield and quality are affected to a certain extent by the naturalfactors such as drought, wind, rain, frost and snow. These force majeurefactors greatly influence the quantity and price of the grapes in this Companyorders and add the uncertainty to the Company’s production and operation.Therefore, the Company will lower the risks that are likely to affect grapequality and result in price fluctuation by means of expanding the self-runvineyards, strengthening the vineyard management and optimizing the layout ofvineyards.

B) Risks in uncertainty of market input andoutput

To cope with the cutthroat market competitionand to meet the needs for market development, the Company has input more andmore capital in the market and the sales expense has taken up a higherpercentage point in the business revenue. The input-output ratio will affectthe Company’s operating results to a great extent and the risk that someinvestments may not reach the expectations is likely to occur. Therefore, theCompany will strengthen market research and analysis, enhance market forecastaccuracy and continue to perfect the input-output evaluation system to ensurethe investments in market to be satisfactory as expected.

C) Risks in product transport

The Company’s products are fragile and sentto 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 springfestival when market has a great demand. At that time, the natural and humanfactors such as serious shortage of transport capacity resulting from busy flowof people and goods, wind, snow, freezing as well as traffic accidents make thetransport 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 peakseason of sales. Therefore, the Company will adopt all methods possible likemaking precise sales prediction and well designed connection of production andsales, reasonably arranging production and transport means and making use ofmore available warehouses in different places to lower these kinds of risks.

D) Risks in investment faults

According to the plan, currently the Companyhas finished the production layout at home, and the next step is to pay moreattention to the overseas merge and acquisition in the same industry.Currently, Yantai Changyu International Wine City (namely Yantai ChangyuIndustrial Park) has those features such as the big investment amount,long-term construction period and many uncertain factors; more unforeseeablefactors for the overseas merge and acquisition projects in the progress ofM&A, it is difficult to make sure the fair and reasonable transactionprice, the integration and management after M&A is also hard. Under theinfluence of uncertain factors for individual projects, It leads to have therisks of facing with the investment amount out of budget or hardly taking backthe expected investment earnings. The Company will take an adequate argumentand scientific decision-making for investment projects, try hard to reduce andavoid investment risks.

10. The Company’s receptions, studies,Ncommunications and visits

RAvailable □Not available

Reception Time	Reception method	Reception object type	Basic information index of studies
2015.05.22	Field survey	Institution	-
2015.05.22	Field survey	Individual	-
Number of of Reception
Number of received institution	&l