Yantai Changyu Pioneer Wine Co., Ltd.

2026 Semi-annual Report

百年张裕

August 21, 2026

Table of Contents

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

II、Brief Introduction for the Company and Main Financial Indicators ....6

III、Discussion and Analysis of Management Team ....9

IV、Corporate Governance, Environmental and Social Responsibility ....27

V、Major issues....29

VI、Changes in Shares and the Shareholders' Situation....36

VII、Related Situation of Bonds....43

VIII、Financial Report....43

I. Important Notice, Table of Contents and Definition

The board of directors, directors and senior executives of the Company guarantee the truthfulness, accuracy and completeness of the contents contained in the semi-annual report with no false records, misleading statements or significant omissions, and undertake individual and joint legal liabilities.

Mr. Hongjiang ZHOU (Person in charge of the Company) and Ms. Cuimei GUO (Person in charge of accounting work, Person in charge of accounting organ & Accountant in charge) assure the truthfulness, accuracy and completeness of the financial report in the semi-annual report.

Except for the following directors, other directors attended this board meeting for reviewing this semi-annual report in person.

Forward-looking statements such as future plans and development strategies covered in this report do not constitute a substantial commitment of the Company to investors. Investors are advised to pay attention to investment risks.

Regarding significant risks that the Company may face during the business process, please refer to “10. Risks and response measures” in “III Discussion and Analysis of Management Team” in this report. Investors are suggested to read carefully and pay attention to investment risks.

The Company has no plan to distribute cash dividends and bonus shares and capital reserve will not be transferred to equity.

Reference Documents

(1) The original of 2026 Semi-annual Report autographed by the Chairman.

(2) The Financial Statements autographed and sealed by the Chairman, ChiefAccountant and Accountants in Charge.

(3) The Prospectus and Public Ofering Announcement for Stock B in 1997; The Prospectus and The Shares' Change & Public Of ering Announcement for Stock A in 2000.

(4) The originals of all documents and announcements that the Company made public during the report period in the newspapers designated by China Securities Regulatory Commission.

Definition

II. Brief Introduction for the Company and Main Financial Indicators

1. Company's information

1. Company's information Stock Abbreviation Changyu A, Changyu B Stock Code 000869，200869 Stock Abbreviation after Alteration — Place of Stock Listing Shenzhen Stock Exchange Legal Name in Chinese 烟台张裕葡萄酿酒股份有限公司 Abbreviation of Chinese Name 张裕 Legal Name in English YANTAI CHANGYU PIONEER WINE COMPANY LIMITED Abbreviation of English Name CHANGYU Legal Representative Hongjiang ZHOU

2. Contact person and information

3. Other information

1) Contact information of the Company

Whether there is any change in the Company's registered address, office address, corresponding postcode, website address and email address during the report period

□Applicable ☑Inapplicable

There is no change in the Company's registered address, office address, corresponding postcode, website address and email address during the report period. Please refer to 2025 Annual Report for detailed information.

2) Information disclosure and filing location

Whether there is any change in information disclosure and filing location during the report period

□Applicable ☑Inapplicable

There is no change in the name of the newspaper for information disclosure, the address of the website designated by the China Securities Regulatory Commission for publishing the semi-annual report, and the filing location of the Company's semi-annual report selected by the Company during the report period. Please refer to 2025 Annual Report for detailed information.

3) Other relevant information

Whether there is any change in other relevant information during the report period

□Applicable ☑Inapplicable

4. Key accounting data and financial indicators

Whether the Company needs to retrospectively adjust or restate the accounting data of previous fiscal years.

☐Yes ☑No

5. Differences in accounting data under PRC accounting standards and international accounting standards

1) Differences of net profit and net asset in the financial report disclosed according to both international accounting standards and PRC accounting standard

□Applicable ☑Inapplicable

There are no differences for net profit and net assets 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

□Applicable ☑Inapplicable

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.

6. Item and amount of non-recurring gains and losses ☑Applicable ☐Inapplicable

Unit：CNY

Specific situation of other gains and losses projects conforming to the definition of non-recurring profit and loss

□Applicable ☑Inapplicable

There does not exist specific situation of other profit and loss items conforming to the definition of non-recurring profit and loss.

Explanation for regarding the non-recurring profit and loss specified in the Explanatory Announcement on Public Company's Information Disclosure No.1- Non-recurring Profit and Loss as recurrent profit and loss

□Applicable ☑Inapplicable

There is no situation regarding the non-recurring profit and loss specified in the Explanatory Announcement on Public Company's Information Disclosure No.1- Non-recurring Profit and Loss as recurrent profit and loss

III. Discussion and Analysis of Management Team

1. Main businesses during the report period

During the report period, the Company's main business was production and operation of wine and brandy.

The Company need to comply with the disclosure requirements of “Food and Liquor Manufacturing Related Businesses” in Shenzhen Stock Exchange Industry Information Disclosure Guideline No. 3 - Industry Information Disclosure.

1) Situation of the industry in which the Company operates

During the report period, the Company's main business was production and operation of wine and brandy, thus providing domestic and foreign consumers with healthy and fashionable alcoholic drinks. Compared with earlier stage, there were no significant changes happened to the Company's main business. The wine industry that the Company involved in was still in growth stage. Being affected by many factors in recent years, the competition in domestic wine market was fierce. However, seen from the long term, the Company believes that the existing consumption concept might change with the increase of people's income level and their pursuit of a relaxed, romantic and healthy lifestyle. More domestic wine would be drunk by people, and wine would enter more and more household consumption. The situation of current low average consumption of domestic wine would gradually improve. The Company was at the forefront in the domestic wine market and was significantly ahead of major domestic competitors.

2) License obtained

Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report

3) Explanation for other significant events

During the report period, there did not exist the trademark ownership dispute, food quality issue or food safety incident etc. that had a significant impact on the Company.

Brand operation

The Company's products were divided into two series: wine and brandy. For wine, main brands included Changyu, Longyu, Noble Dragon, AFIP, Kilikanoon, Golden Icewine Valley, Longue Chanson, Baron Balboa, Donelly, Long Tailed Cat, Commander Bear, Grappie, ATRIO, IWCC, Vermouth and so on. For Brandy, main brands included Koya, Liquan, Mminni, Pagese, Unicorn, Roullet Fransac and so on.

Major sales mode

The Company's main sales mode was the distribution mode, and main sales channel was offline sales, that is, the Company's products were distributed to sales terminals through approximately 5000 distributors at home and abroad and ultimately provided to consumers.

Distribution mode

☑Applicable ☐Inapplicable

① Situation of change in the number of distributors is shown as follows.

② Sales information of the Company’s top 5 distributors during the report period

Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report

The ratio of sales in self-owned exclusive shop exceeds 10%

□Applicable ☑Inapplicable

Sales of online direct sales

☑Applicable ☐Inapplicable

The change in sales prices of major products accounting for more than 10% of total operating income in current report period exceeds 30% compared with those in last report period

□Applicable ☑Inapplicable

Procurement mode and procurement content

Unit: CNY

Amount of purchasing raw materials from cooperatives or farmers exceeds 30% of total procedure amount

□Applicable ☑Inapplicable

The year-on-year change in the price of major outsourced raw materials exceeds 30%

□Applicable ☑Inapplicable

Major production mode

The production mode of the Company is self-produce.

Commissioned processing and production

□Applicable ☑Inapplicable

Major components of operating costs

① Classification of sector

Unit: CNY

② Classification of product

Unit: CNY

Yield and inventory

2. Analysis of core competitiveness

Compared with the participants in the arena of the Chinese wine competition sector, the Company owns following advantages:

Firstly, the Company has a large brand influence. Main brands used have a long history. “Changyu”,“Noble Dragon”and“AFIP”are all “China famous brands” that have strong influence and good reputation.

Secondly, the Company has set up a nationwide marketing network. The Company has formed a “three-level” marketing network system mainly composed of the Company's salesmen and distributors and the online sales platform has had a certain scale and strong influence, owing strong marketing ability and market exploitation ability.

Thirdly, the Company has strong scientific prowess and a product R&D system. Relying on the country's “State-level Wine R&D Center”, the Company has owned powerful winemaker team, mastered advanced winemaking technology and production processes and had strong product innovation capacity and perfect quality control system.

Fourthly, the Company is in possession of a lot of grape-growing bases that are compatible with its development requirements. The Company has developed a great deal of vineyards in the most suitable areas for wine grape growing such as Shandong, Ningxia and Xinjiang, and its subsidiary overseas enterprises also own matching grape bases in local area, making the overall scale and structure generally meet the Company's needs for future development.

Fifthly, products in high, medium and low-grade as well as varieties and categories are all complete. Over 100 varieties of series products such as wine, brandy and sparkling wine covers various grades, including high, medium and low-grade, which can meet different consumer groups' demands. The Company has taken the dominant status in the domestic wine industry after many years' development and has comparative advantages in the future competition.

Sixthly, the Company has a relatively perfect 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.

Seventhly, the Company has set up flexible and efficient decision-making mechanism. The Company's core management team always maintains a working style of unity and pragmatic and flexible and efficient decision-making mechanism, which makes the Company can deal with market changes more calmly.

Eighthly, the global production capacity layout has been basically completed. The Company has completed production capacity layout in China, France, Chile, Spain, Australia and other major wine producing countries in the world, enabling making better use of global high-quality raw material resources, capital, talents and advanced production processes and technologies to provide consumers with diversified quality products and better serve consumers.

Based on the above reasons, the Company has formed relatively strong core competence and will maintain a relatively dominant position in the future predictable market competition.

3. Analysis in main business

Summarization

During the report period, the domestic wine market still maintained a downward trend. Market demand was seriously insufficient, and competition was extremely fierce. The profitability of wine enterprises further declined. The market share of wine in alcoholic products became smaller and smaller. Coupled with the squeeze from other advantageous wine types, the development trend of the industry remained at a low level and there were no obvious signs of a rebound. Facing a severe market environment, the Company adhered to a consumer-oriented approach, intensified marketing reforms, strictly controlled various expenses, actively engaged in product and marketing innovation, and strove to explore new sales channels and emerging markets, achieving certain results.

First, adhere to a consumer-oriented approach, actively guide and cultivate the wine consumption population, create wine consumption scenarios, and strive to expand the wine market scale. During the reporting period, the Company significantly adjusted and improved the sales division system, deepened the “marketing” and “sales” separation reform, shortened the distance between the Company and consumers, laying a solid foundation for better serving consumers; further focused on products, markets and marketing actions, based on different market development stages, implement targeted marketing strategies. Some “decisive battle” markets and innovative products such as Long Tailed Cat have achieved breakthrough progress. The sales revenue of key products has steadily increased. Initiating or leveraging marketing events such as Yun Lin's endorsement for Long Tailed Cat, Macron's praise for Changyu Longyu, Wulaa's “Yantai's sea wind has alcohol”, Minhong Yu's visit to Changyu, Shi Yu becoming the new spokesperson for Changyu's classic brand, Trump's special occasion of drinking Changyu AFIP, and Putin's 13 visits to China all drinking Changyu AFIP, and have further enhanced the brand's popularity and reputation.

Second, closely followed the consumption trends, accelerated the speed of market response, continuously improved product quality and developed new products, effectively meeting the demands of consumers. During the reporting period, the overall quality of our products steadily improved, and the speed of responding to consumers' needs further accelerated; in accordance with the new consumption environment, we strengthened the marketing promotion of innovative products such as “Long Tailed Cat” and “Commander Bear”, achieving remarkable results; by fully leveraging celebrity fans, carried out interactive communication and marketing for new product launches online, which stimulated product sales.

Third, the “going out work” of tourism business has been steadily promoted, the tourist reception volume and tourism income have achieved double growth year on year, and the satisfaction of tourists has been greatly improved, which has not only better empowered the brand of Changyu, but also achieved considerable economic benefits.

Fourth, strengthen financial management and audit supervision, prevent operational risks, and enhance operational efficiency. During the reporting period, the Company proposed the “automatic collection, fixed retention, and linked payment” fund pool strategy, promoted the settlement of internal unit debts, and improved the safety and utilization efficiency of funds; reasonably combined various diversified financial management tools such as time deposits, structured deposits, and agreed deposits, increasing the fund income; effectively handled special tasks such as personal income tax research, goods and labor tax investigation, tax source sorting of real estate, and tax deduction for fund dividends research, avoiding and preventing tax-related risks; by leveraging information tools such as “Every Moment” and “Collaborative Office”, further standardized capital expenditure project management; persistently conducted regular audits such as manager departure audits and economic efficiency audits, strengthened key expense audits such as advertising expenses of business divisions, and improved the level of audit supervision, reducing operational risks.

Fifth, the Company continued to implement B-share repurchases to protect the interests of investors. As of July 28, 2026, the Company had cumulatively repurchased 13,960,000 domestic listed foreign capital shares (B shares) through the dedicated securities account for share repurchase by means of centralized bidding, accounting for 6.9991% of the Company's B shares and 2.1240% of the Company's current total share capital. The highest transaction price for this repurchase was HKD 8.43 per share, while the lowest was HKD 7.99 per share. The total amount of funds paid for the repurchase was HKD115,634,831.36 (including transaction fees).

Based on the implementation of above measures, the Company achieved certain results in the first half of 2026 with a slight increase in revenue compared to the previous year; however, the net profit had a year-on-year decline, and the Company faces significant pressure and great uncertainty in fully achieving the financial budget targets for the year 2026. To achieve the business goals, the Company will focus on the following tasks in the second half of 2026:

First, guided by the “adhere to the right path while innovating” strategy, the Company will comprehensively and deeply implement the separation of “marketing” and “sales”, get closer to consumers, adhere to the consumer--oriented approach, continuously improve products and services, and promote the steady and healthy development of all wine varieties.

Second, accelerate the training and recruitment of talents, and build a backbone team capable of handling tough tasks. The Company will focus on large-scale recruitment of outstanding talents with experience in the fast-moving consumer goods industry, expertise in marketing, brand promotion, digitalization, and AI application, fully stimulating the “catfish effect”, and enhancing the execution and combat effectiveness of the management team.

Third, increase the development and promotion of new products, strengthen product quality and cost management, and continuously enhance product competitiveness. After conducting in-depth and detailed research on the target population and consumption scenarios, the Company will introduce de-alcohol wine and herbal wine in a timely manner; in response to the current market trend of the low-alcohol trendy wine growing rapidly, follow the market trend, fully utilize the global procurement model and the rich and high-quality fruit resources in Yantai, combine technological innovation, and turn low-alcohol trendy wine into a star product with advantages in cost and quality, which is highly favored by Chinese people.

Fourth, improve financial accounting, strengthen fund management, and strive to achieve the goal of cost reduction and efficiency improvement. The Company will coordinate various resources to complete the bank account bank-enterprise direct connection, the sorting of bill direct connection information, connection, complete the upgrade and transformation of each instant reimbursement system and SAP system, and the connection with the treasury system, steadily promote the launch and implementation of the treasury project; promote the official launch of the SAP system of the tourism system; do a good job in the data sorting, process promotion and assessment of the cost reduction and efficiency improvement projects, and ensure the complete achievement of the cost reduction and efficiency improvement goal.

Fifth, complete the work of repurchasing and canceling a portion of the restricted shares for the third period of lifting restriction involved in the Company's 2023 restricted share incentive plan.

Year-on-year change in key financial data

Unit: CNY

Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report

Significant change in the profit form and profit source of the Company during the report period

□Applicable ☑Inapplicable

There is no significant change in the profit form and profit source of the Company during the report period.

Composition of operating revenue

Unit: CNY

Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report

The cases of industry, product or area accounting for over 10% in the Company's operating revenue or operating profit

☑Applicable ☐Inapplicable

Unit: CNY

Under the condition that the statistical caliber of the Company's main business data is 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 period.

☐Available ☑Not available

The Company need to comply with the disclosure requirements of “Food and Liquor Manufacturing Related Businesses” in Shenzhen Stock Exchange Industry Information Disclosure Guideline No. 3 - Industry Information Disclosure.

1) Detailed information on sales expenses

Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report

4. Analysis in non-main business

□Applicable ☑Inapplicable

5. Analysis in assets and liabilities

1) Significant change in assets composition

Unit: CNY

Yantai Changyu Pioneer Wine mathrm C o. , Ltd. 2026 Semi-annual Report

2) Main overseas assets situation

☑Applicable ☐Inapplicable

Unit：CNY

3) Assets and liabilities measured at fair value

□Applicable ☑Inapplicable

4) Limitations of assets rights up to the end of the report period

Please refer to the “Notes to the Consolidated Financial Statements” in the financial report of this report, specifically the “Assets with restricted ownership or use rights”.

6. Analysis in investment condition

1) Overall situation

☑Applicable ☐Inapplicable

2) Cases of acquired significant equity investments during the report period

□Applicable ☑Inapplicable

3) Cases of significant ongoing non-equity investments during the report period

☑Applicable ☐Inapplicable

Unit: CNY

4) Financial assets investment ① Security investment situation □Applicable ☑Inapplicable There are no security investments for the Company during the report period. ② Derivatives investment □Applicable ☑Inapplicable There are no derivatives investments for the Company during the report period. 5) The usage situation of raised capital □Applicable ☑Inapplicable There are no usage situations of raised capital for the Company during the report period.

7. Sale of significant assets and equities

1) Sale of significant assets

☐Applicable ☑ Inapplicable

There are no sale of significant assets for the Company during the report period.

2) Sale of significant equities

☐Applicable ☑Inapplicable

8. Analysis of main holding and joint stock companies

☑Applicable ☐ Inapplicable

Situation of main subsidiaries and joint stock companies affecting over 10% of the Company's net profit

Unit: CNY

Acquisition and disposal of subsidiaries during the report period

□Applicable ☑Inapplicable

Explanation on main holding and joint stock companies

None

9. Situation of the structured subjects controlled by the Company

□Applicable ☑Inapplicable

10. Risks and response measures

1) Risk in price fluctuation of raw materials

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

2) Risk in uncertainty of market input and output

To cope with the cutthroat market competition and to meet the needs for market development, the Company has input more and more capital in the market and the sales expense has taken up a higher percentage point in the business revenue. The input-output ratio will affect the Company's operating results to a great extent and the risk that some investments may not reach the expectations is likely to occur. Therefore, the Company will strengthen market research and analysis, enhance market forecast accuracy and continue to perfect the input-output evaluation system to ensure the investments in market to be satisfactory as expected.

3) Risk 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.

4) Risk in investment faults

The Company invested many projects in the previous periods and the investment amounts were relatively large. For individual project, owing to the influence of various factors, it led 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.

5) Risk in exchange rate

The Company's overseas subsidiaries export products to many different countries and the export amount is relatively large. There may be exchange losses or gains due to exchange rate fluctuation.

6) Other risks

During the production and sales of the Company's products, it may be affected by force majeure such as wars, typhoons, earthquakes, etc..

11. Market value management system and valuation enhancement plan formulation and implementation

Whether the company has established a market value management system

☑Yes ☐No

The company has formulated a Market Value Management System, which mainly covers the purposes and basic principles of market value management, the structure and responsibilities of market value management, the main methods of market value management, the monitoring and early warning mechanism, and the emergency measures. This has further standardized and improved the behavior of market value management.

Whether the company has disclosed a valuation enhancement plan

□Yes ☑No

12. Implementation of the “The Improvement Both on Quality and Return” action plan Whether the company disclosed the “The Improvement Both on Quality and Return” action plan

□Yes ☑No

IV. Corporate Governance, Environmental and Social Responsibility

1. Changes in the Company's directors and senior executives

☑Applicable ☐Inapplicable

2. Situation of profit distribution and capitalization of capital reserve into share capital during the report period

□Applicable ☑Inapplicable

The Company plans not to distribute cash dividends or give bonus shares or make capitalization of capital reserve into share capital.

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

☑Applicable ☐Inapplicable

1) Equity incentive

In 2023, the Company implemented the restricted share incentive plan for 203 middle-level managers and core cadres and granted them 6,785,559 shares of restricted share. On July 24, 2026, the Company's Fifth Interim Board of Directors Meeting in 2026 deliberated and approved the Proposal on Failure to Achieve Conditions for Lifting Restrictions in the Third Period ofLifting Restriction Involved in the Company's 2023 Restricted Share Incentive Plan and Proposal on Buy-back and Cancelling Some Restricted Shares of the Company's 2023 Restricted Share Incentive Plan and to Adjust the Buy-back Price. The conditions for lifting restrictions in the third restriction-lifted period of restricted shares granted under the Company's Incentive Plan have not been met, and the number of restricted shares granted to the Company's 179 incentive subjects that needs to be bought back and cancelled amounts to 2,485,626 shares.

2) Implementation of employees' share ownership plan

☐Available ☑Not available

3) Other employee incentives

☐Available ☑Not available

4. Environmental information disclosure situation

Whether the listed company and its major subsidiaries are included in the list of enterprises that disclose environmental information in accordance with the law

☑Yes ☐No

5. Social responsibility performance

1) The Company served the rural revitalization well, adopted the mode of “company + farmer” or “company + cooperative + farmer”, reformed the sloping fields of Jiaodong Peninsular and the northwestern area including Ningxia and Xinjiang and so on, the uncultivated land or the barren land into graperies. By means of providing capital and technology of viticulture to fruit growers, scientific management level of vineyard had been improved. The Company spared no effort to popularize the non-pollution and mechanized planting methods, continuously improved production efficiency of grape base and quality of grape, and reduced production cost of grape and labor intensity. Through the above measures, on the one hand, it promotes the effective use of land resources, promotes the organic integration of rural households and modern agriculture, and helps increase agricultural efficiency, farmers' incomes and rural development; on the other hand, it improves the local ecological environment and brings huge ecological benefits.

2) The Company provided counterpart supports to Huangchengyang village in Longkou City, an old revolutionary base area by purchasing local agricultural products to help solve the problem of slow sales.

3) The Company provided help and assistance to the Company's in-service or retired employees with poor families, as well as the Company's in-service or retired employees with chronic or serious illnesses.

V. Major issues

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

□Applicable ☑Inapplicable

There is no 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

2. Non-operational occupation capital of the listed company by controlling shareholder and its related parties

□Applicable ☑Inapplicable

There is no non-operational occupation capital of the listed company by controlling shareholder and its related parties during the report period.

3. Illegal external guarantee

□Applicable ☑Inapplicable

There is no illegal guarantee situation during the report period.

4. Appointment and dismissal of certified public accountants

Whether the semi-annual report has been audited

☐Yes ☑No

The semi-annual report has not been audited.

5. Explanation from the Board of Directors for the “Non-standard Audit Report” during this report period

□Applicable ☑Inapplicable

6. Explanation from the Board of Directors for the “Non-standard Audit Report” of last year

□Applicable ☑Inapplicable

7. Issues related with bankruptcy reorganization

□Applicable ☑Inapplicable

There are no related issues of bankruptcy reorganization happened at the end of the report period.

8. Litigation Issue

Material litigation and arbitration

□Applicable ☑Inapplicable

There are no material litigation and arbitration during the report period.

Other Litigation Issue

□Applicable ☑Inapplicable

9. Penalty and rectification

□Applicable ☑Inapplicable

There is no penalty and rectification during the report period.

10. Credit of the Company, its controlling shareholder and actual controller

□Applicable ☑Inapplicable

11. Major related transactions

1) Related transactions in relation to routine operations

☑Applicable □Inapplicable

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

□Applicable ☑Inapplicable

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

□Applicable ☑Inapplicable

There are no related transactions in relation to common foreign investment during the report period.

4) Related credit and debt dealings

☑Applicable □Inapplicable

Whether or not existing non-operating related credit and debt transactions

□Yes ☑No

There is no non-operating related credit and debt transactions during the report period.

5) Deals of related financial companies

□Applicable ☑Inapplicable

There is no deposit, loan, credit granting or other financial business between the related financial companies and related parties.

6) Deals between financial companies controlled by the Company and relayed parties

□Applicable ☑Inapplicable

There is no deposit, loan, credit granting or other financial business between the financial companies controlled by the Company and related parties.

7) Other major related transactions

☑Applicable □Inapplicable

For other major related transactions, please refer to the Announcement of 2026 Annual Expected Routine Related Transaction and the Section XI “ Related Parties and Related Transaction” of the Financial Report of this report.

Disclosure website of interim report for major related transaction

12. Major contracts and execution conditions

1) Trusteeship, contract and lease issues

① Trusteeship situation

□Applicable ☑Inapplicable

There is no trusteeship situation during the report period.

② Contracting situation

□Applicable ☑Inapplicable

There is no such contracting situation during the report period.

③ Lease situation

☑Applicable □Inapplicable

Explanation for lease situation

On January 1, 2022, the Company renewed the Space Lease Agreement with the controlling shareholder Yantai Changyu Group Company Limited. The Company leased the space with 15,196.94 square meters locating at No. 174 Shihuiyao Road, Zhifu District, Yantai City. The rent per year is CNY1.4645million with a rental period of 5 years from January 1, 2022 to December 31, 2026.

On January 1, 2022, the Company's subordinate Sales & Marketing Co. of Yantai Changyu Pioneer Wine Company Limited Brandy Sales Division renewed the Space Lease Agreement with the controlling shareholder Yantai Changyu Group Company Limited, leasing the space with 42,552.83 square meters locating at No. 1 Jichang Road, Zhifu District, Yantai City and the space with 3,038 square meters locating at 56 Dama Road, Zhifu District, Yantai City, which are all under the name of controlling shareholder. The rent of above spaces per year is CNY4.3935million with a rental period of 5 years from January 1, 2022 to December 31, 2026.

In 2023, this Company signed a house-leasing contract with Yantai Shenma Packaging Company Limited. According to this contract, since July 1, 2023, this Company leased property to Yantai Shenma Packaging Company Limited for a business purpose with the annual rent of CNY1,626,880. This contract expires on June 30, 2028.

Project whose profit and loss brought for the Company reach more than 10% of the total profit during the report period

Applicable ☑Inapplicable

There are no lease projects whose profit and loss brought for the Company reach more than 10% of the total profit during the report period.

2) Major guarantee

☑Applicable □Inapplicable

Unit: CNY'0000

Explanation on specific situations of adapting guarantee by complex methods

None

3) Financial management entrustment

☐Applicable ☑Inapplicable

There is no financial management entrustment during the report period.

4) Other important contracts

☐Applicable ☑Inapplicable

There are no other important contracts during the report period.

13. Activity registration form for receptions of research, communication, visit and other activities during the report period

☑Applicable □Inapplicable

14. Other Major issues

☐Applicable ☑Inapplicable

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

15. Major issues of Company's subsidiaries

☐Applicable ☑Inapplicable

VI. Changes in Shares and Shareholders' Situation

1. Changes in shares

1) Changes in shares

Unit: share

Cause of share change ☐Applicable ☑Inapplicable The change in restricted shares is due to the variation in the number of shares locked up by senior executives. Approval of share change ☐Applicable ☑Inapplicable Transfer ownership of changed shares ☐Applicable ☑Inapplicable

Implementation progress of share buy-back ☑Applicable ☐Inapplicable

As of July 28, 2026, the Company has bought back 13,960,000 B shares of the Company through share buy-back special securities account in a centralized bidding mode, accounting for 6.9991% of Company's B shares and 2.1240% of Company's current total share capital, with the highest transaction price of HKD 8.43 per share and the lowest transaction price of HKD 7.99 per share. The total transaction amount was HKD 115,634,831.36 (including transaction fees) that equivalent to CNY99,995,053.11, which is less than CNY100million.

The shares being bought back are currently undergoing the transfer process. The actual number of shares bought back falls within the range specified in the repurchase plan (i.e., the number of buy-back shares is no less than 10 million and no more than 15 million).

Implementation progress of reducing holding buy-back share through the way of centralized bidding ☐Applicable ☑Inapplicable

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. ☐Applicable ☑Inapplicable

Other contents the Company thinks necessary or securities regulatory departments ask to make public. ☐Applicable ☑Inapplicable

2) Changes in restricted shares

☑Applicable ☐Inapplicable

Unit: share

2. Securities issuance and listing situation

☐Applicable ☑Inapplicable

3. The number of shareholders of the Company and the shareholdings

Unit: share

Shareholders holding more than 5%, the top 10 shareholders and the top 10 shareholders with unrestricted tradable shares participate in the lending of shares involved in the refinancing business ☐Applicable ☑Inapplicable

The top 10 shareholders and the top 10 shareholders with unrestricted tradable shares have changed from the previous period due to refinancing lending/restitution reasons ☐Applicable ☑Inapplicable

Whether or not the Company's top 10 common shareholders and top 10 shareholders with unrestricted shares take agreed repurchase transaction during the report period

There is no agreed repurchase transaction taken by the Company's top 10 common shareholders and top 10 shareholders with unrestricted shares during the report period.

4. Changes in shareholdings of directors, supervisors and senior executives ☑Applicable ☐Inapplicable

5. Changes in controlling shareholders or actual controllers

The company has previously disclosed that the actual controller was planning to change the control rights but the process had not yet been completed.

Please provide an update on the progress of the control rights change.

☐Applicable ☑Inapplicable

Changes in the controlling shareholders during the report period

☐Applicable ☑Inapplicable

There is no any change in the controlling shareholders during the report period.

Changes in the actual controllers during the report period

☐Applicable ☑Inapplicable

There is no any change in the actual controllers during the report period.

6. Related Situation of Preferred Shares

☐Applicable ☑Inapplicable

There are no preferred shares during the report period.

XII. Related Situation of Bonds

☐Applicable ☑Inapplicable

XIII. Financial Report

1. Audit report

Whether the semi-annual report has been audited

☐Yes ☑No

The company’s semi-annual report has not been audited.

2. Financial statement

The unit in the statements of the financial notes is RMB Yuan.

2.1 Consolidated balance sheet

Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report

Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report

Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report

Legal Representative: Zhou Hongjiang Accounting Supervisor: Guo Cuimei Accounting Department Manager: Guo Cuimei

2.2 Balance sheet of the parent company

Compiling unit: Yantai Changyu Pioneer Wine Co., Ltd. Unit: yuan

Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report

Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report Legal Representative: Zhou Hongjiang Accounting Supervisor: Guo Cuimei Accounting Department Manager: Guo Cuimei

2.3 Consolidated profit statement

Compiling unit: Yantai Changyu Pioneer Wine Co., Ltd.

Unit: yuan

Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report

Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report

Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report

Legal Representative: Zhou Hongjiang Accounting Supervisor: Guo Cuimei Accounting Department Manager: Guo Cuimei

2.4 Profit statement of the parent company

Compiling unit: Yantai Changyu Pioneer Wine Co., Ltd. Unit: yuan

Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report

Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report

Legal Representative: Zhou Hongjiang Accounting Supervisor: Guo Cuimei Accounting Department Manager: Guo Cuimei

2.5 Consolidated cash flow statement

Compiling unit: Yantai Changyu Pioneer Wine Co., Ltd.

Unit: yuan

Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report

Legal Representative: Zhou Hongjiang Accounting Supervisor: Guo Cuimei Accounting Department Manager: Guo Cuimei Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report

2.6 Cash flow statement of the parent company

Compiling unit: Yantai Changyu Pioneer Wine Co., Ltd. Unit: yuan

Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report

Yantai Changyu Pioneer Wine Co., Ltd. 2026 Semi-annual Report

Legal Representative: Zhou Hongjiang Accounting Supervisor: Guo Cuimei Accounting Department Manager: Guo Cuimei

2.7 Consolidated owner's equities changing list

Unit: yuan

Unit: yuan

2.8 Owner's equities changing list of the parent company

Unit: yuan

Unit: yuan

3. Company profile

Yantai Changyu Pioneer Wine Co., Ltd. (the “Company” or the “Joint-stock Company”) was incorporated as a joint-stock limited company in accordance with the Company Law of the People's Republic of China (the “PRC”) in the merger and reorganization carried out by Yantai Changyu Group Co., Ltd. (“Changyu Group”) with its assets and liabilities in relation to wine business. The Company and its subsidiary companies (hereinafter collectively referred to as the “Group”) are engaged in the production and sale of wine, brandy and sparkling wine, planting and purchase of grapes, development of tourism resources, etc. The registered address of the Company is Yantai City, Shandong Province, and the office address of the headquarters is 56 Dama Road, Zhifu District, Yantai City, Shandong Province.

As on June 30, 2026, the Company issued 657,240,128 shares accumulatively. Refer to Note 7.32 for details.

The parent company of the Group is Changyu Group incorporated in China, which was ultimately and actually controlled by four parties, including Yantai Guofeng Investment Holding Group Co., Ltd., ILLVA Saronno Holding Spa, International Finance Corporation and Yantai Yuhua Investment & Development Co., Ltd.

The financial statement and the consolidated financial statement of the Company were approved by the Board of Directors on August 19, 2026.

The details of scope of the consolidated financial statement in this period can be seen in Note 10 “Equity in other entities”.

4. Preparation basis of financial statement

4.1 Preparation basis

The Company prepares the financial statement on the basis of continuous operation.

4.2 Continuous operation

The Group has appraised the ability of continuous operation for 12 months from June 30, 2026, and no issues or situations causing major doubts to this ability are found. Therefore, this financial statement is prepared on the basis of the continuous operation assumption.

5. Main accounting policies and accounting estimates

5.1 Statement on compliance with ASBE

This financial statement fulfills the requirement of Accounting Standards for Business Enterprises (ASBE) issued by the Ministry of Finance and gives a true and integrated view of the consolidated financial status and the financial status as on June 30, 2026, as well as the consolidated operating result, the operating result, the consolidated cash flow and the cash flow of the Company from January to June 2026.

In addition, the financial statement of the Company also complies with the related disclosure requirements for statement and its notes stipulated by Preparation Rules for Information Disclosure by Companies Ofering Securities to the Public No. 15 – General Provisions on Financial Reports (2023 Revision) by the China Securities Regulatory Commission (hereinafter referred to as the “CSRC”).

5.2 Accounting period

The accounting year is from January 1 to December 31 in Gregorian calendar.

5.3 Operating cycle

The Company takes the period from the acquisition of assets for processing to the realization of cash or cash equivalents as its normal operating cycle. The operating cycle of the Company is 12 months.

5.4 Recording currency

Since Renminbi (RMB) is the currency of the main economic environment in which the Company and the domestic subsidiary companies thereof are situated, the Company and the subsidiary companies thereof adopt RMB as the recording currency. The overseas subsidiary companies thereof determine EUR, CLP and AUD as the recording currency according to the main economic environment in which they are situated. The currency in this financial statement prepared by the Group is RMB. In preparing these financial statements, the foreign currency financial statements of overseas subsidiaries have been translated in accordance with Note 5.9.

5.5 Determination method and selection criteria for significant standards

5.6 Accounting treatment method for business combination under common control and non-common control

If the Group obtains control over one or more enterprises (or a group of assets or net assets) and such transaction or event constitutes a business, it shall be accounted for as a business combination. Business combinations are classified into business combination under common control and business combination under non-common control.

For a business combination not under common control, when assessing whether the acquired set of assets or net assets constitutes a business, the acquirer may consider applying the “concentration test” as a simplified assessment. If the acquired set passes the concentration test, it shall be determined not to constitute a business. If it does not pass the concentration test, it shall be assessed against the business criteria.

When the Group acquires a set of assets or net assets that does not constitute a business, the acquisition cost shall be allocated to the identifiable assets and liabilities acquired at their relative fair values on the acquisition date, rather than applying the accounting treatment for a business combination.

5.6.1 Business combination under common control

A business combination under common control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or same multiple parties before and after the combination, and that control is not transitory. The assets and liabilities obtained by the combining party in the business combination shall be measured on the basis of the carrying amount in the ultimate controlling party's consolidated financial statement as at the combination date. Where there is a difference between the Group's share of carrying amount of the net assets acquired and the carrying amount of the combination consideration paid (or the total par value of the shares issued), the deficit shall be applied in sequence against the surplus reserve and then the undistributed profits. If the stock premium in capital surplus is not sufficient to offset, the deficit shall be applied in sequence against the surplus reserve and then the undistributed profits. The direct related expenses incurred for the business combination shall be included in the current profit and loss when incurred. The combination date is the date on which the combining party actually obtains control of the combined party.

5.6.2 Business combination under non-common control

A business combination under non-common control is a business combination in which all of the combining parties are not ultimately controlled by the same party or same multiple parties before and after the combination. The sum of fair values of the assets paid by the Group, as the acquirer, (including the acquiree's equity the Group held before the acquisition date), liabilities incurred or assumed, and the equity securities issued on the acquisition date in exchange for the control over the acquiree, shall deduct the fair value of the acquiree's identifiable net assets acquired in the combination on the acquisition date. After considering the effect of related deferred income taxes , if the difference is positive, it shall be recognized as goodwill; and if it is negative, it shall be included in the current profit and loss. The direct expenses incurred for the business combination by the Group shall be included in the current profit and loss. All the identifiable assets, liabilities and contingent liabilities which are obtained from the acquiree and meet the recognition conditions shall be confirmed by the Group on the acquisition date according to the fair value thereof. The acquisition date is the date on which the acquirer actually obtains control of the acquiree.

For a business combination involving entities not under common control and achieved in stages, the Group re-measures its previously-held equity interest in the acquiree to its acquisition-date fair value, and recognizes any resulting difference between the fair value and the carrying amount as investment income or other comprehensive income for the current period. Other comprehensive income and other changes in owner's equities that can be reclassified into profit or loss under the equity method of accounting for the equity interest of the acquiree held before acquisition date shall be transferred to current investment income on the purchase date; and if equity interests of the acquiree held before acquisition date are equity instrument investments measured at fair value with changes recognized in other comprehensive income, other comprehensive income recognized before acquisition date shall be transferred to retained earnings on acquisition date.

5.7 Determination standard of control and compiling methods of consolidated financial statement

5.7.1 General principles

The consolidation scope of the consolidated financial statements is determined based on control, including the Company and its controlled subsidiaries. Control refers to the Group's power over the investee, enjoying variable returns through participation in related activities of the investee, and having the ability to use its power over the investee to influence its return amount. When determining whether the Group has power over the investee, the Group only considers substantive rights related to the investee (including substantive rights enjoyed by the Group itself and other parties). The financial condition, operating performance, and cash flows of the subsidiaries shall be included in the consolidated financial statements from the date of control to the date of control termination.

The equity, profit and loss, and total comprehensive income attributable to minority shareholders of the subsidiaries shall be separately presented in the shareholders' equity section of the consolidated balance sheet and the net profit and total comprehensive income section of the consolidated profit statement.

If the current losses shared by minority shareholders of the subsidiaries exceed their share of the subsidiaries' initial owner's equity, the balance shall still be offset against the minority equity.

When the accounting period or accounting policies of a subsidiary are different from those of the Company, the Company has made necessary adjustments to the financial statements of the subsidiary based on the Company's own accounting period or accounting policies. All intra-group transactions and balances during the combination, including unrealized intra-group transactions gains and losses, have been offset. If there is evidence that unrealized losses incurred in intra-group transactions are related to impairment losses of assets, the full amount of such losses shall be recognized.

5.7.2 Subsidiaries acquired through a business combination

Where a subsidiary is acquired through a business combination involving entities under common control, when preparing the consolidated financial statements for current period, based on the carrying amounts of the assets and liabilities of the combined subsidiary in the financial statements of the ultimate controlling party, the combined subsidiary shall be deemed to be included in the consolidation scope of the Company when the ultimate controlling party of the Company begins to exercise control over it, and the initial balance and the comparative figures of the consolidated financial statements shall be correspondingly adjusted.

Where a subsidiary is acquired through a business combination involving entities not under common control, when preparing the consolidated financial statements for current period, based on the fair value of identifiable assets and liabilities of the acquired subsidiary determined on the acquisition date, the acquired subsidiary shall be included in the consolidation scope of the Company from the acquisition date.

5.7.3 Disposal of subsidiaries

When the Group loses control over a subsidiary, any resulting disposal gains or losses are recognized as investment income for the current period. The remaining equity investment is re-measured at its fair value at the date when control is lost, any resulting gains or losses are also recognized as investment income for the current period.

When the Group loses control of a subsidiary in multiple transactions in which it disposes of its long-term equity investment in the subsidiary in stages, the following are considered to determine whether the Group should account for the multiple transactions as a bundled transaction:

\- arrangements are entered into at the same time or in contemplation of each other;

\- arrangements work together to achieve an overall commercial effect;

\- the occurrence of one arrangement is dependent on the occurrence of at least one other arrangement;

\- one arrangement considered on its own is not economically justified, but it is economically justified when considered together with other arrangements.

If each of the multiple transactions does not form part of a bundled transaction, the transactions conducted before the loss of control of the subsidiary are accounted for in accordance with the accounting policy for partial disposal of equity investment in subsidiaries where control is retained.

If each of the multiple transactions forms part of a bundled transaction, each transaction shall be treated as a transaction for disposing of the existing subsidiary and losing control. The difference between the disposal price and the net carrying value of the subsidiary that is continuously calculated from the acquisition date corresponding to the disposal investment before losing control shall be included in other comprehensive income in the consolidated financial statements, and be transferred when losing control to profit or loss of the period losing control.

5.7.4 Changes in minority equity

The difference between the cost of long-term equity investment acquired by the Company through the purchase of minority equity and the net asset share of the subsidiary calculated based on the newly increased shareholding ratio, as well as the difference between the disposal price obtained from partial disposal of equity investment in the subsidiary without losing control and the net asset share of the subsidiary corresponding to the disposal of long-term equity investment, shall be adjusted to the capital reserve (share premium) in the consolidated balance sheet. And if the capital reserve (share premium) is insufficient to offset, the deficit shall be applied in sequence against the surplus reserve and then the undistributed profits.

5.8 Determination standard of cash and cash equivalents

Cash and cash equivalents comprise cash on hand, deposits that can be used for payment at any time, and short-term highly liquid investments which are readily convertible into known amount of cash with an insignificant risk of changes in value.

5.9 Foreign currency transaction and foreign currency statement translation

When the Group receives capital in foreign currencies from investors, the capital is translated to Renminbi at the spot exchange rate at the date of the receipt. Other foreign currency transactions are, on initial recognition, translated to Renminbi at the spot exchange rates.

Monetary items denominated in foreign currencies are translated to Renminbi at the spot exchange rate at the balance sheet date. The resulting exchange differences are generally recognized in current profit or loss, unless they arise from the re-translation of the principal and interest of specific borrowings for the acquisition and construction of qualifying assets. Non-monetary items that are measured at historical cost in foreign currencies are translated to Renminbi using the exchange rate at the transaction date.

In translating the financial statements of a foreign operation, assets and liabilities of foreign operation are translated to Renminbi at the spot exchange rate at the balance sheet date. Equity items, excluding undistributed profit and the translation differences in other comprehensive income, are translated to Renminbi at the spot exchange rates at the transaction date. Income and expenses in the income statement are translated to Renminbi at the spot exchange rates at the transaction date. The resulting translation differences generated by the above conversion are recognized in other comprehensive income. The translation differences accumulated in other comprehensive income with respect to a foreign operation are transferred to profit or loss in the period when the foreign operation is disposed.

5.10 Financial instruments

Financial instruments include cash at bank and on hand, investments in debt and equity securities other than those classified as long-term equity investments, receivables, payables, loans and borrowings and share capital.

5.10.1 Recognition and initial measurement of financial assets and financial liabilities

A financial asset and financial liability is recognized in the balance sheet when the Group becomes a party to the contractual provisions of a financial instrument.

A financial asset (unless it is a trade receivable without a significant financing component) and financial liability is measured initially at fair value. For financial assets and financial liabilities at fair value through profit or loss, any related directly attributable transaction costs are charged to profit or loss; for other categories of financial assets and financial liabilities, any related attributable transaction costs are included in their initial costs. Accounts receivable containing no significant financing component or not considering financing component of contracts that do not exceed one year are measured initially at transaction prices determined by the accounting policies set out in Note 5.22.

5.10.2 Classification and subsequent measurement of financial assets

(a) Classification of financial assets of this Group

The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. On initial recognition, a financial asset is classified as measured at amortized cost, at fair value through other comprehensive income ( mathrm Sigma F V O C I because ) ), or at fair value through profit or loss (“FVTPL”).

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

-it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

\- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

\- it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

\- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment's fair value in other comprehensive income. This election is made on an investment-by-investment basis. The instrument meets the definition of equity from the perspective of the issuer.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

The business model refers to how the Group manages its financial assets in order to generate cash flows. That is, the Group's business model determines whether cash flows will result from collecting contractual cash flows, selling financial assets or both. The Group determines the business model for managing the financial assets according to the facts and based on the specific business objective for managing the financial assets determined by the Group's key management personnel.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. For the purposes of this assessment, ‘ principal' is defined as the fair value of the financial asset on initial recognition. ‘Interest' is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs, as well as a profit margin. The Group also assesses whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.

(b) Subsequent measurement of financial assets

- Financial assets at FVTPL

These financial assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss unless the financial assets are part of a hedging relationship.

- Financial assets at amortized cost

These assets are subsequently measured at amortized cost using the effective interest method. A gain or loss on a financial asset that is measured at amortized cost and is not part of a hedging relationship shall be recognized in profit or loss when the financial asset is derecognized and reclassified, through the amortization process or in order to recognize impairment gains or losses.

- Debt investments at FVOCI

These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, impairment and foreign exchange gains and losses are recognized in profit or loss. Other net gains and losses are recognized in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss.

- Equity investments at FVOCI

These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss. Other net gains and losses are recognized in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to retained earnings.

5.10.3 Classification and subsequent measurement of financial liabilities

Financial liabilities are classified as measured at FVTPL or amortized cost by the Group.

\- Financial liabilities at FVTPL

A financial liability is classified as at FVTPL if it is classified as held-for-trading (including derivative financial liability) or it is designated as such on initial recognition.

Financial liabilities at FVTPL are subsequently measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss, unless the financial liabilities are part of a hedging relationship.

\- Financial liabilities at amortized cost

These financial liabilities are subsequently measured at amortized cost using the effective interest method.

5.10.4 Offsetting

Financial assets and financial liabilities are generally presented separately in the balance sheet, and are not offset. However, a financial asset and a financial liability are offset and the net amount is presented in the balance sheet when both of the following conditions are satisfied:

\- The Group currently has a legally enforceable right to set off the recognized amounts；

\- The Group intends either to settle on a net basis, or to realize the financial asset and settle the financial liability simultaneously.

5.10.5 Derecognition of financial assets and financial liabilities

Financial asset is derecognized when one of the following conditions is met:

\- the contractual rights to the cash flows from the financial asset expire;

\- the financial asset has been transferred and the Group transfers substantially all of the risks and rewards of ownership of the financial asset; or

\- the financial asset has been transferred, although the Group neither transfers nor retains substantially all of the risks and rewards of ownership of the financial asset, it does not retain control over the transferred asset.

Where a transfer of a financial asset in its entirety meets the criteria for derecognition, the difference between the two amounts below is recognized in current profit or loss:

\- the carrying amount of the financial asset transferred measured at the date of derecognition;

\- the sum of the consideration received from the transfer and, when the transferred financial asset is a debt investment at FVOCI, any cumulative gain or loss that has been recognized directly in other comprehensive income for the part derecognized.

The Group derecognizes a financial liability (or part of it) only when its contractual obligation (or part of it) is extinguished.

5.10.6 Impairment

The Group recognizes loss allowances for expected credit loss (ECL) on:

\- financial assets measured at amortized cost;

\- financial investments at fair value through other comprehensive income.

Financial assets measured at fair value, including debt investments or equity securities at FVPL, equity securities designated at FVOCI and derivative financial assets, are not subject to the ECL assessment.

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).

The maximum period considered when estimating ECLs is the maximum contractual period (including extension options) over which the Group is exposed to credit risk.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

ECLs within the next 12 months refers to the ECLs that may occur due to a financial instrument default event within 12 months after the balance sheet date (if the expected duration of the financial instrument is less than 12 months, it is within the expected duration), and is a part of the ECLs for the entire duration.

For bills receivable, accounts receivable, accounts receivable financing generated from daily business activities such as selling goods and providing services, loss allowance always measured at an amount equal to lifetime ECLs. ECLs on these financial assets are estimated using a provision matrix based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current and forecast general economic conditions at the balance sheet date.

For assets other than bills receivable, accounts receivable, accounts receivable financing that meet one of the following conditions, loss allowance are measured at an amount equal to 12-month ECLs. For all other financial instruments, the Group recognizes a loss allowance equal to lifetime ECLs:

\- If the financial instrument is determined to have low credit risk at the balance sheet date; or

\- If the credit risk on a financial instrument has not increased significantly since initial recognition.

Bad debt provision for accounts receivable

(a) Combination categories and determination criteria for bad debt provision based on credit risk characteristics

(b) Determination criteria for single provision of bad debt reserves based on individual provision

For bills receivable, accounts receivable, accounts receivable financing, and other accounts receivable, the Group usually measures its loss provision based on a combination of credit risk characteristics. If the credit risk characteristics of a counterparty are significantly different from those of other counterparties in the portfolio, or if there is a significant change in the credit risk characteristics of that counterparty, a separate provision for loss shall be made for accounts receivable from that counterparty. For example, when a counterparty experiences serious financial difficulties and the ECL rate of accounts receivable from that counterparty is significantly higher than the ECL rate of its aging range, a separate provision for loss shall be made for it.

Financial instruments that have low credit risk

The credit risk on a financial instrument is considered low if the financial instrument has a low risk of default, the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.

Significant increases in credit risk

In assessing whether the credit risk of a financial instrument has increased significantly since initial recognition, the Group assesses whether the credit risk of a financial instrument has increased significantly since initial recognition by comparing the risk of default at the balance sheet date with that at the date of initial recognition.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort, including forward-looking information. In particular, the following information is taken into account:

\- failure to make payments of principal or interest on their contractually due dates;

\- an actual or expected significant deterioration in a financial instrument's external or internal credit rating (if available);

\- an actual or expected significant deterioration in the operating results of the debtor; and

\- existing or forecast changes in the technological, market, economic or legal environment that have a significant adverse effect on the debtor's ability to meet its obligation to the Group.

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

Credit-impaired financial assets

At each balance sheet date, the Group assesses whether financial assets carried at amortized cost and debt investments at FVOCI are credit-impaired. A financial asset is credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:

\- significant financial difficulty of the borrower or issuer;

\- a breach of contract, such as a default or delinquency in interest or principal payments;

\- for economic or contractual reasons relating to the borrower's financial difficulty, the Group having granted to the borrower a concession that would not otherwise consider;

\- it is probable that the borrower will enter bankruptcy or other financial reorganization; or - the disappearance of an active market for that financial asset because of financial difficulties.

Presentation of allowance for ECL

ECLs are re-measured at each balance sheet date to reflect changes in the financial instrument's credit risk since initial recognition. Any change in the ECL amount is recognized as an impairment gain or loss in profit or loss. The Group recognizes an impairment gain or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for debt investments that are measured at FVOCI, for which the loss allowance is recognized in other comprehensive income.

Write-off

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. A write-off constitutes a derecognition event. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group's procedures for recovery of amounts due.

Subsequent recoveries of an asset that was previously written off are recognized as a reversal of impairment in profit or loss in the period in which the recovery occurs.

5.10.7 Equity instrument

The consideration received from the issuance of equity instruments is recognized in shareholders' equity at the actual issue price, with the related transaction costs deducted from shareholders' equity (capital reserve). And if the capital reserve (share premium) is insufficient to offset, the deficit shall be applied in sequence against the surplus reserve and then the undistributed profits. Consideration and transaction costs paid by the Company for repurchasing self-issued equity instruments are deducted from shareholders' equity.

When the Company repurchases its own shares, those shares are treated as treasury shares. All expenditure relating to the repurchase is recorded in the cost of the treasury shares, with the transaction recording in the share register. Treasury shares are excluded from profit distributions and are presented as a deduction under shareholders' equity in the balance sheet.

Upon the cancellation of treasury shares, share capital shall be reduced by the total par value of the shares cancelled. Where the cost of the treasury shares exceeds their total par value, the excess shall be applied in sequence against the capital reserve (share premium), the surplus reserve and then the undistributed profits. Where the cost of the treasury shares is lower than their total par value, the shortfall shall be credited to the capital reserve (share premium).

5.11 Inventories

5.11.1 Inventory categories

Inventories include raw materials, work in progress and reusable materials. Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase, costs of conversion and other expenditure incurred in bringing the inventories to their present location and condition. In addition to the purchase cost of raw materials, work in progress and finished goods include direct labor costs and an appropriate allocation of production overheads.

Agricultural products harvested are reported in accordance with the Accounting Standardfor Business Enterprises No. 1 - Inventories.

5.11.2 Measurement method of cost of inventories

Cost of inventories is calculated using the weighted average method.

5.11.3 Inventory count system

The Group maintains a perpetual inventory system.

5.11.4 Amortization method for low-value consumables and packaging materials

Consumables including low-value consumables and packaging materials are amortized when they are used. The amortization charge is included in the cost of the related assets or recognized in profit or loss for the current period.

5.11.5 Basis for determining the net realizable value and method for provision for obsolete inventories

At the balance sheet date, inventories are carried at the lower of cost and net realizable value.

Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale and relevant taxes. The net realizable value of materials held for use in the production is measured based on the net realizable value of the finished goods in which they will be incorporated. The net realizable value of the inventory held to satisfy sales or service contracts is measured based on the contract price, to the extent of the quantities specified in sales contracts, and the excess portion of inventories is measured based on general selling prices.

Any excess of the cost over the net realizable value of each item of inventories is recognized as a provision for impairment, and is recognized in profit or loss.

5.12 Long-term equity investments

5.12.1 Investment cost determination of long-term equity investments

(a) Long-term equity investments acquired through a business combination

The initial cost of a long-term equity investment acquired through a business combination involving entities under common control is the Company's share of the carrying amount of the subsidiary's equity in the consolidated financial statements of the ultimate controlling party at the combination date. The difference between the initial investment cost and the carrying amount of the consideration given is adjusted to the share premium in the capital reserve, with any deficit applied in sequence against the surplus reserve and then the undistributed profits. For a long-term equity investment in a subsidiary acquired through a business combination achieved in stages which do not form a bundled transaction and involving entities under common control, the Company determines the initial cost of the investment in accordance with the above policies. The difference between this initial cost and the sum of the carrying amount of previously-held investment and the consideration paid for the shares newly acquired is adjusted to capital premium in the capital reserve, with any deficit applied in sequence against the surplus reserve and then the undistributed profits .

For a long-term equity investment obtained through a business combination not involving enterprises under common control, the initial cost comprises the aggregate of the fair value of assets transferred, liabilities incurred or assumed, and equity securities issued by the Company, in exchange for control of the acquiree. For a long-term equity investment obtained through a business combination not involving entities under common control and achieved through multiple transactions in stages which do not form a bundled transaction, the initial cost comprises the carrying amount of the previously-held equity investment in the acquiree immediately before the acquisition date, and the additional investment cost at the acquisition date.

(b) Long-term equity investments acquired other than through a business combination

\- A long-term equity investment acquired other than through a business combination is initially recognized at the amount of cash paid if the Group acquires the investment by cash, or at the fair value of the equity securities issued if an investment is acquired by issuing equity securities.

5.12.2 Subsequent measurement and profit and loss recognition methods of long-term equity investment

(a) Investments in subsidiaries

In the Company's separate financial statements, long-term equity investments in subsidiaries are accounted for using the cost method unless the investment is classified as held for sale. Except for cash dividends or profit distributions declared but not yet distributed that have been included in the price or consideration paid in obtaining the investments, the Company recognizes its share of the cash dividends or profit distributions declared by the investee as investment income for the current period.

The investments in subsidiaries are stated in the balance sheet at cost less impairment losses.

For the impairment testing method and impairment provision method of the investments in subsidiaries, refer to Note 5.21.

In the Group's consolidated financial statements, subsidiaries are accounted for in accordance with the policies described in Note 5.6.

(b) Investments in joint ventures and associates

A joint venture is an arrangement whereby the Group and other parties have joint control and rights to the net assets of the arrangement.

An associate is an enterprise the Group can exert significant influence on.

A long-term equity investment in a joint venture and associate is accounted for using the equity method for subsequent measurement, unless the investment is classified as held for sale.

The accounting treatments under the equity method adopted by the Group are as follows:

Where the initial cost of a long-term equity investment exceeds the Group's interest in the fair value of the investee's identifiable net assets at the date of acquisition, the investment is initially recognized at cost. Where the initial investment cost is less than the Group's interest in the fair value of the investee's identifiable net assets at the date of acquisition, the investment is initially recognized at the investor's share of the fair value of the investee's identifiable net assets, and the difference is recognized in current profit or loss.

After the acquisition of the investment in joint ventures and associates, the Group recognizes its share of the investee's profit or loss and other comprehensive income as investment income or losses and other comprehensive income respectively, and adjusts the carrying amount of the investment accordingly. Once the investee declares any cash dividends or profit distributions, the carrying amount of the investment is reduced by the amount attributable to the Group. Changes in the Group's share of the investee's owners equity, other than those arising from the investee's net profit or loss, other comprehensive income or profit distribution (referred to as“other changes in owners' equity”), is recognized directly in the Group's equity, and the carrying amount of the investment is adjusted accordingly.

In calculating its share of the investee's net profits or losses, other comprehensive income and other changes in owners' equity, the Group recognizes investment income and other comprehensive income after making appropriate adjustments to align the accounting policies or accounting periods with those of the Group based on the fair value of the investee's identifiable net assets at the date of acquisition. Unrealized profits and losses resulting from transactions between the Group and its associates or joint ventures are eliminated to the extent of the Group's interest in the associates or joint ventures. Unrealized losses resulting from transactions between the Group and its associates or joint ventures are eliminated in the same way as unrealized gains but only to the extent that there is no impairment.

The Group discontinues recognizing its share of further losses of the investee after the carrying amount of the long-term equity investment and any long-term interest that in substance forms part of the Group's net investment in the associate is reduced to zero, except to the extent that the Group has an obligation to assume additional losses. If the joint venture or the associate subsequently reports net profits, the Group resumes recognizing its share of those profits only after its share of the profits equals the share of losses not recognized.

For the impairment testing method and impairment provision method of the investments in joint ventures and associates of this Group, refer to Note 5.21.

5.12.3 Criteria for determining the existence of joint control and significant impact over an investee

Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities (activities with significant impact on the returns of the arrangement) require the unanimous consent of the parties sharing control.

The following factors are usually considered when assessing whether the Group can exercise joint control over an investee:

\- Whether no single participant party is in a position to control the investee's related activities unilaterally;

\- Whether strategic decisions relating to the investee's related activities require the unanimous consent of all participant parties that sharing of control.

Significant influence is the power to participate in the financial and operating policy decisions of an investee but does not have control or joint control over those policies.

5.13 Investment properties

Investment properties are properties held either to earn rental income or for capital appreciation or for both. Investment properties are accounted for using the cost model and stated in the balance sheet at cost less accumulated depreciation, amortization and impairment losses, and adopts a depreciation or amortization policy for the investment property which is consistent with that for buildings or land use rights, unless the investment property is classified as held for sale. For the impairment testing method and impairment provision method, refer to Note 5.21.

5.14 Fixed assets

5.14.1 Recognition of fixed assets

Fixed assets represent the tangible assets held by the Group for use in production of goods, supply of services, for rental or for administrative purposes with useful lives over one accounting year.

The initial cost of a purchased fixed asset comprises the purchase price, related taxes, and any attributable expenditure for bringing the asset to working condition for its intended use. The initial cost of self-constructed fixed assets is measured in accordance with the policy set out in Note 5.15.

Where the parts of an item of fixed assets have different useful lives or provide benefits to the Group in a different pattern, thus necessitating use of different depreciation rates or methods, each part is recognized as a separate fixed asset.

For any subsequent cost of fixed assets, including the cost of replacing part of an item of fixed assets, when it is probable that the economic benefits associated with the costs will flow to the Group, it shall be capitalized and included in the cost of fixed assets, and the carrying amount of the replaced part is derecognized meanwhile; and the costs related to the day-to-day maintenance of fixed assets shall be recognized in current profit or loss as incurred.

Fixed assets are stated in the balance sheet at cost less accumulated depreciation and impairment losses.

5.14.2 Depreciation of fixed assets

The cost of a fixed asset, less its estimated residual value and accumulated impairment losses, is depreciated using the straight-line method over its estimated useful life, unless the fixed asset is classified as held for sale.

The useful lives, residual value rates and annual depreciation rates of each class of fixed assets are as follows:

Useful lives, estimated residual values and depreciation methods are reviewed at least at each year-end.

5.14.3 For impairment testing method and impairment provision method, refer to Note 5.21.

5.14.4 Disposal of fixed assets

The Group will derecognize of a fixed asset when meeting one of the following conditions:

when the fixed asset is holding for disposal; or

when no future economic benefit is expected to be generated from its use or disposal.

Gains or losses arising from the retirement or disposal of an item of fixed asset are determined as the difference between the net disposal proceeds and the carrying amount of the item, and are recognized in profit or loss on the date of retirement or disposal.

5.15 Construction in progress

The cost of self-constructed fixed assets includes the cost of materials, direct labor, capitalized borrowing costs, and necessary costs attributable to bringing the asset to working condition for its intended use.

A self-constructed fixed asset is classified as construction in progress and transferred to fixed asset when it is ready for its intended use. No depreciation is provided against construction in progress.

Criteria and timing for transfer of construction in progress to fixed assets

Construction in progress is stated in the balance sheet at cost less impairment losses (see Note 5.21).

If an enterprise sells products or by-products produced by fixed assets before they reach their intended usable state to the outside parties, in accordance with the provisions of Accounting Standards for Business Enterprises No. 14 – Revenue and Accounting Standards for Business Enterprises No. 1 – Inventories, relevant income and costs shall be accounted for separately and included in profit or loss for the current period.

5.16 Borrowing costs

Borrowing costs incurred directly attributable to the acquisition, and construction or production of a qualifying asset are capitalized as part of the cost of the asset. Other borrowing costs are recognized as financial expenses when incurred.

During the capitalization period, the amount of interest (including amortization of any discount or premium on borrowing) to be capitalized in each accounting period is determined as follows:

Where funds are borrowed specifically for the acquisition and construction or production of a qualifying asset, the amount of interest to be capitalized is the interest expense calculated using effective interest rates during the period less any interest income earned from depositing the borrowed funds or any investment income on the temporary investment of those funds before being used on the asset.

To the extent that the Group borrows funds generally and uses them for the acquisition and construction or production of a qualifying asset, the amount of borrowing costs eligible for capitalization is determined by applying a capitalization rate to the weighted average of the excess amounts of cumulative expenditure on the asset over the above amounts of specific borrowings. The capitalization rate is the weighted average of the interest rates applicable to the general-purpose borrowings.

The effective interest rate is determined as the rate that exactly discounts estimated future cash flow through the expected life of the borrowing or, when appropriate, a shorter period to the initially recognized amount of the borrowings.

During the capitalization period, exchange differences related to the principal and interest on a specific-purpose borrowing denominated in foreign currency are capitalized as part of the cost of the qualifying asset. The exchange differences related to the principal and interest on foreign currency borrowings other than a specific-purpose borrowing are recognized as a financial expense when incurred.

The capitalization period is the period from the date of commencement of capitalization of borrowing costs to the date of cessation of capitalization, excluding any period over which capitalization is suspended. Capitalization of borrowing costs commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities of acquisition, construction or production that are necessary to prepare the asset for its intended use are in progress, and ceases when the assets become ready for their intended use. Capitalization of borrowing costs should cease when the qualifying asset being constructed or produced has reached its expected usable or saleable condition. Capitalization of borrowing costs is suspended when the acquisition, construction or production activities are interrupted abnormally for a period of more than three months.

5.17 Biological assets

The biological assets of the Group are productive biological assets.

Productive biological assets are biological assets held for the purposes of producing agricultural produce, rendering of services or rental. Productive biological assets in the Group are vines. Productive biological assets are initially measured at cost. The cost of self-grown or self-bred productive biological assets represents the necessary attributable expenditure incurred before satisfying the expected production and operating purpose, including capitalized borrowing costs.

Productive biological assets, after reaching the expected production and operating purpose, are depreciated using the straight-line method over its useful life. The useful lives, estimated net residual value rates and annual depreciation rates of productive biological assets are as follows:

The Group evaluates the useful life and expected net residential value by considering the normal producing life of the productive biological assets.

Useful lives, estimated residual values and depreciation methods of productive biological assets are reviewed at least at each year-end. Any changes should be treated as changes in accounting estimates.

For a productive biological asset that has been sold, damaged, dead or destroyed, any difference between the disposal proceeds and the carrying amount of the asset (after tax deduction) should be recognized in profit or loss for the period in which it arises.

5.18 Intangible assets

Service life and amortization method

Intangible assets are stated in the balance sheet at cost less accumulated amortization (where the estimated useful life is finite) and impairment losses (see Note 5.21). For an intangible asset with finite useful life, its cost estimated less residual value and accumulated impairment losses is amortized on the straight-line method over its estimated useful life, unless the intangible asset is classified as held for sale.

The respective service life, determination basis, and amortization method for intangible assets are as follows:

The useful life and amortization method of intangible assets with limited useful life are reviewed at least at each year-end.

An intangible asset is regarded as having an indefinite useful life and is not amortized when there is no foreseeable limit to the period over which the asset is expected to generate economic benefits for the Group. At the balance sheet date, the Group had intangible assets with infinite useful lives including the land use rights and trademarks. Land use rights with infinite useful lives are permanent land use rights with permanent ownership held by the Group under the relevant Chile and Australian laws arising from the Group's acquisition of Ndomita Wine Company Chile Spa (“Chile Indomita Wine Group”), and the acquisition of Kilikanoon Estate Pty Ltd ( “ Australia Kilikanoon Estate ” ), therefore there was no amortization. The right to use trademark refers to the trademark held by the Group arising from the acquisition of the Chile Indomita Wine Group and the Australia Kilikanoon Estate with infinite useful lives. The valuation of trademark was based on the trends in the market and competitive environment, product cycle, and managing long-term development strategy. Those bases indicated the trademark will provide net cash flows to the Group within an uncertain period. The useful life is indefinite as it was hard to predict the period that the trademark would bring economic benefits to the Group.

5.19 Goodwill

The initial cost of goodwill represents the excess of cost of acquisition over the acquirer's interest in the fair value of the identifiable net assets of the acquiree under a business combination not involving entities under common control.

Goodwill is not amortized and is stated in the balance sheet at cost less accumulated impairment losses (see Note 5.21). On disposal of an asset group or a set of asset groups, any attributable goodwill is written off and included in the calculation of the profit or loss on disposal.

5.20 Long-term deferred expenses

The Group recognizes expenses that have been incurred and whose benefit period exceeds one year as long-term deferred expenses.

Long-term deferred expenses are amortized using a straight-line method within the benefit period. The respective amortization periods for such expenses are as follows:

5.21 Impairment of assets other than inventories and financial assets

The carrying amounts of the following assets are reviewed at each balance sheet date based on internal and external sources of information to determine whether there is any indication of impairment:

fixed assets

construction in progress

right-of-use assets

intangible assets

productive biological asset

investment properties measured using a cost model

long-term equity investments

goodwill

long-term deferred expenses, etc.

If any indication exists, the recoverable amount of the asset is estimated. In addition, the Group estimates the recoverable amounts of goodwill and intangible assets with infinite useful lives at each year-end, irrespective of whether there is any indication of impairment. Goodwill is allocated to each asset group, or set of asset groups, that is expected to benefit from the synergies of the combination for the purpose of impairment testing.

The recoverable amount of an asset (or asset group, set of asset groups) is the higher of its fair value (see Note 5.21) less costs to sell and its present value of expected future cash flows.

An asset group is composed of assets directly related to cash-generation and is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or asset groups.

The present value of expected future cash flows of an asset is determined by discounting the future cash flows, estimated to be derived from continuing use of the asset and from its ultimate disposal, to their present value using an appropriate pre-tax discount rate.

An impairment loss is recognized in profit or loss when the recoverable amount of an asset is less than its carrying amount. A provision for impairment of the asset is recognized accordingly. Impairment losses related to an asset group or a set of asset groups are allocated first to reduce the carrying amount of any goodwill allocated to the asset group or set of asset groups, and then to reduce the carrying amount of the other assets in the asset group or set of asset groups on a pro rata basis. However, such allocation would not reduce the carrying amount of an asset below the highest of its fair value less costs to sell (if measurable), its present value of expected future cash flows (if determinable) and zero.

Once an impairment loss is recognized, it is not reversed in a subsequent period.

5.22 Fair value measurement

Unless otherwise specified, the Group measures fair value as follows:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

When measuring fair value, the Group takes into account the characteristics of the particular asset or liability (including the condition and location of the asset and restrictions, if any, on the sale or use of the asset) that market participants would consider when pricing the asset or liability at the measurement date, and uses valuation techniques that are appropriate in the circumstances and for which sufficient data and other information are available to measure fair value. Valuation techniques mainly include the market approach, the income approach and the cost approach.

5.23 Estimated liabilities

If the obligation related to contingencies is a current obligation undertaken by the Group, and the performance of such obligation is likely to result in the outflow of economic benefits from the Group, and the relevant amount can be reliably measured, the Group will recognize the estimated liability.

The estimated liabilities are initially measured based on the best estimate of the expenses required to fulfill the relevant current obligations. For assets that have a significant impact on the time value of money, the estimated liability is determined by discounting the estimated future cash flows. When determining the best estimate, the Group takes into account factors such as risks, uncertainties, and time value of money related to contingencies. If the required expenditure exists a continuous range, and the likelihood of various outcomes occurring within this range is the same, the best estimate is determined based on the median value within this range; and in other cases, the best estimate is handled as follows:

\- If the contingency involves a single item, it shall be determined based on the most likely amount to occur.

\- If the contingency involves multiple items, it shall be determined based on various possible outcomes and related probabilities.

The Group reviews the carrying amount of estimated liabilities on the balance sheet date and adjusts the carrying amount based on the current best estimate.

5.24 Share-based payment

5.24.1 Type of share-based payment

The share-based payment of this Group is equity-settled share-based payment.

5.24.2 Accounting treatment related to implementing share-based payment plan

- Equity-settled share-based payment

When the Group exchanges shares or other equity instruments for employee services, the equity instruments granted to employees shall be measured at fair value on the grant date. For share-based payment transactions that are immediately exercisable upon grant, the Group recognizes the fair value of equity instruments as relevant costs or expenses on the grant date, and increases capital reserves accordingly. For share-based payment transactions that can only be exercised after completing the vesting period for services or meeting the prescribed performance conditions after the grant, the Group will make the best estimate of the number of feasible equity instruments on each balance sheet date during the vesting period based on subsequent information such as changes in the number of feasible employees. Based on this, the services obtained in the current period will be included in relevant costs or expenses according to the fair value of the equity instruments on the grant date, and correspondingly included in capital reserves.

When the Group accepts services but does not have settlement obligations, and the equity instruments granted to employees are those of the ultimate controlling party of the Company or its controlled subsidiaries other than the Group, the Group will treat this share-based payment plan as a share-based payment for equity settlement.

5.25 Revenue

Revenue refers to the gross inflow of economic benefits formed during the course of the ordinary activities of the Group, which may increase the shareholders' equities and is irrelevant to the invested capital of the shareholders.

The Group recognizes the revenue upon fulfillment of its performance obligations in the contract, that is, the client obtains control right over the relevant goods or services.

If there are two or more performance obligations under the contact, which shall be fulfilled, the Group will apportion the transaction price to various individual performance obligations in accordance with the relative proportion of separate selling prices of various goods or services under these performance obligations on the commencement date of the contract, and measure and recognize the revenue in accordance with the transaction prices apportioned to various individual performance obligations. The stand-alone selling price refers to the price at which the Group sells goods or provides services to customers separately. If the stand-alone selling price cannot be directly observed, the Group comprehensively considers all the relevant information that can be reasonably obtained, and uses observable input values to the greatest extent to estimate the stand-alone selling price.

For contracts with quality assurance clauses, the Group analyzes the nature of the quality assurance provided. If quality assurance provides a separate service in addition to ensuring to the client that the goods sold meet the established standards, the Group will treat it as an individual performance obligation. Otherwise, the Group conducts accounting treatment in accordance with the Accounting Standards for Business Enterprises No. 13 - Contingencies.

The transaction price refers to the amount of consideration that the Group expects to be entitled to receive due to the transfer of goods or services to the client, excluding payments received on behalf of third parties. The transaction price recognized by the Group does not exceed the amount at which the accumulated recognized revenue will most likely not undergo a significant reversal when the relevant uncertainty is eliminated. In the event that there is a significant financing part in the contract, the Group determines the transaction price based on the amount payable in cash when the client obtains control right over the relevant goods or services. The difference between the transaction price and the contract consideration shall be amortized by the effective interest method during the contract period. From the day of the enforcement of the contract, the Group expects that the interval between the client's acquisition of control right over the goods or services and the client's payment of the price will not exceed one year, regardless of the significant financing part in the contract.

If the Group meets one of the following conditions, the fulfillment of its performance obligations in a certain period will be deemed, or the fulfillment of its performance obligations at a certain time point will be deemed:

\- The client obtains and consumes the economic benefits while the Group fulfills the performance obligation;

\- The client manages to control the goods in process while the Group fulfills the performance obligation.

Goods produced during the performance period have irreplaceable purposes and the Group is entitled to charge money for the performance accumulated and has been finished until the current time within the whole contract period.

For any performance obligations fulfilled in a certain period, the Group will recognize revenue within the certain period in accordance with the performance progress. If the performance progress cannot be determined reasonably and costs incurred are expected to be compensated of the Group, the revenue will be ascertained according to the costs incurred until the performance progress is determined reasonably.

In terms of performance obligations fulfilled at a certain time point, the Group will recognize revenue when the client gains control right over the relevant goods or services. When it comes to determining whether a client has acquired the control right over goods or services, the Group will consider the following conditions:

\- The Group has the current right to receive payment for the goods or services;

\- The Group has transferred the goods in kind to the client;

\- The Group has transferred the legal ownership of the product or the main risks and rewards of ownership to the client;

\- The client has accepted the goods or services, etc.

For sales with sales return clauses, when the customer obtains control of the relevant goods, the Group recognizes revenue based on the amount of consideration expected to be entitled to receive due to the transfer of goods to the customer (that is, does not include the expected amount to be refunded due to sales return), and recognizes liabilities based on the expected amount to be refunded due to sales returns. At the same time, based on the book value at the time of transfer of the goods expected to be returned, the Group recognizes as an asset the balance after deducting the estimated cost of recovering the goods (including the value impairment of the returned goods). On each balance sheet date, the Group re-estimates the future sales returns. If there is any change, it shall be treated as a change in accounting estimates.

The Group has transferred the goods or services to the client and thus has the right to receive corresponding consideration (and the right is dependable on factors other than time lapses) as contract asset, which is subject to provision of impairment on the basis of expected credit loss. The right enjoyed by the Group (only depends on time lapses) to receive consideration unconditionally from the client shall be presented under account receivables. The Group presents the obligation of transferring goods or services for the client due to the consideration received or receivable as contract liabilities.

The specific accounting policies related to the main activities of the Group's revenue are described as follows:

The Group's sales revenue mainly comes from dealer sales. The revenue will be recognized when the Group transfers control of the related products to the customer. According to the business contract, for these transfers, the time when the product is confirmed and signed by the customer shall be recognized as the confirming point of the sales revenue.

5.26 Contract cost

Contract cost includes incremental cost for being awarded the contract and performance cost of the contract.

Incremental cost for being awarded the contract refers to the cost that the Group would not need to pay if no such contracts are awarded (e.g. sales commissions, etc.) Where such cost is expected to be recovered, the Group shall take it as the contract acquisition cost and recognize it as an asset. Expenses incurred by the Group to be awarded contract other than incremental cost expected to be recovered shall be recognized in current profits and losses when incurred.

Any cost incurred by the Group for the performance of any contract that doesn't fall into the scope of other businesses specified in the Standard such as inventory, but meets the following conditions simultaneously, shall be taken as contract performance cost and recognized as an asset.

\- Where such cost is directly related to a current or anticipated contract, including direct labor cost, direct material cost, manufacturing expenses (or similar expenses), costs clearly specified to be borne by the customer and other costs incurred solely due to the contract;

\- Where such cost includes resources to be used by the Group to fulfill future performance obligations;

\- Where such cost is expected to be recovered.

Assets recognized for contract acquisition cost and assets recognized for contract performance cost (hereinafter referred to as “ assets related to contract cost ” ) shall be amortized on the same basis as the revenue recognition of goods or services related to such assets and recognized in current profits and losses. Where the amortization period of assets recognized for the contract acquisition cost does not exceed one year, they shall be recognized in current profits and losses.

Where the book value of assets related to contract costs is higher than the difference between the following two items, the Group shall withdraw the impairment reserves of the excess part and recognize it as the asset impairment loss:

\- Residual consideration expected to be obtained arising from the transfer of goods or services related to the assets by the Group;

\- Cost estimated to be occurred for the transfer of the relevant goods or services.

5.27 Employee benefits

5.27.1 Short-term employee benefits

Employee wages or salaries, bonuses, social security contributions such as medical insurance, work injury insurance, maternity insurance and housing fund, measured at the amount incurred or accrued at the applicable benchmarks and rates, are recognized as a liability as the employee provides services, with a corresponding charge to profit or loss or included in the cost of assets where appropriate.

5.27.2 Post-employment benefits – defined contribution plans

Pursuant to the relevant laws and regulations of the People's Republic of China, the Group participated in a defined contribution basic pension insurance plan in the social insurance system established and managed by government organizations. The Group makes contributions to basic pension insurance plans based on the applicable benchmarks and rates stipulated by the government. Basic pension insurance contributions payable are recognized as a liability as the employee provides services, with a corresponding charge to profit or loss or included in the cost of assets where appropriate.

5.27.3 Dismission welfare

When the Group terminates the employment with employees before the employment contracts expire, or provides compensation under an offer to encourage employees to accept voluntary redundancy, a provision is recognized with a corresponding expense in profit or loss at the earlier of the following dates:

\- When the Group cannot unilaterally withdraw the offer of termination benefits because of an employee termination plan or a curtailment proposal;

When the Group has a formal detailed restructuring plan involving the payment of termination benefits and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it.

5.28 Government grants

Government grants are non-reciprocal transfers of monetary or non-monetary assets from the government to the Group except for capital contributions from the government in the capacity as an investor in the Group.

A government grant is recognized when there is reasonable assurance that the grant will be received and that the Group will comply with the conditions attaching to the grant.

If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or receivable. If a government grant is in the form of a transfer of a non-monetary asset, it is measured at fair value.

Government grants related to assets are grants whose primary condition is that the Group qualifying for them should purchase, construct or otherwise acquire long-term assets. Government grants related to income are grants other than those related to assets. A government grant related to an asset is recognized as deferred income and amortized over the useful life of the related asset on a reasonable and systematic manner as other income or non-operating income. A grant that compensates the Company for expenses or losses to be incurred in the future is recognized as deferred income, and included in other income or non-operating income in the periods in which the expenses or losses are recognized, or included in other income or non-operating income directly.

5.29 Income tax

Current tax and deferred tax are recognized in profit or loss except to the extent that they relate to a business combination or items recognized directly in equity (including other comprehensive income).

Current tax is the expected tax payable calculated at the applicable tax rate on taxable income for the year, plus any adjustment to tax payable in respect of previous years.

At the balance sheet date, current tax assets and liabilities are offset only if the Group has a legally enforceable right to set them off and also intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Deferred tax assets and deferred tax liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases, which include the deductible losses and tax credits carried forward to subsequent periods. Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilized.

Deferred tax is not recognized for the temporary differences arising in a single transaction that is not a business combination, and affects neither accounting profit nor taxable profit (or deductible loss) at the time of the transaction, and the initially recognized assets and liabilities do not result in equal taxable temporary differences or deductible temporary differences. Deferred tax is not recognized for taxable temporary differences arising from the initial recognition of goodwill.

At the balance sheet date, deferred tax is measured based on the tax consequences that would follow from the expected manner of recovery or settlement of the carrying amounts of the assets and liabilities, using tax rates enacted at the balance sheet date that are expected to be applied in the period when the asset is recovered or the liability is settled.

The carrying amount of a deferred tax asset is reviewed at each balance sheet date, and is reduced to the extent that it is no longer probable that the related tax benefits will be utilized. Such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

At the balance sheet date, deferred tax assets and deferred tax liabilities are offset if all of the following conditions are met:

\- the taxable entity has a legally enforceable right to offset current tax liabilities and current tax assets;

they relate to income taxes levied by the same tax authority on either: the same taxable entity; or different taxable entities which intend either to settle the current tax liabilities and current tax assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or deferred tax assets are expected to be settled or recovered.

5.30 Lease

Lease refers to a contract in which it is agreed that the lessor conveys the use right of any asset to the lessee for a period of time in exchange for consideration.

On the contract start date, the Group shall evaluate whether the contract is, or contains, a lease. Where either party thereto conveys the right to control the use of one or more identified assets for a period of time in exchange for consideration, the contract is, or contains a lease.

To determine whether the contract conveys the right to control the use of identified assets for a period of time, the Group conducts the following assessments:

Whether the contract involves the use of an identified asset. An identified asset can be either explicitly specified in a contract, or implicitly when the asset is available to the customer and can be a physically distinct portion, or if some capacity or other portion of the asset is not physically distinct but substantially represents the full capacity of the asset, so that the customer obtains substantially all of the economic benefits from the use of the asset. If the supplier of the asset has the practical ability to substitute the asset throughout the period of use, the asset is not an identified asset;

\- Whether the lessee has the right to obtain substantially all of the economic benefits from the use of the identified asset throughout the period of use; and

\- Whether the lessee has the right to direct the use of an identified asset throughout this

period of use.

If the contract contains multiple separate leases at the same time, the lessee and lessor will split the contract and have each separate lease separately subject to accounting treatment. If the contract includes lease and non-lease parts at the same time, the lessee and the lessor will split them separately. When splitting the lease and non-lease parts included in the contract, the lessee shall allocate the contract consideration according to the relative proportion of the sum of the stand-alone price of each lease part and the stand-alone price of each non-lease part. The lessor shall allocate the contract consideration in accordance with the provisions on transaction price allocation in the accounting policy stated in Note 5.22.

5.30.1 Where the Group is the lessee

Upon the commencement of the lease term, the Group recognizes right-of-use assets and lease liabilities for leases. The right-of-use assets are initially measured at cost, including initially measured amount of leased liability; amount of lease payments made on or before the commencement date of the lease term (the related amount of lease incentive having been enjoyed shall be deducted); initial direct costs incurred and costs that the Group expects to incur to disassemble and remove leased assets, restore the site where leased assets are located or restore leased assets to the agreed condition under the terms of the lease. The Group employs the straight-line method to depreciate right-of-use assets. Where it can be reasonably recognized that the ownership of leased assets will be obtained by the Group upon expiration of the lease term, leased assets will be depreciated during the service life; otherwise, leased assets will be depreciated during the lease term or the remaining service life of such leased assets by the Group, whichever is shorter. Right-of-use assets shall be provided for impairment in accordance with the accounting policies stated in Note 5.21.

When initially calculating the present value of the unpaid lease payment at the commencement date of the lease term, the Group shall employ the interest rate implicit in the lease as the discount rate; where the interest rate implicit in the lease cannot be determined, the incremental lending rate of the Group shall be used as the discount rate.

The Group calculates the interest expense of lease liabilities in each period of the lease term according to a fixed periodic rate, which will be included in current profits and losses or asset cost. The variable lease payment not included in the measurement of lease liabilities shall be recognized in current profits and losses and loss or related asset cost when they actually occur.

In case of any of following circumstances after the commencement date of the lease term, the Group will re-measure lease liabilities at the present value of the lease payment after any change:

\- Where the amount payable anticipated changes according to the guaranteed residual value;

\- Where the index or ratio used for recognizing the lease payment changes;

\- Where there is a change in the Group's assessment results of the option of purchase, renewal option or option of termination of lease or the actual exercising of the termination of the renewal option or option of termination of lease is inconsistent with the original

assessment result.

When the Group re-measures lease liabilities, the book value of right-of-use assets shall be adjusted accordingly. Where the book value of right-of-use assets has been reduced to zero, but lease liabilities still need to be subject to further reduction, the remaining amount shall be recognized in current profits and losses.

The Group does not recognize right-of-use assets and leased liabilities for short-term lease (lease with a lease term within 12 months) and lease of low-value assets. The Group shall include related lease payment into the current profits and losses or relevant asset costs according to the straight-line method in each period of the lease term.

5.30.2 The Group as the lessor

From the inception of lease, the Group will divide leases into finance lease and operating lease. Finance lease refers to a lease in which almost all the risks and returns related to the ownership of the leased asset are essentially transferred, regardless of whether the ownership is finally transferred or not. Operating lease refers to other leases except for the finance lease.

When the Group is the sublease lessor, the sublease shall be classified based on the right-of-use assets arising from the original lease rather than the underlying assets of the original lease. If the original lease is a short-term lease and the Group elects to apply the above-mentioned simplified treatment of short-term lease to the original lease, the Group shall classify the sublease as an operating lease.

For finance leases, from the commencement date of the lease term, the Group recognizes finance lease receivables for finance leases and derecognizes the finance lease assets. The Group regards the net investment in a lease as the entry value of finance lease receivables at the time of initial measurement of finance lease receivables. The net investment in a lease is the sum of the present value of unguaranteed residual value and rental receipts not received yet on the commencement date of the lease term which is subject to discounting at the interest rate implicit in the lease term.

The Group calculates and recognizes the interest income in each period within the lease term according to a fixed periodic rate. Derecognition and impairment of finance lease receivables shall be subject to accounting treatment in accordance with the accounting policies stated in Note 5.10. The variable lease payment which is not included in the net investment in a lease shall be recognized in current profits and losses when it actually occurs.

During each period of the lease term, the Group recognizes lease receipts from operating leases as rental revenue by using the straight-line method. The Group capitalizes initial direct costs pertaining to operating leases upon their occurrence, and apportions them as per the same basis used for recognizing the rental income within the lease term and includes them in current profits and losses by period. The variable lease receipts related to operating leases that are not included in the lease receipts shall be recognized in current profits and losses when they actually occur. The variable lease payment which is not included in the lease receipts shall be recognized in current profits and losses when it actually occurs.

5.31 Assets held for sale

The Group classified a non-current asset or disposal group as held for sale when the carrying amount of a non-current asset or disposal group will be recovered through a sale transaction rather than through continuing use.

A disposal group refers to a group of assets to be disposed of, by sale or otherwise, together as a whole in a single transaction and liabilities directly associated with those assets that will be transferred in the transaction.

A non-current asset or disposal group is classified as held for sale when all the following criteria are met:

\- According to the customary practices of selling such asset or disposal group in similar transactions, the non-current asset or disposal group must be available for immediate sale in their present condition subject to terms that are usual and customary for sales of such assets or disposal groups;

\- Its sale is highly probable, that is, the Group has made a resolution on a sale plan and has obtained a firm purchase commitment. The sale is to be completed within one year.

Non-current assets or disposal groups held for sale are stated at the lower of carrying amount and fair value less costs to sell (except financial assets, deferred tax assets and investment properties subsequent measured at fair value initially and subsequently. Any excess of the carrying amount over the fair value less costs to sell is recognized as an impairment loss in profit or loss.

5.32 Profit distributions

Dividends or profit distributions proposed in the profit appropriation plan, which will be approved after the balance sheet date, are not recognized as a liability at the balance sheet date but are disclosed in the notes separately.

5.33 Related parties

If a party has the power to control, jointly control or exercise significant influence over another party, or vice versa, or where two or more parties are subject to common control or joint control from another party, they are considered to be related parties. Related parties may be individuals or enterprises. Enterprises with which the Company is under common control only from the State and that have no other related party relationships are not regarded as related parties.

In addition to the related parties stated above, the Group determines related parties based on the disclosure requirements of Administrative Procedures on the Information Disclosures of Listed Companies issued by the CSRC.

5.34 Segment reporting

The Group is principally engaged in the production and sales of wine, brandy, and sparkling wine in China, France, Spain, Chile and Australia. In accordance with the Group's internal organization structure, management requirements and internal reporting system, the Group's operation is divided into five parts: China, Spain, France, Chile and Australia. The management periodically evaluates segment results, in order to allocate resources and evaluate performances. In 2026, over 83% of revenue, more than 112% of profit and over 90% of non-current assets derived from China / are located in China. Therefore the Group does not need to disclose additional segment report information.

5.35 Significant accounting estimates and judgments

The preparation of the financial statements requires management to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates as well as underlying assumptions and uncertainties involved are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.

For significant accounting estimates of this Company, see Notes 5.3, 7, 11 and 16.

5.36 Changes in significant accounting policies and accounting estimates

5.36.1 Changes in significant accounting policies

Nil

5.36.2 Changes in significant accounting estimates

Nil

6. Taxes

6.1 Main taxes and tax rates

6.2 Tax incentives

Ningxia Changyu Grape Growing Co., Ltd. “( Ningxia Growing”), a subsidiary of the Group, engaged in grape growing, is incorporated in Yongning County, Ningxia Huizu Autonomous Region. According to clause 27 of PRC Corporate Income Tax and clause 86 of PRC Corporate Income Tax Measures for Implementation, Ningxia Growing enjoys the preferential policy of an exemption of corporate income tax from grape cultivation income.

Yantai Changyu Grape Growing Co., Ltd. (“Grape Growing”), a branch of the Company, engaged in grape growing, is incorporated in Zhifu District, Yantai City, Shandong Province. According to clause 27 of PRC Corporate Income Tax and clause 86 of PRC Corporate Income Tax Measures for Implementation, Grape Growing enjoys the preferential policy of an exemption of corporate income tax from grape cultivation income.

Grape Planting Branch of Yantai Changyu Wine R&D and Manufacturing Co., Ltd. (“R&D and Growing ” ), a branch of the Company, engaged in grape growing, is incorporated in YEDA, Shandong Province. According to Clause 27 of PRC Corporate Income Tax and Clause 86 of PRC Corporate Income Tax Measures for Implementation, R&D and Growing enjoys the preferential policy of an exemption of corporate income tax from grape cultivation income.

Beijing Changyu AFIP Agriculture Development Co., Ltd. (“Agriculture Development”), a subsidiary of the Group, engaged in grape growing, is incorporated in Miyun County, Beijing. According to clause 27 of the Corporate Income Tax Law ofthe People's Republic ofChina and clause 86 of the Implementation Rules of Enterprise Income Tax Law of the People's Republic of China, Agriculture Development enjoys the preferential policy of an exemption of corporate income tax from grape cultivation income.

Xinjiang Baron Balboa Chateau Co., Ltd. (“Shihezi Chateau”), a subsidiary of the Company, is an enterprise of bulk grape wine production and sale and finished bottled grape wine sale incorporated in Shihezi City, Xinjiang Uygur Autonomous Region. In accordance with Announcement on Continuing the Enterprise Income Tax Policies for the Large-Scale Development ofWestern China of the Ministry of Finance, the State Taxation Administration and the National Development and Reform Commission (Announcement No. 23 [2020] of the Ministry of Finance), Shihezi Chateau is qualified to enjoy preferential taxation policies, which means it can pay corporate income tax at a preferential rate of 15% for the period from 2021 to 2030.

Ningxia Chateau Changyu Longyu Estate Co., Ltd. (referred to as “Ningxia Chateau”), a subsidiary of the Company, is an enterprise of finished bottled grape wine production and sale incorporated in Yinchuan City, Ningxia Huizu Autonomous Region. In accordance with Announcement on Continuing the Enterprise Income Tax Policies for the Large-Scale Development ofWestern China of the Ministry of Finance, the State Taxation Administration and the National Development and Reform Commission (Announcement No. 23 [2020] of the Ministry of Finance), Ningxia Chateau is qualified to enjoy preferential taxation policies, which means it can pay corporate income tax at a preferential rate of 15% for the period from 2021 to 2030.

Changyu (Ningxia) Wine Co., Ltd. (“Ningxia Wine”), a subsidiary of the Company, is an enterprise of bulk grape wine production and sale incorporated in Yinchuan City, Ningxia Huizu Autonomous Region. In accordance with Announcement on Continuing the Enterprise Income Tax Policies for the Large-Scale Development of Western China of the Ministry of Finance, the State Taxation Administration and the National Development and Reform Commission (Announcement No. 23 [2020] of the Ministry of Finance), Ningxia Wine is qualified to enjoy preferential taxation policies, which means it can pay corporate income tax at a preferential rate of 15% for the period from 2021 to 2030.

According to Enterprise Income Tax Law of the People's Republic of China and its Implementing Regulations, and Announcement of the Ministry of Finance and the State Taxation Administration on the Tax Policies for Further Supporting the Development of Micro and Small Enterprises and Individual Industrial and Commercial Households (Announcement No. 12 of [2023] of the Ministry of Finance and the State Taxation Administration), for micro and small enterprises that meet the applicable conditions, the taxable income for the year shall be calculated at a reduced rate of 25% of the annual taxable income, and the enterprise income tax shall be paid at the applicable tax rate of 20%. Beijing Changyu Wine Industry Marketing Co., Ltd. “( Beijing Allotting”), a subsidiary of the Group, has been identified as eligible small low-profit enterprise.

According to the provisions of the Announcement of the Ministry of Finance and the State Taxation Administration on Exempting Small-Scale Value-Added Tax Taxpayers from Value-Added Tax (Announcement No. 19 of [2023] of the Ministry of Finance and the State Taxation Administration), from January 1, 2024 to December 31, 2027, small-scale VAT taxpayers subject to a levy rate of 3% on taxable sales income will enjoy a reduced VAT rate of 1%; and prepaid VAT items that are subject to a 3% pre-levy rate will enjoy a reduced VAT prepayment rate of 1%. Xinjiang Changyu Sales Co., Ltd. Weimeisi Tasting Center Branch enjoys this preferential tax policy.

According to the provisions of the Announcement of the Ministry of Finance and the State Taxation Administration on Further Strengthening the Implementation of the Policies Regarding the Refund of Term-End Excess Input Value-Added Tax Credits (Announcement No. 14 of [2022] of the Ministry of Finance and the State Taxation Administration), it will further strengthen the implementation of the refund of term-end excess input value-added tax credits and expand the industry scope of the policy of fully refunding the excess input value-added tax credits. This Company and eligible subsidiaries have enjoyed the refund of term-end excess input value-added tax credits.

According to the Announcement of the Ministry of Finance and the State Taxation Administration on the Tax Policies for Further Supporting the Development of Micro and Small Enterprises and Individual Industrial and Commercial Households (Announcement No. 12 [2023]), from January 1, 2023 to December 31, 2027, the following taxes and surcharges are subject to a 50% reduction for small-scale VAT taxpayers, small low-profit enterprises, and individual industrial and commercial households: resource tax (excluding water resource tax), urban maintenance and construction tax, property tax, urban land use tax, stamp duty (excluding stamp duty on securities transactions), cultivated land occupation tax, as well as education surcharge and local education surcharge. Some of the Company's subsidiaries are eligible for the reduction.

7. Notes to items in the consolidated financial statement

7.1 Monetary capital

Unit: yuan

As on June 30, 2026, the bank deposits of the Group including short-term fixed deposits ranging from 3 months to 12 months amounted to RMB 60,650,000 yuan, with the interest rates ranging from 1.15% to 1.85% (December 31, 2025: RMB 45,650,000 yuan).

As at June 30, 2026, the details of other monetary funds are listed as follows:

Unit: yuan

As on June 30, 2026, the Group does not have any special interest arrangements such as establishing joint fund management accounts with related parties.

7.2 Bills receivable

Classification of bills receivable

The above bills receivable are all due within one year.

7.3 Accounts receivable

7.3.1 Disclosed by age:

Unit: yuan

As on June 30, 2026, the accounts receivable with ownership restrictions were RMB 76,263,655 yuan (December 31, 2025: 73,330,179 yuan). Please refer to Note 7.20 for details.

7.3.2 Accounts receivable are analyzed by customer category as follows:

Unit: yuan

7.3.3 Disclosed by provision for bad debts:

Unit: yuan

7.3.4 Provision for bad debts accrued, withdrawn or transferred back in this period

Provision for bad debts accrued in this period:

Unit: yuan

7.3.5 Accounts receivable actually cancelled after verification in this period

Nil

7.3.6 Accounts receivable and contract assets situation collected by borrowers of top 5 units ranked by ending balance Unit: yuan

7.3.7 Accounts receivable terminating recognition due to transfer of financial assets

Nil

7.3.8 Accounts receivable transferred and included in assets and liabilities

Nil

7.4 Receivables financing

Unit: yuan

7.4.1 Pledged bills receivable of the Group at the end of the year

7.4.2 Outstanding endorsed bills that have not matured at the end of the year

As on June 30, 2026, bills endorsed by the Group to other parties which are not yet due is RMB 99,609,132 yuan (December 31, 2025: RMB 418,066,114 yuan). The notes are used for payment to suppliers and constructions. The Group believes that due to good reputation of bank, the risk of notes not accepting by bank on maturity is very low, therefore derecognize the note receivables endorsed. If the bank is unable to pay the notes on maturity, according to the relevant laws and regulations of China, the Group would undertake limited liability for the notes.

7.5 Advance payment

7.5.1 Advance payment listed by age

Unit: yuan

7.5.2 Advance payment collected by prepaid parties of top 5 units ranked by ending balance

Unit: yuan

7.6 Other receivables

Unit: yuan

Other receivables

7.6.1 Other receivables classified by nature

Unit: yuan

7.6.2 Disclosed by age

Unit: yuan

7.6.3 Provision for bad debts accrued, withdrawn or transferred back in this period

The provision for bad debts accrued in this period was RMB -1,008,715 yuan; and that withdrawn or transferred back in this period was RMB 0 yuan.

7.6.4 Other receivables actually cancelled after verification in this period

Nil

7.6.5 Other receivables collected by borrowers of top 5 units ranked by ending balance Unit: yuan

7.6.6 Accounts receivable involving government subsidies

Nil

7.6.7 Other receivables that are terminated for recognition due to transfer of financial assets Nil

7.6.8 Other receivables transferred and then included in assets and liabilities Nil

7.7 Inventories

7.7.1 Inventory classification

Unit: yuan

7.7.2 Inventory depreciation provision

Unit: yuan

7.8 Other current assets

Unit: yuan

7.9 Long-term equity investments

Unit: yuan

1. Joint ventures

Note 1: The Group has appointed one director to each of these investees. Note 2: The Group has appointed two directors to each of these investees.