Annual Report 2011 Important Notes

1. The Board of Directors, the Supervisory Committee, directors, supervisors and senior executives of the Company confirm that, there are no fictitious presentation, misleading statements or important omissions carried in this report, and shall take responsibilities, individually and/or jointly, for the truth, accuracy and completion of the whole contents. 2. Reanda Certified Public Accountants issued an audit report of the standard and clean opinion for the Company. 3. Mr. Yu Lin, chairman of the Board of Directors, Mr. Ye Changqing, chief accountant, and Ms. Xia Xueyun, principal of the accounting body, hereby guarantee that the financial report enclosed in this annual report are true and complete. 4. The report has been prepared in Chinese and English respectively. In case of discrepancy, the Chinese version shall prevail. 5. In the report, all of Company, the Company and Gujing refer to Anhui Gujing Distillery Co., Ltd., “Gujing Group” refers to Anhui Gujing Group Co., Ltd..

1 Contents Chapter I. Company Information……………………………………………………3 Chapter II. Financial and Business Data Summary……………………………….…...4 Chapter III. Particulars about the Changes of Share Capital & Shareholders…………6 Chapter IV. Particulars about Director, Supervisors, Senior Executives and Employees of the Company………………………………………………………………...…….11 Chapter V. Corporate Governance Structure…………………………………………16 Chapter VI. Briefs to the Shareholders’ General Meeting …………………………..20 Chapter VII. Report of the Board of Directors…………………………………….…21 Chapter VIII. Report of the Supervisory Committee………………………………...42 Chapter IX. Significant Events……………………………………………………….45 Chapter X. Financial Report………………………………………………………….48 Chapter XI. Notes to the Consolidated FinancialStatements 63 Chapter XII. Documents for Reference…………………………...………………..144

2 Chapter I Company Information 1. Legal Name in Chinese: 安徽古井贡酒股份有限公司 Legal Name in English: ANHUI GUJING DISTILLERY COMPANY LIMITED Abbreviate: GUJING 2. Legal Representative: Yu Lin 3. Secretary of the Board: Ye Changqing Add: Gujing Town, Bozhou City, Anhui Province Tel: (0558) 5712231 Fax: (0558) 5317706 E-mail: [email protected] Securities Affairs Representative: Ma Junwei Add: Gujing Town, Bozhou City, Anhui Province Tel: (0558) 5710057 Fax: (0558) 5317706 E-mail: [email protected] 4. Registered Address: Gujing Town, Bozhou City, Anhui Province Office Address: Gujing Town, Bozhou City, Anhui Province Postcode: 236820 Website: http://www.gujing.com 5. Newspaper Designated for Disclosing the Information: China Securities Journal, Shanghai Securities News and Ta Kung Pao Internet Website for Publishing the Annual Report: http://www.cninfo.com.cn Place for filing the Annual Report: Secretary Office of the Board of Directors of the Company 6. Stock Exchange where the company shares are listed: Shenzhen Stock Exchange Short form of the Stock: Gujing Distillery Securities Code: 000596 Short form of the stock: Gujing Distillery B Securities Code: 200596 7. Other Relevant Information: (1) Date of the initial registration: May 30, 1996 Registration Place: Industrial & Commercial Administration Bureau of Anhui Province (2) Registration No. of Corporate Business License: 340000400001632 Tax registration number: 341600151940008 Organizationing code: 15194000-8 (3) Names and addresses of accountants’ offices appointed by the Company: Name: Reanda Certified Public Accountants Address: 2008 Dongqu, Bldg. 1, Zhubang 2000, 100 Balizhuang Xili, ChaoYang District, Beijing, PRC. (4) Name of sponsor institution and name of sponsor engaged by the Company to conduct consistent responsibility of supervision: Name of sponsor institution: GF Securities Co., Ltd. Sponsors: Mr. He Xiaoshe, Mr. Yan Peng

3 Chapter II Financial and Business Data Summary I. Main business data in 2011 Unit: RMB Yuan

Increase or decrease 2011 2010 2009 (%) Operating revenue 3,307,979,236.00 1,879,155,480.31 76.04% 1,341,426,329.43 Operating profit 835,782,955.91 398,306,010.05 109.83% 165,136,819.87 Total profit 850,074,904.95 408,811,500.55 107.94% 166,007,383.21 Net profit attributed to 566,390,286.36 313,757,556.93 80.52% 140,089,179.69 shareholders of the listed Company Net profit attributed to shareholders of the listed Company 553,567,092.68 286,885,074.85 92.96% 138,063,747.88 after deducting non-recurring profit and loss Net cash flow arising from 625,901,467.35 517,700,354.38 20.90% 349,939,729.92 operating activities Increase or decrease As at 31 Dec. 2011 As at 31 Dec. 2010 As at 31 Dec. 2009 year-on-year (%) Total assets 4,241,819,550.30 1,857,931,814.00 128.31% 1,342,230,542.78 Total liabilities 1,480,704,265.85 808,456,266.18 83.15% 534,232,591.85 Owners’ equity attributable to 2,761,115,284.45 1,049,475,547.82 163.09% 807,997,950.93 shareholders of listed companies Total share capital 251,800,000.00 235,000,000.00 7.15% 235,000,000.00 (share)

II. Main financial index Unit: RMB Yuan Increase or decrease 2011 2010 2009 (%) Basic earnings per share 2.34 1.34 74.63% 0.60 (Yuan/share) Diluted earnings per share 2.34 1.34 74.63% 0.60 (Yuan/share) Basic earnings per share 2.29 1.22 87.70% 0.59

4 deducted from recurring profits and losses (Yuan/share) Weighted average net asset 31.65% 34.17% -2.52% 16.95% earning ratio (%) Weighted average net asset earning ratio deducted from 30.94% 31.71% -0.77% 17.10% recurring profits and losses (%) Net cash flow arising from operating activities per 2.49 2.20 13.18% 1.49 share (Yuan/share) As at 31 Dec. Increase or decrease As at 31 Dec. 2011 As at 31 Dec. 2009 2010 year-on-year (%) Net cash flow per share from operating activities 10.97 4.47 145.41% 3.44 (Yuan/share) Asset-liability ratio (%) 34.91% 43.51% -8.60% 39.80%

III. Items of non-recurring profits and losses Unit: RMB Yuan Note (if Non-recurring profits and losses Amount in 2011 Amount in 2010 Amount in 2009 applicable) Gains/losses from disposal of 186,246.05 4,370,129.60 -1,986,576.82 non-current assets Government subsidies recorded into current profit and loss (excluding government subsidies with close 4,111,902.86 2,161,537.17 2,451,455.54 relationship with the Company’s business and rationed government grants in line with the united standard) Recovery of accounts receivable under 4,106,508.26 17,885,989.72 0.00 individual provision for impairment Subsidiaries’ year-to-date Net Profit/Loss Arising from business 0.00 24,890.84 -3,150,017.09 combination of entities controlled by a same company Gains and losses on change in fair value from tradable financial assets and tradable financial liabilities, as well as investment income from disposal of 0.00 982,590.50 196,140.14 tradable financial assets and tradable financial liabilities and financial assets available for sales except for effective

5 hedging related with normal businesses of the Company Minority interests effects 0.00 0.00 -1,915.10 Net amount of other non-operating incomes and expenses except the above 9,993,800.13 3,973,823.73 4,324,238.01 items Income tax effects -5,575,263.62 -2,526,479.48 192,107.13 Total 12,823,193.68 - 26,872,482.08 2,025,431.81

Chapter III Particulars about the Changes of Share Capital &

Shareholders I. Changes of share capital (I) Statement on changes in share capital Unit: share Before this Change Increase or decrease of this Changes (+, -) After this Change Capitaliza Newly Proportio Bonus tion from Proporti Quantity issued Others Subtotal Quantity n shares public on shares reserve I. Shares subject to 16,800,000 16,800,000 16,800,000 6.67% conditional sales 1. State-owned shares 2. State-owned corporate shares 3. Other domestic 16,800,000 16,800,000 16,800,000 6.67% shares Including: domestic non-state-owned 16,800,000 16,800,000 16,800,000 6.67% corporate shares Domestic natural person shares 4. Foreign shares Including: foreign corporate shares Foreign natural person shares 5. Shares of senior managers II. Shares subject to 235,000,000 100.00% 235,000,000 93.33% unconditional-sale 1. RMB ordinary 175,000,000 74.47% 175,000,000 69.50%

6 shares 2. Foreign capital 60,000,000 25.53% 60,000,000 23.83% shares listed locally 3. Foreign capital shares listed oversea 4. Others III. Total shares 235,000,000 100.00% 16,800,000 16,800,000 251,800,000 100.00%

(II) Change of shares subject to conditional sales Unit: Share Numbe r of Number of Number of shares shares Number of shares subject released shares subject to Name of to from subject to Date of releasing trading Reason shareholder trading trading trading trading moratorium moratorium morator moratorium moratorium increased in ium at in current at year-end current year year-be year gin Puning Xinhong Industrial 0 0 7,500,000 7,500,000 Private offering 3 Aug. 2012 Investment Co.,Ltd Shanghai Kaisiyi Investment 0 0 2,000,000 2,000,000 Private offering 3 Aug. 2012 Management Partnership (LLP) Xi’an Changxian Changxian 0 0 2,000,000 2,000,000 Private offering 3 Aug. 2012 Investment Management LLP Enterprise Shanghai Greenwoods Jingtong 0 0 2,000,000 2,000,000 Private offering 3 Aug. 2012 Equity Investment Center Xi’an 0 0 2,000,000 2,000,000 Private offering 3 Aug. 2012

7 Changguo Investment Management LLP Enterprise Goldstate 0 0 1,300,000 1,300,000 Private offering 3 Aug. 2012 Securities Total 0 0 16,800,000 16,800,000 － －

(III) Share issuance and listing 1. Particulars about share issuance as to the end of reporting period With approval of document ZJXK [2011] No. 943 by CSRC, the Company completed private offering of shares on 19 Jul. 2011. The Company published 16.8 million RMB ordinary shares to six specific investors with a total value of RMB 12.60 million. Reanda CPA conducted review and examine of receivable of raised capital and issued Capital Verification Report (Reanda-Yan-Zi[2011] No.1065). The first date for listing of these shares was 3 Aug. 2011, with a restricted trading term of 12 months, which is from 3 Aug. 2011 to 2 Aug. 2012, the date release for listing is 3 Aug. 2012. 2. In the reporting period, there was no share bonus, capitalization of shares, allotment of shares, exercise of warrant, implement of equity stimulus plan, corporate combination, converting of convertible bonds shares, reduction of capital, listing of staff shares, issuance of bonds etc..

II. Particulars about shareholders and actual controllers (I) Total number of shareholders and particulars about the shares held by shareholders Unit: Share Total number of Total number of Shareholders as at Shareholders as at the end of 11,255 one month before the publish date of 11,538 2011 this annual report Particulars about shares held by the top ten shareholders Proportion Nature of Total shares Non-tradable Name of shareholders of shares Shares pledged or frozen shareholder held shares held held Anhui Gujing Group State-owned 53.89% 135,702,011 57,000,000 Company Limited Corporation Domestic Puning Xinhong Industrial non-state-ow 2.98% 7,500,000 7,500,000 Investment Co., Ltd. ned Corporation Foreign KGI ASIA LIMITED 2.06% 5,190,423 corporation GUOTAI JUNAN Foreign SECURITIES(HONGKO 1.84% 4,628,570 corporation NG) LIMITED China Merchants Foreign 1.69% 4,264,900

8 Securities (HK) Co., Ltd corporation UBS (LUXEMBOURG) Foreign 1.46% 3,686,917 S.A. corporation TRIVEST CHINA Foreign 1.30% 3,275,143 FOCUS MASTER FUND corporation Industrial and Commercial Bank of China-Galaxy State-owned 1.14% 2,881,253 Yintai Financing Dividend Corporation Fund Industrial and Commercial Bank of China-GF Wealth State-owned 1.13% 2,848,737 Accumulation Open-ended Corporation Equity Fund Agricultural Bank of China-Soochow Value State-owned 1.03% 2,602,679 Growth Double Power Corporation Stock Fund Shares held by the top ten shareholders holding tradable share Name of shareholders Tradable shares held Variety of shares Anhui Gujing Group Company Limited 135,702,011 Renminbi ordinary shares Domestically listed foreign KGI ASIA LIMITED 5,190,423 shares GUOTAI JUNAN Domestically listed foreign 4,628,570 SECURITIES(HONGKONG) LIMITED shares Domestically listed foreign China Merchants Securities (HK) Co., Ltd 4,264,900 shares Domestically listed foreign UBS (LUXEMBOURG) S.A. 3,686,917 shares Domestically listed foreign TRIVEST CHINA FOCUS MASTER FUND 3,275,143 shares Industrial and Commercial Bank of China-Galaxy Yintai Financing Dividend 2,881,253 Renminbi ordinary shares Fund Industrial and Commercial Bank of China-GF Wealth Accumulation Open-ended Equity 2,848,737 Renminbi ordinary shares Fund Agricultural Bank of China-Soochow Value 2,602,679 Renminbi ordinary shares Growth Double Power Stock Fund Industrial and Commercial Bank of China-GF 2,434,201 Renminbi ordinary shares Strategy Selected Mixed Type Fund Explanation on associated Among the shareholders above, no affiliated relationship exists between the relationship among the top Company’s controlling shareholder—Anhui Gujing Group Company Limited—and ten shareholders or other shareholders, nor they are parties acting in concert as defined in the acting-in-concert Administrative Measures on Information Disclosure of Changes in Shareholding of

9 Listed Companies. Among shareholders holding tradable shares, GF Wealth Accumulation Open-ended Equity Fund and GF Strategy Selected Mixed Type Fund are parties acting in concert. As for other shareholders, the Company does not know whether they are related parties or whether they belong to parties acting in concert as defined in the Administrative Measures on Information Disclosure of Changes in Shareholding of Listed Companies.

(II) Particulars about controlling shareholders The controlling shareholder of the Company is Anhui Gujing Group Company Limited. Gujing Group held 135,702,011 shares of the Company as at 31 Dec. 2011, which is 53.89% of the total shares of the Company.

Gujing Group was established on 16 Jan. 1995, and holds Corporate Business License (No.341600000002689) issued by Industrial & Commercial Administration Bureau of Bozhou City. Gujing Group is located at Gujing Town, Bozhou City, Anhui Province. The legal representative is Mr. Yu Lin. Gujing Group was registered with capital totalling RMB 353.38 million and engages in self-operation and agency services of the import or export business on goods and technology permitted by the state; dealing with foreign trades and cooperated business; doing domestic trades and developing high technology; information consulting service, processing and distributing agricultural by-products; processing and distributing package materials, building materials, glass products, craft supplies and wooden products; and goods delivery transportation. (License or permits may be obtained for special businesses)

Property right relationship and control relationship between the company and actual controller:

The People’s Government of Bozhou

60％

Anhui Gujing Group Company Limited

53.89％

Anhui Gujing Distillery Co., Ltd.

Chapter IV Particulars about Directors, Supervisors, Senior

Executives and Employees of the Company

10 I. Basic information of directors, supervisors, senior executives and employees Total Remunerat remuneration ion drawn drawn from from Reaso Shares at Shares at the Company shareholde Beginning date of Ending date of office n for Name Title Gender Age the year the in the r entities or office term term chang beginning year-end reporting other e period related (RMB’0000) parties or (before tax) not Chairman of Yu Lin Male 58 15 Apr. 2011 16 Apr. 2014 0 0 0.00 No the board Liang General Male 48 15 Apr. 2011 16 Apr. 2014 0 0 109.83 No Jinhui Manager Wang Director Male 47 15 Apr. 2011 16 Apr. 2014 0 0 0.00 Yes Feng Yang Director Male 44 15 Apr. 2011 16 Apr. 2014 0 0 0.00 Yes Xiaofan Zhou Director Male 38 15 Apr. 2011 16 Apr. 2014 0 0 83.85 No Qingwu Deputy GM, Secretary of Ye the Board, Male 38 15 Apr. 2011 16 Apr. 2014 0 0 74.44 No Changqing Chief accountant Wang Independent Male 50 15 Apr. 2011 16 Apr. 2014 0 0 5.63 No Ruihua director Wu Independent Male 50 15 Apr. 2011 16 Apr. 2014 0 0 7.50 No Cisheng director Independent Liu Libin Male 68 15 Apr. 2011 16 Apr. 2014 0 0 7.50 No director Xu Peng Supervisor Male 42 15 Apr. 2011 16 Apr. 2014 0 0 66.95 No Niu Supervisor Male 41 15 Apr. 2011 16 Apr. 2014 0 0 50.21 No Haiting Hu Supervisor Male 46 15 Apr. 2011 16 Apr. 2014 0 0 40.99 No Wenchao Fu Supervisor Male 42 15 Apr. 2011 16 Apr. 2014 0 0 53.88 No Qiangxin Lu Supervisor Male 32 15 Apr. 2011 16 Apr. 2014 0 0 0.00 Yes Duicang Total - - - - - 0 0 - 500.78 -

II. Basic information of current directors, supervisors and senior executives (I) Mr. Yu Lin, 58 year-old, is Economic Engineer who is postgraduate degree holder,

11 incumbent Director, Chairman of the Board of the Company, Chairman of the Board of Anhui Gujing Group Co., Ltd.; had ever acted as worker, management of Chemical Fertilizer Plant of Bozhou County, Chief of Corporate Management of Ministry of Agriculture and Economy of Bozhou City, Chief of Corporate Bureau of County of Bozhou City, Deputy Secretary of Bozhou Municipal Government, Chief of Minority Development Bureau of Bozhou City, Director of Ministry of Economy of Bozhou City, Secretary of Party Leadership Group, Vice Chairman of Political Consultative Conference of Bozhou City. (II) Mr. Liang Jinhui, 48 year-old, is Political Engineer who has educational experience of graduate student, incumbent Director and General Manager of the Company. He ever took posts of Secretary of Information Research Office of the Company, Editor in Chief of Gujing Newspaper Office, Chief of Propaganda and Education Section, Vice Manager of Market Development Department of the company, Supervisor of the Second Supervisory Committee, Manager of Market Development Department, Chief of Market Research and Supervision Center, Supervisor of Third Supervisory Committee and Director of the Fourth Board of Directors, Chairman of the Board of Bozhou Gujing Sales Company. (III) Mr. Wang Feng, 47 year-old, is is Senior Economic Engineer who is postgraduate degree holder, incumbent Director, Deputy Secretary of CPC of Gujing Group. He had ever acted as Secretary of the League Committee of Bozhou Gujing Distillery; Deputy Director of Economy Development Department; Deputy Director of Enterprises Management Department; Manager of Assets Management Department of Gujing Group; Director, Secretary of the board, Vice General Manager, and General Manager of the Second Board of Directors; Director and Chairman of the Third Board of Directors, and Director as well as Chairman of the Fourth Board of Directors. (IV) Mr. Yang Xiaofan, 45 year-old, holder of master degree. At present, he is Vice President of Gujing Group. He began to work in 1987, ever took posts of middle school teacher, journalist of newspaper office, propagandist of district office, teacher of normal school, director of editors’ board of magazine; in Jul. 1993, he began to work in Gujing, he successively acted as Director of the Editors’ Board of Gujing News, Chief of Propaganda, Manager of Propaganda and Information Department, Vice President and General Manager of Anhui Gujing Real Estates Group Co., Ltd., Director and Assistant Chairman, Vice President of Gujing Group. (V) Mr. Zhou Qingwu, 38 year-old, is Economist who has educational experience of undergraduate college. At present, he is Director and Deputy General Manager of the Company, Vice Secretary of CPC of Gujing Group. He had ever acted as Clerk and Deputy Sector Chief of Quality Control Section of Business Administration Department of the Company, Director of Quality Control Center of Assets Management Department, Vice Manager and Manager of Quality Control Department, and Chairman and General Manager of Bozhou Gujing Packing Material Co., Ltd. (VI) Mr. Ye Changqing, 38 year-old, holder of master degree and International Certified Internal Auditor. Incumbent Director, Chief Accountant and acting Secretary of Board of Directors of the company; started to work in July 1997, had ever acted Chief Auditor of Audit Department, Vice Manager of Audit Department and Vice

12 Supervisor and Supervisor of Auditing& Supervision Department; and Supervisor of the Fourth Supervisory Committee. (VII) Mr. Wang Ruihua, 50 year-old, doctor degree in management, certificated public accountant. Incumbent Independent Director of the Company, Director of MBA Education Centre of Central University of Finance and Economics, tutor of PHD student, Independent Director of ZHONG KE SAN HUAN, Aerospace Changfeng and SHANXI GUANLV, External Supervisor of Beijing Rural Commercial Bank Co., Ltd., visiting professor of STATE GRID Corporation of China. He ever took post of member of review and adjudication committee of senior specialized technical officers in accounting series of Department of Finance. (VIII) Mr. Wu Cisheng, 50 year-old, who has Ph.D of Management Study, and is Professor of Management School, Dean of Business Administration Department of Hefei University of Technology, Superintendent of Business Administration Research Institute, has gained Master’s Degree of Industry Engineering in 1990, Ph. D of Business Administration in 2004; and had presided three national social science fund projects, project topics of National Ministry of Science & Technology and National Bureau of Statistics successively; had issued more than 60 theses on magazines in domestic and abroad successively, and published 6 works; and had gained provincial and ministerial advance prize of science and technology. He is incumbent independent director of the company. (IX) Mr. Liu Libin, 68 year-old, is is incumbent Vice Chairman and Chief Secretary of China Advertising Association and President and Chief Editor of International Advertising. He is the Doctor’s Tutor of Communication University of China, Visiting Professor of many universities, Advisor of many brands, Superintendent of IAI International Advertising Institute, Chief Editor of Chinese Advertisement Works Almanac and Chief Editor of Chinese Marketing Creative Works Almanac. And he has acted as member of a review committee of various arts and advertisement exhibitions all around the country. And now he is incumbent the Independent Director of the Company. (X) Mr. Xu Peng, 42 year-old, has educational experience of undergraduate college. He is incumbent Chief Supervisor of the Company, Deputy General Manager and Chief Supervisor of Market Supervision Department of Bozhou Gujing Sales Company. And he had ever acted as Deputy Director and Director of Finance Second Office of Finance Department of the Company, Manager of Finance Department of Anhui Laobada Co., Ltd., and Vice Manager and Manager of Finance Department of the Company. (XI) Mr. Niu Haiting, 41 year-old, has educational experience of undergraduate college. He is incumbent Supervisor of the Company, Member of Party Committee, and member of Commission for Disciplinary Inspection. He had ever acted as Personnel Administrator and Vice Chief Supervisor of Human Resource Department of Anhui Gujing Group. (XII) Hu Wenchao, is 46 year-old, Registered Senior Human Resource Specialist who has educational experience of undergraduate college, National Trainer Grade 2 and one of Administrators recommended by China Human Resource Development

13 Association. Now he is incumbent Supervisor of the Company, Assistant Chief of HR Center of Anhui Gujing Group Co., Ltd. He had ever acted as Labor Allocation Clerk and Deputy GM of Personnel Department, Vice Manager of HR Department of Anhui Gujing Group Co., Ltd., Vice Manager of HR Department of Anhui Gujing Distillery Company Limited. (XIII) Mr. Lu Duicang, 32 year-old, has educational experience of undergraduate college. Now, he is incumbent Supervisor of the Company and General Supervisor of Finance Department of Anhui Gujing Group Co., Ltd. He had ever acted as Accountant, Vice Director and Director of Finance Department First Center of the Company, Factory Manager of Liquor Filling Branch Factory and Manager of Finished Products Department. (XIV) Mr. Fu Qiangxin, 42 year-old, bachelor degree, accountant, incumbent Supervisor of Audit and Inspection Centre of the Company. He ever took posts of accountant of Bozhou Gujing Hotel, Manager of Finance of Bozhou Gujing Integrated Services Company and Bozhou Gujing Import and Export Trade Company, clerk of Planning and Finance Department of Gujing Group.

III. Particulars about the annual remuneration 1. The annual remuneration for the director, supervisor, and senior executives is determined according to such factors as position, performance of company’s business, local income status, consumption level and individual performance appraisals. 2. Annual remuneration The total amount of annual remuneration for the current director, supervisor, and senior executives is RMB 5,007,800 As for the individual amount, please refer to basic information. Remuneration for independent directors is the allowance received from the company. Chairman Mr. Yu Lin, Director Mr. Wang Feng, Director Yang Xiaofan and Supervisor Lu Duicang didn’t draw payment in the Company, but Mr. Yu Lin Mr. Wang Feng, Mr. Yang Xiaofan and Mr. Lu Duicang drew payment in controlling shareholders.

IV. Particulars about changes of directors, supervisors, and senior executives during the report period (I) Change of directors and senior executives 1. The Company convened Shareholders’ General Meeting for Y2010 held by the Company at 9:30 a.m. of 15 Apr. 2011 Of which Mr. Yu Lin, Mr. Liang Jinhui, Mr. Wang Feng, Mr. Yang Xiaofan, Mr. Zhou Qingwu and Mr. Ye Changqing were elected as the Directors of the 6th Board of Directors of the Company at the session; and Mr. Wang Ruihua, Mr. Wu Cisheng and Mr. Liu Libin were elected as the Independent Directors of the 6th Board of Directors of the Company. 2. The Company convened the 1st Session of the 6th Board of Directors held by the Company at 13:00 a.m. of 15 Apr. 2011 Of which Mr. Yu Lin was elected as the Chairman of the 6th Board of Directors of the

14 Company at the session; Mr. Liang Jinhui was engaged as the General Manager of the Company; Mr. Zhou Qingwu and Mr. Ye Changqing were engaged as the Vice General Manager of the Company; and Mr. Ye Changqing was engaged as Deputy GM, the Chief Accountant and Secretary to the Board. The meeting elected Mr. Yu Lin, Mr. Liang Jinhui, Mr. Zhou Qingwu, Mr. Wang Feng and Mr. Wang Ruihua as members of Strategy Committee of the Board, of which Mr. Yu Lin acted as convener; The meeting elected Mr. Wu Cisheng, Mr. Wang Ruihua, Mr. Liu Libin, Mr. Liang Jinhui and Mr. Yang Xiaofan as members of Remuneration and Appraisal Committee of the Board, of which Mr. Wu Cisheng acted as convener. The meeting elected Mr. Liu Libin, Mr. Wang Ruihua, Mr. Wu Cisheng, Mr. Yu Lin and Mr. Wang Feng as members of Nomination Committee of the Board, of which Mr. Liu Libin acted as convener. The meeting elected Mr. Wang Ruihua, Mr. Wu Cisheng, Mr. Liu Libin, Mr. Liang Jinhui and Mr. Ye Changqing as members of Audit Committee of the Board, of which Mr. Wang Ruihua acted as convener. (II) Change of supervisors 1. The Company convened Shareholders’ General Meeting for Y2010 held by the Company at 9:30 a.m. of 15 Apr. 2011, of which Mr. Xu Peng, Mr. Niu Haiting, Mr. Hu Wenchao, Mr. Lu Duicang and Mr. Fu Qiangxin were elected as the Supervisors of the 6th Supervisory Committee of the Company at the session. 2. The Company convened the 1st Session of the 6th Board of Directors held by the Company at 13:00 a.m. of 15 Apr. 2011 of which Mr. Xu Peng was elected as the Chief Supervisor of the 6th Supervisory Committee of the Company at the session.

V. Employees of the Company The Company has 5,203 employees in the payroll, including 478 managerial persons, 225 technicians, 76 financial persons, 3,508 persons engaged in production and sales up to 31 Dec. 2011. Particulars about the education of the employees: There are 14 persons with master or above degrees; 442 persons with bachelor degrees; 475 persons graduated from college, and others 4,272.

Chapter V Corporate Governance Structure I. Particulars about corporate governance

15 Since foundation, the Company constantly perfects corporate governance structure and standardize its management strictly in accordance with the Company Law, Securities Law, Standard for Governance of Listed Companies, Guide Opinion on Setting up Independent Directors Systems for Listed Companies as well as principles and requirements of other relevant laws, regulations and normative documents. (I) In the reporting period, as per requirements of Basic Standard for Enterprise Internal Control and Shenzhen Stock Exchange Guideline on Internal Control of Listed Companies, the Company developed internal control activity, implemented Rules on Management of Assets Provision for Impairment, The Policy on the Liability of Disclosing Materially Inaccurate Information in Annual Report, Rules for Management of External Information User and Rules for Management of Insider of Inner Information, perfected internal control system step by step, promoted normative operation and healthy development. The Board of Directors, the Supervisory Committee and the management of the Company make decisions, perform rights and assume obligation strictly according to the standard operation rules and inner control system so as to make sure the standard operation of the Company in the frame of rules and systems. (II) In the reporting period, according to requirements of China Securities Regulatory Commission and Rules for Listing of Shares in Shenzhen Stock Exchange and with the “open, fair and just” principle, the Company seriously and timely performed information disclosure obligation and guaranteed that the information disclosed is true, accurate and complete, free from fictitious presentation, misleading statements or important omissions, so that all the shareholders will equally acquaint themselves with all the notices of the Company. (III) In the reporting period, there was no horizontal competition or related-party transactions arising from partial system reform, characteristics of industry, state policies or merger or acquisition. In a word, the Company has primarily established a structure of corporate governance in line with requirements for listed companies, the actual corporate governance of the Company is in accordance with requirements of regulatory documents on corporate governance of listed companies stipulated by CSRC. Corporate governance structure chart of the company:

Shareholders’ General Meeting

The 16 Supervisory

The Board of Directors II. Particulars about duty performance of independent directors (I) Presence of the independent directors at the Board Meeting Times of Times of Times of Times of Times of voting Times of meetings meeting meetings Name voting on by meeting Name should be present in should be commission communication absent present person present Independent Ding Yuan 4 0 4 0 0 No Director Independent Wang Ruihua 8 2 6 0 0 No Director Independent Wu Cisheng 12 5 7 0 0 No Director Independent Liu Libin 12 4 8 0 0 No Director Statement for the unable to present the Board Meeting in successive two times: Naught. Number of the Board Meetings 12 convened within the year Including: Number of on-site meeting 5 Number of convene by 7 communication mode Number of the combination of on-site 0 and by communication mode The three independent directors credibly and diligently performed their duties strictly in accordance with the stipulations and regulations of Guidelines on Setting up Independent Directors System for Listed Company, Stipulations on Emphasizing Public Shareholder’s Interests Protection, and Articles of Association. Since the

17 beginning of their tenancy, they have punctually attended Board Meeting and General Meetings of Shareholders, actively understood the situation of operation of the Company, contribute good advices and schemes to the management of the Company, present their independent suggestions on such significant matters as the exchange of assets between the related parties and affiliated transaction, promoted the Board to make scientific and objective decisions, and maintained the interest of the Company and its minor shareholders. (II) Particulars about dissidences from the independent directors In the reporting period, the independent directors did not put forward any dissidence to the relevant events.

III. Particulars about five independences in business, personnel, assets, organizations and financial affairs between this company and controlling shareholders The company and the controlling shareholder, Anhui Gujing Group Co., Ltd., realized five independences in terms of business, personnel, assets, organizations and financial affairs, with separate independent calculation, independent and complete business, independent operation ability, and independent responsibilities and risks. Majority shareholders can not surpass the shareholders’ general meeting to directly or indirectly interfere with the company’s decisions and legal production and operation activities, and there is no same trade competition state of the same products between the company and majority shareholders.

IV. Particulars about internal control (I) Particulars bout internal control in financial statements According to the regulations of Basic Standards for Enterprise Internal Control issued by Ministry of Finance together with China Securities Regulatory Commission and other departments and Guideline on Internal Control of Listed Companies of Shenzhen Stock Exchange, the company has counseled and evaluated the effectiveness of the internal control, and formed Report of Self evaluation on internal control of the Company 2011. The Company is of the opinion that internal control of the financial statements is reasonable and regulatory that there was no material flaws in internal control of the financial statements. (II) Self-appraisal on internal control 1. Opinions on Self-appraisal Report on Internal Control of the Company for Y2011 expressed by the Board of Directors The Board of Directors of the Company considered that the existing internal control system was primarily established and perfected that in accordance with requirements of relevant laws and regulations as well as department rules. It comparatively covered operation activities in each aspect of the Company that each internal system could be exercised in consistent, in time and efficient in all procedure of operation of the Company, then each risk was reasonable controlled, and the realization of each operation target and financial target of the Company was advanced. There was no material flaw in internal control system.

18 2. Opinions on Self-appraisal Report on Internal Control of the Company for Y2011 expressed by the Supervisory Committee of the Company. Self-appraisal Report on Internal Control of the Company for Y2011 earnestly stated contents of several aspects such as establishment and complement of internal control system of the Company, target control procedure, retaining problems, rectification methods and so on, all of which made objective appraisal on the actual circumstances on internal activities of the Company. With the upgrade of the management standard of the Company, the Company put forward the improvement of internal control system, earnestly provided a solid foundation for the sustainable and healthy development of the Company. 3. Opinions on Self-appraisal Report on Internal Control of the Company for Y2011 expressed by Independent Directors of the Company In the reporting period, internal control system is basically profound and executed well. The Company set up perfect internal control system, which was in line with the requirements of relevant laws, administrative statutes and rules for departments as well as possessed legitimacy, reasonableness and effectiveness. The Company also established complete risk assessment system. Corporate governance, production & operating, information disclosure and significant events were carried on strictly in line with regulations of internal control of the Company, internal and outward risks that possibly exist in each links of operating activities were controlled reasonably, and all scheduled targets of each operating activity were realized basically. (III) Establishment and execution of rules of accountability for significant mistakes in annual report information disclosure The Company formulated Rules of Accountability for Significant Mistakes in Annual Report Information Disclosure in 2010. With strict performance of regulations of the system, the Company ensured faculty, accuracy, completeness and promptness of information disclosure, improved quality of information disclosure. In the reporting period, there was no significant error, material information omission in annual report information disclosure of the Company.

V. Particulars about assessment and incentive mechanism to senior executives during the report period The Company has set up a Performance Appraisal and Incentive Mechanism for Senior Executives, which links remuneration of senior executives with the Company’ performance, the decision-making management adopts the assessment and incentive measures by linking the annual remuneration with the Company’ economic indexes & management achievement. To promote the standard, healthy and orderly development of the company and keep the stability of the senior executives, the company annually sets up the assessment index for them and signs a written responsibility of business target at the year-begin, then decides their remuneration and the rewards & punishment at the year-end according to their personal work performance and completion of the Company’s operating target.

Chapter VI Brief Introduction to General Meetings Convened

19 General meetings convened during the reporting period are detailed as follows: Convening Newspapers for publishing resolutions of Publishing Session Date the session Date China Securities Journal, Shanghai The 1st Special Shareholders’ 14 Jan. 2011 Securities News and Hong Kong Ta kung 15 Jan. 2011 General Meeting for Y2011 Pao China Securities Journal, Shanghai Annual Shareholders’ General 15 Apr. 2011 Securities News and Hong Kong Ta kung 16 Apr. 2011 Meeting for Y2010 Pao

Chapter VII Report of the Board of Directors I. Discussion and analysis on the general operation of the Company in the reporting period 2011 is considered a crucial year for the Company’s goal to achieve leap-frog

20 development. In the reporting period, the Company continued to carry out lean management and the operating strategy of “Continuous Focus and Efficient Execution”. Aiming at the goal of “fast growth and high efficiency”, the Company adjusted its organizational structure for marketing, optimized its product mix and rationally allocated various resources, which further improved the Company’s operation and comprehensive competitiveness and ensured fast growth in the main business of distilled spirit. Meanwhile, the brand image continuously improved with better and better profitability. The Company was gaining momentum for growth. For 2011, the Company achieved an operating income of RMB 3,307,979,200, up by 76% year on year; a distilled spirit income of RMB 3,178,683,800, representing a year-on-year growth of 87%; a total profit of RMB 850,074,900, up by 108% year on year; a net profit reaching RMB 566,390,300, up by 81% year on year; net operating cash flows of RMB 625,901,500, up by 21% from a year earlier; EPS of RMB 2.34, up by 75% from a year earlier; and net operating cash flows per share of RMB 2.49, up by 13% from a year earlier. As such, the Company fully accomplished the product and operation objectives set at the beginning of the year, with its production and operation condition constantly improving. (I) General operation of the Company in the reporting period 1. The Company deepened marketing, optimized the organizational structure, proactively expanded the market and tried to make its brand more influential. Keeping to the marketing strategy of “continuous focus and high-efficient execution”, with innovating in the marketing mode as the breakthrough point, the Company worked on markets with more effort. Under the guiding principles of “high-efficient, flat, professional and systematic”, the Company optimized the organizational structure for sales and tried to formulate an operation system integrating “promotion, execution, service and supervision”. With the campaign of “three direct links to shops, streets and consumers” as the focus, the Company put in careful and intensive effort to realize the rapid growth of core markets and mass sales of the strategic core products. Besides, according to the annual planning, a series of brand promotion activities were carried out in an in-depth way, which renewed the marketing mode of distilled spirit and increased the influence of the brand. On 20 Jun. 2011, the Company became a “global partner” of the Chinese Pavilion at the 2012 World Expo in Yeosu, South Korea, with its “Gujinggong Year Protoplasmic Spirit” series being chosen as the sole designated distilled spirit for the Chinese Pavilion in the 2012 World Expo, demonstrating “No boundaries for liquor” once again. On 16 Sept. 2011, in the Third Contest for “Huazun Cup”, a contest in China for assessing value of liquor brands, the value of the Company’s brand “Gujinggong” hit a record high at RMB 14.068 billion and became one of the “China’s Top Ten Fast-Growing Distilled Liquor Brands”, “China’s Top Ten Liquor Brands with the Most Investment Value”, and “China’s Top Ten Liquor Brands with Global Competitiveness”. 2. The Company carried forward fine management, enhanced quality control, reinforced the production and sales coordination and stabilized the product quality. The Company pursues “no best, only better” in its fine management. In 2011, the

21 Company put in great effort to carry forward fine management, fully implemented the operation gist brochure, and formulated a basic management system for standardized operation. Meanwhile, it steadily improved the quality of the base liquor through effectively monitoring during the production process, as well as optimizing and stabilizing the liquor-making skills. It also designed a QC platform on its own, which integrated original liquor appraisal, staff appraisal, new product appraisal, record-keeping and analysis data management, and further improved the production techniques and liquor-making process. By proactively implementing the production and sales dispatching mechanism and quickly solving problems raised by customers, the Company was able to ensure the quality of its products. 3. By making use of the capital market and innovating in the financial mode, the Company tried to promote leap-frog development. During the reporting year, the Company proactively sought help from the capital market and successfully raised RMB 1.26 billion. Meanwhile, from a major financial aspect, the Company optimized the capital management mode, looked for cost control blind spots and proactively carried out special researches and other activities, which greatly improved the quality and efficiency of the financial work. It also worked on capital operation and financial innovations at the same time, which provided strong driving force for the leap-frog development of the Company. 4. The Company enhanced its cultural campaign and cared for its employees, which stimulated its core driving force. Corporate culture is the soul and strength for an enterprise. In 2011, with “firmly promote the culture, increase the strength, improve the quality, picture the future and promote the faithfulness” (also known as “five firmness”) as the leading values, the Company kept to the principle of “treating both root causes and symptoms, tackling problems in a comprehensive way, using both punishment and prevention and focusing on prevention”, devoted itself to a clean, simple and harmonious cultural atmosphere, and formulated a corporate culture system covering dreams, faith, values, code of conduct and code of ethics. Besides, the Company properly adjusted the remuneration system, increasing the overall salaries for manufacture workers and office staff, and giving the staff a strong sense of happiness, belonging and driving. In this way, we jointly built and shared our home of Gujing.

(II) Operation condition of the main business 1. Main business scope of the Company The Company mainly undertakes the production and sales of distilled spirits including “Gujinggong”, “Gujing” distilled spirits and other distilled spirits with strong flavor and fragrance, with the alcohol contents ranging from 30 degree to 60 degree, and the prices ranging from high, medium to low levels. A fairly complete product system has been formed with the “Gujinggong Year Protoplasmic Spirits” series as the core and traditional products (with the flower-flavor elegant spirit series and Golden Gujinggong spirit as representatives) as the important support.

2. Main businesses classified according to products and industries

22 Unit: RMB 0’000 Main businesses classified according to industries Increase/decreas Increase/decreas Increase/decrease e of operating e of operating Operating Gross profit ratio of gross profit Industries Operating cost income over the cost over the income (%) ratio over the previous year previous year previous year (%) (%) (%) Distilled spirits 317,868.38 76,545.74 75.92% 86.89% 82.92% 0.52% Hotel services 7,163.22 4,593.51 35.87% -13.64% -13.99% 0.26% Others 2,721.75 2,165.51 20.44% -56.22% -44.11% -17.24% Total 327,753.35 83,304.76 74.58% 77.55% 63.15% 2.24% Main businesses classified according to products Increase/decreas Increase/decreas Increase/decrease e of operating e of operating Operating Gross profit ratio of gross profit Products Operating cost income over the cost over the income (%) ratio over the previous year previous year previous year (%) (%) (%) Top grade liquor 210,303.11 39,746.50 81.10% 111.24% 108.48% 0.25% Medium grade liquor 102,818.14 33,973.65 66.96% 51.88% 59.28% -1.53% Low grade liquor 4,747.14 2,825.58 40.48% 67.75% 94.73% -8.25% Total 317,868.38 76,545.74 75.92% 86.89% 82.92% 0.52%

3. Main businesses classified according to regions Unit: RMB 0’000 Regions Operating income Increase/decrease of operating income over the previous year (%) North China 58,066.23 37.52% Central China 220,331.83 76.25% South China 49,051.38 183.23% Overseas 303.92 608.94% Total 327,753.36 77.55%

4. Main suppliers and customers During the reporting period, the total purchase from the top five suppliers of the Company is RMB 447,888,700, accounting for 58.88% of the total purchase amount; During the reporting period, the total sales income from the top five customers of the Company is RMB 451,226,530.68 accounting for 13.64% of the total main business income of the Company.

(III) Extraordinary movements of financial highlights for the reporting period, as well as reasons thereof 1. Items in the balance sheet Notes: No significant change occurred in the asset composition of the Company.

(1) Monetary funds were up 224% on a year-on-year basis, which was mainly because

23 most of the funds raised this year remained unused, the operating revenue and funds inflows increased, and accounts payable remained undue and unpaid at the period-end. (2) Notes receivable were up 411% on a year-on-year basis, which was mainly because the income increased and notes were adopted for settlement more often. (3) Accounts receivable were up 194% on a year-on-year basis, which was mainly because the Company offered a greater line of credit sales to some important customers due to an earlier Spring Festival. (4) Prepayments were up 12,650% on a year-on-year basis, which was mainly due to the prepayments for equipments, land compensation, property purchase and advertising. (5) Other receivables were down 89.88% on a year-on-year basis, which was mainly because the advertising deposits paid last year offset some advertising fees and the land compensation paid last year for others offset some land transfer payments. (6) Construction in process was up 1,371% on a year-on-year basis, which was mainly because the projects invested with raised funds or the Company’s own funds started construction. (7) Intangible assets were up 60.96% on a year-on-year basis, which was mainly due to the increased land for the projects invested with raised funds or the Company’s own funds. (8) Long-term deferred expenses were up 447% on a year-on-year basis, which was mainly due to the leasing and decoration expenses for the new Zhengzhou Experience Club, as well as the new decoration expenses for the Celebrity House. (9) Accounts payable were up 75.19% on a year-on-year basis, which was mainly because the end of the year was a sales peak and procurements increased accordingly. (10) Accounts received in advance were up 48.21% on a year-on-year basis, which was mainly because the end of the year was a sales peak and income increased accordingly. (11) Payroll payable was up 53.02% on a year-on-year basis, which was mainly because the Company achieved a better business performance, resulting in higher salaries and bonuses for employees, and the housing public reserve funds for the fourth quarter of the year were to be paid in the next year. (12) Taxes and fares payable were up 101% on a year-on-year basis, which was mainly because then end of the year was a sales peak, resulting in more income and thus more VAT and consumption tax unpaid at the year-end, and profit increased this year, resulting in more income tax payable. (13) Other payables were up 99.10% on a year-on-year basis, which was mainly because more price-control deposits and construction in process quality deposits increased as a result of an increased sales volume. (14) Other non-current liabilities were up 130% on a year-on-year basis, which was mainly because the Company received governmental subsidiaries in relation to assets. (15) Capital reserve was up 360% on a year-on-year basis, which was mainly due to the arrival of the privately raised funds.

24 2. Measurement attributes for major assets for the reporting period The Company has adopted the new Accounting Standards for Business Enterprises since 1 Jan. 2007. During the reporting period, no significant change occurred in the measurement attributes for the Company’s major assets. For details, see the notes to the financial report.

3. Main items in the income statement (1) Operating income was up 76.04% as compared to last year, which was mainly due to the increased prices and sales of distilled spirits in the year. (2) Operating cost was up 58.83% as compared to last year, which was mainly due to the sales increase and the rising labor cost in the year. (3) Business taxes and surcharges were up 79.02% as compared to last year, which was mainly because sales increased this year, resulting in more VAT and consumption tax. (4) Selling expense was up 96.93% as compared to last year, which was mainly because the Company enhanced sales promotion, resulting in a greater expenditure on sample liquor, service fees and advertising. (5) Administrative expense was up 31.45% as compared to last year, which was mainly because the Company achieved a better business performance and salaries & bonuses for employees thus increased. (6) Financial expense was down 399% as compared to last year, which was mainly because the note handling fees charged increased, as well as the interest income on term deposits and structural deposits. (7) Asset impairment loss was up 86.18% as compared to last year, which was mainly because the Company recovered less receivable amount for which bad-debt provisions were made at full amount in prior periods. (8) Investment gains were up 68.59% as compared to last year, which was mainly because investment gains were recognized on the cancellation of a subsidiary. (9) Non-business expenses were down 71.89% as compared to last year, which was mainly due to the decrease in losses on long-term asset disposal. (10) Income tax expense was up 198% as compared to last year, which was mainly because profits for the reporting year increased and sample liquor increased accordingly.

4. Main items in the cash flow statement (1) Net cash flows from operating activities were up 20.90% as compared to last year, which was mainly due to sales growth of distilled spirit, as well as the Company’s greater efforts in collecting receivables. (2) Net cash flows from investing activities were up 112.45% as compared to last year, which was mainly because the projects invested with raised funds or the Company’s own funds started construction. (3) Net cash flows from financing activities were up 1,572.23% as compared to last year, which was mainly due to the privately raised funds.

25 5. Operating status and results of main controlled enterprises and joint ventures (1) Bozhou Gujing Sales Company Bozhou Gujing Sales Company has a registered capital of RMB 84.86 million with the Company holding 100% of its equity interests, which is mainly engaged in sale of liquor and trade service. At the end of the reporting period, Bozhou Gujing Sales Company had total assets of RMB 800,761,700 and achieved a business income of RMB 3,162,557,800 and net profits of RMB 417,724,200 for the year.

(2) Bozhou Gujing Glass Product Co., Ltd. Bozhou Gujing Glass Product Co., Ltd. has a registered capital of RMB 66.46 million with the Company holding 100% of its equity interests, which is mainly engaged in production and sales of glass products. At the end of the reporting period, Bozhou Gujing Glass Product Co., Ltd. had total assets of RMB 127,734,700 and achieved a business income of RMB 158,037,800 and net profits of RMB 14,885,900 for the year.

(3) Bozhou Gujing Packaging Co., Ltd. Bozhou Gujing Packaging Co., Ltd. has a registered capital of RMB 30 million, which is mainly engaged in providing packaging services for “Gujing” and “Gujinggong” liquor series, fruit and vegetable liquor and health liquor. At the end of the reporting period, Bozhou Gujing Packaging Co., Ltd. had total assets of RMB 30 million and achieved a business income of RMB 0 and net profits of RMB 0 for the year.

(4) Bozhou Gujing Inn Co., Ltd. With a registered capital of RMB 628,000, Bozhou Gujing Inn Co., Ltd. is mainly engaged in inn and parking services, Chinese food processing, cigarettes and liquor, retail of daily necessities, etc.. The Company holds 100% of its equity interests. At the end of the reporting period, Bozhou Gujing Inn Co., Ltd. had total assets of RMB 1,527,000 and achieved a business income of RMB 3,365,800 and net profits of RMB -229,000 for the year.

(5) Shanghai Gujing Jinhao Hotel Management Co., Ltd. With a registered capital of RMB 54,000,000, Shanghai Gujing Jinhao Hotel Management Co., Ltd. is mainly engaged in hotel management (excluding catering service), leasing of self-owned housing properties and managing affiliated agencies. The Company holds 100% of its equity interests. At the end of the reporting period, Shanghai Gujing Jinhao Hotel Management Co., Ltd. had total assets of RMB 271,859,300 and achieved a business income of RMB 69,555,635.61 and net profits of RMB 3,156,700 for the year.

(6) Hefei Gujing Trading Co., Ltd. With a registered capital of RMB 10 million, Hefei Gujing Trading Co., Ltd. is mainly

26 engaged in sale of distilled spirits. The Company holds 100% of its equity interests. At the end of the reporting period, Hefei Gujing Trading Co., Ltd. had total assets of RMB 24,342,000 and achieved a business income of RMB 9,881,900 and net profits of RMB 2,423,000 for the year.

(7) Anhui Jinyunlai Culture & Media Co., Ltd. With a registered capital of RMB 2 million, Anhui Jinyunlai Culture & Media Co., Ltd. is mainly engaged in domestic commercial production & dissemination, sale of grafts & gifts, etc. The Company holds 100% of its equity interests. At the end of the reporting period, Anhui Jinyunlai Culture & Media Co., Ltd. had total assets of RMB 102,044,500 and achieved a business income of RMB 171,504,700 and net profits of RMB 2,331,700 for the year.

(8) Bozhou Gujing Transportation Co., Ltd. With a registered capital of RMB 6.95 million, Bozhou Gujing Transportation Co., Ltd. is mainly engaged in trucking service, sales & maintenance, etc. The Company holds 100% of its equity interests. At the end of the reporting period, Bozhou Gujing Transportation Co., Ltd had total assets of RMB 3,587,200 and achieved a business income of RMB 0 and net profits of RMB -163,800 for the year.

(9) Bozhou Gujing Waste Reclamation Co., Ltd. With a registered capital of RMB 1 million, Bozhou Gujing Waste Reclamation Co., Ltd. is mainly engaged in reclaiming wine bottles, broken glasses, waste paper boxes and other waste and old materials. The Company holds 100% of its equity interests. At the end of the reporting period, Bozhou Gujing Waste Reclamation Co., Ltd. had total assets of RMB 1,534,600 and achieved a business income of RMB 2,646,300 and net profits of RMB 91,100 for the year.

(II) Routine work of the Board of Directors during the reporting period 1. Sessions and main proposals approved at the sessions The Board of Directors held 12 sessions during the reporting period, at which mainly the following proposals were reviewed and approved: the proposal on the special mechanism for preventing the principal shareholder and related parties from capital occupation, the proposal on revising the Company’s Articles of Association, the proposal on profit distribution and capitalization of capital reserves for 2010, the 2010 Annual Report and its Summary, the 2010 internal control self-evaluation report, the proposal on routine transactions with related parties, the proposal on re-election of the Board of Directors, the proposal on electing members for special committees under the 6th Board of Directors, the proposal on electing Mr. Yu Lin as the chairman for the 6th Board of Directors, the proposal on engaging GM and company secretary, the proposal on engaging vice GMs and chief accountant, the proposal on creating a special account for raised funds and fully authorizing the management to handle the relevant matters, the proposal on relocation & reconstruction of the base liquor plant

27 and investment in auxiliary facilities and other significant proposals. 2. Execution on resolutions of shareholders’ general meetings by Board of Directors In the reporting period, in accordance with the Company Law, the Securities Law, the Articles of Association of the Company and other relevant laws and regulations, as well as resolutions and authorization from the Shareholders’ General Meeting, the Company conscientiously executed resolutions made at shareholders’ general meetings. It finished the re-election of the Board of Directors, carried out the various routine transactions with related parties, and handled matters in relation to engaging an audit agency.

(III) Corporate governance Since foundation, the Company constantly perfects corporate governance structure and standardizes its management strictly in accordance with the Company Law, Securities Law, Standard for Governance of Listed Companies, Guide Opinion on Setting up Independent Directors Systems for Listed Companies as well as principles and requirements of other relevant laws, regulations and normative documents.

During the reporting period, as per requirements of Basic Standard for Enterprise Internal Control and Shenzhen Stock Exchange Guideline on Internal Control of Listed Companies, the Company carried out internal control activities, perfected the internal control system step by step, and promoted normative operation and healthy development. The Board of Directors, the board of supervisors and the management of the Company make decisions, perform rights and assume obligation strictly according to the standard operation rules and inner control system so as to make sure the standard operation of the Company in the frame of rules and systems.

During the reporting period, according to requirements of China Securities Regulatory Commission and Rules for Listing of Shares in Shenzhen Stock Exchange and with the “open, fair and just” principle, the Company seriously and timely performed information disclosure obligation and guaranteed that the information disclosed is true, accurate and complete, free from fictitious presentation, misleading statements or important omissions, so that all the shareholders will equally acquaint themselves with all the notices of the Company.

In conclusion, the Company has established the corporate governance structure satisfying the requirements of listed company and actuality of corporate governance have met the requirements of normative documents on listed company governance issued by China Securities Regulatory Commission.

(IV) Outlook of the Company’s future development and operation plan for 2012 1. Industry development prospects of the Company The keynote of the national economic work in 2012 is “keeping stable as the first and meanwhile pursuing progress”. Under the circumstance of weak exports and slow investment, promoting consumption and expanding domestic demands will certainly

28 be the key to ensure economic growth. Due to the upgrading of consumption structure continues to stimulate huge demands for white spirit, the situation of increase of quantity and price for white spirit will remain unchanged. The growth of consumption in middle and high-end alcohol products is far more than that of low-end products, so the “Matthew Effect” for the famous high quality wine manufacturing enterprises will continue to expand.

At present, the area integration for white spirit preliminarily emerges, and “capital invested in wine manufacturing enterprises” will become increasingly intense, which signifies that the white spirit enterprise has gradually entered the stage of systemic competition and merger from the individual competition. The competition in terms of channel, brand and capital will continue to change the industrial competitive pattern. Besides, the restricted policies such as “restraints of alcoholic products advertises in CCTV”, “imprison for drunk drive” and “three public consumption restraints” as well as the expansion of productivity in white spirit industry will have a certain influence on the fast growth of white spirit industry.

2. Operating measures of the Company in 2012 (1) Uphold the main business and create new business, keep focus on, strengthen supervision and strive to break through In 2012, the Company will continue to strengthen and deepen the “three direct links to shops, streets and consumers” project, uphold the main business and create new business, keep focus on, strengthen supervision and strive to break through; establish appraisal system for dealers, optimize the structure of dealers; adhere to implement “price control” mode, so as to ensure the stability in price system; strengthen the brand building, and innovate the cooperative pattern with the media; enhance the market supervision, optimize expenses input, and increase the expense efficiency; adhere to the spirit of “no relaxation and loose for any second”, deeply cultivate its core market, move the two wings, accelerate the national process, and seek breakthrough in the overseas market.

(2) Strictly ensure the quality, enhance R&D, perfect the appraisal system and establish sensitive market feedback mechanism The Company will continue to promote the guiding concept of “Quality First” and “With taste as the standard of quality and judge the taste after drinking”, deeply implement various activities of “quality management enhancing year”, take advantage of the technical exchange platform and cooperation by production, study and research, enhance the technical innovation, strengthen the basic research, focus on key projects, so as to strive to make some breakthrough in flavor research, taste research, the response after drinking as well as the production technology research; perfect the quality appraisal and examination system, establish the awareness of excellent works, so as to ensure the stable taste of products and avoid low-quality products; increase the sensitivity and timeliness, so as to quickly respond to and handle the problems raised from the market.

29 (3) Keep improving, pursue excellent and strive towards the lean enterprise The Company will continue to perfect its Lean Sigma Management System, establish perfect and standardized work flow, fixed the action tips, consolidate the lean result, enlarge the lean effect, deeply advance the lean management, use the lean management to promote the optimization and reconstitution of procedure and flow, increase the production efficiency, reduce the production cost, create lean culture, aware and value, so as to overall enhance the Company’s comprehensive management level and operating efficiency, as well as move towards the goal of lean enterprise.

(4) Accelerate to advance the construction of raised proceed investment projects, enhance the profitability and create more value for shareholders The Company will send a great supporting cast to the construction of raised proceed investment projects; continue to strengthen the sense of organizational discipline for the construction personnel, display creative, fighting, contributive and diligent work style and subjective initiative, make overall plans and coordinate the relationship with property owners, construction units, supervising units and government authorities, so as to ensure the said projects to be constructed in accordance with “first-class planning, quality, speed and image”; meanwhile, basing on the responsible attitude for shareholders, the Company will sincerely advance the construction of raised proceed investment projects, so as to accelerate to enhance its brand influence, market competition and overall profitability, and make more value for its shareholders.

(5) Innovate the capital operational mode, and strengthen the financial management as well as advance the enterprise development The Company will build the capital operational mode with the nodes of “resources, asset and capital”; actively participate in the whole-process control on production, operation and sales, do well on the pricing of products, the prediction on the cost and profits of products; strengthen the control on selling expenses, do well the appraisal on the input effect of marketing expenses; optimize capital management mode, enhance the capital using efficiency, so as to better promote the fast development for the Company

(6) Perfect human resources management and appraisal system, enhance the living standards of staffs and jointly build our home of Gujing The Company will establish and perfect its human resources management and appraisal system, strengthen the selection, engagement and appraisal of talents; emphasize the orientation of post value, optimize the arrangement of posts and allocation of functions, reasonably distribute relevant resources and enhance the efficiency of posts; basing on the principal of “simultaneous increase in income and business performance”, optimize performance appraisal and incentive mechanism, strengthen the orientation of business performance and value and actively explore new incentives, so as to realize the system incentive from self incentive; continue to

30 increase the income of staffs, provide sweeter care for the staffs, increase their sense of belonging, so as to jointly build our home of Gujing.

We will start a new journey with full hope. The year of 2012 will certainly be special, the Company will adhere to use the “firmly promote the culture, increase the strength, improve the quality, picture the future and promote the faithfulness” (also known as “five firmness”) as the leading values, with “striving for superiority” as the power as well as with the “time and tide wait for no man” as the sense of urgency and responsibility, unite, struggle and forge ahead to overcome the difficulties, so as to build Gujing as our spirit home, creative park for our career and wealth manor of materialized labor, and further write the new chapter of a leapfrog development for Gujing.

III. Investments in report period (I) Investment with non-raised proceeds Total raised proceeds 122,749.95 Total raised proceeds invested Total raised proceeds with usage 14,604.30 0.00 this year altered in the reporting period Accumulative raised proceeds 0.00 with usage altered Accumulative raised proceeds 14,604.30 Proportion of accumulative raised invested 0.00% proceeds with usage altered Accu Chan mulati ged Total Significa ve Investme proje comm Reach nt invest nt Committed cts or itted Total Date when ed change ed progress Benefit investment projects not invest investmen Invested the project projec occurred amou as at the realized and investment (parti ment t after amount in reached ted to nt as end of the in this direction of extra al of adjustmen this year serviceable benefi feasibilit at the period year raised proceeds chan raised t (1) condition t or y of the end of (%)(3)＝ ge procee not project the (2)/(1) inclu ds or not period ded) (2) Committed investment projects Technological Transform on the 13,50 459.6 31 Dec. Brewage of No 12,194.42 459.68 3.77% 0.00 N/A No High-quality Base 0.00 8 2012 Wine Construction of Base Wine 68,60 2,208. 31 Dec. Blending & Filling No 65,921.06 2,208.92 3.35% 0.00 N/A No Centre and 0.00 92 2012 Ancillary Facilities Construction of No 27,50 27,500.00 6,634.60 6,634. 24.13% 31 Dec. 0.00 N/A No Marketing Network

31 0.00 60 2013 Construction of 17,00 5,301. 31 Dec. Brand No 17,000.00 5,301.10 31.18% 0.00 N/A No Communication 0.00 10 2012 Subtotal of 126,6 122,615.4 14,60 committed - 14,604.30 - - 0.00 - - 00.00 8 4.30 investment projects Investment direction of extra raised proceeds Repaying bank - - - - - loans (if any) Supplementing the working capital (if - - - - - any) Subtotal of investments with - 0.00 0.00 0.00 0.00 - - 0.00 - - extra raised proceeds 126,6 122,615.4 14,604.3 Total - 14,604.30 - - 0.00 - - 00.00 8 0 Situation and reason on failing to catch up with the planned progress or None achieve the estimated earnings (with details of each involved project) Explanation on significant change No significant change in the feasibility of the project. of project feasibility Amount, usage and used amount of the N/A extra raised proceeds Change of implementation place of raised N/A proceeds investment projects Adjustment in implementation N/A way of raised proceeds

32 investment projects Applicable In accordance the explanation of the Particulars on the Private Issuance of A-share of Anhui Gujing Distillery Co., Ltd. and the Listing Announcement, “Before the raised proceeds being in place, the Company can use the self-raised proceeds to input preliminarily in accordance Preliminary input with the actual progress of raised proceeds investment projects; after the raised proceeds and replacement of being in place, the Company can use the raised proceeds to replace the self-raised proceeds raised proceeds preliminarily input”. And the Proposal on Using the Raised Proceeds to Replace the investment projects Self-raised Proceeds Preliminarily Input to the Raised Proceeds Investment Projects was reviewed and approved at the 7th Session of the 6th Board of Directors, which agreed to use the raised proceeds to replace the self-raised proceeds of RMB27,058,143.42 preliminarily input to the raised proceeds investment projects. The above funds replacement was completed on 6 Jan. 2012. Project of temporarily supplementing N/A current capital with idle raised proceeds N/A Balance of raised proceeds during the implementation of Deposited in the special account for raised proceeds projects and reason thereof Use and whereabouts of the None remaining raised capital

(II) Investment with non-raised proceeds Accrued earnings of Name of project Investment amount Project progress project Relocation and Technological Transform on the Brewage of Base 8,445.59 20.05% None Wine Investment project 0 0 None Total 8,445.59 - -

IV. Explanation on Change in Accounting Estimates 1. Overview of the change in accounting estimates (1) Date of the change: 1 Jan. 2012 (2) Reason for the change: In order to unite and refine the management and accounting rules for fixed assets, as well as strictly control the occurrence of non-operating business, the Company planed to change the depreciation life of fixed

33 assets from 1 Jan. 2012. (3) Accounting estimates for fixed assets before the change Category of fixed assets Expected useful life Annual depreciation rate Residual value rate Houses and buildings 8-35 years 2.70%-12.1% 3%-5% Machinery Equipments 8-10 year 9.70%-12.10% 3%-5% Transportation 8 years 12.10% 3% Equipments Office equipments and 8 years 12.10% 3% others

(4) Accounting estimates for fixed assets after the change Category of fixed assets Expected useful life Annual depreciation rate Residual value rate Houses and buildings 8-35 years 2.70%-12.1% 3%-5% Machinery Equipments 8-10 year 9.70%-12.10% 3%-5% Transportation 4 years 24.25% 3% Equipments Office equipments and 3 years 32.33% 3% others

2. Influence on the Company by the change in accounting estimates In accordance with relevant regulations of Accounting Standards for Business Enterprise, the change is more suitable to adopt the prospective application method, because it need not retroactively adjust the financial date in previous years from 1 Jan. 2012. Since the change in accounting estimate for fixed assets on 1 Jan. 2012, it was expected to reduce about RMB 3,090,800 of net profit for the Company per year, and reduce about RMB 3,090,800 of the owners’ equities for the Company per year.

V. A standard unqualified auditor’s report has been issued for the Company’s Annual Report 2011 by Reanda Certified Public Accountants Co., Ltd. And no changes have occurred in the Company’s accounting policy. Nor there has been any correction of material accounting errors.

VI. Routine work of Board of Directors (Ⅰ) Sessions held by Board of Directors During the report period, 12 sessions were convened by the Board of Directors, which were detailed as follows: 1. The 27th Session of the 5th Board of Directors Date of Session: 19 Jan. 2011 Content: (1) The Proposal on Special Mechanism on Preventing the Capital Occupation by Principal Shareholder and Related Parties for Anhui Gujing Distillery Co., Ltd. was reviewed and approved; (2) The Proposal on Revising the Articles of Association was reviewed and approved. Disclosure situation: The public notice on the above resolutions was published in

34 China Securities Journal, Shanghai Securities News, and Hong Kong Ta Kung Pao dated 21 Jan. 2011.

2. The 28th Session of the 5th Board of Directors Date of Session: 10 Feb. 2011 Content: The Proposal on the Engagement of GM for the Company was reviewed and approved Disclosure situation: The public notice on the above resolutions was published in China Securities Journal, Shanghai Securities News, and Hong Kong Ta Kung Pao dated 11 Feb. 2011.

3. The 29th Session of the 5th Board of Directors Date of Session: 25 Mar. 2011 Content: (1) The 2010 Work Report of Board of Directors was reviewed and approved; (2) The 2010 Final Financial Report was reviewed and approved; (3) The Preplan on Distributing Profit and Turning Capital Reserve into Share Capital for 2010 was reviewed and approved; (4) The 2010 Annual Report and its Summary were reviewed and approved; (5) The Self-evaluation Report on Internal Control in 2010 was reviewed and approved; (6) The Preplan on Routine Related Transactions between the Company and Related Parties in 2011 was reviewed and approved; (7) The Proposal on Engaging Auditing Agency for 2011 was reviewed and approved; (8) The Proposal on the Re-election of the Board of Directors was reviewed and approved; (9) The Proposal on Convening the Shareholders’ General Meeting 2010 was reviewed and approved. Disclosure situation: The public notice on the above resolutions was published in China Securities Journal, Shanghai Securities News, and Hong Kong Ta Kung Pao dated 26 Mar. 2011.

4. The Special Session of the 5th Board of Directors Date of Session: 6 Apr. 2011 Content: The Proposal on Adjusting the Line of Raised Proceeds used in the Raised Proceed Investment Project of Private Issuance of A-share was reviewed and approved. Disclosure situation: The public notice on the above resolutions was published in China Securities Journal, Shanghai Securities News, and Hong Kong Ta Kung Pao dated 7 Apr. 2011. 5. The 1st Session of the 6th Board of Directors Date of Session: 15 Apr. 2011 Content: (1) The Proposal on Electing Mr. Yu Lin as the Chairman of the Board for the

35 Company was reviewed and approved; (2) The Proposal on Electing the Members of the Special Committees under the Sixth Board of Directors was reviewed and approved; (3) The Proposal on the Engagement of GM and Secretary to the Board for the Company was reviewed and approved; (4) The Proposal on the Engagement of Vice GM and Chief Accountant for the Company was reviewed and approved. Disclosure situation: The public notice on the above resolutions was published in China Securities Journal, Shanghai Securities News, and Hong Kong Ta Kung Pao dated 16 Apr. 2011.

6. The 2nd Session of the 6th Board of Directors Date of Session: 26 Apr. 2011 Content: The Proposal on the First Quarterly Report and Its Summary was reviewed and approved.

7. The 3rd Session of the 6th Board of Directors Date of Session: 14 Jul. 2011 Content: The Proposal on Establishing Special Account for Raised Proceeds and Authorizing the Management Team to Totally Handle the Relevant Matters Hereof was reviewed and approved. Disclosure situation: The public notice on the above resolutions was published in China Securities Journal, Shanghai Securities News, and Hong Kong Ta Kung Pao dated 15 Jul. 2011.

8. The 4th Session of the 6th Board of Directors Date of Session: 29 Jul. 2011 Content: The Proposal on the Relocation and Technical Transform of Brewage of Base Wine and Investment Projects on Supporting Facilities was reviewed and approved. Disclosure situation: The public notice on the above resolutions was published in China Securities Journal, Shanghai Securities News, and Hong Kong Ta Kung Pao dated 2 Aug. 2011.

9. The 5th Session of the 6th Board of Directors Date of Session: 18 Aug. 2011 Content: The Proposal on the Semi-annual Report and Its Summary was reviewed and approved. Disclosure situation: The public notice on the above resolutions was published in China Securities Journal, Shanghai Securities News, and Hong Kong Ta Kung Pao dated 19 Aug. 2011.

10. The 6th Session of the 6th Board of Directors Date of Session: 24 Oct. 2011

36 Content: The Proposal on the Third Quarterly Report for 2011 and Its Summary was reviewed and approved.

11. The Special Session of the 6th Board of Directors Date of Session: 4 Nov. 2011 Content: (1) The Proposal on the Increase of Registered Capital for the Company was reviewed and approved; (2) The Proposal on Revising the Articles of Association was reviewed and approved. Disclosure situation: The public notice on the above resolutions was published in China Securities Journal, Shanghai Securities News, and Hong Kong Ta Kung Pao dated 5 Nov. 2011.

12. The 7th Session of the 6th Board of Directors Date of Session: 29 Dec. 2011 Content: The Proposal on Using the Raised Proceeds to Replace the Self-raised Proceeds Preliminarily Input to the Raised Proceeds Investment Projects was reviewed and approved Disclosure situation: The public notice on the above resolutions was published in China Securities Journal, Shanghai Securities News, and Hong Kong Ta Kung Pao dated 30 Dec. 2011.

(Ⅱ) Execution on resolutions of shareholders’ general meetings by Board of Directors In the reporting period, in accordance with the Company Law, the Securities Law, the Articles of Association of the Company and other relevant laws and regulations, as well as resolutions and authorization from the Shareholders’ General Meeting, the Company conscientiously executed resolutions made at shareholders’ general meetings, which was detailed as follows: 1. Conscientiously executing the Proposal on the Re-election of the Board of Directors and the Proposal on the Re-election of Supervisory Committee 2. Thoroughly executing matters concerning profits and dividends distribution of Y2010 3. Executing matters concerning engaging the audit agency 4. Executing matters concerning the private issuance for the Company

(Ⅲ) Report on duty performance of Audit Committee 1. Work of Audit Committee under Board of Directors The Audit Committee under the Board of Directors comprises 3 independent directors and 2 other directors, which is chaired by Independent Director Mr. Wang Ruihua with a professional accounting background. Pursuant to relevant requirements of CSRC and Shenzhen Stock Exchange, as well as the Specific Implementation Rules for Audit Committee under Board of Directors, the Work Rules for Independent Directors on Annual Reports and the Work Procedure for Audit Committee under Board of Directors on Annual Reports, the Audit Committee

37 diligently and responsibly performed their duties as follows: (1) The Committee carefully reviewed the 2011 audit plan for the Company and relevant materials and determined the schedule for auditing the Company’s 2011 financial report upon discussion with registered accountants for the annual audit from Reanda Certified Public Accountants Co., Ltd.; (2) The Committee carefully reviewed the preliminary financial statements prepared by the Company before the entry of registered accountants for the annual audit and issued a written review opinion; (3) After the entry of registered accountants for the annual audit, the Committee communicated with them on problems arising from the audit process and the date for submission of the auditor’s report; (4) After the registered accountants had issued the preliminary audit opinion, the Committee once again reviewed the financial statements for the year 2011 and formed a written review opinion; (5) After Reanda Certified Public Accountants Co., Ltd. had issued the 2011 Auditor’s Report, the Committee convened a meeting to summarize the annual audit performed by the CPA firm, vote on and make resolutions on the annual financial statements, as well as on engaging a CPA firm for the audit next year.

2. Review opinion, summary report on annual audit and relevant resolutions by Audit Committee under Board of Directors (1) Preliminary review opinion from the Audit Committee on financial statements issued by the registered accountants for the annual audit: Board of Directors of the Company, We have reviewed the financial statements submitted by the Company’s Finance Department on 20 Mar. 2012, including the balance sheet, the income statement, the statement of changes in shareholders’ equity, the cash flow statement as of the period from Jan. 2011 to 31 Dec. 2011, as well as some notes to the financial statements. According to relevant accounting standards, as well as relevant financial rules of the Company, we paid close attention to factuality and completeness of the accounting information and whether the financial statements were prepared in strict accordance with the New Enterprise Accounting Standards and relevant financial rules of the Company. Upon inquiring of the Company’s relevant financial and management personnel, examining minutes of meetings held by the Shareholders’ General Meeting, the Supervisory Committee, the Board of Directors and relevant committees, checking relevant account books and vouchers, and conducting analysis procedure on important financial data, we are of the opinion that: All transactions of the Company have been recorded factually and completely with appropriate accounting policies and reasonable accounting estimates. No significant misstatements or omissions have been found; the principal shareholder has not occupied capital of the Company; and no external guarantees in violation of regulations or abnormal related transactions have been found. Audit Committee under Board of Directors 21 Mar. 2012

38 (2) Review opinion from the Audit Committee on the Company’s financial statements on which registered accountants for the annual audit had issued the preliminary audit opinion: Board of Directors of the Company, We have reviewed the financial statements submitted on 26 Mar. 2012 by the Company’s Finance Department after registered accountants for the annual audit have issued the preliminary audit opinion, including the balance sheet as at 31 Dec. 2011, the income statement, the statement of changes in shareholders’ equity, the cash flow statement as of the year then ended, as well as notes to the financial statements. According to relevant accounting standards, as well as relevant financial rules of the Company, we paid close attention to factuality and completeness of the accounting information, whether the financial statements were prepared in strict accordance with the New Enterprise Accounting Standards and relevant financial rules of the Company and matters after the balance sheet date. Upon our discussion with registered accountants on the preliminary audit opinion and review of relevant account books and vouchers, we are of the opinion that: The original review opinion should remain. The Company has handled matters after the balance sheet date in strict compliance with the New Enterprise Accounting Standards. And the Company’s financial statements have been prepared according to the New Enterprise Accounting Standards and relevant financial rules of the Company, which have fairly presented the Company’s financial position as at 31 Dec. 2011 and its operating results and cash flows as of the year then ended in all material aspects. Audit Committee under Board of Directors 27 Mar. 2012 (3) Summary report by Audit Committee on this annual audit performed by CPA firm Board of Directors of the Company, We have reviewed the 2011 Annual Audit Plan submitted by the Company’s Finance Department on 10 Feb. 2012 and fully communicated with project manager from Reanda Certified Public Accountants on the said audit plan. Upon that, the project manager and we have both agreed that the said plan is detailed with specific responsibilities for all parties involved, which provides a strong guarantee for successful accomplishment of the 2011 annual audit. According to the said audit plan, all 12 auditors (including the project manager) from Reanda Certified Public Accountants Co., Ltd. came to the Company in 27 Nov. 2011. On 27 Mar. 2012, on-site audit on all companies included into the consolidated statements was accomplished. The project manager communicated constantly and fully with all members of the Audit Committee on statement consolidation, accounting adjustment, application of accounting policies, accounting deficiencies to be improved discovered in the audit process, etc.. During the on-site audit by registered accountants for the annual audit, the Audit Committee paid close attention to problems discovered during the audit process and often communicated and discussed with the registered accountants by phone and meetings. We focused on the following issues when communicating:

39 �Whether financial statements are prepared in accordance with the New Enterprise Accounting Standards, requirements of securities regulatory authorities and relevant financial rules of the Company; � The observation of laws, regulations, requirements of other external departments, the management’s policies and instructions and other requirements of internal organs by the Finance Department; ③ Whether internal accounting control rules of the Company have been established and perfected; ④ Whether all departments of the Company cooperated with registered accountants so as they could obtain sufficient and appropriate materials and data for the audit. Registered accountants for the annual audit gave positive answers concerning the issues above and issued an auditor’s report with standard unqualified audit opinion on 27 Mar. 2012. In our opinion, registered accountants for the annual audit have performed the audit in strict compliance with the Independent Audit Standards for Chinese CPAs, with sufficient time for the audit and well-allocated and professionally capable audit personnel. As such, the audited financial statements are able to fully present the Company’s financial position as at 31 Dec. 2011 and its operating results and cash flows as of the year then ended. And the audit conclusion issued is in line with the actual situation of the Company. Audit Committee under Board of Directors 27 Mar. 2012

(4) Resolution by Audit Committee on engaging a CPA firm for 2012 The Audit Committee under the Board of Directors of the Company convened a meeting on 27 Mar. 2012. Five persons should attend the Meeting and five of them were actually present. At the Meeting, all members of the Committee approved the following proposals by signing voting: ① 2011 Annual Financial Report of the Company; ② Summary Report on 2011 Annual Audit Performed by Reanda Certified Public Accountants Co., Ltd.; ③ Considering that Reanda Certified Public Accountants Co., Ltd. has performed the 2011 annual audit of the Company professionally, diligently and responsibly, it is proposed to continue to engage Reanda Certified Public Accountants Co., Ltd. as the legal audit agency for the Company in 2012. The proposals above shall be submitted to the Board of Directors for review. Audit Committee under Board of Directors 27 Mar. 2012

(Ⅳ) Duty performance of Remuneration Committee The Remuneration and Appraisal Committee under the Board of Directors comprises five directors, with three of them being independent directors, and the Committee is chaired by Independent Director Mr. Wu Cisheng. Based on completion of main financial indexes and business objectives, work areas

40 and main responsibilities for directors, supervisors and senior executives, and completion of indicators involved in the appraisal system for directors, supervisors and senior executives, and according to the performance appraisal standards and procedures, the Committee conducted performance appraisal on directors, supervisors and senior executives and put forward remuneration and incentive methods for them in accordance with the performance appraisal result and the remuneration distribution policy. Pursuant to relevant laws and regulations of CSRC and Shenzhen Stock Exchange, as well as internal control rules and the Specific Implementation Rules for Remuneration and Appraisal Committee under Board of Directors, the Committee examined the remuneration for the Company’s directors, supervisors and senior executives as disclosed and issued the following examination opinion: Based on work areas, responsibilities, importance of the Company’s directors, supervisors and senior executives, as well as remuneration level in the same sector, the Committee is in charge of formulating and examining remuneration plans of the Company, including performance appraisal standards and procedures, as well as rules for incentive and punishment. Meanwhile, it also takes charge of formulating appraisal standards for directors (excluding independent directors), supervisors and senior executives, examining duty performance of the said personnel, and conducting annual performance appraisals according to appraisal standards and remuneration policies. According to the Company’s unified management rules on remuneration, as well as results of the annual performance appraisal, conducted by the Remuneration and Appraisal Committee under the Board of Directors, the Board of Directors determined the remuneration for directors, supervisors and senior executive who received remuneration from the Company. Remuneration for the Company’s directors, supervisors and senior executives for 2011 as disclosed was in line with the Company’s management rules on remuneration and no violation or inconsistency of the Company’s management rules has been found.

VII. Execution of the Management Rules for Information Insider and Management Rules for Information Reporting, Submission to and Use by External Parties In order to further perfect the Company’s corporate governance, strengthen the management on the information disclosure for the Company, the Company promulgated the Management Rules for Information Insider and Management Rules for Information Reporting, Submission to and Use by External Parties, which were reviewed and approved at the 20th Session of the 5th Board of Directors. In the reporting period, the company secretary was responsible for the disclosure of sensitive information. Before the disclosure of any significant information in periodical reports or interim announcements, the personnel who had access to the insider information all filled in the Registration Form for Information Insiders in a timely manner as required by Anhui Securities Regulatory Bureau and Shenzhen Stock Exchange. During the reporting period, no insider traded the Company’s shares making use of the insider

41 information before the disclosure of significant sensitive information that might influence the Company’s stock price. During the first half of the year, the Company strictly carried out the Management Rules for Information Reporting, Submission to and Use by External Parties, effectively controlling the reporting and submission of the Company’s business data, financial statements and other internal information to external parties. No information of the Company was leaked against applicable laws and regualtions during the reporting period.

VIII. Plan for profit distribution (I) Pre-plan for profit distribution On 27 March 2012, the Sixth Meeting of Board of Directors - No.8 Meeting, has been passed the resolution of prifits distribution, basis on the total share capital in 251.80 million shares as at 31 December 2011, using the undistributed profits to issue cash dividend by CNY 4.5 (Including tax) per 10 shares, the cash dividend shall be issued amounting to CNY 113.31 million, at the same time, transfer of capital reserves to share capital by 10 shares upon each 10 shares to the whole shareholders, amounting to 251.80 million shares. The resolution still need to deliberate by the General Shareholders Meeting of the Company.

(II) Distribution of cash dividends in the past three years: Unit: (RMB) Yuan Proportion in net profit Net profit attributable to attributable to Annual profit Cash dividend shareholders of the Company in shareholders of the Year available for (including tax) consolidated statements for the Company in distribution year consolidated statements for the year 2010 82,250,000.00 313,757,556.93 26.21% 322,176,816.26 2009 82,250,000.00 140,249,825.53 58.65% 159,241,699.35 2008 0.00 33,535,778.40 0.00% -3,995,880.78 Proportion of accumulative cash dividends for past three years in 33.74 latest average annual net profit (%)

Chapter VIII Report of the Supervisory Committee I. Meetings held by Supervisory Committee in report period and resolutions thereof Pursuant to the Company Law, the Stock Listing Rules, the Articles of Association of the Company and the Rules of Procedure for Supervisory Committee of the Company, all members of the Supervisory Committee have faithfully performed duties assigned by the Company’s Articles of Association and fully safeguarded interests of the Company and all its shareholders. During the report period, the Supervisory Committee convened six meetings, with

42 informing, organizing and resolution-making of the meetings in line with legal procedures. And details about the meetings are as follows: (I)The 14th Session of the 5th Supervisory Committee Date: 25 Mar. 2011 Resolutions made: 1. The 2010 Annual Work Report of Supervisory Committee was reviewed and approved; 2. The 2010 Annual Final Financial Report was reviewed and approved; 3. The 2010 Annual Report and its Summary was reviewed and approved; 4. The Preplan on Profit Distribution and Turning Public Reserve to Share Capital for 2010 was reviewed and approved; 5. The 2010 Self-evaluation Report on Internal Control was reviewed and approved; 6. The Preplan on Engaging an Audit Agency for 2011 was reviewed and approved; 7. The Proposal on the Re-election of Supervisory Committee Disclosure situation: The public notice on the above resolutions was published in China Securities Journal, Shanghai Securities News, and Hong Kong Ta Kung Pao dated 26 Mar. 2011.

(II)The 1st Session of the 6th Supervisory Committee Date: 15 Apr. 2011 Resolutions made: The Proposal on Electing Mr. Xu Peng as the Chairman of the 6th Supervisory Committee was reviewed and approved Disclosure situation: The public notice on the above resolutions was published in China Securities Journal, Shanghai Securities News, and Hong Kong Ta Kung Pao dated 16 Apr. 2011.

(III) The 2nd Session of the 6th Supervisory Committee Date: 26 Apr. 2011 Resolutions made: The Proposal on the First Quarterly Report for 2011 and Its Summary was reviewed and approved

(IV) The 3rd Session of the 6th Supervisory Committee Date: 18 Aug. 2011 Resolutions made: The Proposal on the Semi-annual Report for 2011 and Its Summary was reviewed and approved

(V) The 4th Session of the 6th Supervisory Committee Date: 24 Oct. 2011 Resolutions made: The Proposal on the Third Quarterly Report for 2011 and Its Summary was reviewed and approved

(VI) The 5th Session of the 6th Supervisory Committee Date: 29 Dec. 2011 Resolutions made: The Proposal on Using the Raised Proceeds to Replace the

43 Self-raised Proceeds Preliminarily Input to the Raised Proceeds Investment Projects was reviewed and approved Disclosure situation: The public notice on the above resolutions was published in China Securities Journal, Shanghai Securities News, and Hong Kong Ta Kung Pao dated 30 Dec. 2011.

II. Independent opinions expressed by Board of Supervisors on relevant matters (I) Legal operation of the Company During the report period, all members of the Board of Supervisors sat in on or attended all meetings held by the Board of Directors in 2011, the Annual Shareholders’ General Meeting for Y2010 and the 1st Special Shareholders’ General Meeting for Y2011. Sticking to the principle of “legality, supervision, self-discipline and standardization”, the Board of Supervisors adopted an attitude of being faithful, conscientious and responsible to all shareholders in performing the supervision duty, which conducted effective supervision on meeting-convening procedures of the Shareholders’ General Meeting and the Board of Directors, proposals put forward at the meetings and resolutions made at the meetings. Upon that, the Board of Supervisors is of the opinion that the Company has been operated in strict compliance with the Company Law, the Securities Law, the Articles of Association of the Company and other relevant laws and regulations, further improved various management rules of the Company, and ensured legal operation of the Company; that during the report period, directors, GMs and other senior management personnel did not violate laws, regulations or the Articles of Association of the Company or do harm to interests of the Company and minority shareholders when performing their duties; and that the Company has formulated a complete set of internal control rules and procedures for withdrawing, verifying and writing-off relevant asset impairment provisions are legal with sufficient evidence.

(II) Supervision upon finance of the Company The 2011 Annual Financial Audit Report on Anhui Gujing Distillery Co., Ltd. issued by Reanda CPAs Co., Ltd. with a standard unqualified opinion after the audit factually presents the Company’s financial position as at 31 Dec. 2011 and its operating results for the year then ended. The Company has kept clear accounts of incomes and expenses with its accounting measurement and account management both in line with relevant requirements.

(III) Supervision upon use of raised funds During the report period, the Company did not raise any funds or invest in any project with raised funds. Funds raised previously had been used up before 2011 and no use of raised funds was carried down into the report period.

(IV) Supervision upon asset purchase and sale During the report period, the Company conducted transactions of asset purchase and sale with reasonable prices. No insider dealings or behaviors that may do harm to

44 interests of some shareholders or cause asset loss of the Company have been found.

(V) Supervision upon related transactions Related transactions of the Company are mainly routine related transactions between the Company and the controlling shareholder and subsidiaries of the controlling shareholder, which are priced fairly and reasonably in line with relevant regulations and the Articles of Association of the Company. And the Company has performed the duty of information disclosure according to requirements of Shenzhen Stock Exchange and the Articles of Association of the Company.

Chapter IX Significant Events I. There existed no significant lawsuits or arbitrations in the reporting period.

II. There existed no bankruptcy reorganization in the reporting period.

III. In the reporting period, the Company did not hold stock equities of other listed companies or financial enterprises such as commercial banks, securities companies, insurance companies, trust companies and futures companies.

IV. No significant events of asset purchase, asset sale and enterprise mergers during report period

V. In the reporting period, there existed no such events as equity incentive plans or commitments.

VI. Significant related transactions (I)Routine related transactions Significant routine related transactions in the report period are detailed as follows: Unit: RMB Ten thousand Selling goods and providing labor service Purchasing goods and receiving labor to related parties service from related parties Related party Transaction Proportion in same kind Proportion in same kind Transaction price price of transactions of transactions Anhui Ruifuxiang Food Co., Ltd. 151.77 0.05% 4578.51 62.12% Total 151.77 0.05% 4578.51 62.12% The said related transactions were submitted to the 29th Session of the 5th Board of Directors for review and were approved with related directors avoiding the voting. And they were later implemented upon review and approval from the 2010 Annual Shareholders’ General Meeting.

All independent directors of the Company believe that these related transactions are for the purpose of ensuring normal production and operation of the Company. These transactions have been conducted in a standardized procedure with fair and rational

45 transaction prices. These related transactions are in line with interests of the Company and all its shareholders, with no harm done to minority interests. A legal procedure was adopted when these related transactions were voted on at the meeting held by the Board of Directors, which was in line with the Company Law, the Securities Law and other laws and regulations, as well as relevant provisions of the Company’s Articles of Association.

VII. Commitments made by the Company and shareholders holding over 5% shares of the Company Commitment Promisor Contents of commitment Implementation The Board of Directors of the Company will strictly abide by the Company Law, Securities Law, the Administration on Securities Issuance of Listed Company and other laws, regulations and rules, as well as the stipulations from CSRC. Besides, it makes the following commitment since the offering day of the new adding stocks from the private issuance: (1) It commits to publish its periodical report and disclose all information with significant influence on the investors truly, accurately, completely, fairly and timely, as well as accept the supervision and administration from CSRC and Shenzhen Stock Exchange. Commitment The (2) It commits to declare publicly on any information appears in the public made in the Fulfilled Company medias with possible misleading influence on the Company’s stock price after its issuance awareness. (3) It commits that the Company’s directors, supervisors and other senior management personnel will sincerely heard of the opinions and criticism from the public, and won’t directly or indirectly engage in the activities of trading the Company’s stocks by using the inside information and other illegal ways. The Company hereby guarantees that there is no false information or major omissions in the documents submitted to the Shenzhen Stock Exchange, and it won’t disclose any relevant information without the approval from Shenzhen Stock Exchange during the period of application for listing.

VIII. Engagement and disengagement of CPA firm As decided by the 2010 Shareholders’ General Meeting, Reanda Certified Public Accountants Co., Ltd. would continue serving as the audit agency for the Company in 2011. In the report period, the Company paid RMB 750,000 in total to Reanda CPAs firm as the audit fee.

IX. Researches, interviews and visits received In compliance with the Guidance of Shenzhen Stock Exchange for Fair Information Disclosure of Listed Companies, when receiving interviews and inquiries from investors in the report period, the Company did not separately disclose, reveal or leak undisclosed significant information of the Company to certain entities selectively, privately or in advance, which ensured fair information disclosure of the Company. Researches, interviews and visits received in the report period are detailed as follows:

46 Main discussion and Way of Type of Date Place Visitor materials provided by the reception visitor Company The Production and operation 5 Jul. 2011 Field research Individual Bosera Funds Company of the Company The Institute of Sinolink Production and operation 5 Jul. 2011 Field research Individual Company Securities of the Company The Production and operation 5 Jul. 2011 Field research Individual Sinolink Securities Company of the Company Fortune SG Fund The Production and operation 5 Jul. 2011 Field research Individual Management Co., Company of the Company Ltd. BOCOM & The Schroders Fund Production and operation 5 Jul. 2011 Field research Individual Company Management Co., of the Company Ltd. ABC-CA Fund The Production and operation 5 Jul. 2011 Field research Individual Management Co., Company of the Company Ltd. Pursuant to the Guidance of Shenzhen Stock Exchange for Fair Information Disclosure of Listed Companies, the Company will establish and perfect internal control rules and procedures for information disclosure so as to ensure fair information disclosure. Meanwhile, it will also formulate strict rules on confidentiality, rules on receiving and introducing the Company to investors, and registration rules for information disclosure, and disclose its internal control rules on information disclosure so as to do a better job in information disclosure.

X. No significant events after the balance sheet date.

XI. Directors, supervisors and senior executives of the Company received no punishment from regulatory authorities in the report period.

XII. Punishments received or rectifications required by CSRC upon supervision During the report period, the Company, its Board of Directors and directors received no investigations, administrative punishments or criticism by circular from CSRC, open criticism from the stock exchange, or punishments in any other form. In the report period, the Company did not have to make rectifications required by CSRC upon supervision.

XIII. Explanation on the scheme of private issuance of A-share As approved by the CSRC Document Zheng-Jian-Xu-Ke [2011] No. 943, the Company accomplished the issuance-related work of the private offering project on 19 Jul. 2011. The Company issued a total of 16.80 million shares of RMB ordinary shares (A-shares) to 6 specific investors, raising RMB 1.26 billion in total. Reanda

47 Certified Public Accountants verified the raised capital upon its arrival and issued the Capital Verification Report Reanda-Yan-Zi [2011] No. 1065. And the trading restricted period for the said private offering lasts for 12 months, i.e. from 3 Aug. 2011 to 2 Aug. 2012, and the release date is 3 Aug. 2012. Now the construction of investment projects with raised funds are orderly advanced, for details about the progress of investment, please refer to the Special Report on the Deposit and Use of Raised Funds for 2011.

XIV. During the report period, there existed no any other significant event that the Company should but not yet disclose.

Chapter X Financial Report

I. Auditor’s Report REANDA SHEN ZI [2012] No. 1184 To the Shareholders of Anhui Gujing Distillery Co., Ltd.: We have audited the attached financial statements of Anhui Gujing Distillery Co., Ltd. (“the Company”), which comprise the consolidated and the Company’s balance sheet as at December 31, 2011, the consolidated and the Company’s income statement, the consolidated and the Company’s cash flow statement, the consolidated and the Company’s statement of changes in owners’ equity for the year then ended, and the notes to financial statements. I. Responsibilities of the management concerning the financial statements The management of the Company is responsible for the preparation of these financial statements and fair presentation. These responsibilities include: (1) preparing financial statements according to the Accounting Standards for Business Enterprises and make them a fair presentation; and (2) designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. II. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the Chinese Certified Public Accountants' Auditing Standards. These standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amount and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the consolidation financial statements and fair presentation in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a

48 basis for our audit opinion. III. Opinion In our opinion, the financial statements have been prepared in accordance with the requirements of the Enterprises Accounting Standards promulgated by the People’s Republic of China in all material respects, and present fairly the financial positions of the Group and the Company as at December 31, 2011, and their respective operating results and cash flows for the year then ended.

Reanda Certified Public Accountants Co., Ltd.

Certified Public Accountant: Zhang Liping

Certified Public Accountant: Wu Wenhui

Beijing, China 27 March 2012

II. Financial Statements Balance Sheet Prepared by Anhui Gujing Distillery Co., Ltd. As at 31 Dec. 2011 Unit: (RMB) Yuan Closing balance Opening balance Items Consolidation The Company Consolidation The Company Current Assets: Monetary funds 2,082,032,491.33 1,885,937,555.53 643,231,404.42 480,737,398.56 Settlement reserves Lendings to banks and other financial institutions Transactional financial assets Notes receivable 490,543,018.49 481,125,332.25 96,030,755.37 95,501,941.37 Accounts receivable 37,685,831.22 1,857,487.49 12,818,732.56 141,180.50 Accounts paid in 233,262,710.73 148,873,681.27 1,829,510.94 1,204,384.85 advance Premiums receivable Reinsurance premiums receivable Receivable reinsurance contract reserves Interest receivable 4,451,540.35 4,395,740.35 Dividend receivable Other accounts 7,882,417.86 263,635,938.96 77,890,785.60 267,012,565.97 receivable Financial assets purchased under agreements to resell Inventories 578,157,069.43 545,878,714.66 452,879,486.68 415,921,177.10

49 Non-current assets due within 1 year Other current assets Total current assets 3,434,015,079.41 3,331,704,450.51 1,284,680,675.57 1,260,518,648.35 Non-current assets: Entrusted loans and advances granted Available-for-sale financial assets Held-to-maturity investments Long-term accounts receivable Long-term equity 247,991,408.32 227,891,408.32 investment Investing property 32,558,410.26 32,558,410.26 45,302,486.98 45,302,486.98 Fixed assets 362,778,190.84 152,140,192.21 340,073,469.76 124,128,116.13 Construction in 133,017,100.51 132,982,180.51 9,044,377.55 6,563,500.47 progress Engineering materials Disposal of fixed assets Production biological assets Oil-gas assets Intangible assets 248,594,232.04 124,709,474.17 154,446,392.29 27,308,645.11 R&D expense Goodwill Long-term deferred 9,678,465.54 4,536,265.22 1,770,776.25 1,770,776.25 expenses Deferred income tax 21,178,071.70 20,167,034.56 22,613,635.60 21,187,756.69 assets Other non-current assets Total of non-current assets 807,804,470.89 715,084,965.25 573,251,138.43 454,152,689.95 Total assets 4,241,819,550.30 4,046,789,415.76 1,857,931,814.00 1,714,671,338.30 Current liabilities: Short-term borrowings Borrowings from Central Bank Customer bank deposits and due to banks and other financial institutions Borrowings from banks

50 and other financial institutions Transactional financial liabilities Notes payable Accounts payable 219,823,856.45 225,568,150.93 125,477,892.08 114,914,319.09 Accounts received in 135,597,187.88 590,174,171.08 91,491,403.51 300,050,355.69 advance Financial assets sold for repurchase Handling charges and commissions payable Employee’s 192,762,077.27 102,876,125.19 125,967,749.54 74,580,660.62 compensation payable Tax payable 671,079,511.43 446,265,127.40 334,701,132.86 226,903,366.29 Interest payable Dividend payable Other accounts payable 248,890,018.78 89,012,417.91 125,010,186.17 55,588,232.84 Reinsurance premiums payable Insurance contract reserves Payables for acting trading of securities Payables for acting underwriting of securities Non-current liabilities due within 1 year Other current liabilities 2,075,708.75 1,798,000.00 1,257,788.19 863,000.00 Total current liabilities 1,470,228,360.56 1,455,693,992.51 803,906,152.35 772,899,934.53 Non-current liabilities: Long-term borrowings Bonds payable Long-term payables Specific payables Estimated liabilities Deferred income tax liabilities Other non-current 10,475,905.29 10,354,500.20 4,550,113.83 4,151,000.00 liabilities Total non-current 10,475,905.29 10,354,500.20 4,550,113.83 4,151,000.00 liabilities Total liabilities 1,480,704,265.85 1,466,048,492.71 808,456,266.18 777,050,934.53

51 Owners’ equity (or shareholders’ equity) Paid-up capital (or 251,800,000.00 251,800,000.00 235,000,000.00 235,000,000.00 share capital) Capital reserves 1,546,738,493.19 1,498,962,107.35 336,039,042.92 288,262,657.08 Less: Treasury stock Specific reserves Surplus reserves 147,070,297.60 141,968,037.33 97,283,190.70 92,180,930.43 Provisions for general risks Retained profits 815,506,493.66 688,010,778.37 381,153,314.20 322,176,816.26 Foreign exchange difference Total equity attributable 2,761,115,284.45 2,580,740,923.05 1,049,475,547.82 937,620,403.77 to owners of the Company Minority interests Total owners’ equity 2,761,115,284.45 2,580,740,923.05 1,049,475,547.82 937,620,403.77 Total liabilities and 4,241,819,550.30 4,046,789,415.76 1,857,931,814.00 1,714,671,338.30 owners’ equity

Profit Statement Prepared by Anhui Gujing Distillery Co., Ltd. Jan. - Dec. 2011 Unit: (RMB) Yuan As of Y2011 As of Y2010 Items Consolidation The Company Consolidation The Company I. Total operating revenues 3,307,979,236.00 1,957,164,481.24 1,879,155,480.31 1,105,037,334.45 Including: Sales income 3,307,979,236.00 1,957,164,481.24 1,879,155,480.31 1,105,037,334.45 Interest income Premium income Handling charge and commission income II. Total operating cost 2,473,852,861.75 1,701,604,629.09 1,481,832,060.76 932,057,797.33 Including: Cost of sales 861,012,764.70 827,862,350.62 542,084,920.98 457,164,400.30 Interest expenses Handling charge and commission expenses Surrenders Net claims paid Net amount withdrawn for the insurance contract reserve Expenditure on policy dividends Reinsurance premium

52 Taxes and associate 522,390,054.93 495,328,024.61 291,806,411.63 276,298,496.31 charges Selling and distribution 798,067,079.39 190,724,471.78 405,248,013.62 48,429,669.01 expenses Administrative expenses 345,615,957.58 222,853,051.65 262,928,406.45 168,482,104.12 Financial expenses -51,871,404.15 -33,627,927.71 -10,385,253.44 -7,171,942.40 Asset impairment loss -1,361,590.70 -1,535,341.86 -9,850,438.48 -11,144,930.01 Add: Gain/(loss) from change in fair value (“-” means loss) Gain/(loss) from investment 1,656,581.66 371,010,624.52 982,590.50 119,906,520.27 (“-” means loss) Including: share of profits in associates and joint ventures Foreign exchange gains (“-” means loss) III. Business profit (“-” means 835,782,955.91 626,570,476.67 398,306,010.05 292,886,057.39 loss) Add: non-operating income 16,911,302.91 7,458,576.15 19,822,862.39 17,284,735.82 Less: non-operating expense 2,619,353.87 1,848,819.85 9,317,371.89 7,933,049.33 Including: loss from non-current 396,678.97 8,044.53 5,170,903.26 5,160,956.53 asset disposal IV. Total profit (“-” means loss) 850,074,904.95 632,180,232.97 408,811,500.55 302,237,743.88 Less: Income tax expense 283,684,618.59 134,309,163.96 95,053,943.62 29,809,836.20 V. Net profit (“-” means loss) 566,390,286.36 497,871,069.01 313,757,556.93 272,427,907.68 Attributable to owners of the 566,390,286.36 497,871,069.01 313,757,556.93 272,427,907.68 Company Minority shareholders’ income VI. Earnings per share (I) basic earnings per share 2.34 1.34 (II) diluted earnings per 2.34 1.34 share Ⅶ. Other comprehensive incomes Ⅷ. Total comprehensive incomes 566,390,286.36 497,871,069.01 313,757,556.93 272,427,907.68 Attributable to owners of the 566,390,286.36 497,871,069.01 313,757,556.93 272,427,907.68 Company Attributable to minority shareholders

Cash Flow Statement Prepared by Anhui Gujing Distillery Co., Ltd. Jan. - Dec. 2011 Unit: (RMB) Yuan As of Y2011 As of Y2010 Items Consolidation The Company Consolidation The Company

53 I. Cash flows from operating activities: Cash received from sale of commodities and rendering of 3,467,179,264.61 2,185,615,817.88 2,097,226,867.79 1,254,247,657.00 service Net increase of deposits from customers and dues from banks Net increase of loans from the central bank Net increase of funds borrowed from other financial institutions Cash received from premium of original insurance contracts Net cash received from reinsurance business Net increase of deposits of policy holders and investment fund Net increase of disposal of tradable financial assets Cash received from interest, handling charges and commissions Net increase of borrowings from banks and other financial institutions Net increase of funds in repurchase business Tax refunds received 976,614.88 1,340,383.73 Other cash received relating to 213,872,969.49 67,797,805.76 71,547,891.42 34,327,138.55 operating activities Subtotal of cash inflows from 3,682,028,848.98 2,253,413,623.64 2,170,115,142.94 1,288,574,795.55 operating activities Cash paid for goods and 1,108,607,023.23 1,022,068,472.17 581,575,389.72 515,921,354.80 services Net increase of customer lendings and advances Net increase of funds deposited in the central bank and amount due from banks Cash for paying claims of the original insurance contracts Cash for paying interest,

54 handling charges and commissions Cash for paying policy dividends Cash paid to and for employees 516,181,360.59 235,666,465.31 263,320,162.43 138,106,074.35 Various taxes paid 981,128,678.39 692,592,618.07 453,288,625.04 302,115,499.01 Other cash payment relating to 450,210,319.42 78,996,659.00 354,230,611.37 97,899,020.77 operating activities Subtotal of cash outflows from 3,056,127,381.63 2,029,324,214.55 1,652,414,788.56 1,054,041,948.93 operating activities Net cash flows from 625,901,467.35 224,089,409.09 517,700,354.38 234,532,846.62 operating activities II. Cash flows from investing activities: Cash received from disposal of 10,000,000.00 15,721,660.50 11,464,396.07 investments Cash received from return on 363,057,695.16 119,179,229.20 investments Net cash received from disposal of fixed assets, 987,318.61 276,019.86 15,292,590.68 14,207,842.23 intangible assets and other long-term assets Net cash received from disposal of subsidiaries or other business units Other cash received relating 8,100,000.00 8,100,000.00 3,250,000.00 3,250,000.00 to investing activities Subtotal of cash inflows 9,087,318.61 381,433,715.02 34,264,251.18 148,101,467.50 from investing activities Cash paid to acquire fixed assets, intangible assets and other 344,656,892.95 318,792,844.60 176,024,797.82 81,065,841.27 long-term assets Cash paid for investment 30,000,000.00 14,041,480.00 10,454,030.00 Net increase of pledged loans Net cash paid to acquire subsidiaries and other business 2,150,486.75 2,150,486.75 units Other cash payments relating to investing activities Subtotal of cash outflows from 344,656,892.95 348,792,844.60 192,216,764.57 93,670,358.02 investing activities Net cash flows from investing -335,569,574.34 32,640,870.42 -157,952,513.39 54,431,109.48 activities III. Cash flows from financing

55 activities: Cash received from capital 1,231,500,000.00 1,231,500,000.00 contributions Including: Cash received from minority shareholder investments by subsidiaries Cash received from borrowings Cash received from issuance of bonds Other cash received relating 9,600,000.00 to financing activities Subtotal of cash inflows from 1,231,500,000.00 1,231,500,000.00 9,600,000.00 financing activities Repayment of borrowings 5,000,000.00 5,000,000.00 Cash paid for interest expenses and distribution of 79,818,322.54 79,818,322.54 82,329,200.00 82,329,200.00 dividends or profit Including: dividends or profit paid by subsidiaries to minority shareholders Other cash payments 3,211,800.00 3,211,800.00 279,427.98 279,427.98 relating to financing activities Sub-total of cash outflows from 83,030,122.54 83,030,122.54 87,608,627.98 87,608,627.98 financing activities Net cash flows from financing 1,148,469,877.46 1,148,469,877.46 -78,008,627.98 -87,608,627.98 activities IV. Effect of foreign exchange rate changes on cash and cash -683.56 2,407.32 equivalents V. Net increase in cash and cash 1,438,801,086.91 1,405,200,156.97 281,741,620.33 201,355,328.12 equivalents Add: Cash and cash 643,231,404.42 480,737,398.56 361,489,784.09 279,382,070.44 equivalents at year-begin VI. Cash and cash equivalents at 2,082,032,491.33 1,885,937,555.53 643,231,404.42 480,737,398.56 the end of the year

56 Statement of Changes in Owners’ Equity (Consolidated) Prepared by Anhui Gujing Distillery Co., Ltd. As of the year 2011 Unit: (RMB) Yuan As of the year 2011 As of the year 2010 Equity attributable to owners of the Company Equity attributable to owners of the Company Paid-up Minorit Paid-up Minorit Total Total Items capital Less: Specifi Genera y capital Less: Specifi Genera y Capital Surplus Retaine owners’ Capital Surplus Retaine owners’ (or treasur c l risk Others interest (or treasur c l risk Others interest reserve reserve d profit equity reserve reserve d profit equity share y stock reserve reserve s share y stock reserve reserve s capital) capital) 235,00 336,03 381,15 1,049,4 235,00 326,06 176,95 807,99 I. Balance at the end of the 97,283, 69,977, 0,000.0 9,042.9 3,314.2 75,547. 0,000.0 4,758.9 5,910.5 7,950.9 previous year 190.70 281.49 0 2 0 82 0 2 2 3 Add: change of accounting policy Correction of errors in previous periods 628,00 63,118. -67,362 623,75 Other 0.00 44 .48 5.96 235,00 336,03 381,15 1,049,4 235,00 326,69 176,88 808,62 II. Balance at the beginning 97,283, 70,040, 0,000.0 9,042.9 3,314.2 75,547. 0,000.0 2,758.9 8,548.0 1,706.8 of the year 190.70 399.93 0 2 0 82 0 2 4 9 III. Increase/ decrease of 1,210,6 434,35 1,711,6 204,26 240,85 16,800, 49,787, 9,346,2 27,242, amount in the year (“-” 99,450. 3,179.4 39,736. 4,766.1 3,840.9 000.00 106.90 84.00 790.77 means decrease) 27 6 63 6 3 (I) Net profit 566,39 566,39 313,75 313,75 0,286.3 0,286.3 7,556.9 7,556.9 6 6 3 3 (II) Other comprehensive incomes 566,39 566,39 313,75 313,75 Subtotal of (I) and (II) 0,286.3 0,286.3 7,556.9 7,556.9 6 6 3 3 1,210,6 1,227,4 (III) Capital paid in and 16,800, 9,916,2 9,916,2 99,450. 99,450. reduced by owners 000.00 84.00 84.00 27 27 1,210,6 1,227,4 1. Capital paid in by 16,800, 99,450. 99,450. owners 000.00 27 27 2. Amounts of share-based payments recognized in owners’ equity 9,916,2 9,916,2 3. Others 84.00 84.00 -132,03 -109,49 49,787, -82,250 27,242, -82,250 (IV) Profit distribution 7,106.9 2,790.7 106.90 ,000.00 790.77 ,000.00 0 7 1. Appropriations to 49,787, -49,787 27,242, -27,242 surplus reserves 106.90 ,106.90 790.77 ,790.77 2. Appropriations to general risk provisions 3. Appropriations to -82,250 -82,250 -82,250 -82,250

58 owners (or shareholders) ,000.00 ,000.00 ,000.00 ,000.00 4. Other (V) Internal carry-forward of owners’ equity 1. New increase of capital (or share capital) from capital public reserves 2. New increase of capital (or share capital) from surplus reserves 3. Surplus reserves for making up losses 4. Other (Ⅵ) Specific reserve 1. Withdrawn for the period 2. Used in the period -570,00 -570,00 (Ⅶ) Other 0.00 0.00 251,80 1,546,7 147,07 815,50 2,761,1 235,00 336,03 381,15 1,049,4 97,283, IV. Closing balance 0,000.0 38,493. 0,297.6 6,493.6 15,284. 0,000.0 9,042.9 3,314.2 75,547. 190.70 0 19 0 6 45 0 2 0 82

59 Statement of Changes in Owners’ Equities (the Company)

Prepared by Anhui Gujing Distillery Co., Ltd. As of the year 2011 Unit: (RMB) Yuan As of the year 2011 As of the year 2010 Paid-up Paid-up Less: Surplus General Total Less: Surplus General Total Item capital Capital Specific Retained capital Capital Specific Retained treasury public risk owners’ treasury public risk owners’ (or share reserve reserve profit (or share reserve reserve profit stock reserve reserve equity stock reserve reserve equity capital) capital) I. Balance at the end of the 235,000,0 288,262,6 92,180,93 322,176,8 937,620,4 235,000,0 288,184,0 64,938,13 159,241,6 747,363,8 previous year 00.00 57.08 0.43 16.26 03.77 00.00 10.28 9.66 99.35 49.29 Add: change of accounting policy Correction of errors in previous periods Other II. Balance at the beginning 235,000,0 288,262,6 92,180,93 322,176,8 937,620,4 235,000,0 288,184,0 64,938,13 159,241,6 747,363,8 of the year 00.00 57.08 0.43 16.26 03.77 00.00 10.28 9.66 99.35 49.29 III. Increase/ decrease of 16,800,00 1,210,699 49,787,10 365,833,9 1,643,120 27,242,79 162,935,1 190,256,5 amount in the year (“-” 78,646.80 0.00 ,450.27 6.90 62.11 ,519.28 0.77 16.91 54.48 means decrease) 497,871,0 497,871,0 272,427,9 272,427,9 (I) Net profit 69.01 69.01 07.68 07.68 (II) Other comprehensive

60 incomes 497,871,0 497,871,0 272,427,9 272,427,9 Subtotal of (I) and (II) 69.01 69.01 07.68 07.68 (III) Capital paid in and 16,800,00 1,210,699 1,227,499 reduced by owners 0.00 ,450.27 ,450.27 1. Capital paid in by 16,800,00 1,210,699 1,227,499 owners 0.00 ,450.27 ,450.27 2. Amounts of share-based payments recognized in owners’ equity 3. Others 49,787,10 -132,037, -82,250,0 27,242,79 -109,492, -82,250,0 (IV) Profit distribution 6.90 106.90 00.00 0.77 790.77 00.00 1. Appropriations to 49,787,10 -49,787,1 27,242,79 -27,242,7 surplus reserves 6.90 06.90 0.77 90.77 2. Appropriations to general risk provisions 3. Appropriations to -82,250,0 -82,250,0 -82,250,0 -82,250,0 owners (or shareholders) 00.00 00.00 00.00 00.00 4. Other (V) Internal carry-forward of owners’ equity 1. New increase of capital (or share capital) from capital public reserves 2. New increase of

61 capital (or share capital) from surplus reserves 3. Surplus reserves for making up losses 4. Other (Ⅵ) Specific reserve 1. Withdrawn for the period 2. Used in the period (Ⅶ) Other 78,646.80 78,646.80 251,800,0 1,498,962 141,968,0 688,010,7 2,580,740 235,000,0 288,262,6 92,180,93 322,176,8 937,620,4 IV. Closing balance 00.00 ,107.35 37.33 78.37 ,923.05 00.00 57.08 0.43 16.26 03.77

62 Anhui Gujing Distillery Co., Ltd.

Notes to the Consolidated Financial Statements

For the Year Ended 31 December 2011 (All amounts are expressed, unless otherwise stated, in Renminbi (CNY).)

Note 1: Company Profile

1.1 History

Anhui Gujing Distillery Co., Ltd. (hereafter “the Company”) was registered in the The People's

Republic of China on 30 May 1996.

The Company has been issued 60,000,000 domestic listed foreign shares (hereafter “B” shares) in

June 1996 and 20,000,000 domestic listed CNY ordinary shares (hereafter “A” shares) in

September 1996, the par value of ordinary shares is CNY1.00 per share. Both A share and B share are listed in Shenzhen Stock exchange.

On 29 May 2006, the shareholder meeting for the Company’s shareholdings reform of A-share market have been discussed and approved the proposal of the shareholdings reform, and that has been implemented in June 2006. After the Company’s shareholdings reform implemented, all shares of the Company became outstanding shares, which including 147,000,000 shares with restrict condition on disposal, represent 62.55% of total share capital, and 88,000,000 shares without restrict condition on disposal, represent 37.45% of total share capital.

On 27 June 2007, the Company issued the

Gujing Distillery Co., Ltd.>, the 11,750,000 outstanding shares with restrict condition on disposal canbe listed in stock market, and the approved issue date is on 29 June 2007. Hence, outstanding shares with restrict condition on disposal are 135,250,000 shares, representing 57.55% of total share capital, the share without restrict condition on disposal are 99,750,000 shares, representing

42.45% of total share capital.

On 17 July 2008, the Company issued the

Gujing Distillery Co., Ltd.>, the 11,750,000 outstanding shares with restrict condition on disposal canbe listed in stock market, and the approved issue date is on 18 July 2008. Hence, outstanding shares with restrict condition on disposal are 123,500,000 shares, representing 52.55% of total

63 share capital, the share without restrict condition on disposal are 111,500,000 shares, representing

47.45% of total share capital.

On 24 July 2009, the Company issued the

Gujing Distillery Co., Ltd.>, the 123,500,000 outstanding shares with restrict condition on disposal canbe listed in stock market, and the approved issue date is on 29 July 2009. Hence, all shares of the Company were became outstanding shares without restrict condition on disposal.

According to the approval by China Securities Regulatory Commission (the authorization file No. zhengjianxuke[2011]943), On 15th July 2011, the Company private issued 16,800,000 shares of ordinary share (A shares) to specific investors, the par value in CNY 1 per share, and the offering price is CNY 75 per share, the funds raised amounting to CNY 1,260 million, deduct those sundry issuing charges amounting to CNY 32,500,549.73, the actual funds raised net amounting to CNY

1,227,499,450.27. The above funds have been reviewed by Reanda Certified Public Accountants

Co., Ltd., and issued the Capital Verification Report (REANDA YAN ZI[2011]No.1065).

Legal representative: Yu Lin

Place of registration: Gujing Town, Bozhou City, Anhui Province

The parent: Anhui Gujing Group Co., Ltd. ( hereafter “the Gujing Group”)

1.2 Industry

The Company operates within the food manufacturing industry.

1.3 Scope of business

The approved business scope: grain procurement(operation by licence), manufacture of distilled spirits, beer, red wine, facilities for wine making, packaging materials, and glass bottles, alcohol, feeds, grease( limited to the by-products from alcohol manufacture), development of high-tech, biotechnology development agricultural and sideline products deep processing.

1.4 Main products

The Company’s main products are grain kind distilled spirits.

1.5 Description of significant changes of primary operating activities, significant changes of the structure of shareholding, significant mergers, acquisition and re-organisation occurred during the current reporting period.

On 15th July 2011, the Company private issued 16,800,000 shares of ordinary share (A shares) to

64 specific investors, after the issuance, the shareholding hold by the Gujing Group (the parent company) decreased from 57.745% to 53.893%, however the parent company has no changed. The Company has no significant changes of primary operating activities, nor significant mergers, acquisition and re-organisation occurred during the current reporting period.

Note 2: Summary of Significant accounting policies、accounting estimates and correct previous accounting period errors

2.1 Basis for preparation of the financial statements

The financial statements are prepared on the basis of going concern, with reference to the actual occurrence of transactions and events, and in accordance with the Enterprise Accounting Standards of China issued by the Ministry of Finance of the People’s Republic of China on 15th Febuary 2006, and other relevant regulations (hereafter collectively, the Enterprise Accounting Standards of China or the CASs), as well as based on those accounting policies and accounting estimates that described in Note 2.

2.2 Declaration of compliance with the Enterprise Accounting Standards of China

The financial statements of (the Group and) the Company have been prepared in accordance with the Enterprise Accounting Standards of China and present truly, fairly and completely, in all material respects, the financial position of (the Group and) the Company as at 31 December 2011, the performance, the cash flows and other relevant information of (the Group and) the Company for the year then ended.

2.3 Accounting year

The accounting year adopted by the Company is the calendar year (ie. from 1 January to 31 December).

2.4 Functional currency

The functional currency of the Company is the Renminbin(CNY).

2.5 Accounting methods for business combination

2.5.1 Business combination under common control

Identifiable assets acquired and liabilities assumed through business combination of an entity under common control are measured at their carrying amounts in the acquiree’ account as at the combination date. The excess of the consideration for combination over the net identifiable assets acquired as at the combination date is debited to capital reserves, and to retained earnings where

65 capital reserves are insufficient.

2.5.2 Business combination not under common control

Identifiable assets acquired and liabilities assumed through business combination of an entity not under common control are measured at their fair values as at the combination date. Goodwill as of the combination date is recognised and measured as the excess of the consideration for combination over the net identifiable assets acquired as at the combination date. If the net identifiable assets acquired as at the combination date exceeds the consideration for combination, the excess of the consideration for combination over the net identifiable assets acquired as at the combination date, after the assessment of the fair value of the net identifiable assets acquired as at the combination date, is recognised as a gain through profit or loss for the reporting period in which the combination occurred.

2.6 Preparation of the consolidated financial statements

2.6.1 Scope of consolidated financial statements

The consolidated financial statements are prepared in accordance with CAS 33 – Consolidated

Financial Statements issued on February 2006. The scope of consolidated financial statements, determined on the basis of control existence. The consolidated financial statements consolidate separate financial statements of the parent company and subsidiaries and entities for specific purposes directly or indirectly controlled by the parent company. Control exists is when the parent company has power to govern the financial and operating policies of an entity and is able to obtain economic benefits from the entity’s operation.

If it is objectively evidential that the parent company has no control over a subsidiary, the subsidiary is excluded from consolidation.

2.6.2 Acquisition and disposal the shares of subsidiaries

The transaction date of acquisition or disposal of share of subsidiary is the date on which the risks and economic benefits associated with the transferred share is transferred to the transferee. The post-acquisition or pre-disposal performance and cash flows of a subsidiary acquired or disposed through business combination not under common control are adequately consolidated in the consolidated statement of comprehensive income and the consolidated statement of cash flows.

The performance and cash flows for the current reporting period of a subsidiary acquired through business combination under common control during the current reporting period has consolidated in the consolidated statement of comprehensive income and the consolidated statement of cash

66 flows and list independently; and, the comparables of the consolidated financial statements has adjusted accordingly.

If the Company acquires minority equity shares of subsidiaries, thus hold the long-term equity investment, on the date of prepare consolidation statement, the difference between the value of the new long-term equity investment and the value of subsidiary’s net assets enjoyed by proportion of shareholdings(begin with acquired date or combination date), shall be adjusted to capital reserve, if the capital reserve is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings.

2.6.3 Uniform accounting policies and accounting period

Where the accounting policies and accounting period of a subsidiary are different from those of the parent company, the separate financial statements of the subsidiary are adjusted using the accounting policies and accounting period adopted by the parent company before consolidation.

The separate financial statements of a subsidiary acquired through business combination not under common control are adjusted to reflect the fair values of the identifiable assets, liabilities and contingent liabilities of the subsidiary as at the combination date before consolidation.

2.6.4 Consolidation method

During the preparation of the consolidated financial statements, intra-group balances and transactions are eliminated.

The net identifiable assets of subsidiaries attributable to minority interest of subsidiaries are separately presented in the consolidated financial statements.

2.7 Cash equivalents

Cash equivalents include short-term (normally with a maturity date within three months from the date of acquisition) and highly liquid investments and which are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

2.8 Transactions denominated in foreign currencies and translation of financial statements denominated in foreign currencies

2.8.1 Transactions denominated in foreign currencies

Transactions denominated in foreign currencies (currencies other than the functional currency) are accounted for in the functional currency using the transaction-date spot exchange rates (the middle rates quoted by the People’s Bank of China; hereafter, the same applies).

67 Monetary assets held on a balance sheet date denominated in foreign currencies are translated into the functional currency using the balance-sheet-date spot exchange rates; differences in value arising from differences between the transaction-date spot exchange rates and the balance-sheet-date spot exchange rates are accounted for through profit or loss for the reporting period ended on that balance sheet date. Non-monetary assets held and liabilities outstanding on a balance sheet date measured using the historical cost convention are translated into the functional currency using the transaction-date spot exchange rates. Non-monetary assets held and liabilities outstanding on a balance sheet date measured at fair value are translated into the functional currency using the spot exchange rates prevailing on the dates of fair value assessments; differences in value arising from differences between the transaction-date spot exchange rates and the assessment-date spot exchange rates are accounted for through profit or loss for the reporting period during which the assessments occurred.

2.8.2 Translation of financial statements denominated in foreign currencies

① Elements of assets and liabilities of financial statements denominated in foreign currencies are translated into the functional currency using the balance-sheet-date spot exchange rates; elements of shareholder’s equity of financial statements denominated in foreign currencies, except undistributed profit, are translated into the functional currencies using the transaction-dates spot exchange rates.

② Elements of income and expenses of financial statements denominated in foreign currencies are translated into the functional currency using the transaction-date spot exchange rates.

Foreign exchange differences arising from treatments described in the above paragraph are separately presented in the financial statements as an element of shareholder’ equity.

③ Cash flows denominated in foreign currencies are translated into the functional currency using the transaction-date spot exchange rates. The impact of changes in exchange rates on cash flows is separately presented in the statement of cash flows.

2.9 Financial instruments 2.9.1 Classification of financial assets and financial liabilities Financial assets, according to their purposes of investment and economic substance, are classified into fair value through profit or loss, held-to-maturity investments, loans and receivables, and available-for-sale financial assets four categories. Financial liabilities, according to their economic substance, are classified into fair value through

68 profit or loss and others.

① Financial assets or financial liabilities at fair value through profit or loss: including held for trading financial assets or financial liabilities and designated by the Company as at fair value through profit or loss.

A financial asset or financial liability is classified as held for trading if it is: a. Acquired or incurred principally for the purpose of selling or repurchasing it in the near term; or b. Part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or c. A derivative (except for a derivative that is a designated and effective hedging instrument, a derivative of financial guarantee contract, a derivative that settle by equity instrument, which the price of instrument could not be quoted in active market and the fair value could not measure reasonably).

A financial asset or financial liability is classified as designated fair value through profit or loss if it is: a. The designation can be eliminated or significantly reduced the inconsistent situation or relate profit and loss cause by different measurement basis of financial assets and financial liabilities; or b. Company risk management or investment strategy has been enshrined in a formal written document that the financial assets portfolio, the financial liabilities portfolio, or the financial assets and financial liabilities portfolio are management in fair value-based and evaluation and report to key management person.

② Held-to-maturity investments: are non-derivative financial assets with fixed or determinable payments and fixed maturity that company has the positive intention and ability to hold to maturity. Mainly include the Company's management has a clear intention and ability to hold to maturity of fixed-rate national bonds, floating-rate corporate bonds.

③ Receivables: are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Receivables of the Company mainly refer to the Company's sales of goods or rendering of services to form the accounts receivable and other receivables.

④ Available-for-sale financial assets: are those non-derivative financial assets that are designated as available for sale at initial recognized, or those financial assets are not measured in fair value based and through to profit and loss, or loans and receivables, or held-to-maturity investments. ⑤ Other financial liabilities: financial liabilities not divided into measurement in fair value base

69 and through into profit and loss account.

2.9.2 Measurement of financial assets and financial liabilities The Company’s financial asset or financial liability is recognized at its fair value initially. For financial assets or financial liabilities at fair value through profit or loss, relevant transaction costs that are directly attributable to current profit and loss; for other types of financial assets or financial liabilities, transaction costs related to the amount included in the initial confirmation cost. Subsequent measurement of financial assets and financial liabilities:

① Financial assets or financial liabilities at fair value through profit or loss measured at its fair value, at balance sheet date, the changed difference of fair value are accounted for profit and loss in current period.

② Held-to-maturity investments, which shall be measured at amortized cost using the effective interest method, the profit or loss of termination confirmation, impairment or amortization included in the profit and loss account.

③ Loans and receivables, which shall be measured at amortized cost using the effective interest method, the profit or loss from termination confirmation, impairment or amortization included in the profit and loss account.

④ Available-for-sale financial assets, are measured with fair value, any changes of fair value of available-for-sale financial assets at the end of period are accounted for capital reserve (other capital reserve). Disposal of available-for-sale financial assets, the difference between consideration received and carrying value of the financial assets included into investment profit or loss account; at the same time, turn out the original cumulative amount of fair value change of corresponding part within the equity, included into investment profit or loss account. The impairment losses and Exchange differences of foreign monetary financial assets including into current profit and loss. Interest received and cash dividends received during the hold period are recognized as investment income. ⑤ Other financial liabilities, together with the equity instrument that price not be quoted in active market and the fair value could not measure reasonably measured, as well as the subsequent measurement should according to the cost of derivative financial liabilities. A financial guarantee contracts not classified into financial liabilities designated at fair value with changes in fair value accounted through profit for loss for the relevant reporting period or a deep-discounted loan not classified into financial liabilities designated at fair value with changes

70 in fair value accounted through profit for loss for the relevant reporting period is subsequently measured at the higher of the amount determined by CAS 13 – Contingencies and the residual amount after deducting the cumulative amortisation determined by CAS 14 – Revenue from the amount upon the initial recognition. Other financial liabilities adopt the effective interest method, subsequent measured by amortization cost, recognized the profits and losses by termination confirmation or amortization to current profit and loss account.

⑥ Fair value: It’s the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. In a fair deal, the transaction should the two sides are continuing operations enterprises, do not intend to carry out the liquidation or a major reduction in scale of operation, or under adverse conditions is still trading. The existence of an active market of financial assets or financial liabilities, the quotation within the active market should be used to determine its fair value. If there is no active market, company should adopt valuation techniques to determine the fair value.

⑦ The amortized cost of a financial asset or financial liability： it’s the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial recognized amount and the maturity date amount, and minus any reduction for impairment or unrecoverable. ⑧ The effective interest method: It’s a method of using effective interest calculating the amortized cost of a financial asset or a financial liability (or group of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash flows through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. Then calculating the effective interest rate, company shall estimate cash flows considering all contractual terms of the financial instrument (for example, prepayment, call and similar options) but shall not consider future credit losses.

2.9.3 Transfer and derecognition of financial assets

① Derecognize financial asset if, and only if, meets one of the following three conditions: a. terminate the contractual rights of cash flows from the financial asset; b. the financial assets have been transferred, and the ownership of the risks and rewards of financial assets transfered to other party; c. the financial assets have been transferred, but the Company neither transfered the ownership

71 of the risks and rewards of financial assets, nor retained , and gives up control of the financial assets.

② When termination conditions of entire transferred assets has been satisfied, the differences between the amounts of following items shall be recognised in the current period profits and losses account: a. The carrying value of transferred financial assets; b. The consideration received from the transfer, and the accumulative amount of the changes of the fair value originally recorded in the shareholders’ equities.

③ If the transfer of partial financial assets satisfies the conditions of derecognize, the entire book value of the transferred financial asset shall apportion, between the portion whose derecognize and the recognized portion (under such circumstance, the service asset retained shall be deemed as a portion of financial asset whose derecognize), be apportioned according to their respective relative fair value, and the difference between the amounts of the following two items shall be accounted for the profits and losses of the current period . a. The portion of carrying value derecognized; b. The consideration received from the transfer, and the accumulative amount of the changes of the fair value originally recorded in the shareholders’ equities. ④ If the Company fails to satisfy the conditions of derecognize for transferred financial assets, it shall continue to recognize the entire financial assets to be transferred and shall recognize the consideration it receives as a financial liability. For those financial assets transfer adopt continuing involvement method, the Company should recognize one financial asset and one financial liability, according to the extent of the transferred financial assets of continuing involvement. 2.9.4 Impairment assessment of and impairment allowance for financial assets

① If the Company have the following evidence to prove the impairment of financial assets, should recognize the provision of impairment: a. significant financial difficulty of the issuer or obligor; b. a breach of contract, such as a default or delinquency in interest or principal payments; c. the lender, for economic or legal reasons relating to the borrower＇s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; d. it becoming probable that the borrower will enter bankruptcy or other financial reorganisation; e. the disappearance of an active market for that financial asset because of financial difficulties; f. observable data indicating that there is a measurable decrease in the estimated future cash

72 flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group; g. adverse changes in the payment status of borrowers in the group, let the lender may cannot recover the investment cost; h. the fair value of financial instrument investment incur serious or non-temporary decline; i. other objective evidence that prove impairment of financial assets.

② On balance sheet date, the Company should adopt different impairment test method for different category of financial assets, and recognize provision of impairment: a. Held-to-maturity investments: on the balance sheet date, if there are objective evidence of impairment for the investment, the Company has recognized the impairment loss by the asset’s carrying amount and the present value of estimated future cash flows. b. Available-for-sale financial assets: on the balance sheet date, the Company analyse the impairment evidences of the financial assets, experienced judgement whether continuing decline in the fair value. Generally, if the fair value of financial assets incurred serious decline, after consideration of all relevant factors, anticipate this is non-temporary, therefore can identified the available-for-sale financial assets has impaired, should recognize the impairment loss. When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective evidence that the asset is impaired, the cumulative loss that had been recognised directly in equity shall be removed from equity and recognised in impairment loss account of income statement.

2.10 Accounts receivable

2.10.1 Accounts receivable belong to individual significance and individually assessed for impairment:

Criteria and norm of individual significance: On the balance sheet date, those individual accounts receivable and individual other receivables more than 2 million (include 2 million) is considered as individual significant amounts.

Measurement of impairment allowances for receivables of individual significance: A receivable of individual significance is individually assessed for impairment on the balance sheet date. If it is objectively evidential that a receivable of individual significance has impaired, the impairment loss shall be recognized based on the difference of the book values higher than the present value of future cash flows.

If receivable of individual significance is not impaired by individually assessed for impairment,

73 the impairment loss shall be recognized based on the accounts’ age (as credit risk portfolio), refer to Note 2.10.2 for details.

2.10.2 Accounts receivable belong to recognition of impairment allowances by group: Method for recognition of Group type Basis of determination of group impairment allowances by group

Account’s age group Condition of account’s age Age analysis

Adopt the age analysis method:

Age % for accounts receivable % for other receivables

Within 1 year (including. 1 year)

Including: Within 6 months 1.00 1.00

6 months - 1year 5.00 5.00

1-2 years 10.00 10.00

2-3 years 50.00 50.00

Over 3 years 100.00 100.00

2.10.3 Accounts receivable belong to individually insignificant but individually assessed for impairment:

The reason for individually assessed for impairment: the credit risk is high.

Method for recognition of impairment allowances: A receivable which is individually insignificant but the credit risk is high, should be individually assessed for impairment, the impairment loss shall be recognized based on the difference of the book values higher than the present value of future cash flows.

2.10.4 For other receivables (including Notes receivable, Advances to suppliers, Interest receivables, long-term receivables etc), the provision for impairment allowances recognized based on the difference of the book values higher than the present value of future cash flows.

2.10.5 Accounts receivable between companies belong to the consolidated financial statement not provision for impairment allowances.

2.11 Inventories 2.11.1 Classification of inventories

Inventories include finished goods and merchandises held for sale, work-in-progress and materials and supplies to be consumed in the course of production of goods or rendering of services.

74 Inventories are classified into materials in transit, raw materials, work-in-progress, finished goods, goods in transit, materials and goods of consignment and revolving materials etc.

2.11.2 Measurement of inventories upon issuance

Inventories are measured using the weighted average method upon issuance. Inventories are normally carried at actual costs.

2.11.3 Determination of net realisable value of inventories and recognition of impairment allowances for inventories

① Estimates of net realizable value: Finished goods, merchandises and those materials used for directly sale, the net realizable value is referred to the estimated selling price minus the estimated selling expenses and related tax and fees in normal operating process. Those stocks need to process; the net realizable value is referred to the estimated selling price minus the estimated finished cost and estimated selling expenses and related tax and fees in normal operating process; the net realizable value of the quantity of inventory held to satisfy firm sales or service contracts is based on the contract price. If the sales contracts are for less than the inventory quantities held, the net realisable value of the excess is based on general selling prices.

② Impairment loss of inventories

At the balance sheet date, the evaluation criteria should base on the lower value between costs and net realizable value. When net realizable values are lower than costs, provision for impairment loss of inventories shall be made. Under normal circumstances, the Company provision impairment loss in according to individual inventory items, but for large quantity and low-unit-price inventories, provision for impairment loss of inventories shall be made based on the category of inventories; for those inventories that relating to the same product line that have similar purposes or end uses, are produced and marketed in the same geographical area, and cannot be practicably evaluated separately from other items in that product line, their impairment loss provision shall be consolidated.

When the circumstances that previously caused inventories to be written off below cost no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of the write-off is reversed (i.e. the reversal is limited to the amount of the original write-off) so that the new carrying amount is the lower of the cost and the revised net realizable value. The amount reversed recording into current profit and loss.

75 2.11.4 Inventories physical count system

The inventory physical count system adopted by the Company is the perpetual inventory system.

2.11.5 Low-value consumables and packaging materials

Low-value consumables and packaging materials are expended using the full amortisation method.

2.12 Long-term equity investments

Long-term equity investment including the equity investments held by the Company, who can able to exercise control, joint control or significant influence over the investees, or the Company do not have control, joint control or significant influence over the investees, and which are not quoted in an active market and of which the fair values cannot be reliably measured.

2.12.1 Investment cost of long-term equity investments

The Company separates the following cases of long-term equity investment for measurement:

① Long-term equity investment obtained through business combinations: a. For obtaining subsidiary under common control, the consideration cost can be cash payment, non-monetary assets transfer or taking over the subsidiary’s liability. Under this situation, the investment cost is carrying amount of shareholder’s equity of the subsidiary on the merger date.

The difference between the carrying amount of the net assets obtained and investment cost of long-term equity investment shall be adjusted to capital reserve. If the capital reserve is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings. In the case of company issues equity securities as the consideration, the investment cost is carrying amount of shareholder’s equity of the subsidiary on the merger date. If the book value amount of the issued shares is deemed as the capital, the difference between the carrying amount of the issued shares and investment cost of long-term equity investment shall be adjusted to capital reserve. If the capital reserve is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings. All direct expenses related to the merger, including the auditor fee, evaluation expense, legal service expense, etc will be accrued into the current profit and loss. b. For obtaining subsidiary not under common control, the cost of long-term equity investment is fair value of assets paid, liabilities undertaken by the Company, or the fair value of equity bonds issued. Where the cost of a business combination exceeds the acquirer’s interest in the fair value of the bargainor’s identifiable net assets, the difference shall be recognized as goodwill, Where the

76 cost of combination is less than the acquirer’s interest in the fair value of the bargainor’s identifiable net assets, after reassessment, the difference shall be recognized in profit or loss for the current period (non-operating income). Expenses directly attributable to business combination under common control, including but not limited to the audit fees, legal services fees, assessment and consultation fees and other costs directly related to business combinations shall be recognised in the transaction period profits and losses; while instruments issued as the consideration of business combinations, the issuing expenses of bonds or equity instruments recognised as the initial costs of bonds or equity instruments included in the cost of business combinations (except for issuing expenses of bonds and equity instruments).

Business combination not under common control achieved in stages, accounting treatment distinguish the individual financial statement and consolidated financial statement:

(i) Within the individual financial statement, the investment cost is sum of carrying value of equity investment to the bargainor before the merger date and increased consideration cost invested in the merger date; If the shareholdings of the bargainor hold by the Company (before the merger date) including other comprehensive income, which shall be accrued into the investment income when disposal the equity investment (For example, fair value changes of available-for-sale financial assets that recognized into capital reserves, the same below).

(ii) Within the consolidated financial statement, for the shareholdings of the bargainor hold by the

Company, revaluation shall be carried in accordance with the fair value on the merger date, the difference between the carrying amoun and fair value shall be recognized in the investment income for the current period; If the shareholdings of the bargainor hold by the Company (before the merger date) including other comprehensive income, which shall be recognized in the investment income for the current period. Within the notes of financial statement, the acquirer shall be disclosed the fair value (on the merger date) of the shareholdings of the bargainor hold and profits or losses recognized by the revaluation.

② Other long-term equity investment that obtained not through business combinations, accordance with the following principles to determine the investment costs: a. Long-term equity investment, which is acquired by cash consideration, the actual cash payment amount will be deemed as the investment cost. The investment cost includes the direct expenses related to the long-term equity investment, taxes and other necessary expenses. But if the actual

77 payment contains cash dividend that has not been received but has been announced, that should be accounted separately. b. Long-term equity investment, which is acquired by issuing equity securities, the fair value of the issued equity will be deemed as the investment cost. c. For those long-term equity investments that invested by the investors, the values agreed in the investment contracts or agreements will be deemed as the investment cost, except that the contracts or agreements provide that the values are not fair. d. Long-term equity investment is acquired by exchange of non-monetary assets, if the transaction has commercial substance or the fair values of exchange assets can be reliably measured, the fair values of these assets and relevant taxes will be deemed as the investment cost; the difference between the fair values of the assets and book values will be recognised into the current profit and loss; if the non-currency asset exchange does not satisfy these two conditions mention above, the book values of the assets and relevant taxes will be deemed as the investment cost. e. Long-term equity investment, which is acquired by the debt restructuring the fair values of the obtained equities will be deemed as the investment cost; the difference between the investment cost and book values of credit will be recognised into the current profit and loss.

2.12.2 Subsequent measurement of long-term equity instruments and recognition of gains or losses The historical cost convention is employed to calculate the long-term equity investment of subsidiaries and will be adjusted in accordance with the equity method in the preparation of the consolidated financial statements. The Company adopt historical cost convention for the following conditions: a long-term equity investment where the investing enterprise does not have joint control or significant influence over the investee, the investment is not quoted in an active market and its fair value can’t be reliably measured. The Company adopt equity method for the following conditions: a long-term equity investment where the investing enterprise have joint control or significant influence over the investee. a. When a long-term equity investment is subsequently measured using the historical cost convention, increase or recovery of investment need to adjust the cost of long term equity investment. Cash dividends or profit distributions declared by the investee shall be recognized as investment income in the current period. However, investment income recognized by the investing enterprise shall be limited to the amount distributed to it out of accumulated net profits of the investee arising after the investment was made. Any cash dividends or distributions received in excess of this amount shall be treated as a recovery of investment cost. b. When a long-term equity investment is subsequently measured using the equity method, after the investing enterprise has acquired a long-term equity investment, it shall recognize its share of net profits or losses made by the investee as investment income or losses, and adjust the carrying

78 amount of the investment accordingly. Investment income for the reporting period is recognised as the investor’s share of the net profit or loss of the investee for that reporting period. In computing the investor’s share of the net profit or loss of the investee, the net profit or loss of the investee in the investee’s account is adjusted for non-uniform accounting policies, the increased or decreased depreciation and amortisation resulting from the acquisition fair value adjustments on fixed assets and intangible assets of the investee, the acquisition fair value adjustments on impairment allowance for assets and the elimination of intra-group transaction except losses arising from intra-group transactions which are impairment loss on assets in accordance with CAS 8 – Impairment of assets. If an investor’s share of losses of an associate equals or exceeds its interest in the associate, the investor discontinues recognizing its share of further losses, after the investor’s interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the investor has incurred legal or constructive obligations or made payments on behalf of the associate; If the associate subsequently reports profits, the investor resumes recognizing its share of those profits only after its share of the profits equals the share of losses not recognized, recover investment interests, and in the book value of the long-term equity investment successively.

Those long term equity for affiliated company and joint company, hold before first executive date, if ther is relevant investment debit difference, according to residual time to amortize in straight line method, the amortization amount recognized in current profit and loss account.

2.12.3 Criterion for the existence of joint control or significant influence

① The existence of jointly control by an investor is usually evidenced in one or more of the following ways: A. any venturer cannot control the jointly controlled company’s operation alone;

B. the strategy decision of the jointly controlled company, should be agreed by each venture parties; C. the venturers may appoint one of them to manange the jointly controlled company, through control or agreement, but the management must follow all venturers’ financial and operation strategies. When the jointly controlled company during legal reconstruction or bankrupt, or the transfer funds to investors strictly restricted in long time, the venturers cannot exercise joint control to the investee. However, if the joint control is really exsit can be certified, the venturers still adopt equity method of long term equity investment principle to account.

② The existence of significant influence by an investor is usually evidenced in one or more of the following ways: A. representation on the board of directors or equivalent governing body of the investee; B. participation in policy-making processes, including participation in decisions about dividends or other distributions; C. material transactions between the investor and the investee; D.

79 dispatch of managerial personnel; or E. provision of essential technical information.

2.12.4 Impairment assessment for long-term equity investments and recognition of impairment allowance for long-term equity investments:

Each long-term equity investment is individually assessed for impairment on the balance sheet date. The assessment takes into account factors such as the investee’s operating strategies, the legal environment in which the investee operates, the demand of the market in which the investee operates and the investee’s profit-making ability to determine whether a long-term equity investment is subject to impairment. If the carrying amount of a long-term equity investment exceeds its net recoverable amount as at the balance sheet date, the excess is recognised as impairment loss of assets for the reporting period during which the impairment occurred; and an impairment allowance for that long-term equity investment of equal amount is also recognised. The recognised impairment loss for long-term equity investment is irreversible.

2.13 Investment property Investment property is held to earn rentals or for capital appreciation or for both. Investment property includes leased or ready to transfer after capital appreciation land use rights and leased buildings.

2.13.1 Depreciation or amortization method of property investment is measured by cost model:

Property investment is measured by cost model, according to its expected useful life and net residual rate on buildings and land-use right to calculate depreciation or amortization. The Company’s estimated useful life, net residual rate and annual depreciation rate of investment property set out below: Annual depreciation Categories Estimated residual rate % Estimated useful life (amortization) rate % Houses and buildings 3-5 8-35years 2.7-12.1

Land use rights 0 50years 2

2.13.2 Basis of impairment of property investment is measured by cost model

On the balance sheet date, the evaluation criteria should base on the lower value between carrying value and net realizable value. When net realizable values are lower than carrying value, provision for impairment loss of property investment shall be made. If the value of the impaired investment property recovered, the provided impairment loss in prior period cannot be carry back.

2.14 Fixed assets 2.14.1 Recognition of fixed assets Fixed assets are tangible assets, held for use in production or supply of goods or services, for

80 rental to others, or for administrative purpose, and have high unit price, as well as useful lives more than one accounting year. Fixed assets shall be recognized by actual costs incurred, if they meet the following conditions: ① The economic benefits related to fixed asset probably flows to the enterprise; ② The cost of fixed asset may be reliably measured.

The expenses relate meet above condition to fixed asset would be capitalized in the cost of asset, if

not, it would be recognized as expense in profit and loss account of that period.

2.14.2 Depreciation of fixed assets Straight-line method is in used to calculate the depreciation of fixed assets.

The estimated useful lives, the estimated residual rates and the annual depreciation rate of each class of fixed assets are set out below:

Estimated residual value Estimated annual Categories Estimated useful life rate % depreciation rate %

Houses and buildings 8-35 years 3-5 2.7-12.1

Machineries 8-10 years 3-5 9.7-12.1

Vehicles 8 years 3 12.1

Administrative equipments 8 years 3 12.1 and others

2.14.3 Impairment assessment for fixed assets and recognition of impairment allowance for fixed assets On the balance sheet date, the Company assess all types of fixed assets whether there is any indication that an asset may be impaired, if any such indication exists, the entity shall estimate the recoverable amount of the asset, reducing the carrying value to the estimated recoverable amount, the difference recognized into the current profit and loss account, simultaneous recognize the provision for impairment. Once the impairment loss has recognized, never carry back in future acoounting period. In assessing whether there is any indication that an asset may be impaired, the Company shall consider, as a minimum, the following indications: ①during the period, an asset’s market value has declined significantly more than would be expected as a result of the passage of time or normal use;

②significant changes with an adverse effect on the entity have taken place during the period, or will take place in the near future, in the technological, market, economic or legal environment in which the entity operates or in the market to which an asset is dedicated;

③market interest rates or other market rates of return on investments have increased during the

period, and those increases are likely to affect the discount rate used in calculating an asset’s value

81 in use and decrease the asset’s recoverable amount materially;

④ evidence is available of obsolescence or physical damage of an asset;

⑤ significant changes with an adverse effect on the entity have taken place during the period, These changes include the asset becoming idle, plans to discontinue or restructure the operation to which an asset belongs, plans to dispose of an asset before the previously expected date;

⑥ evidence is available from internal reporting that indicates that the economic performance of an asset is, or will be, worse than expected. For example: the net cash inflow or realized operating profits( or losses) made by the assets has declined significantly more than would be expected. ⑦ other indications that an asset may be impaired.

2.14.4 Recognision of finance leased fixed assets

When transfered substantially all the risks and rewards incidental to ownership, the Company recognize the fixed assets of finance lease. At the commencement of the lease term, the Company shall recognise finance leases as assets and liabilities in their balance sheets at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. The depreciation policy for depreciable leased assets shall be consistent with that for depreciable assets that are owned. If there is reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset shall be fully depreciated over the lease term, however, if there is no reasonable certainty that the lessee will obtain ownership by the end of the lease term, the asset shall be fully depreciated over the shorter of the lease term and its useful life.

2.15 Construction in progress

2.15.1 Category of construction in progress The category of construction in progress classified by the approved project.

2.15.2 Criteria for conversion of construction in progress to fixed assets

Construction in progress is transferred to fixed assets when the project is substantially ready for its intended use. The project is in condition of ready for used but not transact in the final account would be transferred to fixed assets in its estimate value, and adjust the value after transact in the final account, but would not adjust depreciated value that have been depreciated.

2.15.3 Impairment assessment for construction in progress and recognition of impairment allowance for construction in progress

On the balance sheet date, the Company shall assess the overall construction in progress, If there is evidence provide that the value of project are declined, the entity shall estimate the recoverable

82 amount of the asset, reducing the carrying value to the estimated recoverable amount, the difference recognized into the current profit and loss account, simultaneous recognize the provision for impairment. Once the impairment loss has recognized, never carry back in future acoounting period. Execise impairment test for construction in progress, if satisfied the one or more the following conditions:

① suspend the project in a long time, and according to the estimate, not restart the construction within the next 3years;

② evidence is available of obsolescence in either function or technical, and bring great uncertainty for the cash inflows to the Company;

③ other indications that project may be impaired.

2.16 Borrowing costs

2.16.1 Recognition of capitalization of borrowing costs and capitalization period

Borrowing costs that are direct attributable to construction, purchase and production of assets and comply with capitalization conditions, shall be capitalized and accounted to costs of relate assets; otherwise, borrowing costs shall be recognized as expenses when incurred and accounted through in profit and loss in current period.

The capitalization of borrowing costs shall satisfy the following conditions:

① The capital expenditures have been incurred.

② The borrowing costs have been incurred. ③ Activities relating to acquisition, construction or production that are necessary to make the assets being intended for use or sales have been launched.

Other borrowing costs 、discount or premium and difference of foreign exchange, should be recognized in the current profit and loss account.

Capitalization of borrowing costs shall be suspended during periods in which acquisition, construction or production of assets is interrupted abnormally, and is interrupted for over continuous period of three months.

Capitalisation of borrowing costs should cease when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. Borrowing costs should be recognised as an expense in the subsequent period.

83 2.16.2 Measurement of capitalized borrowing costs

For a specific purpose borrowing, the amount of interest to be capitalized shall be the actual interest expenses incurred for the period less deposit interests of the borrowing founds or investment income from the temporary investment.

Where funds are borrowed under general purpose, the entity shall determine the amount of interest to be capitalized by applying capitalization rate to weighted average of the excess amount between cumulative expenditures on the asset and the amount of specific-purpose borrowings. The capitalization rate shall be weighted average of the interest rates applicable to the general-purpose borrowings.

2.17 Intangible assets

2.17.1 Recognition and measurement of intangible assets:

Intangible assets are recognize initially at cost.

2.17.2 Estimate of useful life and amortisation of intangible assets:

Period of intangible asset that could bring future economic benefit inflow to company could determined reasonably according to the judgment according to reason of contract right or other legal right, condition in same industry, history experience, and demonstrate of expert would be recognize as finite useful life assets. Otherwise, the asset would be recognize as infinite useful life assets.

① To estimate the life of finite useful years asset would consider factor of: a. The life cycle of the product produced by the assets, and the information of similar asset; b. The development of craftwork and technology, and the estimate of future development trend; c. The demand condition in market of the product produced by the asset; d. The estimated action would be taken by competitor or potential competitor; e. The expense expected to maintain the assets to bring future economic benefits and the ability of the Company to pay for it; f. The relevant law restriction on control period of the asset or other similar restriction such as franchise, lease period; g. Relation with other assets’ useful life, that hold by the Company.

② The intangible asset with finite useful years should be amortization on a systematic and rational basic according its economic benefit achievement plan. A straight line method would be used if the plan could not define.

2.17.3 Impairment assessment for infinite useful years assets and recognition of impairment

84 allowance for infinite useful years assets

Intangible asset with infinite useful years would not amortize, but would conduct impairment test every year. the useful life of such an asset should be reviewed each reporting period to determine whether events and circumstances continue to support an indefinite useful life assessment for that asset., if still under uncertainty situation after the revaluation, shall conduct impairment test. When the net recoverable amount lower than the carryng value, reducing the carrying value to the estimated recoverable amount, the difference recognized into the current profit and loss account, simultaneous recognize the impairment allowance. The recognised impairment allowance is irreversible in subsequent reporting periods.

Execise impairment test for intangible assets, if meet the one or more the following conditions:

A. Significant changes with an adverse effect on the profitability of intangible assets have taken place during the period, These changes include the intangible replaced by other new technique;

B. The market value has declined in current period, and may not rise in the future residual

period;

C. Other indication to prove that the carrying value higher than the recoverable value.

2.17.4 The rules of divide the research stage and the development stage of internal research and developmet project

Internal organizational research expenses are accounted through profit and loss in current period; development costs which are recognized as intangible assets shall satisfy the following conditions:

① it is technical feasible for use or sales upon the completion of the intangible assets; ② it is intended for use or sales upon the completion of the intangible assets; ③ the manner to provide that expect future economic benefits that are attributable to the intangible assets including a market is exist for the asset or product of the asset or provide evidence of serviceable if asset are inside used; ④ the entity should have enough technology, financial and other resources to support the completion of development, and have ability to use or sale the intangible assets; ⑤ the cost of intangible asset can be measured reliably.

2.18 Long-term deferred expenditure

An item long-term deferred expenses is an expense which has been incurred and which has a beneficial period (a period during which an expense is expected to bring economic benefits to an

85 entity) which is longer than one year and which includes at least part of the reporting period during which the expense was incurred and subsequent reporting periods. An item of long-term deferred expenses is recognised at the actual amount of the expense incurred and allocated in each month of the beneficial period using the straight line method.

2.19 Accrued liabilities

2.19.1 Recognition of accrued liabilities:

Obligation with contingency factor such as external hypothecate, lawsuit or arbitrage in dispute, guarantee on quality of product, cut-down plan, loss of contract, recombine obligation, obligation on abandon fixed asset, and meet the follow condition simultaneously would determined as liabilities:

①This obligation is current obligation of the Company; and,

②The performance of this obligation will probably cause economic benefits outflow of the

Company; and

③The amount of this obligation can be reliably measured.

Loss contracts and restructuring obligations of the Company meet the above conditions shall be recognized as accrued liabilities.

2.19.2 Measurement of accrued liabilities

Accrued liabilities would be measured initial according to the optimum evaluation of outflow of economic benefit, and the Company perform relate obligation that consider risk, incertitude, time value of currency of contingency factor. Discount future cash flow to present value to determine the optimum evaluation if the time value of currency has great impact. On balance sheet date, check the carry amount of accrued liabilities, and make adjustment to carry amount to reflect the optimum evaluation. The increase amount in carry amount of accrued liabilities cause by time process would be determined as interest fee.

2.19.3 Optimum evaluation of accrued liabilities

If the necessary payments have scopes, the optimum evaluation shall be determined based on the average amount between the upper and lower limit amount of scope ; if the necessary payments do not have such scopes, then the optimum evaluation shall be determined in the following method:

① If the contingent event is involved in an individual project, the optimum evaluation amount will

86 be determined base on the most possible amount;

② If the contingent event is involved more than one project, the optimum evaluation amount shall be determined base on possible amount and occurrence probability. In case of all or part of payments about the confirmed liquidation liabilities are expected to be compensated by the third parties or other parties, and the compensation amounts are surely received, then such amounts shall be separately recognized as assets. The confirmed compensation amounts shall not exceed book values of confirmed liabilities.

2.20 Shares-based payment and equity instrument

2.20.1 Categories of share-based payment

The types of shares-based payment of the Company are: cash-settle and equity-settle.

① Cash-settled share-based payment

The measurement of cash-settle is according with the fair value of liability undertake by the

Company, which is calculated base on the Company’s share or other equity instrument.

The value of cash-settle share-based payment that could exercise immediately after award would be reckoned to relate cost or expense, and increase liability corresponds to it.

On each balance sheet date, a best estimated of situation of exercise cash-settled right that with waiting-period should be undertaken, and reckon cost or expense and increase liability which is on the base of service award by the Company, according to the fair value of company’s liability.

② Equity-settled share-based payment

The measurement is base on the fair value of the equity instrument granted to employees.

The value of equity-settled payment that could be exercised immediately after award would be reckoned in relates cost and expense and increase capital reserves corresponds to it..

On each balance sheet date, a best estimated of amount of exercise equity-settled that with waiting-period should be undertaken, and reckon in cost or expense and capital reserves which is on the base of service award by the Company, according to the fair value of company’s liability.

2.20.2 Determining the fair value of equity instruments granted

① For those shares granted to employees shall measure the fair value of equity instruments granted at the measurement date, based on market prices if available, simultaneously, taking into account the terms and conditions ( exclude the vesting conditions of external market) upon

87 which those equity instruments were granted.

② For those share options granted to employees, the market prices are not available in most circumstance. If there is no clauses and requirements of others similar trading options, the

Company shall estimate the fair value of the share option granted using a valuation technique.

2.20.3 Base of the best estimate of vesting equity instrument’s recognization

On each balance sheet date of waiting-period, the Company shall recognise an amount for the equity instrument during the vesting period based on the best available estimate of the number of equity instruments expected to vest and shall revise that estimate, if necessary, if subsequent information indicates that the number of equity instruments expected to vest differs from previous estimates.

2.20.4 Accounting treatment of share-based payment plan:

① For cash-settled share-based payment transactions granted vest immediately, reckon cost or expense according to the fair value of the Company’s liability on the measurement date, increase liability corresponds to it. At each reporting date and at the date of final settlement, with any change in intrinsic value recognised in profit or loss.

② If the equity instruments granted do not vest until completes a specified period of service or can be satisfied pre requirment, on each balance sheet date of waiting-period, the Company shall recognise an amount for the equity instrument during the vesting period based on the best available estimate of the number of equity instruments, according to the fair value of the

Company’s liability, recognize the received services as cost or expense,and increase liability corresponds to it.

③ The value of equity-settled payment that could be exercised immediately after award would be reckoned in relates cost and expense and increase capital reserves corresponds to it..

④ If the equity instruments granted do not vest until completes a specified period of service or can be satisfied pre requirment, on each balance sheet date of waiting-period, the Company shall recognise an amount for the equity instrument during the vesting period based on the best available estimate of the number of equity instruments, according to the fair value on the measurement date,, recognize the received services as cost or expense,and increase capital reserve corresponds to it.

88 2.21 Revenue

Recognition and measurement of revenue:

2.21.1 Revenue from sales of goods

Revenue from the sale of goods shall be recognized when all of the following conditions are satisfied:

① the entity has transferred the significant risks and reward ownership of goods to the buyer;

② the entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over goods sold;

③ the amount of revenue can be measured reliably;

④ relate economic benefit is probably inflow to the enterprise;

⑤ the associated costs incurred or to be incurred can be measured reliably.

2.21.2 Revenue from rendering of services

① The Company recognize revenue from rendering of service when come out of rendering of service can be measured reliably at balance sheet date, and adopt percentage of completion method in recognition of revenue. The method depends on schedule of complete to determined revenue and expense.

The outcome of service can be estimated reliably when all the following conditions are satisfied: a. the amount of revenue can be measured reliably; b. relate economic benefit is probably inflow to the enterprise; c. the complete of schedule could be determined reliably; d. the associated costs incurred or to be incurred can be measured reliably.

② When the outcome of rendering of service cannot be measured reliably at balance sheet date: a. revenue shall be recognized to the extent of costs incurred that are expected to be recoverable if compensation are predict to be award; b. to those cost that without compensation in predict, through to profit and loss account without recognize revenue.

2.21.3 Revenue from transfer of assets use right

The revenue of transfer of assets use right including : interest income、user charges etc, recognized

89 when all the following conditions are satisfied:

① the economic benefits related to the transaction are probably will flow into the Company;

② the amounts can be reliably measured.

Interest income, compute base on the funds used time by other peoples and the actual interest rate.

User charges, compute base on the chargeable time and method arranged in the contract or agreement.

2.22 Government grants

2.22.1 Recognition of government grants

① comply with the conditions attached to the grant;

② the Company can receive the grant.

2.22.2 Category and accounting treatment of government grants

① A government grant related to an asset shall be recognized as deferred income, when the assets is substantially ready for its intended use, evenly amortized to profit and loss over the useful lives of the related asset. Unamortized amount would be one-off recognized in profit and loss account when the asset is sale, convey, scrap, derogation before its useful life.

② For government grant related to income, if the grant is a compensation for related expenses or losses to be incurred in subsequent periods, the grant shall be recognized as deferred income, and recognized in profit and loss over the periods in which the related cost are recognized.

2.22.3 Measurement of government grants

If the government grants is monetary assets, recognized by the amount received or to be received.

If the government grants is non monetary assets, recognized by the fair value; if the fair value cannot be estimated reliably, recognized by the nominal value.

2.22.4 Restitution of recognized government grants

① If there is relevant deferred income, decrease the carrying value of the deferred income, any exceeds the amount shall be recognized to current profit and loss account.

② If there is no relevant deferred income, recognized to current profit and loss account directly.

2.23 Deferred tax assets and deferred tax liabilities

The Company uses balance sheet-liability method in calculation of income taxes.

90 According the difference between carry amount of asset and liability and its tax base, apply tax rate to determine deferred tax assets or liabilities according the predict period of recover assets or discharge liabilities.

2.23.1 Recognition of deferred income tax assets

① Deferred tax assets shall be recognized according to deductible temporary differences to the extent that is probable that tax profits will be available against which the deductible temporary differences can be utilized, but deferred tax assets arise from initial recognize of assets and liabilities in transaction that have character listed below would not recognised: a. The transaction is not business combination; b. At the time of the transaction, it affects neither accounting profit nor taxable profit (or deductible loss)

② The company and subsidiaries, associated companies and joint venture investments that can be related to deductible temporary differences, while meeting the following conditions, to confirm the corresponding deferred income tax assets: a. Temporary differences in the foreseeable future is likely to switch back to; and b. It is likely to be used for deductible temporary differences in taxable income in the future.

③ The Company can carry forward for the subsequent year's tax losses and tax credits, to very likely be used to offset tax losses and tax credits amount of future taxable income limit, verify the corresponding deferred income tax assets.

2.23.2 Recognition of deferred tax liabilities

Deferred tax liabilities shall be recognized for all taxable temporary differences, except to the extent that the deferred tax liabilities arise from:

① The initial recognition of goodwill;

② The initial recognition of assets or liabilities, when all the following conditions are satisfied: a. The transaction is not a business combination; b. At the time of the transaction, it affects neither accounting profit nor taxable profit (or deductible loss).

③ Temporary differences arise from the investments in subsidiaries, associates and interests in joint ventures, when all the following conditions are satisfied:

91 a. The parent, investor or venturer is able to control the timing of the reversal of the temporary difference; and b. It is probable that the temporary difference will not reverse in the foreseeable future.

2.23.3 The carrying amount of a deferred tax asset should be reviewed at each balance sheet date The Company should reduce the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilised. Any such reduction should be reversed to the extent that it becomes probable that sufficient taxable profit will be available.

2.24 Operating leases and finance leases

2.24.1 Operating leases

① When the Company as the Lessee under operating lease, lease payments under an operating lease shall be recognised as an expense on a straight-line basis over the lease term. Initial direct expense undertaken by the Company, recognized to the management expenses, contingent rental incurred recognized as current expenses. If the lease contract including a rent-free period, the

Company shall amortize the overall rent expenses on a straight-line basis over the whole lease period, during the rent-free period recognize lease expenses and liability correspond to it. If the lessee’s expenses paid by the lessor, the Company shall be reduce this expenses from the total rent expenses, and amortize the balance.

② When the Company as the lessor under operating lease, lease income from operating leases shall be recognised in income on a straight-line basis over the lease term. The initial costs, recognized to the current profit and loss account, however, if the amount is large, shall be added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the lease income. If the lease contract including a rent-free period, the Company shall recognize the total lease income for the whole lease period, during the rent-free period recognize the income also. If the Company paid some lessee’s expenses, the Company shall amortize the income balance (total lease income deduct the expenses) during lease period.

2.24.2 Finance lease

① At the commencement of the lease term, lessees shall recognise finance leases as assets in their balance sheets at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, and the amount of present value of the minimum lease

92 payments recognized as long term accounts payable, the difference recognized as unrecognized financial charges. During each lease period, adopt actual interest rate method to amortize the expenses, and recognized to financial expense in current period.

The depreciation policy for depreciable leased assets shall be consistent with that for depreciable assets that are owned, the depreciation period according to the lease period. If there is reasonable certainty that the lessee will obtain ownership by the end of the lease term, the assets shall be depreciated over its useful life. If there is no reasonable certainty that the lessee will obtain ownership by the end of the lease term, the asset shall be fully depreciated over the shorter of the lease term and its useful life.

② When the Company as the lessor under finance lease, lessors shall recognise assets held under a finance lease in their balance sheets and present them as a long term accounts receivable at an amount equal to the minimum lease receivable add the initial cost, and simultaneously recognize unguaranteed residual value. The diference between the total of minimum lease receivable、initial costs 、unguaranteed residual value and the total of present value shall be recognized as unrealized financing profits, adopt the actual interest rate method to recognize income during the lease period, recording to other operating income.

2.25 Non-current assets held for sale

2.25.1 Recognition of non-current assets held for sale

The Company shall classify a non-current asset as held for sale if when all the following conditions are satisfied:

① the appropriate level of management must be committed to a plan to sell the asset;

② the Company has entered into a irrepealable transfer agreement with buyer;

③ the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification.

2.25.2 Accounting treatment

A non-current asset classified as held for sale is measured at the net residual amount after deducting the costs necessary to make a sale from its held-for-sale-classification fair value upon classification. The net residual amount is capped by the carrying amount of the asset immediately

93 before the classification. The excess of the carrying amount of the asset immediately before the classification over the net residual amount is accounted for as impairment loss on assets for the reporting period during which the asset is classified as held for sale.

If a non-current asset (or disposal group) held for sale no longer meets the criteria for recognition as held for sale, the asset (or disposal group) is ceased to be recognised as held for sale and measured at the lower of:

① its carrying amount before the asset (or disposal group) was classified as held for sale, adjusted for any depreciation, amortisation or revaluations that would have been recognised had the asset

(or disposal group) not been classified as held for sale, and

② its recoverable amount at the date of the subsequent decision not to sell.

2.26 Significant changes of accounting policies and accounting estimates

2.26.1 Changes of accounting polices

There are no changes in accounting policies during current reporting period.

2.26.2 Changes of accounting estimates

There are no changes in accounting estimates during current reporting period.

2.27 Corrections of errors of prior periods

There are no corrections of errors of prior periods during current reporting period.

Note 3: Taxation

3.1 Taxes and surcharges applicable to the Company:

Taxes and surcharges Tax base Tax rate%

Revenues from sales of products and Value added tax 17、13 raw materials

Business tax Business tax taxable revenue 3、5

Sales revenue and sales volume of 20% based on price or CNY 0.5 per kg Consumption duty taxable products (500ml)

Urban maintenance Sum of VAT payable, consumption 5、7 and construction surcharge duty payable and business tax payable

94 for the reporting period

Sum of VAT payable, consumption

Education surcharge duty payable and business tax payable 3

for the reporting period

Sum of VAT payable, consumption

Local education surcharge duty payable and business tax payable 2

for the reporting period

Corporate income tax Taxable profits 25 *Note

*Note: Bozhou Gujing Waste Reclamation Co., Ltd. ( the subsidiary of the company) is a small and meager profit company, the corporate income tax rate is 20%.

Note 4: Business combination and the consolidated financial statements

4.1 Circumstance of subsidiaries

4.1.1 Subsidiaries acquired through incorporation or investment

*The monetary unit is ten thousand unless otherwise stated.

Type Place Nature *Registered Subsidiaries of incorporation of registration of business capital Business scope

Wholesales of distilled spirit, Bozhou Gujing Sales Co., Ltd. Holding Trade and Bozhou, Anhui 8,486.00 construction materials, feeds and (hereafter Gujing Sales) subsidiary business assistant materials

Department stores, wine, hardware, Hefei Gujing Trading Co., Ltd. Holding Trade and Hefei, Anhui 1,000.00 and wholesale of construction (hereafter Hefei Trading) subsidiary business materials

Bozhou Gujing Transportation Co., Ltd Holding Transportation, sales, repair and Bozhou, Anhui Transportation 695.00 (hereafter Gujing Transportation) subsidiary maintainance services

Bozhou Gujing Glass Co., Ltd Holding Manufacture and sales of glass Bozhou, Anhui Manufacturing 6,646.00 (hereafter Gujing Glass) subsidiary products

Bozhou Gujing Waste Reclamation Co., Holding Collect and sale of recycled glass Ltd Bozhou, Anhui Recycled 100.00 subsidiary bottle, glass, and other wastebaskets (hereafter Gujing Waste)

Domestic advertising production,

Anhui Jinyunlai Culture & Media Co.,Ltd. Holding Advertisement publish, design and agency; Hefei, Anhui 200.00 (hereafter Jinyunlai) subsidiary marketing conference etiquette service, craft

gifts sales

Bozhou Gujing Packaging Co., Ltd. Holding Approved operating business:None. Bozhou, Anhui Manufacturing 3,000.00 (hereafter Gujing Packaging) subsidiary General operating business: Provide

95 Type Place Nature *Registered Subsidiaries of incorporation of registration of business capital Business scope

packaging services for Gujing

distilled spirit, Gujing Gong series

distilled spirit, vegetable and fruit

wine, health wine and mixed wine.

Subsidiaries acquired through incorporation or investment (Continued)

* Actual amount of investment The balance of other items that, substantially Holding proportion Voting rights Subsidiaries as at 31/12/2011 constitute the net investment in subsidiary % proportion %

Gujing Sales 8,486.00 0.00 100.00 100.00

Hefei Trading 1,000.00 0.00 100.00 100.00

Gujing Transportation 695.00 0.00 100.00 100.00

Gujing Glass 6,646.00 0.00 100.00 100.00

Gujing Waste 100.00 0.00 100.00 100.00

Jinyunlai 200.00 0.00 100.00 100.00

Gujing Packaging 3,000.00 0.00 100.00 100.00

Subsidiaries acquired through incorporation or investment (Continued)

The amount of minority The balance of parent company’s equity, that is equal to

Whether consolidated Minority equity used for decrease the parent shareholders’ equity less the subsidiary’s Subsidiaries statements equity the profits and losses of current loss undertaken by the minority shareholders

minority shareholders according their quotient of the beginning of the period

Gujing Sales Yes 0.00 0.00 0.00

Hefei Trading Yes 0.00 0.00 0.00

Gujing Transportation Yes 0.00 0.00 0.00

Gujing Glass Yes 0.00 0.00 0.00

Gujing Waste Yes 0.00 0.00 0.00

Jinyunlai Yes 0.00 0.00 0.00

Gujing Packaging Yes 0.00 0.00 0.00

4.1.2 Subsidiaries acquired through business combination under common control

*The monetary unit is ten thousand unless otherwise stated.

Type Place Nature *Registered Subsidiaries of of Business scope of business capital incorporation registration

Hotel management（Except for catering Shanghai Gujing Jinhao Hotel Management Holding Hotel Shanghai 5,400.00 management、Except for hotel operation）; Co., Ltd (hereafter Shanghai Jinhao) subsidiary Management Self-owned housing rental; establish branch.

96 （If there is need administrative licensing,

operating based on the license.）

Accommodation, parking services；Chinese Bozhou Gujing Hotel Co., Ltd.(hereafter Holding Hotel Bozhou, Anhui 62.80 meal process, sales of cigarette and wine and Gujing Hotel) subsidiary operation commodities

Subsidiaries acquired through business combination under common control (Continued)

* Actual amount The balance of other items that, Voting rights Subsidiaries of investment substantially constitute the net Holding proportion % proportion % as at 31/12/2011 investment in subsidiary

Shanghai Jinhao 26,505.89 0.00 100.00 100.00

Gujing Hotel 79.84 0.00 100.00 100.00

Subsidiaries acquired through business combination under common control (Continued)

The balance of parent company’s equity, that The amount of minority Whether is equal to the parent shareholders’ equity less equity used for decrease Subsidiaries consolidated Minority equity the subsidiary’s current loss undertaken by the profits and losses of statements the minority shareholders according their minority shareholders quotient of the beginning of the period

Shanghai Jinhao Yes 0.00 0.00 0.00

Gujing Hotel Yes 0.00 0.00 0.00

4.2 Changes of scope of consolidation financial statements

Shanghai Gujing Trading Co., Ltd.(hereafter, Gujing Trading) has been cancelled on April 21th, 2011, the financial statement of Gujing Trading included in the consolidated financial statements for the year ended 31 December 2010. Therefore, the consolidated financial statements of the Company for the year ended 31 December 2011 have deducted the individual financial statement of Gujing Trading. On 12 December 2011, the Company invested CNY 30 milion to establish the wholly owned subsidiary Gujing Packaging, the financial statement of Gujing Packaging has been included in the consolidated financial statements.

4.3 New subsidiaries included in the consolidated financial statement during current reporting period

Subsidiaries Net assets value as at 31/12/2011 Net profit for the current reporting period

Gujing Packaging 30,000,000.00 0.00

Note 5: Notes to elements of the consolidated financial statements

5.1 Monetary funds

97 Balance as at 31/12/2011 Balance as at 31/12/2010

Items Foreign exchange Foreign Original amount Translated amount Original amount Translated amount rate exchange rate

Cash in hand

CNY 101,826.09 1.0000 101,826.09 180,852.46 1.0000 180,852.46

Subtotal 101,826.09 180,852.46

Demand deposits

CNY 2,081,911,723.03 1.0000 2,081,911,723.03 642,986,669.59 1.0000 642,986,669.59

USD 3,006.27 6.3009 18,942.21 9,645.97 6.6227 63,882.37

Subtotal 2,081,930,665.24 643,050,551.96

Total 2,082,032,491.33 643,231,404.42

5.2 Notes receivable

5.2.1 Disclosure by classification

Items Balance as at 31/12/2011 Balance as at 31/12/2010

Bank acceptance 490,543,018.49 96,030,755.37

Total 490,543,018.49 96,030,755.37

5.2.2 As at 31 December 2011, the amount of notes receivable transferred by endorsement but remaining immature is CNY 169,938,832.00, details of top five debtors:

Issuer Date of issue Date of maturity Amount

Wuhu Tiansheng Industry Co., Ltd. 20-7-2011 20-3-2012 3,000,000.00

Shanghai Jiancan Metal Material Co., Ltd. 31-10-2011 30-4-2012 2,000,000.00

Nantong Huiwei Plastic Co., Ltd. 11-7-2011 11-1-2012 1,329,250.00

Nanjing Sanjing Medicine Co., Ltd. 26-8-2011 26-2-2012 1,200,000.00

Changshu Yihua Diamond Co., Ltd. 10-10-2011 10-4-2012 1,000,000.00

Total 8,529,250.00

5.3 Accounts receivable

5.3.1 Disclosure by classification

Balance as at 31/12/2011

Carrying amount Items Impairment allowance before impairment allowance

Amount % of total Amount % of total

Accounts receivable belong to individual significance and 0.00 0.00 0.00 0.00 individually assessed for impairment

Accounts receivable belong to recognition of impairment allowances by group:

Age group 39,013,882.35 100.00 1,328,051.13 3.40

98 Balance as at 31/12/2011

Carrying amount Items Impairment allowance before impairment allowance

Amount % of total Amount % of total

Accounts receivable belong to individually insignificant but 0.00 0.00 0.00 0.00 individually assessed for impairment

Total 39,013,882.35 100.00 1,328,051.13 3.40

(Continued)

Balance as at 31/12/2010

Carrying amount Items Impairment allowance before impairment allowance

Amount % of total Amount % of total

Accounts receivable belong to individual significance and 0.00 0.00 0.00 0.00 individually assessed for impairment

Accounts receivable belong to recognition of impairment allowances by group:

Age group 13,479,796.20 100.00 661,063.64 4.90

Accounts receivable belong to individually insignificant but 0.00 0.00 0.00 0.00 individually assessed for impairment

Total 13,479,796.20 100.00 661,063.64 4.90

5.3.2 Accounts receivable using the age analysis method for measurement of impairment allowances:

Balance as at 31/12/2011

Carrying amount Age Impairment allowance before impairment allowance

Amount % of total Amount % of total

Within 1 year

Including: within 6 months 32,023,338.50 82.08 320,233.38 1.00

6 months - 1year 4,401,006.02 11.28 220,050.30 5.00

Subtotal of accounts receivable within 1 year 36,424,344.52 93.36 540,283.68 1.48

1-2 years 1,994,998.68 5.12 199,499.87 10.00

2-3 years 12,543.15 0.03 6,271.58 50.00

Over 3years 581,996.00 1.49 581,996.00 100.00

Total 39,013,882.35 100.00 1,328,051.13 3.40

(Continued)

Age Balance as at 31/12/2010

99 Carrying amount Impairment allowance before impairment allowance

Amount % of total Amount % of total

Within 1 year

Including: within 6 months 12,099,472.51 89.76 120,994.73 1.00

6 months - 1year 333,186.94 2.47 16,659.35 5.00

Subtotal of accounts receivable within 1 year 12,432,659.45 92.23 137,654.08 1.11

1-2 years 415,836.04 3.08 41,583.60 10.00

2-3 years 298,949.50 2.22 149,474.75 50.00

Over 3years 332,351.21 2.47 332,351.21 100.00

Total 13,479,796.20 100.00 661,063.64 4.90

5.3.3 Circumstance for accounts receivable recovered or received although that has been fully provided impairment allowances before, and the proportion of impairment allowances of accounts receivable higher than the provision of accounting policies.

Accumulated impairment al Amounts of Reasons for recover Basis of determine the original Content lowance recognised before recovered or or receive impairment allowance recovered or received received

Jinan Sugar Tobacco Strengthen collection According to the accounting 54,588.16 54,588.16 and Wine Corporation the final payments policy of impairment allowance

Total 54,588.16 54,588.16

5.3.4 During the current reporting period, the Company has no accounts receivable written off.

5.3.5 Details of accounts receivable owed by entities which own 5% or more of the shares of the Company during the current reporting period.

Relationship with the Shareholder Amount Age Content Company

Gujing Group. The parent company 38,485.49 within 6 months Hotel consumptions

Total 38,485.49

5.3.6 Details of top five accounts receivable:

Relationship with Carrying amount % of total Debtors Age the Company as at 31/12/2011 accounts receivable

Anhui Yinfeng Trading Co., Ltd. Non-related party 7,866,761.72 within 6 months 20.16

Shanghai Haiyan Logistics Development Co., Non-related party 1,926,523.81 within 6 months 4.94 Ltd

Zhengzhou Two-Seven District Zhiyuan Non-related party 1,806,754.60 Within 1 year 4.63 Wine Co., Ltd.

The People’s Government, Gujing Town Non-related party 1,703,333.33 within 6 months 4.37

100 Relationship with Carrying amount % of total Debtors Age the Company as at 31/12/2011 accounts receivable

Farm Industry Commerce Super Market Non-related party 1,539,446.69 Within 2 years 3.95 （Group）Co., Ltd

Total 14,842,820.15 38.05

5.3.7 Refer to Note 6.5 for details of accounts receivable due from related parties.

5.4 Advances to suppliers

5.4.1 Disclosure by age:

Carrying amount as at 31/12/2011 Carrying amount as at 31/12/2010 Age Amount % of total Amount % of total

Within 1 year 233,258,065.73 100.00 1,793,790.94 98.05

1-2 years 4,645.00 0.00 35,720.00 1.95

2-3 years 0.00 0.00 0.00 0.00

Over 3 years 0.00 0.00 0.00 0.00

Total 233,262,710.73 100.00 1,829,510.94 100.00

5.4.2 Details of top five advance to suppliers:

Relationship with the Carrying amount Reason(s) Suppliers Age Company as at 31/12/2011 for unsettlement

Payment in advance for house Anhui Zhenda Investment Co., Ltd. Non-related party 66,346,000.00 Within 1 year purchased

Payment in advance for CCTV Non-related party 52,464,436.00 Within 1 year advertising expense for 2012

Payment in advance for land Qiaocheng District Land Reserve Center Non-related party 36,672,050.00 Within 1 year leasing and compensations.

Qiaocheng District Land and Resources Payment in advance for land Non-related party 22,397,208.00 Within 1 year Bureau leasing and compensations

Anhui Jinjuan International Advertisement Payment in advance for Non-related party 6,900,000.00 Within 1 year Co., Ltd., Partner Medium Branch advertising expense for 2012

Total 184,779,694.00

5.4.3 The Company has no advances to entities which own 5% or more of the shares of the Company.

5.4.4 Refer to Note 6.5 for details of advances to related parties.

5.5 Interests receivable

Item Balance as at 31/12/2011 Balance as at 31/12/2010

Fixed deposit receipt 4,451,540.35 0.00

Total 4,451,540.35 0.00

101 5.6 Other receivables

5.6.1 Disclosure by classification

Balance as at 31/12/2011

Carrying amount Item Impairment allowance before impairment allowance

Amount % of total Amount % of total

Other receivables belong to individual significance and individually 54,205,281.87 90.99 51,109,940.55 94.29 assessed for impairment

Other receivables belong to recognition of impairment allowances by group:

Age group 5,368,699.28 9.01 581,622.74 10.83

Other receivables belong to individually insignificant but 0.00 0.00 0.00 0.00 individually assessed for impairment

Total 59,573,981.15 100.00 51,691,563.29 86.77

(Continued)

Balance as at 31/12/2010

Carrying amount Item Impairment allowance before impairment allowance

Amount % of total Amount % of total

Other receivables belong to individual significance and individually 55,216,448.81 41.05 55,216,448.81 100.00 assessed for impairment

Other receivables belong to recognition of impairment allowances by group:

Age group 79,299,603.57 58.95 1,408,817.97 1.78

Other receivables belong to individually insignificant but 0.00 0.00 0.00 0.00 individually assessed for impairment

Total 134,516,052.38 100.00 56,625,266.78 42.10

5.6.2 Other receivables using the age analysis method for measurement of impairment allowances:

Balance as at 31/12/2011

Carrying amount Age Impairment allowance before impairment allowance

Amount % of total Amount % of total

Within 1 year

Including: within 6 months 4,387,567.89 81.72 43,875.68 1.00

6 months - 1year 243,321.49 4.53 12,166.07 5.00

Subtotal of accounts receivable within 1 year 4,630,889.38 86.25 56,041.75 1.21

1-2 years 235,809.90 4.40 23,580.99 10.00

2-3 years 0.00 0.00 0.00 0.00

102 Balance as at 31/12/2011

Carrying amount Age Impairment allowance before impairment allowance

Amount % of total Amount % of total

Over 3years 502,000.00 9.35 502,000.00 100.00

Total 5,368,699.28 100.00 581,622.74 10.83

(Continued)

Balance as at 31/12/2010

Carrying amount Age Impairment allowance before impairment allowance

Amount % of total Amount % of total

Within 1 year

Including: within 6 months 76,893,145.27 96.97 768,931.45 1.00

6 months - 1year 1,525,447.18 1.92 76,272.36 5.00

Subtotal of accounts receivable within 1 year 78,418,592.45 98.89 845,203.81 1.08

1-2 years 324,885.51 0.41 32,488.55 10.00

2-3 years 50,000.00 0.06 25,000.00 50.00

Over 3years 506,125.61 0.64 506,125.61 100.00

Total 79,299,603.57 100.00 1,408,817.97 1.78

5.6.3 Circumstance for other receivables recovered or received although that has been fully provided impairment allowances before, and the proportion of impairment allowances of accounts receivable higher than the provision of accounting policies.

Original basis of impairment Sum of impairment allowance Recovered/received Debtors Reason(s) for recover allowance recognised before recovered amount

Capital-Bridge Received insolvency The enterprise has entered 12,835,000.00 612,000.00 Securities liquidation funds insolvency liquidation procedure

Received insolvency The enterprise has entered Minfa Securities 12,879,010.28 3,494,508.26 liquidation funds insolvency liquidation procedure

Total 25,714,010.28 4,106,508.26

5.6.4 The Company has no other receivables written off during the current reporting period. 5.6.5 The Company has no other receivables owed by entities which own 5% or more of the shares of the Company. 5.6.6 Details of top five other receivables:

Relationship with the Carrying amount % of total Debtors Age Company as at 31/12/2011 other receivables

Hengxin Securities Non-related party 29,502,438.53 Over 3 years 49.52

Minfa Securities Non-related party 12,479,843.34 Over 3 years 20.95

103 Capital-Bridge Securities Non-related party 12,223,000.00 Over 3 years 20.52

Daqing Mieying Trading Co.,Ltd. Non-related party 500,000.00 Over 3 years 0.84

Li Yuejun Non-related party 320,000.00 Within 6 months 0.54

Total 55,025,281.87 92.37

5.6.7 Refer to Note 6.5 for details of other receivables due from related parties.

5.7 Inventories

5.7.1 Disclosure by classification

As at 31/12/2011 As at 31/12/2010

Carrying amount Carrying amount Items Impairment Net carrying Impairment Net carrying before impairment before impairment allowance amount allowance amount allowance allowance

Raw material and 80,384,897.21 3,021,570.96 77,363,326.25 65,545,977.24 5,609,659.23 59,936,318.01 packaging materials

Work in progress and self-manufactured 407,663,001.44 0.00 407,663,001.44 317,467,522.18 0.00 317,467,522.18 semi-finished goods

Finished goods 94,891,327.59 1,760,585.85 93,130,741.74 78,961,306.99 3,485,660.50 75,475,646.49

Total 582,939,226.24 4,782,156.81 578,157,069.43 461,974,806.41 9,095,319.73 452,879,486.68

5.7.2 Impairment allowance for inventories

Recognised Decrease in the Carrying amount as at Carrying amount as at Items during the current current reporting period 31/12/2010 31/12/2011 reporting period Recovered Written off

Raw material and 5,609,659.23 2,128,929.63 0.00 4,717,017.90 3,021,570.96 packaging materials

Finished goods 3,485,660.50 776,195.67 0.00 2,501,270.32 1,760,585.85

Total 9,095,319.73 2,905,125.30 0.00 7,218,288.22 4,782,156.81

5.8 Investment property

5.8.1 Investment property measured using the historical cost convention

Increase during Decrease during Carrying amount Carrying amount Items the current the current as at 31/12/2010 as at 31/12/2011 reporting period reporting period

1.Cost: 79,352,732.76 0.00 18,226,261.91 61,126,470.85

Houses and buildings 76,708,140.76 0.00 18,226,261.91 58,481,878.85

Land use rights 2,644,592.00 0.00 0.00 2,644,592.00

Recognition Newly increased for current year

104 Increase during Decrease during Carrying amount Carrying amount Items the current the current as at 31/12/2010 as at 31/12/2011 reporting period reporting period

2.Accumulated depreciation and 34,050,245.78 0.00 3,537,860.03 9,020,045.22 28,568,060.59 amortisation:

Houses and buildings 33,865,943.45 0.00 3,481,968.81 9,020,045.22 28,327,867.04

Land use rights 184,302.33 0.00 55,891.22 0.00 240,193.55

3.Carrying amount before 45,302,486.98 32,558,410.26 impairment allowance

Houses and buildings 42,842,197.31 30,154,011.81

Land use rights 2,460,289.67 2,404,398.45

4.Accumulated impairment 0.00 0.00 0.00 0.00 allowance

Houses and buildings 0.00 0.00 0.00 0.00

Land use rights 0.00 0.00 0.00 0.0

5.Net carrying amount 45,302,486.98 32,558,410.26

Houses and buildings 42,842,197.31 30,154,011.81

Land use rights 2,460,289.67 2,404,398.45

5.8.2 The depreciation and amortisation of investment property recognised during the current reporting period amounting to CNY 3,537,860.03; There is no cost of investment property transferred from construction in progress during the current reporting period; During the current reporting period cost of investment property transferred to fixed assets amounting to CNY

18,226,261.91, and the accumulated depreciation amounting to CNY 9,020,045.22.

5.8.3 Investment property with pending ownership registration

Accumulated Accumulated Net carrying Items Cost impairment depreciation amount allowance

Filling workshop building(3rd floor) 22,618,411.84 11,870,870.02 0.00 10,747,541.82

Filling workshop administration building(2nd 6,458,600.00 3,151,797.12 0.00 3,306,802.88 floor)

Filling workshop 8,268,007.88 2,843,837.06 0.00 5,424,170.82

Packaging functional building project(Including 6,110,867.18 3,431,252.22 0.00 2,679,614.96 seventh packaging workshop)

Feed mills betterment project(1st workshop) 4,263,000.01 207,297.06 0.00 4,055,702.95

Feed mills betterment project(2nd workshop) 5,920,833.34 287,912.58 0.00 5,632,920.76

Total 53,639,720.25 21,792,966.06 0.00 31,846,754.19

105 5.9 Fixed assets

5.9.1 Circumstance of fixed assets

Increase during Decrease during Carrying amount Carrying amount Items the current the current as at 31/12/2010 as at 31/12/2011 reporting period reporting period

1.Cost 797,965,905.14 79,952,738.82 18,206,614.53 859,712,029.43

Houses and buildings 503,961,199.28 28,522,560.03 1,684,781.27 530,798,978.04

Machineries 193,190,395.60 30,436,392.69 8,038,264.64 215,588,523.65

Vehicles 32,046,687.27 8,037,042.53 5,600,009.76 34,483,720.04

Administrative equipments and others 68,767,622.99 12,956,743.57 2,883,558.86 78,840,807.70

Newly Recognition for

increased current year

2. Accumulated depreciation 450,940,444.96 9,020,045.22 45,377,730.01 15,356,372.02 489,981,848.17

Houses and buildings 257,758,414.08 9,020,045.22 17,868,340.63 958,995.81 283,687,804.12

Machineries 133,952,164.80 0.00 16,184,849.26 6,605,754.42 143,531,259.64

Vehicles 14,851,585.08 0.00 4,868,908.05 5,430,795.20 14,289,697.93

Administrative equipments and others 44,378,281.00 0.00 6,455,632.07 2,360,826.59 48,473,086.48

3.Carrying amount before impairment 347,025,460.18 369,730,181.26 allowance

Houses and buildings 246,202,785.20 247,111,173.92

Machineries 59,238,230.80 72,057,264.01

Vehicles 17,195,102.19 20,194,022.11

Administrative equipments and others 24,389,341.99 30,367,721.22

4.Accumulated impairment allowance 6,951,990.42 0.00 0.00 6,951,990.42

Houses and buildings 4,264,099.10 0.00 0.00 4,264,099.10

Machineries 2,020,210.96 0.00 0.00 2,020,210.96

Vehicles 0.00 0.00 0.00 0.00

Administrative equipments and others 667,680.36 0.00 0.00 667,680.36

5.Net carrying amount 340,073,469.76 362,778,190.84

Houses and buildings 241,938,686.10 242,847,074.82

Machineries 57,218,019.84 70,037,053.05

Vehicles 17,195,102.19 20,194,022.11

Administrative equipments and others 23,721,661.63 29,700,040.86

5.9.2 Within the increase of accumulated depreciation during the current reporting period, CNY

45,377,730.01 is the depreciation recognised for the current reporting period; cost of fixed assets transferred from construction in progress during the current reporting period amounting to CNY

106 28,189,113.78; cost and accumulated depreciation of fixed assets transferred from investment property during the current reporting period amounted to CNY 18,226,261.91 and CNY

9,020,045.22 respectively; due to the renovation projects, the decrease of cost and accumulated depreciation of fixed assets during the current reporting period included transfer to construction in progress amounting to CNY 4,491,392.16 and CNY 3,080,413.66 respectively. During the current reporting period, there is no transfer to investment property from fixed assets.

5.9.3 Details of temporary idle assets as at the end of the period

Accumulated Items Cost Accumulated depreciation Net carrying amount impairment allowance

Houses and buildings 15,646,500.09 11,190,960.05 4,264,099.10 191,440.94

Machineries 12,113,215.87 9,978,244.36 2,020,210.96 114,760.55

Administrative equipments and others 2,641,888.65 1,942,360.02 667,680.36 31,848.27

Total 30,401,604.61 23,111,564.43 6,951,990.42 338,049.76

5.9.4 Details of fixed assets let under operating leases as at the end of the period

Accumulated Items Cost Accumulated depreciation Net carrying amount impairment allowance

Machineries 4,123,746.31 2,601,451.75 0.00 1,522,294.56

Administrative equipments and others 294,948.62 68,844.04 0.00 226,104.58

Total 4,418,694.93 2,670,295.79 0.00 1,748,399.14

5.9.5 Fixed assets with pending ownership registration

Accumulated Accumulated Net carrying Items Cost depreciation impairment allowance amount

Boiler room 4,917,406.90 3,357,747.38 0.00 1,559,659.52

Turbine house 2,064,038.30 1,402,168.08 0.00 661,870.22

35KV substation room 3,495,600.00 2,237,329.65 1,167,530.40 90,739.95

West district precision filtration steel 719,280.00 34,885.08 0.00 684,394.92 structure platform

West district the liquor steel mesh 5,759,109.81 281,853.80 0.00 5,477,256.01 warehouse

West district packaging materials 6,889,077.45 421,722.40 0.00 6,467,355.05 warehouse

West district new warehouse for 3,560,182.67 0.00 0.00 3,560,182.67 distilled spirit

Manufacturing workshop and 17,850,964.12 7,385,971.21 0.00 10,464,992.91

107 Accumulated Accumulated Net carrying Items Cost depreciation impairment allowance amount

subsidiary facilities

Office building, dormitory building 1,774,371.18 755,970.48 0.00 1,018,400.70 and subsidiary facilities

Total 47,030,030.43 15,877,648.08 1,167,530.40 29,984,851.95

5.9.6 The Company has no pledged and warranted fixed assets during current reporting period.

5.10 Construction in progress

5.10.1 Details of construction in progress

As at 31/12/2011 As at 31/12/2010

Carrying amount Carrying

Items before Impairment Net carrying amount before Impairment Net carrying

impairment allowance amount impairment allowance amount

allowance allowance

Anaerobic methane project 0.00 0.00 0.00 14,847.40 0.00 14,847.40

Zhangji wine pot project 0.00 0.00 0.00 5,085,598.20 0.00 5,085,598.20

Zhengde square 0.00 0.00 0.00 1,439,123.25 0.00 1,439,123.25

Human resource system 0.00 0.00 0.00 23,931.62 0.00 23,931.62 e-HR

Production line project of

glass bottles decoration firing 0.00 0.00 0.00 144,635.01 0.00 144,635.01

and spray paint

No.4 furnace innovation 0.00 0.00 0.00 2,336,242.07 0.00 2,336,242.07 project

Betterment project for

brewing high quality base 7,117,925.85 0.00 7,117,925.85 0.00 0.00 0.00

liquor skill

Project for base liquor

blending and storing, filling 40,493,357.07 0.00 40,493,357.07 0.00 0.00 0.00 center and supporting

facilities

R&D project for base liquor

removal and supporting 84,455,897.59 0.00 84,455,897.59 0.00 0.00 0.00

facilities

Gujing operation network 915,000.00 0.00 915,000.00 0.00 0.00 0.00

Technical innovation project 24,920.00 0.00 24,920.00 0.00 0.00 0.00 - workshop

Deep processing 10,000.00 0.00 10,000.00 0.00 0.00 0.00 multifunctional building

Total 133,017,100.51 0.00 133,017,100.51 9,044,377.55 0.00 9,044,377.55

108 5.10.2 Movement of significant construction in progress

Transferred to Other decrease Increase during Carrying fixed assets during the Carrying the Items Budgeted cost amount as at during the current amount as at current reporting 31/12/2010 current reporting 31/12/2011 period reporting period period

Anaerobic methane 500,000.00 14,847.40 460,053.78 474,901.18 0.00 0.00 project

Zhangji wine pot 5,859,011.96 5,085,598.20 1,029,631.86 6,115,230.06 0.00 0.00 project

Zhengde square 1,500,000.00 1,439,123.25 0.00 1,439,123.25 0.00 0.00

Human resource 460,000.00 23,931.62 427,350.42 0.00 451,282.04 0.00 system e-HR

Production line

project of glass 1,406,275.77 144,635.01 1,243,758.83 1,388,393.84 0.00 0.00 bottles decoration

firing and spray paint

No.4 furnace 8,940,268.07 2,336,242.07 6,328,059.84 8,664,301.91 0.00 0.00 innovation project

Blending No.4

warehouse storage 1,065,200.00 0.00 1,087,714.86 1,087,714.86 0.00 0.00 wine tanks

renovation

West district new

warehouse for 3,680,300.00 0.00 3,560,182.67 3,560,182.67 0.00 0.00

distilled spirit

blending and storing

center collect wine 1,280,124.00 0.00 1,253,380.83 1,253,380.83 0.00 0.00

station reform

Renovation project 3,700,000.00 0.00 3,755,187.95 0.00 3,755,187.95 0.00 for celebrity hall

Betterment project for

brewing high quality 135,000,000.00 0.00 7,117,925.85 0.00 0.00 7,117,925.85

base liquor skill

Project for base liquor

blending and storing, 686,000,000.00 0.00 40,493,357.07 0.00 0.00 40,493,357.07 filling center and

supporting facilities

R&D project for base 372,340,000.00 0.00 84,455,897.59 0.00 0.00 84,455,897.59

109 Transferred to Other decrease Increase during Carrying fixed assets during the Carrying the Items Budgeted cost amount as at during the current amount as at current reporting 31/12/2010 current reporting 31/12/2011 period reporting period period

liquor removal and

supporting facilities

Gujing operation 3,050,000.00 0.00 915,000.00 0.00 0.00 915,000.00 network

Technical innovation 9,940,000.00 0.00 24,920.00 0.00 0.00 24,920.00 project – workshop

Deep processing

multifunctional 20,200,000.00 0.00 10,000.00 0.00 0.00 10,000.00

building

No. 4 finished goods 3,000,000.00 0.00 2,886,257.37 2,886,257.37 0.00 0.00 tents

Technical innovation

project- workshop 1,380,000.00 0.00 1,319,627.81 1,319,627.81 0.00 0.00

phase 1

Total 1,259,301,179.8 9,044,377.55 156,368,306.73 28,189,113.78 4,206,469.99 133,017,100.51

(Continued)

Weight of cost Including: interests Capitalisation rate Cumulative to date in Stage of capitalised applicable to the Source of Items interests budgeted cost completion% during the current current reporting finance capitalised % reporting period period %

Anaerobic methane project 94.98 100.00 0.00 0.00 0.00 self-financing

Zhangji wine pot project 104.37 100.00 0.00 0.00 0.00 self-financing

Zhengde square 95.94 100.00 0.00 0.00 0.00 self-financing

Human resource system e-HR 98.10 100.00 0.00 0.00 0.00 self-financing

Production line project of glass bottles decoration firing and spray 98.73 100.00 0.00 0.00 0.00 self-financing paint

No.4 furnace innovation project 96.91 100.00 0.00 0.00 0.00 self-financing

Blending No.4 warehouse storage 102.11 100.00 0.00 0.00 0.00 self-financing wine tanks renovation

West district new warehouse for 96.74 100.00 0.00 0.00 0.00 self-financing distilled spirit blending and storing center 97.91 100.00 0.00 0.00 0.00 self-financing

110 Weight of cost Including: interests Capitalisation rate Cumulative to date in Stage of capitalised applicable to the Source of Items interests budgeted cost completion% during the current current reporting finance capitalised % reporting period period % collect wine station reform

Renovation project for celebrity 101.49 100.00 0.00 0.00 0.00 self-financing hall

self-financing Betterment project for brewing 5.27 5.01 0.00 0.00 0.00 and raised high quality base liquor skill funds

Project for base liquor blending self-financing and storing, filling center and 5.90 4.85 0.00 0.00 0.00 and raised supporting facilities funds

R&D project for base liquor 22.68 20.05 0.00 0.00 0.00 self-financing removal and supporting facilities

Gujing operation network 30.00 30.00 0.00 0.00 0.00 self-financing

Technical innovation project - 0.25 0.25 0.00 0.00 0.00 self-financing workshop

Deep processing multifunctional 0.05 0.05 0.00 0.00 0.00 self-financing building

No. 4 finished goods tents 96.21 100.00 0.00 0.00 0.00 self-financing

Technical innovation project- 95.63 100.00 0.00 0.00 0.00 self-financing workshop phase 1

Total 0.00 0.00 0.00

5.10.3 Other decrease: human resource system e-HR during the current reporting period mainly results by transferred to intangible assets, the celebrity hall renovation project during the current reporting period mainly results by transferred to long-term deferred expenses.

5.11 Intangible assets

5.11.1 Circumstance of intangible assets:

Increase Decrease Carrying amount Carrying amount Items during the current during the current as at 31/12/2010 as at 31/12/2011 reporting period reporting period

1.Cost 212,369,601.20 99,627,759.54 0.00 311,997,360.74

Land use rights 172,441,156.80 98,352,204.00 0.00 270,793,360.80

Trade mark privileges 38,150,000.00 0.00 0.00 38,150,000.00

Software 1,778,444.40 1,275,555.54 0.00 3,053,999.94

2.Accumulated amortisation 57,923,208.91 5,479,919.79 0.00 63,403,128.70

111 Increase Decrease Carrying amount Carrying amount Items during the current during the current as at 31/12/2010 as at 31/12/2011 reporting period reporting period

Land use rights 19,539,640.07 5,042,980.53 0.00 24,582,620.60

Trade mark privileges 37,850,000.00 60,000.00 0.00 37,910,000.00

Software 533,568.84 376,939.26 0.00 910,508.10

3.Carrying amount before impairment 154,446,392.29 248,594,232.04 allowance

Land use rights 152,901,516.73 246,210,740.20

Trade mark privileges 300,000.00 240,000.00

Software 1,244,875.56 2,143,491.84

4.Accumulated impairment allowance 0.00 0.00 0.00 0.00

Land use rights 0.00 0.00 0.00 0.00

Trade mark privileges 0.00 0.00 0.00 0.00

Software 0.00 0.00 0.00 0.00

5.Net carrying amount 154,446,392.29 248,594,232.04

Land use rights 152,901,516.73 246,210,740.20

Trade mark privileges 300,000.00 240,000.00

Software 1,244,875.56 2,143,491.84

5.11.2 Within the increase of amortisation of intangible assets during the current reporting period, CNY 5,479,919.79 is the amortisation recognised for the current reporting period.

5.12 Long-term deferred expenses

Increase Amortisation Other decrease Carrying amount Carrying amount Items during the current for the current during the current as at 31/12/2010 as at 31/12/2011 reporting period reporting period reporting period

Breweries industrial park decoration 1,486,844.67 0.00 743,422.34 0.00 743,422.33

Extract filtering wine pot overhaul 283,931.58 0.00 141,965.86 0.00 141,965.72 expenses

Celebrity hall 0.00 3,755,187.95 104,310.78 0.00 3,650,877.17

House leasing in Zhengzhou 0.00 3,938,400.41 875,200.09 0.00 3,063,200.32

Decoration expenses of Zhengzhou 0.00 2,268,000.00 189,000.00 0.00 2,079,000.00 experience club

Total 1,770,776.25 9,961,588.36 2,053,899.07 0.00 9,678,465.54

5.13 Deferred tax assets

5.13.1 Recognized deferred tax assets

Items Balance as at 31/12/2011 Balance as at 31/12/2010

112 Items Balance as at 31/12/2011 Balance as at 31/12/2010

Impairment allowance for receivables 13,254,903.61 14,205,749.62

Impairment allowance for inventories 1,195,539.20 2,215,092.01

Impairment allowance for fixed assets 1,737,997.61 1,737,997.61

Unrealized profits from intragroup transactions 155,725.48 73,008.05

Deferred income 3,137,903.51 1,451,975.50

Accrued expenses 1,577,905.34 2,929,812.81

Deductible losses 118,096.95 0.00

Total 21,178,071.70 22,613,635.60

5.13.2 Details of unrecognized deferred tax assets

Items Balance as at 31/12/2011 Balance as at 31/12/2010

Impairment allowance for receivables 0.00 115,707.61

Impairment allowance for inventories 0.00 58,737.93

Impairment allowance for fixed assets 0.00 0.00

Deductible losses 0.00 2,814,074.68

Total 0.00 2,988,520.22

5.13.3 The deductible losses of unrecognized deferred tax assets shall be maturity in the following years

Particular Year Balance as at 31/12/2011 Balance as at 31/12/2010

Year 2012 0.00 0.00

Year 2013 0.00 5,646,957.86

Year 2014 0.00 766,752.30

Year 2015 0.00 4,893,210.53

Year 2016 0.00 0.00

Total 0.00 11,306,920.69

5.13.4 Details of deductible temporary differences

Deductible temporary differences Items Balance as at 31/12/2011 Balance as at 31/12/2010

Impairment allowance for receivables 53,019,614.42 56,823,499.97

Impairment allowance for inventories 4,782,156.81 8,860,368.01

Impairment allowance for fixed assets 6,951,990.42 6,951,990.42

Unrealized profits from intragroup transactions 622,901.90 292,032.21

Deferred income 12,551,614.04 5,807,902.02

Accrued expenses 6,311,621.33 11,719,251.22

Deductible losses 512,867.42 0.00

113 Deductible temporary differences Items Balance as at 31/12/2011 Balance as at 31/12/2010

Total 84,752,766.34 90,455,043.85

5.14 Impairment allowance for assets

Increase Decrease during the current Carrying amount Carrying amount Items during the current reporting period as at 31/12/2010 as at 31/12/2011 reporting period Recovered Written off

Impairment allowance for receivables 57,286,330.42 683,209.31 4,949,925.31 0.00 53,019,614.42

Impairment allowance for inventories 9,095,319.73 2,905,125.30 0.00 7,218,288.22 4,782,156.81

Impairment allowance for fixed assets 6,951,990.42 0.00 0.00 0.00 6,951,990.42

Total 73,333,640.57 3,588,334.61 4,949,925.31 7,218,288.22 64,753,761.65

5.15 Accounts payable

5.15.1 Age analysis

Age Amount Outstanding as at 31/12/2011 Amount Outstanding as at 31/12/2010

Within 1 year 214,665,021.65 120,513,831.94

Over 1 year 5,158,834.80 4,964,060.14

Total 219,823,856.45 125,477,892.08

5.15.2 The Company has no accounts payable owed to entities which own 5% or more of the shares of the Company.

5.15.3 Refer to Note 6.5 for details of accounts payable due to related parties.

5.15.4 The details of significant accounts payable remaining unsettled for more than one year

Amount outstanding Reason(s) for Post balance sheet Creditors Age as at 31/12/2011 unsettlement date repayment

Shanghai Tianshi Printing Co., Ltd. 474,696.76 Over 3 years Business Suspend 0.00

Jiangsu Liyang Construction and Installation Co., 490,485.32 Over 3 years Decorate deposit 0.00 Ltd.

Tianshi Printing (Shenzhen) Co., Ltd. 243,732.61 Over 3 years Business Suspend 0.00

Shenzhen Gome Paper Packaging Co.,Ltd. 155,801.66 Over 3 years Business Suspend 0.00

Chongqing Jima Glasswork Co., Ltd. 147,699.07 1-2 years Unsettlement 0.00

Total 1,512,415.42 0.00

5.16 Advances from customers

5.16.1 Age analysis

Age Amount Outstanding as at 31/12/2011 Amount Outstanding as at 31/12/2010

Within 1 year 128,698,731.68 84,900,159.05

114 Over 1 year 6,898,456.20 6,591,244.46

Total 135,597,187.88 91,491,403.51

5.16.2 The Company has no advances from entities which own 5% or more of the shares of the

Company.

5.16.3 Please refer to Note 6.5 for details of advance from related parties.

5.16.4 The details of significant advances from customers remaining unsettled for more than one year:

Amount outstanding as at Reason(s) for Customers Age 31/12/2011 unsettlement

Shandong Panther Group Co., Ltd. 92,800.00 1-2 years Final payments

Yantai Muping Huarong Gujing Wine Shop 53,460.00 2-3 years Final payments

Taihe Country Yifeng Trading Co., Ltd. 50,000.00 1-2 years Final payments

Nanjing Haotuo International Trading Co., Ltd. 38,000.00 1-2 years Final payments

Beijing Tongguang Economic Technology Co., Ltd. 34,857.42 2-3 years Final payments

Total 269,117.42

5.17 Employee benefits payable

5.17.1 Details of employee benefits payable

Amount Amount Increase during the Decrease during the Items outstanding outstanding current reporting period current reporting period as at 31/12/2010 as at 31/12/2011

1.Wages, salaries and subsidies 91,382,499.10 482,142,867.27 428,093,383.26 145,431,983.11

2.Employee welfare 0.00 24,751,313.05 24,751,313.05 0.00

3.Social insurance: 11,149,377.43 35,143,277.89 36,083,681.92 10,208,973.40

Including: ①Medical insurance 1,439,319.86 10,531,931.09 9,534,752.79 2,436,498.16

②Basic pension 9,674,599.61 18,559,406.54 21,786,422.80 6,447,583.35

③Redundancy insurance 22,797.03 3,837,603.69 3,221,484.43 638,916.29

④Employment injury 7,793.02 1,245,010.39 878,227.62 374,575.79 insurance

⑤Maternity insurance 4,867.91 969,326.18 662,794.28 311,399.81

4.Housing provident fund 14,701,572.60 32,528,241.73 22,185,177.96 25,044,636.37

5.Redundancy benefits 0.00 55,618.00 55,618.00 0.00

6.Labour union fee and employee 8,734,300.41 9,713,558.11 6,371,374.13 12,076,484.39 education fee

7.Non-monetary welfare 0.00 3,640,473.66 3,640,473.66 0.00

8.Redundancy compensation 0.00 0.00 0.00 0.00

115 Amount Amount Increase during the Decrease during the Items outstanding outstanding current reporting period current reporting period as at 31/12/2010 as at 31/12/2011

9. Others 0.00 0.00 0.00 0.00

Including: Cash-settled share-based 0.00 0.00 0.00 0.00 payments

Total 125,967,749.54 587,975,349.71 521,181,021.98 192,762,077.27

5.17.2 In the amount outstanding as at 31 December 2011, no amount belongs to default.

5.18 Taxes payable

Items Amount outstanding as at 31/12/2011 Amount outstanding as at 31/12/2010

Value added tax 145,921,550.30 75,399,278.88

Consumption duty 195,847,812.80 140,420,188.41

Business tax 733,221.63 615,100.66

Urban maintenance and construction surcharge 25,868,592.02 8,995,466.49

Corporate income tax 267,060,470.99 99,978,490.67

Personal income tax 4,739,780.86 902,332.16

Stamp duty 1,777,727.97 636,169.62

Education surcharge 25,773,125.40 7,002,243.42

Others 3,357,229.46 751,862.55

Total 671,079,511.43 334,701,132.86

5.19 Other payables

5.19.1 Age analysis

Age Amount Outstanding as at 31/12/2011 Amount Outstanding as at 31/12/2010

Within 1 year 186,943,937.99 80,236,518.17

Over 1 year 61,946,080.79 44,773,668.00

Total 248,890,018.78 125,010,186.17

5.19.2 Details of other payables to entities which own 5% or more of the shares of the Company during the current reporting period:

Shareholders Nature of balance Amount outstanding as at 31/12/2011 Amount outstanding as at 31/12/2010

Gujing Group Leasing expenses 180,311.93 191,666.67

Total 180,311.93 191,666.67

5.19.3 Refer to Note 6.5 for details of other payables due to related parties.

116 5.19.4 Details of significant other payables remaining unsettled for more than one year

Amount outstanding Reason(s) Creditors Age as at 31/12/2011 for unsettlement

Anhui Anzhen Investment Co., Ltd 5,000,000.00 Over 3 years Cannot contact with the creditor

Guangxi Jiangong First Installation Co., Ltd 2,265,300.00 2-3 years The project is disqualification

Suzhou Haochen Trading Co., Ltd. 1,449,884.00 1-3 years Guarantee deposit

Fujian Jimma Group Co., Ltd. 689,320.00 1-3 years Guarantee deposit

Beijing Dongdan Jewel China and Foreign Wine Defer payment due to the creditor n 612,500.00 1-2 years Mall Co., Ltd. ot strictly to perform the contract.

Total 10,017,004.00

5.19.5 Details of significant other payables remaining unsettled within one year

Amount outstanding Items Content as at 31/12/2011

Housing provident fund, personal part 8,330,157.95 Housing provident fund

Provision for top overhaul expenses 4,657,350.00 Top overhaul expenses

Jieshou Xinghua Engineering and Construction Co., Ltd. 3,826,000.00 Contract deposit

Social insurance, personal part 3,336,929.97 Social insurance

Anqing Classics Trading Co., Ltd. 2,227,980.00 Guarantee deposit

Total 22,378,417.92

5.20 Other current liabilities

Balance as at Increase during the Decrease during the Balance as at Items 31/12/2010 current reporting period current reporting period 31/12/2011

Energy efficiency renovation project for coal industrial 547,788.19 417,958.75 535,038.19 430,708.75 boiler and glass furnace

Bozhou Logistics Center Project 60,000.00 60,000.00 60,000.00 60,000.00

Special funds for finance prevention and treatment 650,000.00 649,999.79 649,999.79 650,000.00 sewage

Finance subsidy for energy saving projects 0.00 400,833.33 30,833.33 370,000.00

Finance subsidy for technical reconstruction 0.00 568,750.00 43,750.00 525,000.00

Within financial budget, interest subsidy for deposit 0.00 76,666.67 36,666.67 40,000.00 technical reconstruction

Total 1,257,788.19 2,174,208.54 1,356,287.98 2,075,708.75

Note: The other current liabilities refer to the deferred income that shall be amortized during the next accounting period.

5.21 Other non-current liabilities

117 5.21.1 Disclosure by classification

Item Amount outstanding as at 31/12/2011 Amount outstanding as at 31/12/2010

Government grants related to assets 10,475,905.29 4,550,113.83

Total 10,475,905.29 4,550,113.83

5.21.2 Explaination for other non-current liabilities: Government grants related to assets and the balance as at 31 December 2011.

Increase during Amortiation Decrease during Amount Amount the during the the Items outstanding as at outstanding as current reporting current reporting current reporting 31/12/2010 at 31/12/2011 period period period

Energy efficiency renovation project for coal 1,470,113.83 0.00 0.00 417,958.75 1,052,155.08 industrial boiler and glass furnace

Bozhou Logistics Center Project 480,000.00 0.00 0.00 60,000.00 420,000.00

Special funds for finance prevention and treatment 2,600,000.00 0.00 0.00 649,999.79 1,950,000.21 sewage

Finance subsidy for energy saving projects 0.00 3,700,000.00 0.00 400,833.33 3,299,166.67

Finance subsidy for technical reconstruction 0.00 4,200,000.00 0.00 568,750.00 3,631,250.00

Within financial budget, interest subsidy for deposit 0.00 200,000.00 0.00 76,666.67 123,333.33 technical reconstruction

Total 4,550,113.83 8,100,000.00 0.00 2,174,208.54 10,475,905.29

Note: The decrease refer to the deferred income that shall be amortized during the next accounting period, transferred to other current liabilities.

5.22 Share capital

Unit of quantity: Share

Movements during the current reporting period (+、－)

Amount as at Conversion Amount as at Items New shares Bonus 31/12/2010 from Others Subtotal 31/12/2011 issue issue reserves

i.Shares with restrict condition on disposal

1. State-owned shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2.Shares hold by national corporation 0.00 0.00 0.00 0.00 0.00 0.00 0.00

3. Shares hold by other domestic 0.00 16,800,000.00 0.00 0.00 0.00 16,800,000.00 16,800,000.00 investment

Including：Shares held by domestic 0.00 16,800,000.00 0.00 0.00 0.00 16,800,000.00 16,800,000.00 corporation

118 Movements during the current reporting period (+、－)

Amount as at Conversion Amount as at Items New shares Bonus 31/12/2010 from Others Subtotal 31/12/2011 issue issue reserves

Shares held by domestic legal 0.00 0.00 0.00 0.00 0.00 0.00 0.00 people

4. Shares hold by foreign investment 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Including：Shares held by foreign 0.00 0.00 0.00 0.00 0.00 0.00 0.00 corporation

Shares held by foreign legal 0.00 0.00 0.00 0.00 0.00 0.00 0.00 people

Total of shares with restrict condition on 0.00 16,800,000.00 0.00 0.00 0.00 16,800,000.00 16,800,000.00 disposal ii. Shares without restrict condition on disposal

1.RMB ordinary shares 175,000,000.00 0.00 0.00 0.00 0.00 0.00 175,000,000.00

2. Domestically listed foreign shares 60,000,000.00 0.00 0.00 0.00 0.00 0.00 60,000,000.00

3.Overseas listed foreign shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00

4.Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total of shares without restrict condition on 235,000,000.00 0.00 0.00 0.00 0.00 0.00 235,000,000.00 disposal

Total shares 235,000,000.00 16,800,000.000 0.00 0.00 0.00 16,800,000.00 251,800,000.00

5.23 Capital reserves

Increase Decrease Amount as at Amount as at Categories during the current during the current 31/12/2010 31/12/2011 reporting period reporting period

Share premium 303,653,005.78 1,210,699,450.27 0.00 1,514,352,456.05

Other capital reserves 32,386,037.14 0.00 0.00 32,386,037.14

Total 336,039,042.92 1,210,699,450.27 0.00 1,546,738,493.19

On 15th July 2011, the Company private issued 16,800,000 shares of ordinary share (A shares) to specific investors, which generated share premium amounting to CNY 1,210,699,450.27.

5.24 Surplus reserve

Increase Decrease Amount as at Amount as at Categories during the current during the current 31/12/2010 31/12/2011 reporting period reporting period

119 Statutory surplus reserve 97,283,190.70 49,787,106.90 0.00 147,070,297.60

Total 97,283,190.70 49,787,106.90 0.00 147,070,297.60

5.25 Undistributed profits

Items Y/e 31/12/2011 Y/e 31/12/2010

Pre-adjustment balance brought forward 381,153,314.20 176,955,910.52

Total adjustment to balance brought forward 0.00 -67,362.48

Post-adjustment balance brought forward 381,153,314.20 176,888,548.04

Add: Net profit attributable to shareholders of the 566,390,286.36 313,757,556.93 parent

Less: Transferred to statutory surplus reserve 49,787,106.90 27,242,790.77

Transferred to discretionary surplus reserve 0.00 0.00

Transferred to provision for general risks 0.00 0.00

Dividends payable 82,250,000.00 82,250,000.00

Dividends converted to share capital 0.00 0.00

Balance carrying forward 815,506,493.66 381,153,314.20

5.26 Operating revenues and costs

5.26.1 Operating revenues

Items Y/e 31/12/2011 Y/e 31/12/2010

Revenues from principal operating activities 3,277,533,563.45 1,845,961,091.62

Revenues from other operating activities 30,445,672.55 33,194,388.69

Total operating revenues 3,307,979,236.00 1,879,155,480.31

Operating costs for principal operating activities 833,047,568.58 510,613,433.10

Operating costs for other operating activities 27,965,196.12 31,471,487.88

Total operating costs 861,012,764.70 542,084,920.98

5.26.2 Revenues from principal operating activities by products

Y/e 31/12/2011 Y/e 31/12/2010 Products Operating revenues Operating costs Operating revenues Operating costs

Distilled spirit 3,178,683,815.08 765,457,373.60 1,700,837,690.83 418,456,053.95

Revenues from hotel 71,632,235.61 45,935,143.61 82,948,484.21 53,409,097.94

Others 27,217,512.76 21,655,051.37 62,174,916.58 38,748,281.21

Total 3,277,533,563.45 833,047,568.58 1,845,961,091.62 510,613,433.10

5.26.3 Principal operating activities by territories

Y/e 31/12/2011 Y/e 31/12/2010 Area Operating revenues Operating costs Operating revenues Operating costs

120 Y/e 31/12/2011 Y/e 31/12/2010 Area Operating revenues Operating costs Operating revenues Operating costs

Northern of mainland 580,662,250.61 139,829,006.96 422,235,431.38 104,758,857.85

Middle of mainland 2,203,318,287.36 574,366,286.72 1,250,111,037.21 362,930,919.50

Southern of mainland 490,513,802.78 118,120,401.09 173,185,922.00 42,796,480.50

International 3,039,222.70 731,873.81 428,701.03 127,175.25

Total 3,277,533,563.45 833,047,568.58 1,845,961,091.62 510,613,433.10

5.26.4 Details of operating revenues from top five clients

Items Operating revenue % of total operating revenue

The first 165,650,404.65 5.01

The second 89,390,881.04 2.70

The third 73,830,543.39 2.23

The fourth 69,737,269.01 2.11

The fifth 52,617,432.59 1.59

Total 451,226,530.68 13.64

5.27 Business tax and surcharges

Items Y/e 31/12/2011 Y/e 31/12/2010

Consumption duty 422,730,548.03 240,875,916.62

Business tax 5,062,777.71 4,812,703.70

Urban maintenance and construction surcharge and 94,561,951.36 46,077,125.63 Education surcharge

Flood protection fee 34,777.83 40,665.68

Total 522,390,054.93 291,806,411.63

The provision standards for taxes and surcharges refer to Note 3 Taxation.

5.28 Sales expenses

Items Y/e 31/12/2011 Y/e 31/12/2010

Employee remunerations 76,826,712.64 50,670,903.18

Travel expenses 34,243,626.56 25,423,841.99

Advertisements charges 205,228,902.67 173,064,895.95

Transportation charges 17,232,626.61 12,596,120.53

Sales promotion costs 147,813,975.79 74,106,654.64

Sample wine 186,510,506.38 48,478,769.26

Service fee 115,792,599.63 10,870,663.28

121 Items Y/e 31/12/2011 Y/e 31/12/2010

Meeting expenses 5,273,474.70 2,167,774.30

Other sales expenses 9,144,654.41 7,868,390.49

Total 798,067,079.39 405,248,013.62

5.29 General and administrative expenses

Items Y/e 31/12/2011 Y/e 31/12/2010

Employee remunerations 224,805,779.16 144,039,874.83

Administrative expenses 19,341,431.30 15,597,765.22

Consultant and audit fees 3,357,818.66 1,617,036.05

Taxes and surcharges 11,374,904.66 8,511,394.23

Maintenance expenses 10,011,740.54 27,223,661.71

Depreciation assets 16,358,400.98 12,320,623.02

Amortization of intangible assets 5,479,919.79 3,134,429.37

Pollution discharge 3,874,640.53 3,158,453.93

Business entertainment 3,122,321.68 4,358,494.10

Materials wear and tear 20,329,192.18 16,797,095.79

Travel expenses 6,151,946.21 5,460,085.92

Hotel management charges 2,701,291.85 2,668,350.13

Water and electricity charges 5,507,959.34 3,641,467.41

Green charges 100,741.30 422,124.58

Scientific research and verification charges 1,080,868.31 518,085.45

Storage costs 2,535,852.31 2,993,339.88

Insurance expenses 2,160,291.96 1,039,882.07

Amortization of long-term deferred expenses 989,698.98 743,422.34

Tragemark registration expenses 1,092,422.00 734,225.00

Lease costs 2,601,558.32 1,096,066.67

Others 2,637,177.52 6,852,528.75

Total 345,615,957.58 262,928,406.45

5.30 Financial costs

Items Y/e 31/12/2011 Y/e 31/12/2010

Interest expenses 0.00 79,200.00

Less: Interest income 41,040,473.83 8,634,771.94

Less: received bills charges 10,844,157.80 1,884,399.31

Exchange gain or loss 683.56 -2,407.32

Bank charges 12,543.92 57,125.13

122 Items Y/e 31/12/2011 Y/e 31/12/2010

Total -51,871,404.15 -10,385,253.44

5.31 Impairment loss on assets

Items Y/e 31/12/2011 Y/e 31/12/2010

Impairment loss on receivables -4,266,716.00 -18,072,472.72

Impairment loss on inventories 2,905,125.30 3,036,889.39

Impairment loss on fixed assets 0.00 5,185,144.85

Total -1,361,590.70 -9,850,438.48

5.32 Investment income

Items Y/e 31/12/2011 Y/e 31/12/2010

Incomes from disposal of long-term equity investment 1,656,581.66 0.00

Incomes from disposal of held for trading financial 0.00 982,590.50 assets

Total 1,656,581.66 982,590.50

5.33 Non-operating income

5.33.1 Details of non-operating income

Recognized into current

Items Y/e 31/12/2011 Y/e 31/12/2010 reporting period extraordinary

profits or losses

Gains from disposal of non-current assets 582,925.02 11,726,530.01 582,925.02

Including: Gains from disposal of fixed assets 582,925.02 11,726,530.01 582,925.02

Government grants 4,111,902.86 2,161,537.17 4,111,902.86

Income from penalties 6,127,862.85 2,666,828.64 6,127,862.85

Sales of wastes 4,342,385.46 1,938,802.44 4,342,385.46

Unable pay for the overdue accounts payable 408,462.40 526,003.66 408,462.40

Others 1,337,764.32 803,160.47 1,337,764.32

Total 16,911,302.91 19,822,862.39 16,911,302.91

5.33.2 Government Grants

Items Y/e 31/12/2011 Y/e 31/12/2010

Subsidy received 3,135,287.98 1,005,265.63

Returned tax 976,614.88 1,156,271.54

Total 4,111,902.86 2,161,537.17

5.34 Non-operating expenses

123 Recognized into current

Items Y/e 31/12/2011 Y/e 31/12/2010 reporting period extraordinary

profits or losses

Loss on disposal of non-current assets 396,678.97 5,170,903.26 396,678.97

Including: Loss on disposal of fixed assets 396,678.97 9,946.73 396,678.97

Loss on disposal of intangible assets 0.00 5,160,956.53 0.00

Abandonment loss 1,757,080.92 2,185,497.15 1,757,080.92

Overdue fine 0.00 446,699.35 0.00

Indemnity paid 130,000.00 1,030,000.00 130,000.00

Others 335,593.98 484,272.13 335,593.98

Total 2,619,353.87 9,317,371.89 2,619,353.87

5.35 Corporate income tax expenses

Items Y/e 31/12/2011 Y/e 31/12/2010

Current tax 282,249,054.69 95,826,564.12

Deferred tax 1,435,563.90 -772,620.50

Total 283,684,618.59 95,053,943.62

5.36 Computation of basic earnings per share and diluted earnings per share

Y/e 31/12/2011 Y/e 31/12/2010 Profits for current reporting period Basic EPS Diluted EPS Basic EPS Diluted EPS Net profits attributable to ordinary 2.34 2.34 1.34 1.34 shareholders Net profits (deducted extraordinary profits or losses) attributable to ordinary 2.29 2.29 1.22 1.22 shareholders

Basic EPS =P0÷S

S= S0＋S1＋Si×Mi÷M0– Sj×Mj÷M0-Sk

Including:

P0: Net profits attributable to ordinary shareholders or net profits attributable to ordinary

shareholders that has deducted extraordinary profits or losses;

S: The weighted average of the number of ordinary shares outstanding during the current

reporting period;

S0: The total number of ordinary shares outstanding at the beginning of the period;

S1: The incremental ordinary shares issued as a result of the conversion of surplus to ordinary

124 shares or distribution of shares dividend;

Si: The incremental ordinary shares issued as a result of the conversion of a debt instrument to ordinary shares or issued new shares;

Sj: Decrement shares as a result of the number of ordinary shares buyback, etc;

Sk: The number of shares contraction during the current reporting period;

M0: The number of months of the current reporting period;

Mi: The accumulative months that is from the next month of incremental shares to the month of end of reporting period;

Mj: The accumulative months that is from the next month of decrement shares to the month of end of reporting period.

Diluted EPS = P1/(S0＋S1＋Si×Mi÷M0–Sj×Mj÷M0–Sk+ The weighted average number of increased ordinary shares from Options and warrants、Share options、Convertible debenture, etc)

Including: P1: The net profits attributable to ordinary shareholders or net profits attributable to ordinary shareholders that have deducted extraordinary profits or losses, and adjustment for diluting effect in accordance with the CASs.

5.37 Notes to elements of the consolidated statement of cash flows

5.37.1 Other cash receipts in relation to operating activities

Items Y/e 31/12/2011 Y/e 31/12/2010

Guarantee deposit 138,613,744.77 29,676,648.19

Government Grant 1,779,000.00 376,167.65

Interest income 36,588,933.48 8,634,771.94

Others 36,891,291.24 32,860,303.64

Total 213,872,969.49 71,547,891.42

5.37.2 Other cash payments in relation to operating activities

Items Y/e 31/12/2011 Y/e 31/12/2010

Cash paid in sales expenses and general 448,726,046.33 320,379,353.93 and administrative expenses

Guarantee deposit 0.00 30,764,822.98

Others 1,484,273.09 3,086,434.46

Total 450,210,319.42 354,230,611.37

125 5.37.3 Other cash receipts in relation to investing activities

Items Y/e 31/12/2011 Y/e 31/12/2010

Government grants related to assets 8,100,000.00 3,250,000.00

Total 8,100,000.00 3,250,000.00

5.37.4 Other cash receipts in relation to financing activities

Items Y/e 31/12/2011 Y/e 31/12/2010

Cash from shareholder’s donation 0.00 9,600,000.00

Total 0.00 9,600,000.00

5.38 Supplementary information for the consolidated cash flows statement

5.38.1 Supplementary informations

Supplemental informations Y/e 31/12/2011 Y/e 31/12/2010

1.Adjusting net profit to cash flow from operating activities:

Net profits 566,390,286.36 313,757,556.93

Add: Impairment allowance of assets -8,579,878.92 -17,634,014.87

Depreciation of fixed assets and biological assets held for production and 45,377,730.01 42,372,849.72 depletion of oil and gas assets

Amortisation of investment property 3,537,860.03 3,140,589.37

Amortisation of intangible assets 5,479,919.79 3,134,429.37

Amortisation of long-term deferred expenses 2,053,899.07 885,388.20

Loss on disposal of fixed assets, intangible assets and other long-term -186,246.05 -6,156,774.43 assets (gain presented with “-” prefix)

Loss on writing-off of fixed assets (gain presented with “-” prefix) 638,191.45 1,786,644.83

Loss on changes in fair value (gain presented with “-” prefix) 0.00 0.00

Financial costs (income presented with “-” prefix) 0.00 76,792.68

Investment loss (income presented with “-” prefix) -1,656,581.66 -982,590.50

Decrease of deferred tax assets (increase presented with “-” prefix) 1,435,563.90 -772,620.50

Increase of deferred tax liabilities (decrease presented with “-” prefix) 0.00 0.00

Decrease of inventories (increase presented with “-” prefix) -120,964,419.83 -87,408,920.85

Decrease of operating receivables (increase presented with “-” prefix) -477,342,110.33 -10,394,992.43

Increase of operating payables (decrease presented with “-” prefix) 611,073,541.51 276,525,114.84

Others (Amortisation of deferred income) -1,356,287.98 -629,097.98

Net cash flows from operating activities 625,901,467.35 517,700,354.38

2.Significant investing and financing activities not involving movements of cash flows：

126 Supplemental informations Y/e 31/12/2011 Y/e 31/12/2010

Debt-to-equity conversion 0.00 0.00

Convertible debt instruments due within one year 0.00 0.00

Fixed assets acquired under financial leases 0.00 0.00

3.Net movement of cash and cash equivalents:

Cash as at the end of the reporting period 2,082,032,491.33 643,231,404.42

Less: Cash as at the beginning of the reporting period 643,231,404.42 361,489,784.09

Add: Cash equivalents as at the end of the reporting period 0.00 0.00

Less: Cash equivalents as at the beginning of the reporting period 0.00 0.00

Net increase of cash and cash equivalents 1,438,801,086.91 281,741,620.33

5.38.2 Information of subsidiaries and other entities acquired or disposed during the current reporting period

Items Y/e 31/12/2011 Y/e 31/12/2010 i. Information of subsidiaries and other entities acquired during the current reporting period

1. Price of acquisition 0.00 570,000.00

2. Cash and cash equivalents paid for acquisition 0.00 570,000.00

Less: Cash and cash equivalents held by subsidiaries and other entities acquired 0.00 419,513.25

3. Net cash and cash equivalents paid for acquisition 0.00 150,486.75

4.Net identifiable assets of subsidiaries acquired 0.00 648,646.80

Current assets 0.00 767,821.80

Non-current assets 0.00 413,729.26

Current liabilities 0.00 532,904.26

Non-current liabilities 0.00 0.00 ii. Information of subsidiaries and other entities disposed during the current reporting period

1.Price of disposal 0.00 0.00

2.Cash and cash equivalents received from disposal 0.00 0.00

Less: Cash and cash equivalents held by 0.00 0.00

3.Net cash and cash equivalents received from disposal 0.00 0.00

4.Net identifiable assets disposed 0.00 0.00

Current assets 0.00 0.00

Non-current assets 0.00 0.00

Current liabilities 0.00 0.00

Non-current liabilities 0.00 0.00

5.38.3 Composition of cash and cash equivalents

127 Items Y/e 31/12/2011 Y/e 31/12/2010

1.Cash 2,082,032,491.33 643,231,404.42

Including: Cash in hand 101,826.09 180,852.46

Demand deposits 2,081,930,665.24 643,050,551.96

2.Cash equivalents 0.00 0.00

Including: Debt instrument matured in less than three months 0.00 0.00

3.Cash and cash equivalents as at 31/12/2010 2,082,032,491.33 643,231,404.42

Note 6: Related parties and transactions with related parties

6.1 Details of the parent

Name of Type of Place of Legal Registered Relationship Nature of business parent incorporation registration representative capital

Holding State-owned Bozhou, Drink, building materials, Gujing Group Yu Lin 353,380,000.00 company enterprise Anhui manufacture plastic products

(Continued)

Name of Shareholding Voting right Ultimate controller Organisation code parent in the Company % in the Company % of the Company

Anhui Province Bozhou City Gujing Group 53.893 53.893 151947437 the People’s Government

6.2 Details of subsidiaries

Refer to Note 4.1 for details of subsidiaries of the Company.

6.3 Details of other related parties

Other related parties Relationship Organisation code

Anhui Ruifuxiang Food Co., Ltd Controlling shareholder, affiliate of actual controller 77908892-2

Anhui Ruijing Business Travel(Group) Co., Ltd Controlling shareholder, affiliate of actual controller 14912443-1

Bozhou Gujing Thermoelectricity Co., Ltd Controlling shareholder, affiliate of actual controller Have been transferred

Anhui Ruijing Famous Wine Marketing Co., Ltd Controlling shareholder, affiliate of actual controller Have been cancelled

Anhui JinYang Media Co., Ltd Controlling shareholder, affiliate of actual controller Have been cancelled

Anhui Bozhou Gujing Employee Hospital Controlling shareholder, affiliate of actual controller Have been cancelled

Bozhou Guesthouse Co., Ltd. Controlling shareholder, affiliate of actual controller 554599270

Anhui Orient Taiji Travel Development Co., Ltd. Controlling shareholder, affiliate of actual controller 771139617

Bozhou Gujing Hotel Co., Ltd. Controlling shareholder, affiliate of actual controller 151940032

Anhui Gujing Real Estate Group Co., Ltd. Controlling shareholder, affiliate of actual controller 697383485

128 Other related parties Relationship Organisation code

Orient Ruijing Enterprise Investment Controlling shareholder, affiliate of actual controller 768363191 Development Co., Ltd.

Anhui Hengxin Pawn Co., Ltd. Controlling shareholder, affiliate of actual controller 752994458

Bozhou Ruineng Thermal Power Co., Ltd. Controlling shareholder, affiliate of actual controller 560699980

6.4 Transactions with related parties

6.4.1 Transactions through which goods or services are purchased

Y/e 31/12/2011 Y/e 31/12/2010 Pricing policy Proportion of Proportion of Content and decision Related parties total amount total amount of transaction making Amount Amount of similar of similar procedures transactions % transactions %

Anhui JinYang Media Co., Ltd Advertisement Market price 0.00 0.00 99,080,811.60 57.25

Anhui Ruifuxiang Food Co., Procurement alcohol Market price 45,785,065.26 62.12 42,733,413.50 100.00 Ltd Accept catering and Bozhou Guesthouse Co., Ltd. Market price 562,530.92 1.29 0.00 0.00 accommodation servi Total 46,347,596.18 141,814,225.10

6.4.2 Transactions to supply goods or services

Y/e 31/12/2011 Y/e 31/12/2010 Pricing policy Proportion of Proportion of Content and decision Related parties total amount total amount of transaction making Amount Amount of similar of similar procedures transactions % transactions %

Anhui Bozhou Gujing Sales of water、electricity Market price 0.00 0.00 2,421.88 0.03 Employee Hospital and gas Gujing Group Sales of mini materials Market price 10,462.85 0.46 76,167.71 0.41

Gujing Group Provide catering services Market price 328,564.71 12.69 124,419.00 0.15

Anhui Ruijing Famous Sales of distilled spirit Market price 16,149,989.74 0.46 123,327,539.32 7.25 Wine Marketing Co., Ltd Anhui Ruifuxiang Food Sales of distilled spirit Market price 1,517,718.81 0.05 47,239.32 0.00 Co., Ltd Anhui Ruijing Business Provide catering services Market price 5,549.90 0.01 0.00 0.00 (Group) Co., Ltd. Bozhou Guesthouse Co., Sales of distilled spirit Market price 32,153.85 0.00 0.00 0.00 Ltd. Bozhou Guesthouse Co., Provide catering services Market price 4,000.00 0.35 0.00 0.00 Ltd. Anhui Orient Taiji Travel Sales of distilled spirit Market price 170,119.66 0.01 0.00 0.00 Development Co., Ltd.

129 Y/e 31/12/2011 Y/e 31/12/2010 Pricing policy Proportion of Proportion of Content and decision Related parties total amount total amount of transaction making Amount Amount of similar of similar procedures transactions % transactions %

Anhui Ruijing Real Estate Sales of distilled spirit Market price 615.38 0.00 0.00 0.00 Co., Ltd. Bozhou Gujing Hotel Co., Sales of distilled spirit Market price 123,076.94 0.00 0.00 0.00 Ltd. Anhui Gujing Real Estate Sales of distilled spirit Market price 93,107.36 0.00 0.00 0.00 Group Co., Ltd. Orient Ruijing Enterprise Sales of distilled spirit Market price 36,444.73 0.00 0.00 0.00 Investment Development Bozhou Ruineng Thermal Sales of distilled spirit Market price 90,000.00 0.00 0.00 0.00 Power Co., Ltd. Anhui Hengxin Pawn Co., Sales of distilled spirit Market price 7,999.99 0.00 0.00 0.00 Ltd. Total 18,569,803.92 123,577,787.23

6.4.3 Lease assets between related parties

Lease expenses for

Lessor Lessee Category of lease assets Inception date Expiry date Pricing policy the current

reporting period

Gujing Group The Company Buildings nd constructions 1/6/2010 31/5/2020 Market price 1,800,000.00

Gujing Group Gujing Hotel Buildings nd constructions 1/6/2010 31/5/2020 Market price 500,000.00

Total 2,300,000.00

6.5 The balance of payables and receivables among related parties

Items Related parties Amount as at 31/12/2011 Amount as at 31/12/2010

Accounts receivable

Gujing Group 38,485.49 0.00

Anhui Ruifuxiang Food Co., Ltd 2,000.00 0.00

Other receivables

Orient Ruijing Enterprise Investment 5,704.00 0.00 Development Co., Ltd.

Accounts payable

Anhui Ruifuxiang Food Co., Ltd 0.00 5,986,267.22

Other payables

Anhui Ruijing Business (Group) Co., Ltd. 105,999.42 181,984.17

Gujing Group 180,311.93 191,666.67

130 Items Related parties Amount as at 31/12/2011 Amount as at 31/12/2010

Anhui Ruifuxiang Food Co., Ltd 200.00 0.00

Bozhou Guesthouse Co., Ltd. 10,360.00 0.00

Anhui Orient Taiji Travel Development Co., Ltd. 8,000.00

Advances from customers

Anhui Orient Taiji Travel Development Co., Ltd. 10,000.00 0.00

Note 7: Contingencies

No significant contingency is required for disclosure as at 31 December 2011.

Note 8: Financial commitments

No financial commitment is required for disclosure as at 31 December 2011.

Note 9: Post-balance-sheet-date events

On 8 November 2011, according to the approvement by the General Shareholders Meeting of

Hefei Trading (subsidiary of the Company), the Hefei Trading has been found liquidation group for write-off of registration, on 16 December 2011, it has finished the business taxation write-off.

Up to the reporting date, the business registration have not yet completed.

On 27 March 2012, the Sixth Meeting of Board of Directors - No.8 Meeting, has been passed the resolution of prifits distribution, basis on the total share capital in 251.80 million shares as at 31

December 2011, using the undistributed profits to issue cash dividend by CNY 4.5 (Including tax) per 10 shares, the cash dividend shall be issued amounting to CNY 113.31 million, at the same time, transfer of capital reserves to share capital by 10 shares upon each 10 shares to the whole shareholders, amounting to 251.80 million shares. The resolution still need to deliberate by the

General Shareholders Meeting of the Company.

No other post-balance-sheet-date event is required for disclosure as at the balance sheet date.

Note 10: Notes to the main elements of the separate financial statement

10.1 Accounts receivable

10.1.1 Disclosure by classification

As at 31/12/2011

Items Carry amount Impairment allowance before impairment allowance

131 Amount % of total Amount % of total

Accounts receivable belong to individual significance and 0.00 0.00 0.00 0.00 individually assessed for impairment

Accounts receivable belong to recognition of impairment allowances by group:

Age group 2,461,104.32 100 603,616.83 24.53

Accounts receivable belong to individually insignificant but 0.00 0.00 0.00 0.00 individually assessed for impairment

Total 2,461,104.32 100 603,616.83 24.53

(Continued)

As at 31/12/2010

Carry amount Items Impairment allowance before impairment allowance

Amount % of total Amount % of total

Accounts receivable belong to individual significance and 0.00 0.00 0.00 0.00 individually assessed for impairment

Accounts receivable belong to recognition of impairment allowances by group:

Age group 587,771.00 100.00 446,590.50 75.98

Accounts receivable belong to individually insignificant but 0.00 0.00 0.00 0.00 individually assessed for impairment

Total 587,771.00 100.00 446,590.50 75.98

10.1.2 Accounts receivable using the age analysis method for measurement of impairment allowances:

Balance as at 31/12/2011

Carrying amount Age Impairment allowance before impairment allowance

Amount % of total Amount % of total

Within 1 year

Including: within 6 months 1,873,333.32 76.12 18,733.33 1.00

6 months - 1year 0.00 0.00 0.00 0.00

Subtotal of accounts receivable within 1 year 1,873,333.32 76.12 18,733.33 1.00

1-2 years 0.00 0.00 0.00 0.00

2-3 years 5,775.00 0.23 2,887.50 50.00

Over 3years 581,996.00 23.65 581,996.00 100.00

Total 2,461,104.32 100.00 603,616.83 24.53

(Continued)

132 Balance as at 31/12/2010

Carrying amount Age Impairment allowance before impairment allowance

Amount % of total Amount % of total

Within 1 year

Including: within 6 months 0.00 0.00 0.00 0.00

6 months - 1year 0.00 0.00 0.00 0.00

Subtotal of accounts receivable within 1 year 0.00 0.00 0.00 0.00

1-2 years 5,775.00 0.98 577.50 10.00

2-3 years 271,966.00 46.27 135,983.00 50.00

Over 3years 310,030.00 52.75 310,030.00 100.00

Total 587,771.00 100.00 446,590.50 75.98

10.1.3 During current reporting period, the Company has no accounts receivable recovered or received although that has been fully provided impairment allowances, and the proportion of impairment allowances of accounts receivable higher than the provision of accounting policies.

10.1.4 The Company has no accounts receivable owed by entities which own 5% or more of the shares of the Company.

10.1.5 Details of top five accounts receivable:

Relationship with the Carrying amount % of total Debtors Age Company as at 31/12/2011 accounts receivable

The People’s Government, Gujing Non-related party 1,703,333.33 within 6 months 69.21 Town

Gujing Yuye Co., Ltd. Non-related party 169,999.99 within 6 months 6.91

Huaiyuan Chang Vanguard Non-related party 492,545.00 Over 2 years 20.01

Anhui Sanbao FeedCo., Ltd Non-related party 95,226.00 Over 3 years 3.87

Total 2,461,104.32 100.00

10.2 Other receivables

10.2.1 Disclosure by classification

Balance as at 31/12/2011

Carrying amount Carrying amount Items before impairment allowance before impairment allowance

Amount % of total Amount % of total

Other receivables belong to individual significance and individually 54,205,281.87 17.22 51,109,940.55 94.29

133 Balance as at 31/12/2011

Carrying amount Carrying amount Items before impairment allowance before impairment allowance

Amount % of total Amount % of total assessed for impairment

Other receivables belong to recognition of impairment allowances by group:

Age group 260,568,323.84 82.78 27,726.20 0.01

Other receivables belong to individually insignificant but 0.00 0.00 0.00 0.00 individually assessed for impairment

Total 314,773,605.71 100.00 51,137,666.75 16.25

(Continued)

Balance as at 31/12/2010

Carrying amount Carrying amount Items before impairment allowance before impairment allowance

Amount % of total Amount % of total

Other receivables belong to individual significance and individually 55,216,448.81 17.11 55,216,448.81 100.00 assessed for impairment

Other receivables belong to recognition of impairment allowances by group:

Age group 267,487,194.73 82.89 474,628.76 0.18

Other receivables belong to individually insignificant but 0.00 0.00 0.00 0.00 individually assessed for impairment

Total 322,703,643.54 100.00 55,691,077.57 17.26

10.2.2 Other receivables using the age analysis method for measurement of impairment allowances:

Balance as at 31/12/2011

Carrying amount Age Impairment allowance before impairment allowance

Amount % of total Amount % of total

Within 1 year

Including: within 6 months 260,330,354.49 99.91 9,741.97(Note) 0.00

6 months - 1year 152,254.05 0.06 7,612.70(Note) 5.00

Subtotal of accounts receivable within 1 year 260,482,608.54 99.97 17,354.67 0.01

1-2 years 83,715.30 0.03 8,371.53 10.00

2-3 years 0.00 0.00 0.00 0.00

Over 3years 2,000.00 0.00 2,000.00 100.00

Total 260,568,323.84 100.00 27,726.20 0.01

134 (Continued)

Balance as at 31/12/2010

Carrying amount Age Impairment allowance before impairment allowance

Amount % of total Amount % of total

Within 1 year

Including: within 6 months 136,060,681.56 50.87 437,438.10 1.00

6 months - 1year 131,145,213.17 49.03 7,260.66 5.00

Subtotal of accounts receivable within 1 year 267,205,894.73 99.90 444,698.76 0.17

1-2 years 279,300.00 0.10 27,930.00 10.00

2-3 years 0.00 0.00 0.00 0.00

Over 3years 2,000.00 0.00 2,000.00 100.00

Total 267,487,194.73 100.00 474,628.76 0.18

Note: The parent company not provide for impairment allowance for subsidiaries within consolidated financial statement.

10.2.3 The major impairment allowance of other receivables has been recovered/received during current reporting period:

Sum of impairment Recovered Debtors Reason(s) for recover Original basis of impairment allowance allowance recognised amount before recovered

Capital-Bridge Received insolvency The enterprise has entered insolvency 12,835,000.00 612,000.00 Securities liquidation funds liquidation procedure

Received insolvency The enterprise has entered insolvency Minfa Securities 12,879,010.28 3,494,508.26 liquidation funds liquidation procedure

Total 25,714,010.28 4,106,508.26

10.2.4 The Company has no other receivables owed by entities which own 5% or more of the shares of the Company

10.2.5 Details of top five other receivables:

% of total Relationship with Carrying amount Debtors Nature Age other the Company as at 31/12/2011 receivables

Shanghai Jinhao Subsidiary 181,500,000.00 Borrowing 1-3 years 57.66

Payment in advance for Jinyunlai Subsidiary 53,011,000.00 Within 1 year 16.84 advertising expense

Hengxin Securities Non-related party 29,502,438.53 Margins for government debt Over 3 years 9.37

Minfa Securities Non-related party 12,479,843.34 Margins for government debt Over 3 years 3.96

135 % of total Relationship with Carrying amount Debtors Nature Age other the Company as at 31/12/2011 receivables

Capital-Bridge Securities Non-related party 12,223,000.00 Margins for government debt Over 3 years 3.88

Total 288,716,281.87 91.71

10.3 Long-term equity investments

10.3.1 Circumstance of long-term equity investments

Explaination for the

difference between proportion of proportion of Investee Accounting method Investment cost shareholding proportion shareholding % voting rights% and voting rights

proportion

Gujing Sales Historical cost convention 84,864,497.89 100.00 100.00

Gujing Transportation Historical cost convention 6,875,743.00 100.00 100.00

Gujing Glass Historical cost convention 65,795,666.00 100.00 100.00

Hefei Trading Historical cost convention 9,900,000.00 100.00 100.00

Shanghai Jinhao Historical cost convention 49,906,854.63 100.00 100.00

Gujing Hotel Historical cost convention 648,646.80 100.00 100.00

Gujing Packaging Historical cost convention 30,000,000.00 100.00 100.00

Total 247,991,408.32

(Continued)

Impairment Movement allowance Cash dividend for Carrying amount during the Carrying amount Impairment Investee recognised during current reporting as at 31/12/2010 current reporting as at 31/12/2011 allowance the current year period reporting period

Gujing Sales 84,864,497.89 0.00 84,864,497.89 0.00 0.00 361,371,205.06

Gujing Transportation 6,875,743.00 0.00 6,875,743.00 0.00 0.00 0.00

Gujing Glass 65,795,666.00 0.00 65,795,666.00 0.00 0.00 0.00

Shanghai Trading 9,900,000.00 -9,900,000.00 0.00 0.00 0.00 0.00

Hefei Trading 9,900,000.00 0.00 9,900,000.00 0.00 0.00 1,686,490.10

Shanghai Jinhao 49,906,854.63 0.00 49,906,854.63 0.00 0.00 0.00

Gujing Hotel 648,646.80 0.00 648,646.80 0.00 0.00 0.00

Gujing Packaging 0.00 30,000,000.00 30,000,000.00 0.00 0.00 0.00

Total 227,891,408.32 20,100,000.00 247,991,408.32 0.00 0.00 363,057,695.16

10.4 Operating revenues and costs

136 10.4.1 Operating revenues

Items Y/e 31/12/2011 Y/e 31/12/2010

Revenues from principal operating activities 1,917,609,583.10 1,064,923,019.29

Revenues from other operating activities 39,554,898.14 40,114,315.16

Total operating revenues 1,957,164,481.24 1,105,037,334.45

Operating costs for principal operating activities 793,593,712.17 417,724,670.51

Operating costs for other operating activities 34,268,638.45 39,439,729.79

Total operating costs 827,862,350.62 457,164,400.30

10.4.2 Revenues from principal operating activities by products

Y/e 31/12/2011 Y/e 31/12/2010 Products Operating revenues Operating costs Operating revenues Operating costs

Distilled spirit 1,917,609,583.10 793,593,712.17 1,064,923,019.29 417,724,670.51

Total 1,917,609,583.10 793,593,712.17 1,064,923,019.29 417,724,670.51

10.4.3 Details of operating revenues from top five clients:

Clients Operating revenue % of total operating revenue

The first 1,903,328,466.92 97.25

The second 5,752,488.88 0.29

The third 1,456,253.85 0.07

The fourth 468,846.15 0.02

The fifth 334,529.92 0.02

Total 1,911,340,585.72 97.65

Note: The 77.11% increase of the operating revenues for the year ended 31/12/2011 from the operating revenues for the year ended 31/12/2010 mainly results from the increase of sales volume and selling price.

10.5 Investment income

10.5.1 Details of investment income

Items Y/e 31/12/2011 Y/e 31/12/2010

Incomes from long-term equity investments measured using the 363,057,695.16 119,179,229.20 historical cost convention

Incomes from disposal of long-term equity investment 7,952,929.36 0.00

Incomes from disposal of held for trading financial assets 0.00 727,291.07

Total 371,010,624.52 119,906,520.27

10.5.2 Investment income from Long-term equity investments measured using the historical cost convention

137 Reasons for movement during the Investee Y/e 31/12/2011 Y/e 31/12/2010 current reporting period

Gujing Sales 361,371,205.06 112,010,933.77 Increased the cash dividend received

Hefei Trading 1,686,490.10 2,644,597.10 Decreased the cash dividend received

Gujing Glass 0.00 4,523,698.33 Decreased the cash dividend received

Total 363,057,695.16 119,179,229.20

10.6 Supplementary information for the consolidated cash flows statement

Supplemental informations Y/e 31/12/2011 Y/e 31/12/2010

1.Adjusting net profit to cash flow from operating activities:

Net profits 497,871,069.01 272,427,907.68

Add: Impairment allowance of assets -6,252,359.76 -12,364,587.52

Depreciation of fixed assets and biological assets held for production and 20,334,221.18 18,244,150.32 depletion of oil and gas assets

Amortisation of investment property 3,537,860.03 3,140,589.37

Amortisation of intangible assets 2,226,930.48 1,538,861.08

Amortisation of long-term deferred expenses 989,698.98 885,388.20

Loss on disposal of fixed assets, intangible assets and other long-term -197,160.24 -6,088,161.80 assets (gain presented with “-” prefix)

Loss on writing-off of fixed assets (gain presented with “-” prefix) 467,406.18 1,952,772.89

Loss on changes in fair value (gain presented with “-” prefix) 0.00 0.00

Financial costs (income presented with “-” prefix) 0.00 79,200.00

Investment loss (income presented with “-” prefix) -371,010,624.52 -119,906,520.27

Decrease of deferred tax assets (increase presented with “-” prefix) 1,020,722.13 -2,239,895.51

Increase of deferred tax liabilities (decrease presented with “-” prefix) 0.00 0.00

Decrease of inventories (increase presented with “-” prefix) -128,101,562.29 -84,045,139.37

Decrease of operating receivables (increase presented with “-” prefix) -428,193,878.47 -78,745,288.58

Increase of operating payables (decrease presented with “-” prefix) 632,358,586.18 239,866,570.13

Others (Amortisation of deferred income) -961,499.80 -213,000.00

Net cash flows from operating activities 224,089,409.09 234,532,846.62

2.Significant investing and financing activities not involving movements of cash flows：

Debt-to-equity conversion 0.00 0.00

Convertible debt instruments due within one year 0.00 0.00

Fixed assets acquired under financial leases 0.00 0.00

3.Net movement of cash and cash equivalents:

Cash as at the end of the reporting period 1,885,937,555.53 480,737,398.56

Less: Cash as at the beginning of the reporting period 480,737,398.56 279,382,070.44

138 Supplemental informations Y/e 31/12/2011 Y/e 31/12/2010

Add: Cash equivalents as at the end of the reporting period 0.00 0.00

Less: Cash equivalents as at the beginning of the reporting period 0.00 0.00

Net increase of cash and cash equivalents 1,405,200,156.97 201,355,328.12

Note 11: Supplemental information

11.1 List of extraordinary profits or losses for the current reporting period

Items Amount Remarks

Profits or losses from disposal non-current assets 186,246.05

Tax return, relief from ultra vires approval or no formal approval file 0.00

The government subsidy recognized into current profit and loss, except those government subsidies that closely related to the Company’s business, according to national policies, and 4,111,902.86 according to standard unified quota or ration

The collected fees for possession of funds recognized into current profit and loss 0.00

Gains from the investment costs paid less than the acquirer’s interest in the fair value of the 0.00 bargainor’s identifiable net assets( During acquire subsidiary、joint venture and associates)

Profits and losses from exchange of non-monetary assets 0.00

Profits and losses from investment or management of assets entrusted to others 0.00

The provison for impairment of assets due to force majeure factors, such as incurred natural 0.00 disasters

Profits and losses from debt restructuring 0.00

Restructuring expenses, such as replacement of employees、integration expenses, etc 0.00

Profits and losses from the any amount exceed fair values when there is non under fair value 0.00 transactions

The net profits and losses of subsidiary that is from beginning of the period to the combination 0.00 date, the subsidiary generated from the business combination that is under the same control

Profits and losses from contingent events that irrelevant to the Company’s normal business 0.00

Except for effective hedging operations that relevant to the Company’s normal business, the profits and losses from fair value changes from held for trading financial assets and held for 0.00 trading financial liabilities, as well as the investment gains from disposal held for trading financial assets、held for trading financial liabilities and available-for-sale financial assets

Reversal of provision for impairment of receivable that carry impairemt test individually 4,106,508.26

Profits and losses from external entrusted loan 0.00

Profits and losses from fair value changes of investment property that adopt fair value model as 0.00 subsequent measurement method

The impact on current profit and loss, that according to tax, accounting and other laws and 0.00 regulations requirement to carry out one time adjustment for current profit and loss

139 Items Amount Remarks

Trustee fee income from entrusted operations 0.00

Other non operating income and expenses except from above mentioned items 9,993,800.13

Other profit and loss items that satisfied the definition of extraordinary profits or losses 0.00

Subtotal 18,398,457.30

Less: the amount from income tax effect 5,575,263.62

the impact from minority interests 0.00

Total 12,823,193.68

11.2 Yield Rate of Net Assets and Earnings Per Share

Weighted EPS (Yuan per share)

Profits for current reporting period Reporting Period Average Yield Rate Basic EPS Diluted EPS of Net Assets%

Year 2011 31.65 2.34 2.34 Net profits attributable to ordinary shareholders Year 2010 34.17 1.34 1.34

Net profits (deducted extraordinary profits or Year 2011 30.94 2.29 2.29 losses) attributable to ordinary shareholders Year 2010 31.71 1.22 1.22

11.3 Reasons and details of extraordinary movement of significant items of financial statements

11.3.1 Monetary funds: The 2.24 times increase of the balance of monetary funds as at 31/12/2011 from the balance of monetary funds as at 31/12/2010 mainly results from the most of raised funds have not used yet, and the received funds of trading receivables increased.

11.3.2 Notes payable: The 4.11 times increase of the balance of notes payable as at 31/12/2011 from the balance of notes payable as at 31/12/2010 mainly results from the increase of operating revenue during current reporting period, and the method of settlement of notes increased.

11.3.3 Accounts receivable: The 1.94 times increase of the accounts receivable as at 31/12/2011 from the balance of accounts receivable as at 31/12/2010 mainly results from the Chinese New Year for the year earlier than last year, the Company increased the credit limit for partly important clients.

11.3.4 Advances to suppliers: The 126.50 times increase of the balance of advances to suppliers as at 31/12/2011 from the balance of advances to suppliers as at 31/12/2010 mainly results from the advance payment for purchase of equipment, land acquisition compensation, purchase of house and advertising expenses.

11.3.5 Other receivables: The 89.88% decrease of the balance of other receivables as at

140 31/12/2011 from the balance of other receivables as at 31/12/2010 mainly results from the guarantee deposit for publish advertisement paid in last year, which used for payment of advertising expenses during the current reporting period, and the land acquisition compensation paid in last year, which used for payment of land leasing during the current reporting period.

11.3.6 Construction in progress: The 13.71 times increase of the balance of construction in progress as at 31/12/2011 from the balance of construction in progress as at 31/12/2010 mainly results from the raising investment project and the Company’s self investment project have started construction during the current reporting period.

11.3.7 Intangible assets: The 60.96% increase of the balance of intangible assets as at 31/12/2011 from the balance of intangible assets as at 31/12/2010 mainly results from the increase of land use rights of raising investment project and the Company’s self investment project.

11.3.8 Long-term deferred expenses: The 4.47 times increase of the balance of long-term deferred expenses as at 31/12/2011 from the balance of long-term deferred expenses as at 31/12/2010 mainly results from the increase of leasing and decoration expenses of Zhengzhou experience club, and increased the decoration expenses of celebrity hall.

11.3.9 Accounts payable: The 75.19% increase of the balance of accounts payable as at 31/12/2011 from the balance of accounts payable as at 31/12/2010 mainly results from the increase of procurement for expansion of production scale.

11.3.10 Advances from customers: The 48.21% increase of the balance of advances from customers as at 31/12/2011 from the balance of advances from customers as at 31/12/2010 mainly results from the increase of sales volume and expansion of sales scale.

11.3.11 Employee benefits payable: The 53.02% increase of the balance of employee benefits payable as at 31/12/2011 from the balance of employee benefits payable as at 31/12/2010 mainly results from the increase of salaries and bonus, which is due to the performance of the Company improved.

11.3.12 Tax payable: The 1.01 times increase of the balance of tax payable as at 31/12/2011 from the balance of tax payable as at 31/12/2010 mainly results from the increase of VAT, consumption duty and the corporate tax payable caused by the operating revenues and profits increased.

11.3.13 Other payables: The 99.10% increase of the balance of other payables as at 31/12/2011 from the balance of other payables as at 31/12/2010 mainly results from the increased margins( for price control) received from new clients, and increased guarantee deposit for quality of

141 construction in progress.

11.3.14 Other non-current liabilities: The 1.30 times increase of the balance of other non-current liabilities as at 31/12/2011 from the balance of other non-current liabilities as at 31/12/2010 mainly results from the government grant related to assets received during current reporting period.

11.3.15 Capital reserves: The 3.60 times increase of the balance of capital reserves as at 31/12/2011 from the balance of capital reserves as at 31/12/2010 mainly results from received the funds raised by private issued shares during the current reporting period.

11.3.16 Operating revenue: The 76.04% increase of the revenue for the year ended 31/12/2011 from the revenue for the year ended 31/12/2010 mainly results from the sales volume of distilled spirit increased and the selling price raised.

11.3.17 Operating cost: The 58.83% increase of the cost for the year ended 31/12/2011 from the cost for the year ended 31/12/2010 mainly results from the increase of sales and labor costs.

11.3.18 Business tax and surcharges: The 79.02% increase of the business tax and surcharges for the year ended 31/12/2011 from the business tax and surcharges for the year ended 31/12/2010 mainly results from the increase of sales, VAT and consumption tax.

11.3.19 Sales expenses: The 96.93% increase of the sales expenses for the year ended 31/12/2011 from the sales expenses for the year ended 31/12/2010 mainly results from the Company increase sales promotion strength, those samples, services fees and advertising expense increased.

11.3.20 General and administrative expenses: The 31.45% increase of the general and administrative expenses for the year ended 31/12/2011 from the general and administrative expenses for the year ended 31/12/2010 mainly results from the increase of salaries and bonus, which is due to the performance of the Company improved.

11.3.21 Financial costs: The 3.99 times decrease of the financial costs for the year ended 31/12/2011 from the financial costs for the year ended 31/12/2010 mainly results from the income of charges for notes increased, as well as the interest incomes of fixed deposit and structured deposit increased.

11.3.22 Impairment loss on assets: The 86.18% increase of the impairment loss on assets for the year ended 31/12/2011 from the impairment loss on assets for the year ended 31/12/2010 mainly results from the decrease of accounts receivable partly recovered although that has been fully provided impairment allowances before.

142 11.3.23 Investment income: The 68.59% increase of the investment income for the year ended 31/12/2011 from the investment income for the year ended 31/12/2010 mainly results from recognized investment incomes through subsidiary write-off.

11.3.24 Non-operating expenses: The 71.89% decrease of the non-operating expenses for the year ended 31/12/2011 from the non-operating expenses for the year ended 31/12/2010 mainly results from the loss of disposal of long-term assets decreased.

11.3.25 Corporate income tax expenses: The 1.98 times increase of the corporate income tax expenses for the year ended 31/12/2011 from the corporate income tax expenses for the year ended 31/12/2010 mainly results from the increase of profits and samples during the current reporting period.

Note 12: Authorisation for publication

The financial statements have been authorised to publish by the Board of Directors on 27 March 2012.

Anhui Gujing Distillery Co., Ltd.

Legal Representative: Chief accountant: Financial director:

27 March 2012 27 March 2012 27 March 2012

Chapter XI Documents Available for Reference Ⅰ. Financial statements carrying the signatures and stamps of the Company’s legal representative, the Chief Financial Officer and the person in charge of accounting. Ⅱ. Original Auditor’s Report stamped by the CPAs firm and signed and stamped by registered accountants. Ⅲ. Original copies of all documents and the announcements thereof disclosed in the report period on China Securities Journal and Hong Kong Ta Kung Pao. Ⅳ. Other relevant documents.

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