泸州老窖：2023年年度报告（英文）

2023 Annual Report of Luzhou Laojiao Co., Ltd. 1 Luzhou Laojiao Co., Ltd. 2023 Annual Report April 2024 2023 Annual Report of Luzhou Laojiao Co., Ltd. 2 2023 Annual Report Section IImportant Statements, Contents and Definitions The Board of Directors, Board of Supervisors, directors, supervisors and senior management guarantee that the information presented in this report is free of any false records, misleading statements or material omissions, and shall individually and together be legally liable for truthfulness, accuracy and completeness of its contents. Liu Miao, responsible person for the Company, Xie Hong, responsible person for accounting work and Song Ying, responsible person for the Company’s financial affairs (Accounting Supervisor) have warranted that the financial statements in this report are true, accurate and complete. Other directors attended the board meeting to deliberate this report by themselves except the following directors. Name of directors who did not attend the meeting in person Position of directors who did not attend the meeting in person Reason for not attending the meeting in person Name of deputies Liu Miao Chairman of the board Work Lin Feng Affected by risks, uncertainties and assumptions, the forward-looking statements concerning business objectives and future plans made in this report based on the subjective assumptions and judgments of the future policies and economic conditions may be significantly different from the actual results. Such statements shall not be considered as virtual promises of the Company to investors, and the investors and relevant persons shall maintain adequate risk awareness and shall understand the differences between plans, forecasts and commitments. In the annual report, the potential risks in the operation of the Company have been disclosed. Investors are kindly reminded to pay attention to possible investment risks. The profit distribution plan approved by the board of directors: based on 1,471,987,769 shares, a cash dividend of CNY 54.00 (tax inclusive) will be distributed for every 10 existing shares held,0 shares of bonus shares (tax inclusive), and reserves would not be converted into share capital. This Report has been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese version shall prevail. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 3 Contents Section IImportant Statements, Contents and Definitions.........................................2 Section IICompany Profile and Key Financial Results ..............................................6 Section IIIManagement Discussion and Analysis ....................................................12 Section IVCorporate Governance ............................................................................53 Section VEnvironmental and Social Responsibility ................................................79 Section VISignificant Events ...................................................................................91 Section VIIChanges in Shares and Information about Shareholders.......................99 Section VIIIPreferred Shares ..................................................................................110 Section IXInformation about Bond .........................................................................111 Section XFinancial Report ......................................................................................1172023 Annual Report of Luzhou Laojiao Co., Ltd. 4 Documents Available for Reference 1. Financial statements signed and stamped by the responsible person for the Company, the responsible person for accounting work and the responsible person for the Company’s financial affairs (Accounting Supervisor); 2. The original of the auditor’s report with the seal of the accounting firm, and signed and stamped by CPAs; and 3. The originals of all company documents and announcements that are disclosed to the public during the reporting period. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 5 Definitions Term Reference Definition Company, the Company, Luzhou Laojiao Refer to Luzhou Laojiao Co., Ltd. Laojiao Group Refer to Luzhou Laojiao Group Co., Ltd. XingLu Group Refer to Luzhou XingLu Investment Group Co., Ltd. SASAC of Luzhou Refer to State-owned Assets Supervision and Administration Commission of Luzhou Huaxi Securities Refer to Huaxi Securities Co., Ltd. Luzhou Bank Refer to Luzhou Bank Co., Ltd. Sales Company Refer to Luzhou Laojiao Sales Co., Ltd. Brewing Company Refer to Luzhou Laojiao Brewing Co., Ltd. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 6 Section IICompany Profile and Key Financial Results 1. Corporate information Stock abbreviation Luzhou Laojiao Stock code 000568 Stock exchange where the shares of the Company are listed Shenzhen Stock Exchange Name of the Company in Chinese 泸州老窖股份有限公司Abbr. of the Company name in Chinese 泸州老窖Name of the Company in English (if any) Luzhou Laojiao Co., Ltd. Abbr. of the Company name in English (if any) LZLJ Legal representative Liu Miao Registered address Guojiao Square, Luzhou City, Sichuan Province, China Postal code 646000 Past changes of registered address The Company’s registered address has changed from 46 Guihua Street, Luzhou City, Sichuan Province, China to Guojiao Square, Luzhou City, Sichuan Province, China in 2000. Business address Luzhou Laojiao Command Center,71 Nanguang Road, Luzhou City, Sichuan Province, China Postal code 646000 Company website E-mail lzlj@lzlj.com 2. Contact us Secretary of the board Representative for securities affairs Name Li Yong Wang Chuan Address Luzhou Laojiao Command Center,71 Nanguang Road, Luzhou City, Sichuan Province, China Tel. (0830)2398826 (0830)2398826 Fax (0830)2398864 (0830)2398864 E-mail dsb@lzlj.com dsb@lzlj.com 2023 Annual Report of Luzhou Laojiao Co., Ltd. 7 3. Information disclosure and place where the annual report is kept Stock exchange website where this Report is disclosed China Securities Journal, Securities Times, Securities Daily Media and website where this Report is disclosed . cninfo.com.cn Place where the annual report of the Company is kept Board office 4. Company registration and alteration Unified social credit code 91510500204706718H Changes in main business activities since the Company was listed (if any) None Changes of controlling shareholders of the Company (if any) Before September 2009, the controlling shareholder was the SASAC of Luzhou. After the equity transfer in September 2009, the controlling shareholder was changed to Laojiao Group, but the actual controller is still the SASAC of Luzhou. 5. Other relevant information Accounting firm engaged by the Company Name of the accounting firm Sichuan Huaxin (Group) CPAFirm Business address of the accounting firm 28/F., South Jinmaolidu, NO.18 Ximianqiao Street, Chengdu City, Sichuan Province. Name of accountants for writing signature Li Wulin, Tang Fangmo, and Fan Bo Sponsors engaged by the Company to continuously perform its supervisory function during the reporting period □ Applicable N/A Financial adviser engaged by the Company to continuously perform its supervisory function during the reporting period. Applicable N/A 6. Key accounting data and financial indicators 2023 Annual Report of Luzhou Laojiao Co., Ltd. 8 Whether the Company performed a retroactive adjustment to or restatement of accounting data. Yes No 2023 2022 YoYChange 2021 Operating revenues (CNY) 30,233,301,388.2625,123,563,271.6220.34% 20,642,261,724.37 Net profits attributable to shareholders of the Company (CNY) 13,246,394,700.5910,365,383,281.8027.79% 7,955,554,351.73 Net profits attributable to shareholders of the Company before non-recurring gains and losses (CNY) 13,150,392,806.6510,321,481,236.9327.41% 7,884,384,055.60 Net cash flows from operating activities (CNY) 10,648,364,935.468,262,648,269.7228.87% 7,698,648,104.51 Basic earnings per share (CNY/share) 9.027.0627.76% 5.43 Diluted earnings per share (CNY/share) 9.027.0627.76% 5.43 Weighted average ROE 35.07% 33.32% 1.75% 31.15% At the end of 2023 At the end of 2022 YoYChange At the end of 2021 Total assets (CNY) 63,294,455,201.6051,385,481,354.5223.18% 43,211,782,005.68 Net assets attributable to shareholders of the Company (CNY) 41,391,410,494.8934,207,871,130.0321.00% 28,040,247,005.94 Whether the lower of the net profits attributable to shareholders of the Company before and after non-recurring gains and losses was negative for the last three accounting years, and the latest auditor’s report indicated that there was uncertainty about the Company’s ability to continue as a going concern Yes No Whether the lower of the net profits attributable to shareholders of the Company before and after non-recurring gains and losses was negative Yes No 7. Differences in accounting data under domestic and overseas accounting standards 2023 Annual Report of Luzhou Laojiao Co., Ltd. 9 7.1. Differences in the net profits and net assets disclosed in the financial reports prepared under the international and China accounting standards Applicable N/A No such differences for the reporting period. 7.2. Differences in the net profits and net assets disclosed in the financial reports prepared under the overseas and China accounting standards Applicable N/A No such differences for the reporting period. 8. Key financial results by quarter Unit: CNY Q1 Q2 Q3 Q4 Operating revenues 7,610,153,819.276,982,897,954.877,349,670,544.398,290,579,069.73 Net profits attributable to shareholders of the Company 3,712,618,630.923,377,808,156.153,475,695,183.382,680,272,730.14 Net profits attributable to shareholders of the Company before non-recurring gains and losses 3,688,940,523.353,351,998,052.283,448,863,775.132,660,590,455.89 Net cash flows from operating activities 1,508,783,232.534,138,977,564.513,404,807,099.841,595,797,038.58 Whether there are any material differences between the financial indicators above or their summations and those which have been disclosed in quarterly or semi-annual reports Yes No 9. Non-recurring profits and losses Applicable N/A Unit: CNY Item 2023 2022 2021 Note Profit or loss from disposal of non-current assets (including the write-off portion of the impairment 44,694,238.3719,805,093.70 -347,429.88 See "Section XNote 5.48" for details. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 10 provision) Government grants accounted for, in the profit or loss for the current period (except for the government grants closely related to the business of the Company and given in accordance with defined criteria and in compliance with government policies, and have a continuing impact on the Company's profit or loss) 51,950,003.1134,931,161.5251,756,953.15 See "Section XNote 5.44" for details. Gain or loss on fair-value changes in financial assets and liabilities held by a non-financial enterprise, as well as on disposal of financial assets and liabilities (exclusive of the effective portion of hedges that is related to the Company's normal business operations) 68,181,502.73 -2,585,156.726,352,241.79 See "Section XNote 5.45 and 5.46" for details. Reversed portions of impairment allowances for receivables which are tested individually for impairment 80,000,000.00 Other non-operating income and expenditure except above-mentioned items -35,875,412.667,873,927.25 -40,241,672.68 See "Section XNote 5.49 and 5.50" for details. Less: Corporate income tax 31,697,444.1214,413,895.3124,082,098.59 Minority interests (after tax) 1,250,993.491,709,085.572,267,697.66 Total 96,001,893.9443,902,044.8771,170,296.13 -- Other items that meet the definition of non-recurring gain/loss: Applicable N/A No such cases for the reporting period. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 11 Explain the reasons if the Company classifies any non-recurring gain/loss item mentioned in the Explanatory Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public-Non-Recurring Gains and Losses as a recurring gain/loss item. Applicable N/A No such cases for the reporting period. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 12 Section IIIManagement Discussion and Analysis 1. Industry overview for the reporting period In 2023, as the consumer market gradually returned to normal, the baijiu industry showed a trend of the coexistence of consumption upgrading and degradation, intensified differentiation, and more intense competition. Capacity optimisation, quality upgrading, technological innovation, cultural development, consumer experience, and service enhancement became the era characteristics for the baijiu industry of high-quality development. The industry development showed an increasingly obvious trend of concentrating on well-known production areas, famous brands, excellent culture, and high quality. The baijiu industry was gradually entering the era of existing competition and giant competition. Only enterprises that could create excellent products and services for consumers, had sound governance structures, and social values could stand out. 2. Business scope in the reporting period The Company shall comply with the disclosure requirements for companies engaging in food & liquor and wine production of the Guidelines No.3 of the Shenzhen Stock Exchange on Sel f-regulation of Listed Companies—Industry-specific Information Disclosure. Holding three food business licenses, the Company operates within the baijiu subdivision industry which belongs to the liquor & wine, beverage and refined tea production industry with specialized baijiu product design, production and sales as its main business model. The Company’s primary products are baijiu series such as "National Cellar 1573" and "Luzhou Laojiao", and its main comprehensive performance indicators rank high in the baijiu industry. For the reporting period, operating revenue amounted to CNY 30.233 billion, up 20.34% year on year; and the net profit attributable to the shareholders of the listed company reached CNY 13.246 billion, up 27.79% year on year. For the Company's brand operations, please refer to "4.1 Overview" under “4. Analysis of main business” in this section. The Company’s main products are classified as follows: Main product types Classification criteria Representative brand name Mid- and high-end baijiu Tax-inclusive sales price ≥ CNY 150 per bottle National Cellar 1573, Luzhou Laojiao Tequ, and Century-old Luzhou Laojiao Jiaoling Baijiu Other baijiu Tax-inclusive sales price < CNY 150 per bottle Luzhou Laojiao Touqu and Luzhou Laojiao · Hey Guys 2023 Annual Report of Luzhou Laojiao Co., Ltd. 13 Main sales models: Currently, the Company has two main sales models: 1. Traditional channel operation model: It is mainly authorized distribution of the offline distributors. The Company establishes cooperative relationships with the distributors by product lines and regions. The Company directly supplies goods to the distributors, and then distributors sell them to consumers and terminal outlets. 2. Emerging channel operation model: It is mainly online sales operations. The Company establishes cooperative relationships with e-commerce platforms, self-media and webcasters, and sells the goods to consumers through flagship stores, specialty stores, live streaming rooms on online platforms and other network terminals. Distribution models: Applicable □N/A 1. Main sales models Unit: CNY Operating revenue Cost of sales Gross profit margin YoY change of operating revenue YoY change of cost of sales YoY change of gross profit margin By sales model Traditional channel 28,657,038,767.863,143,781,427.0689.03% 22.98% 6.94% 1.65% 2023 Annual Report of Luzhou Laojiao Co., Ltd. 14 operation model Emerging channel operation model 1,420,240,091.72340,763,293.0476.01% -2.97% 24.17% -5.24% 2. Distributors Region Number of distributors at the end of the reporting period Increased number during the reporting period Decreased number during the reporting period YoY change of number of distributors (%) Reason for any significant change Domestic 171028210.41 Overseas 104224 -17.46 3. Main settlement method for distributors and distribution method The Company's main settlement method for distributors is payment before delivery. The distribution method is authorized distribution. 4. Top five distributors The Company had no accounts receivable from the top five distributors at the end of the period. For details, please refer to Section III 4.2.8. "Main customers and suppliers". Store sales terminals accounted for more than 10% □ Applicable N/A Online direct sales Applicable □N/A For the sales of the Company's main products, please refer to Section III 4.2.1. "Breakdown of operating revenues". The Company's complete series of products are sold online. Its main cooperation platforms included JD.com and Tmall. Sales price of main products contributing over 10% of the total operating revenues for the current period changed by more than 30% from the previous reporting period □ Applicable N/A Purchase model and purchase content Unit: CNY Purchase model Purchase content Amount of main purchase content Organic raw grains are purchased through cooperative model and supplied by organic raw grain bases; other raw grains and packaging materials are purchased through bid invitation Raw materials 3,656,343,649.12 Purchase based on the unified pricing of the National Development and Reform Commission and the price bureau, and purchase through bid invitation Fuels and energies 184,372,751.40 2023 Annual Report of Luzhou Laojiao Co., Ltd. 15 Purchase through bid invitation Low-value consumables 64,065,969.51 The purchase of raw materials from cooperatives or farmers accounted for more than 30% of the total purchase amount □ Applicable N/A The price of main raw materials purchased externally changed by more than 30% year-on-year □ Applicable N/A Main production model: The Company's main production model is self-production. Commissioned processing and production □ Applicable N/A Main breakdown items of cost of sales Unit: CNY By business segment Item 20232022 YoYChange Amount As % of cost of sales Amount As % of cost of sales Baijiu Raw materials 2,938,909,467.97 84.34% 2,757,973,459.70 85.80% 6.56% Baijiu Labor costs 261,260,432.247.50% 208,363,976.36 6.48% 25.39% Baijiu Manufacturing overhead 284,374,819.898.16% 247,916,280.85 7.71% 14.71% Production volume and inventory 1. Production volume, sales volume and inventory of main products Product classification Production volume (ton) Sales volume (ton) Inventory (ton) YoY change of production volume (%) YoY change of sales volume (%) YoY change of inventory Description of major changes Mid- and high-end baijiu 31,258.4237,583.88 36,551.55 -23.43 1.24 -14.75 Other baijiu 52,698.0758,694.24 5,699.32 11.94 19.64 -51.27 The YoY decrease in inventory was mainly due to the increased sales volume of other baijiu in the current period. 2. Inventory at the end of the reporting period Unit: Ton Finished baijiu Semi-finished baijiu (including base baijiu) 42,250.87430,838.17 3. Capacity 2023 Annual Report of Luzhou Laojiao Co., Ltd. 16 Unit: Ton Main products Design capacity Actual capacity Capacity in progress Baijiu 170,000 170,00080,000 3. Analysis of core competitiveness A. Geographical advantage Luzhou City, where the Company is located, is known as the “City of Baijiu” and the origin of China’s strong aromatic baijiu culture. It sits in the transitional area between the southern rim of the Sichuan Basin and the Yunnan-Guizhou Plateau, featuring a warmer and more humid sub-tropical climate compared to other areas at the same latitude, with a temperature above 0℃ throughout the year. The unique climate and soil are agreeable to grow grains for baijiu brewing. The glutinous red sorghum and soft wheat grown in this area are the primary raw materials for the baijiu of the Company. The cellars in which the Company brews its baijiu are made of the local loessal clay characterized by strong viscosity, rich minerals and excellent moisture retention. In addition, the abundant and quality water in the region creates a unique geographical advantage for the production of the Company’s baijiu. B. Advantage of cellars and brewing technique Aged cellars are the most essential condition for a strong aromatic baijiu maker to produce good quality baijiu. The Cellars of National Treasure 1573, founded in 1573, was granted by the State Council as the first Cultural Relic of National Importance in the industry under the Protection of the State in December 1996.1,619 cellars of Luzhou Laojiao which have been continuously used for over 100 years, together with its 16 ancient brewing workshops and three natural cellar holes, were all selected as the fourth batch of Cultural Relics of National Importance under the Protection of the State in 2013. They are unique resources that cannot be replicated. In both 2006 and 2012, Luzhou Laojiao Daqu Cellars were twice selected into the preliminary list of China for World Heritage. In November 2018, Luzhou Laojiao Cellars and Brewing Workshops were selected into China’s Industrial Heritage List. The time-honored Traditional Brewing Technique of Luzhou Laojiao is a 24-generation inheritance and a classic brewing technique for strong aromatic baijiu. This technique was selected as the first batch of National Intangible Cultural Heritage in May 2006. The Cellars of National Treasure 1573 and the Traditional Brewing Technique of Luzhou Laojiao together provide the most essential basis and assurance for the quality of the product series of National Cellar 1573 and Luzhou Laojiao. Additionally, Huangyi Brewery Eco-Park has moved into full production in late 2020. Upholding the cultural connotations of 2023 Annual Report of Luzhou Laojiao Co., Ltd. 17 “inheritance of ancient ways, pure-grain brewing, traditional techniques, and intelligent technologies”, the Company carried out brewing technical renovation featuring automatic, intelligent and information technology-based transformation. As such, it has established a baijiu brewery eco-park comprising brewing workshops, leaven making workshops, and base baijiu storage cellars, along with energy and sewage treatment facilities. This brewery eco-park brings with it new production capacities of 100,000 tons of quality pure-grain solid baijiu and 100,000 tons of leaven in addition to a new storage capacity of 380,000 tons of baijiu per year, marking a substantial increase in the Company’s production capacity. C. Brand advantage Brand is a key business resource for baijiu producers. The Company’s reputation is greatly built on its superiority in brand. National Cellar 1573, which is of a connoisseurship level, is a world-famous high-end brand. Luzhou Laojiao Tequ, a classic brand for strong aromatic baijiu, was selected in 1952 by the first national tasting competition judges as one of the four most famous baijiu brands in China. It is the only strong aromatic baijiu brand that won the title of “National Famous Baijiu” for five consecutive times, as well as the pioneer with regard to the “Tequ” variety of baijiu. In recent years, the Company has successfully put in place a brand system of “dual brands, three product series, and major single products” with great clarity and focus. The programs carried out to promote the brand of National Cellar 1573 and revive the brand of Luzhou Laojiao have produced remarkable results, with significant improvement in brand influence. The Company’s baijiu is increasingly known by consumers as a national brand of strong aromatic baijiu and of authentic flavor. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 18 D. Quality and R&D advantage The Company is committed to producing high-quality baijiu, advocating a healthy lifestyle and “making the quality visible”. The first “Organic Sorghum Planting Base” was established and the six-factor management system (including organic, quality, safety, environment, measurement and energy) was built and improved. The research platforms are established, including National Engineering Research Center of Solid-State Brewing, National Liquor Test Center, National Postdoctoral Workstation, etc, which all support the innovation and upgrading of products with their strong technical force. In recent years, the Company has put in a lot of efforts in researching Tequ production, brewing informatization & intelligent transformation. Relying on the technological innovation platforms such as the National Industrial Design Center, and continuously deepening the cooperation with universities and scientific research institutes including the Chinese Academy of Sciences and the Tsinghua University, the Company has undertaken dozens of national- or provincial-level projects and has been granted hundreds of invention or utility model patents. And remarkable results have been achieved with respect to improvement of the quality of base Baijiu, as well as production efficiency improvement. E. Talent advantage The Company has 1 inheritor of national intangible cultural heritage,4 masters of Chinese brewing,2 masters of Chinese baijiu,2 Chinese liquor connoisseurs,1 master of Chinese baijiu technique,13 senior professor engineers,8 experts who receive special allowances from the State Council,4 national technicians,2 national model workers,3 national Labor Day Medal winners,3 academic and 2023 Annual Report of Luzhou Laojiao Co., Ltd. 19 technologic leaders of Sichuan province,1 expert with outstanding contribution in Sichuan province,1 innovation leader of Tianfu,1 excellent engineer of Tianfu,1 skills leader of Tianfu,3 craftsmen of Tianfu,2 craftsmen of Sichuan province,1 technological elite of Tianfu,1 young science and technology talent of Tianfu,4 technicians of Sichuan province, as well as hundreds of highly skilled personnel including national baijiu judges, senior brewing technicians and brewing technicians. The comprehensive and professional personnel system assures the sound development of the Company. 4. Analysis of main business 4.1. Overview 2023 marked the 450th anniversary of the building of the Cellars of National Treasure 1573 of Luzhou Laojiao. The Company firmly implemented the annual development theme of "promoting reform, enhancing collaboration, focusing on main areas and achieving leapfrog development", pursuing innovation while maintaining integrity, and striving for progress. The Company took solid steps in promoting the high-quality development of Luzhou Laojiao and achieved outstanding results that reached a new historical high. For the reporting period, operating revenue amounted to CNY 30.233 billion, up 20.34% year on year; and the net profit attributable to the shareholders of the listed company reached CNY 13.246 billion, up 27.79% year on year. The Company’s main operations and the results in the reporting period are summarized as follows: A. Making a breakthrough in sales with a surging business volume The Company vigorously overcame challenges around the marketing theme of "reform deepening, concentration on breakthroughs, digital empowerment, and going all out", with significant sales performance and market layout results. The business volume hit a new high. The brand of National Cellar 1573 achieved comprehensive coverage in the domestic market and was fully promoted in overseas markets; the brand of Luzhou Laojiao gained a strong basis in the granary market, and a stable and penetrating presence in the opportunity market. This move yielded more practical results. The deepening of key projects such as the "Hundred Cities Programme" further activated market consumption and increased market share. Operations led to increasing traffic. The "Lighthouse Programme" was deeply implemented, and the application of scene scanning was deepened, leading to geometric consumer growth. The campaigns set more benchmarks. The proactive marketing strategy was fully implemented, and the Chunlei Action focused on "promoting five codes, expanding 2023 Annual Report of Luzhou Laojiao Co., Ltd. 20 outlets, and strengthening the atmosphere", continuously consolidating the channel foundation; the Autumn Harvest Action was conducted around "raising prices, strengthening channels, and promoting sell-through", continuing to strengthen the market consumption basis. B. Promoting consumption and upgrading ecosystems The Company continued to focus on consumer promotion and ecosystem building, and fully promoted the implementation and operation of the three-level public relations system. The quality of the ecosystem was better. The Company fully leveraged the role of public relations departments at all levels to carry out public relations activities in various ecosystems, building a larger ecosystem with better quality. Public relations operations had higher efficiency. The Company integrated public relations resources and cultivated and developed ecosystems, laying the foundation for sales conversion; it established a marketing service centre, developed a strong product promotion system, and fully leveraged the powerful role of sales, service sales, and promotion. The public relations team had stronger capabilities. The incentive mechanism for public relations professionals was continuously optimised, and the labour competition in the public relations system was successfully held, cultivating and outputting a large number of skilled professionals in business, organisation, and marketing. C. Guaranteeing production and improving quality and efficiency The Company's capabilities in capacity guarantee, quality guarantee, product guarantee, scientific research guarantee were constantly improved. Capacity guarantee was as solid as a rock. The Company fully leveraged the advantages of the Cellars of National Treasure and intelligent brewing, and continuously improved the utilisation rate of brewing resources and production efficiency. Quality guarantee was continuously perfected. The Company continuously carried out external audits on quality, food safety and organic systems, with a 100% pass rate. It participated in drafting and revising over 20 standards at all levels including national and industrial standards, and received national honours such as the "National Excellent Enterprise with Quality and Credit" and "National Quality and Integrity Benchmark Enterprise". Product guarantee was lean and efficient. The packaging material guarantee rate, product guarantee completion rate, and on-time delivery rate were constantly increasing; digital logistics operations achieved comprehensive coverage. The scientific research guarantee achieved remarkable results. The Company declared more than 20 scientific research projects for governments, associations, and other organisations at all levels; it organised 103 patent applications and published 44 scientific research papers; it was approved to establish the National Baijiu Industry Metrology and Testing Centre, which achieved a breakthrough from "zero" in the building of the national industry metrology and testing centre in Sichuan Province. D. Revitalizing brands and taking culture as the foundation The Company focused on the theme of "the 450th anniversary of continuous brewing of the Cellars of National Treasure 1573", and extensively carried out various cultural activities to promote the continuous recovery of the value of Luzhou Laojiao as a famous baijiu brand. The brand profundity was constantly enriched. The Company continuously explored and enriched the cultural connotations of "Living Dual National Treasures", and its brand culture shaping case won the first prize of National Outstanding Achievements in Corporate Culture; as the unique Sichuan baijiu brand, the Company was 2023 Annual Report of Luzhou Laojiao Co., Ltd. 21 successfully selected as a national-level demonstration base for the productive protection of intangible cultural heritage from 2023 to 2025. The brand breadth was constantly expanded. The Company prioritised the precision and coverage of brand promotion to expand brand breadth, and opened up a new battlefield for brand building and consumer promotion through innovative marketing methods such as "Cellar Owner Festival"; by accurately pushing brand content through new media, the Company effectively reached and connected millions of young people. The brand height was continuously raised. With the help of global events such as the Belt and Road Forum for International Cooperation, the brand image was constantly enhanced. In collaboration with top competition events such as the Australian Open and the International Table Tennis Federation, the Company continuously upgraded crossover marketing in the cultural and sports fields; by carrying out a global cultural tour, the Company interpreted the spiritual connotation of "letting the world taste the Chinese flavour" through practical actions. The rankings of the Company's two brands were significantly improved in the lists such as the annual Hurun Most Successful Chinese Heritage Brands and the Kantar BrandZTop 100 Most Valuable Chinese Brands. E. Empowered by digital and intelligent technologies and driven by innovation The Company firmly promoted the building of "digital and intelligent Luzhou Laojiao" and was awarded the title of Digital Intelligence Pioneer Enterprise of Sichuan Province. The benefits of digital marketing doubled. The Company continuously promoted the digitisation of channels, consumers, and employees, and established a digital management system and labelling system for core consumption assets. The digital and intelligent production efficiency was improved. The intelligent packaging centre was completed and put into operation, the first phase of the intelligent production scheduling command centre was completed, and the building of the production information system was smoothly promoted. These showed that the level of digital production was far ahead. The efficiency of digital management was innovated. The Company accelerated the digitisation process in supply chain management, financial management, safety production, and knowledge management, with top-level design blueprints and diverse management applications. The Company's production and operation further achieved cluster-based efficiency innovation and all-round data circulation. F. Implementing fine management and consolidating foundation The Company's headquarters achieved significant results in capacity building. Basic management continued to improve. The Company established a management framework based on organisation, with finance as the core, assessment as the guarantee, and digital intelligence as the support, integrating authorisation, systems, and processes. Risk prevention and control continued to be strengthened. The Company continuously strengthened audit efforts, carried out inspections and supervision on key production and operation tasks, strictly controlled legal risks, and adhered to compliant operations. Talent selection and cultivation was constantly strengthened. The Company further enriched the talent pool and continued to carry out the targeted training work; it led the establishment of the Professional Committee of Baijiu Brewing and Baijiu Body Design of the Chinese Workers' Technical Association. The employee innovation project was awarded the second prize of the National Excellent Innovation Achievement Award for Employees, and the Company was awarded the "National May First Labor Medal". 2023 Annual Report of Luzhou Laojiao Co., Ltd. 22 G. Assuming responsibilities and promoting a shared future with harmony The Company actively practiced the corporate philosophy of "Baijiu for the World, a Shared Future", reflecting the responsibilities of a state-owned enterprise, and it won the "Social Welfare Award at the 30th anniversary of the China Alcoholic Drinks Association". Assistance was provided for underdeveloped counties to ensure their basic needs to be met. The Company actively promoted seven types of assistance projects, including rural infrastructure building, industrial assistance, education assistance, and condolence donations. The implementation of social charitable activities was promoted. The Company continuously carried out donation projects for education such as "Little Schoolbag, Big Love", " Pillars Project", "Luzhou Laojiao Scholarship", and "Luzhou Laojiao Teacher's Pointer". Low-carbon and sustainable ecological development was practiced. The Company promoted resource recycling and improved the level of clean production, achieving remarkable results in green and low-carbon development, and it was included on the list of the "2023 China Industry Carbon Peaking Leaders". Social responsibility reporting was constantly improved. The ESG project comprehensively showcased the good image of Luzhou Laojiao that actively assumed social responsibility, and the Company was included into the "ESGPioneer 100 List of Listed Companies in China". 4.2. Revenues and cost of sales 4.2.1. Breakdown of operating revenues Unit: CNY 2023 2022 YoYChange Amount As % of operating revenues Amount As % of operating revenues Total 30,233,301,388.26100% 25,123,563,271.62100% 20.34% By business segment Baijiu 30,077,278,859.5899.48% 24,766,121,998.4998.58% 21.45% Other revenues 156,022,528.680.52% 357,441,273.131.42% -56.35% By product Mid- and high-end baijiu 26,841,342,073.1488.78% 22,132,546,058.6488.10% 21.28% Other baijiu 3,235,936,786.4410.70% 2,633,575,939.8510.48% 22.87% Other revenues 156,022,528.680.52% 357,441,273.131.42% -56.35% 2023 Annual Report of Luzhou Laojiao Co., Ltd. 23 By geographical segment Domestic 30,056,130,668.7299.41% 24,970,484,945.5899.39% 20.37% Overseas 177,170,719.540.59% 153,078,326.040.61% 15.74% By sales model Traditional channel operation model 28,657,038,767.8694.79% 23,302,396,093.4392.75% 22.98% Emerging channel operation model 1,420,240,091.724.70% 1,463,725,905.065.83% -2.97% Other revenues 156,022,528.680.51% 357,441,273.131.42% -56.35% 4.2.2. Business segments, products, geographical segments or sales models contributing over 10% of the operating revenues or profits Applicable N/A Unit: CNY Operating revenue Cost of sales Gross profit margin YoY change of operating revenue YoY change of cost of sales YoY change of gross profit margin By business segment Baijiu 30,077,278,859.583,484,544,720.1088.41% 21.45% 8.41% 1.39% By product Mid- and high-end baijiu 26,841,342,073.142,076,149,454.3492.27% 21.28% 4.80% 1.22% Other baijiu 3,235,936,786.441,408,395,265.7656.48% 22.87% 14.21% 3.31% By geographical segment Domestic 30,056,130,668.723,511,380,225.1088.32% 20.37% 4.83% 1.73% By sales model Traditional channel operation model 28,657,038,767.863,143,781,427.0689.03% 22.98% 6.94% 1.65% Under the circumstances that the statistical standards for the Company’s main business data were adjusted in the reporting period, the Company’s main business data in the current year is calculated based on adjusted statistical standards at the end of the reporting period Applicable N/A 4.2.3. Whether revenue from sales of goods is higher than revenue of rendering services Yes No By business segment Item Unit 2023 2022 YoYChange Baijiu Sales volume Ton 96,278.1286,182.6511.71% Production volume Ton 83,956.4987,902.60 -4.49% 2023 Annual Report of Luzhou Laojiao Co., Ltd. 24 Inventory Ton 42,250.8754,572.50 -22.58% Reason for any over 30% YoY movements in the data above Applicable N/A 4.2.4. Execution of significant sales or purchase contracts in the reporting period Applicable N/A 4.2.5. Breakdown of cost of sales By business segment Unit: CNY By business segment Item 2023 2022 YoYChange Amount As % of cost of sales Amount As % of cost of sales Baijiu Raw materials 2,938,909,467.9784.34% 2,757,973,459.7085.80% 6.56% Baijiu Labor costs 261,260,432.247.50% 208,363,976.366.48% 25.39% Baijiu Manufacturing overhead 284,374,819.898.16% 247,916,280.857.71% 14.71% 4.2.6. Change in the scope of the consolidated financial statements for the reporting period Yes No During the current period, two subsidiaries, Luzhou Baonuo Biotechnology Co., Ltd. and Luzhou Laojiao Custom Liquor Co., Ltd., were liquidated and de-registered in October 2023 and December 2023, respectively. And they have been excluded from the consolidated financial statements since their de-registration. 4.2.7. Major changes in the business, products or services in the reporting period Applicable N/A 4.2.8. Main customers and suppliers Sales to main customers of the Company Total sales to top five customers（CNY） 18,830,449,252.26 Total sales to top five customers as % of the total sales 62.28% Total sales to related parties among top five customers as % of the total sales 0.00% Information on top five customers No. Customer Sales amount (CNY) As % of the total sales for the year 2023 Annual Report of Luzhou Laojiao Co., Ltd. 25 1 Customer A 13,257,808,911.0443.85% 2 Customer B 1,969,215,689.386.51% 3 Customer C 1,758,771,037.595.82% 4 Customer D 1,250,271,768.334.13% 5 Customer E 594,381,845.921.97% Total -- 18,830,449,252.2662.28% Other information on main customers Applicable N/A Main suppliers of the Company Total purchases from top five suppliers（CNY） 1,332,690,651.98 Total purchases from top five suppliers as % of the total purchases 34.12% Total purchases from related parties among top five suppliers as % of the total purchases 4.91% Information on top five suppliers No. Supplier Purchases (CNY) As % of the total purchases for the year 1 Supplier A 386,156,811.999.89% 2 Supplier B 316,848,393.448.11% 3 Supplier C 237,525,381.976.08% 4 Supplier D 200,350,449.715.13% 5 Supplier E 191,809,614.874.91% Total -- 1,332,690,651.9834.12% Other information on main suppliers Applicable N/A 4.3. Expenses Unit: CNY 20232022 YoYChange Reason for any significant change Selling and distribution expenses 3,974,425,526.923,448,771,046.0215.24% General and administrative expenses 1,139,480,677.231,162,422,257.23 -1.97% Finance expenses -371,152,206.41 -286,376,927.48 R&D expenses 225,955,797.33206,248,486.579.56% 2023 Annual Report of Luzhou Laojiao Co., Ltd. 26 The Company shall comply with the disclosure requirements for companies engaging in food & liquor and wine production of the Guidelines No.3 of the Shenzhen Stock Exchange on Sel f-regulation of Listed Companies—Industry-specific Information Disclosure. 4.3.1. Breakdown of selling and distribution expenses Unit: CNY Selling and distribution expenses 20232022 YoYChange Reason for any significant change Advertising expenses 1,614,086,963.331,880,179,769.91 -14.15% Sales promotion expenses 1,479,620,839.26712,641,702.96107.62% Mainly due to the increased sales promotion activities in the current period Warehousing and logistics expenses 198,741,925.26138,589,417.9443.40% Mainly due to the increased sales revenue from baijiu, leading to a corresponding increase in warehousing and logistics expenses Labor costs 297,757,314.24355,699,286.88 -16.29% Other 384,218,484.83361,660,868.336.24% 4.3.2. Breakdown of advertising expenses Unit: CNY Advertising Expenses Online advertising (exclusive of TV advertising) 292,940,860.00 Offline advertising 329,644,361.77 TV advertising 378,942,183.00 Other (inclusive of branding ideas, exhibitions & showcases, advertising materials, activity planning, etc.) 612,559,558.56 4.4. R&D investments Applicable N/A Major R&D projects Purpose Progress Specific objectives Expected impact on the Company Thermochemical Energy- and Resource-based Coupled Utilization Technology of Brewing Waste The project is a national key R&D program during the "13th Five-year Plan" period undertaken by Luzhou Laojiao, which aims to realize the energy- and resource-based utilization of brewing waste with thermochemical technology, and develop a complete Taking brewing waste as the research target and the energy- and resource-based research and development of thermochemical treatment as the technical breakthrough, the project develops and completes one pilot line for drying and To develop an intelligent equipment system with packaged technology for the resource- and energy-based utilization of brewing waste, successfully build a demonstration base for the project industrialization, and achieve more than 90% of resource- Realize a large-scale resource- and energy-based utilization of brewing waste and achieve both ecological and economic benefits. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 27 set of intelligent equipment systems for the resource- and energy-based utilization of brewing waste. pyrolysis of distiller's grains, and realizes the processing capacity of five tons/day for distiller's grains. Currently, the Company is building an industrial demonstration line with a processing capacity of 100,000 tons/year, making a systematic breakthrough in the resource-based utilization technology of brewing waste and industrialization in China. and energy-based utilization of brewing waste to ensure the low-carbon, green development of the Chinese baijiu industry. Study on the Expression Regulation of Key Genes in Leaven Microorganisms in China and Japan and the Improvement of Chinese Leaven Quality The project is an international project that the Company jointly undertook, which studies the evolution pattern and formation mechanism of microbiomes during the natural leaven-marking and fermentation, and screens for microbial strains with specific functions for the production of functional enhanced leaven. A study on the diversity of microorganisms in the incised notopterygium has been carried out. Multiple omics analyses including macro-genomic and metabolomic analysis of strong-flavor baijiu were completed. Functional enhanced leaven was developed, and corporate standards for finished strong-flavor baijiu and other products were formulated. To develop functional leaven according to different quality indicator requirements based on functional leaven-marking microorganisms and key gene expression regulation, systematically evaluate the efficacy of leaven and optimize the process. Improve the leaven and baijiu quality and enhance the Company's core competitiveness. High-value Patent Incubation Center Project of Luzhou Laojiao The project is to implement national standards for intellectual property management, and achieve efficient management of the Company in the creation, application and protection of intellectual property. An all-round layout of intellectual property is made around the core key technologies of the industrial chain to promote the creation The Company has continuously improved the enterprise's intellectual property management system, and passed the annual supervision and audit of the management system; the Company has passed the annual assessment of national intellectual property demonstration enterprises; focusing The Company has strengthened the close integration of intellectual property creation and protection with the whole process of technological innovation, enhanced the capability of the enterprise to create intellectual property and prevent potential intellectual property risks. The Company has strengthened the analysis and application of patent The Company has established a sound intellectual property management system, strengthened the creation and protection of intellectual property, and enhanced the core competitiveness of the enterprise. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 28 of high-quality patents and build a patent pool for core technologies. on key technologies, the Company has fully utilised patent analysis tools to conduct competitive situation analysis, and prepare situation analysis and layout reports; the Company has organised high-value patent cultivation training and technical discussions and exchanges to enhance the awareness of intellectual property creation and protection among all staff. information, laid out and explored intellectual property around core key technologies, and formed a series of high-value patents with technical, economic, and legal value. Establishment of Sichuan Innovation Center for Solid-state Brewing Technologies The Company took the lead to jointly build the Sichuan Innovation Center for Solid-state Brewing Technologies with several universities, institutes and other enterprises, aiming to overcome a batch of core technological challenges in solid-state brewing and resolve the major problem of "large scale but weak capacity" faced by the solid-state brewing sector. The Company has developed and improved the policy system for the Innovation Center, perfected the infrastructure of the Innovation Center, and continued to carry out solid-sate brewing technology research, industry exchanges, result transformation and talent training. Relying on the Innovation Center as the carrier, Luzhou Laojiao initiated the establishment of the "Solid-state Brewing Technology Innovation Alliance in the Chengdu-Chongqing Twin City Economic Circle", and served as the first chairman unit of the Alliance. The Alliance absorbed more than 60 member units upstream and downstream of the industrial chain to serve the development of the To gathering innovative resources in solid-state brewing, create an innovation alliance in the solid-sate brewing sector, make breakthroughs in core key technologies in the solid-sate brewing sector, and form a science and technology innovation center with national influence. Successfully build a technological innovation platform, thereby improving the Company's scientific and technological innovation capabilities and level. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 29 solid-state brewing industry. AStudy on the Optimization of Key Intelligent Equipment and the System Control for Brewing By applying modern technologies such as intelligent sensing, image recognition, spectral technology and bio-chips, the project aims to develop core technologies for each link of brewing production, including fermentation, vinasse-based ingredient making, distillation of grains in retorts and baijiu selection, and build intelligent brewing production lines with independent optimization, production decision-making and execution capabilities to comprehensively upgrade the solid-state brewing technologies in the baijiu industry. Luzhou Laojiao carries out industry-university-research cooperation with universities and research institutes in the field of intelligent brewing, deeply analyzes traditional production processes and fermentation principles, innovatively applies simulation technology, automation technology, online testing, industrial robots, big data analysis, intelligent decision-making and other technologies to the brewing engineering renovation project of Luzhou Laojiao, breaks through the key bottleneck of intelligent brewing technology, and forms the first intelligent baijiu brewing demonstration solution for the whole brewing process in the industry. The project results were appraised by an expert committee with Academician Sun Baoguo as the chairman as "international leading level" and won the First Prize of Sichuan Science and Technology Progress Award. To build an intelligent brewing demonstration production line. Level up the Company's intelligent brewing and promote the transformation and upgrading of the traditional brewing industry. Construction of the Brewing Microbial Resources and Data Platform The project aims to carry out collection of brewing microbial resources, rapid isolation, authentication, review and transfer Luzhou Laojiao carries out industry-university-research cooperation with universities, and has screened and obtained a series of To establish a brewing microbial strain bank of a certain scale, which can achieve long-term safe preservation of Master the core resources of baijiu brewing microorganisms and enhance the Company's ability to protect and utilize 2023 Annual Report of Luzhou Laojiao Co., Ltd. 30 of microbial resources in the brewing process of baijiu and development of excellent strains for industrial use, establish a brewing microbial strain library and related enzymology library, and promote the protection, sharing and sustainable utilization of brewing microbial resources. new species and key functional microorganisms such as the "Laojiao Lactobacillus", "Laojiao Syntrophococcus", and "Laojiao Clostridium" in the pit mud based on the analysis of the metabolic basics of the microbial flora in the mud of the 400-year-old national treasure fermentation pit.20 applications for invention patents related to functional strains have been filed, of which three have been granted. The Company analyzed their brewing performance and applied them to brewing production, which has strongly improved the sensory quality and quality of the base baijiu. The relevant achievements have won the First Prize of Sichuan Patent Award and the First Prize of 2023 Science & Technology Progress Award of China Alcoholic Drinks Association. strains and is supplemented by special information technology to manage strain information. brewing microbial resources. Information about R&D personnel 20232022 YoYChange Number of R&D personnel 468480 -2.50% R&D personnel as % of total employees 12.55% 13.31% -0.76% Educational backgrounds of R&D personnel Bachelor’s degree 307320 -4.06% Master’s degree 131133 -0.01% Doctoral degree (including postdoctoral 302711.11% 2023 Annual Report of Luzhou Laojiao Co., Ltd. 31 workstations) Age structure of R&D personnel Below 30 217218 -0.46% 30~40204219 -6.85% Information about R&D investments 20232022 YoYChange R&D investments (CNY) 267,474,647.16206,248,486.5729.69% R&D investments as % of operating revenues 0.88% 0.82% 0.06% Capitalized R&D investments (CNY) 0.000.000.00% Capitalized R&D investments as % of total R&D investments 0.00% 0.00% 0.00% Reason for any significant change in the composition of R&D personnel and the impact Applicable N/A Reason for any significant YoY change in the percentage of the R&D investments in the operating revenues Applicable N/A Reason for any sharp variation in the percentage of the capitalized R&D investments and rationale Applicable N/A 4.5. Cash flows Unit: CNY Item 20232022 YoYChange Subtotal of cash inflows from operating activities 32,865,186,758.6126,877,272,861.8222.28% Subtotal of cash outflows from operating activities 22,216,821,823.1518,614,624,592.1019.35% Net cash flows from operating activities 10,648,364,935.468,262,648,269.7228.87% Subtotal of cash inflows from investing activities 1,933,604,489.482,243,596,415.18 -13.82% Subtotal of cash outflows from investing 3,201,722,342.484,117,450,731.91 -22.24% 2023 Annual Report of Luzhou Laojiao Co., Ltd. 32 activities Net cash flows from investing activities -1,268,117,853.00 -1,873,854,316.73 Subtotal of cash inflows from financing activities 6,860,373,039.145,372,133,945.0927.70% Subtotal of cash outflows from financing activities 8,078,799,107.437,450,522,397.498.43% Net cash flows from financing activities -1,218,426,068.29 -2,078,388,452.40 Net increase in cash and cash equivalents 8,164,022,685.994,326,477,650.0488.70% Explanation of why the data above varied significantly Applicable N/A Net cash flows from investing activities increased by CNY 605,736,463.73 year-on-year, mainly due to the decreased purchase of wealth management products (collective asset management plans) from securities firms in the current period. Net cash flows from financing activities increased by CNY 859,962,384.11 year-on-year, mainly due to the receipt of bank loan in the current period. Net increase in cash and cash equivalents increased by CNY 3,837,545,035.95 year-on-year, indicating an increase of 88.70%. It was mainly due to the increased net cash flows from operating, investing and financing activities in the current period. Explanation of main reasons leading to the material difference between net cash flows from operating activities during the reporting period and net profit for the year Applicable N/A 5. Analysis of non-core business Applicable N/A 6. Assets and liabilities 6.1. Significant change of asset items Unit: CNY At the end of 2023 At the beginning of 2023 Change in percentage Reason for any significant change Amount As % of total assets Amount As % of total assets Cash and cash equivalents 25,952,025,091.2841.00% 17,757,528,211.2534.56% 6.44% 2023 Annual Report of Luzhou Laojiao Co., Ltd. 33 Accounts receivable 17,461,378.980.03% 5,939,420.780.01% 0.02% Inventories 11,622,043,947.4618.36% 9,840,742,374.8519.15% -0.79% Investment property 37,785,416.770.06% 39,149,454.220.08% -0.02% Long-term equity investments 2,708,254,833.504.28% 2,667,500,553.175.19% -0.91% Fixed assets 8,613,223,465.4613.61% 8,856,258,598.7817.23% -3.62% Construction in progress 1,718,468,880.532.72% 808,919,047.211.57% 1.15% Right-of-use assets 23,260,955.230.04% 39,952,525.630.08% -0.04% Contract liabilities 2,672,977,090.304.22% 2,566,374,718.764.99% -0.77% Long-term loans 10,000,300,000.0015.80%13,179,600,000.006.19% 9.61% Mainly due to the receipt of bank loan in the current period Lease liabilities 22,356,404.470.04% 29,096,969.660.06% -0.02% Note 1: The Company is currently in a period of business expansion. According to the actual operation situation, the Company utilises low-cost borrowings and its own funds to carry out important project construction, and carries out reasonable cash management in accordance with the progress of the projects. Under the premise of controllable risks, the Company has moderately increased its financial leverage and optimised its capital structure, which can help increase the return on capital and the Company's earnings. Whether overseas assets account for a larger proportion in total assets Applicable N/A 6.2. Assets and liabilities measured at fair value Applicable □ N/A Unit: CNY Item Opening balance Changes in fair value through profit or loss Changes in cumulative fair value recorded into equity Provision for impairment Amount of purchase Amount of sale Other changes Closing balance Financial asset 1.Held-for-trading financial assets (exclusive of derivative financial assets) 1,073,466,7 80.37 62,998,156.40 1,700,000,0 00.00 1,409,472,8 37.94 1,426,992,0 98.83 2023 Annual Report of Luzhou Laojiao Co., Ltd. 34 4.Investments in other equity instruments 1,136,736,9 78.11 146,614,564.52 391,086,685.52 402,893,468.80 6. Accounts receivables financing 4,583,352,5 03.37 1,354,818,5 04.56 5,938,171,0 07.93 Subtotal of financial assets 6,793,556,2 61.85 62,998,156.40 146,614,564.52 1,700,000,0 00.00 1,800,559,5 23.46 1,354,818,5 04.56 7,768,056,5 75.56 Total 6,793,556,2 61.85 62,998,156.40 146,614,564.52 1,700,000,0 00.00 1,800,559,5 23.46 1,354,818,5 04.56 7,768,056,5 75.56 Financial liability 0.009,694.10 69.779,763.87 Whether measurement attribution of main assets changes significantly in this year Yes No 6.3. Restricted asset rights as of the end of this reporting period Item Closing balance Reason Other cash and cash equivalents (CNY) 10,000,000.00 Restricted bank guarantees Bank deposits (CNY) 48,222,882.52 Accrued interest on term deposits Other cash and cash equivalents (CNY) 772,930.90 Restricted security deposits at e-commerce platforms Total 58,995,813.42 7. Investment 7.1. Total investment Applicable N/A Investment made in the reporting period (CNY) Investment made in the prior year (CNY) YoY change 3,415,581,665.594,633,852,571.05 -26.29% 7.2. Significant equity investment made in the reporting period Applicable N/A 2023 Annual Report of Luzhou Laojiao Co., Ltd. 35 7.3. Significant ongoing non-equity investment in the reporting period Applicable □ N/A Unit: CNY Item Investment form Whether it is a fixed asset investment Industry of the investment project Amount of input in the reporting period Accumulated actual input amount by the end of the reporting period Capital source Project progress Projected income Accumulated actual income by the end of the reporting period Reasons for not meeting the schedule and projected income Date of disclosure (if any) Disclosure index (if any) Luzhou Laojiao Technical Upgrade Project of Intelligent Brewing (Phase I) Self-built Yes Baijiu 205,55 5,761.1 4 788,85 6,006.8 1 Self-financing 15.00% 0.000.00 N/A 13 July 2022 Announcement No. 2022-24 on the Implementation of Luzhou Laojiao Technical Upgrade Project of Intelligent Brewing (Phase I) by Subsidiary on http://www.cninfo.com.cn/ Total -- -- -- 205,55 5,761.1 4 788,85 6,006.8 1 -- -- 0.000.00 -- -- -- 2023 Annual Report of Luzhou Laojiao Co., Ltd. 36 7.4. Financial assets investment 7.4.1. Securities investment Applicable □ N/A Unit: CNY Category of securities Stock code Abbreviation of securities Initial investment cost Accounting measurement model Beginning book balance Changes in fair value recognized in profit or loss Changes in the cumulative fair value recorded into equity Amount of purchase Amount of sale Profit and loss during the reporting period Closing book balance Accounting item Capital source Domestic and foreign stock 60121 1 GTJA 12,719,156.7 6 Fair value measurement 160,04 9,389.21 162,52 2,558.58 6,241,808.41 175,24 1,715.34 Investments in other equity instruments Own fund Domestic and foreign stock 00224 6 SNC 1,030,000.00 Fair value measurement 14,931,950.2 4 11,775,515.4 4 78,177.75 12,805,515.4 4 Investments in other equity instruments Own fund Domestic and foreign stock 01983 LZBANK 51,120,000.0 0 Fair value measurement 120,15 8,392.72 45,613,837.6 9 3,471,360.00 96,733,837.6 9 Investments in other equity instruments Own fund Domestic and foreign stock 01880 CTG Duty-Free 542,28 5,380.80 Fair value measurement 807,13 9,120.07 - 66,344,205.6 0 391,08 6,685.52 977,28 0.23 84,854,489.6 8 Investments in other equity instruments Own fund Total 607,15 4,537.56 -- 1,102,278,85 2.24 0.00 153,56 7,706.11 0.00 391,08 6,685.52 10,768,626.3 9 369,63 5,558.15 -- -- 7.4.2. Derivative investment Applicable □ N/A 2023 Annual Report of Luzhou Laojiao Co., Ltd. 37 A. Derivatives investments for hedging purposes in the reporting period Applicable □ N/A Unit: CNY 10,000 Type of derivative Initial investment amount Opening amount Gain or loss on change in fair value during the current period Cumulative fair value change recorded in equity Purchased in the current period Sold in the current period Closing amount Closing amount as % of the Company’s closing equity Forward forex sale and settlement contract 00 -9.7200000.00% Total 00 -9.7200000.00% Explanation of significant changes in accounting policies and specific financial accounting principles in respect of the Company's hedges for the reporting period as compared to the prior period In accordance with the relevant provisions and guidelines of the Accounting Standards for Business Enterprises No.22 - Recognition and Measurement of Financial Instruments and the Accounting Standards for Business Enterprises No.37 - Presentation of Financial Instruments issued by the Ministry of Finance, the Company took the relevant accounting measures for its business of derivative transactions to reflect the relevant items in the balance sheet and the income statement. The Company did not meet the applicable conditions of the Accounting Standards for Business Enterprises No.24 - Hedge Accounting and did not yet apply hedge accounting. The hedging business during this Reporting Period was a newly added business and was not carried out in the previous reporting period. Actual gain/loss in the reporting period In accordance with the Accounting Standard for Business Enterprises No.37 - Presentation of Financial Instruments, changes in fair value were included in the profit and loss for the current period, and a loss of CNY 97.2 thousand was valued at fair value during the holding period. Results of hedges The forward foreign exchange settlement and sales business engaged in by the Company was based on specific business operations and the Company's production and operation, hedging product price and exchange fluctuation risks, achieving expected risk management goals, and playing a positive role in stabilizing production and operation. Source of derivatives investment funds Own fund Risk analysis of positions held in derivatives during the reporting period and explanation The financial derivatives business conducted both domestically and internationally had a real business background. The Company will strictly control the types and sizes of financial derivatives business, choose foreign exchange hedging products with simple structures as much as possible, and do not engage in complex financial derivatives business beyond the actual needs of operation. The purpose is only to lock in risk exposure, and match with actual foreign exchange receipts and disbursements. The Company will not engage in any form or substance of speculative transactions. The term of the purchased foreign exchange hedging products should be as close to or equal to the term of the Company's foreign exchange risk exposure as possible, and should not exceed the term of the foreign exchange risk exposure. The Company will only engage in foreign exchange hedging transactions with financial institutions with corresponding business qualifications approved by the State Administration of Foreign Exchange (SAFE) and the People's Bank of China. The Company will strictly 2023 Annual Report of Luzhou Laojiao Co., Ltd. 38 of control measures (including but not limited to market risk, liquidity risk, credit risk, operational risk, legal risk, etc.) control the size of foreign exchange forward contracts. In order to meet the needs of normal production and operation, it is expected that the cumulative foreign exchange hedging business carried out by the Company and its holding subsidiaries will not exceed the equivalent of CNY 500 million. The above limit can be used in a rolling and circular manner. The Company will pay close attention to changes in the international and domestic market condition, strengthen its research and analysis of exchange rates, regularly review and adjust foreign exchange hedging plans in response to market and business changes, and avoid exchange losses to the greatest extent possible. If there is a partial deviation between the actual business amount and term and the expected income and expenditure plan due to changes in the business of transaction enterprises, it will not pose a substantial delivery risk to the hedging transaction. Transaction enterprises will strengthen the management of accounts receivable, closely track customer payments, actively collect payments, reduce risks of customer default and contract breaching, and control the risks that the Company may face within an acceptable range. The Company has formulated the Foreign Exchange Hedging Business Management System, which clearly stipulates the management organisation, approval authority, operation procedures, risk control, information disclosure, information confidentiality of the Company's foreign exchange hedging business, effectively regulating and controlling the behaviour and risks of foreign exchange hedging business. Transaction enterprises will regularly organise professional training for personnel involved in financial derivatives business, enable them to fully understand the characteris tics and risks of financial derivatives trading, continuously strengthen the professional ethics education and professional literacy of relevant personnel, and improve their business level. Changes in market prices or fair value of derivative products during the reporting period, specific methods used and relevant assumption and parameter settings shall be disclosed for analysis of fair value of derivatives Forward foreign exchange settlement and sales products are featured by high market transparency and active transactions, and transaction prices and settlement prices of that day can fully reflect the fair value of derivatives; the losses from changes in fair value during the Reporting Period was CNY 97.2 thousand, determined based on the market price of the exchange at the end of the period. Litigation involved (if applicable) N/A Disclosure date of the announcement about the board’s consent for the derivative investment (if any) 13 June 2023 Special opinions expressed by non-The Company's foreign exchange hedging business was carried out to meet the normal production and operation needs, with the aim of avoiding foreign exchange market risks, preventing adverse effects caused by significant fluctuations in exchange rates, controlling the Company's financial expenses, and reducing exchange rate risks in foreign operations. At the same time, the Company has formulated the Foreign Exchange Hedging Business Management System and improved relevant internal 2023 Annual Report of Luzhou Laojiao Co., Ltd. 39 executive directors concerning the Company's derivatives investment and risk control control procedures. The targeted risk control measures taken by the Company were feasible and effective. The decision-making procedures for the Company's foreign exchange hedging business complied with relevant national laws, regulations, and the Company's Articles of Association, without prejudice to the interests of the Company and shareholders as a whole, especially those of minority shareholders. Therefore, the independent directors agreed that the Company and its holding subsidiaries should carry out foreign exchange hedging business with a cumulative amount not exceeding CNY 500 million (in a rolling and circular manner) within 12 months from the date of approval by the Company's Board of Directors. B. Derivatives investments for speculative purposes in the reporting period □Applicable N/A No such cases in the reporting period 7.5. Use of funds raised Applicable N/A 7.5.1. General use of funds raised Applicable □ N/A Unit: CNY 10,000 Year Method Total amount of funds raised Net proceeds Total amount of raised funds used in the reporting period Accumulated amount of raised funds used Total amount of re-purposed funds raised in the reporting period Total amount of accumulated re-purposed funds raised Accumulated re-purposed funds raised as % of total funds raised Total amount of unused funds raised Purpose and direction of unused funds raised Amount of funds raised idle for more than two years 2020 Public offering of corporate bond 150,000149,400 24,931.3 2 111,035.54 000.00% 46,504.1 2 Deposited in special account for raised funds 0 2022 Public offering of corporate bond 150,000149,8800149,880000.00% 0 N/A 0 Total -- 300,000299,280 24,931.3 2 260,915.54 000.00% 46,504.1 2 -- 0 Notes for general use of funds raised 1. The total amount of unused funds raised of the corporate bond “20 Laojiao 01” includes interest on some funds raised. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 40 2. The funds raised of the corporate bond “22 Lujiao 01” are all used for committed purposes, and the interest income of CNY 41,633.34 from the said funds raised is used to replenish the working capital. 7.5.2. Fund raised for committed projects Applicable □ N/A Unit: CNY 10,000 Committed investment projects and direction of over-raised funds Whether the project has been changed (including partial change) Total amount of funds raised for committed investment Adjusted Investment total amount (1) Investment amount in the reporting period Accumulated input by the end of the reporting period (2) Investment progress by the end of reporting period (3)＝(2)/(1) Date of the projects reach the working condition for their intended use Realized benefits during the reporting period Whether the expected benefits have been achieved Whether the feasibility of the project has changed significantly Committed investment projects Technical Renovation Project of Brewing (Phase II) No 398,400398,400 15,569.2 4 329,497.86 91.39% 30 June 2021 N/AYes No Project of Intelligent Upgrading and Building of the Information Management System No 9,362.08 17,595.9 7 N/AN/ANo No Project of Acquiring Sealing Equipment for the Cellar of Huangyi Brewing Base No 012,043.3 30 June 2021 N/AYes No Project of Acquiring Accessory Equipment for Leaven Making for No 04,980.25 30 June 2021 N/AYes No 2023 Annual Report of Luzhou Laojiao Co., Ltd. 41 Huangyi Brewing Base Subtotal of committed investment projects -- 398,4001398,400 24,931.3 2 364,117.3 8 -- -- N/A -- -- Use of over-raised funds None Total -- 398,400398,400 24,931.3 2 364,117.3 8 -- -- N/A -- -- Explain project by project the situation and reason for not reaching plan progress or expected benefits (including reason for inputting “N/A” for “Whether the expected benefits have been achieved”) N/A Significant changes of project feasibility N/A Amount, purpose and progress of over-raised funds N/A Change of implementation site N/A 2023 Annual Report of Luzhou Laojiao Co., Ltd. 42 of investment projects Adjustment of the implementation mode of raised funds investment projects N/A Situation of advance investment and replacement Applicable On 14 May 2019, the Company held the First Extraordinary General Meeting of Shareholders of 2019, which considered and approved the Proposal on Requesting the Company’s General Meeting of Shareholders to Fully Authorize Chairman of the Board or Other Personnel Authorized by the Board to Go Through Procedures for the Public Offering of Corporate Bond. According to the Proposal, in the event of inconsistency between the payment of the raised funds and the progress of the project implementation, the Company may make advance investments using other funds (including self-owned funds, bank project loans, etc.) according to the actual situation, and replace fund investment other than capital funds when the raised funds are in place. As of 31 December 2023, the Company had replaced advance investments of self-pooled funds of CNY 653,444,758.68 using the raised funds. Idle raised funds used for temporary supplementary liquidity N/A Amount and reason for surplus of funds raised N/A Purpose and whereabouts of unused funds raised The idle raised funds are deposited in the special account No.9550880046723000135 for raised funds in the Chengdu Branch of China Guangfa Bank Co., Ltd., the special account No.517517460013000000860 for raised funds in the Luzhou Branch of Bank of Communications Co., Ltd., and the special account No.631395395 for raised funds in the Chengdu Branch of China Minsheng Banking Corp., Ltd. Problems and other situation when raised funds are used and disclosed N/A 2023 Annual Report of Luzhou Laojiao Co., Ltd. 43 Note 1: The subtotal of funds raised for committed projects was CNY 3,984 million, which was the combined amount of CNY 4,000 million (CNY 2,500 million of corporate bonds issued in August 2019 plus CNY 1,500 million of corporate bonds issued in March 2020) minus the total issuance costs of CNY 16 million. Note 2: Because there are uncertainties in the approval and issue time for bond, in order to ensure smooth progress of the projects and protect the interests of the Company’s shareholders, the investment sequence and specific amounts of the corresponding raised funds should be determined by the Chairman of the Board as authorized by the general meeting of shareholders or other persons as authorized by the Board of Directors within the scope of the four raised funds investment projects according to the actual needs, provided that the capital funds for each project is no less than 20% of the total investment. Note 3: As of 31 December 2023, the Project of Intelligent Upgrading and Building of the Information Management System was in the process. Note 4: These raised funds investment projects have helped further expand the Company’s production and sales, and increase its comprehensive competitiveness. The economic benefits of these projects cannot be measured separately. 7.5.3. Re-purposed funds raised Applicable N/A No such cases in the reporting period 8. Sale of major assets and equity interests 8.1. Sale of major assets Applicable N/A No such cases in the reporting period. 8.2. Sale of major equity interests Applicable N/A 9. Analysis of major subsidiaries Applicable N/A 2023 Annual Report of Luzhou Laojiao Co., Ltd. 44 Main subsidiaries and joint companies with an over 10% influence on the Company’s net profit Unit: CNY Company name Company type Business scope Registered capital Total assets Net assets Operating Revenue Operating profit Net profit Luzhou Laojiao Sales Co., Ltd. Subsidiary Sales of baijiu series such as “National Cellar 1573” and “Luzhou Laojiao” 100,000,0 00.00 8,677,934,513.38 2,486,013,024.18 29,064,19 6,996.65 13,367,29 8,229.61 10,013,69 9,095.81 Acquisition and disposal of subsidiaries during the reporting period □ Applicable N/A Notes for major holding companies and joint stock companies There were no major holding companies or joint stock companies during the reporting period of which information shall be disclosed. 10. Structured entities controlled by the Company Applicable N/A 11. Outlook for the future development of the Company 11.1. Industry landscape and trends A. According to the data released by the China Alcoholic Drinks Association, in 2023, the national baijiu sector produced 6.29 million kilolitres, experiencing a decline of 5.1% compared to the previous year; however, it generated sales revenue of CNY 756.3 billion, up by 9.7%, and realised a total profit of CNY 232.8 billion, an increase of 7.5%. The output of baijiu continued to decline, and the industry became more and more concentrated in well-known production areas, famous brands, excellent culture, and high quality. The competition in baijiu sector became increasingly fierce. B. In recent years, more and more baijiu enterprises have increased their investment in technological innovation, made significant progress in platform building, technology research and development, the transformation of industry, university and research institutions, and software and device improvement, and formed their own advantages and characteristics. In the face of increasingly fierce technological competition, the technological strength of leading industries will truly become the core competitiveness that supports the development of enterprises. C. Enterprises accelerate the deep integration of their operations with the increasingly perfect big data, Internet of Things and artificial intelligence technology, and Chinese baijiu is stepping into the 2023 Annual Report of Luzhou Laojiao Co., Ltd. 45 era of digital and intelligent development at a faster speed. Strengthening the concept of digital intelligence, building a digital and intelligent system and cultivating digital and intelligent talents will become the key work of baijiu enterprises in the future. D. In the era of traffic, the baijiu industry is showing a trend of younger people-oriented, low-alcoholic, fashionable and healthy development. The "people, goods, and venues" and "online and offline" are gradually integrated, and new sales methods, new technologies and new models emerge in endlessly. 11.2. The Company’s development strategy 11.2.1. Development opportunities in the future A. In recent years, supporting and encouraging the development of baijiu industry has become an important part of governments at all levels and relevant competent departments to develop new productivity and promote high-quality development. The State Council, the Ministry of Industry and Information Technology, the Ministry of Culture and Tourism and local governments have successively issued policies and measures to support the development of baijiu industry. As the main representative and local pillar enterprise of Sichuan baijiu, Luzhou Laojiao has embraced a valuable opportunity for high-quality development. B. The baijiu industry has entered a structural adjustment cycle. The number of baijiu enterprises above designated size and baijiu production capacity have continued to decline, and sales revenue and total profits have increased year by year. Chinese baijiu industry is moving from an extensive production capacity expansion stage to a profit-driven stage where high-quality production capacity dominates. In the next few years, Chinese baijiu is still in the accelerated concentration period of the industry. In such industry environment, Luzhou Laojiao, with well-known production areas, famous brands, excellent culture, and excellent quality, will strive to stand out. C. Over the past over 40 years of reform and opening up, with the rapid economic growth, cultural prosperity and revival, and the rising international status, an increasing number of Chinese people show their recognition of national culture, support for national industries, and recognition of national brands, which has brought a golden opportunity for high-quality development of Chinese baijiu, an excellent national brand. As the pioneer of strong aromatic baijiu, Luzhou Laojiao has the opportunity to rise inevitably in market competition and seize new heights in industry development. 11.2.2. Possible challenges and risks in the future A. Macroeconomic risk: The global economic growth momentum is insufficient, regional flashpoints are frequent, and the complexity, severity, and uncertainty of the external environment are increasing. The foundation for China's sustained economic recovery is not yet stable, with insufficient effective demand, overcapacity in some industries, and gloomy social expectations. There are still many risks and hidden dangers, bottlenecks in the domestic circulation and interference in the international circulation, bringing more uncertainty to the domestic consumption environment. B. Market competition risk: The baijiu industry has entered a new round of structural adjustment cycle, and the industry development trend of "competition, differentiation and concentration" has accelerated its evolution, requiring enterprises to constantly achieve innovation, improve brand value, optimise product structure, strengthen channel management, improve operational efficiency, and improve competitiveness through digital transformation and other means. At the same time, they also need to pay attention to industry trends and flexibly adjust strategies to adapt to the changing market environment. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 46 11.2.3. The Company's "14th five-year" development strategy No change occurred to the Company’s "14th five-year" development strategy. For details, see the 2021 Annual Report. 11.3. Completion of the business plan in 2023 For the reporting period, operating revenue amounted to CNY 30.233 billion, up 20.34% year on year; and the net profit attributable to the shareholders of the listed company reached CNY 13.246 billion, up 27.79% year on year. The Company has successfully completed its business target “to achieve a year-on-year increase in operating revenue by at least 15%" as set by the Board of Directors at the beginning of the year. 11.4. Business plan in 2024 In production and operation, the Company will implement the development theme of "proceeding with confidence, overcoming challenges, innovating, and collaborating", adhere to the principle of pursuing innovation while maintaining integrity, and comprehensively overcoming challenges, and strive for a comprehensive victory in the key battle of the 14th Five-Year Plan, with a focus on the overall working idea of "aiming at one objective, focusing on three cores, and promoting six improvements". 11.4.1. Annual objective The Company will strive to achieve a year-on-year increase in operating revenue by at least 15% (The annual objective for 2024 is formulated by the Company according to the 14th five-year strategic plan and based on its business capabilities. It does not represent the Company's profit forecast for 2024, and is not a commitment by the Company. Whether it can be achieved depends on many factors such as changes in market conditions and efforts of the operation team. There are great uncertainties. Investors are kindly reminded to pay special attention). 11.4.2. Focusing on three cores The Company will focus on digital and intelligent transformation, accelerate the coverage and drive of digitalisation in various systems, and fully leverage the effectiveness of digitalisation. Meanwhile, it will focus on brand upgrading. Under the theme of "Chinese Strong Aromatic Baijiu for 700 years", the National Cellar brand will continue to enhance its brand reputation and height, while the Luzhou Laojiao brand will continue to enhance its brand image and value. Also, it will focus on collaboration, the Company will focus on collaboration, adhere to a systematic concept, fully integrate internal and external resources, and emphasise overall design and collaborative cooperation. 11.4.3. Promoting six improvements A. Upgrading marketing model and resolutely overcoming all challenges comprehensively The Company will accelerate the upgrade of digital marketing models, fully promote the effective implementation of key strategies, complete key task indicators with high quality, and ensure the achievement of annual sales targets. B. Accelerating breakthroughs in digital and intelligent innovation and building leading advantages in this respect 2023 Annual Report of Luzhou Laojiao Co., Ltd. 47 The Company will promote high-quality digital building of marketing, production, supply chain, and management systems, rapidly increase the coverage percentage of digital technology, and achieve digitally and intelligently driven business and management. C. Focusing on the main theme of "Chinese Strong Aromatic Baijiu for 700 years" and continuously improving brand image Focusing on the main theme of "Chinese Strong Aromatic Baijiu for 700 years", the Company will classify and integrate the two brand promotion of National Cellar and Luzhou Laojiao, and make multidimensional efforts to promote cultural stories and strengthen the recognition of the Chinese honourable brands. D. Strengthening production management and upholding quality advantages The Company will strictly adhere to the lifeline of quality, firmly uphold the concept of quality first, continuously and comprehensively promote the quality-oriented production strategy, and comprehensively build a quality and safety management system for the entire industry chain, full traceability, and full lifecycle, to firmly ensure that the Company's product quality is leading. E. Strengthening the transformation of technological research achievements and enhancing the technological image of the enterprise The Company will strengthen the output of technological achievements, accelerate the transformation of technological research achievements, and strengthen the empowerment of technological research for the development of the Company. The Company will fully tap into its technology promotion resources, and enhance the Company's powerful technological support and technological promotion for production, quality, brand, and sales. F. Adhering to the systematic concept and strengthening collaborative cooperation The Company will deepen the overall design and coordination of internal decision-making mechanisms, business systems, and internal control management systems to enhance management efficiency; it will strengthen the cooperation with upstream and downstream partners in the industrial chain, and make full efforts throughout the entire chain; it will actively fulfil its social responsibility as a state-owned enterprise, supporting local economic and social development, and exerting its positive social effects. 12. Visits paid to the Company for purposes of research, communication, interview, etc. in the reporting period Applicable N/A Date of visit Place of visit Way of visit Type of visitor Visitor Main inquiry information and materials provided Index to main inquiry information 14 February 2023 Company Headquarters Field survey Institution Institutional investor Company performance nfo.com.cn/ 17 February 2023 Company Headquarters Field survey Institution Institutional investor Company performance nfo.com.cn/ 12 May 2023 Company Headquarters Communication through an online platform Other All investors Industry trends and company performance nfo.com.cn/ 2023 Annual Report of Luzhou Laojiao Co., Ltd. 48 29 June 2023 Company Headquarters Field survey Other Institutional and individual investors and media Industry trends and company performance nfo.com.cn/ 12 December 2023 Company Headquarters Communication through an online platform Institution Institutional investor Industry trends and company performance nfo.com.cn/ 13. Implementation of the action plan for "Dual Enhancement of Development Quality and Shareholder Returns" Indicate whether the Company has disclosed its action plan for "Dual Enhancement of Development Quality and Shareholder Returns". Yes □ No In accordance with the guiding ideology of "further invigorating the capital market and boosting investor confidence" proposed at the Political Bureau meeting of the CPCCentral Committee and "vigorously improving the quality and investment value of listed companies, taking more powerful and effective measures, and focusing on stabilizing the market and confidence" proposed at the State Council Executive Meeting, in order to safeguard the interests of all shareholders, boost investor confidence, and promote the long-term healthy and sustainable development of the Company, Luzhou Laojiao Co., Ltd. (hereinafter referred to as "the Company") has formulated its action plan for "Dual Enhancement of Development Quality and Shareholder Returns" in combination with the Company's development strategy, business picture, and financial condition. The specific measures are as follows: A. Strengthening confidence in strategic planning and aiming at the Company's development goals The Company has formulated the "136" strategic plan for the 14th Five-Year Plan based on the development idea of "giving play to advantages, tackling areas of weaknesses, improving quality, building strength, and seeking rejuvenation". Specifically, "1" refers to one development goal, namely, firmly insisting on the goal of regaining the "Top 3" ranking among the Chinese baijiu industry; "3" refers to three major development principles, namely, insisting on brand leadership and fully enhancing the value of Chinese famous baijiu brands, insisting on taking quality as foundation and sparing no efforts to build a core production area of world famous baijiu, and insisting on take culture as the foundation and striving to build a pilgrimage site for Chinese baijiu culture; "6" refers to "Six-in-One" Luzhou Laojiao, namely, building a strong-brand Luzhou Laojiao, a quality Luzhou Laojiao, a cultural Luzhou Laojiao, an innovative Luzhou Laojiao, a digital and intelligent Luzhou Laojiao, and a harmonious Luzhou Laojiao. Since the 14th Five-Year Plan period, the Company has firmly implemented the "136" development strategy, won key battles such as expanding production capacity, upgrading brands, and strengthening teams, and has entered a stage of high-quality development. The National Cellar 1573 brand achieved comprehensive coverage in the domestic market and was fully expanding in overseas markets; the Luzhou Laojiao brand built a strong basis in the granary market, and has gained a stable 2023 Annual Report of Luzhou Laojiao Co., Ltd. 49 and penetrating presence in the opportunity market, with much good news of the revival of famous baijiu; the breakthrough project of expanding key sales areas has been deeply promoted, market consumption has been further activated, and market share has been further increased. In terms of digital marketing and brand building, channel development and public relations empowerment, online expansion and offline integration, and overseas layout and domestic boosting, a more clear and effective path has been created with the characteristics of Luzhou Laojiao, which has made contributions to the healthy and rapid development of the Company. During the 14th Five-Year Plan period, the compound growth rate of the Company's net profit attributable to the parent company reached 30.17%, and in 2023, operating revenue amounted to CNY 30.233 billion, up 20.34% year on year; the net profit attributable to the parent company reached CNY 13.246 billion, up 27.79% year on year; and various performance indicators reached a new historical high. In the future, the Company will continue to steadfastly implement the principle of "growing as fast as possible on the basis of healthy development", and resolutely "compete" for better performance while benchmarking against outstanding enterprises in the industry and main competitors, and move towards the established goals prudently and meticulously. B. Deeply promoting technological innovation and strengthening the transformation of scientific research achievements In recent years, the Company has attached great importance to the development mode of innovation leading progress, integrated innovation forces, gathered innovation resources, tackled the frontier and common key technologies of the baijiu industry, and promoted the transfer and transformation of achievements and industry sharing, thus promoting the transformation of the baijiu industry from experience oriented to technological oriented. This has made important contributions to the technological innovation, transformation and upgrading of the baijiu industry in China. First, the Company has successfully established multiple major national-level technological innovation platforms, including the National Engineering Research Centre of Solid-State Brewing, the National Industrial Design Centre, and the National Postdoctoral Workstation. The Company has formed a comprehensive technological innovation platform system with the National Engineering Research Centre of Solid-State Brewing as the R&D core, covering basic R&D, talent cultivation, and engineering transformation in multiple fields, and has built a highland for technological innovation in the entire industry. Second, the Company has continuously increased investment in technological innovation, research and development, and continuously enhanced its independent innovation capabilities. In the past five years, the total R&D investment reached CNY 842.1 million, and the compound annual growth rate of innovation R&D investment reached 25.67%. Third, the Company has actively carried out collaborative innovation between the Company, universities and research institutions, establishing cooperative relationships with more than 30 universities and institutions such as Tsinghua University and Shanghai Jiao Tong University. Through various forms including joint laboratory building, joint undertaking of major projects, joint training of talents, and establishment of open projects, the Company has carried out extensive technical exchange and cooperation, forming a good pattern of diversified cooperation, innovative development, and mutual benefit between universities and the Company. Fourth, the Company has attached great importance to the creation and protection of intellectual property rights, and regarded intellectual property building as an important development strategy for the Company. The number of applications and authorisations for invention and utility model patents has maintained a rapid growth. Up to now, the Company has been granted 527 patents, including 188 invention patents and 2023 Annual Report of Luzhou Laojiao Co., Ltd. 50 339 utility models, both of which are at the forefront of the industry. In the future, the Company will continue to leverage its advantages in scientific research platforms, talent, and publicity to comprehensively consolidate Luzhou Laojiao's leading position in scientific research. C. Highly valuing standardised operations and improving corporate governance level The Company has continuously consolidated the foundation of corporate governance, improved the corporate governance structure, actively studied laws and regulations and the latest regulatory policies, and standardised the Company's management system. The Company has also clearly defined the responsibilities and authorities of the Board of Directors, the Board of Supervisors, general meetings of shareholders and the management in decision-making, execution, and supervision, and regulated the rights and obligations of the Company and shareholders. The Company has vigorously promoted the systematisation, standardisation, and digitalisation of corporate governance, synchronously enhanced the information-based level in the Board of Directors, the Board of Supervisors and general meetings of shareholders, and incorporated the building of the integrated securities business platform into the "digital and intelligent Luzhou Laojiao" system, to continuously improve the level of corporate governance. In order to further improve the Company's risk management system and ensure that the directors, supervisors, and senior management of the Company fully perform their duties within their scope of responsibilities, the Company has actively promoted the purchase of liability insurances for directors, supervisors, and senior management. Meanwhile, the Company has become the first listed company in the industry to sign a liability insurance agreement for directors, supervisors, and senior management which has been approved by a general meeting of shareholders. In the future, the Company will continue to promote information technology building to empower corporate governance, continuously improve operational efficiency and scientific decision-making level. D. Fulfilling the information disclosure obligation compliantly and strictly guarding the defence line of insider trading The Company takes standardised information disclosure as the bottom line, conducts information disclosure with high standards, and effectively respects and safeguards the legitimate rights and interests of investors. First, the Company has established and improved a management system centred on major information internal reporting system, temporary and periodic report preparation procedure, insider information management system, and other policy documents, and continuously promoted the standardised and procedural business work, to ensure accurate and rigorous information disclosure. Second, the Company has adhered to investor demand orientation, actively promoted voluntary information disclosure, attached importance to the pertinence, readability, and effectiveness of disclosure content, and continuously improved the transparency of information disclosure of the Company. The Company has been awarded the highest A grade in the information disclosure assessment of listed companies on the Shenzhen Stock Exchange for several consecutive years. In the future, the Company will continuously improve the transparency of information disclosure and continuously display information on the Company's operations at multiple levels, angles, and dimensions. E. Efficiently carrying out investor relations activities and conveying the Company's investment value The Company has actively adapted to the needs of investor research and carried out investor 2023 Annual Report of Luzhou Laojiao Co., Ltd. 51 relationship management through a combination of "inviting in" and "going out" models. It has actively communicated with investors on industry hot topics, the Company's business picture, and development strategies through the Shenzhen Stock Exchange investor interaction platform, establishment of investor hotlines, improvement of investor relationship websites, hosting online collective reception days, and on-site investor surveys. In doing so, the Company has conveyed its investment value and safeguarded investors' right to know. At the same time, the Company has adhered to investor demand orientation. Based on the continuous growth of overseas shareholders in recent years, the Company has innovatively used overseas accounts such as Facebook, X, and IG to simultaneously publish the Company's performance promotion, shortened the disclosure time interval between Chinese and English versions, and conducted overseas roadshows, to ensure the timeliness of information acquisition for overseas investors. In the future, the Company will continue to build a two-way communication mechanism for a deep understanding and positive interaction with the capital market to transmit the Company's value. (The Company's investor relations website has been fully updated. Investors are welcome to visit . F. Improving shareholder returns and safeguarding the legitimate rights and interests of shareholders The Company adheres to the implementation of an active profit distribution policy, attaches importance to reasonable returns to investors while considering the sustainable development of the Company, and maintains the continuity and stability of profit distribution. The Company clearly stipulates in its Articles of Association that the Company may distribute dividend in cash or stocks and the dividend should not be less than 50% of the distributable profit realised for that year, and the profit to be distributed in cash should not be less than 30% of the distributable profit realised for that year. Since its listing, the Company has paid out a cumulative cash dividend amount of CNY 35.353 billion, with a dividend payout ratio of 61.14%, ranking among the top among more than 5,000 listed companies in the Shanghai and Shenzhen stock markets. This has allowed all shareholders to fully share the Company's development achievements and effectively maintained the Company's good image in the capital market. In the future, the Company will formulate reasonable profit distribution policies while ensuring normal operation and long-term development, and effectively allow investors to share the fruits of the Company's growth and development. G. Encouraging the controlling shareholder to actively increase its shareholdings to maintain the stability of the capital market Based on its recognition of the Company's long-term value and its firm belief in the Company's development prospects, the controlling shareholder of the Company, Luzhou Laojiao Group Co., Ltd., planned to increase its holdings in the Company through call auction trading within six months from 15 December 2023, with a proposed increase amount of no less than CNY 200 million, effectively maintaining the stability of the capital market and boosting investor confidence. As at 15 March 2024, Luzhou Laojiao Group Co., Ltd. has accumulatively increased its holdings of 607,800 shares in the Company through bidding trading, accounting for 0.04% of the total share capital of the Company, with an increase of CNY 101.9956 million. The plan for this increase in holdings has not been fully implemented yet. Luzhou Laojiao Group Co., Ltd. will continue to implement the holding increase according to the plan, and the Company will fulfil its information disclosure obligations in a timely manner in accordance with relevant regulations. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 52 In the future, the Company will focus on the development theme of "proceeding with confidence, overcoming challenges, innovating, and collaborating", actively take responsibility, keep diligent, and make solid progress while striving for high-quality development. The Company will also firmly establish a sense of return to shareholders, effectively implement the "dual enhancement of development quality and shareholder returns" action plan, significantly enhance investors' satisfaction, and actively contribute to stabilizing the capital market and investor confidence. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 53 Section IVCorporate Governance 1. Basic situation of corporate governance Since it was listed, in accordance with the Corporate Law, the Securities Law, The Listed Company Governance Standards and other laws, administrative regulations and departmental rules and normative documents, the Company has constantly perfected corporate governance structure, standardized its operation, established the rules and system on the basis of the Company's articles of association whose main framework is the rules of procedure of the shareholders' general meeting, rules of procedure of the board of directors and rules of procedure of the board of supervisors, which is formed the management system whose main structure is the shareholders meeting, board of directors, board of supervisors and management. During the reporting period, the Company won a number of honors and awards, including “The 25th Golden Bull Awards—Best Investment Value Award”, “The 14th Tianma Awards—Best Investor Relations Award”, “100 ESGPioneers of Chinese Listed Companies”, and “China Association for Public Companies—Excellent Board Practice”. Any incompliance with the applicable laws and administrative regulations, as well as regulations related to the governance of listed companies issued by the CSRC Yes No There is no incompliance with the applicable laws and administrative regulations, as well as regulations related to the governance of listed companies issued by the CSRC. 2. Independency of assets, personnel, finance, organizations and businesses which are separated from the controlling shareholder and the actual controller The Company has an independent and complete production and operation system and independent decision-making ability. There is no horizontal competition between the Company and the controlling shareholders and its subsidiaries. The Company has daily affiliated transactions with the controlling shareholders and its subsidiaries. Such daily affiliated transactions belong to the need of rational allocation of resources and do not affect the independence of the Company. For affiliated transactions, the Company has strictly fulfilled the relevant decision-making procedures and information disclosure obligations, and implemented the system of Non-executive directors' prior examination and avoidance system of related directors (shareholders). 2.1 In the aspect of assets Asset integrity. There are clear ownership and independency of the Company's assets invested by controlling shareholders. The Company has an independent and complete production, supply, sales system and auxiliary production system and supporting facilities. The industrial property rights, trademarks and non-patented technology and other intangible assets are owned by the Company. There is no situation that the controlling shareholders occupy and transfer the assets of the company. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 54 2.2. In the aspect of business Business apart. The Company is totally independent in the operation, production and sales of baijiu series of “Luzhou Laojiao” and “National Cellar 1573”. It has the ability to operate independently in the market. The board of directors and the management can independently make production and operation decisions within the corresponding authority. 2.3 In the aspect of personnel The Company has built independent labor management, personnel management and salary management. The Company has established a relatively complete labor management system and post responsibility system. Meanwhile, the Company's senior management personnel all receive salary in the Company, but not at the controlling shareholders. 2.4 In the aspect of organization Organization independence. The Company has independent production management organization and system, independent office and production management place, and independent management organization, functional organization and branch. 2.5 In the aspect of finance Financial independence. The Company has completed and independent financial department. Independent accounting system and financial management are established. The Company separately sets bank accountants, conducts external settlement and pays taxes according to law. 3. Horizontal competition Applicable N/A 4. Annual meeting of shareholders and special meetings of shareholders convened during the reporting period 4.1. Meetings of shareholders convened during the reporting period Meeting Type Investor participation ratio Convened date Disclosure date Resolutions 2022 Annual General Meeting of Shareholders General Meeting of Shareholders 63.51% 29 June 2023 30 June 2023 Announcement on Resolutions of The 2022 Annual General Meeting of Shareholders Announcement No: 2023-19 (o.com.cn/) 2023 Annual Report of Luzhou Laojiao Co., Ltd. 55 4.2. Special meetings of shareholders convened at the request of preferred shareholders with resumed voting rights Applicable N/A 5. Directors, supervisors, and senior management 5.1 General information Name Gender Age Incumbent/ Former Period of service Shares held by the beginning of the reporting period (share) Shares increased during the reporting period (share) Shares decreased during the reporting period (share) Other increase/ decrease (share) Shares held by the end of the reporting period (share) Reason for share changes Liu Miao Male 54 Chairman of the board Incumbent 2015.6.30- 2024.6.29 288,087 288,087 Lin Feng Male 50 Director, General manager Incumbent 2015.6.30- 2024.6.29 95,900 95,900 Xiong Pingting Female 48 Director, Deputy general manager Incumbent 2021.6.29- 2024.6.29 62,800 62,800 Liu Junhai Male 54 Non-executive director Incumbent 2018.6.27- 2024.6.29 0 0 Chen You’an Male 66 Non-executive director Incumbent 2021.6.29- 2024.6.29 0 0 Lyu Xianpei Male 60 Non-executive director Incumbent 2021.6.29- 2024.6.29 0 0 Li Guowang Male 60 Non-executive director Incumbent 2022.6.29- 2024.6.29 0 0 Qian Xu Male 60 External director Incumbent 2015.6.30- 2024.6.29 0 0 Ying Hanjie Male 54 External director Incumbent 2016.9.13- 2024.6.29 0 0 Gong Zhengying Female 54 External director Incumbent 2022.6.29- 2024.6.29 0 0 Yang Ping Male 47 Chairman of the Board of Supervisors Incumbent 2021.6.29- 2024.6.29 0 0 Li Male 54 Supervisor Incumbent 2018.6.27- 0 0 2023 Annual Report of Luzhou Laojiao Co., Ltd. 56 Guangjie 2024.6.29 Li Lunyu Female 37 Supervisor Incumbent 2021.6.29- 2024.6.29 0 0 Tang Shijun Male 47 Supervisor Incumbent 2022.6.29- 2024.6.29 0 0 Ou Fei Male 38 Supervisor Incumbent 2022.6.29- 2024.6.29 0 0 Shen Caihong Male 58 Deputy general manager Incumbent 2002.6.30- 2024.6.29 195,575 15,094 180,481 Shareholding reduction on the open market Xie Hong Female 54 CFOIncumbent 2015.3.6- 2024.6.29 76,700 76,700 He Cheng Male 57 Deputy general manager Incumbent 2015.6.30- 2024.6.29 76,700 76,700 Zhang Suyi Male 52 Deputy general manager Incumbent 2015.12.29- 2024.6.29 76,700 76,700 Li Yong Male 47 Deputy general manager, Secretary of the board Incumbent 2021.9.20- 2024.6.29 62,800 62,800 Wang Hongbo Male 60 Director, Deputy general manager Former1 2015.3.6- 2024.2.2 76,700 76,700 Total -- -- -- -- -- 1,011,9 62 015,0940996,868 -- Note 1: Due to reaching the statutory retirement age, Mr. Wang Hongbo has applied for resignation as a director and member of the special committee of the Board of Directors and deputy general manager of the Company on 2 February 2024, and will not hold any position in the Company or the Company's majority-owned subsidiaries after his resignation. For details, please refer to the ''Announcement on Resignation of Director and Deputy General Manager'' (Announcement No.2024-7). Whether any director, supervisor or senior management resigned before the expiry of their periods of service during the reporting period □ Yes No Changes in directors, supervisors, and senior management Applicable □ N/A Name Type Date Reason Li Yong Secretary of the board Appointed 10 March 2023 Appointed Wang Hongbo Secretary of the Resignation 3 March 2023 Voluntary resignation 2023 Annual Report of Luzhou Laojiao Co., Ltd. 57 board 5.2 Employment information Professional background, work experience and major duties of current directors, supervisors and senior management. Mr. Liu Miao, male, born in 1969, MBA of Wright State University in the USA, Master of Chinese Brewing, senior marketing specialist. He used to serve as planning minister, general manager of Sales Company, general manager assistant, and deputy general manager of the Company. At present, he is secretary of the party committee and chairman of the board in Laojiao Group, secretary of the party committee and chairman of the board in the Company, as well as chairman of the board in Luzhou Sanrenxuan Liquor Industry Co., Ltd. Mr. Lin Feng, male, born in 1973, Master degree, professorate senior economist, senior marketing specialist. He was deputy general manager and general manager of Sales Company, director of marketing, director of human resources, chief dispatcher, deputy general manager of the Company. At present, he is deputy secretary of the party committee, director, and general manager of the Company. Ms. Xiong Pingting, female, born in 1975, holds a master's degree and the titles of Human Resource Management Professional (grade one), Economist, and Political Mentor. Positions previously held by her include Deputy Director and Director of the Office of Luzhou Laojiao Sales Co., Ltd., Deputy Director of the Office of Jiangyang District People's Government of Luzhou (temporary), Deputy Director of the Human Resources Department and Corporate Management Department of Luzhou Laojiao Co., Ltd., General Manager of the Brand Operation Department, Director of the Office (concurrently), Secretary of the general Party branch, and Deputy General Manager of Luzhou Laojiao Sales Co., Ltd. At present, she is member of the Party Committee, Director, Deputy Secretary of the Discipline Inspection Committee, Deputy General Manager, and Chairman of the Labor Union of the Company. Mr. Liu Junhai, male, born in 1969, holds a Ph.D. degree in law and is a doctoral supervisor. Positions previously held by him include Assistant to the Director and Researcher at the Institute of Law of the Chinese Academy of Social Sciences ("CASS"), Professor at CASS, Vice Chairman of China Consumers Association, and Deputy Director Researcher at the Planning Committee under the China Securities Regulatory Commission ("CSRC"). Currently, he serves as Professor at the Law School of Renmin University of China, Director at the Institute of Commercial Law of Renmin University of China, Arbitrator at China International Economic and Trade Arbitration Commission and Beijing Arbitration Commission (Beijing International Arbitration Center) (concurrently). He has served as a non-executive director of the Company since June 2018. Mr. Chen You'an, male, born in 1958, holds an Eng.D. degree in management science and engineering and is a Senior Engineer. Currently, he is Independent Director of Nomura Orient 2023 Annual Report of Luzhou Laojiao Co., Ltd. 58 International Securities Co., Ltd., and Hexie Health Insurance Co., Ltd. He has served as a non-executive director of the Company since June 2021. Mr. Lyu Xianpei, male, born in 1964, holds a Ph.D. degree in accounting. Positions previously held by him include Vice Dean at the School of Accounting and Director at the Auditing Department of Southwestern University of Finance and Economics. Currently, he serves as Professor and Doctoral Supervisor at Southwestern University of Finance and Economics, Chairman of Sichuan Educational Audit Society, as well as Independent Director of Sichuan Teway Food Group Co., Ltd., and North Chemical Industries Co., Ltd. He has served as a non-executive director of the Company since June 2021. Mr. Li Guowang, male, born in 1963, holds a postgraduate degree and is a senior economist. He once served as the Deputy Director of the Information Center of the Ministry of Commerce, Deputy General Manager of Futures Brokerage Co., Ltd. under China Banking and Insurance Information Technology Management Co., Ltd., General Manager of the Shanghai Securities Business Department of China Banking and Insurance Information Technology Management Co., Ltd., Director of the Strategic Development Department of the R&DCenter of China Galaxy Securities Co., Ltd., General Manager of the R&DCenter of Shanghai Securities Co., Ltd., Marketing Director of Galaxy Asset Management Co., Ltd., Director of the Research Institute of Hwa Bao Securities Co., Ltd., Chief Economist and Director of the Research Institute of Zhongshan Securities Co., Ltd., and Chief Economist of Shanghai Dalu Futures Co., Ltd. At present, he is the Deputy Director of the Green Finance Committee of the Jiangsu Financial Association, member of the Association of Zhejiang Talent in Shanghai, and Director of Shanghai Jiayan Supply Chain Management Co., Ltd. He has served as a non-executive director of the Company since June 2022. Mr. Qian Xu, Male, born in 1963, PhD. He was general manager and chairman of the board of Beijing Enterprises Real-Estate Group Co., Ltd., chairman of the board and general manager of Beijing Enterprises Urban Development Group Co., Ltd., chairman of the board of Beijing Properties (Holdings) Limited (listed on the Hong Kong Stock Exchange), and non-executive director of CAQ Holdings Limited (listed on the Australian Stock Exchange). He has served as a director of the Company since June 2015. Mr. Ying Hanjie, Male, born in 1969, Doctor of Biochemistry, professor, and academician of the Chinese Academy of Engineering. He was deputy director of Pharmacy and Life Sciences School of Nanjing University of Technology. At present, he is director of National Biochemical Engineering Technology Research Center of Nanjing Tech University, chairman of the board of Nanjing Biotogether Co., Ltd., director of Nanjing High Tech University Biological Technology Research Institute Co., Ltd., and director of Jiangsu Institute of Industrial Biotechnology. He has served as a director of the Company since September 2016. Ms. Gong Zhengying, female, born in 1969, holds a postgraduate degree and is a senior economist. She once served as the Deputy Head of the Open Development and Social System Section of Luzhou Economic System Reform Commission, Deputy Head and Head of the Enterprise Property 2023 Annual Report of Luzhou Laojiao Co., Ltd. 59 Rights Supervision Section of Luzhou State-owned Assets Supervision and Administration Commission, Party Secretary and Chairman of Luzhou Xinglu Asset Management Co., Ltd., Chairman of Luzhou Parking Lot Infrastructure Investment Co., Ltd., and Executive Director (legal representative) of Luzhou Qihang Parking Lot Construction Investment Co., Ltd. and Luzhou Xinglu Lantian Market Management Co., Ltd. At present, she is a full-time external director of Luzhou Laojiao Group Co., Ltd., Luzhou Aviation Development Investment Group Co., Ltd., Sichuan Lutianhua Co., Ltd., Luzhou Industrial Development Investment Group Co., Ltd., Luzhou Development Holding Group Co., Ltd., Luzhou Baijiu Industry Development Investment Group Co., Ltd., and Luzhou Airport (Group) Co., Ltd. She has served as a director of the Company since June 2022. Mr. Yang Ping, male, born in 1976, Professor of Engineering, holds a doctoral degree. Positions previously held by him include Deputy Director and Director at the National Cellar Workshop Section, Director at the Production and Technology Department, and Deputy General Manager of Luzhou Laojiao Brewing Co., Ltd. Currently, he is Chairman of the Board of Supervisors and member of the Discipline Inspection Committee of the Company, as well as Secretary of the Party Committee and General Manager of Luzhou Laojiao Brewing Co., Ltd. Mr. Li Guangjie, male, born in 1969, Master degree, economist. He was manager of Planning Department of the Company, deputy director of Sales Company, manager of Import and Export company, general manager assistant of Sales Company. At present, he is supervisor and deputy general manager of Sales Company. Ms. Li Lunyu, female, born in 1986, holds a university degree as well as is Assistant Political Mentor and Assistant Engineer. Positions previously held by her include Publicity Officer at the Office of the CPCLuzhou Laojiao Committee, Deputy Head and Manager of Tianjin Division of the Business Department for Luzhou Laojiao Tequ 60 and 80, Secretary of the CPCNational Cellar Section Branch of Luzhou Laojiao Brewing Co., Ltd., Director of the Office of the CPCLuzhou Laojiao Brewing Committee, and Director of the Discipline Inspection Department and Vice Chairman of the Labor Union of Luzhou Laojiao Brewing Co., Ltd. Currently, she is Supervisor, Vice Chairman of the Labor Union, and Director of the Office of the Labor Union of the Company. Mr. Tang Shijun, male, born in 1976, holds a bachelor's degree and is a senior accountant. He once served as the Head of the Finance Department and Director of the Business Finance Center of Luzhou Laojiao Lundao Liquor Sales Co., Ltd., Chief Controller of Shanghai Pharmaceutical (Luzhou) Co., Ltd., Chief Accountant and Director of Luzhou Naxi District State-owned Assets Management Co., Ltd., and Director of the Financing Department of Luzhou Huixing Investment Group Co., Ltd. At present, he is a full-time external director assistant of Luzhou state-owned enterprises, as well as Manager of the Finance and Asset Management Department of Luzhou State Owned Capital Operation Management Co., Ltd., and General Manager of Luzhou Development Investment Company (Sichuan Trust and Investment Company Luzhou Office). He has served as a supervisor of the Company since June 2022. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 60 Mr. Ou Fei, male, born in 1985, holds a bachelor's degree. He once worked in Guizhou Renhuai Fengzhiji Liquor Co., Ltd., Sichuan Dashan Law Firm and Jiangyang District People's Procuratorate, Luzhou City. At present, he is a full-time external supervisor of Sichuan Lutianhua Co., Ltd., Luzhou Industrial Development Investment Group Co., Ltd., Luzhou Development Holding Group Co., Ltd., Sichuan Xinhuoju Chemical Co., Ltd. and Luzhou State Owned Capital Operation Management Co., Ltd. He has served as a supervisor of the Company since June 2022. Mr. Shen Caihong, Male, born in 1966, Master degree, professor-level senior engineer, one of the first batch of representative inheritors of national intangible cultural heritage, one of the first batch of “Master of Chinese Brewing”, and one of the first batch of "Sichuan craftsmen". He was manager of the Company’s leaven-making branch, manager of base baijiu company, general manager assistant and director of production department. At present, he is deputy general manager, chief engineer, director of national solid brewing engineering technology research center and chairman of the board of Luzhou Pinchuang Technology Co., Ltd. Ms. Xie Hong, female, born in 1969, Master degree, senior accountant, and senior economist. She was section chief of Treasury Section of the Finance Bureau, section chief of Non-tax Revenue Collection Management Section, director of Luzhou Municipal Finance Treasury Payment Center, chief accountant of Luzhou Finance Bureau. At present, she is a member of the party committee and CFO of the Company. Mr. He Cheng, male, born in 1966, Master of Management Economics of Nanyang Technological University, senior engineer, expert who receives special allowances from the State Council, Master of Chinese Baijiu, and Master of Chinese Brewing. He was chief dispatcher of the Company, general manager of Brewing Company, as well as director of the business administration department, director of the human resources department, director of the quality department, and director of the dispatching center of the Company. At present, he is a member of the party committee, deputy general manager, chief quality officer and director of food safety of the Company. Mr. Zhang Suyi, male, born in 1971, PhD, professorate senior engineer, representative inheritor of Sichuan Intangible Cultural Heritage. He was a worker, production team leader and assistant superintendent at Brewing Workshop No.6, vice director and director of Gouchu Center, and deputy chief engineer of the Company, as well as deputy general manager, and director of the Baijiu Body Design Centre of Brewing Company. At present, he is deputy general manager, and director of safety and environmental protection of the Company. Mr. Li Yong, male, born in 1977, holds a postgraduate degree and is a brewing engineer. He once worked in the education sector at the Party and government organizations at the township level as well as departments at the county and municipal levels. Also, he used to be Director of the Group Office of Luzhou Laojiao Group, Director of the General Manager’s Office of the Company, as well as Deputy Secretary of the Party Committee, Secretary of the Party Committee, and Deputy General Manager of Sales Company. Currently, he is Deputy General Manager, Secretary of the Board, and member of the Discipline Inspection Committee of the Company, as well as Chairman of the Board of 2023 Annual Report of Luzhou Laojiao Co., Ltd. 61 Luzhou Laojiao Technology Innovation Co., Ltd. Position in shareholder-holding companies Applicable N/A Name Name of shareholder-holding companies Position in shareholder-holding companies Beginning date of term Ending date of term Any remunerations received from shareholder-holding companies Liu Miao Laojiao Group Secretary of the party committee, Chairman of the board 11 March 2022 No Gong Zhengying Laojiao Group Director 15 February 2022 No Position in other companies Applicable N/A Name Name of other companies Position in other companies Beginning date of term Ending date of term Any remunerations received from other companies Liu Junhai Institute of Commercial Law of Renmin University of China Director Liu Junhai China International Economic and Trade Arbitration Commission, and Beijing Arbitration Commission (Beijing International Arbitration Center) Arbitrator Chen You’an Nomura Oriental International Securities Co., Ltd., and Hexie Health Insurance Co., Ltd. Non-executive director Lyu Xianpei Sichuan Education and Audit Society Chairman Lyu Xianpei Sichuan Teway Food Group Co., Ltd., and North Chemical Non-executive director 2023 Annual Report of Luzhou Laojiao Co., Ltd. 62 Industries Co., Ltd. Li Guowang Green Finance Committee of the Jiangsu Financial Association Vice chairman Li Guowang Association of Zhejiang Talent in Shanghai Director Li Guowang Shanghai Jiayan Supply Chain Management Co., Ltd. Director Ying Hanjie National Biochemical Engineering Technology Research Center of Nanjing University of Technology Director Ying Hanjie Nanjing Biotogether Co., Ltd. Chairman of the board Ying Hanjie Nanjing High Tech University Biological Technology Research Institute Co., Ltd., and Jiangsu Institute of Industrial Biotechnology Director Gong Zhengying Luzhou Aviation Development Investment Group Co., Ltd., Sichuan Lutianhua Co., Ltd., Luzhou Industrial Development Investment Group Co., Ltd., Luzhou Development Holding Group Co., Ltd., Luzhou Baijiu Industry Development Investment Group Co., Ltd., and Luzhou Airport (Group) Co., Ltd. Director 2023 Annual Report of Luzhou Laojiao Co., Ltd. 63 Tang Shijun Finance and Asset Management Department of Luzhou State Owned Capital Operation Management Co., Ltd. Manager Tang Shijun Luzhou Development Investment Company (Sichuan Trust and Investment Company Luzhou Office) General Manager Ou Fei Sichuan Lutianhua Co., Ltd., Luzhou Industrial Investment Group Co., Ltd., Luzhou Development Holding Group Co., Ltd., Sichuan Xinhuoju Chemical Co., Ltd., Luzhou State Owned Capital Operation Management Co., Ltd. Supervisor Punishments imposed in the recent three years by the securities regulators on the incumbent directors, supervisors and senior management as well as those who left in the reporting period Applicable N/A 5.3 Remuneration of directors, supervisors and senior management The following describes the decision-making procedures, grounds on which decisions are made and actual remuneration payment of directors, supervisors and senior management. Decision-making procedures for directors, supervisors and senior management: The remuneration of non-executive directors, external directors and external supervisors shall be determined by the general meeting of shareholders, and the remuneration of directors, supervisors and senior management who hold positions within the Company shall be determined by relevant rules of SASAC of Luzhou and relevant rules of the Company. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 64 Grounds on which decisions are made of directors, supervisors and senior management: Calculate according to the appraisal methods formulated at the beginning of the year. Actual remuneration payment of directors, supervisors and senior management: Details refer to “Remuneration of directors, supervisors and senior management during the reporting period”. Remuneration of directors, supervisors and senior management during the reporting period Unit: CNY 10,000 Name Gender Age Incumbent/ Former Total before-tax remuneration from the Company Remuneration from related parties of the Company Liu Miao Male 54 Chairman of the board Incumbent 166.2 No Lin Feng Male 50 Director, General manager Incumbent 164.3 No Xiong Pingting Female 48 Director, Deputy general manager Incumbent 95.2 No Liu Junhai Male 54 Non-executive director Incumbent 9.52 No Chen You’an Male 66 Non-executive director Incumbent 9.52 No Lyu Xianpei Male 60 Non-executive director Incumbent 9.52 No Li Guowang Male 60 Non-executive director Incumbent 9.52 No Qian Xu Male 60 External director Incumbent 9.52 No Ying Hanjie Male 54 External director Incumbent 9.52 No Gong Zhengying Female 54 External director Incumbent 0 No Yang Ping Male 47 Chairman of the Board of Supervisors Incumbent 120.7 No Li Guangjie Male 54 Supervisor Incumbent 106.51 No Li Lunyu Female 37 Supervisor Incumbent 67.32 No Tang Shijun Male 47 Supervisor Incumbent 0 No Ou Fei Male 38 Supervisor Incumbent 0 No Shen Caihong Male 58 Deputy general manager Incumbent 114.1 No Xie Hong Female 54 CFOIncumbent 129.9 No He Cheng Male 57 Deputy general manager Incumbent 111.3 No Zhang Suyi Male 52 Deputy general manager Incumbent 108.3 No Li Yong Male 47 Deputy general manager, Secretary of the board Incumbent 95.2 No Wang Hongbo Male 60 Director, Deputy general manager Former 131.7 No 2023 Annual Report of Luzhou Laojiao Co., Ltd. 65 Total -- -- -- -- 1,467.85 -- Other information Applicable N/A 6. Performance of directors during the reporting period 6.1. Board meetings convened during the reporting period Meeting Convened date Disclosure date Resolutions The 27th Meeting of the 10th Board of Directors 9 March 202310 March 2023 Announcement on Resolutions of the 27th Meeting of the 10th Board of Directors (Announcement No.2023-5) ( The 28th Meeting of the 10th Board of Directors 6 April 20237 April 2023 Announcement on Resolutions of the 28th Meeting of the 10th Board of Directors (Announcement No.2023-7) ( The 29th Meeting of the 10th Board of Directors 28 April 202329 April 2023 Announcement on Resolutions of the 29th Meeting of the 10th Board of Directors (Announcement No.2023-10) ( The 30th Meeting of the 10th Board of Directors 13 June 202314 June 2023 Announcement on Resolutions of the 30th Meeting of the 10th Board of Directors (Announcement No.2023-17) ( The 31st Meeting of the 10th Board of Directors 11 July 202312 July 2023 Announcement on Resolutions of the 31st Meeting of the 10th Board of Directors (Announcement No.2023-20) ( The 32nd Meeting of the 10th Board of Directors 28 August 202329 August 2023 Announcement on Resolutions of the 32nd Meeting of the 10th Board of Directors (Announcement No.2023-23) ( The 33rd Meeting of the 10th Board of Directors 25 September 202326 September 2023 Announcement on Resolutions of the 33rd Meeting of the 10th Board of Directors (Announcement No.2023-27) ( The 34th Meeting of the 10th Board of Directors 30 October 202331 October 2023 Announcement on Resolutions of the 34th Meeting of the 10th Board of Directors (Announcement No.2023-32) ( The 35th Meeting of the 10th Board of Directors 15 November 202316 November 2023 Announcement on Resolutions of the 35th Meeting of the 10th Board of Directors (Announcement No.2023-36) ( The 36th Meeting of the 10th Board of Directors 22 December 202323 December 2023 Announcement on Resolutions of the 36th Meeting of the 10th Board of Directors (Announcement No.2023-41) ( The 37th Meeting of the 27 December 202328 December 2023 Announcement on Resolutions of the 2023 Annual Report of Luzhou Laojiao Co., Ltd. 66 10th Board of Directors 37th Meeting of the 10th Board of Directors (Announcement No.2023-42) ( 6.2. Attendance of directors in board meeting and general meeting of shareholders Attendance of director in board meeting and general meeting of shareholders Director Attendance due in the reporting period (times) Attendance on site (times) Attendance by telecommunication (times) Attendance through a proxy (times) Absence (times) Absence for two consecutive times Attendance at general meeting of shareholders (times) Liu Miao 117310 No 1 Lin Feng 116320 No 1 Wang Hongbo 115330 No 0 Xiong Pingting 116320 No 1 Liu Junhai 116320 No 0 Chen You’an 118300 No 1 Lyu Xianpei 117310 No 0 Li Guowang 118300 No 1 Qian Xu 116320 No 0 Ying Hanjie 114340 No 0 Gong Zhengying 118300 No 0 6.3. Objections from directors in related issues of the Company Were there any objections on related issues of the Company from director Yes No Directors have no objection on related issues of the Company during the reporting period. 6.4. Other details about the performance of duties by directors Was there any advice from directors adopted by the Company Yes No Explanation about advice of directors is adopted or not adopted by the Company or not The Company adopted the advice of non-executive directors in respect of safe production, system improvement, and internal control construction. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 67 7. Activities of special committees under the Board of Directors during the reporting period Committee Members Number of meetings convened Convened date Topics Substantial opinion and recommendations Other information Details of objections (if any) The Strategy Committee Liu Miao, Lin Feng, and Wang Hongbo 3 8 June 2023 Review of the following proposals: 1. The Proposal on the Implementation of the Project on the Cultural Conservation and Restoration, the Creation of Baijiu Culture Scenarios and the Improvement of the Surrounding Environment of the Baijiu Cave of Luzhou Laojiao's Brewing Workshop in Xiaoshi Area; 2. The Proposal on Conducting Forex Hedges; and 3. The Proposal on the Investment and Wealth Management with Own Funds Approved, to be submitted to the Board of Directors for further review The Strategy Committee 7 July 2023 Review of the following proposal: The Proposal on the Implementation of the Sichuan Luzhou Baijiu Industrial Park (Huangyi) Cogeneration Expansion Project (Phase I) Project The Strategy Committee 17 August 2023 Review of the following proposal: The Proposal on the De-registration of Luzhou Laojiao Custom Liquor Co., Ltd. The Audit Committee Lyu Xianpei, Chen You’an and Qian Xu 4 17 April 2023 Review of the following proposals: 1. The 2022 Annual Financial Report; 2. The 2022 Internal Control Self-assessment Report; 3. The Summary Report of the 2022 Annual Audit; 4. The Work Plan for the 2023 Internal Audit; 5. The Q1 2023 Report; and 6. The Proposal on the Re-appointment of CPAFirm Approved, to be submitted to the Board of Directors for further review The Audit Committee 17 August 2023 Review of the following proposals: 1. The Proposal on the 2023 Interim Financial Report; and 2. The 2023 Interim Audit Work Report The Audit Committee 23 October 2023 Review of the following proposals: 1. The Audit Work Report for Q1-Q3 2023 Annual Report of Luzhou Laojiao Co., Ltd. 68 2023; and 2. The Q32023 Report The Audit Committee 15 December 2023 Review of the following proposal: The Proposal on the Formulation of the Internal Audit Charter (Trial) of Luzhou Laojiao Co., Ltd. The Remuneration and Appraisal Committee Chen You’an, Li Guowang, and Ying Hanjie 1 11 November 2023 Review of the following proposals: 1. The Proposal on the Remunerations of the Management for 2022; and 2. The Proposal on the Incentive Income of the Management for 2020-2022 Approved, to be submitted to the Board of Directors for further review 8. Performance of duties by the board of supervisors Were there any risks to the Company identified by the board of supervisors when performing its duties during the reporting period Yes No The board of supervisors has no objection during the reporting period. 9. Staff in the Company 9.1. Number, functions and educational backgrounds of the staff Number of in-service staff of the parent company at the end of the reporting period 1,288 Number of in-service staff of main subsidiaries at the end of the reporting period 2,482 Total number of in-service staff at the end of the reporting period 3,770 Total number of staff with remuneration in the period 3,770 Number of retirees to whom the Company or its main subsidiaries need to pay retirement pension 916 Functions Function by category Number of staff Production staff 1,387 Sales staff 963 R&D staff 759 Financial staff 100 Administrative staff 561 Total 3,770 Educational backgrounds Educational background by category Number of staff Senior high school and below 450 Junior college 854 2023 Annual Report of Luzhou Laojiao Co., Ltd. 69 Bachelor 1,969 Master 485 Doctor 12 Total 3,770 9.2. Staff remuneration policy In 2023, the Company implemented the distribution policy of "sharing benefits, paying for losses, classification and setting, and long-term policy effects", continuously strengthened the digital assessment, linked individual performance with organizational performance, and highlighted the distribution according to performance. The Company implemented the post rating wage system and strengthened the performance management of all employees. According to the following principles: Link individual performance with organizational performance: The increase of wages is linked to the increase of the Company's operating performance and profit growth; Under the same caliber, the proportion of increase in salaries shall not exceed the proportion of increase in performance and profit growth. Salary and its changes based on position, ability and performance: The salary of employee shall be determined by position and the depth of their expertise. The salary shall be adjusted accordingly when the position, ability and performance change. Performance orientation, bonus and forfeit: Performance assessment is conducted according to the actual contributions of employees, and the salary distribution is inclined to the employees with excellent performance. The principle of equal wage negotiation: Abide by the principles that both sides of labor and capital agrees in collective negotiation, so as to realize the unity of benefit and fairness. 9.3. Staff training plans In 2023, based on the staff career development system and job qualification standards, the Company fully optimized and upgraded the targeted training system comprising different levels to meet demands for staff ability improvement for different positions and different levels. At the same time, targeted at different professional lines, the Company horizontally designed "Elite Programme" training, and strove to create a large number of elite employees who would be rooted in various fields. Sail Programme: The "Sail Programme" training was conducted for new employees hired through campus and social recruitment and for other grassroots employees. The implemented training involved four aspects: General ability training, marketing practical training, business capability enhancement training, and career planning. The purpose was to enhance new employees' understanding and recognition of the Company's core values, familiarise them with the Company's production and operation statuses and their work procedures, and allow them to accumulate 2023 Annual Report of Luzhou Laojiao Co., Ltd. 70 professional knowledge and skills and improve their ability to work independently. Dive Program: The “Dive Program” training was conducted for general employees on specialized lines. The purpose was to strengthen their specialty knowledge and ability to solve specialty problems, enhance their basic management skills, improve their competency and raise their performance. The training was conducted in the form of sub-programs, such as “Happy Learning Sub-program” and “Excellent Frontline Manager Sub-program” to provide specialty knowledge and skills of different systems. Voyage Program: The “Voyage Program” training was conducted for key personnel with a systematic design of three-year development plans and a focus on three themes, including “self-management”, “work management” and “interpersonal management”. The purpose was to enrich employees’ knowledge on corporate business management, improve their knowledge structure, and enhance their strategic understanding and abilities of work and team management. Steering Program: The “Steering Program” training was conducted for middle management personnel and department experts in the form of online and offline combined, “coming in” and “going out” combined and ability enhancement and work style building combined. Through the learning of advanced management concepts and practices, the training aimed to drive employees to broaden their mind, expand their vision, strengthen their leadership skills and enhance their level of corporate management. Elite Programme: Targeting employees from different professional lines of the Company, the Company piloted and created training programmes for digital, human resources, and other professional lines. Model learning, external training, and introduction of teaching staff were employed to improve the professional level of employees. In addition, in terms of professional talents training, in combination with the strategic needs of talent development and relevant policies of provinces and cities, the Company strengthens study on skilled worker development policies, actively carries out the work of staff title appraisal, skill rating, recommendation and assessment and so on. Based on its actual condition, the Company researched and developed top-level design documents for professional talent cultivation, such as the Implementation Plan for "Luzhou Laojiao Skilled Worker Action", to systematically guide the building of professional talent teams. 9.4. Labor outsourcing Applicable N/A 10. Profit distribution and converting capital reserves into share capital Formulation, execution or adjustments of profit distribution policy, especially cash dividend policy, in 2023 Annual Report of Luzhou Laojiao Co., Ltd. 71 the reporting period. Applicable N/A According to the plan for profit distribution for 2022 deliberated and approved by 2022 annual meeting of shareholders, based on its total of 1,471,987,769 shares, the Company distributed a cash dividend of CNY 42.25 (tax inclusive) per 10 shares to all shareholders. The distribution plan was implemented on 28 August 2023. A special statement of the policy of cash dividends Whether it meets the requirements of the articles of corporation or the resolution of shareholders' meeting: Yes Whether the standard and proportion of dividends are clear: Yes Whether the relevant decision-making process and systems are complete: Yes Whether non-executive directors perform their duties and play their due role: Yes If the Company has no dividend plan, it should disclose the specific reasons and the next steps it intends to take to enhance investor returns N/A Whether the minority shareholders have the opportunity to fully express their opinions and appeals and whether their legitimate rights and interests have been adequately protected: Yes Whether the conditions and procedures are compliant and transparent and whether the cash dividend policy is adjusted or changed: N/A The Company made a profit in the reporting period and the profit distributable to shareholders of the Company was positive, but it did not put forward a preliminary plan for cash dividend distribution to shareholders. Applicable N/A Preliminary plan for profit distribution and converting capital reserves into share capital for the reporting period Applicable N/A Bonus shares for every 10 shares (share) 0 Dividends for every 10 shares (CNY) (tax included) 54.00 Total shares as the basis for the preliminary plan for profit distribution (share) 1,471,987,769 Total cash dividends (CNY) (tax included) 7,948,733,952.60 Cash dividends in other forms (e.g. repurchase share) 0.00 Total cash dividends (CNY) (including other forms) 7,948,733,952.60 Distributable profit (CNY) 33,815,566,574.75 2023 Annual Report of Luzhou Laojiao Co., Ltd. 72 Percentage of cash dividends in the total distributed profit (including other forms) 100% Information of the cash dividends The development stage of the Company is mature and the Company has no major fund expenditure arrangement. When the profit distribution is carried out, the proportion of cash dividends in this profit distribution should at least reach 80%. Details of preliminary plan for profit distribution and converting capital reserves into share capital 11. Implementation of any equity incentive plan, employee stock ownership plan or other incentive measures for employees Applicable N/A 11.1. Equity incentives A. On 26 September 2021, relevant proposals such as the Proposal on the 2021 Restricted Share Incentive Plan (Draft) and Summary of Luzhou Laojiao Co., Ltd. were approved at the Seventh Meeting of the 10th Board of Directors and the Third Meeting of the 10th Board of Supervisors of the Company, respectively. B. On 2 December 2021, the Company received the Approval of Luzhou State-owned Assets Supervision and Administration Commission on the Implementation of the Second Phase of the Equity Incentive Plan for Listed Companies by Luzhou Laojiao Co., Ltd. (L.G.Z.K.P. [2021] No.62) from the Luzhou State-owned Assets Supervision and Administration Commission, which approved in principle to the implementation of the Restricted Share Incentive Plan by the Company. C. On 24 December 2021, the Board of Supervisors of the Company issued the review opinion, i.e., Explanation on the Review and Announcement of the List of Awardees of the 2021 Restricted Share Incentive Plan. D. On 29 December 2021, the relevant proposals such as the Proposal on the 2021 Restricted Share Incentive Plan (Draft) and Summary of Luzhou Laojiao Co., Ltd. were approved at the First Extraordinary General Meeting of Shareholders of 2021. Meanwhile, a self-inspection on the trading of the Company's shares by insiders of the Incentive Plan and the proposed awardees was conducted, and the Self-Inspection Report on the Trading of the Company's Shares by Insiders and Awardees in the 2021 Restricted Share Incentive Plan was disclosed. E. On 29 December 2021, the Company held the 12th Meeting of the 10th Board of Directors and the Sixth Meeting of the 10th Board of Supervisors and reviewed and approved the Proposal on the Grant of Restricted Shares to Awardees respectively. The independent directors consented to the relevant matters. F. On 21 February 2022, the Company disclosed the Announcement on the Completion of Registration 2023 Annual Report of Luzhou Laojiao Co., Ltd. 73 of Restricted Share Grant, completed the registration of the first grant of restricted shares. Upon the registration of the grant,6,862,600 restricted shares were granted to 437 objects, the grant price was CNY 92.71 per share and the listing date was 22 February 2022. G. On 25 July 2022, the Company held the 18th Meeting of the 10th Board of Directors and the Ninth Meeting of the 10th Board of Supervisors and reviewed and approved the Proposal on the Grant of Reserved Restricted Shares to Awardees respectively. The independent directors consented to this matter. H. On 5 August 2022, the Board of Supervisors of the Company issued the review opinion, i.e., Explanation on the Review and Announcement of the List of Awardees for the Reserved Restricted Shares of the 2021 Restricted Share Incentive Plan. I. On 2 September 2022, the Company held the 22nd Meeting of the 10th Board of Directors and the 13th Meeting of the 10th Board of Supervisors, at which the Proposal on the Repurchase and Retirement of Certain Restricted Shares and the Adjustment of Repurchase Price and the Proposal on the Adjustment of the Granted Price of Reserved Restricted Shares of 2021 Restricted Share Incentive Plan were reviewed and approved respectively. In accordance with the relevant provisions of the incentive plan of the Company and the authorization of the First Extraordinary General Meeting of Shareholders of 2021, the Board of Directors of the Company agreed to adjust the grant price and repurchase price of the reserved restricted shares under the incentive plan from CNY 92.71 per share to CNY 89.466 per share in view of the implementation of the Company's profit distribution plan for 2021. The independent directors consented to this matter. J. On 3 September 2022, the Company disclosed the Announcement on the Repurchase and Cancellation of Some Restricted Shares to Reduce Registered Capital and Notice to Creditors. By the expiration of the declaring period, the Company had not received any declaration from the relevant creditors for early payout of debts or provision of guarantee. K. On 26 September 2022, the Company disclosed the Announcement on the Completion of the Registration of the Grant of the Reserved Restricted Shares under the 2021 Restricted Share Incentive Plan. Upon the registration of the grant of the reserved restricted shares,342,334 restricted shares were granted to 46 objects, the grant price was CNY 89.466 per share and the listing date was 28 September 2022. L. On 29 November 2022, the Company disclosed the Announcement on the Completion of the Repurchase and Cancellation of Some Restricted Shares. The Company proposed to repurchase and cancel a total of 62,310 restricted shares granted but not lifted from restricted sales. As at 29 November 2022, the Company completed the aforesaid repurchase and cancellation of restricted shares. M. On 29 December 2022, the Company held the 26th Meeting of the 10th Board of Directors and the 15th Meeting of the 10th Board of Supervisors and reviewed and approved the Proposal on the Grant of Reserved Restricted Shares to Awardees respectively. The independent directors consented to this matter. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 74 N. On 13 January 2023, the Board of Supervisors of the Company issued the review opinion, i.e., Explanation on the Review and Announcement of the List of Awardees for the Reserved Restricted Shares of the 2021 Restricted Share Incentive Plan. O. On 16 February 2023, the Company disclosed the Announcement on the Completion of the Registration of the Grant of the Reserved Restricted Shares under the 2021 Restricted Share Incentive Plan. Upon the registration of the grant of the reserved restricted shares,92,669 restricted shares were granted to 17 objects, the grant price was CNY 89.466 per share and the listing date was 17 February 2023. P. On 23 January 2024, the Company held the 38th Meeting of the 10th Board of Directors and the 20th Meeting of the 10th Board of Supervisors, at which the Proposal on the Repurchase and Retirement of Certain Restricted Shares and the Adjustment of Repurchase Price and the Proposal on the Satisfaction of Unlocking Conditions for the First Unlocking Period of the 2021 Restricted Share Incentive Plan were reviewed and approved respectively. In accordance with the relevant provisions of the incentive plan of the Company and the authorization of the First Extraordinary General Meeting of Shareholders of 2021, the Board of Directors of the Company agreed to adjust the grant price and repurchase price of the reserved restricted shares under the incentive plan from CNY 89.466 per share to CNY 85.241 per share in view of the implementation of the Company's profit distribution plan for 2022. Meanwhile, as the unlocking conditions had been satisfied for the first unlocking period of the 2021 Restricted Share Incentive Plan, a total of 2,734,640 restricted shares held by 435 eligible awardees were unlocked for public trading on 22 February 2024. Equity incentives for directors and senior management Applicable N/A Unit: share Name Office title Stock options held at the beginning of the reporting period Stock options granted in the reporting period Exercisable share options for the reporting period Exercised share options in the reporting period Exercise price for exercised share options in the reporting period (CNY / share) Stock options held at the end of the reporting period Market price at the end of the reporting period (CNY / share) Restricted shares held at the beginning of the reporting period Unlocked shares in the reporting period Restricted shares granted in the reporting period Grant price of the restricted shares (CNY/ share) Restricted shares held at the end of the reporting period Liu Miao Chairman of the board 000000095,9000092.7195,900 Lin Feng Director, General manager 000000095,9000092.7195,900 2023 Annual Report of Luzhou Laojiao Co., Ltd. 75 Wang Hongbo Director, Deputy general manager 000000076,7000092.7176,700 Shen Caihong Deputy general manager 000000076,7000092.7176,700 Xie Hong CFO 000000076,7000092.7176,700 He Cheng Deputy general manager 000000076,7000092.7176,700 Zhang Suyi Deputy general manager 000000076,7000092.7176,700 Xiong Pingting Deputy general manager 000000062,8000092.7162,800 Li Yong Deputy general manager, Secretary of the board 000000062,8000092.7162,800 Total -- 0000 -- 700,90 0 00 -- 700,90 0 Notes (if any) The first grant date for the 2021 Restricted Share Incentive Plan was 29 December 2021 and the registration date of the grant was 21 February 2022. Appraisal mechanism and incentives for senior management For details, please refer to the 2021 Restricted Share Incentive Plan (Draft) and Summary of Luzhou Laojiao Co., Ltd., the Performance Appraisal Methods for the 2021 Restricted Share Incentive Plan of Luzhou Laojiao Co., Ltd., and the Management Methods for the 2021 Restricted Share Incentive Plan of Luzhou Laojiao Co., Ltd., which have been disclosed by the Company on on 26 September 2021. 11.2. Implementation of employee stock ownership plans Applicable N/A 11.3. Other incentive measures for employees Applicable N/A 2023 Annual Report of Luzhou Laojiao Co., Ltd. 76 12. Establishment and implementation of the internal control system during the reporting period 12.1. Establishment and implementation of the internal control system During the reporting period, in accordance with the Basic Rules for Internal Control of Enterprises, the Guidelines of the Shenzhen Stock Exchange for the Internal Control of Listed Companies, relevant laws, administrative regulations, normative documents, and other regulatory requirements concerning internal control, as well as the reality of the Company, the Company consistently improved and optimized its internal control systems and established a well-developed system that covered the corporate governance, administrative management, operations management, financial management, human resources, production guarantee, and safety and environmental protection. Additionally, it strengthened the implementation, supervision, inspection, feedback, and improvement of the internal control systems in the operations management to ensure that each internal control system is reasonable, complete, and effective, thereby promoting the sound, sustainable development of the Company. 12.2. Material internal control deficiencies found in the reporting period □ Yes No 13. The Company’s management and control of subsidiaries during the reporting period Company name Consolidation plan Consolidation progress Problems arising in consolidation Solutions taken Solution implementation progress Subsequent solutions N/A 14. Internal control assessment report and auditor report 14.1. Internal control assessment report Disclosure date of the internal control assessment report 27 April 2024 Disclosure index of the internal control assessment report 2023 Internal Control Assessment Report ( Ratio of the total assets of the appraised entitles to the consolidated total assets 90.00% Ratio of the operating revenues of the appraised entitles to the consolidated operating revenue 90.00% Deficiencies identification standard Type Financial report Non-financial report 2023 Annual Report of Luzhou Laojiao Co., Ltd. 77 Qualitative standard Material deficiencies：（1）Correction of material errors in financial reports that have been announced (except retroactive adjustment of previous years due to changes in policies or other objective factors)；（2）Material misstatement of current financial report which was unrecognized but found by the auditor；（3） Corrupt transaction of senior management；（4）Audit committee and internal audit department are not effective to the internal control supervision . Material deficiencies：（1）violate national regulations and laws；（2）The Company’s decision-making procedures are unscientific；if there is a decision-making misplay, it will result in significant deal failure; （3）The substantial loss of managerial or technical staff；（4）Important business lacks system control or system failure, important economic business has internal control system guidance, but with no effective operation；（5）material deficiencies of internal control cannot be rectified in time. Quantitative standard 1. Material deficiencies：Misstatement ≥ 5% of total profits；Misstatement ≥ 1% of total assets；Misstatement ≥ 5% of total operating revenue；Misstatement ≥5% of owner's equity 2. Significant deficiencies：3% of gross profits≤Misstatement<5% of gross profits；0.5% of total assets≤Misstatement<1% of total assets；3% of total operating revenue≤Misstatement<5% of total operating revenue；3% of owner's equity≤Misstatement<5% of owner's equity. 3. General deficiencies：Misstatement<3% of gross profits；Misstatement<0.5% of total assets；Misstatement<3% of total operating revenue；Misstatement<3% of owner's equity. 1. Material deficiencies：loss≥5% of net profits. 2. Significant deficiencies：3% of net profits≤ loss＜5% of net profits. 3. General deficiencies：loss＜3% of net profits Number of financial-report material deficiencies 0 Number of non-financial-report material deficiencies 0 Number of significant financial-report related deficiencies 0 Number of significant Non-financial-report related deficiencies 0 14.2. Internal control auditor report Applicable N/A Deliberation opinion section in the internal control audit report The Company maintained, in all material respects, effective internal control over financial reporting as of 31 December 2023, based on the Basic Rules on Enterprise Internal Control and other applicable regulations. Disclosure of internal control audit report Disclosed Disclosure date of the internal control audit report 27 April 2024 Disclosure index of the internal control audit report 2023 Internal Control Auditor Report ( Type of the audit’s opinion Standard unqualified opinion 2023 Annual Report of Luzhou Laojiao Co., Ltd. 78 Significant deficiencies found in the non-financial report No The accounting firm issued the internal control audit report of non-standard opinions Yes No Whether the internal control audit report issued by the accounting firm is consistent with the self-assessment report issued by the board of directors. Yes No 15. Remediation of Problems Identified by Self-inspection in the Special Campaign on Listed Company Governance None. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 79 Section VEnvironmental and Social Responsibility 1. Information about environment protection Whether the listed company and its subsidiaries belong to heavy polluting industries prescribed by the environmental protection department Yes □ No Policies and industry standards on environmental protection In the process of production and operation, the Company strictly follow the laws, regulations and industry standards related to environmental protection, such as the Environmental Protection Law of the People's Republic of China, Law of the People's Republic of China on Environmental Impact Assessment, Law of the People's Republic of China on Atmospheric Pollution Prevention and Control, Law of the People's Republic of China on Water Pollution Prevention and Control, Administrative Measures for the Legal Disclosure of Enterprise Environmental Information, Regulations on the Administration of Environmental Protection of Construction Projects of the People's Republic of China, Regulations on Administration of Pollutant Discharge Permits, Policies and Industry Standards on Environmental Protection, Standard for Pollution Control on Hazardous Waste Storage, Standards for the Emission of Water Pollutants in the Fermented Alcohol and Baijiu Industry, Regulations on the Prevention and Control of Environmental Pollution by Solid Waste in Sichuan Province, and Regulations on Environmental Protection of Sichuan Province. Environmental protection administrative permission In 2023, the Company obtained six ecological and environmental administrative permits, including a total of three permits for change and renewal of discharge permits and three approvals of environmental impact assessment reports. Name of permit Administrative permit No. Review and issuance authority Acquiring time Valid term Permitted matter Remark Discharge Permit for Luzhou Laojiao Co., Ltd. (Xiaoshi Brewery Base) 91510500204706718H002V Luzhou Municipal Ecology and Environment Bureau 17 April 2023 5 years Concentration limit on fugitive emission of air pollutants: 2.0 mg/Nm3 for non-methane hydrocarbon (NMHC) and 20 dimensionless for odor concentration. Change Discharge Permit for Luzhou Laojiao Co., Ltd. (Huangyi Brewery Eco-91510500204706718H004Q Luzhou Municipal Ecology and Environment Bureau 6 June 2023 5 years Permitted annual discharge limits for wastewater: 440.18t/a for chemical oxygen demand (COD), 33.01t/a for ammonia nitrogen,55.02t/a for total Re-application 2023 Annual Report of Luzhou Laojiao Co., Ltd. 80 Park) nitrogen (TN), and 3.3t/a for total phosphorus (TP). Luzhou Laojiao Brewing Co., Ltd. (Energy Center of Sichuan Luzhou Baijiu Industrial Park) 91510500204755181G002V Luzhou Municipal Ecology and Environment Bureau 30 March 2023 5 years Permitted annual organized emission limits for air pollutants: 8.64t/a for particulate matters,18.88t/a for sulfur dioxide, and 136.08t/a for nitrogen oxides. Change Reply to the Report of Luzhou Laojiao on the Environmental Impact of Phase I Construction Project of Flexible Intelligent Filling Pilot Line L.SH.H.J.H. [2023] No.21 Luzhou Municipal Ecology and Environment Bureau 1 March 2023 Permanent In the 19# and 20# workshops in the south area of Sichuan Luzhou Baijiu Industrial Park, three 7,000-bottle/h manual filling production lines were utilized and supported with new equipment such as code-scanning devices for the production of small-scale and customized baijiu products, and one 24,000-bottle/h filling line was newly added for the production of a wide range of small-volume products. After the project is completed and put into production, a baijiu filling capacity of 27,000 tons/year will be developed. Newly acquired Reply to the Report of Luzhou Laojiao on the Environmental Impact of Phase II Construction Project of Flexible Intelligent Filling Pilot Line L.SH.H.J.H. [2023] No.19 Luzhou Municipal Ecology and Environment Bureau 1 March 2023 Permanent A 5,000-bottle/h filling line was constructed in 18# workshop in the south area of Sichuan Luzhou Baijiu Industrial Park for the automated production of small-scale and customized gift-boxed products. After the project is completed and put into production, a baijiu filling capacity of 9,600 tons/year will be developed. Newly acquired Reply to the Report of Luzhou Laojiao Custom Liquor Co., Ltd. on the Environmental Impact of No. 21 Production Workshop Renovation Project in the South Area of Huangyi Brewery Eco-Park L.SH.H.J.H. [2023] No.20 Luzhou Municipal Ecology and Environment Bureau 1 March 2023 Permanent An 8,000-bottle/h of conventional production and packaging line for custom products, a 3,000-bottle/h of production and packaging line for shaped-bottle custom products, and a box packaging line for small single personalized custom products were constructed in 21# workshop in the south area of Sichuan Luzhou Baijiu Industrial Park. After the project is completed and put into production, a baijiu filling Newly acquired 2023 Annual Report of Luzhou Laojiao Co., Ltd. 81 Industry discharge standards and pollutants in producing and operating activities Company name Type of main pollutant and particular pollutant Name of main pollutant and particular pollutant Discharge type Number of discharge outlet Distribution of discharge outlet Emission concentration/intensity Pollution discharge standard Total emission Approved total emission Excessive discharge Luzhou Laojiao Co., Ltd. Water pollutant COD Direct discharge 1 Luohan Brewery Eco-Park 20.84mg/L 50mg/L 7.9696t 23.183t/a No Luzhou Laojiao Co., Ltd. Water pollutant Ammonia nitrogen Direct discharge 1 Luohan Brewery Eco-Park 0.19mg/L 5mg/L 0.0569t 2.017t/a No Luzhou Laojiao Co., Ltd. Water pollutant Total nitrogen Direct discharge 1 Luohan Brewery Eco-Park 6.14mg/L 15mg/L 2.3424t 5.796t/a No Luzhou Laojiao Co., Ltd. Water pollutant Total phosphorus Direct discharge 1 Luohan Brewery Eco-Park 0.06mg/L 0.5mg/L 0.0223t 0.232t/a No Luzhou Laojiao Co., Ltd. Air pollutant PM Organized discharge 3 Luohan Brewery Eco-Park 0.69mg/m3 20mg/m30.1635t 3.900t/a No Luzhou Laojiao Co., Ltd. Air pollutant Sulfur dioxide Organized discharge 3 Luohan Brewery Eco-Park 0.20mg/m3 50mg/m30.1907t 11.500t/a No Luzhou Laojiao Co., Ltd. Air pollutant Oxynitride Organized discharge 3 Luohan Brewery Eco-Park 30.08mg/m3 150mg/m3 3.9348t 45.400t/a No Luzhou Laojiao Co., Ltd. Water pollutant COD Indirect discharge 1 Huangyi Brewery Eco-Park 30.68mg/L 400mg/L 18.0878t 440.180t/a No Luzhou Laojiao Co., Ltd. Water pollutant Ammonia nitrogen Indirect discharge 1 Huangyi Brewery Eco-Park 0.42mg/L 30mg/L 0.2310t 33.010t/a No Luzhou Laojiao Co., Ltd. Water pollutant Total nitrogen Indirect discharge 1 Huangyi Brewery Eco-Park 18.38mg/L 50mg/L 10.8063t 55.020t/a No Luzhou Laojiao Co., Ltd. Water pollutant Total phosphorus Indirect discharge 1 Huangyi Brewery Eco-Park 0.84mg/L 3.0mg/L 0.4989t 3.300t/a No Luzhou Laojiao Brewing Co., Ltd. Air pollutant Dust Organized discharge 2 Energy Center of Sichuan Luzhou Baijiu Industrial Park 0.902mg/m3 5mg/m30.6875t 8.640t/a No Luzhou Laojiao Brewing Co., Ltd. Air pollutant PM Organized discharge 1 Energy Center of Sichuan Luzhou Baijiu Industrial Park 1.752mg/m3 20mg/m30.0295t No Luzhou Laojiao Brewing Co., Ltd. Air pollutant Sulfur dioxide Organized discharge 2 Energy Center of Sichuan Luzhou Baijiu Industrial Park 0.307mg/m3 35mg/m30.2785t 18.880t/a No Luzhou Laojiao Brewing Co., Ltd. Air pollutant Sulfur dioxide Organized discharge 1 Energy Center of Sichuan Luzhou Baijiu Industrial Park 0.233mg/m3 50mg/m30.0081t No Luzhou Laojiao Brewing Co., Ltd. Air pollutant Oxynitride Organized discharge 2 Energy Center of Sichuan Luzhou Baijiu Industrial Park 34.65mg/m3 100mg/m3 24.7201t 136.080t/a No capacity of 7,000 tons/year will be developed. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 82 Luzhou Laojiao Brewing Co., Ltd. Air pollutant Oxynitride Organized discharge 1 Energy Center of Sichuan Luzhou Baijiu Industrial Park 38.66mg/m3 150mg/m3 0.6057t No Treatments of pollutants A. Waste water: Areas of the Company that produce wastewater are National Cellar, Zaojiaoxiang Brewery Base, Xiaoshi Brewery Base, Anning Technology Park, Luohan Brewery Eco-Park, and Huangyi Brewery Eco-Park. In National Cellar, Zaojiaoxiang Brewery Base, Xiaoshi Brewery Base, and Anning Technology Park, the high-concentration brewing wastewater is temporarily collected in pools (or tanks), and is later transferred to the wastewater treatment station of Huangyi Brewery Eco-Park by truck for treatment. The wastewater treatment stations of Luohan Brewery Eco-Park and Huangyi Brewery Eco-Park are equipped with online monitors to automatically monitor COD, ammonia nitrogen, total phosphorus, total nitrogen, pH value and flows, and transmit the monitoring data to the supervision platform of the higher authority. The Company's facilities for prevention and control of wastewater pollution are under normal operations, ensuring up-to-standard discharge through general discharging outlets. Compared with last year, suspended matter discharge was reduced by 48.45%, and COD discharge by 8.85%. B. Waste gas: Areas of the Company that produce exhaust gas are National Cellar, Zaojiaoxiang Brewery Base, Xiaoshi Brewery Base, Luohan Brewery Eco-Park, and Huangyi Brewery Eco-Park. In National Cellar Brewery Base, natural gas boilers are used, while in Xiaoshi Brewery Base and Zaojiaoxiang Brewery Base, direct-fired bottom boilers are used. The natural gas boilers of Luohan Brewery Eco-Park (20t/h,30t/h) and the natural gas boilers of Huangyi Brewery Eco-Park (20t/h,75t/h, 75t/h) are equipped with online monitors to automatically monitor exhaust gas, and transmit the monitoring data to the supervision platform of the higher authority. Low NOx combustion technology is adopted for the natural gas boilers. The Company's facilities for prevention and control of exhaust gas pollution are under normal operations, ensuring up-to-standard emission of exhaust gas through outlets. Compared with last year, PM discharge was reduced by 13.04%, and Oxynitride discharge by 9.51%. Emergency plan for environmental emergencies In 2023, the Company organized the revision and issuance of the Contingency Plan for Environmental Emergencies in Jiangyang District of Luzhou Laojiao Co., Ltd. (2023), the Contingency Plan for Environmental Emergencies in Longmatan District of Luzhou Laojiao Co., Ltd. (2023), and completed the corresponding Report on Environmental Emergency Resource Investigation, Environmental Risk Assessment Report, Special Contingency Plan and On-site Disposal Plan. Environmental self-monitoring plan Monitoring site Monitoring indicator Implementation standard Emission limit Monitoring frequency Monitoring form Monitoring compliance rate in H1 2023 Unorganized monitoring points 1#-4# for the exhaust Odor concentration Emission Standards for Odor Pollutants 20 (dimensionless) 1 time/half-year Manual 100% 2023 Annual Report of Luzhou Laojiao Co., Ltd. 83 gas emission outlets of Luohan Brewery Eco-Park Hydrogen sulfide (GB14554- 93) 0.06 mg/m3 Ammonia 1.5 mg/m3 NMHC Sichuan Emission Control Standard for Volatile Organic Compounds (DB51/2377-2017) 2 mg/m3 Particulate matters Integrated Emission Standards for Air Pollutants (GB16297-1996) 1 mg/m3 Exhaust gas emission outlets DA022, DA021 (unused) and DA020 of Luohan Brewery Eco-Park Ringelman emittance Emission Standards for Air Pollutants for Boiler (GB13271-2014) ≤ 1 1 time/quarter Manual 100% Nitrogen oxide 150 mg/m3 Automatic Particulate matters 20 mg/m3 Sulfur dioxide: 50 mg/m3 Exhaust gas emission outlet DA019 of Luohan Brewery Eco-Park Hydrogen sulfide Emission Standards for Odor Pollutants (GB14554- 93) 15,000 / 1 time/half-year Manual 100% Ammonia / 1.8 kg/h Odor concentration / 27 kg/h Exhaust gas emission outlet DA018 of Luohan Brewery Eco-Park Sulfur dioxide: Integrated Emission Standards for Air Pollutants (GB16297-1996) 240 mg/m3 0.77 kg/h 1 time/quarter Manual 100% Particulate matters 120 mg/m3 3.5 kg/h Nitrogen oxide 550 mg/m3 2.6 kg/h Volatile organic compounds Sichuan Emission Control Standard for Volatile Organic Compounds (DB51/2377-2017) 60 mg/m3 3.4 kg/h Exhaust gas emission outlet DA017 of Luohan Brewery Eco-Park NMHC Sichuan Emission Control Standard for Volatile Organic Compounds (DB51/2377-2017) 60 mg/m3 3.4 kg/h 1 time/quarter Manual 100% Exhaust gas emission outlets DA001-DA016 of Luohan Brewery Eco-Park Particulate matters Integrated Emission Standards for Air Pollutants (GB16297-1996) 120 mg/m3 1 time/half-year Manual 100% Main outlet DW001 of the wastewater treatment station of Luohan Brewery Eco-Park Flow Standards for the Emission of Water Pollutants in the Fermented Alcohol and Baijiu Industry (GB27931-2011) / 1 time/quarter Automatic 100% PH value 6-9 COD 50 mg/L Ammonia nitrogen 5 mg/L TP 0.5 mg/L TN 15 mg/L Suspended solids 20 mg/L 1 time/month Manual Five-day BOD 20mg/L Chroma 20 Rainwater outlets DW002-DW006 of Luohan Brewery Eco-Park Suspended solids Standards for the Emission of Water Pollutants in the Fermented Alcohol and Baijiu Industry (GB2731-2011) 20 mg/L 1 time/month (1 time/quarter in case of no abnormalities monitored) Manual 100% COD 50 mg/L Noise monitoring points 1-4# at the boundary of Luohan Brewery Eco-Park Boundary noise Emission Standard for Noise of Industrial Enterprises at Boundary (GB12348-2008) Daytime: 60 dB (A); nighttime: 50 dB (A) 1 time/quarter Manual 100% Circulating cooling water outlet DW002 of the Energy Center of Sichuan Luzhou Baijiu Industrial Park PH value, COD, TP / / 1 time/quarter Manual 100% Wastewater outlet DW001 of the Energy Center of Sichuan Luzhou Baijiu Industrial Park PH value Integrated Wastewater Discharge Standard (GB8978-1996) 6-9 1 time/quarter Manual 100% Total dissolved solids (TDS) / Suspended solids 140 mg/L 2023 Annual Report of Luzhou Laojiao Co., Ltd. 84 Five-day BOD 80 mg/L COD 400 mg/L TN 50 mg/L Ammonia nitrogen 30 mg/L TP 3 mg/L Boiler exhaust gas vents DA001-DA002 of the Energy Center of Sichuan Luzhou Baijiu Industrial Park Ringelman emittance Emission Standard of Air Pollutants for Thermal Power Plants (GB13223-2011) ≤ 1 1 time/quarter Manual 100% Nitrogen oxide 100 mg/m3 Automatic Soot 5 mg/m3 Sulfur dioxide: 35 mg/m3 Boiler exhaust gas vent DA003 of the Energy Center of Sichuan Luzhou Baijiu Industrial Park Ringelman emittance Emission Standards for Air Pollutants for Boiler (GB13271-2014) ≤ 1 1 time/quarter Manual 100% Nitrogen oxide 150 mg/m3 Automatic Particulate matters 20 mg/m3 Sulfur dioxide: 50 mg/m3 Rainwater outlets DW004-DW010 of Huangyi Brewery Eco-Park Suspended solids Standards for the Emission of Water Pollutants in the Fermented Alcohol and Baijiu Industry (GB2731-2011) 50 mg/L 1 time/month (1 time/quarter in case of no abnormalities monitored) Manual 100% COD 100 mg/L Unorganized monitoring points 1#-4# at the boundary of Huangyi Brewery Eco-Park Odor concentration Emission Standards for Odor Pollutants (GB14554-93) 20 (dimensionless) 1 time/quarter Manual 100% Hydrogen sulfide 0.06 mg/m3 Ammonia 1.5 mg/m3 NMHC Sichuan Emission Control Standard for Volatile Organic Compounds (DB51/2377-2017) 2 mg/m3 Particulate matters Integrated Emission Standards for Air Pollutants (GB16297-1996) 1 mg/m3 DA041 and DA042 of Huangyi Brewery Eco-Park Odor concentration Emission Standards for Odor Pollutants (GB14554- 93) 2,000 (dimensionless) 1 time/half-year Manual 100% Ammonia 4.9 kg/h Hydrogen sulfide 0.33 kg/h DA096-DA097 of Huangyi Brewery Eco-Park NMHC Sichuan Emission Control Standard for Volatile Organic Compounds (DB51/2377-2017) 60 mg/m3 4.76 kg/h 1 time/quarter Manual 100% DA034-DA040, DA043-DA070, DA076-DA086, DA088-DA095, DA098, and DA099 of Huangyi Brewery Eco-Park Particulate matters Integrated Emission Standards for Air Pollutants (GB16297-1996) 120 mg/m3 1 time/half-year Manual 100% Main outlet of the wastewater treatment station of Huangyi Brewery Eco-Park Flow Standards for the Emission of Water Pollutants in the Fermented Alcohol and Baijiu Industry (GB2731-2011) / 1 time/quarter Automatic 100% PH value 6-9 COD 400 mg/L Ammonia nitrogen 30 mg/L TP 3 mg/L TN 50 mg/L Suspended solids 140 mg/L 1 time/month Manual Five-day BOD 80 mg/L Chroma 80 Noise monitoring points 1-4# at the boundary of Huangyi Brewery Eco-Park Boundary noise Emission Standard for Noise of Industrial Enterprises at Boundary (GB12348-2008) Daytime: 65 dB (A); nighttime: 55 dB (A) 1 time/quarter Manual 100% Unorganized monitoring points 1#-7# at Xiaoshi Brewery Base Odor concentration Emission Standards for Odor Pollutants (GB14554- 93) 20 1 time/half-year Manual 100% NMHC Sichuan Emission Control Standard for Volatile Organic Compounds (DB51/2377-2017) 2.0 mg/m3 Boiler exhaust gas vents DA001-DA010 of Xiaoshi Brewery Base Ringelman emittance Emission Standards for Air Pollutants for Boiler (GB13271-2014) ≤ 1 1 time/year Manual 100% Soot 20 mg/m3 Sulfur dioxide: 50 mg/m3 Nitrogen oxide 150 mg/m31 time/month 2023 Annual Report of Luzhou Laojiao Co., Ltd. 85 Noise monitoring points at the boundary of Xiaoshi Brewery Base Boundary noise Emission Standard for Noise of Industrial Enterprises at Boundary (GB12348-2008) Daytime: 60 dB (A) 1 time/quarter Manual 100% Unorganized monitoring points 1#-4# at National Cellar and 1#-3# Zaojiaoxiang Brewery Bases Odor concentration Emission Standards for Odor Pollutants (GB14554- 93) 20 1 time/half-year Manual 100% NMHC Sichuan Emission Control Standard for Volatile Organic Compounds (DB51/2377-2017) 2.0 mg/m3 Boiler exhaust gas vents DA001-DA003 of National Cellar and Zaojiaoxiang Brewery Bases Ringelman emittance Emission Standards for Air Pollutants for Boiler (GB13271-2014) ≤ 1 1 time/year Manual 100% Soot 20 mg/m3 Sulfur dioxide: 50 mg/m3 Nitrogen oxide 150 mg/m31 time/month Noise monitoring points at the boundary of National Cellar and Zaojiaoxiang Brewery Bases Boundary noise Emission Standard for Noise of Industrial Enterprises at Boundary (Class 4 for street frontage) Daytime: 60 dB (A) 1 time/quarter Manual 100% Rainwater outlet DW003 of National Cellar Brewery Bases Suspended solids Standards for the Emission of Water Pollutants in the Fermented Alcohol and Baijiu Industry (GB2731-2011) 20mg/L 1 time/month (1 time/quarter in case of no abnormalities monitored) Manual 100% Input in environmental management and protection and the payment of environmental protection-related taxes During the Reporting Period, more than CNY 44.29 million was input in environmental governance and protection, and CNY 185.3 thousand was paid in environmental protection tax as required. Taxable pollutant Amount of tax payable (CNY 10,000) Actual amount paid (CNY 10,000) Tax deduction (CNY 10,000) Water pollutant and air pollutant 18.5318.530.00 Measures taken to reduce carbon emissions during the reporting period and the results Applicable N/A The Company reduced CO2 emissions through resource recycling. Through the pressure recovery and utilisation of waste heat steam, during the Reporting Period, the energy-saving system saved steam of approximately 14,100 tons and reduced carbon dioxide of approximately 3,380 tons. The Company recycled the marsh gas generated from the wastewater treatment process as boiler fuel, with more than 3.35 million cubic meters of marsh gas recycled during the Reporting Period, and more than 49,260 tons of carbon dioxide emissions were reduced. The Company reduced carbon dioxide emissions by purchasing green power. During the Reporting Period, over 30.9 million kilowatt-hours of green power were purchased and carbon emissions were reduced by over 17,630 tons. Administrative penalties received in the reporting period due to environmental issues The Company or subsidiary Reason for penalties Regulation violated Penalties Impact on the Company Rectification N/A 2023 Annual Report of Luzhou Laojiao Co., Ltd. 86 Other information about environmental protection that should be disclosed N/A Other information about environment protection N/A 2. Social responsibility See the 2023 Social Responsibility Report disclosed on the same day with this Annual Report. 3. Efforts in poverty alleviation and rural revitalization 3.1. Work plan for rural revitalization in 2023 In 2023, the Company will strictly implement the arrangement of the central, provincial and municipal Party committees regarding effectively connecting consolidation and expansion of poverty alleviation achievements with rural revitalization, coordinate various resources and strengths to improve areas of weakness, consolidate the achievements, lay the foundation and promote the revitalization, take multiple measures to resolutely fulfill the paired assistance responsibility, and comprehensively promote new progress in rural revitalization and new levels in agricultural and rural modernization in assisted villages. A. Enhance the leadership of party building and consolidate the rural governance. The party branches of the Company will continue to collaborate with the party branches of the assisted villages, and party workers will be selected to guide the standard implementation of policies such as the "three meetings and one lecture" and organizational life meetings. The Company will help villages establish and improve a rural governance system that combines autonomy, rule of law and moral governance under the leadership of party organizations, promote grassroots party organizations in rural areas to publicize the Party's ideas, implement the Party's decisions, lead grassroots governance and unite and mobilize the masses, regulate the management of village affairs and support rural revitalization. B. Enhance the building of the assistance team to boost rural revitalization. The Company will strive to consolidate the responsibilities of the assistance team stationed in the village, continuously improve the comprehensive ability of the assistance cadres, and build a high-quality and responsible force for rural revitalization with excellent work style. In addition, it will strongly cooperate with the "two committees" of the village to consolidate and expand the results of poverty eradication, complete rural revitalization tasks such as rural industrial development and spiritual civilization construction, and contribute to the comprehensive rural revitalization from industry, talent, culture and ecology. C. Enhance consumption assistance and stimulate industrial development momentum. Relying on the resource and platform advantages, the Company will continue to integrate resources and coordinate the integrated development of "livestock, production, promotion and sales" around special industries such as Maiwa yak, continuously enhance product promotion and development, promote the upgrading of industrial supporting facilities and the improvement of chains, and facilitate the effective transformation of the "geographical card" into a "treasure for wealth". It will continue to carry out 2023 Annual Report of Luzhou Laojiao Co., Ltd. 87 "purchase instead of donation" campaign, and adopt market-oriented means to sign annual targeted purchase agreements with the assisted counties for agricultural and sideline products, and bring high-quality agricultural products onto e-commerce platforms. D. Deepen employment assistance and enhance blood-creation momentum. In assisted villages, the Company will establish a ledger of employment assistance for poverty-alleviation and low-income families, actively help them compete for public service jobs, and organize training on employment skills such as e-commerce and farming techniques to extensively cultivate training groups of wealthy leaders. Fully relying on the assistance projects, the Company will support unstable households in poverty alleviation and marginal households prone to poverty to develop yard economy and work to increase income according to local conditions. Additionally, the Company will identify, intervene and assist farmers who are at risk of returning to poverty as early as possible to firmly guard the bottom line of preventing large-scale return to poverty. E. Advocate the transformation of outmoded habits and customs and promote a new style of civilization. The Company will enhance the promotion of the socialist core values and guide party members and cadres in assisted villages to update their ideology and form a diligent, civilized and healthy lifestyle. In addition, the Company will cooperate with the assisted villages to continue to carry out activities rich in rural culture, such as the Guozhuang Dance and equestrian to enrich the spiritual and cultural life of the villagers and promote the transformation into a harmonious, aggressive and good society. 3.2. The achievements of paired assistance in 2023 The Company always upholds the important principle of "I do practical things for the public" to guide the assistance initiative, and actively implements seven categories of assistance projects including infrastructure construction, industrial support, self-belief and education support, and health assistance. A total of CNY 2,922,700 has been invested to carry out paired assistance in Guntang Village, Hongyuan County, and Xiangtian Village, Gulin County, as well as fundamental assistance in Hongyuan County. Additionally, four Party Committee meetings were held to examine paired assistance and fundamental assistance. Six special seminars were held and four full-time assistance cadres with outstanding abilities were dispatched to the villages. Members of the Company's leadership team visited the villages eight times, and the guidance group spent three days in field investigation. Two joint meetings on paired assistance were organised. First, the standard of Party organisations was enhanced. For six consecutive years, the Company has been engaging in paired cooperation activities with the Maiwa Township Party Committee and its affiliated Party branches. A total of CNY 30,000 was allocated to reward and express care for outstanding and disadvantaged Party members in 2023, aiming to standardise and regulate Party organisations at the township and village levels, and provide strong organisational guarantees for rural revitalisation. Second, infrastructures were improved. In line with the actual situation of the assisted villages and the needs of the masses, a total of CNY 300,000 was invested in the construction of sanitary toilets, maintenance of public bathhouses, improvement of road surface hardening, optimisation of drinking water quality, in order to renovate and improve the living environment, address the urgent needs of the masses, and lay a solid foundation for rural revitalisation. Third, full efforts were made to promote local specialties. By virtue of the county's resource endowment and the Company's operational advantages, industrial support activities were launched and CNY 1,057,000 was spent to assist Hongyuan County in establishing the "Yak Grassland Enterprise Store" on Douyin platform. By creating a multi-dimensional sales assistance system, the Company helped promote specialty products through online e-commerce platforms and 2023 Annual Report of Luzhou Laojiao Co., Ltd. 88 offline exhibitions, thereby boosting the visibility and sales volume of the Maiwa Yak series products. Aggregate sales of Hongyuan Maiwa yaks amounted to nearly CNY 1 million. Additionally, through the "purchase instead of donation" activity, CNY 1,011,200 was spent to purchase agricultural and sideline products from the assisted areas and additional CNY 100,000 was donated to the village collective economy. Furthermore, over CNY 40,000 was contributed to the purchase of baby chicks for farmers in Xiangtian Village, thereby consolidating the industrial foundation and stimulating the "engine" for rural revitalisation. Fourth, education on gratitude and hard work was launched. The "Bridge Project" education assistance action has been implemented for six years. In 2023,27 graduates from Guntang Village and Xiangtian Village were awarded a total of CNY 135,000 in scholarships to help impoverished students realise their dream of attending university, thus injecting "endogenous power" into rural revitalisation. Fifth, the building of rural cultural civilisation was promoted. The Company has supported rural cultural festival activities for six years, investing CNY 30,000 annually to conduct the 2023 Maiwa Township Cultural Festival to promote rural cultural characteristics, and enhance the spiritual outlook of villagers. In addition, CNY 46,000 was devoted to moral evaluation activities, contributing to the substantive development of rural revitalisation. Sixth, the difficulties of the masses were strictly monitored. Dynamic monitoring was carried out thoroughly to prevent returning to poverty. Members of the Company's leadership team and the rural revitalisation working group measured the actual conditions with their footsteps, paying regular visits to express care to households at risk of returning to poverty, households on the edge of poverty, and severely disadvantaged households. An investment of CNY 143,500 was allocated for the household visits in 2023, covering nearly 200 people, to enhance the foundation for rural revitalisation. Seventh, external training opportunities were created. With an input of CNY 30,000, village cadres and forgoers in getting rich were organised to visit and study in advanced rural revitalisation areas with similar geographical environments. They learned from advanced experiences in animal husbandry, planting, and creating liveable habitats, to gain insights and explore ways for rural revitalisation. 3.3. Highlights of paired assistance in 2023 A. External support-based and self-motivation-based industrial support accelerated the "speed" of rural revitalisation. To promote the rapid development and transformation of featured industries in Guntang Village, and to effectively increase residents' income, the Company adopts a comprehensive industrial support approach combining external support and self-motivation. It gradually explores and forms a sustainable support model transitioning from "external support" to "self-motivation". The Company signed a tripartite assistance agreement with a local agricultural product processing company and the government of Guntang Village to build an integrated production and sales chain characterised by production by farmers in Guntang Village - processing by the agricultural product company - sales by Luzhou Laojiao. This aims to create a collective economic income model with "guaranteed income + profit sharing". The "purchase instead of donation" programme generated over CNY 8.76 million in revenue for local residents, effectively solving the "last mile" problem of product sales in poverty alleviation. In addition, the Company invested funds and created conditions to establish sales platforms locally, while also cultivating local sales and operational talent. This effort not only assists in promoting product branding and sales but also creates more job opportunities and provides an ample talent pool for the local area, thereby providing the "original driving force" for rural revitalisation. B.The "integrated" and "penetrating" ideological and ethical standards forged the "soul" of rural revitalisation. To firmly consolidate the achievements of changing customs and promoting etiquette, and 2023 Annual Report of Luzhou Laojiao Co., Ltd. 89 to establish a scientific, civilised, and healthy rural lifestyle, outdated practices have been further eliminated in support of civilised norms. The Company solidly promotes the ideological and ethical standards among villagers and cultivates a civilised rural atmosphere. An investment of CNY 300,000 was made to improve public facilities, including the construction of sanitary toilets and public bathhouses, aiming to enhance the sanitation conditions for the villagers, advocate for a civilised and healthy lifestyle, and elevate the awareness of hygiene and happiness index among the villagers. The Company spent CNY 30,000 to support the cultural festival in Guntang Village, featuring over ten vibrant traditional cultural activities such as Maiwa Guozhuang Dance, sandbag lifting and equestrian performance. The Village Cultural Festival has become an annual event that the locals look forward to. Since the cultural square of Guntang Village was put into use, it has hosted more than ten activities to disseminate intangible cultural heritage such as Maiwa Tibetan Opera and Baiwang Playing and Singing, successfully making it a popular destination for the locals and a must-visit spot for tourists. Throughout the year, over ten sessions of training and lectures were organised on grassland fire prevention, hygiene awareness, and safeguarding against online scams. Party members, cadres, and the general public participated in five special Party lectures, including "Themed teach-ins on the 20th National Congress of the Communist Party of China", "Celebrating the 70th Anniversary of the Establishment of the Prefecture", and "Branch Secretaries Lecturing on Party Classes". The Company persistently conducted household visits to promote filial piety, respect for the elderly, and civilised customs, in efforts to change customs and promote etiquette and foster a culture of civility to support rural revitalisation. 3.4. Work plan for assistance in 2024 A. Enhance industrial assistance and stimulate the development momentum. By virtue of the resource endowment of the assisted areas and the operational advantages of the Company, the Company will focus on incorporating agricultural and animal husbandry industries into modernised industrial parks. Our goal is to promote the transformation and high-quality development of modern animal husbandry, tap into and utilise the unique advantages of resources in the assisted villages. It plans to broaden the sales channels of characteristic agricultural and sideline products through e-commerce platforms, bulk purchases, and "purchase for sales" initiatives, aiming to accelerate the conversion of resource advantages into industrial strengths. B. Improve the infrastructure and enhance the living environment. To effectively improve the rural living environment and enhance the happiness index of the people, one of the Company's objectives is to build ecologically beautiful and liveable villages. In 2024, the plan is to renovate the architectural style of the houses in the assisted villages and construct access roads, further improve the hygiene of the village environment and beautify the village appearance, so as to continuously promote the creation of liveable rural areas with beautiful environment, villages, and courtyards. C. Strengthen the talent support and enhance the vitality of development. Focusing on the requirements of the new era and based on the new stage of development, the Company will continue to stimulate endogenous vitality and cultivate local talents as an effective path to increase the talent pool and enhance the quality of rural revitalisation. It will continue to carry out activities such as the "Bridge Project" - education on gratitude and hard work, and support for village cadres and residents to participate in training in advanced areas, aiming to build a team of talents who are rooted in the rural areas and will not easily leave. D. Increase cultural support and enrich the cultural knowledge. To further solidify the ideological and 2023 Annual Report of Luzhou Laojiao Co., Ltd. 90 ethical standards and build up moral power for rural revitalisation, the company will continue to focus on local cultural characteristics and the spiritual needs of the masses. It will strongly support the promotion of traditional culture such as Tibetan opera, and actively organise themed events for International Women's Day, and other activities to enrich the cultural life of the masses. These efforts aim to broaden the villagers' horizons, uplift their spirits, and foster a subjective willingness to alleviate poverty. E. Enhance the building of the assistance team to boost rural revitalisation. Considering the next steps in the assistance plan, the Company, guided by the principle of sending people who are needed and suitable for the task, will select a group of individuals with strong execution abilities, high professional qualities, and broad expertise to form an assistance team. The Company will ensure that the assistance initiative is effectively implemented on the front line, and the role of assistance is well played on the front line, so as to contribute to the comprehensive revitalisation of rural industries, talents, culture, ecosystem, and other aspects. In 2024, the Company will continue to strengthen communication and collaboration with leaders at all levels of the county and township, and will promote various assistance projects with more practical measures and better methods, injecting new vitality to the comprehensive revitalisation and development of Guntang Village and Xiangtian Village. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 91 Section VISignificant Events 1. Performance of undertakings 1.1. Undertakings of the Company's actual controller, shareholders, related parties and acquirer, as well as the Company and other commitment makers fulfilled in the reporting period or ongoing by the end of this reporting period Applicable N/A Commitment Promisor Type of commitment Details of commitment Date of commitment making Term of commitment Fulfillment Other commitments Laojiao Group Other commitments Not to reduce shares of Luzhou Laojiao Co., Ltd. held by the Company in any way within 12 months from 25 August 2023 25 August 2023 12 months Ongoing Executed on time or not Yes 1.2. Where any earnings forecast was made for any of the Company's assets or projects and the reporting period is still within the forecast period, the Company shall explain whether the performance of the asset or project reaches the earnings forecast and reasons Applicable N/A 2. Occupation of the Company's fund by the controlling shareholder or its related parties for non-operating purposes Applicable N/A No such cases in the reporting period. 3. Irregularities in the provision of guarantees Applicable N/A No such cases in the reporting period. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 92 4. Explanation of the board of directors regarding the latest "non-standard audit opinion" Applicable N/A 5. Explanation of the board of directors, the board of supervisors and non-executive directors (if any) regarding the "non-standard audit opinion" for the reporting period Applicable N/A 6. Reason for changes in accounting policies and accounting estimates, as well as correction of major accounting errors compared to the financial report for the prior year Applicable □ N/A Unit：CNY Content and reason for changes in accounting policies Name of statement item materially affected Amount affected On 30 November 2022, the Ministry of Finance issued the Interpretations of Accounting Standards for Business Enterprises No.16 (C.K. [2022] No.31), providing that the requirement of "accounting processing under initial recognition and exemption is not applicable to deferred income taxes related to assets and liabilities incurred from a single transaction" will enter into force as of 1 January 2023. Deferred income tax assets Deferred income tax liabilities For this new requirement of "accounting processing under initial recognition and exemption is not applicable to deferred income taxes related to assets and liabilities incurred from a single transaction", Interpretation No.16 stipulates that single transactions that are not business combinations, that affect neither accounting profit nor taxable income (or deductible losses) at the time the transaction occurs, and where the initial recognition of assets and liabilities results in taxable temporary differences and deductible temporary differences of equal amounts shall not be governed by the provisions for exemption from initial recognition of deferred tax liabilities and deferred tax assets in Accounting Standards for Business Enterprises No.18 - Income Taxes. At the time of the transaction, the enterprise shall recognise the corresponding deferred income tax liabilities and deferred income tax assets for taxable temporary differences and deductible temporary differences arising from the initial recognition of assets and liabilities in such transaction. The Company has adopted the provisions of Interpretation No.16, "Accounting processing under initial recognition and exemption is not applicable to deferred income taxes related to assets and liabilities incurred from a single transaction" as of 1 January 2023. The implementation of this interpretation has not had a significant impact on the Company's financial position and operating results. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 93 Apart from the aforementioned changes, there have been no other significant accounting policy changes during the reporting period. 7. Reason for changes in scope of the consolidated financial statements compared to the financial report for the prior year Applicable □ N/A Two subsidiaries were liquidated and cancelled during the current period: Luzhou Baonuo Biotechnology Co., Ltd. was liquidated and cancelled in October 2023; Luzhou Laojiao Custom Liquor Co., Ltd. was liquidated and cancelled in December 2023. Since the cancellation of these two companies, they are no longer included in the scope of the consolidated financial statements. 8. Engagement and disengagement of CPA firm CPA firm at present Name of the domestic CPA firm Sichuan Huaxin (Group) CPAFirm The Company’s payment for the domestic CPA firm (CNY 10,000) 103 Consecutive years of the audit service provided by the domestic CPA firm 25 Names of the certified public accountants from the domestic CPA firm Li Wulin, Tang Fangmo, Fan Bo Consecutive years of the audit service provided by the certified public accountants Li Wulin 4 years, Tang Fangmo 5 years, Fan Bo 2 years Whether the CPAs firm was changed in the current period Yes No Engagement of any CPAs firm for internal control audit, financial advisor or sponsor Applicable N/A The Company appointed Sichuan Huaxin (Group) CPAFirm as the internal control auditor for this year. The remuneration of audit in total paid by the Company was CNY 520 thousand. 9. Possibility of delisting after disclosure of this annual report Applicable N/A 10. Bankruptcy and reorganization Applicable N/A No such cases in the reporting period. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 94 11. Material litigation and arbitration Applicable N/A Profile of litigation (arbitration) Amount involved in the case (CNY 10,000) Whether it forms an estimate liability Progress in litigation (arbitration) Trial results and impacts of litigation (arbitration) Execution of judgment of litigation (arbitration) Date of disclosure Disclosure index The Company filed a lawsuit with ABC Changsha Yingxin Branch over a deposit dispute, and the case has been completed in the first instance of Hunan Province Higher People's Court and the final trial of the Supreme People's Court. The case is now at the stage of enforcement. 14,942.5 No The second trial has been concluded, and the case is now at the stage of enforcement. For the losses that the Company cannot recover through criminal execution procedures, 40% shall be borne by ABC Changsha Yingxin Branch,20% shall be borne by ABC Changsha Hongxin Branch and the rest shall be borne by the Company itself. The Company applied to Hunan Province Higher People's Court for enforcement of the verdict. Hunan Province Higher People's Court ruled that Hunan Changsha Intermediate People’s Court should see to the execution of the verdict. Upon the enforcement, the banks have paid part of the compensations. 15 October 2014 See Section VI “Other significant events” The Company filed a lawsuit with ICBC Nanyang Zhongzhou Branch over a deposit dispute, and the case has been completed in the first instance of Henan Province Higher People's Court and the final trial of the Supreme People's Court. The case is now at the stage of enforcement. 15,000 No The second trial has been concluded, and the case is now at the stage of enforcement. ICBC Nanyang Zhongzhou Branch, ICBC Nanyang Branch, and Sanya Rural Commercial Bank Hongsha Branch shall pay compensations of CNY 75 million, CNY 7.5 million and CNY 6.105 million respectively with the relevant interest to the Company, and the rest of the loss shall be borne by the Company itself. The banks have paid part of the compensations. As there was a dispute over the verdict, the Company applied to Henan Province Higher People's Court for enforcement of the verdict. Henan Province Higher People's Court ruled that Nanyang Intermediate People’s Court should see to the execution of the verdict. The case is now at the stage of enforcement by Nanyang Intermediate People’s Court. 10 January 2015 See Section VI “Other significant events” 2023 Annual Report of Luzhou Laojiao Co., Ltd. 95 12. Punishments and rectifications Applicable N/A No such cases in the reporting period. 13. Credit conditions of the Company as well as its controlling shareholder and actual controller Applicable N/A 14. Significant related party transactions 14.1. Related party transactions arising from routine operation Applicable N/A No such cases in the reporting period. 14.2. Related party transactions regarding purchase or sales of assets or equity interests Applicable N/A No such cases in the reporting period. 14.3. Related party transitions arising from joint investments in external parties Applicable N/A No such cases in the reporting period. 14.4. Credits and liabilities with related parties Applicable N/A No such cases in the reporting period. 14.5. Transactions with related finance companies Applicable N/A The Company did not make deposits in, receive loans or credit from and was not involved in any other finance business with any related finance company or any of its related parties. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 96 14.6. Transactions between finance companies controlled by the Company and related parties Applicable N/A No related parties made deposits in, received loans or credit from or was involved in any other finance business with any finance company controlled by the Company. 14.7. Other significant related party transactions Applicable N/A No such cases in the reporting period. 15. Significant contracts and their execution 15.1. Trusteeship, contracting and leasing 15.1.1. Trusteeship Applicable N/A No such cases in the reporting period. 15.1.2. Contracting Applicable N/A No such cases in the reporting period. 15.1.3. Leasing Applicable N/A No such cases in the reporting period. 15.2. Major guarantees Applicable N/A No such cases in the reporting period. 15.3. Entrusted cash asset management 15.3.1. Entrusted assets management Applicable N/A 2023 Annual Report of Luzhou Laojiao Co., Ltd. 97 Entrusted assets management during the reporting period Unit: CNY 10,000 Type Fund source for entrusted assets management Amount of entrusted assets management Undue balance Overdue outstanding amount Impairment allowances for the overdue outstanding amount Wealth management product of securities firm Own funds 120,000120,00000 Others Own funds 20,00020,00000 Total 140,000140,00000 Particulars of high risk wealth management products with a significant single amount or low security or poor liquidity Applicable N/A Expected inability to recover the principal of entrusted assets management or other circumstances that may result in impairment Applicable N/A 15.3.2 Entrust loans Applicable N/A No such cases in the reporting period. 15.4. Other significant contracts Applicable N/A No such cases in the reporting period. 16. Other significant events Applicable N/A The Company disclosed in October 2014 and January 2015 respectively the contract disputes involving three savings deposits of CNY 500 million in total with banks including ABCChangsha Yingxin Branch and ICBCNanyang Zhongzhou Branch. Upon criminal booty recovery, criminal and civil enforcement, as of 31 December 2023, the Company had recovered a total amount of CNY 372 million for the three disputes. See details in the Company’s announcements: Date of announcement No. Catalogue Official website 15 October 20142014-35 Announcement of significant litigation 2023 Annual Report of Luzhou Laojiao Co., Ltd. 98 12 November 20142014-41 Announcement of significant litigation progress 6 December 20142014-43 Announcement of significant litigation progress part II 10 January 20152015-1 Announcement of significant events 4 February 20152015-4 Announcement of significant events progress 25 March 20152015-11 Announcement of significant litigation progress part III 18 April 20152015-20 Announcement of significant litigation progress part IV 22 April 20152015-21 Announcement of significant events progress part II 24 April 20152015-25 Announcement of significant litigation progress part V 15 July 20152015-44 Announcement of significant litigation progress part VI 22 July 20152015-45 Announcement of significant litigation progress part VII 6 June 20182018-17 Announcement of significant litigation progress part VIII 7 May 20192019-11 Announcement of significant litigation progress part IX 17 May 20192019-13 Announcement of significant litigation progress part X 24 March 20202020-6 Announcement of significant litigation progress part XI 6 May 20202020-14 Announcement of significant litigation progress part XII 7 November 20202020-34 Announcement of significant litigation progress part XIII 6 July 20212021-30 Announcement of significant litigation progress part XIV 15 December 20212021-57 Announcement of significant litigation progress part XV 30 December 20212021-64 Announcement of significant litigation progress part XVI 17. Significant events of subsidiaries Applicable □ N/A The Company invested in the technical upgrade program of intelligent brewing (Phase I) with the wholly-owned subsidiary, Brewing Company, as the implementer. The total investment amount approximated CNY 4,782.5090 million. For further information, see Announcement No.2022-24 on the Implementation of Luzhou Laojiao’s Technical Upgrade Program of Intelligent Brewing (Phase I) by Subsidiary. The program is currently under construction. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 99 Section VIIChanges in Shares and Information about Shareholders 1. Changes in shares 1.1 Changes in shares Unit：Share Before Changes in this year (＋，－) After Number Proportion Issuance of new shares Bonus shares Capitalization of capital reserves Other Subtotal Number Proportion I. Restricted shares 7,390,5450.50% 92,669 -14,62578,0447,468,5890.51% 1. Shares held by the state 2. Shares held by state-owned corporations 3. Shares held by other domestic investors 7,390,5450.50% 92,669 -14,62578,0447,468,5890.51% Of which: shares held by domestic corporations Shares held by domestic individuals 7,390,5450.50% 92,669 -14,62578,0447,468,5890.51% 4. Shares held by foreign corporations Of which: shares held by foreign corporations Shares held by foreign individuals II. Non-restricted shares 1,464,504,55599.50% 14,62514,6251,464,519,18099.49% 1.CNY common shares 1,464,504,55599.50% 14,62514,6251,464,519,18099.49% 2. Domestically listed foreign shares 2023 Annual Report of Luzhou Laojiao Co., Ltd. 100 3. Overseas listed foreign shares 4. Other III. Total shares 1,471,895,100100.00% 92,669 092,6691,471,987,76999.49% Reasons for the change in shares Applicable □ N/A A. On 29 December 2022, the Proposal on the Grant of Reserved Restricted Shares to Awardees was deliberated and approved at the 26th Meeting of the 10th Board of Directors and the 15th Meeting of the 10th Board of Supervisors, respectively. As such, it was decided to grant the restricted shares to eligible awardees and the grant was completed and registered on 16 February 2023. A total of 92,669 restricted shares were granted to 17 awardees as registered, which were listed on 17 February 2023. B.14,625 locked-up shares of senior management of Mr. Shen Caihong were lifted from restricted sales on 2 January 2023. Approval of share changes Applicable □ N/A On 29 December 2022, the Proposal on the Grant of Reserved Restricted Shares to Awardees was deliberated and approved at the 26th Meeting of the 10th Board of Directors and the 15th Meeting of the 10th Board of Supervisors, respectively. As such, it was decided to grant the restricted shares to eligible awardees and the grant was completed and registered on 16 February 2023. A total of 92,669 restricted shares were granted to 17 awardees as registered, which were listed on 17 February 2023. Upon the completion of this grant registration, the total share capital of the Company increased to 1,471,987,769 shares from 1,471,895,100. Transfer of share ownership Applicable N/A Effects of changes in shares on the basic EPS, diluted EPS, net assets per share attributable to common shareholders of the Company and other financial indexes over the last year and the last reporting period Applicable N/A Other contents that the Company considers it necessary or required by the securities regulatory authorities to disclose Applicable N/A 1.2 Changes in restricted shares Applicable □ N/A Unit：Share Name of shareholder Number of restricted shares held at Increase in restricted shares during Decrease in restricted shares during Number of restricted shares held at Reason for restriction Date of unlocking 2023 Annual Report of Luzhou Laojiao Co., Ltd. 101 the beginning of the reporting period the reporting period the reporting period the end of the reporting period 2021 Restricted Share Incentive Plan 7,142,62492,669 7,235,293 Restricted shares for equity incentive In accordance with the relevant provisions governing lifting the restriction of the Company’s 2021 Restricted Share Incentive Plan Shen Caihong 103,781 14,62589,156 Locked-up shares of senior management Locked-up shares of senior management were lifted from restricted sales on 2 January 2023. Total 7,246,40592,66914,6257,324,449 -- -- 2. Issuance and listing of securities 2.1 Securities (excluding preferred shares) issued in the reporting period Applicable □ N/A Name of stock and derivative securities Date of offering Offering price (or interest rate) Number offered Date of listing Number approved for public trading Date of termination of trading Index to disclosed information Date of disclosure Stocks Grant of reserved restricted shares for 2021 Restricted Share Incentive Plan 17 February 2023 CNY 89.466/share 92,669 17 February 2023 92,669 Announcement No. 2023-3 on the Completion of the Grant of Reserved Restricted Shares for 2021 Restricted Share Incentive Plan disclosed 16 February 2023 2023 Annual Report of Luzhou Laojiao Co., Ltd. 102 on o.com.cn Convertible corporate bonds, convertible corporate bonds with warrants, or corporate debt Other derivative securities Notes to the offering of securities during the reporting period On 29 December 2022, the Proposal on the Grant of Reserved Restricted Shares to Awardees was deliberated and approved at the 26th Meeting of the 10th Board of Directors and the 15th Meeting of the 10th Board of Supervisors, respectively. As such, it was decided to grant the restricted shares to eligible awardees and the grant was completed and registered. A total of 92,669 restricted shares were granted to 17 awardees as registered, which were listed on 17 February 2023. For details, see the Announcement No.2023-3 on the Completion of the Grant of Reserved Restricted Shares for 2021 Restricted Share Incentive Plan disclosed on 2.2 Changes in total shares of the Company and the shareholder structure, as well as the asset and liability structure Applicable □ N/A During the Reporting Period, the total shares of the Company increased by 92,669 shares due to the implementation of the 2021 Restricted Share Incentive Plan, and the shares granted were listed on 17 February 2023. 2.3 Existing staff-held shares □Applicable N/A 3. Shareholders and actual controller 3.1 Total number of shareholders and their shareholdings Unit：Share Total number of common shareholders at the end of the reporting period 124,164 Total number of common shareholders at the prior month-end before the disclosure date of the 118,425 Total number of preferred shareholders with resumed voting rights by the end of the 0 Total number of preferred shareholders with resumed voting rights by the end of the reporting period (if any)(see Note 8) 0 2023 Annual Report of Luzhou Laojiao Co., Ltd. 103 annual report reporting period (if any)(see Note 8) Shareholdings of shareholders with a shareholding percentage over 5% or the top 10 shareholders (exclusive of shares lent in refinancing) Name of shareholder Nature of shareholder Shareholding percentage Total shares held by the end of the reporting period Increase/decrease during the reporting period Number of holding restricted shares Number of holding non-restricted shares Pledged, marked or frozen shares Status of shares Number of shares Luzhou Laojiao Group Co., Ltd. State-owned corporation 25.89% 381,088,38900381,088,389 N/A 0 Luzhou XingLu Investment Group Co., Ltd. State-owned corporation 24.86% 365,971,14200365,971,142 N/A 0 Hong Kong Securities Clearing Company Limited Outbound corporation 3.23% 47,491,2611,878,605047,491,261 N/A 0 Bank of China Co., Ltd. – Baijiu index classification securities investment fund by China Merchants Fund Other 2.92% 43,016,979 -3,059,247043,016,979 N/A 0 China Securities Finance Corporation Limited Other 2.30% 33,842,0590033,842,059 N/A 0 Bank of China Co., Ltd.－Blue chip selected hybrid securities investment fund by E Fund Other 1.46% 21,470,000 -1,460,000021,470,000 N/A 0 Industrial and Commercial Bank of China Co., Ltd.-Newly growth hybrid securities investment fund by Invesco Great Wall Other 0.92% 13,598,087 -4,075,690013,598,087 N/A 0 Central Huijin Asset Management Co., Ltd. State-owned corporation 0.92% 13,539,8620013,539,862 N/A 0 China Life Insurance Company Limited-Tradition-common Other 0.65% 9,530,312936,29809,530,312 N/A 0 2023 Annual Report of Luzhou Laojiao Co., Ltd. 104 insurance product-005L－CT001 Hu Agricultural Bank of China Co., Ltd. - Consumption industry stock - based securities investment fund by E Fund Other 0.64% 9,432,832 -1,140,46109,432,832 N/A 0 Strategic investors or general corporations become the top-ten shareholders due to placing of new shares（if any）（see note 3） N/A Related parties or acting-in-concert 1. Luzhou Laojiao Group Co., Ltd. and Luzhou XingLu Investment Group Co., Ltd. are both holding state-owned companies under the jurisdiction of SASAC of Luzhou. The two companies signed the agreement of persons acting in concert on 31 December 2015. For details, please refer to the announcement of the Company on 5 January 2016 - Announcement on the agreement of persons acting in concert signed by shareholders. The announcement number is 2016-1 (. The two companies signed the renewed agreement of persons acting in concert on 27 May 2021. For details, please refer to the announcement of the Company on 29 May 2021 - Announcement on the renewed agreement of persons acting in concert signed by shareholders. The announcement number is 2021-18 (. 2. In addition, whether there is an association between the remaining shareholders or they belong to persons acting in concert is unknown. Explain if any of the shareholders above was involved in entrusting/being entrusted with voting rights or waiving voting rights N/A Special account for repurchased shares among the top 10 shareholders (if any) (see note 10) N/A Shareholdings of the top 10 non-restricted shareholders Name of shareholder Number of non-restricted shares held in by the end of the reporting period Type of shares Type Number Luzhou Laojiao Group Co., Ltd.381,088,389 CNY common shares 381,088,389 Luzhou XingLu Investment Group Co., Ltd.365,971,142 CNY common shares 365,971,142 Hong Kong Securities Clearing Company Limited 47,491,261 CNY common shares 47,491,261 Bank of China Co., Ltd. – Baijiu index classification securities investment fund by China Merchants Fund 43,016,979 CNY common shares 43,016,979 China Securities Finance Corporation Limited 33,842,059 CNY common shares 33,842,059 Bank of China Co., Ltd.－Blue chip selected hybrid securities investment fund by EFund 21,470,000 CNY common shares 21,470,000 Industrial and Commercial Bank of China Co., Ltd.-Newly growth hybrid securities investment fund by Invesco Great Wall 13,598,087 CNY common shares 13,598,087 Central Huijin Asset Management Co., Ltd.13,539,862 CNY common shares 13,539,862 2023 Annual Report of Luzhou Laojiao Co., Ltd. 105 China Life Insurance Company Limited-Tradition-common insurance product-005L－CT001 Hu 9,530,312 CNY common shares 9,530,312 Agricultural Bank of China Co., Ltd. - Consumption industry stock - based securities investment fund by EFund 9,432,832 CNY common shares 9,432,832 The statement of association or acting-in-concert between the top 10 shareholders of unrestricted shares and between the top 10 shareholders of unrestricted shares and top 10 shareholders See the table above Top 10 common shareholders participating in securities margin trading (if any) (see note 4) N/A Top 10 shareholders involved in refinancing shares lending: Applicable □ N/A Unit：Share Top 10 shareholders involved in refinancing shares lending Full name of shareholder Shares in the common account and credit account at the period-begin Shares lent in refinancing and not yet returned at the period-begin Shares in the common account and credit account at the period-end Shares lent in refinancing and not yet returned at the period-end Total shares As % of total share capital Total shares As % of total share capital Total shares As % of total share capital Total shares As % of total share capital Bank of China Co., Ltd. – Baijiu index classification securities investment fund by China Merchants Fund 46,076,2263.13% 00.00% 43,016,9792.92% 55,0000.00% Changes in top 10 shareholders compared with the prior period: □Applicable N/A Did any of the top 10 common shareholders or the top non-restricted common shareholders of the Company conduct any promissory repurchase during the reporting period. □Yes No 2023 Annual Report of Luzhou Laojiao Co., Ltd. 106 The top 10 non-restricted common shareholders, the top10 common shareholders did not conduct any promissory repurchase during the reporting period. 3.2 Controlling shareholder Nature of controlling shareholder：Local state-owned Type of controlling shareholder：Corporation Name of controlling shareholder Legal representative/Company principal Date of establishment Credibility code Main business scope Luzhou Laojiao Group Co., Ltd. Liu Miao 21 December 200091510500723203346U General project: Social economy consulting services; business management consulting; financial consulting; business headquarters management; import and export agency; trade brokerage; crops planting services; trees planting operation; elder care services; tourism development project planning and consulting; technical agency services; engineering and technological research and experimental development; display device manufacturing; supply chain management services; technical services, technical development, technical consulting, technical communication, technical transfer, and technical promotion; domestic freight transport agency; equity fund-invested asset management services; passenger ticket agent; and business agency service. It shall also include licensed projects (business activities can be carried out legally and independently with business license in addition to projects that must be approved by law): Agency bookkeeping; career intermediary activities; 2023 Annual Report of Luzhou Laojiao Co., Ltd. 107 food production; food sales; and medical services. (business activities that require approval in accordance with laws can be carried out upon approval of relevant authorities, and the specific business projects shall be subject to the approval document or license of relevant departments) Shareholdings of the controlling shareholder in other controlled or non-controlled listed companies at home or abroad during the reporting period 1. As of 30 June 2023, Laojiao Group holds 70,406,310 shares of Luzhou Xinglu Water (Group) Co., Ltd. (02281.HK), accounting for 8.19% of the total issued shares. 2. As of 30 September 2023, Laojiao Group holds 212,954,666 shares of Hongli Zhihui Group Co., Ltd. (300219.SZ) through its wholly-owned subsidiary, Sichuan Jinduo investment Co., Ltd., accounting for 30.08% of the total issued shares. 3. As of 30 September 2023, Laojiao Group holds 475,940,143 shares of Huaxi Securities Co., Ltd. (002926.SZ), accounting for 18.13% of the total issued shares. 4. As of 30 June 2023, Laojiao Group holds 390,528,000 shares of Luzhou Bank (01983.HK), accounting for 14.37% of the total issued shares. Change of the controlling shareholder during the reporting period □Applicable N/A No such cases in the reporting period 3.3 Actual controller and its persons acting in concert Nature of actual controller：Local State-owned Assets Supervision and Administration Commission Type of actual controller：Corporation Name of actual controller Legal representative/Company principal Date of establishment Credibility code Main business scope SASAC of Luzhou Du Lei 1 March 200511510400771686813T State-owned assets supervision and administration department Share holdings of the controlling shareholder in other controlled or non-controlled listed companies at home or abroad during the reporting period. 1. As of 30 June 2023, XingLu Group, a controlled subsidiary of SASAC of Luzhou, holds 511,654,127 shares of Luzhou Xinglu Water (Group) Co., Ltd. (02281.HK), accounting for 59.51% of the total issued shares. Luzhou Infrastructure Construction Investment Co., Ltd., a holding subsidiary of XingLu Group, holds 62,709,563 shares of Luzhou Xinglu Water (Group) Co., Ltd. (02281.HK), and accounting for 7.29% of the total issued shares. Laojiao Group, a controlled subsidiary under SASAC of Luzhou, holds 70,406,310 shares of Luzhou Xinglu Water (Group) Co., Ltd. (02281.HK), accounting for 8.19% of the total issued shares. 2. As of 30 September 2023, Laojiao Group holds 212,954,666 shares of Hongli Zhihui Group Co., Ltd. (300219.SZ) through its controlled subsidiary, Sichuan Jinduo investment Co., Ltd., accounting for 30.08% of the total shares issued. 3. As of 30 September 2023, Luzhou Industrial Investment Group Co., Ltd., a holding Company under the jurisdiction of SASAC of Luzhou, holds 193,464,610 shares of Sichuan Lutianhua Company Limited (000912.SZ), accounting for 12.34% of the total shares issued. Lutianhua Group Company Limited, a wholly -owned subsidiary of Luzhou Industrial Investment Group Co., Ltd., holds 221,458,993 shares of Sichuan Lutianhua Company Limited (000912.SZ), and accounting for 13.49% of the total issued shares. 4. As of 30 September 2023, Laojiao Group, a controlled subsidiary under SASAC of Luzhou, holds 475,940,143 shares of Huaxi Securities Co., Ltd. (002926.SZ), accounting for 18.13% of the total issued shares. 5. As of 30 June 2023, Laojiao Group, a controlled subsidiary under SASAC of Luzhou, holds 325,440,000 shares of Luzhou Bank (01983.HK), accounting for 14.37% of the total issued shares. XingLu Group, a controlled subsidiary under SASAC of Luzhou, holds 48,659,355 shares of Luzhou Bank (01983.HK), accounting for 1.79% of the total issued shares. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 108 Change of the actual controller during the reporting period □Applicable N/A The actual controller of the Company has not changed during the reporting period. Ownership and control relations between the actual controller and the Company The actual controller control the company through a trust or other ways of assets management □Applicable N/A 3.4 Number of accumulative pledged shares held by the company’s controlling shareholder or the largest shareholder as well as its acting-in-concert parties accounts for 80% of all shares of the company held by them □Applicable N/A 3.5 Other corporate shareholders with a shareholding proportion over 10% Applicable □ N/A Name of corporate shareholder Legal representative/Company principal Date of establishment Registered capital (CNY) Main business scope Luzhou XingLu Investment Group Co., Ltd. Dai Zhiwei 28 January 20034,934,049,244 Investment and asset management; project management services; self-finance real estate business 2023 Annual Report of Luzhou Laojiao Co., Ltd. 109 activities; investment advisory services and financial advisory services (excluding such financial activities as illegal capital raising and collecting public funds) (business activities that require approval in accordance with laws can be carried out upon approval of relevant authorities) 3.6 Limits on reduction of the Company’s shares held by its controlling shareholder, actual controller, restructuring party and other commitment entities. □Applicable N/A 4. Specific implementation of share repurchase during the reporting period Implementation progress of shares repurchases □Applicable N/A Implementation progress of share buyback reduction through centralized bidding □Applicable N/A 2023 Annual Report of Luzhou Laojiao Co., Ltd. 110 Section VIIIPreferred Shares □Applicable N/A No preferred stock in the Company during the reporting period. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 111 Section IXInformation about Bond Applicable N/A 1. Enterprise bonds Applicable N/A No such cases in the reporting period. 2. Corporate bonds Applicable N/A 2.1. Basic information about the corporate bond Unit：CNY 10,000 Name Abbr. Code Issue date Value date Due date Bond balance Interest rate Way of redemption Place of trading 2020 Public Offering of Corporate Bond of Luzhou Laojiao Co., Ltd. for Qualified Investors (Phase I) 20 Lao Jiao 01 149062.SZ 16 March 2020 17 March 2020 17 March 2025 150,0003.50% In terms of the bonds of this phase, interests will be paid by year and the principal will be repaid in lump sum at maturity. The interests will be paid once every year and the interests for the last installment will be paid together with the Shenzhen Stock Exchange 2023 Annual Report of Luzhou Laojiao Co., Ltd. 112 principal. 2022 Public Offering of Corporate Bond of Luzhou Laojiao Co., Ltd. for Professional Investors (Phase I) 22 Lao Jiao 01 148133.SZ 2 December 2022 2 December 2022 4 December 2023 02.85% In terms of the bonds of this phase, interests will be paid by year and the principal will be repaid in lump sum at maturity. The interests will be paid once every year and the interests for the last installment will be paid together with the principal. All has been paid on 4 December 2023. Shenzhen Stock Exchange Appropriate arrangement of the investors (if any) The bonds are applicable to eligible investors who have qualified securities accounts with Shenzhen Branch of China Securities Depository and Clearing Co., Ltd., are permitted to engage in the subscription and transfer of corporate bonds in accordance with the Management Measures for the Issue and Transaction Management of Corporate Bonds, Management Measures for the Suitability of Securities and Futures Investors, Management Measures of Shenzhen Stock Exchange for the Suitability of Securities Market Investors , and relevant laws and regulations, and have the corresponding risk identification and bearing capacity (excluding those prohibited by laws and regulations) Trading systems applicable Tradable by way of bidding, offering, inquiry and agreement Risk of termination of listing and trading (if any) and countermeasures N/A Overdue bonds □Applicable N/A 2.2. Triggering and execution of issuer or investor option clauses and investor protection clauses □Applicable N/A 2023 Annual Report of Luzhou Laojiao Co., Ltd. 113 2.3. Information about the intermediaries Bond Intermediary Office address Signature accountant Contact person of intermediary Contact number 2020 Public Offering of Corporate Bond of Luzhou Laojiao Co., Ltd. for Qualified Investors (Phase I)/ 2022 Public Offering of Corporate Bond of Luzhou Laojiao Co., Ltd. for Professional Investors (Phase I) China International Capital Corporation Limited. 33rd Floor, China World Office 2, No.1 Jianguomenwai Avenue, Chaoyang District, Beijing N/AQi Qin (010)65051166 2020 Public Offering of Corporate Bond of Luzhou Laojiao Co., Ltd. for Qualified Investors (Phase I) / 2022 Public Offering of Corporate Bond of Luzhou Laojiao Co., Ltd. for Professional Investors (Phase I) China Chengxin International Credit Rating Co., Ltd. Building 6, Galaxy SOHO, No.2 Nanzhugan hutong, Chaoyangmennei Avenue, Dongcheng District, Beijing N/ASun Shu (010)66428877 Indicate by tick mark whether above intermediaries changed in the reporting period □Yes No 2.4. List of the usage of the raised funds Unit：CNY 10,000 Bonds Total amount Amount spent Unused amount Operation of special account for raised funds (if any) Rectification of raised funds for violation operation (if any) Whether is consistent with the usage, using plan and other agreements stipulated in the raising specification 2020 Public Offering of Corporate Bond of Luzhou Laojiao Co., 150,000111,035.5446,504.121 The company has set up a special account to deposit the funds raised N/AYes 2023 Annual Report of Luzhou Laojiao Co., Ltd. 114 Ltd. for Qualified Investors (Phase I) and has signed a fund account supervision agreement to clarify it. The special account for fund raising was operating normally during the Reporting Period. (1) Account name: Luzhou Laojiao Co., Ltd.; Opening bank: Guangfa Bank Co., Ltd., Chengdu Branch; Bank account: 9550880046723000135. (2) Account name: Luzhou Laojiao Co., Ltd.; Opening bank: Bank of Communications Co., Ltd., Luzhou Branch; Bank account: 51751746001 3000000860. (3) Account name: Luzhou Laojiao Co., Ltd.; Opening bank: China Minsheng Bank Co., Ltd., Chengdu Branch; Bank account: 631395395. 2022 Public Offering of Corporate Bond of Luzhou Laojiao Co., Ltd. for Professional Investors (Phase I) 150,000149,88020 Luzhou Laojiao Co., Ltd.; Opening bank: China Merchants Bank Co., Ltd., Chengdu Fucheng Avenue Sub-branch; Bank account: 02890014041 0888. N/AYes 2023 Annual Report of Luzhou Laojiao Co., Ltd. 115 Note: 1. Total Unused Raised Funds include a portion of the interest on the funds raised. 2. The net amount of funds raised by the Company this time is CNY 1,498,800,000.00. As at 31 December 2023, all of it has been used for the committed purposes of the fund raising. The interest income generated from the raised funds, amounting to CNY 41,633.34, has been utilised to supplement working capital. The raised funds were used for project construction Applicable □ N/A The Company raised a fund of CNY 4.0 billion through the issue of corporate bonds respectively on 27 August 2019 and 16 March 2020. After deduction of the issue fees, the balance amount was set to use in the technical renovation project of brewing (Phase II), Project of Intelligent Upgrading and Building of the Information Management System, Project of Acquiring Sealing Equipment for the Cellar of Huangyi Brewing Base and Project of Acquiring Accessory Equipment for Leaven Making for Huangyi Brewing Base. As of 31 December 2023, CNY 3,641,173,800 of the fund-raising through the issue of corporate bonds had been used. The Company changed the usage of above funds raised from bonds during the reporting period. □Applicable N/A 2.5. Changes in credit ratings in the reporting period □Applicable N/A 2.6. Execution and changes with respect to guarantees, repayment plans and other repayment-ensuring measures in the reporting period, as well as the impact on the interests of bond holders □Applicable N/A 3. Debt instruments as a non-financial enterprise □Applicable N/A No such cases in the reporting period. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 116 4. Convertible corporate bonds □Applicable N/A No such cases in the reporting period. 5. Consolidated loss of the reporting period over 10% of net assets as at the end of last year □Applicable N/A 6. Matured interest-bearing debt excluding bonds up the period-end □Applicable N/A 7. Whether there was any violation of rules and regulations during the reporting period □Yes No 8. The major accounting data and the financial indicators of the recent 2 years of the company as of the end of the reporting period Unit：CNY 10,000 Item 31 December 202331 December 2022 Change Current ratio 4.503.1542.86% Debt/asset ratio 34.38% 33.19% 1.19% Quick ratio 3.312.2050.45% 20232022 Change Net profits before non-recurring gains and losses 1,315,039.281,032,148.1227.41% EBITDA/debt ratio 163.53% 235.37% -71.84% Interest cover (times) 37.4961.28 -38.82% EBITDA-to-interest cover (times) 38.8764.08 -39.34% 2023 Annual Report of Luzhou Laojiao Co., Ltd. 117 Section XFinancial Report 1. Auditor’s report Type of audit report Standard without reserved opinion Signing date of auditor’s report 25 April 2024 Name of Audit Sichuan Huaxin (Group) CPAFirm No. of auditor’s report Chuan Huaxin Audit [2024] No.0035 Names of auditors Li Wulin, Tang Fangmo, Fan Bo Auditor’s Report To the shareholders of Luzhou Laojiao Co., Ltd.: Opinion We have audited the financial statements of Luzhou Laojiao Co., Ltd. (hereinafter referred to as the “Company”), which comprise the consolidated balance sheet and balance sheet as at 31 December 2023, consolidated income statement and income statement, consolidated cash flow statement and cash flow statement, consolidated statement of changes in owners' equity and statement of changes in owners' equity for the year then ended; and notes to the financial statements. In our opinion, the attached financial statements are prepared, in all material respects, in accordance with Accounting Standards for Business Enterprises and present fairly the financial position of the company as at 31 December 2023 and its operating results and cash flow for the year then ended. Basis for opinion We conducted our audit in accordance with China Standards on Auditing (“CSAs”) for Certified Public Accountants. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of professional ethics for Certified Public Accountants in China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were 2023 Annual Report of Luzhou Laojiao Co., Ltd. 118 addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matters identified in our audit are summarized as follows: 1. Key audit matters-Recognition of domestic baijiu sales revenue Key audit matters How our audit addressed the Key Audit Matter As shown in Note 7.38 in the Financial Statements, the domestic baijiu sales revenue of the Company in 2023 is CNY 29,900,173,500, accounting for 98.90% of the operating revenue of CNY 30,233,301,400. It is the main source of the Company's operating profit. For the operating revenue is one of the key results indicators and the inherent risk of its misstatement is relatively high, therefore, we identified the recognition of domestic baijiu sales revenue as a key audit matter. Our procedures in relation to recognition of domestic baijiu sales revenue included: 1. Understood, evaluated and tested the reasonableness and effectiveness of the internal control design related to the Company's revenue. Particular attention was paid to the appropriateness of specific conditions for recognition of revenue. 2. Compared the key indicators such as sales volume, unit price of sales and gross profit rate of the Company in the current period with those in the previous period, so as to identify the rationality of changes in key indicators and reasons for changes. 3. The income of the top five customers accounted for 62.28% of the total business income. For main customers, we carried out the following audit procedures to verify the occurrence, completeness and accuracy of the revenue recognized by the management: (1) Obtained the sales contract signed by the Company and the customer, carefully read the key terms of the contract, and understand the implementation of the contract; (2) Performed the confirmation procedure. We sent confirmation letters to verify the amount of sales revenue in the reporting period and the closing balance of accounts receivables or contract liabilities during the reporting period. For local customers in Luzhou, we went to their office to carry out confirmation procedure and obtained the situation of purchase, sales and storage of Luzhou Laojiao brand baijiu during the reporting period, so as to analyze and judge whether there are abnormal fluctuations in its inventory and its rationality; For customers outside Luzhou, we mailed confirmation letters and controlled the whole process of reply letter by ourselves. (3) Inquired the customer's business information and key personnel information, and checked whether they are related party of the Company. 4. For the top 5 customers of the year and other customers, checked sales contracts, customers' purchase orders, shipping documents, transport documents, accounting vouchers, payment receipts, customer signature records and other materials to verify the occurrence, completeness and accuracy of the revenue recognized by the management. 5. Selected the confirmation voucher of large amount of sales before and after the balance sheet date, paid attention to the date of sales invoice and customer receipt, and paid attention to whether there is a large amount of return after the period, so as to verify whether the corresponding revenue is included in the appropriate accounting period. The evidence obtained from the above audit procedures can support the Company's management's 2023 Annual Report of Luzhou Laojiao Co., Ltd. 119 recognition of domestic baijiu sales revenue. 2. Key audit matters-Existence of bank deposits Key audit matters How our audit addressed the Key Audit Matter As shown in Note 7.1 in the Financial Statements, as of 31 December 2023, the bank balance of the Company is CNY 25,916,630,900, accounting for 40.95% of the total assets. Bank deposits are high-risk assets. Therefore, we identified the existence of bank deposits as a key audit matter. Our procedures in relation to existence of bank deposits included: 1. Understood and tested the design and implementation of key internal controls related to the funds management cycle to confirm the effectiveness of relevant internal controls. 2. Accompanied by relevant personnel of the Company, auditors went to the bank by themselves where the Company opens a basic bank account to print the account opening list of the Company and check the account opening information individually. 3. Checked the carrying amount of all bank accounts with the original amount of bank statements and certificates of deposit, and obtained all copies. 4. Based on the results of checking the amount of bank statements, obtained the balance reconciliation of all bank accounts compiled by the Company, and check all the outstanding items, whether there are any important overdue items that are not booked in time. 5. Implemented the confirmation procedure for the Company's bank deposits, the confirmation letters were sent out by mailing after auditors checked the address and the receiver through telephone, network and other public information, and we controlled the whole reply letter process by ourselves. 6. Obtained and reviewed time deposits or structured deposit agreements, identified the types of relevant bank deposits, analyzed the principal and interest recovery risks, and judged the adequacy of the disclosure. 7. Inquired the management and relevant personnel about the purpose of all bank accounts on the Company's books and analyzed whether there are abnormal use or bank accounts opened for unknown reasons. The evidence obtained from the above audit procedures can support the Company's management's assertion of the existence of bank deposits. Other information The directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other 2023 Annual Report of Luzhou Laojiao Co., Ltd. 120 information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of directors and those charged with governance for the financial statements The directors of the Company are responsible for the preparation of the financial statements that give a true and fair view in accordance with the disclosure requirements of Accounting Standards for Business Enterprises, and designing, implementing and maintaining internal control that is necessary to ensure the financial statements are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditor's responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with CSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with CSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: (1) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a 2023 Annual Report of Luzhou Laojiao Co., Ltd. 121 material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. (2) Obtain an understanding of internal control relevant to the audit 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 Company’s internal control. (3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. (4) Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. (5) Evaluate the overall presentation, structure and content of the financial statements, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. (6) Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so 2023 Annual Report of Luzhou Laojiao Co., Ltd. 122 would reasonably be expected to outweigh the public interest benefits of such communication. Sichuan Huaxin (Group) CPAFirm Chinese CPA: Li Wulin (Engagement Partner) Chengdu·China Chinese CPA: Tang Fangmo Chinese CPA: Fan Bo 25 April 2024 2023 Annual Report of Luzhou Laojiao Co., Ltd. 123 2. Financial statements Monetary unit for the financial statements and the notes thereto: CNY Prepared by: Luzhou Laojiao Co., Ltd. Consolidated balance sheet As at 31 December 2023 Unit：CNY Item Balance as at 31 December 2023 Balance as at 1 January 2023 Current assets: Cash and cash equivalents 25,952,025,091.2817,757,528,211.25 Settlement reserves Lending funds Held-for-trading financial assets 1,426,992,098.831,073,466,780.37 Derivative financial assets Notes receivables Accounts receivables 17,461,378.985,939,420.78 Accounts receivables financing 5,938,171,007.934,583,352,503.37 Prepayment 202,309,186.70114,257,506.26 Premiums receivable Reinsurance accounts receivable Reinsurance contract reserve Other receivables 22,716,893.1223,396,533.98 Including：Interests receivable Dividends receivable Buying back the sale of financial assets Inventories 11,622,043,947.469,840,742,374.85 Contract assets Assets held for sale Non-current assets due within one year Other current assets 176,684,731.97153,035,946.94 Total current assets 45,358,404,336.2733,551,719,277.80 Non-current assets: Disbursement of loans and advances Investments in debt obligations Investments in other debt obligations Long-term receivables Long-term equity investments 2,708,254,833.502,667,500,553.17 Investments in other equity instruments 402,893,468.801,136,736,978.11 Other non-current financial assets Investment property 37,785,416.7739,149,454.22 Fixed assets 8,613,223,465.468,856,258,598.78 Construction in progress 1,718,468,880.53808,919,047.21 Productive biological assets Oil and gas assets 2023 Annual Report of Luzhou Laojiao Co., Ltd. 124 Use right assets 23,260,955.2339,952,525.63 Intangible assets 3,397,873,791.083,083,271,852.79 Development expenses Goodwill Long-term deferred expenses 960,005.91710,010.92 Deferred tax assets 674,429,617.921,005,167,353.80 Other non-current assets 358,900,430.13196,095,702.09 Total non-current assets 17,936,050,865.3317,833,762,076.72 Total assets 63,294,455,201.6051,385,481,354.52 Current liabilities: Short-term loans Borrowings from the central bank Loans from other banks Held-for-trading financial liabilities 9,763.87 Derivative financial liabilities Notes payable Accounts payable 2,357,223,733.212,311,665,585.04 Advance from customer Contract liabilities 2,672,977,090.302,566,374,718.76 Financial assets sold for repurchase Deposits from customers and inter-bank Customer brokerage deposits Securities underwriting brokerage deposits Employee benefits payable 523,866,711.41675,034,885.31 Taxes payable 2,939,627,533.003,481,150,728.98 Other payable 1,150,721,162.531,202,409,278.49 Including：Interests payable Dividends payable 29,684,819.8216,594,850.58 Handling charges and commissions payable Reinsurance accounts payable Liabilities held for sale Non-current liabilities due within one year 78,918,152.4181,879,466.63 Other current liabilities 347,485,071.57333,627,225.47 Total current liabilities 10,070,829,218.3010,652,141,888.68 Non-current liabilities: Insurance contract reserves Long-term loans 10,000,300,000.003,179,600,000.00 Bonds payable 1,498,716,737.022,996,099,571.86 Including：Preferred shares Perpetual bonds Lease liabilities 22,356,404.4729,096,969.66 Long-term payables Long-term payroll payables Accrued liabilities 2023 Annual Report of Luzhou Laojiao Co., Ltd. 125 Deferred income 27,772,083.7433,704,323.80 Deferred tax liabilities 142,773,028.22166,043,663.88 Other non-current liabilities Total non-current liabilities 11,691,918,253.456,404,544,529.20 Total liabilities 21,762,747,471.7517,056,686,417.88 Owners' equity Share capital 1,471,987,769.001,471,895,100.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 5,185,481,523.224,800,154,468.99 Less: treasury stock 616,743,610.59639,021,998.78 Other comprehensive income 63,130,469.51330,751,245.84 Special reserves Surplus reserves 1,471,987,769.001,471,895,100.00 General risk reserve Undistributed profits 33,815,566,574.7526,772,197,213.98 Total equity attributable to owners of the parent company 41,391,410,494.8934,207,871,130.03 Non-controlling interests 140,297,234.96120,923,806.61 Total owners' equity 41,531,707,729.8534,328,794,936.64 Total liabilities and owners' equity 63,294,455,201.6051,385,481,354.52 Legal representative：Liu Miao Person in charge of accounting affairs：Xie Hong Person in charge of accounting department：Song Ying Balance sheet of parent company As at 31 December 2022 Unit：CNY Item Balance as at 31 December 2023 Balance as at 1 January 2023 Current assets: Cash and cash equivalents 24,271,855,815.2517,009,231,873.64 Held-for-trading financial assets 1,426,992,098.83974,505,894.18 Derivative financial assets Notes receivables Accounts receivables 47,500.00 Accounts receivables financing Prepayment 6,360,210.402,141,256.01 Other receivables 14,844,650,322.9812,042,401,844.84 Including：Interests receivable Dividends receivable Inventories 1,051,717.532,499,333.08 Contract assets Assets held for sale Non-current assets due within one year 2023 Annual Report of Luzhou Laojiao Co., Ltd. 126 Other current assets 108,073,731.7734,163.66 Total current assets 40,658,983,896.7630,030,861,865.41 Non-current assets: Investments in debt obligations Investments in other debt obligations Long-term receivables Long-term equity investments 6,494,866,955.206,278,966,093.87 Investments in other equity instruments 402,589,547.171,136,433,056.48 Other non-current financial assets Investment property 37,785,416.7739,149,454.22 Fixed assets 950,099,737.281,021,509,077.72 Construction in progress 57,369,565.3749,136,390.14 Productive biological assets Oil and gas assets Use right assets 316,259.61600,190.05 Intangible assets 781,194,544.01617,211,243.56 Development expenses Goodwill Long-term deferred expenses 820,758.81548,507.41 Deferred tax assets 154,645,014.28147,351,049.81 Other non-current assets 200,783,195.9414,808,459.12 Total non-current assets 9,080,470,994.449,305,713,522.38 Total assets 49,739,454,891.2039,336,575,387.79 Current liabilities: Short-term loans Held-for-trading financial liabilities Derivative financial liabilities Notes payable Accounts payable 19,666,554.1551,174,790.68 Advance from customer Contract liabilities 2,230,734.501,510,508.26 Employee benefits payable 163,823,844.30241,471,148.70 Taxes payable 204,018,131.83381,259,266.93 Other payables 1,960,371,090.551,730,335,596.91 Including：Interests payable Dividends payable Liabilities held for sale Non-current liabilities due within one year 74,018,942.6367,673,936.27 Other current liabilities 289,995.48196,366.07 Total current liabilities 2,424,419,293.442,473,621,613.82 Non-current liabilities: Long-term loans 10,000,300,000.003,179,600,000.00 Bonds payable 1,498,716,737.022,996,099,571.86 Including：Preferred shares Perpetual bonds Lease liabilities 203,920.20 2023 Annual Report of Luzhou Laojiao Co., Ltd. 127 Long-term payables Long-term payroll payables Accrued liabilities Deferred income Deferred tax liabilities 72,592,887.99132,565,131.74 Other non-current liabilities Total non-current liabilities 11,571,609,625.016,308,468,623.80 Total liabilities 13,996,028,918.458,782,090,237.62 Owners' equity Share capital 1,471,987,769.001,471,895,100.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 5,179,307,881.604,789,603,151.65 Less: treasury stock 616,743,610.59639,021,998.78 Other comprehensive income 60,513,567.32328,542,995.36 Special reserves Surplus reserves 1,471,987,769.001,471,895,100.00 Undistributed profits 28,176,372,596.4223,131,570,801.94 Total owners' equity 35,743,425,972.7530,554,485,150.17 Total liabilities and owners' equity 49,739,454,891.2039,336,575,387.79 Consolidated income statement Unit：CNY Item Year 2023 Year 2022 1. Total operating revenue 30,233,301,388.2625,123,563,271.62 Including: Operating revenue 30,233,301,388.2625,123,563,271.62 Interest income Earned premium Fee and commission income 2. Total operating costs 12,638,987,548.9011,424,541,543.84 Including: Cost of sales 3,537,151,403.153,369,528,394.02 Interest expense Handling charges and commission expenses Refunded premiums Net payments for insurance claims Net provision for insurance contracts Bond insurance expense Reinsurance Expenses Taxes and surcharges 4,133,126,350.683,523,948,287.48 Selling and distribution expenses 3,974,425,526.923,448,771,046.02 2023 Annual Report of Luzhou Laojiao Co., Ltd. 128 General and administrative expenses 1,139,480,677.231,162,422,257.23 Research and Development expenses 225,955,797.33206,248,486.57 Financial expenses -371,152,206.41 -286,376,927.48 Including：Interest expenses 488,003,010.93229,673,136.36 Interest income 864,006,165.58505,746,664.32 Plus: Other income 54,179,605.3936,524,317.09 Investment income ("-" for losses) 84,724,581.98104,715,915.31 Including: income from investment in associates and joint ventures 66,927,156.6984,626,608.53 Income from the derecognition of financial assets measured at amortized cost (“-” for losses) Foreign exchange gains ("-" for losses) Net gain on exposure hedges (“-” for losses) Gains from the changes in fair values(“-“ for losses) 62,988,462.30 -12,023,622.50 Credit impairment losses (“-” for losses) 932,241.70 -1,165,718.34 Impairment losses(“-“ for losses) Gains from disposal of assets("-" for losses) 44,694,238.3719,805,093.70 3. Operating profits ("-" for losses) 17,841,832,969.1013,846,877,713.04 Plus: non-operating income 36,203,863.1727,833,420.31 Less: non-operating expenses 72,079,275.8319,959,493.06 4. Total profits before tax ("-" for total losses) 17,805,957,556.4413,854,751,640.29 Less: income tax expenses 4,517,297,533.233,444,162,535.86 5. Net profit ("-" for net loss) 13,288,660,023.2110,410,589,104.43 5.1 By operating continuity 5.1.1 Net profit from continuing operation ("-" for losses) 13,288,660,023.2110,410,589,104.43 5.1.2 Net profit from discontinued operation ("-" for losses) 5.2 By ownership 1) Attributable to shareholders of the parent company 13,246,394,700.5910,365,383,281.80 2) Attributable to non-controlling interests 42,265,322.6245,205,822.63 6. Net of tax from other comprehensive income -267,285,844.76165,065,173.42 Net of tax from other comprehensive income to the owner of the parent company -267,620,776.33163,224,093.52 6.1 Other comprehensive income cannot reclassified into the profit and -270,029,977.35173,373,357.69 2023 Annual Report of Luzhou Laojiao Co., Ltd. 129 loss: 1) Remeasure the variation of net indebtedness or net asset of defined benefit plans 2) Share in other comprehensive income that cannot be classified into profit and loss under equity method 106,537.86 3) Changes in fair value of investments in other equity instruments -270,136,515.21173,373,357.69 4) Changes in fair value of the company’s credit risks 5) Other 6.2 Other comprehensive income that will be reclassified into the profit and loss 2,409,201.02 -10,149,264.17 1) Share in other comprehensive income that will be classified into profit and loss under equity method 2,000,549.31 -12,402,376.19 2) Changes in fair value of investments in other debt obligations 3) Other comprehensive income arising from the reclassification of financial assets 4) Allowance for credit impairments in investments in other debt obligations 5) Reserve for cash-flow hedge 6) Balance arising from the translation of foreign currency financial statements 408,651.712,253,112.02 7) Others Net of tax from other comprehensive income to non-controlling interests 334,931.571,841,079.90 7. Total comprehensive income 13,021,374,178.4510,575,654,277.85 Total comprehensive income attributable to owners of the parent company 12,978,773,924.2610,528,607,375.32 Total comprehensive income attributable to non-controlling interests 42,600,254.1947,046,902.53 8. Earnings per share (1) Basic earnings per share 9.027.06 (2) Diluted earnings per share 9.027.06 Legal representative：Liu Miao Person in charge of accounting affairs：Xie Hong Person in charge of accounting department：Song Ying Income statement of parent company Unit：CNY Item Year 2023 Year 2022 1. Operating revenue 9,145,460,581.258,410,433,537.26 2023 Annual Report of Luzhou Laojiao Co., Ltd. 130 Less: Cost of sales 6,915,061,972.966,178,065,196.37 Taxes and surcharges 69,667,975.4465,990,094.21 Selling and distribution expenses General and administrative expenses 955,055,338.48963,400,839.26 Research and Development expenses 93,610,992.9490,299,057.13 Financial expenses -523,148,275.90 -465,296,222.32 Including：Interest expenses 344,865,497.27145,296,657.64 Interest income 872,919,941.62613,452,430.61 Plus: Other income 20,117,651.9618,824,179.28 Investment income ("-" for losses) 9,964,009,506.497,842,231,445.15 Including: income from investment in associates and joint ventures 43,134,582.1745,123,842.50 Income from the derecognition of financial assets at amortized cost (“-” for losses) Net gain on exposure hedges (“-” for losses) Gains from the changes in fair values(“-“ for losses) 60,959,140.61 -10,984,508.69 Credit impairment losses (“-” for losses) 630,355.40 -610,527.84 Asset impairment losses (“-” for losses) Gains from disposal of assets("-" for losses) 44,029,637.8919,786,813.38 2. Operating profits ("-" for losses) 11,724,958,869.689,447,221,973.89 Plus: non-operating income 26,553,752.2518,588,745.48 Less: non-operating expenses 24,214,208.3117,852,225.18 3. Total profits before tax ("-" for total losses) 11,727,298,413.629,447,958,494.19 Less: income tax expenses 479,471,279.32408,118,536.71 4. Net profit ("-" for net loss) 11,247,827,134.309,039,839,957.48 4.1 Net profit from continuing operation ("-" for losses) 11,247,827,134.309,039,839,957.48 4.2 Net profit from discontinued operation ("-" for losses) 5. Net of tax from other comprehensive income -268,029,428.04160,970,981.50 5.1 Other comprehensive income cannot reclassified into the profit and loss: -270,029,977.35173,373,357.69 1) Remeasure the variation of net indebtedness or net asset of defined benefit plans 2) Share in other comprehensive income that cannot be classified into profit and loss under equity method 106,537.86 3) Changes in fair value of investments in other equity -270,136,515.21173,373,357.69 2023 Annual Report of Luzhou Laojiao Co., Ltd. 131 instruments 4) Changes in fair value of the company’s credit risks 5) Other 5.2 Other comprehensive income that will be reclassified into the profit and loss 2,000,549.31 -12,402,376.19 1) Share in other comprehensive income that will be classified into profit and loss under equity method 2,000,549.31 -12,402,376.19 2) Changes in fair value of investments in other debt obligations 3) Other comprehensive income arising from the reclassification of financial assets 4) Allowance for credit impairments in investments in other debt obligations 5) Reserve for cash-flow hedge 6) Balance arising from the translation of foreign currency financial statements 7) Others 6. Total comprehensive income 10,979,797,706.269,200,810,938.98 7. Earnings per share (1) Basic earnings per share (2) Diluted earnings per share Consolidated statement of cash flows Unit：CNY Item Year 2023 Year 2022 1. Cash flows from operating activities Cash received from sale of goods and rendering of services 31,589,430,458.5225,912,851,214.24 Net increase in customer bank deposits and placement from banks and other financial institutions Net increase in loans from central bank Net increase in loans from other financial institutions Premiums received from original insurance contracts Net cash received from reinsurance business Net increase in deposits and investments from policyholders Cash received from interest, handling charges and commissions Net increase in placements from other financial institutions 2023 Annual Report of Luzhou Laojiao Co., Ltd. 132 Net capital increase in repurchase business Net cash received from customer brokerage deposits Refunds of taxes and surcharges 4,311,439.2796,229,396.25 Cash received from other operating activities 1,271,444,860.82868,192,251.33 Subtotal of cash inflows from operating activities 32,865,186,758.6126,877,272,861.82 Cash paid for goods purchased and services received 6,584,743,337.245,224,385,672.55 Net increase in loans and advances to customers Net increase in deposits in central bank and other banks and financial institutions Cash paid for original insurance contract claims Net increase in lending funds Cash paid for interests, handling charges and commissions Cash paid for policy dividends Cash paid to and on behalf of employees 1,291,700,762.531,159,257,102.51 Cash paid for taxes and surcharges 11,873,473,704.949,242,016,336.48 Cash paid for other operating activities 2,466,904,018.442,988,965,480.56 Subtotal of cash outflows from operating activities 22,216,821,823.1518,614,624,592.10 Net cash flows from operating activities 10,648,364,935.468,262,648,269.72 2. Cash flows from investing activities Cash received from disposal of investments 1,806,849,496.562,130,340,931.54 Cash received from returns on investments 57,070,473.4447,015,525.79 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 69,684,519.4866,239,957.85 Net cash received from disposal of subsidiaries and other business units Cash received from other investing activities Subtotal of cash inflows from investing activities 1,933,604,489.482,243,596,415.18 Cash paid to acquire and construct fixed assets, intangible assets and other long-term assets 1,501,625,135.451,035,165,351.11 Cash paid for investments 1,700,000,000.003,082,285,380.80 Net increase in pledge loans Net cash paid to acquire subsidiaries and other business units Cash paid for other investing activities 97,207.03 2023 Annual Report of Luzhou Laojiao Co., Ltd. 133 Subtotal of cash outflows from investing activities 3,201,722,342.484,117,450,731.91 Net cash flows from investing activities -1,268,117,853.00 -1,873,854,316.73 3. Cash flows from financing activities Cash received from investors 10,373,039.14670,224,927.99 Including: cash received by subsidiaries from investments by minority shareholders 2,082,314.403,366,028.35 Cash received from borrowings 6,850,000,000.004,700,000,000.00 Cash received from other financing activities 1,909,017.10 Subtotal of cash inflows from financing activities 6,860,373,039.145,372,133,945.09 Cash paid for debt repayments 1,524,700,000.002,500,000,000.00 Cash paid for distribution of dividends and profits or payment of interest 6,546,495,859.544,928,927,484.50 Including: dividends and profits paid to minority shareholders by subsidiaries 16,594,850.5914,784,831.00 Cash paid for other financing activities 7,603,247.8921,594,912.99 Subtotal of cash outflows from financing activities 8,078,799,107.437,450,522,397.49 Net cash flows from financing activities -1,218,426,068.29 -2,078,388,452.40 4. Effect of fluctuation in exchange rate on cash and cash equivalents 2,201,671.8216,072,149.45 5. Net increase in cash and cash equivalents 8,164,022,685.994,326,477,650.04 Plus: balance of cash and cash equivalents at the beginning of the period 17,729,006,591.8713,402,528,941.83 6. Balance of cash and cash equivalents at the end of the period 25,893,029,277.8617,729,006,591.87 Cash flow statements of parent company Unit：CNY Item Year 2023 Year 2022 1. Cash flows from operating activities Cash received from sale of goods and rendering of services 9,465,106,131.527,836,045,120.10 Refunds of taxes and surcharges Cash received from other operating activities 883,796,732.00633,774,675.70 Subtotal of cash inflows from operating activities 10,348,902,863.528,469,819,795.80 Cash paid for goods purchased and services received 7,055,302,497.345,463,276,771.05 Cash paid to and on behalf of 459,785,090.92994,821,318.51 2023 Annual Report of Luzhou Laojiao Co., Ltd. 134 employees Cash paid for taxes and surcharges 1,081,990,787.32700,305,299.72 Cash paid for other operating activities 344,059,510.02232,654,650.21 Subtotal of cash outflows from operating activities 8,941,137,885.607,391,058,039.49 Net cash flows from operating activities 1,407,764,977.921,078,761,756.31 2. Cash flows from investing activities Cash received from disposal of investments 1,725,428,067.292,141,935,199.60 Cash received from returns on investments 9,960,472,292.737,816,398,926.76 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 57,611,113.2050,809,694.44 Net cash received from disposal of subsidiaries and other business units Cash received from other investing activities Subtotal of cash inflows from investing activities 11,743,511,473.2210,009,143,820.80 Cash paid to acquire and construct fixed assets, intangible assets and other long-term assets 440,672,744.6992,415,078.78 Cash paid for investments 1,720,000,000.002,982,285,380.80 Net cash paid to acquire subsidiaries and other business units Cash paid for other investing activities Subtotal of cash outflows from investing activities 2,160,672,744.693,074,700,459.58 Net cash flows from investing activities 9,582,838,728.536,934,443,361.22 3. Cash flows from financing activities Cash received from investors 8,290,724.74666,858,899.64 Cash received from loans 6,850,000,000.004,700,000,000.00 Cash received from other financing activities 28,533,781.29110,999,028.72 Subtotal of cash inflows from financing activities 6,886,824,506.035,477,857,928.36 Cash paid for debt repayments 1,524,700,000.002,500,000,000.00 Cash paid for distribution of dividends and profits or payment of interest 6,542,888,426.794,930,586,734.79 Cash paid for other financing activities 2,576,358,468.602,008,038,082.56 Subtotal of cash outflows from financing activities 10,643,946,895.399,438,624,817.35 Net cash flows from financing activities -3,757,122,389.36 -3,960,766,888.99 4. Effect of fluctuation in exchange rate on cash and cash equivalents 102,691.83469,950.14 2023 Annual Report of Luzhou Laojiao Co., Ltd. 135 5. Net increase in cash and cash equivalents 7,233,584,008.924,052,908,178.68 Plus: balance of cash and cash equivalents at the beginning of the period 16,991,891,937.5012,938,983,758.82 6. Balance of cash and cash equivalents at the end of the period 24,225,475,946.4216,991,891,937.50 Consolidated statement of changes in owners' equity For the year ended 31 December 2023 Unit：CNY Item Year 2023 Equity attributable to owners of the parent company Non-controlling interests Total owners' equity Share capital Other equity instruments Capital reserve Less：Treasury stock Other Comprehensive Income Special reserve Surplus reserve General risk reserve Undistributed profit Other Subtotal Preferred stock Perpetual bond Other 1. Balance as at 31 December of last year 1,471,895,100.0 0 4,800,154,468.9 9 639,0 21,99 8.78 330,7 51,24 5.84 1,471,895,100.0 0 26,77 2,197,213.98 34,20 7,871,130.03 120,9 23,80 6.61 34,32 8,794,936.64 Plus: adjustments for changes in accounting policies Adjustments for correction of accounting errors in prior year Others 2. Balance as at 1 January of the 1,471,895,100.0 0 4,800,154,468.9 9 639,0 21,99 8.78 330,7 51,24 5.84 1,471,895,100.0 0 26,77 2,197,213.98 34,20 7,871,130.03 120,9 23,80 6.61 34,32 8,794,936.64 2023 Annual Report of Luzhou Laojiao Co., Ltd. 136 current year 3.Increases/decreases in the current period (“-” for decreases) 92,66 9.00 385,3 27,05 4.23 - 22,27 8,388.19 - 267,6 20,77 6.33 92,66 9.00 7,043,369,360.7 7 7,183,539,364.8 6 19,37 3,428.35 7,202,912,793.2 1 (1) Total comprehensive income - 251,4 05,12 3.12 13,24 6,394,700.59 12,99 4,989,577.47 42,60 0,254.19 13,03 7,589,831.66 (2) Capital contributed or reduced by owners 92,66 9.00 385,0 99,22 8.22 - 22,27 8,388.19 407,4 70,28 5.41 6,457,993.99 413,9 28,27 9.40 Capital contributions by owners 92,66 9.00 8,198,055.74 8,290,724.74 2,082,314.40 2,082,314.40 Capital contributions by other equity instruments holders Amounts of share-based payments recognized in owners' equity 376,9 01,17 2.48 - 30,56 9,112.93 407,4 70,28 5.41 4,375,679.59 411,8 45,96 5.00 Others (3) Profit distri92,66 9.00 - 6,219 - 6,219 - 29,68 - 6,2482023 Annual Report of Luzhou Laojiao Co., Ltd. 137 bution ,240,993.0 3 ,148,324.0 3 4,819.83 ,833,143.8 6 Withdrawal of surplus reserves 92,66 9.00 - 92,66 9.00 Withdrawal of general risk reserve Profit distributed to owners (or shareholders) - 6,219,148,324.0 3 - 6,219,148,324.0 3 - 29,68 4,819.83 - 6,248,833,143.8 6 Others (4) Internal carry-forward of owners' equity - 16,21 5,653.21 16,21 5,653.21 Conversion of capital reserves into paid-in capital Conversion of surplus reserves into paid-in capital Surplus reserves offsetting losses Carry-forward of 2023 Annual Report of Luzhou Laojiao Co., Ltd. 138 retained earnings from changes in defined benefit plans Carry-forward of retained earnings from other comprehensive income - 16,21 5,653.21 16,21 5,653.21 Others (5) Special reserves Withdrawal for the period Use for the period (6) Others 227,8 26.01 227,8 26.01 227,8 26.01 4. Balance as at 31 December of the current year 1,471,987,769.0 0 5,185,481,523.2 2 616,7 43,61 0.59 63,13 0,469.51 1,471,987,769.0 0 33,81 5,566,574.75 41,39 1,410,494.89 140,2 97,23 4.96 41,53 1,707,729.85 For the year ended 31 December 2022 Unit：CNY Item Year 2022 Equity attributable to owners of the parent company Non-controlling interests Total owners' equity Share capital Other equity instruments Capital reserve Less：Treasury stock Other Comprehensive IncoSpecial reserve Surplus reserve General risk reserve Undistributed profit Other Subtotal Preferred stock Perpetual bond Other 2023 Annual Report of Luzhou Laojiao Co., Ltd. 139 me 1. Balance as at 31 December of last year 1,464,752,476.0 0 3,755,354,665.7 3 167,5 27,15 2.32 1,464,752,476.0 0 21,18 7,860,235.89 28,04 0,247,005.94 97,01 4,116.89 28,13 7,261,122.83 Plus: adjustments for changes in accounting policies Adjustments for correction of accounting errors in prior year Others 2. Balance as at 1 January of the current year 1,464,752,476.0 0 3,755,354,665.7 3 167,5 27,15 2.32 1,464,752,476.0 0 21,18 7,860,235.89 28,04 0,247,005.94 97,01 4,116.89 28,13 7,261,122.83 3.Increases/decreases in the current period (“-” for decreases) 7,142,624.00 1,044,799,803.2 6 639,0 21,99 8.78 163,2 24,09 3.52 7,142,624.00 5,584,336,978.0 9 6,167,624,124.0 9 23,90 9,689.72 6,191,533,813.8 1 (1) Total comprehensive income 163,2 24,09 3.52 10,36 5,383,281.80 10,52 8,607,375.32 47,04 6,902.53 10,57 5,654,277.85 (2) Capital contri7,142,624.00 1,044,799,803.2 639,0 21,99 8.78 412,9 20,42 8.48 8,242,468.77 421,1 62,89 7.25 2023 Annual Report of Luzhou Laojiao Co., Ltd. 140 buted or reduced by owners 6 Capital contributions by owners 7,142,624.00 654,1 41,64 9.18 661,2 84,27 3.18 3,366,028.35 3,366,028.35 Capital contributions by other equity instruments holders Amounts of share-based payments recognized in owners' equity 390,6 58,15 4.08 - 22,26 2,274.40 412,9 20,42 8.48 4,876,440.42 417,7 96,86 8.90 Others (3) Profit distribution 7,142,624.00 - 4,781,061,930.5 5 - 4,773,919,306.5 5 - 31,37 9,681.58 - 4,805,298,988.1 3 Withdrawal of surplus reserves 7,142,624.00 - 7,142,624.00 Withdrawal of general risk reserve Profit distributed to owners (or shareholders) - 4,773,919,306.5 5 - 4,773,919,306.5 5 - 31,37 9,681.58 - 4,805,298,988.1 3 Other 2023 Annual Report of Luzhou Laojiao Co., Ltd. 141 s (4) Internal carry-forward of owners' equity Conversion of capital reserves into paid-in capital Conversion of surplus reserves into paid-in capital Surplus reserves offsetting losses Carry-forward of retained earnings from changes in defined benefit plans Carry-forward of retained earnings from other comprehensive income Others 2023 Annual Report of Luzhou Laojiao Co., Ltd. 142 (5) Special reserves Withdrawal for the period Use for the period (6) Others 15,62 6.84 15,62 6.84 15,62 6.84 4. Balance as at 31 December of the current year 1,471,895,100.0 0 4,800,154,468.9 9 639,0 21,99 8.78 330,7 51,24 5.84 1,471,895,100.0 0 26,77 2,197,213.98 34,20 7,871,130.03 120,9 23,80 6.61 34,32 8,794,936.64 Statement of changes in owners' equity of parent company For the year ended 31 December 2023 Unit：CNY Item Year 2023 Share capital Other equity instruments Capital reserve Less：Treasury stock Other Comprehensive Income Special reserve Surplus reserve Undistributed profit Other Total owners' equity Preferred stock Perpetual bond Other 1. Balance as at 31 December of last year 1,471,8 95,100.00 4,789,6 03,151.65 639,02 1,998.7 8 328,54 2,995.3 6 1,471,8 95,100.00 23,131,570,80 1.94 30,554,485,15 0.17 Plus: adjustments for changes in accounting policies Adjustments for correction of accounting 2023 Annual Report of Luzhou Laojiao Co., Ltd. 143 errors in prior year Others 2. Balance as at January 1 of the current year 1,471,8 95,100.00 4,789,6 03,151.65 639,02 1,998.7 8 328,54 2,995.3 6 1,471,8 95,100.00 23,131,570,80 1.94 30,554,485,15 0.17 3.Increases/decreases in the current period (“-” for decreases) 92,669.00 389,70 4,729.9 5 - 22,278,388.19 - 268,02 9,428.0 4 92,669.00 5,044,8 01,794.48 5,188,9 40,822.58 (1) Other comprehensive income - 251,81 3,774.8 3 11,247,827,13 4.30 10,996,013,35 9.47 (2) Capital contributed or reduced by owners 92,669.00 389,47 6,903.9 4 - 22,278,388.19 411,84 7,961.1 3 Capital contributions by owners 92,669.00 8,198,0 55.74 8,290,7 24.74 Capital contributions by other equity instruments holders Amounts of share-based payments recognized in owners' equity 381,27 8,848.2 0 - 30,569,112.93 411,84 7,961.1 3 Others (3) Profit distribution 92,669.00 - 6,219,2 40,993.03 - 6,219,1 48,324.03 Withdrawal of surplus reserves 92,669.00 - 92,669.00 Profit distributed to owners (or - 6,219,1 48,324.03 - 6,219,1 48,324.03 2023 Annual Report of Luzhou Laojiao Co., Ltd. 144 shareholders) Others (4) Internal carry-forward of owners' equity - 16,215,653.21 16,215,653.21 Conversion of capital reserves into paid-in capital Conversion of surplus reserves into paid-in capital Surplus reserves offsetting losses Carry-forward of retained earnings from changes in defined benefit plans Carry-forward of retained earnings from other comprehensive income - 16,215,653.21 16,215,653.21 Others (5) Special reserves Withdrawal for the period Use for the period (6) Others 227,82 6.01 227,82 6.01 4. Balance as at 31 December of the 1,471,9 87,769.00 5,179,3 07,881.60 616,74 3,610.5 9 60,513,567.32 1,471,9 87,769.00 28,176,372,59 6.42 35,743,425,97 2.75 2023 Annual Report of Luzhou Laojiao Co., Ltd. 145 current year For the year ended 31 December 2022 Unit：CNY Item Year 2022 Share capital Other equity instruments Capital reserve Less：Treasury stock Other Comprehensive Income Special reserve Surplus reserve Undistributed profit Other Total owners' equity Preferred stock Perpetual bond Other 1. Balance as at 31 December of last year 1,464,7 52,476.00 3,739,6 66,108.27 167,57 2,013.8 6 1,464,7 52,476.00 18,872,792,77 5.01 25,709,535,84 9.14 Plus: adjustments for changes in accounting policies Adjustments for correction of accounting errors in prior year Others 2. Balance as at January 1 of the current year 1,464,7 52,476.00 3,739,6 66,108.27 167,57 2,013.8 6 1,464,7 52,476.00 18,872,792,77 5.01 25,709,535,84 9.14 3.Increases/decreases in the current period (“-” for decreases) 7,142,6 24.00 1,049,9 37,043.38 639,02 1,998.7 8 160,97 0,981.5 0 7,142,6 24.00 4,258,7 78,026.93 4,844,9 49,301.03 (1) Other comprehensive income 160,97 0,981.5 0 9,039,8 39,957.48 9,200,8 10,938.98 (2) Capital contributed or reduced by owners 7,142,6 24.00 1,049,9 37,043.38 639,02 1,998.7 8 418,05 7,668.6 0 Capital contrib7,142,6 654,14661,28 2023 Annual Report of Luzhou Laojiao Co., Ltd. 146 utions by owners 24.001,649.1 8 4,273.1 8 Capital contributions by other equity instruments holders Amounts of share-based payments recognized in owners' equity 395,79 5,394.2 0 - 22,262,274.40 418,05 7,668.6 0 Others (3) Profit distribution 7,142,6 24.00 - 4,781,0 61,930.55 - 4,773,9 19,306.55 Withdrawal of surplus reserves 7,142,6 24.00 - 7,142,6 24.00 Profit distributed to owners (or shareholders) - 4,773,9 19,306.55 - 4,773,9 19,306.55 Others (4) Internal carry-forward of owners' equity Conversion of capital reserves into paid-in capital Conversion of surplus reserves into paid-in capital Surplus reserves offsetting losses Carry-forward of retained earning2023 Annual Report of Luzhou Laojiao Co., Ltd. 147 s from changes in defined benefit plans Carry-forward of retained earnings from other comprehensive income Others (5) Special reserves Withdrawal for the period Use for the period (6) Others 4. Balance as at 31 December of the current year 1,471,8 95,100.00 4,789,6 03,151.65 639,02 1,998.7 8 328,54 2,995.3 6 1,471,8 95,100.00 23,131,570,80 1.94 30,554,485,15 0.17 3. Company Profile 3.1 Company Overview Luzhou Laojiao Co., Ltd. (hereinafter referred to as "Company" or "the Company"), formerly known as Luzhou City Qu Liquor Factory and Luzhou Laojiao Distillery in Sichuan Province. It was established in March 1950 on the basis of 36 brewing workshops from the Ming and Qing dynasties. On 20 September 1993, Luzhou Laojiao brewery established a joint-stock limited company with fund-raising exclusively from its operational assets. On 25 October 1993, the public offering of shares was approved by Sichuan Provincial People's Government and CSRC with two documents of ChuanFuHan (1993) No.673 and FaShenZi (1993) No.108. After the offering, the total share capital was 86,880,000 shares, which were listed and traded in Shenzhen stock exchange on 9 May 1994. As the end of 31 December 2004, the Company's total share capital reached 841,399,673 shares after multiple rights issues, among which the controlling shareholder, State Assets Management Bureau of Luzhou (later renamed as State-owned Assets Supervision and Administration Commission of Luzhou, hereinafter referred to as "SASAC of Luzhou") held 585,280,800 shares of the Company, with a shareholding ratio of 69.56%. On 27 October 2005, the Company implemented the non-tradable share reform. After the 2023 Annual Report of Luzhou Laojiao Co., Ltd. 148 implementation, the total share capital remained unchanged, and the shareholding ratio of SASAC of Luzhou decreased from 69.56% to 60.43%. In November 2006, the Company implemented private placement, and the total share capital increased from 841,399,673 shares to 871,399,673 shares. The shareholding ratio of SASAC of Luzhou decreased from 60.43% to 58.35%. As the end of 27 February 2007, SASAC of Luzhou sold 42,069,983 shares of the Company, and after the sale, it still held 466,375,156 shares of the Company, with its shareholding ratio reduced to 53.52%. On 19 May 2008, the Company increased 522,839,803 shares of capital stock resulting from capital reserve and undistributed profits transferred to increase capital stock. After the implementation, the total share capital reached 1,394,239,476 shares, among which, SASAC of Luzhou held 746,200,250 shares of the Company, and the shareholding ratio was still 53.52%. On 3 September 2009, the 300,000,000 shares and the 280,000,000 shares held by SASAC of Luzhou were separately transferred to Luzhou Laojiao Group Co., Ltd. (hereinafter referred to as the "Laojiao Group") and Luzhou XingLu Investment Group Co., Ltd. (hereinafter referred to as the "Xinglu Group"). After the transfer, Laojiao Group, Xinglu Group, and SASAC of Luzhou respectively held 300,000,000 shares,280,000,000 shares and 166,200,250 shares. So far, Laojiao Group became the first majority shareholder and SASAC of Luzhou was the actual controller. From 6 June 2012 to 20 November 2013, the first and second phases of the Company's equity incentive plan were exercised. After the exercise, the total share capital of the Company was changed to 1,402,252,476 shares. On 10 April 2014 and 18 July 2016, SASAC of Luzhou transferred 81,088,320 shares and 84,000,000 shares to Laojiao Group and Xinglu Group respectively. In addition, Laojiao Group has increased its equity stake through the secondary market of 13,137,100 shares. So far, Laojiao Group, Xinglu Group and SASAC of Luzhou held 394,225,489 shares,365,971,142 shares and 1,111,930 shares respectively, with the shareholding ratios of 28.11%,26.10% and 0.08% respectively. On 23 August 2017, the Company issued CNY 62,500,000 ordinary shares (A shares) privately, raising a total capital of CNY 3,000,000,000. After the additional issuance, the total capital stock of the Company was changed to 1,464,752,476 shares. In addition, from 2017 to 2018, Laojiao Group decreased 13,137,100 shares that were increased through the secondary market from April 2014 to December 2015. After share reduction, Laojiao Group, Xinglu Group and SASAC of Luzhou held 381,088,389 shares,365,971,142 shares and 1,111,930 shares respectively, with the shareholding ratios of 26.02%,24.99% and 0.08% respectively. Laojiao Group still was the first majority shareholder and SASAC of Luzhou still was the actual controller. In February 2022, the registration of 6,862,600 shares of the Restricted Share Incentive Plan granted by the Company for the first time were completed; in September 2022, the Company granted 342,334 shares of the Restricted Share Incentive Plan for the second time; in September 2022, with seven 2023 Annual Report of Luzhou Laojiao Co., Ltd. 149 awardees no longer eligible, the Company decided to repurchase and retire the 62,310 restricted shares of them which had been granted but not lifted from restricted sales; in December 2022, the Company granted 92,669 shares of the Restricted Share Incentive Plan for the third time; so far, the above grant and repurchase of the Restricted Share Incentive Plan had all been registered and the total shares of the Company changed to 1,471,987,769 shares. The grant and repurchase of the Restricted Share Incentive Plan caused no changes in the controlling shareholders and the actual controller of the Company. 3.2 Registered address of the Company, company type, and headquarter address Registered address and headquarter address of the Company are located in Sichuan Luzhou Laojiao Square and company type is other incorporated company (Listed). 3.3 Business nature of the Company and main business activity Industry of the Company is the baijiu subdivision industry of the liquor and wine, beverage and refined tea production industry. The main activity are research and development, production and sales of “National Cellar 1573”,”Luzhou Laojiao” and other baijiu series. The main products are: “National Cellar 1573 Series”, ”Century-old Luzhou Laojiao Jiaoling Series” , ”Luzhou Laojiao Tequ”, ”Touqu”, ”Hey Guys” and other baijiu series. 3.4 The name of the controlling shareholder and the ultimate substantive controller The controlling shareholder is Luzhou Laojiao Group Co., Ltd.; the ultimate substantive control is SASAC of Luzhou. 3.5 Approval and submission of the financial report and its date The financial report is approved and submitted by the board of directors of the Company on 25 April 2024. 4. Basis of preparation of financial statements 4.1. Basis of preparation of financial statements The Company has prepared its financial statements on a going concern basis, and the preparation is based on actual transactions and events in compliance with Accounting Standards for Business Enterprises and relevant guidance and explanation (the following called the ASBE) issued by Ministry of Finance, and Rules on Company Information Disclosure and Preparation of Publicly Issued Securities No.15- General Rules on Financial Reporting Rules (2023 Revision) issued by CSRC. 4.2. Going concern The Company’s business activities have adequate financial support. Based on the current information 2023 Annual Report of Luzhou Laojiao Co., Ltd. 150 obtained by the Company, comprehensively considering factors such as macro-policy risk, market operation risk, current or long-term profitability, debt repayment ability of the Company, as well as its resource of financial support, the Company believes that it is reasonable to prepare the financial statements on a going concern basis and there are no events or situations resulting in significant doubts over going concern for at least 12 months. 5. Significant accounting policies and accounting estimates The Company shall comply with the disclosure requirements for companies engaging in food & liquor and wine production of the Guidelines No.3 of the Shenzhen Stock Exchange on Sel f-regulation of Listed Companies—Industry-specific Information Disclosure. 5.1 The declaration about compliance with ASBE The financial statements of the Company have been prepared in accordance with ASBE, and present truly and completely, the financial position and the Company’s and results of operations, changes in shareholders’ equity and cash flows. In addition, in all material respects, the financial statements of the Company comply with disclosure requirements of the financial statements and their notes in accordance with Rules on Company Information Disclosure and Preparation of Publicly Issued Securities No.15- General Rules on Financial Reporting Rules revised by CSRC in 2023. 5.2 Accounting period The Company adopts the calendar year as its accounting year, i.e. from 1st January to 31st December. 5.3 Business Cycle The Company’s business cycle is 12 months. 5.4 Functional currency The Company has adopted China Yuan (CNY) as functional currency. 5.5 Methods for determining materiality standards and selection criteria Applicable □ N/A Item Materiality standard Material receivables withdrawal of bad debt provision separately accrued Material bad debt provision recovered or reversed in accounts receivables Significant write-off of accounts receivables Significant prepayments aging over one year, accounts payable, contract liabilities and other payables The carrying balance at the end of the Reporting Period ≥ CNY 5 million 2023 Annual Report of Luzhou Laojiao Co., Ltd. 151 Material construction in progress Single project under construction with a budget exceeding CNY 150 million and a total amount accounted for the current period exceeding CNY 50 million Material overseas operating entity The overseas operating entities' external revenue accounts for ≥ 3% of the consolidated operating revenue, and the total profit accounts for ≥ 0.5% of the consolidated total profit Material non-wholly-owned subsidiary The revenue of non-wholly-owned subsidiaries accounts for ≥ 3% of the consolidated operating revenue, and the total profit accounts for ≥ 0.5% of the consolidated total profit Significant associated enterprise The book value of long-term equity investments in associated enterprises accounts for ≥ 3% of the total assets in the consolidated financial statements 5.6 The accounting treatment of business combinations involving enterprises under common control and business combinations not involving enterprises under common control (1) Business combination under common control Assets and liabilities obtained by the Company from the combine through business combination under common control shall be measured at the book value as stated in the consolidated financial statements of ultimate controlling party at the combination date. The share of the book value of the merged party’s owner’s equity in the consolidated financial statements is taken as the initial investment cost of long-term equity investments in individual financial statements. The capital reserve (stock premium or capital premium) is adjusted according to the difference between the book value of net asset acquired through combination and the book value of consideration paid for the combination (or total par value of shares issued). If the capital reserve (stock premium or capital premium) is insufficient to offset, the retained earnings shall be adjusted. (2) Business combination not under common control Assets paid, liabilities incurred or assumed and the equity securities issued as consideration for combination shall be measured based on fair value on the acquisition date, the difference between fair value and its book value shall be included in current profit and loss. The Company shall recognize the difference of the combination costs in excess of the fair value of the net identifiable asset acquired from the acquiree through combination as goodwill. After the review, if the combination costs are still in short of the fair value of the net identifiable asset acquired from the acquiree through combination, include the difference in the current profit and loss. Fees, commissions, and other transaction expenses paid on issuance of equity securities as combination consideration in the business combination shall be included in the initial measurement amount of equity securities. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 152 5.7 Criteria for judging control and preparation of consolidated financial statements (1) Consolidated Financial Statement Scope The scope of the Company’s consolidated financial statements is based on control, and all subsidiaries controlled are included in the consolidation scope of the consolidated financial statements. (2) Consolidation procedures The consolidated financial statements are based on the financial statements of the Company and its subsidiaries, and are prepared by the parent company with other relevant information. When preparing consolidated financial statement, the Company considers the Group as an accounting entity, adopts unified accounting policies, and applies the requirements of ASBE related to recognition, measurement and presentation to reflect the Group’s financial position, operating results and cash flows. All the subsidiaries within the consolidation scope of consolidated financial statements shall adopt the same accounting policies and accounting periods as those of the Company. If the accounting policies or accounting periods of a subsidiary are different from those of the Company, the financial statements of the subsidiary, upon preparation of consolidated financial statements, shall be made necessary adjustment based on its own accounting policies and accounting periods of the Company. For subsidiaries acquired from the business combination not under common control, the financial statements shall be adjusted on the basis of the fair value of identifiable net assets on the date of purchase. For the subsidiary acquired from the business combination under common control, its assets and liabilities (including the goodwill formed by the acquisition of the subsidiary by the ultimate controlling party) shall be adjusted on the basis of the book value in the consolidated statements of the ultimate controlling party. The portion of a subsidiary’s equity, the current net profit and loss of subsidiaries, and the current comprehensive income attributable to non-controlling interests shall be separately presented as non-controlling interests in consolidated balance sheet within owners' equity, below the net profit line item and below the total comprehensive income line item in the consolidated income statement respectively. When the amount of current loss attributable to non-controlling shareholders of a subsidiary exceeds the balance of the non-controlling shareholders’ portion in the opening balance of owner's equity of the subsidiary, the excess shall be allocated against the non-controlling interests. Acquisition of subsidiaries or business During the reporting period, if the Company acquires subsidiaries from the business combination under common control, the opening balance in the consolidated balance sheet shall be adjusted. The income, expenses and profits of the newly acquired subsidiaries from the beginning to the end of the reporting period shall be included in the consolidated income statement. The cash flows of the newly acquired 2023 Annual Report of Luzhou Laojiao Co., Ltd. 153 subsidiaries from the beginning to the end of the reporting period shall be included in the consolidated statement of cash flows. At the same time, the relevant items of the comparative information shall be adjusted as the combined entity existed since the control point of the ultimate controlling party. If the Company can control the investee from the business combination under common control due to additional investment or other reasons, the parties involved in the combine shall be deemed to adjust in the current state when the ultimate controlling party starts to control them. For the equity investment before obtaining control of the investee, the recognized relevant profit or loss and other comprehensive income and other changes in net assets between the later of acquisition date of previous equity and the date on which both the investor and the investee are under common control and the combination date shall respectively write-down the beginning retained earnings or current profits and losses during the period of comparative information. During the reporting period, if the Company acquires subsidiaries from the business combination not under common control, the opening balance in the consolidated balance sheet shall not be adjusted. The income, expenses and profits of the newly acquired subsidiaries from the acquisition date to the end of the reporting period shall be included in the consolidated income statement. The cash flows of the newly acquired subsidiaries from the acquisition date to the end of the reporting period shall be included in the consolidated statement of cash flows. When the Company becomes capable of exercising control over an investee not under common control due to additional investment or other reasons, the Company shall re-measure the previously held equity interests to its fair value on the acquisition date, and the difference shall be recognized as investment income. When the previously held equity investment is accounted for under equity method, any other comprehensive income previously recognized and other equity changes (excluding other comprehensive, net profit and loss and profit distribution ) in relation to the acquiree’s equity changes shall be transferred to profit and loss for the current period when acquisition took place, except for other comprehensive income resulting from changes in net liabilities or net assets due to re-measurement of defined benefit plan by investee. Disposal of subsidiaries and business General treatments During the reporting period, if the Company disposes subsidiaries, the income, expenses and profits of the newly disposed subsidiaries from the beginning to the disposal date shall be included in the consolidated income statement. The cash flows from the beginning to the disposal date shall be included in the consolidated statement of cash flows. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 154 In case of loss of control over the investee due to partial disposal of the equity investment or other reasons, the Company shall re-measure the remaining equity investment at its fair value at the date of loss of control. The amount of the consideration obtained from the disposal of the equity and the fair value of the remaining equity, minus the net asset shares calculated continuously from the acquisition date based on the previous shareholding proportion and the goodwill, the difference shall be included in the investment income of the period when the control is lost. Other comprehensive income related to the former subsidiary’s equity investment of or other changes in owners' equity excluding net profit and loss, other comprehensive income and profit distribution shall be transferred to investment income for the current period when control is lost. Other comprehensive income resulting from changes in net liabilities or net assets due to re-measurement of defined benefit plan by investee is excluded. Disposal of subsidiaries by step If the Company loses control of a subsidiary is through multiple transactions by steps, the terms, conditions and economic impact of the disposal transaction shall be considered. When one or more of the following conditions may indicate that multiple transactions should be treated as a package of transactions for accounting treatment: a.These arrangements were entered into at the same time or in contemplation of each other; b.These arrangements work together to achieve an overall commercial effect; c.The occurrence of one arrangement depends on the occurrence of at least one other arrangement; d.One arrangement alone is not economically justified, but it is economically justified when considered together with other arrangements If the transactions of the disposal of the equity investment of the subsidiary until the loss of control belong to a package transaction, the Company shall account for as a transaction; However, the difference between each disposal consideration received and the corresponding proportion of the subsidiary’s net assets before the loss of control shall be recognized as other comprehensive income in the consolidated financial statements and transferred into the profit and loss of the current period when the control is lost. If the transactions from the disposal of the equity investment of the subsidiary to the loss of control are not considered as a package transactions, the accounting treatment shall be conducted according to the relevant policies on the partial disposal of the equity investment of the subsidiary where control is retained before the loss of control. When the control is lost, the disposal shall be accounted for according to the general treatment. Purchase of non-controlling interests The difference between the increase in the cost of long-term equity investment result from acquisition of 2023 Annual Report of Luzhou Laojiao Co., Ltd. 155 non-controlling shareholders and the share of net assets of the subsidiary calculated continuously from the acquisition date or combination date based on newly shareholding proportion shall be adjusted to equity (share) premium of capital reserves in the consolidated balance sheet. If the capital reserve is insufficient, any excess shall be adjusted against retained earnings. Partial disposals of equity investment in subsidiaries without loss of control When the Company disposes of a portion of a long-term equity investment in a subsidiary without loss of control, the difference between disposal consideration and net assets of the subsidiary calculated continuously since the acquisition date or the combination date related to the disposal of long-term equity investment shall be adjusted to equity (share) premium of capital reserves in the consolidated balance sheet. If the capital reserve is insufficient, any excess shall be adjusted against retained earnings. 5.8 Classification of joint venture arrangements and the accounting treatment method of common operation (1) Classification of joint venture arrangements A joint arrangement is classified as either a joint operation or a joint venture according to the structure, legal form, agreed terms and other facts and conditions of a joint arrangement. A joint arrangement that is structured through a separate vehicle is usually classified as a joint venture. However, when a joint arrangement provides clear evidence that it meets any of the following requirements and complies with applicable laws and regulations as a joint operation: a. The legal form of the joint arrangement indicates that the parties that have joint control have rights to the assets, and obligations for the liabilities, relating to the arrangement. b. The terms of the joint arrangement specify that the parties that have joint control have the rights to the assets, and the obligations for the liabilities, relating to the arrangement. c. Other facts and circumstances indicate that the parties that have joint control have rights to the assets, and the obligations for the liabilities, relating to the arrangement. The parties that have joint control have rights to substantially all of the output of the arrangement, and the arrangement depends on the parties that have joint control on a continuous basis for settling the liabilities of the arrangement. (2) Accounting by parties of a joint operator A joint operator shall recognize the following items in relation to its interest in a joint operation, and account for them in accordance with relevant accounting standards: a. Its solely-held assets, and its share of any assets held jointly; b. Its solely-assumed liabilities, and its share of any liabilities incurred jointly; c. Its revenue from the sale of its share of the output arising from the joint operation; 2023 Annual Report of Luzhou Laojiao Co., Ltd. 156 d. Its share of the revenue from sale of the output by the joint operation; and e. Its solely-incurred expenses and its share of any expenses incurred jointly. The Company shall only recognize the portion of the profit and loss attributable to other participants in the joint venture, resulting from investment or sale of assets to the joint venture by the Company (excluding those assets constituting the business), prior to the sale of such assets to a third party. The Company shall fully recognize impairment loss when there is any impairment loss of invested or sold assets occurring in accordance with the ASBENo.8-Asset Impairment. The Company shall only recognize the part of the profit and loss attributable to other participants in the joint venture before selling the assets and other assets purchased from the joint venture (excluding those assets constituting the business) to a third party. When the impairment loss of the purchased assets is in accordance with the ASBENo.8-Asset Impairment, the Company shall recognize such losses according to its share. When the Company does not have common control over the joint venture, if the Company enjoys the assets related to the joint venture and assumes the liabilities related to the joint venture, the accounting treatment shall be conducted according to the above principles. Otherwise, the accounting treatment shall be conducted in accordance with the relevant accounting standards. 5.9 Cash and cash equivalents When preparing the cash flow statement, the Company recognizes cash on hand and deposits that can be readily withdrawn on demand as cash. Cash equivalents are the Company’s short-term (due within 3 months from purchase date), highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Restricted bank deposits are not recognized as cash and cash equivalents in the cash flow statement. 5.10 Foreign currency transactions and translation of foreign currency statements (1) Foreign currency transactions At the time of initial recognition of a foreign currency transaction of the Company, the amount in the foreign currency shall be translated into the amount in CNY currency at the spot exchange rate of the transaction date. For the monetary items of foreign currencies, the translation is done according to spot rate of the balance sheet date. The exchange difference generated from the difference of spot rate of the current balance sheet date and the time of initial recognition of a foreign currency or the previous balance sheet date is charged to the profit or loss of the current period except that the exchange difference generated from foreign currency borrowings relating to assets of which the acquisition or production satisfies the capitalization conditions is capitalized. Non-monetary items measured at fair value that is reflected in foreign currency at the end of the period, the Company shall firstly translate the foreign currency into the amount in functional currency at the spot exchange rate on the date when the fair value is determined, and then compare it with the original functional currency amount. Difference between the translated functional currency amount and the 2023 Annual Report of Luzhou Laojiao Co., Ltd. 157 original functional currency amount is treated as profit or loss from changes in fair value (including changes in exchange rate) and is recognized in current profit and loss. If there is a non-monetary item of available-for-sale financial assets, the differences are recorded into other comprehensive income. (2) Translation of foreign currency statements Assets and liabilities in the balance sheets shall be translated at the spot exchange rates on balance sheet date. Shareholders’ equity items, except for the item of "undistributed profits", are translated at the spot exchange rates on the dates when the transactions occur. Revenue and expense items in the income statement are translated at the spot exchange rates on the dates when the transactions occur or at the exchange rate determined in a systematical and reasonable method and similar to the spot exchange rate on the day when the transactions occur. Differences arising from the above translations of foreign currency financial statements are separately listed under other comprehensive income in the consolidated balance sheet. If the overseas business is partly disposed of, the foreign currency financial statements exchange difference shall be calculated in proportion to the percentage of disposal and transferred to gain or loss on disposal for the current period. Foreign currency cash flow and cash flow of foreign subsidiaries shall be translated at approximate exchange rate of spot rate on the date of cash flow. 5.11 Financial Instruments A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. When the Company becomes a party to a financial instrument contract, the related financial asset or financial liability should be recognized. (1) Classification, recognition and measurement of financial assets Based on the business model of financial asset management and the contract cash flow characteristics of financial assets, the Company classifies financial assets into: financial assets measured at amortized cost; financial assets measured at fair value with their changes included into other comprehensive income; and financial assets measured at fair value with their changes included into current profits/losses. At the initial recognition, financial assets are measured at fair value. For financial assets measured at fair value with their changes included into current profits/losses, the expenses involved in the transaction are directly recorded into current profits/losses; for other financial liabilities, the expenses involved in the transaction are recorded into the initially recognized amount. 1) Financial assets measured at amortized cost The business model in which the Company manages financial assets measured at amortized cost aims 2023 Annual Report of Luzhou Laojiao Co., Ltd. 158 to receive contract cash flow. Furthermore, the characteristics of the contract cash flow of such financial assets are consistent with basic borrowing and lending arrangements, which means that cash flow generated on a specific date serves only as payment for principal and interests based on the amount of unpaid principal. The Company adopts the effective interest method for such financial interests, performs subsequent measurement of them at amortized cost, and includes the gains or losses from derecognition, changes or impairment of them into current profits/losses. 2) Financial assets measured at fair value with their changes included into other comprehensive income The business model in which the Company manages such financial assets both aims to receive contract cash flow and for the purpose of sale. Furthermore, the characteristics of the contract cash flow of such financial assets are consistent with basic borrowing and lending arrangements. The Company measure such financial assets at fair value and include their changes into other comprehensive income, but record impairment losses or gains, exchange gains or losses and interest income calculated in the effective interest method into current profits/losses. At the initial recognition, the Company may specify non-trading equity instrument investment as a financial asset measured at fair value with its changes included into other comprehensive income and should recognize the dividend income according to regulations; the specification is irrevocable once made. When the financial asset is derecognized, the cumulative gains or losses previously included into other comprehensive income should be transferred into retained earnings. 3) Financial assets measured at fair value with their changes included into current profits/losses For financial assets other than the above financial assets measured at amortized cost and financial assets measured at fair value with their changes included into other comprehensive income, the Company classifies them as financial assets measured at fair value with their changes included into current profits/losses. In addition, at the initial recognition, the Company specifies partial financial assets as financial assets measured at fair value with their changes included into current profits/losses, in order to eliminate or substantially reduce accounting mismatch. For such financial assets, the Company performs subsequent measurement using fair value and records changes in the fair value into current profits/losses. (2) Classification, recognition and measurement of financial liabilities At their initial recognition, financial liabilities are divided into financial liabilities measured at fair value with their changes included into current profits/losses and other financial liabilities. For financial liabilities measured at fair value with their changes included into current profits/losses, the expenses involved in the transaction are directly recorded into the current profits/losses. For other financial liabilities, the expenses involved in the transaction are recorded into the initially recognized value. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 159 1) Financial liabilities measured at fair value with their changes included into current profits/losses Financial liabilities measured at fair value with their changes included into current profits/losses include trading financial liabilities (including derivatives classified as financial liabilities) and the financial liabilities specified to be measured at fair value with their changes included into current profits/losses at the initial recognition. Trading financial liabilities (including derivatives classified as financial liabilities) are subsequently measured at fair value, with changes in fair value recorded into current profits/losses, except for those related to hedge accounting. For those specified as financial liabilities measured at fair value with their changes included into current profits/losses, changes in the fair value of such liabilities caused by changes in the Company’s own credit risk should be included into other comprehensive income. In derecognition of such liabilities, cumulative changes in their value caused by the Company’s own credit risk that have been recorded into other comprehensive income should be transferred into retained earnings. Other changes in their fair value should be recorded into current profits/losses. If treatment of the impact of the Company’s own credit risk changes of such financial liabilities in the above manner causes or expands accounting mismatch in profits/losses, the Company will include all gains or losses of such financial liabilities (including the amount of the impact of the Company’s own credit risk changes) into current profits/losses. 2) Other financial liabilities Financial liabilities other than those formed from the transfer of financial assets not meeting derecognition conditions or continuous involvement into transferred financial assets and those outside financial guarantee contracts are classified as financial liabilities measured at amortized cost. Such financial liabilities should be subsequently measured at amortized cost and the gains or losses from derecognition or amortization should be included into current profits/losses. (3) Recognition basis and measurement method of transfer of financial assets If a financial asset meets any of the following conditions, it shall be derecognized: 1)The contractual right for collecting the cash flow of the financial asset has been terminated; 2)The financial asset has been transferred and almost all the risks and remunerations in respect of the ownership of the financial asset has been transferred to the transferee; 3)The financial asset has been transferred, and although the enterprise neither transfers nor retains almost all the risks and remunerations in respect of the ownership of the financial asset, it has abandoned its control over the asset. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 160 If the enterprise neither transfers nor retains almost all the risks and remunerations in respect of the ownership of the financial asset and does not abandon its control over the asset, the involved financial asset shall be recognized according to the level of continuous involvement of the transferred financial asset and the relevant liabilities shall be recognized accordingly. The level of continuous involvement of the transferred financial asset refers to the level of risk faced by the enterprise due to changes in the value of the financial asset. If the overall transfer of the financial asset meets the recognition conditions, the difference between the carrying value of the transferred financial asset as well as the consideration received from the transfer and the cumulative amount of fair value changes originally-recorded into other comprehensive incomes shall be recorded into the current profits/losses. If partial transfer of the financial asset meets the recognition conditions, the carrying value of the transferred financial asset shall be apportioned at the relative fair value between the derecognition and underecognition part. The difference between the summation of the consideration received from the transfer and the cumulative amount of fair value changes originally-recorded into other comprehensive incomes that should be apportioned to the derecognition part and the apportioned aforementioned carrying value shall be recorded into the current profits/losses. For a financial asset sold with the right of recourse or with the transfer of the financial asset endorsement, the Company shall decide whether almost all the risks and remunerations in respect of the ownership of the financial asset should be transferred. If they are transferred, the financial asset shall be derecognized; if they are retained, the financial asset shall not be derecognized; if they are neither transferred nor retained, the Company will continue to decide whether the enterprise should retain control over the asset and perform the accounting treatment according to the principles stated in previous paragraphs. (4) Derecognition of financial liabilities When the current obligation of a financial liability (or a part of it) is relieved, the Company will derecognize the financial liability (or the part of it). When the Company (borrower) signs an agreement with a lender to replace an original financial liability in the form of bearing a new financial liability and the contract terms for the new financial liability differ from those for the original in substance, the original financial liability should be derecognized and the new one should be recognized. When the Company makes substantial changes to the contract terms of an original financial liability (or a part of it), the original financial liability should be derecognized and a new financial liability should be recognized according to the amended contract terms. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 161 When a financial liability (or a part of it) is derecognized, the Company will include the difference between its carrying value and the consideration paid (including non-cash assets or liabilities borne that are transferred out) into current profits/losses. (5) Offsetting of financial assets and financial liabilities When the Company has the legal right to offset recognized financial assets and financial liabilities and may execute the legal right currently and simultaneously, the Company plans to settle or simultaneously encash the financial assets in net amounts and pay off the financial liabilities, the financial assets and the financial liabilities which are presented in the net amount after the mutual offset in the balance sheet. Other than that, they shall be presented separately in the balance sheet without the mutual offset. (6) Method of determining the fair value of financial assets and financial liabilities Fair value refers to the price that a market participant can receive for selling an asset or transferring a liability in an orderly transaction on the measurement date. For an existing financial instrument in an active market, the Company adopts the quotations in the active market to determine its fair value. Quotations in the active market refer to prices that can be easily obtained from exchanges, brokers, industrial associations and pricing service institutions and represent the actual prices in the market transactions happening in a fair trade. For a non-existing financial instrument in an active market, the Company adopts the valuation technique to determine its fair value. The valuation technique includes references to familiar situations and the prices used by the parties voluntarily participating in the recent market transactions, as well as references to the present fair value of other financial instruments of the same nature, discounted cash flow method and options pricing model. In the valuation, the Company uses a valuation technique that is applicable in the current situation with sufficient data available and other information support, chooses input values that are consistent with the asset or liability characteristics considered by market players in related asset or liability transactions, and make maximum effort to use related observable input values on a preferential basis. When it is unable or unfeasible to obtain related observable input values, unobservable will be used. (7) Equity instruments Equity instruments refer to the contracts that can prove the Company’s residual equity of assets after the deduction of all liabilities. The Company’s issuance (including refinancing), repurchase, sale or cancellation of equity instruments serve as the change treatment of equity. Transaction expenses related to the equity transactions are deducted from the equity. The Company does not recognize changes in the fair value of equity instruments. Dividends from the Company’s equity instruments distributed during the validity (including the “interests” 2023 Annual Report of Luzhou Laojiao Co., Ltd. 162 from instruments classified as equity instruments) are treated as profit distribution. (8) Impairment of financial instruments Based on the expected credit loss, the Company treats financial assets measured at amortized cost and debt instrument investment measured at fair value with its changes included into other comprehensive income by impairment and recognizes the provision for loss. Credit loss means the difference between all contract cash flow discounted at the original effective interest rate to be received according to contracts and all contract cash flow expected to be received, namely, the present value of all cash shortage. For a financial asset with credit impairment purchased by or originated from the Company, it should be discounted by the effective interest rate after credit adjustment to the financial asset. For accounts receivable that do not contain significant financing components, the Company adopts simplified measurement to measure loss provisions according to the amount equivalent to the expected credit loss for the entire duration. For a financial asset other than those using the above simplified measurement, the Company assesses on each balance sheet date whether its credit risk has substantially increased since the initial recognition. If it has not and is in the first stage, the Company will measure the loss provision at the amount equivalent to the expected credit loss for the next 12 months and calculate the interest income according to the book balance and the effective interest rate; if it has substantially increased since the initial recognition without credit impairment and is in the second stage, the Company will measure the loss provision at the amount equivalent to the expected credit loss for the entire duration and calculate the interest income according to the book balance and the effective interest rate; if credit impairment has occurred since the initial recognition and is in the third stage, the Company will measure the loss provision by the amount equivalent to the expected credit loss for the entire duration and calculate the interest income according to the amortization cost and the effective interest rate. For financial instruments with low credit risks on balance sheet dates, the Company assumes that their credit risks have not substantially increased since the initial recognition. The Company assesses expected credit losses of financial instruments based on individual and group assessment. The Company considers the credit risk characteristics of different customers and assesses the expected credit losses of accounts receivable and other receivables based on account age portfolio. When assessing expected credit losses, the Company considers reasonable and well-founded information on past matters, present conditions and forecast of future economic conditions. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 163 When it no longer reasonably expects to recover all or part of the contract cash flow of financial assets, the Company will directly write down the book balance of such financial assets. 5.12 Notes receivable The types of portfolios for which bad debt provisions are made according to the portfolios of credit risk characteristics and the basis for determining them: Divide notes receivables into various portfolios according to common risk characteristics based on the credit risk characteristics of acceptors and determine the accounting estimate policies of expected credit loss：Portfolio name Provision method Bank acceptance bill portfolio The management evaluates that this type has low credit risk and its fixed bad debt provision ratio is 0%. Trade acceptance portfolio The provision for impairment is made according to the expected loss rate with the same portfolio classification of accounts receivables 5.13 Accounts receivables The types of portfolios for which bad debt provisions are made according to the portfolios of credit risk characteristics and the basis for determining them: As for accounts receivables, regardless of whether there is a significant financing component, the Company always measures the provision for loss based on the amount equivalent to the expected credit loss over the entire life, and the resulting increase or reversal of provision for loss shall be included in the current profit or loss as gains or losses on impairment. The accrual method is as follows: (1) When there is objective evidence showing that an account receivable has incurred credit impairment, the Company shall make bad debt provision for the account receivable and recognize the expected credit loss. (2) When the information about the expected credit loss of a single financial asset cannot be evaluated at a reasonable cost, the Company shall divide the accounts receivables portfolio according to credit risk characteristics and measure the expected credit loss based on portfolios: Portfolio name Provision method Risk portfolio Expected credit loss Other portfolio No bad debt provision Other portfolio refers to the normal intercourse funds among the Company and businesses under the same control, the recovery of which are controllable with no risks. Thus, no bad debt provision was made. The aging calculation method of credit risk characteristic portfolio based on aging: The Company combines the accounts receivables classified as risk portfolio in accordance with similar credit risk characteristics (aging), and calculates the expected credit loss through the exposure at default and expected credit loss rate over the entire life based on the current situation and prediction of 2023 Annual Report of Luzhou Laojiao Co., Ltd. 164 future economic situation consulting historical credit loss experience. The comparative table of the credit loss rate is as follows: Aging Expected loss provision rate % Within 1 year 5 1-2 years 10 2-3 years 20 3-4 years 40 4-5 years 80 Over 5 years 100 The ageing of accounts receivable is calculated from the month in which the amounts are actually incurred. 5.14 Accounts receivables financing The accounts receivables financing of the Company refer to the notes receivables measured at fair value through other comprehensive income on the balance sheet date. For more details, see Note 5.11 Financial instruments. 5.15 Other receivables The types of portfolios for which bad debt provisions are made according to the portfolios of credit risk characteristics and the basis for determining them: As for other receivables, regardless of whether there is a significant financing component, the Company always calculates the expected credit loss through the exposure at default and expected credit loss rate in the next 12 months or over the entire life based on the current situation and prediction of future economic situation consulting historical credit loss experience, and the resulting increase or reversal of provision for loss shall be included in the current profit or loss as gains or losses on impairment. The accrual method is as follows: (1) When there is objective evidence showing that the other receivable has incurred credit impairment, the Company shall make bad debt provision for the other receivable and recognize the expected credit loss. (2) When the information about the expected credit loss of a single financial asset cannot be evaluated at a reasonable cost, the Company shall divide the other receivables portfolio according to credit risk characteristics and measure the expected credit loss based on portfolios. Portfolio name Provision method Risk portfolio Expected credit loss Other portfolio No bad debt provision Other portfolio refers to the normal intercourse funds among the Company and businesses under the same control, the recovery of which are controllable with no risks. Thus, no bad debt provision was made. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 165 The aging calculation method of credit risk characteristic portfolio based on aging: The Company combines the other receivables classified as risk portfolio in accordance with similar credit risk characteristics (aging), and calculates the expected credit loss through the exposure at default and expected credit loss rate in the next 12 months or over the entire life based on the current situation and prediction of future economic situation consulting historical credit loss experience. The comparative table of the credit loss rate is as follows: Aging Expected loss provision rate % Within 1 year 5 1-2 years 10 2-3 years 20 3-4 years 40 4-5 years 80 Over 5 years 100 The ageing of other receivables is calculated from the month in which the amounts are actually incurred. 5.16 Contract assets The Company presents contract assets or contract liabilities on the balance sheet according to the relationship between the fulfillment of its contract performance obligations and its customers’ payment. Considerations that the Company has the right to collect for commodities transferred or services provided to customers (and such right depends on other factors than time lapses) are presented as contract assets. The Company presents the right possessed to collect consideration from customers unconditionally (only depending on the passing of time) as accounts receivable. Refer to “The method of determining the expected credit loss of accounts receivables and accounting treatment method” for the detail on the Company’s method of determining the expected credit loss of contract assets and accounting treatment method. 5.17 Inventory (1) Classification of inventory Inventories are classified as: raw materials, goods in progress (including semi-finished goods), stock commodities, and dispatched inventories. (2) Measurement method of acquiring and dispatching inventories The standard cost is used for daily accounting of raw materials, and the difference of material cost should be carried forward on a monthly basis to adjust the standard cost into the actual cost; The goods in progress (including semi-finished goods) shall be accounted according to the actual cost, and the 2023 Annual Report of Luzhou Laojiao Co., Ltd. 166 weighted average method shall be used when they are received and delivered. The actual cost of the inventory at the end of the month above shall be taken as the standard cost, and the delivery shall be priced according to the standard cost. At the end of the month, the standard cost of the inventory at the end of the month shall be adjusted into the actual cost through the cost-sharing difference. (3) Determining criteria and method of provision for stock obsolescence At the end of the period, inventory is measured according to the lower of cost and net realizable value. The difference between inventory cost and net realizable value is higher than the provision for stock obsolescence, which is recorded into current profit and loss. For inventories that are related to product ranges produced and sold in the same district or used for the same or similar ultimate purpose and are difficult to be measured separately from other inventories, the Company provides for stock obsolescence as a whole. For inventories that have large quantities but low value, the Company provides for stock obsolescence on a category basis. The materials held for production shall be measured at cost if the net realizable value of the finished products is higher than the cost. If a decline in the value of materials shows that the net realizable value of the finished products is lower than the cost, the materials shall be measured at the net realizable value. (4) Inventory system The Company adopts perpetual inventory system. (5) Amortization method of packing materials and low-cost consumables It is amortized in full at once. 5.18 Assets held for sale (1) Determining criteria for non-current assets held for sale or disposal groups The Company shall classify the non-current assets or disposal group meeting the following conditions into the held-for-sale category: The assets (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups); Its sale must be highly probable.; The Company has already made a decision to dispose the component and has a commitment from the purchaser, the transfer will be completed within one year. The non-current assets or disposal group acquired by the Company for resale shall be divided into the held-for-sale category on the acquisition date if it meets the condition that "the sale is expected to be 2023 Annual Report of Luzhou Laojiao Co., Ltd. 167 completed within one year" and if it is likely to meet other conditions for the held-for-sale category within a short period (usually three months). Due to one of the following reasons that the Company is unable to control, leading to the transactions uncompleted with non-related party within one year, and the Company still commits to sale non-current assets or disposal groups, it can continue to account for non-current assets or disposal groups as held-for-sale: the buyer or any other party accidentally set sale extension condition. The Company has to take action in time according to these conditions and the extension problem is expected to be solved within one year; In rare cases, the Company has taken the necessary steps and re-satisfy the hold for sale category condition within the first year for the new circumstances which caused it unable to complete the sale of the non-current assets or disposal group within one year. (2) Accounting treatment of non-current assets or disposal groups held for sale a. Initial measurement and subsequent measurement When the Company measure a non-current asset or disposal group held for sale initially or re-measure at balance sheet date subsequently, the impairment loss should be recognized if the book value is higher than fair value less costs to sell at the amount of the difference of these two in profit and loss, the provision for assets held for sale need to be recognized at the same time. For the non-current assets or disposal groups divided into held-for-sale category on the acquisition date, they shall be measured as the lower of the initial measurement amount and the net amount after deducting the selling expenses from the fair value under the assumption that it is not divided into held-for-sale categories at the initial measurement. Except for the non-current assets or the disposal groups obtained in the enterprise merger, the difference caused by the non-current assets or the disposal groups taking the net amount after the fair value minus the selling expenses as the initial measurement amount shall be recorded into the current profit and loss. For the impairment of disposal group, it should write off goodwill if existing, and then write down the related assets proportionally. Depreciation or amortization should cease for the non-current asset held for sale. Interest and other charges on liabilities in the disposal groups held for sale continue to be recognized. b. Accounting treatment of reversal of impairment loss If the net amount of the non-current assets held for sale on the subsequent balance sheet date increases after the fair value minus the selling expenses, the amount previously written down shall be reversed, and the amount of the impairment loss recognized after being classified as the held-for-sale 2023 Annual Report of Luzhou Laojiao Co., Ltd. 168 shall be reversed, and the reversed amount shall be included in the current profit and loss. The impairment loss recognized before the classification of the held-for-sale shall not be reversed. If the net amount of the disposal groups held for sale on the subsequent balance sheet date increases after the fair value deducting the selling expenses, the amount previously written down shall be reversed, and the amount of the impairment loss recognized as non-current assets after being classified as the held-for-sale shall be reversed, and the reversed amount shall be included in the current profit and loss. The book value of the goodwill that has been written down and the impairment losses recognized before the classification of the held-for-sale shall not be reversed. The subsequent reversed amount of the impairment loss recognized by the disposal groups held for sale shall be increased in proportion to the book value of non-current assets except goodwill in the disposal groups. c. Recognition criteria and presentation of discontinued operations Non-current assets or disposal groups that are no longer divided into held-for-sale category or non-current assets are removed from disposal groups held for sale because of no longer meeting the condition of classification of held-for-sale, they are measured at lower of the following two: book value before being classified as the held-for-sale considering depreciation, amortization or impairment that should have been recognized under the assumption that it is not divided into held-for-sale categories; and recoverable amount. When terminating the recognition of the non-current assets held for sale or the disposal groups, the unrecognized gains or losses shall be recorded into the current profit and loss. 5.19. Investments in debt obligations N/A 5.20 Investments in other debt obligations N/A 5.21 Long-term receivables For more details, see Note 5.11 Financial instruments. 5.22 Long-term equity investment (1) Judgment criteria of common control and significant influence 2023 Annual Report of Luzhou Laojiao Co., Ltd. 169 Common control on an agreement with other participants refers to the Company share control with other participants on an arrangement according to relevant conventions, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. This arrangement belongs to joint venture. Where the joint venture arrangement is made by a separate entity and the Company is judged to have rights to the net assets of such a separate entity according to the relevant conventions. Such a separate entity shall be regarded as a joint venture and accounted by the equity method. If the Company is judged to be not entitled to the net assets of the separate entity according to relevant conventions, the separate entity shall be regarded as a joint venture and the Company shall recognize the items related to the shares of the joint venture and perform accounting treatment in accordance with relevant accounting standards. The term ‘significant influence’ refers to the power to participate in decision-making on the financial and operating policies of the investee, but with no control or joint control over the formulation of these policies. The Company judges that it has a significant impact on the invested entity through one or more of the following situations and taking all the facts and circumstances into consideration: a. Dispatch representatives to the board of directors or similar authorities of the investee. b. To participate in the financial and business policy making process of the investee. c. Significant transactions with the investee. d. Dispatch management personnel to the investee. e. To provide key technical data to the investee. (2) Determination of the initial investment cost a. Long-term equity investment resulting from combination Business combination under common control：For the long-term equity investments obtained by cash paid, non-monetary assets paid or assumed liabilities and the equity securities issued by the acquirer, on the merger date, the initial investment cost of long-term equity investment shall be taken as the share of the owner's equity of the investee in the book value of the final control party's consolidated financial statements. If the investee under business combination under common control can be controlled due to additional investment or other reasons, the initial investment cost of long-term equity investment shall be determined on the merger date according to the share of the net assets of the investee in the book value of the final control party's consolidated financial statements. The difference between the initial investment cost of the long-term equity investment on the merger date and sum of the book value of the long-term equity investment before the merger and the new consideration of acquiring shares on the merger date shall be recorded to adjust the equity premium. If the equity premium is insufficient to be written down, the retained earnings shall be written down. Business combination not under common control：The Company takes the initial investment cost of 2023 Annual Report of Luzhou Laojiao Co., Ltd. 170 long-term equity investment as the merger cost determined on the purchase date. If the investee can be controlled under business combination not under common control due to additional investment or other reasons, the previous book value of the equity investment held plus the sum of the newly added investment cost shall be taken as the initial investment cost calculated according to the cost method. b. Long-term equity investment obtained by other means For the long-term equity investments obtained by cash paid, the Company recognizes their fair value as the initial investment costs. For the long-term equity investments acquired by the issue of equity securities, the initial investment cost shall be the fair value of the equity securities issued. For long-term equity investments obtained by non-monetary assets exchange, under the condition that an exchange of non-monetary assets is of commerce nature and the fair value of assets exchanged can be reliably measured, non-monetary assets traded in is initially stated at the fair value of the assets traded out, unless there is conclusive evidence indicating that the fair value of the assets traded in is more reliable; if the above conditions are not satisfied, initial investment costs of long-term equity investments traded in shall be recognized at the book value of the assets traded out and the relevant taxes and surcharges payable. For long-term equity investments obtained by debt restructuring, the Company recognizes the fair value of shares of debt-for-equity swap as the initial investment costs. (3) Subsequent measurement and recognition of profit and loss a. Long-term equity investments measured under the cost method Long-term equity investments that can control the investee are measured under the cost method. For long-term equity investments accounted at the cost method, except cash dividends or profits declared but not yet distributed which are included in the actual payments or the consideration actually paid for the investment, the cash dividends or profits declared by the investee shall be recognized as the investment income irrespective of net profits realized by the investee before investment or after investment. b. Long-term equity investments measured under the equity method For the long-term equity investment which has joint control or significant influence over the investee, the equity method is adopted for accounting. For long-term equity investments measured at the equity method, if the initial investment costs are higher than the investor’s attributable share of the fair value of the investee’s identifiable net assets, no adjustment will be made to the initial costs of the long-term 2023 Annual Report of Luzhou Laojiao Co., Ltd. 171 equity investments; if the initial investment costs are lower than the investor’s attributable share of the fair value of the investee’s identifiable net assets, the difference shall be recognized in current profit and loss. The Company shall, according to the shares of net profits and other comprehensive income realized by the investee that shall be enjoyed or borne by the Company, recognize the profit and loss on the investments and adjust the book value of the long-term equity investments. When recognizing the net profits and losses and other comprehensive income of the investee that the Company shall enjoy or bear, the Company shall make a recognition and calculation based on the net book profits and losses of the investee after appropriate adjustments. However, where the Company is unable to obtain the relevant information due to failure to reasonably determine the fair value of the investee’s identifiable assets, minor difference between the investee’s identifiable assets and the book value thereof or other reasons, the profits or losses on the investments shall be directly calculated and recognized based on the net book profits and losses of the investee. The Company shall calculate the part distributed from cash dividends or profits declared by the investee and correspondingly reduce the book value of the long-term equity investments. When recognizing the income from investments in associates and joint ventures, the Company shall write off the part of incomes from internal unrealized transactions between the Company and associates and joint ventures which are attributable to the Company and recognize the profit and loss on investments on such basis. Where the losses on internal transactions between the Company and the investee are impairment of related assets, full amounts of such losses shall be recognized. Profit and loss from internal unrealized transactions between the Company’s subsidiaries included into the combination scope and associates and joint ventures shall be written off according to the above principles and the profit and loss on investments thereafter shall be recognized on such basis. When the share of net loss of the investee attributable to the Company is recognized, it is treated in the following sequence: Firstly, write off the book value of the long-term equity investments; where the book value of the long-term equity investments is insufficient to cover the loss, investment losses are recognized to the extent that book value of long-term equity which form net investment in the investee in other substances and the book value of long-term receivables shall be written off; after all the above treatments, if the Company still assumes additional obligation according to investment contracts or agreements, the obligation expected to be assumed should be recognized as provision and included into the investment loss in the current period. If the investee is profitable in subsequent accounting periods, the Company shall treat the loss in reverse order against that described above after deducting unrecognized share of loss: i.e. write down the book value of the recognized provision, then restore the book value of long-term interests which substantially form net investments in the investee, then restore the book value of long-term investments, and recognize investment income at the same time. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 172 5.23 Investment property Measurement model of investment property Cost model Method of depreciation or amortization Investment property is the property that is held to earn rent or capital appreciation or both and can be measured and sold separately. The Company’s investment property includes land use right already rent, land use right held for appreciation and then sold, and buildings already rent. (1) Initial Recognition When the Company can obtain the rental income or value-added income related to the investment property and the cost of the investment property that can be measured reliably, the Company will initially measure it according to the actual expenditure of purchase or construction: The cost of the purchased investment property includes the purchase price and related taxes directly attributable to the asset; The cost of self-built investment property consists of the necessary expenses incurred before the asset reaches the intended use condition; The cost of the investment property obtained by other means shall be recognized in accordance with relevant accounting standards. (2) Subsequent measurement In general, the Company adopts the cost model to measure the follow-up expenditure of investment property. The depreciation or amortization of investment property shall be carried out in accordance with the accounting policies for the Company's fixed assets or intangible assets. If there is solid evidence suggests that the investment property acquired can be measured at fair value continuously and reliably, the Company can use fair value model for subsequent measurement. For the investment property measured at fair value model, the Company does not provide depreciation or amortization and adjusts its book value based on the fair value of investment property at the balance sheet date. The difference between the fair value and book value is recorded into current profit or loss. (3) When the Company changes the use of investment property, the relevant investment property will be transferred to other assets. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 173 5.24. Fixed assets (1) Recognition of fixed assets Fixed assets refer to tangible assets held for the purpose of producing commodities, providing services, renting or business management with useful life exceeding one accounting year. Fixed assets are recognized when the following criteria are satisfied simultaneously: It is probable that the economic benefits relating to the fixed assets will flow into the Company; the cost of the fixed assets can be measured reliably. (2) Depreciation of fixed assets Category Depreciation method Estimated useful life (Year) Estimated residual value rate (%) Annual depreciation rate (%) Buildings and Constructions Straight-line method 10－455% 9.50－2.11 Special equipment Straight-line method 5－355% 19.00－2.71 Universal equipment Straight-line method 4－255% 23.75－3.80 Transportation equipment Straight-line method 65% 15.83 Other equipment Straight-line method 4－165% 23.75－5.94 Except for fixed assets still in use after full depreciation, the Company depreciates all fixed assets and calculates the depreciation in the straight-line depreciation method. Based on the nature and use of fixed assets, the Company determines their service life and estimated net salvage value and reviews their service life, estimated net salvage value and depreciation method at the end of the year. Changes in the service life, estimated net salvage value and depreciation method of the same type of assets are treated as changes in accounting estimation. (3) Impairment test method and impairment provision accrued method of fixed assets At the end of the period, the fixed assets shall be measured at the lower of the book value and the recoverable amount. If the recoverable amount of fixed assets is lower than the book value due to a continuous decline in the market value, or technological obsolescence, damage, or long-term idleness, a provision for impairment of the fixed assets shall be made for the difference between the recoverable amount and the book value of individual fixed assets. If the recoverable amount of the individual asset is difficult to estimate, the Company will determine the recoverable amount of the asset group based on 2023 Annual Report of Luzhou Laojiao Co., Ltd. 174 the asset group to which the asset belongs. The impairment losses on fixed assets must not be reversed in subsequent accounting periods once recognized. For fixed assets for which depreciation provision has been made, the depreciation rate and depreciation amount shall be remeasured according to the book value of the fixed assets (the original price of fixed assets minus accumulated depreciation and provision for impairment), and the remaining service life. On the balance sheet date, the fixed assets shall be measured at the lower of the book value and the recoverable amount. 5.25. Construction in progress (1) Construction in progress refers to various construction and installation works carried out for the construction or repair of fixed assets, including the actual expenditure incurred in new construction, reconstruction and expansion, and the net value of fixed assets transferred from the reconstruction and expansion projects. (2) Construction in progress is accounted on an individual project basis with actual cost valuation method. The borrowing costs incurred before the projects reach the intended use condition shall be included in the project cost. The fixed assets shall be carried forward in the month when the project is qualified for acceptance and delivery for use. For those that have reached the intended use condition but have not yet completed the final account, from the date of reaching the intended use condition, according to the project budget, construction cost or the actual cost of the project, the cost transferred to the fixed assets shall be determined according to the estimated value, and the depreciation shall be recognized; After the completion of the final account, the original provisional value shall be adjusted according to the actual cost, but the amount of depreciation accrued shall not be adjusted. (3) The loan interest and related expenses incurred during the construction period shall be capitalized into the cost of the construction in Progress. (4) On the balance sheet date, the construction in progress is recognized at the lower of book value and recoverable amount. 5.26. Borrowing costs (1) Scope of borrowing costs and its capitalization conditions The Company’s borrowing costs capitalized during period of capitalization are relevant loan expenses directly attributable to the assets eligible for capitalization, including interest thereon, amortization of discounts or premiums, ancillary expenses and exchange differences incurred from foreign currency loan, etc. Borrowing costs are capitalized when the following three conditions are met simultaneously: ① the asset expenditure has occurred, ② the borrowing costs have occurred, ③ the purchase and 2023 Annual Report of Luzhou Laojiao Co., Ltd. 175 construction activities necessary to make the assets reach the intended use condition have started. (2) Recognition of capitalized amounts The capitalized amount of borrowing expenses is calculated as follows: As for special loan borrowed for acquiring and constructing or producing assets eligible for capitalization, borrowing costs of special loan actually incurred in the current period less the interest income of the loans unused and deposited in bank or return on temporary investment should be recognized as the capitalization amount of borrowing costs. As for general loans used for acquiring and constructing or producing assets eligible for capitalization, the interest of general loans to be capitalized should be calculated by multiplying the weighted average of asset disbursements of the part of accumulated asset disbursements in excess of special loans by the capitalization rate of used general loans. During the period of capitalization, the capitalized amount of interest of each accounting period shall not exceed the current actual interest of the relevant loans. Where there are discounts or premiums on loans, the amounts of interest for each accounting period should be adjusted taking account of amortizable discount or premium amounts for the period by effective interest method. Auxiliary expenses incurred from special loans before the acquired or constructed assets eligible for capitalization reach the working condition for their intended use or sale should be capitalized when they incur and charged to the costs of assets eligible for capitalization; those incurred after the acquired or constructed assets eligible for capitalization reach the working condition for their intended use or sale should be recognized as costs according to the amounts incurred when they incur and charged to the current profit or loss. (3) Recognition of capitalization rate For a special loan for the purchase and construction of fixed assets, the capitalization rate is the interest rate of the loan; For more than one special loan for the acquisition and construction of fixed assets, the capitalization rate is a weighted average interest rate of these loans. (4) Capitalization suspension of borrowing costs If the acquisition and construction or production activities of assets eligible for capitalization are interrupted abnormally and this condition lasts for more than three months, the capitalization of borrowing costs should be suspended. The borrowing costs incurred during interruption are charged to profit or loss for the current period, and the capitalization of borrowing costs continues when the acquisition and construction or production activities of the asset resume. (5) Capitalization cessation of borrowing costs Capitalization of borrowing costs should cease when the acquired and constructed or produced assets eligible for capitalization have reached the working condition for their intended use or sale. Borrowing 2023 Annual Report of Luzhou Laojiao Co., Ltd. 176 costs incurred after the assets eligible for capitalization have reached the working condition for their intended use or sale should be recognized as the current profit and loss when they incur. If parts of the acquired and constructed or produced assets are completed separately but the assets cannot be used or sold externally until overall completion, the capitalization of borrowing costs should cease at the time of overall completion of the said assets. 5.27. Biological assets N/A 5.28. Oil and gas assets N/A 5.29. Intangible assets (1) Useful life and the basis for its determination, estimation, amortization methodology or review procedures Intangible assets refer to identifiable non-monetary assets that are owned or controlled by the Company without a physical form. Measurement method a. Costs of intangible assets purchased include purchase price, related tax and expenses and other expenditure that can be distributed to the asset directly to reach its expected use. b. Intangible assets invested by investors shall be valued at the value agreed upon in the investment contract or agreement; c. Expenses on the research phase of internally researched and developed intangible assets shall be included in the current profit and loss when they incur; The expenditures incurred in the development stage of the internal research and development projects shall be recognized as intangible assets when the following conditions are met; otherwise, they shall be recorded into the current profit and loss when they incur. i. It is technically feasible to finish intangible assets for use or sale; ii. It is intended to finish and use or sell the intangible assets; iii. The usefulness of methods for intangible assets to generate economic benefits shall be proved, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the intangible assets themselves or the intangible assets will be used internally; iv. It is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of sufficient technologies, financial resources and other resources. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 177 v. The expenditure attributable to the intangible asset during its development phase can be measured reliably. d. If payment of the purchase price of intangible assets can be deferred and exceeds normal credit conditions, the purchase has the nature of finance in fact and cost of the intangible asset shall be determined on the basis of present value of the purchase price. The difference between the amount actually paid and the present value of the purchase price should be recorded into current profit or loss other than those should be capitalized during the credit period. Useful life and the basis for its determination, estimation, amortization methodology or review procedures For intangible assets with limited useful life, amortization shall be carried out according to the straight-line method within the period that brings economic benefits to the enterprise. At the end of each period, the useful life and amortization method of intangible assets with limited service life shall be reviewed. If there are differences with the original estimates, corresponding adjustments shall be made. Intangible assets whose useful life is uncertain shall be regarded as intangible assets if it is impossible to foresee the term in which intangible assets bring economic benefits to the enterprise. Intangible assets with uncertain useful life shall not be amortized during the holding period, and the life of intangible assets shall be reviewed at the end of each period. If it is still uncertain after the review at the end of the period, the impairment test shall continue during each accounting period. At the end of each period, the useful life of intangible assets with uncertain service life shall be reviewed. Impairment test On the balance sheet date, intangible assets are valued at the lower of book value and recoverable amount. (2) The scope of research and development expenditure collection and the related accounting treatment The R&D expenditure of the Company mainly include the materials consumed in the implementation of R&D activities, salaries of R&D department employees, depreciation and amortisation of assets such as equipment and software used in research and development, R&D testing, R&D technical service fees, and licensing fees. The expenditures incurred in the development stage of the research and development projects shall be recognized as intangible assets when the following conditions are met; otherwise, they shall be recorded into the current profit and loss when they occur. a. It is technically feasible to finish intangible assets for use or sale; b. It is intended to finish and use or sell the intangible assets; 2023 Annual Report of Luzhou Laojiao Co., Ltd. 178 c. The usefulness of methods for intangible assets to generate economic benefits shall be proved, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the intangible assets themselves or the intangible assets will be used internally; d. It is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of sufficient technologies, financial resources and other resources. e. The expenditure attributable to the intangible asset during its development phase can be measured reliably. Development expenditures that have been recorded into profit and loss in previous periods are not recognized as assets in subsequent periods. The capitalized expenditure in the development stage is listed as development expenditure in the balance sheet, and it will be recorded into intangible assets from the date when the project reaches its intended purpose. 5.30. Long-term assets impairment On the balance sheet date, the Company makes a judgment on whether there are signs of possible impairment of long-term assets. If there are impairment indicators of non-current assets, the Company estimates the recoverable amount based on individual asset. If recoverable amount of individual asset is difficult to be estimated, the Company should recognize the recoverable amount of the asset group which the individual asset belongs to. The recoverable amount is the higher of fair values less costs of disposal and the present values of the future cash flows expected to be derived from the asset. If the measurement result of recoverable amount shows that recoverable amount of the non-current assets is less than its book value, the book value shall be written down to the recoverable amount, and the amount written down shall be recognized as the impairment loss of assets, recorded into the current profit and loss, and the corresponding impairment provision of assets shall be made at the same time. Once impairment loss stated above is recognized, reversal is not allowed in the subsequent accounting periods. After the recognition of the impairment loss, the depreciation or amortization expense of the impairment asset shall be adjusted accordingly in the future period so as to systematically apportion the adjusted book value of the asset (deducting the expected net salvage value) within the remaining service life of the asset. The Company should perform impairment test for goodwill and intangible assets with indefinite life at least at each year end, no matter whether there is impairment indicator. Goodwill shall be combined with its related asset group or asset group portfolio so as to perform an impairment test. When the Company performs an impairment test on relevant asset group or asset group portfolio including goodwill, if there are signs of impairment, the Company shall firstly perform an impairment test on asset group or asset group portfolio excluding goodwill and calculate the 2023 Annual Report of Luzhou Laojiao Co., Ltd. 179 recoverable amount, and compare with the related book value, recognize the corresponding impairment loss. Then, the Company performs an impairment test on relevant asset group or asset group portfolio including goodwill, and compares the book value of the relevant asset groups or asset group portfolio (including proportional book value of goodwill) with its recoverable amount. If the recoverable amount of relevant asset group or asset group portfolio is less than its book value, the Company shall recognize impairment loss of goodwill. 5.31. Long-term deferred expenses Long-term deferred expenses shall be initially measured according to the actual costs incurred. It is amortized using the straight-line method over the beneficial period. If it cannot benefit the following accounting period, the amortized value of the item that has not been amortized will be transferred to the current profit and loss. 5.32. Contract liabilities The recognition method of contract liabilities: The Company presents contract assets or contract liabilities on the balance sheet according to the relationship between the fulfillment of its contract performance obligations and its customers’ payment. Obligations to be fulfilled by the Company of transferring commodities or providing services to customers, as the Company has received or should receive customers’ considerations, are presented as contract liabilities. 5.33. Employee benefits (1) Accounting treatment method of short-term benefits Short-term benefits are the benefits that the Company expects to pay in full within 12 months after the reporting period in which the employee provided relevant services, excluding the compensation for employment termination. Accrued short term benefits will be recognized as liability during the accounting period in which the employee is providing the relevant service to the Company. The liability will be included in the current profit and loss or the relevant assets cost. (2) Accounting treatment method of post-employment benefits a. Defined contribution plan The defined contribution plan of the Company includes payments of basic pension and unemployment insurance calculated according to the local payment base and proportion. The amount shall be included into the profit and loss or the relevant assets cost for the accounting period in which the employee provides the service to the Company. b. Defined benefit plan According to the formula determined by the expected accumulative projected unit credit method, the 2023 Annual Report of Luzhou Laojiao Co., Ltd. 180 Company will record the benefit obligation generated by the defined benefit plan belonging to the period during in which the employee provides the service into the current profit and loss or the relevant assets cost. The deficit or surplus resulting from the present value minus the fair value of the assets of a defined benefit plan is recognized as a net liability or net asset of a defined benefit plan. If there is surplus in the defined benefit plan, the net assets of the defined benefit plan shall be measured at the lower of the surplus and the upper limit of assets of the defined benefit plan. All defined benefit plan obligations, including those expected to be paid within the twelve months following the end of the annual reporting period in which the employee provides the service, are discounted based on the market yield and high quality corporate bonds in an active market that match the duration and currency of defined benefit plan obligations on the balance sheet date. The service costs generated by the defined benefit plan and the net interest on net liabilities or net assets of the defined benefit plan are included in the current profit and loss or relevant assets cost; Changes in net liabilities or net assets generated by the re-measurement of the defined benefit plan are included in other comprehensive income and are not reversed to profit and loss in subsequent accounting periods. At the time of settlement of the defined benefit plan, the settlement gains or losses shall be recognized according to the difference between the present value of the obligations of the defined benefit plan and the settlement price determined on the settlement date. (3) Accounting treatment method of termination benefits Employee benefits liabilities shall be recognized and included into profit or loss for the current period on the earlier date of the two following circumstances: a. When the Company is not able to withdraw the benefits from termination of employment or resignation persuasion unilaterally; b. When the Company recognizes costs and fees relevant to reforming the termination benefits payment. As for the termination benefits that cannot be fully paid within 12 months after the end of the annual report period, the Company shall choose an appropriate discount rate and record it into current profit and loss based on it. (4) Accounting treatment method of other long-term employee benefits Other long-term employee benefits are all employee benefits other than short-term benefits, post-employment benefits and termination benefits. Other long-term employee benefits provided by the Company to the employee that meet the conditions of the defined contribution plan shall be treated in accordance with the same principles of the defined contribution plan; If the conditions for defined benefits are met, net liabilities or net assets of other long-2023 Annual Report of Luzhou Laojiao Co., Ltd. 181 term employee benefits shall be recognized and measured in accordance with the relevant principles of the defined benefits plan. 5.34. Estimated liabilities (1) Recognition criteria of estimated liabilities If the contingent obligations meet the following conditions simultaneously, the Company shall recognize it as an estimated liability: This obligation is the Company's current obligation; the performance of this obligation is highly likely to result in an outflow of economic benefits from the Company; The amount of the obligation can be measured reliably. (2) Measurement method of estimated liabilities The Company's estimated liabilities are initially measured in terms of the best estimate of the expenditure of fulfilling the relevant current obligations. For determining the best estimate, the Company takes various factors into account such as the risk, uncertainty and time value of money related to contingencies. If the time value of money has a significant impact, the best estimate is determined by discounting the relevant future cash outflows. The best estimate is processed as follows: Where there is a continuous range (or range) of required expenditures and the probability of the occurrence of various results within the range is same, the best estimate is determined according to the mean of the middle value of the range, namely the mean value of the upper and lower limits. Where there is no continuous range (or range) of required expenditures, or where there is a continuous range but the possibility of various outcomes within the range is different, if the contingencies involve a single item, the best estimate is determined according to the most likely amount; If the contingencies involve more than one item, the best estimate is calculated and determined according to various possible results and relevant probabilities. Where all or part of the expenses required for the liquidation of the estimated liabilities of the Company are expected to be compensated by a third party, the amount of compensation shall be recognized as an asset when it is basically confirmed that it can be received, and the confirmed amount of compensation shall not exceed the book value of the estimated liabilities. 5.35. Share-based payment (1) The type of share-based payment Share-based payment is classified as equity-settled share-based payment and cash-settled share-based payment. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 182 (2) The method of determining the fair value of equity instruments For equity-settled share-based payment related with employees, the equity instrument is measured at fair value. The cash-settled share-based payment shall be measured according to the fair value of the liabilities calculated and determined on the basis of shares or other equity instruments undertaken by the Company. For the fair value of the stock option granted, the fair value is determined by using the stock option pricing model, and the following factors are taken into account: the current price of the underlying shares, the exercise price of the option, the risk-free interest rate within the period of the option, the option life, and the expected volatility of the stock price. (3) Recognition of the best estimate basis of instrument that can be exercised For the equity-settled share-based payment settled immediately after the grant, the fair value of the equity instrument shall be included in the relevant costs or expenses on the grant date, and the capital reserve shall be increased accordingly. Grant date means the date on which the share-payment agreement is approved. For the equity-settled share-based payment, in which the services during waiting period are completed and the performance conditions are met, in return for services of employees, on each balance sheet date during waiting period, the current obtained service shall be included in the relevant costs or expenses and the capital reserves in accordance with the fair value of the equity instruments on the grant date, based on best estimate of the number of vested equity instruments, and the subsequent changes in fair value shall not be recognized. On each balance sheet date during waiting period, the Company makes the best estimate based on the latest available employee number change and other subsequent information, and modifies the number of equity instruments for the estimated vesting. On the vesting date, the final expected number of vesting instruments is the same as the actual number of vesting instruments. (4) Relevant accounting treatment of implement, modification and termination of share-based payment plan For equity-settled share-based payment, no adjustments will be made to the recognized costs and total owners' equity after the vesting date. On the vesting date, the Company shall recognize the share capital and the equity premium according to the exercise situation, and carry forward the capital reserve recognized in the waiting period. No matter how it modifies the terms and conditions of the granted equity instruments or it cancels the granted equity instruments or its settlement, the equity instruments granted by the Company shall be recognized at fair value on the grant date and it measures obtained the corresponding services, unless it cannot be vested because it cannot meet the vesting conditions of equity instruments (except market conditions). 2023 Annual Report of Luzhou Laojiao Co., Ltd. 183 5.36. Other financial instruments such as preferred shares and perpetual bonds N/A 5.37. Revenue Accounting policies for recognition and measurement of revenue disclosed by type of business (1) Basic principles of revenue identification The Company recognizes revenue when it has fulfilled the performance obligations under the contract, that is, when the customers obtain the control of relevant goods or services, at the transaction price allocated to the performance obligations. Performance obligations refer to the Company's promise that it will transfer clearly distinguishable goods or services to customers under the contract. Obtaining control of related goods refers to that customers can control the use of the goods and obtain almost all the economic benefits from the goods. The Company will evaluate the contract on the contract start date, identify each individual performance obligation contained in the contract, and judge whether each individual performance obligation will be performed within a certain period of time or at a certain point in time. If one of the following conditions is met, and the performance obligation is performed within a certain period of time, the Company will identify revenue within a period of time according to the performance progress: a. The customers obtain and consume the economic profits while the Company performs the contract. b. The customers can control the products under construction during the performance of the Company; c. The products produced during the performance of the Company cannot be replaced, and the Company has the right to collect payment for the completed performance accumulated during the entire contract period. Otherwise, the Company will identify revenue when the customers obtain control rights of the relevant goods or services. For the performance obligations performed within a certain period of time, the Company will apply the input-output method to identify the appropriate performance progress based on the nature of the goods and services. The input-output method is to identify the performance progress based on the value of the goods that have been transferred to the customers to the customers. When the performance progress cannot be reasonably identified and the Company's incurred costs are expected to be compensated, the Company will identify the revenue according to the amount of the incurred costs until the performance progress can be reasonably identified. (2) The methods of revenue identification The Company primarily sells baijiu, which involve performance obligations fulfilled at a certain point in time. For the recognition of the revenue of domestic products, the following conditions must be met: The Company has delivered the products to the customer as per the contract, and the customer has accepted the goods; payment has been received or a receipt voucher has been obtained, and the 2023 Annual Report of Luzhou Laojiao Co., Ltd. 184 relevant economic benefits are likely to flow in; and control of the goods has transferred to the customer. The following requirements must be met to recognise the revenue of export products: The Company has declared the products according to the contract, obtained the bill of lading, received the payment or obtained the receipt voucher, and relevant economic benefits are likely to flow in, and control of the goods has transferred to the customer. The following requirements must be met to recognise the revenue of sales through third-party platforms or company-owned websites: The sales platform is responsible for delivering the goods to the customer, or the Company entrusts a logistics company to deliver the goods to the customer, and revenue is recognised upon receipt of the platform settlement statement or upon delivery of the goods. Different business models for the same type of business involve different revenue recognition and measurement methods N/A 5.38 Contract costs Contract costs comprise incremental costs incurred as the Company obtains a contract, and costs for contract performance. Incremental costs incurred as the Company obtains a contract refer to those costs which will not incur without entering into a contract (such as sales commission). If it is expected that the costs are recoverable, the Company will recognize the costs incurred to obtain a contract as one form of assets. In case that the term of asset amortization is shorter than one year or one normal operating cycle, the costs will be recognized as profit and loss of the current period after occurrence. If the costs incurred from contract performance fall outside the inventory or the scope of other enterprise accounting standards and satisfy all of the following conditions, the Company will recognize the costs for contract performance as assets: a) The costs are directly related to one existing contract or contract that is expected to be obtained; b) The costs enrich the Company's resources for future contract performance (including continual fulfillment); c) The costs are estimated to be recovered. Assets recognized from costs incurred to obtain a contract and costs for contract performance (hereinafter referred to as "assets related to contract costs") will be amortized based on the basis the same with the income from commodities or services related to the assets, and will be recognized as profit and loss of the current period. In case that the book value of assets related to contract costs is higher than the difference of the two items below, the Company will set aside provisions for assets impairment to deal with the extra part, and recognize that part as impairment losses: a) Estimated residual consideration to be obtained from transfer of commodities or services related to the assets; b) Estimated costs incurred from transfer of the relevant commodities or services. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 185 5.39. Government grants Government grants are monetary assets and non-monetary assets acquired free of charge by the Company from the government like fiscal subsidies. (1) Judgment basis and accounting treatment method of government grants related to assets Government grants related to assets are government grants that are acquired by the Company and used for forming long-term assets through purchasing and constructing or other ways. If the government documents do not clearly specify the target of the subsidy, the Company shall separately explain judgment basis of classifying the government grants into the government grants related to assets or income. Accounting method: it shall be recognized as deferred income allocated evenly over the useful lives (the period of depreciation and amortization) of the relevant assets from the month of commence of depreciation or amortization when the relevant assets reaching the intended use condition, and included in the current profit or loss. However, government grants measured at the nominal amount shall be directly included in current profit and loss. (2) Judgment basis and accounting treatment method of government grants related to income Government grants related to income are government grants other than government grants related to assets; Accounting method: a. If it is used to compensate the Company’s relevant expenses or losses in future periods, it should be recognized as deferred income and included into the current profit and loss or written off of the related costs when the relevant expenses, losses are recognized. b. If it is used to compensate the Company’s relevant expenses or losses incurred, it is directly included into the current profit and loss on acquisition or written off of the related costs. c. Recognition time-point of government grants Government grants are recognized when the Company can meet the attached conditions for the government grants and the Company can receive the grants. d. Measurement of government grants If a government grant is a monetary asset, it shall be measured in the light of the received or receivable amount. If a government grant is a non-monetary asset, it shall be measured at its fair value; and if its fair value cannot be obtained in a reliable way, it shall be measured at a nominal amount. 5.40. Deferred tax assets or deferred tax liabilities The Company adopts the balance sheet liability method to account for income tax. The Company recognizes deferred tax assets when the following conditions are met simultaneously: 2023 Annual Report of Luzhou Laojiao Co., Ltd. 186 i. Temporary differences are highly likely to be reversed in the foreseeable future; ii. Taxable income that may be used to offset the deductible temporary difference is likely to be obtained in the future and is limited to the amount of taxable income that is likely to be obtained. On each balance sheet date, the current income tax liabilities (or assets) incurred in the current period or prior periods shall be measured by the Company in light of the expected payable (refundable) amount of income taxes according to the tax law; The deferred income tax assets and deferred income tax liabilities shall be measured at the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled. The Company shall review the carrying amount of deferred income tax assets on each balance sheet date. The current income tax and deferred income tax shall be recorded into the current profit and loss as income tax expense or income, except for the income tax generated from the enterprise merger, transactions or events directly recognized in the owner's equity. Basis for deferred income tax assets and deferred income tax liabilities presented as a net amount after offset: When the following conditions are simultaneously met, deferred income tax assets and deferred income tax liabilities are presented as a net amount after offset: i. The enterprise has the legal right to settle the current income tax assets and current income tax liabilities on a net basis; ii. Deferred income tax assets and deferred income tax liabilities were related to the income tax levied by the same tax administration department on the same taxpayer or different taxpayers, but during the period when each significant deferred income tax assets and liabilities would be reversed in the future, the involved taxpayer intended to settle the current income tax assets and liabilities on a net basis or to acquire assets and settle liabilities at the same time. 5.41. Lease (1) Accounting treatment with the Company as lessee ①Judgment criteria and accounting treatment for short-term leases and leases of low-value assets as a lessee for simplified treatment On the beginning date of the lease term, the Company will recognise the lease with a lease term not exceeding 12 months and exclude the purchase option as a short-term lease. Leases with a value below CNY 40,000 when a single leased asset is a brand-new asset are identified as low-value asset leases. If the Company sublets or expects to sublet the leased assets, the original lease shall not be deemed as a low-value asset lease. The Company records the payments of short-term and low-value asset leases incurred during each period of the lease term in the relevant asset costs or the profit or loss for the current period by the straight-line method. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 187 The Company will recognise right-of-use assets and lease liabilities on the inception date of the lease term, excluding the above short-term and low-value asset leases. ②Right-of-use assets Right-of-use assets are initially measured at costs, including: A. The initial measurement amount of lease liabilities; B. If there is a lease incentive for the lease payment paid on or before the start date of the lease term, the relevant amount of the lease incentive already enjoyed shall be deducted; C. Initial direct expenses incurred by the Company; D. The expected cost to be borne by the Company in order to dismantle and remove the assets leased, restore original state of the place where the assets leased are in, or restore the assets leased to the state stipulated in the lease terms. ③Lease liabilities The Company initially measures the lease obligation at the present value of the lease payments outstanding at the commencement date of the lease term. When calculating the present value of lease payments, the Company uses the interest rate implicit in lease as the rate of discount. If the interest rate implicit in lease cannot be determined, the Company’s incremental lending rate is used as the rate of discount. After the commencement of the lease term, the Company uses the cost model for subsequent measurement of right-of-use assets, depreciates right-of-use assets on a straight-line basis, calculates the interest expense on the lease liability within the lease term and includes it in the current profit or loss, unless such interest charge is stipulated to be included in the underlying asset cost. Variable lease payments that are not included in the measurement of the lease obligation should be included in the current profit or loss when they are actually incurred, unless such payments are stipulated to be included in the underlying asset cost. After the commencement of the lease term, the Company remeasures the lease liability and adjusts the corresponding right-of-use asset, and if the carrying value of the right-of-use asset has been reduced to zero but the lease liability is subject to further reduction, the difference is recorded in current profit or loss: (1) When there is a change in the valuation of the purchase option, renewal option or termination option, or actual exercise, the Company remeasures the lease liabilities at the present value of the lease payments after the change and the revised discount rate; (2) When there is a change in the actual fixed payment, the estimated payable of the residual value of the guarantee, the index or rate used to confirm the lease payment, the Company calculated the present value based on the changed lease payment amount and the original discount rate to remeasure the lease liabilities. However, where changes in lease payments arise from changes in floating interest rates, a revised discount rate was used to calculate the present value. (2) Accounting treatment with the Company as lessor ① Lease classification 2023 Annual Report of Luzhou Laojiao Co., Ltd. 188 The Company classifies leases into finance leases and operating leases at the inception of leases. A finance lease refers to a lease where almost all the risks and rewards, related to the ownership of the leased asset, are substantially transferred, regardless of whether the ownership is eventually transferred or not. All leases other than finance leases are classified as operating leases. ② Operating leases The Company recognizes the lease payments receivable of the operating lease as rental earnings in each period within the lease term on a straight-line basis or according to other systematic and reasonable methods. The initial direct costs related to the operating lease are capitalized, amortized within the lease term on the same basis as the recognition of rental earnings, and included in profit or loss for the current period. The received variable lease payments related to the operating lease that are not included in the lease payments receivable are included in profit or loss for the current period when they are actually incurred. ③ Finance leases On the commencement date of the lease term, the Company recognizes the finance lease receivables for the finance lease and derecognizes the leased asset of the finance lease. In the initial measurement of finance lease receivables, the sum of the unsecured residual value and the present value of the lease payments receivable not yet received on the commencement date of the lease term discounted at the interest rate implicit in lease is the entry value of the finance lease receivables. The Company calculates and recognizes the interest income in each period within the lease term at a fixed interest rate implicit in the lease. The received variable lease payments that are not included in the measurement of the net investment in the lease are included in profit or loss for the current period when they are actually incurred. 5.42. Income tax expenses The Company adopts the balance sheet liability method to account for income tax. The Company recognizes deferred tax assets when the following conditions are met simultaneously: 1. Temporary differences are highly likely to be reversed in the foreseeable future; 2. Taxable income that may be used to offset the deductible temporary difference is likely to be obtained in the future and is limited to the amount of taxable income that is likely to be obtained. On each balance sheet date, the current income tax liabilities (or assets) incurred in the current period or prior periods shall be measured by the Company in light of the expected payable (refundable) amount of income taxes according to the tax law; The deferred income tax assets and deferred income tax liabilities shall be measured at the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled. The Company shall review the carrying amount of deferred income tax assets on each balance sheet 2023 Annual Report of Luzhou Laojiao Co., Ltd. 189 date. The current income tax and deferred income tax shall be recorded into the current profit and loss as income tax expense or income, except for the income tax generated from the enterprise merger, transactions or events directly recognized in the owner's equity. 5.43 Other significant accounting policies and accounting estimates N/A 5.44 Changes in significant accounting policies and accounting estimates 5.44.1. Changes in significant accounting policies Applicable □ N/A Unit：CNY Content and reason of changes Name of statement item materially affected Amount affected On 30 November 2022, the Ministry of Finance issued the Interpretations of Accounting Standards for Business Enterprises No.16 (C.K. [2022] No. 31), providing that the requirement of "accounting processing under initial recognition and exemption is not applicable to deferred income taxes related to assets and liabilities incurred from a single transaction" will enter into force as of 1 January 2023. Deferred income tax assets Deferred income tax liabilities For this new requirement of "accounting processing under initial recognition and exemption is not applicable to deferred income taxes related to assets and liabilities incurred from a single transaction", Interpretation No.16 stipulates that single transactions that are not business combinations, that affect neither accounting profit nor taxable income (or deductible losses) at the time the transaction occurs, and where the initial recognition of assets and liabilities results in taxable temporary differences and deductible temporary differences of equal amounts shall not be governed by the provisions for exemption from initial recognition of deferred tax liabilities and deferred tax assets in Accounting Standards for Business Enterprises No.18 - Income Taxes. At the time of the transaction, the enterprise shall recognise the corresponding deferred income tax liabilities and deferred income tax assets for taxable temporary differences and deductible temporary differences arising from the initial recognition of assets and liabilities in such transaction. The Company has adopted the provisions of Interpretation No.16, "Accounting processing under initial recognition and exemption is not applicable to deferred income taxes related to assets and liabilities incurred from a single transaction" as of 1 January 2023. The implementation of this interpretation has not had a significant impact on the Company's financial position and operating results. Apart from the aforementioned changes, there have been no other significant accounting policy changes during the Reporting Period. 5.44.2. Changes in significant accounting estimates □Applicable N/A 2023 Annual Report of Luzhou Laojiao Co., Ltd. 190 5.44.3. Adjustments to Financial Statement Items at the Beginning of the Year of the First Implementation of the New Accounting Standards Implemented since 2023 □Applicable N/A 6. Taxes 6.1. Major tax types and rates Tax type Tax base Tax rate Value-added tax Taxable sales income 13%,9%,6% Urban maintenance and construction tax Taxable turnover tax 7% Corporate income tax Taxable income 25%,15%,16.5%,9%,0% Consumption tax (based on price) Baijiu tax price or ex-factory price 20% Consumption tax (based on quantity) Quantity of baijiu CNY 1.00/kg Education surcharge Taxable turnover tax 3% Local education surcharge Taxable turnover tax 2% Property tax Original value of the property*70%; house rent 1.2%,12% Land use tax Land area CNY 5-18.00/m2 Others According to national regulation Tax payment subject using different corporate income tax rates, the corporate income tax rates are as follows: Company name Corporate income tax rate Luzhou Pinchuang Technology Co., Ltd.15% Luzhou Laojiao International Development (Hong Kong) Co., Ltd. 16.5% Luzhou Laojiao Commercial Development (North America) Co., Ltd. 21%-40% Mingjiang Co., Ltd.21%-40% Luzhou Red Sorghum Modern Agricultural Development Co., Ltd. Exempted from corporate income tax Guangxi Luzhou Laojiao Imported Liquor Industry Co., Ltd. 9% Luzhou Laojiao International Trade (Hainan) Co., Ltd.15% 6.2. Tax preferences (1) According to Announcement of the Ministry of Finance, State Taxation Administration and National Development and Reform Commission on Continuing the Corporate Income Tax Policies Concerning the Western Development Strategy (No.23 in 2020, Ministry of Finance), from 1 January 2021 to 31 December 2030, companies are located in the western region whose primary business is listed in the Catalogue of Encouraged Industries in the Western Region, and the primary business income accounting for over 60% of the total enterprise income. These companies shall be subject to the corporate income tax at a reduced rate of 15%. The Company's holding subsidiary, Luzhou Pinchuang Technology Co., Ltd., whose primary business income meet the requirements of scope 2023 Annual Report of Luzhou Laojiao Co., Ltd. 191 and standard of the Catalogue of Encouraged Industries in the Western Region, is paid at the rate of 15% for corporate income tax. (2) According to Article 27 of the Corporate Income Tax Law of the People's Republic of China and Article 86, Item 1 of the Implementation Regulations of the Corporate Income Tax Law, companies are exempted from enterprise income tax when they engage in agricultural, forestry, animal husbandry and fishery industries. The holding subsidiary of the Company, Luzhou Red Sorghum Modern Agricultural Development Co., Ltd., is engaged in the cultivation and sale of organic sorghum and enjoys the reduction of corporate income tax preferences. (3) According to the Article 15, Item 1 of the Provisional Regulations on Value-Added Tax, agricultural producers sell self-produced agricultural products exempt from value-added tax. The holding subsidiary of the Company, Luzhou Red Sorghum Modern Agricultural Development Co., Ltd., is engaged in the cultivation and sale of organic sorghum and enjoys the value-added tax exemption. (4) According to the Article 3, Item 7 of the Notice on Revise of Interim Measures of Accelerating the Development in Headquarters Economy of China-Malaysia Qinzhou Industrial Park, till 31 December 2025, the enterprises in the Qinzhou Industrial Park that enjoy 15% of tax rate of Western Development with the half reduction in the tax period of preferential policies shall enjoy the local share of corporate income tax exemption (namely 40% of corporate income tax was exempted, and the proportion adjusted by the state shall be executed according to new proportion); Guangxi Luzhou Laojiao Imported Liquor Industry Co., Ltd., the wholly-owned subsidiary of the Company, pays corporate income tax at the rate of 9% according to the tax preference policies. (5) According to Announcement on Preferential Corporate Income Tax Policies in Hainan Free Trade Port (Cai Shui [2020] No.31), the Company's wholly-owned subsidiary, Luzhou Laojiao International Trade (Hainan) Co., Ltd., whose primary business income meet the requirements of scope and standard of the Catalogue of Encouraged Industries in Hainan Free Trade Port, is paid at the rate of 15% for corporate income tax. 7. Notes to the main items of the consolidated financial statements (All currency unit is CNY, except other statements) 7.1. Cash and cash equivalents Unit：CNY Item Closing Balance Opening Balance Cash 24,059.2428,711.93 Bank deposit 25,916,630,894.8317,729,643,050.90 Other cash and cash equivalents 35,370,137.2127,856,448.42 Total 25,952,025,091.2817,757,528,211.25 Including: Total deposit outbound 93,987,202.6868,948,954.39 Other statements: Note 1: The deposit outbound is the balance of cash and cash equivalents of the foreign holding 2023 Annual Report of Luzhou Laojiao Co., Ltd. 192 subsidiary of the Company. Note 2: The closing balance of other monetary funds mainly consists of the remaining funds in securities accounts of the Company in the amount of CNY 946,249.11, bank guarantee deposits of CNY 10,000,000.00 for the subsidiary, Luzhou Laojiao Sales Co., Ltd., and the closing balance of funds in self-owned accounts on third-party platforms for subsidiaries such as Luzhou Laojiao Electronic Commerce Co., Ltd. and Luzhou Laojiao Nostalgic Liquor Marketing Co., Ltd., in the amount of CNY 24,423,888.10. Note 3: There is no special benefit arrangement such as establishing a fund co-management account with related parties in the current period. Liquor and wine manufacturing companies shall disclose in detail whether there are special interest arrangements such as establishing co-management accounts with related parties. □Applicable N/A 7.2. Held-for-trading financial assets Unit：CNY Item Closing Balance Opening Balance Financial assets measured at fair value with their changes included into current profits/losses 1,426,992,098.831,073,466,780.37 Including: Wealth management products 1,426,992,098.831,073,466,780.37 Including: Total 1,426,992,098.831,073,466,780.37 Other statements: Note 1: The closing balance is the Company’s wealth management products of the collective asset management plan purchased from securities-type companies which are measured at fair value based on the amount calculated on the basis of the net value of relevant asset units published on the official website of the asset manager. 7.3. Accounts receivable 7.3.1. Disclosure by aging Unit：CNY Aging Closing book balance Opening book balance Within 1 year (including 1 year) 18,489,106.2716,002,381.01 1-2 years 263,509.80 2-3 years 263,509.80 Total 18,752,616.076,265,890.81 Note: 1 The closing book balance increased by CNY 12,486,725.26, up 199.28% compared with the opening book balance, which was mainly due to the impact of credit sales in overseas baijiu sales. 2 There are no accounts receivable with significant single amount exceeding three years in age at the end of the period. 7.3.2. Disclosure by withdrawal methods for bad debts Unit：CNY 2023 Annual Report of Luzhou Laojiao Co., Ltd. 193 Type Closing Balance Opening Balance Book balance Provision for bad debt Book value Book balance Provision for bad debt Book value Amount Proportion Amount Proportion Amount Proportion Amount Proportion Accounts receivable tested for impairment individually 372,217.14 1.98% 372,217.14 100.00 % Including: Accounts receivable that are not individually material but for which a separate provision for bad debts has been made 372,217.14 1.98% 372,217.14 100.00 % Accounts receivable tested for impairment by the portfolio 18,380,398.93 98.02% 919,019.95 5.00% 17,461,378.98 6,265,8 90.81 100.00 % 326,470.03 5.21% 5,939,4 20.78 Including: Accounts receivable tested for impairment on the portfolio with charact18,380,398.93 98.02% 919,019.95 5.00% 17,461,378.98 6,265,8 90.81 100.00 % 326,470.03 5.21% 5,939,4 20.78 2023 Annual Report of Luzhou Laojiao Co., Ltd. 194 eristics of credit risk Total 18,752,616.07 100.00 % 1,291,2 37.09 6.89% 17,461,378.98 6,265,8 90.81 100.00 % 326,470.03 5.21% 5,939,4 20.78 Accounts receivable tested for impairment individually: CNY 372,217.14 Unit：CNY Name Opening Balance Closing Balance Book balance Provision for bad debt Book balance Provision for bad debt Proportion Reason Beijing Secoo Trading Limited 372,217.14372,217.14100.00% The amount is not expected to be recovered Total 372,217.14372,217.14 Accounts receivable tested for impairment by the portfolio: CNY 919,019.95 Unit：CNY Name Closing Balance Book balance Provision for bad debt Proportion Risk portfolio 18,380,398.93919,019.955.00% Including: within 1 year 18,380,398.93919,019.955.00% Other portfolio Total 18,380,398.93919,019.95 Notes to the determination basis for the portfolio: Accounts receivable of the same age have similar credit risk characteristics. If adopting the general mode of expected credit loss to withdraw provision for bad debt of accounts receivable □Applicable N/A 7.3.3. Provision and recovery for bad and doubtful debt in the current period Allowance of provision for bad debt: Unit：CNY Type Opening Balance Changes in current period Closing Balance Allowance Reversal or recovery Write-off Other Provision allowance by individual item 372,217.14 372,217.14 Provision allowance by risk portfolio 326,470.03592,549.92 919,019.95 Total 326,470.03964,767.06 1,291,237.091 Note: There is no significant provision in accounts receivable reversed or recovered in the reporting period. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 195 7.3.4. Top five entities with the largest balances of accounts receivable and contract assets Unit：CNY Company name Closing balance of accounts receivable Closing balance of contract assets Closing balance of accounts receivable and contract assets Proportion to total closing balance of accounts receivable and contract assets Closing balance of provision for bad debt provision of accounts receivable and impairment allowance of contract assets China Duty Free International LTD 16,952,591.49 16,952,591.4990.40% 847,629.57 BAIWANWINES INC. 795,108.57 795,108.574.24% 39,755.43 Beijing Secoo Trading Limited 372,217.14 372,217.141.98% 372,217.14 TAIFUNG CASTELMOR LIMITED 353,820.01 353,820.011.89% 17,691.00 Park Street Imports, LLC 197,941.00 197,941.001.06% 9,897.05 Total 18,671,678.21 18,671,678.2199.57% 1,287,190.19 7.4. Accounts receivable financing 7.4.1. Accounts receivable financing listed by category Unit：CNY Item Closing Balance Opening Balance Bank acceptance bill 5,938,171,007.934,583,352,503.37 Total 5,938,171,007.934,583,352,503.37 7.4.2. Disclosure by withdrawal methods for bad debts Unit：CNY Type Closing Balance Opening Balance Book balance Provision for bad debt Book value Book balance Provision for bad debt Book value Amount Proportion Amount Proportion Amount Proportion Amount Proportion Including: Provision allowance by portfolio 5,938,1 71,007.93 100.00 % 5,938,1 71,007.931 4,583,3 52,503.37 100.00 % 4,583,3 52,503.37 Including: Bank accepta5,938,1 71,007.100.00 % 5,938,1 71,007.4,583,3 52,503.100.00 % 4,583,3 52,503.2023 Annual Report of Luzhou Laojiao Co., Ltd. 196 nce bill 93933737 Total 5,938,1 71,007.93 100.00 % 5,938,1 71,007.93 4,583,3 52,503.37 100.00 % 4,583,3 52,503.37 Note: 1. The notes receivable under accounts receivable financing comprise bank acceptance, and the Company believes that the bank acceptance it holds does not pose significant credit risks. It does not anticipate significant losses due to defaults by banks or other drawers, therefore, no provision for credit impairment losses has been recognised. Provision allowance by portfolio: CNY 0 Unit：CNY Name Closing Balance Book balance Provision for bad debt Proportion Risk portfolio 5,938,171,007.93 Other portfolio Total 5,938,171,007.93 Notes to the determination basis for the portfolio: As bank acceptance has low credit risks, no bad debt provision is made. 7.4.3. Accounts receivable financing that have been endorsed to other parties or discounted by the Company but have not expired at the end of the period Unit：CNY Item Derecognition at period-end Not derecognition at period-end Bank acceptance bill 7,153,627,657.961 Total 7,153,627,657.96 Note: 1. Due to the fact that the acceptor of bank acceptance is a commercial bank, which is of high credit level, the likelihood of default at the maturity of bank acceptance is low. Therefore, the Company derecognises bank acceptance that has been endorsed or discounted. 7.4.4. Changes in accounts receivable financing in the reporting period and fair value Item Opening Balance Increase in current period Decrease in current period Closing Balance Notes receivable 4,583,352,503.3724,829,288,029.7523,474,469,525.195,938,171,007.93 Total 4,583,352,503.3724,829,288,029.7523,474,469,525.195,938,171,007.93 Note: Accounts receivable financing represents bank acceptance, with a short remaining maturity. The book value closely aligns with the fair value; hence, the book value is used as its fair value. 7.4.5. Other statements ①There was no accounts receivable financing pledge at the end of the period. ②There are no accounts receivable financing actually written off during the reporting period. ③There are no accounts receivable financing transferred to accounts receivable due to the non-performance of the agreements by the issuers. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 197 7.5. Other receivables Unit：CNY Item Closing Balance Opening Balance Other receivables 22,716,893.12123,396,533.98 Total 22,716,893.1223,396,533.98 Note: 1. Other receivables above-mentioned refer to other receivables after deducted interest receivable and dividend receivable. 7.5.1. Other receivables 7.5.1.1. Other receivables disclosed by nature Unit：CNY Nature Closing book balance Opening book balance Intercourse funds 17,537,144.3718,516,591.35 Petty cash 214,206.23326,785.39 Saving deposits involving contract disputes 127,564,873.50129,049,496.98 Total 145,316,224.10147,892,873.72 Note 1: The saving deposits involving contract disputes are three deposits amounting to CNY 500,000,000.00 with Changsha Yingxin Sub-branch of Agricultural Bank of China and Nanyang Zhongzhou Sub-branch of Industrial and Commercial Bank of China disclosed by the Company in the 2014 Annual Report. The deposits have lost the nature of monetary fund due to their involvement in contract disputes and have thus been transferred into “other receivables”. The closing balance of this account as at the date of the statement was CNY 127,564,873.50. 7.5.1.2. Disclosure by aging Unit：CNY Aging Closing book balance Opening book balance Within 1 year (including 1 year) 15,696,066.0711,192,350.26 1-2 years 38,347.61636,514.08 2-3 years 293,480.003,542,500.00 Over 3 years 129,288,330.421132,521,509.38 3-4 years 11,500.00122,800.00 4-5 years 22,800.001,168,807.90 Over 5 years 129,254,030.42131,229,901.48 Total 145,316,224.10147,892,873.72 Note: 1 Other receivables with significant single amount exceeding three years in age relates to savings deposit of CNY 127,564,873.50, which are yet to be recovered due to contractual disputes. 7.5.1.3. Disclosure by withdrawal methods for bad debts Applicable □ N/A Unit：CNY Type Closing balance Opening Balance Book balance Provision for bad debt Book value Book balance Provision for bad debt Book value 2023 Annual Report of Luzhou Laojiao Co., Ltd. 198 Amount Proportion Amount Proportion Amount Proportion Amount Proportion Other receivables tested for impairment individually 127,614,873.50 87.82% 120,050,000.00 94.07% 7,564,8 73.50 129,049,496.98 87.26% 120,000,000.00 92.99% 9,049,4 96.98 Including: Other receivables that are individually material and for which a separate provision for bad debts has been made 127,564,873.50 87.78% 120,000,000.00 94.07% 7,564,8 73.50 129,049,496.98 87.26% 120,000,000.00 92.99% 9,049,4 96.98 Other receivables that are not individually material but for which a separate provision for bad debts has been made 50,000.00 0.03% 50,000.00 100.00 % Other receivables tested for impairm17,701,350.60 12.18% 2,549,3 30.98 14.40% 15,152,019.62 18,843,376.74 12.74% 4,496,3 39.74 23.86% 14,347,037.00 2023 Annual Report of Luzhou Laojiao Co., Ltd. 199 ent by the portfolio Including: Other receivables tested for impairment on the portfolio with characteristics of credit risk 17,701,350.60 12.18% 2,549,3 30.98 14.40% 15,152,019.62 18,843,376.74 12.74% 4,496,3 39.74 23.86% 14,347,037.00 Total 145,316,224.10 100.00 % 122,599,330.98 84.37% 22,716,893.12 147,892,873.72 100.00 % 124,496,339.74 84.18% 23,396,533.98 Other receivables tested for impairment individually: CNY 120,050,000.00 Unit：CNY Name Opening Balance Closing Balance Book balance Provision for bad debt Book balance Provision for bad debt Proportion Reason Saving deposits involving contract disputes 129,049,496.9 8 120,000,000.0 0 127,564,873.5 0 120,000,000.0 0 94.07% Provision based on legal opinion Beijing Secoo Trading Limited 50,000.0050,000.00100.00% The amount is not expected to be recovered Total 129,049,496.9 8 120,000,000.0 0 127,614,873.5 0 120,050,000.0 0 Other receivables tested for impairment by the portfolio: CNY 2,549,330.98 Unit：CNY Name Closing Balance Book balance Provision for bad debt Proportion Risk portfolio 17,701,350.602,549,330.9814.40% Including: within 1 year 15,696,066.07784,803.305.00% 1-2 years 38,347.613,834.7610.00% 2-3 years 243,480.0048,696.0020.00% 3-4 years 11,500.004,600.0040.00% 4-5 years 22,800.0018,240.0080.00% Over 5 years 1,689,156.921,689,156.92100.00% Other portfolio Total 17,701,350.602,549,330.98 Notes to the determination basis for the portfolio: Accounts receivable of the same age have similar credit risk characteristics. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 200 Allowance of provision for bad debt adopting the general mode of expected credit loss: Unit：CNY Provision for bad debt First stage Second stage Third stage Total Expected credit loss of the next 12 months Expected loss in the duration (credit impairment not occurred) Expected loss in the duration (credit impairment occurred) Balance of 1 January 2023 4,496,339.74 120,000,000.00124,496,339.74 Balance of 1 January 2023 in the current period ——Transferred to the third stage -5,000.00 5,000.00 Allowance of the current period -1,942,008.76 45,000.00 -1,897,008.76 Balance of 31 December 2023 2,549,330.98 120,050,000.00122,599,330.98 The basis for the division of each stage and the withdrawal proportion of bad debt provision The basis for division is that other receivables with single bad debt provision represent credit impairment losses incurred since initial recognition (Stage 3), while the remaining portion is categorised based on aging portfolio. Withdrawal proportions of bad debt provision are14.40% for Stage 1 and 94.07% for Stage 3, totaling 84.37%. Changes of book balance with significant amount changed of loss provision in the current period □Applicable N/A 7.5.1.4. Provision and recovery for bad and doubtful debt in the current period Allowance of provision for bad debt: Unit：CNY Type Opening Balance Changes in current period Closing Balance Allowance Reversal or recovery Write-off or verification Other Other receivables tested for impairment individually 120,000,000.0 0 45,000.00 5,000.00 120,050,000.0 0 Other receivables tested for impairment by the portfolio 4,496,339.74 -1,942,008.76 -5,000.002,549,330.98 Total 124,496,339.7 4 -1,897,008.76 122,599,330.9 8 7.5.1.5. Top five entities with the largest balances of the other receivables Unit：CNY Company Name Nature Closing Balance Aging Proportion in total receivables Provisioning amount at period end 2023 Annual Report of Luzhou Laojiao Co., Ltd. 201 Agricultural Bank of China Changsha Yingxin Sub-branch, Industrial and Commercial Bank of China Nanyang Zhongzhou Sub-branch and another bank Saving deposits involving contract disputes 127,564,873.50 Over 5 years 87.78% 120,000,000.00 Beijing Jingdong Century Trading Co., Ltd. Security deposit 1,000,000.001-5 years 0.69% 345,000.00 Luzhou Aopulan Beer Co., Ltd. Security deposit 300,000.00 Over 5 years 0.21% 300,000.00 Chen Weirong Petty cash 214,206.23 Within 1 year 0.15% 10,710.31 Luzhou Qianheng Labor Service Co., Ltd. Intercourse funds 74,150.56 Within 1 year 0.05% 3,707.53 Total 129,153,230.29 88.88% 120,659,417.84 7.6. Prepayment 7.6.1. Aging analysis Unit：CNY Aging Closing Balance Opening Balance Amount Proportion Amount Proportion Within 1 year 196,801,356.0797.28% 108,917,843.7095.33% 1-2 years 1,685,909.930.83% 3,541,174.813.10% 2-3 years 2,987,977.501.48% 1,633,422.201.43% Over 3 years 833,943.200.41% 165,065.550.14% Total 202,309,186.701 114,257,506.26 Note: 1. At the end of the period, there was an increase of CNY 88,051,680.44 compared to the beginning of the period, representing a growth of 77.06%, which was mainly due to intensified promotional activities for company products, leading to a corresponding increase in prepaid amounts to suppliers. Reasons for significant prepayments whose aging is longer than 1 year without timely settlement: There is no significant prepayment whose aging is longer than 1 year. 7.6.2. Top five entities with the largest balances of prepayment Company Name Closing Balance Proportion to the total closing balance of prepayment Shanghai Merlot Advertising Co., Ltd.78,949,725.75 39.02% Sports Equipment Center of General Administration of Sport of China 26,775,956.27 13.24% China Railway Chengdu Group Co., Ltd. 13,108,333.34 6.48% Luzhou Western Gas Co., Ltd.12,183,456.63 6.02% Luzhou Power Supply Company of State Grid Sichuan Electric Power Company 8,176,600.90 4.04% Total 139,194,072.89 68.80% 2023 Annual Report of Luzhou Laojiao Co., Ltd. 202 7.7. Inventories Whether the Company needs to comply with the disclosure requirements of real estate industry No 7.7.1. Categories of Inventories Unit：CNY Category Closing Balance Opening Balance Book Balance Provision for stock obsolescence or impairment provision of contract performance costs Book Value Book Balance Provision for stock obsolescence or impairment provision of contract performance costs Book Value Raw materials 112,835,009.7 7 112,835,009.7 7 128,252,608.9 5 128,252,608.9 5 Goods in progress 9,169,963,972.73 9,169,963,972.73 7,305,642,685.28 7,305,642,685.28 Finished goods 2,316,583,144.62 2,316,583,144.62 2,382,939,263.97 2,382,939,263.97 Goods in transit 22,661,820.34 22,661,820.3423,907,816.65 23,907,816.65 Total 11,622,043,94 7.46 11,622,043,94 7.46 9,840,742,374.85 9,840,742,374.85 The Company shall comply with the disclosure requirements for companies engaging in food & liquor and wine production of the Guidelines No.3 of the Shenzhen Stock Exchange on Sel f-regulation of Listed Companies—Industry-specific Information Disclosure. 7.7.2. Notes to the closing balance of inventories including capitalized borrowing expense There was no capitalized borrowing expense in the closing balance of inventories. 7.8. Other current assets Unit：CNY Item Closing Balance Opening Balance Value-added tax 164,220,376.30139,165,221.10 Corporate income tax 8,733,293.339,447,204.77 Other taxes 3,731,062.344,423,521.07 Total 176,684,731.97153,035,946.94 Other statements: The value-added tax expected to be deducted in the next fiscal year and corporate income tax and other taxes are disclosed in other current assets. 7.9. Other equity instrument investment Unit：CNY Item Closing Balance Opening Balance Gains recorded in other Losses recorded in other Accumulative gains recorded Accumulative losses recorded Dividend income recognizeReason for assigning 2023 Annual Report of Luzhou Laojiao Co., Ltd. 203 comprehensive income in the current period comprehensive income in the current period in other comprehensive income in the current period in other comprehensive income in the current period d in current year to measure in fair value of which changes included other comprehensive income Financial assets assigned to measure in fair value of which changes included other comprehensive income: Including: China Tourism Group Duty Free Corporation Limited 84,854,48 9.681 807,139,1 20.07 331,197,9 44.87 66,344,20 5.60 977,280.2 3 According to the mode of managing assets by management layer Guotai Junan Securities Co., Ltd. 175,241,7 15.34 160,049,3 89.21 15,192,32 6.13 162,522,5 58.58 6,241,808.41 According to the mode of managing assets by management layer Luzhou Bank Co., Ltd. 96,733,83 7.69 120,158,3 92.72 23,424,55 5.03 45,613,83 7.69 3,471,360.00 According to the mode of managing assets by management layer Guotai Junan Investment Management Co., Ltd. 22,611,83 4.24 22,611,83 4.24 According to the mode of managing assets by management layer North Chemical Industries Co., Ltd. 12,805,51 5.44 14,931,95 0.24 2,126,434.80 11,775,51 5.44 78,177.75 According to the mode of managing assets by 2023 Annual Report of Luzhou Laojiao Co., Ltd. 204 management layer Guojiu Big Data Co., Ltd. 8,799,784.78 10,000,00 0.00 1,200,215.22 1,200,215.22 According to the mode of managing assets by management layer Sichuan China Baijiu Golden Triangle Brand Operation Development Co., Ltd. and other equity instrument investments 1,846,291.63 1,846,291.63 5,752,926.37 500,000.0 0 According to the mode of managing assets by management layer Total 402,893,4 68.80 1,136,736,978.11 15,192,32 6.13 357,949,1 49.92 219,911,9 11.71 73,297,34 7.19 11,268,62 6.39 Note: 1. The closing balance decreased by CNY 733,843,509.31, down 64.56% compared with the opening balance, which was mainly due to the disposal of partial investment in China Tourism Group Duty Free Corporation Limited in the current period. Categories of non-trading equity instrument investment in the current period: Unit：CNY Item Recognized dividends income Accumulative gains Accumulative losses Amount of other comprehensive income transferred to retained earnings Reason for assigning to measure at fair value and changes recorded into other comprehensive income Reason of other comprehensive income transferred to retained earnings China Tourism Group Duty Free Corporation Limited 977,280.23 66,344,205.6016,215,653.21 According to the mode of managing assets by management layer Partial disposal Guotai Junan Securities Co., Ltd. 6,241,808.41 162,522,558.5 8 According to the mode of managing assets by management layer Luzhou Bank Co., Ltd. 3,471,360.0045,613,837.69 According to the mode of managing assets by 2023 Annual Report of Luzhou Laojiao Co., Ltd. 205 management layer Guotai Junan Investment Management Co., Ltd. According to the mode of managing assets by management layer North Chemical Industries Co., Ltd. 78,177.7511,775,515.44 According to the mode of managing assets by management layer Guojiu Big Data Co., Ltd. 1,200,215.22 According to the mode of managing assets by management layer Sichuan China Baijiu Golden Triangle Brand Operation Development Co., Ltd. and other equity instrument investments 500,000.00 5,752,926.37 According to the mode of managing assets by management layer 7.10. Long-term equity investments Unit：CNY Investee Opening Balance (book value) Opening Balance of provision for impairment Changes in current period Closing Balance (book value) Closing Balance of provision for impairment Increase Decrease Gain or loss recognized under equity method Adjustments of other comprehensive income Other changes in equity Cash divided or profit declared Provision for impairment Other 1. Joint Ventures 2. Associate Huaxi Securities Co., Ltd. 2,497,540,5 92.05 2,567,098.8 0 44,16 7,627.40 2,107,087.1 7 8,184,934.3 2 2,535,630,3 72.30 2,567,098.8 0 Luzhou Laojiao Postdoctoral 40,18 5,894.77 - 1,846,843.2 6 38,33 9,051.51 2023 Annual Report of Luzhou Laojiao Co., Ltd. 206 Workstation Technology Innovation Co., Ltd. Sichuan Development Liquor Investment Co., Ltd. 5,889,654.2 4 8,326.61 5,897,980.8 5 Sichuan Tongniang Baijiu Industry Technology Research Institute Co., Ltd. Note 8,086,855.9 1 253,5 36.99 8,340,392.9 0 CTS Luzhou Laojiao Cultural Tourism Development Co., Ltd. 115,7 97,55 6.20 4,021,653.7 3 227,8 26.01 120,0 47,03 5.94 Subtotal 2,667,500,5 53.17 2,567,098.8 0 46,60 4,301.47 2,107,087.1 7 227,8 26.01 8,184,934.3 2 2,708,254,8 33.50 2,567,098.8 0 Total 2,667,500,5 53.17 2,567,098.8 0 46,60 4,301.47 2,107,087.1 7 227,8 26.01 8,184,934.3 2 2,708,254,8 33.50 2,567,098.8 0 The recoverable amount is determined based on the net amount of the fair value minus disposal costs □Applicable N/A The recoverable amount is determined by the present value of the forecasted future cash flow □Applicable N/A 2023 Annual Report of Luzhou Laojiao Co., Ltd. 207 7.11. Investment property 7.11.1. Investment property with cost measurement model Applicable □ N/A Unit：CNY Item Buildings and constructions Land use right Construction in progress Total I. Original cost: 1.Opening balance 47,321,613.939,566,480.21 56,888,094.14 2.Increase in current period (1) External purchase (2) Transfer from inventories/fixed assets/construction in progress (3) Increase from business combination 3.Decrease in current period (1) Disposal (2) Other transfer out 4.Closing Balance 47,321,613.939,566,480.21 56,888,094.14 II. Accumulated depreciation and amortization 1.Opening Balance 15,125,126.702,613,513.22 17,738,639.92 2.Increase in current period 662,897.92701,139.53 1,364,037.45 (1) Provision or amortization 662,897.92701,139.53 1,364,037.45 3.Decrease in current period (1) Disposal (2) Other transfer out 4.Closing Balance 15,788,024.623,314,652.75 19,102,677.37 III. Provision for impairment 1.Opening Balance 2.Increase in current period (1) Provision 3.Decrease in current period (1) Disposal (2) Other transfer out 4.Closing Balance IV. Book Value 1.Closing Book Value 31,533,589.316,251,827.46 37,785,416.77 2023 Annual Report of Luzhou Laojiao Co., Ltd. 208 2.Opening Book Value 32,196,487.236,952,966.99 39,149,454.22 The recoverable amount is determined based on the net amount of the fair value minus disposal costs □Applicable N/A The recoverable amount is determined by the present value of the forecasted future cash flow □Applicable N/A 7.11.2. Investment property without certification of right Unit：CNY Item Book value Reason for not having the certification of right Buildings of the Company 31,478,347.81 In procedure 7.12. Fixed assets Unit：CNY Item Closing Balance Opening Balance Fixed assets 8,613,187,271.6718,853,348,204.83 Disposal of fixed assets 36,193.792,910,393.95 Total 8,613,223,465.468,856,258,598.78 Note 1: The fixed assets listed above refer to the fixed assets deducted those disposed. 7.12.1. Details of fixed assets Unit：CNY Item Buildings and constructions Specialized equipment General equipment Transportation equipment Other equipment Total I. Original cost: 1.Opening balance 7,584,141,471.95 1,174,111,092.25 1,093,021,145.63 46,364,595.04 1,604,593,254.93 11,502,231,55 9.80 2.Increase in current period 92,376,864.9579,761,327.61 157,751,986.1 4 402,797.9159,347,158.47 389,640,135.0 8 (1) External purchase 1,606,417.5134,463,316.82128,300.893,752,348.4239,950,383.64 (2) Transfer from construction in progress 110,898,978.5 4 65,212,322.19 113,657,757.1 8 348,050.2557,568,977.72 347,686,085.8 8 (3) Increase from business combination (4) Changes of exchange rates 7,468.20 7,468.20 (5) Adjustment for completion settlement - 18,522,113.59 12,942,587.919,623,443.94 -73,553.23 -1,974,167.671,996,197.36 3.Decrease in current period 74,973,465.863,875,093.0826,848,117.81 11,252,352.46 116,949,029.2 1 (1) Disposal or retirement 63,512,058.183,875,093.0822,402,534.58 11,252,352.46 101,042,038.3 0 2023 Annual Report of Luzhou Laojiao Co., Ltd. 209 (2) Transfer to intangible assets/construction in progress 11,461,407.68 4,445,583.23 15,906,990.91 4.Closing Balance 7,601,544,871.04 1,249,997,326.78 1,223,925,013.96 46,767,392.95 1,652,688,060.94 11,774,922,66 5.67 II. Accumulated depreciation 1.Opening Balance 956,719,104.1 8 470,768,377.6 5 426,894,845.3 7 32,266,009.80 761,612,077.9 0 2,648,260,414.90 2.Increase in current period 249,022,880.3 5 138,689,344.8 5 128,014,893.9 2 2,941,188.5567,404,370.54 586,072,678.2 1 (1) Provision 249,022,880.3 5 138,689,344.8 5 128,010,633.8 6 2,941,188.5567,404,370.54 586,068,418.1 5 (2) Changes of exchange rates 4,260.06 4,260.06 3.Decrease in current period 48,454,776.642,840,340.4013,585,429.48 8,340,092.6673,220,639.18 (1) Disposal or retirement 48,454,776.642,840,340.4013,585,429.48 8,340,092.6673,220,639.18 4.Closing Balance 1,157,287,207.89 606,617,382.1 0 541,324,309.8 1 35,207,198.35 820,676,355.7 8 3,161,112,453.93 III. Provision for impairment 1.Opening Balance 622,940.07 622,940.07 2.Increase in current period (1) Provision 3.Decrease in current period (1) Disposal or retirement 4.Closing Balance 622,940.07 622,940.07 IV. Book Value 1.Closing Book Value 6,443,634,723.08 643,379,944.6 8 682,600,704.1 5 11,560,194.60 832,011,705.1 6 8,613,187,271.67 2.Opening Book Value 6,626,799,427.70 703,342,714.6 0 666,126,300.2 6 14,098,585.24 842,981,177.0 3 8,853,348,204.83 7.12.2. Fixed assets leased out through operating lease Unit：CNY Item Closing book value Buildings and constructions 22,460,128.25 Total 22,460,128.25 7.12.3. Fixed assets without certification of right Unit：CNY Item Book value Reason for not having the certification of right Buildings of the Company 22,410,444.43 The property ownership certificate has not been processed yet for the historical reasons, and it plans to be 2023 Annual Report of Luzhou Laojiao Co., Ltd. 210 processed after gradually improving procedures. Buildings of the Company 227,087,401.40 In procedure Buildings of the subsidiary-brewing company 4,368,821,210.29 In procedure Total 4,618,319,056.12 7.12.4. Disposal of fixed assets Unit：CNY Item Closing Balance Opening Balance Disposal and retirement of assets 36,193.792,910,393.95 Total 36,193.792,910,393.95 7.13. Construction in progress Unit：CNY Item Closing Balance Opening Balance Construction in progress 1,718,468,880.531808,919,047.21 Total 1,718,468,880.53808,919,047.21 Note: 1. The term "construction in progress" in the above table refers to construction in progress minus construction materials. 7.13.1. Details of the construction in progress Unit：CNY Item Closing Balance Opening Balance Book balance Provision for impairment Book value Book balance Provision for impairment Book value Technical renovation of Luzhou Laojiao Intelligent packaging center 1,132,704,191.02 1,132,704,191.02 638,798,849.1 6 638,798,849.1 6 Technical renovation project of Luzhou Laojiao intelligent brewing (I) 217,839,823.4 9 217,839,823.4 9 12,284,062.35 12,284,062.35 Technical renovation of Luzhou Laojiao Intelligent packaging center (II) 141,773,898.9 7 141,773,898.9 7 122,641.51 122,641.51 Project of Luzhou Laojiao's 92,773,969.99 92,773,969.9917,305,831.68 17,305,831.68 2023 Annual Report of Luzhou Laojiao Co., Ltd. 211 Flexible Intelligent Filling Pilot Line Construction Project of Luzhou Laojiao's Strong Aroma Baijiu Experience Marketing Centre 1,194,002.45 1,194,002.45 Technical Reform Project of Luzhou Laojiao's Brewing Base 574,755.15 574,755.1514,512,482.57 14,512,482.57 Other projects 131,608,239.4 6 131,608,239.4 6 125,895,179.9 4 125,895,179.9 4 Total 1,718,468,880.531 1,718,468,880.53 808,919,047.2 1 808,919,047.2 1 Note: 1. The closing balance increased by CNY 909,549,833.32, up 112.44% compared with the opening balance, which was mainly due to the increase in input in the technical renovation of Intelligent packaging center and technical renovation project of intelligent brewing in the current period. 7.13.2. Significant changes in construction in progress Unit：CNY Item Budget Opening Balance Increase in current period Transfer into fixed assets Other decreases Closing Balance Proportion of accumulative project input in budget Progress (%) Accumulative capitalized interest Including: Capitalized interest for the period Capitalization rate for the period (%) Source of funds Technical renovation of Luzhou Laojiao Intelligent packaging center 1,886,176,0 00.00 638,7 98,84 9.16 778,7 90,03 1.23 96,85 6,474.40 188,0 28,21 4.97 1,132,704,1 91.02 81.92 % 80.00 % 185,8 76.75 35,10 7.46 3.59% Other 2023 Annual Report of Luzhou Laojiao Co., Ltd. 212 Technical renovation project of Luzhou Laojiao intelligent brewing (I) 4,782,509,0 00.00 12,28 4,062.35 205,5 55,76 1.14 217,8 39,82 3.49 16.62 % 15.00 % Other Technical renovation of Luzhou Laojiao Intelligent packaging center (II) 250,0 00,00 0.00 122,6 41.51 141,6 51,25 7.46 141,7 73,89 8.97 64.08 % 70.00 % Other Project of Luzhou Laojiao's Flexible Intelligent Filling Pilot Line 174,3 00,00 0.00 17,30 5,831.68 75,46 8,138.31 92,77 3,969.99 70.95 % 70.00 % Other Construction Project of Luzhou Laojiao's Strong Aroma Baijiu Experience 2,604,356,7 00.00 181,3 01,30 1.34 180,1 07,29 8.89 1,194,002.4 5 6.96% 5.00% Other 2023 Annual Report of Luzhou Laojiao Co., Ltd. 213 Marketing Centre Technical Reform Project of Luzhou Laojiao's Brewing Base 189,7 32,30 0.00 14,51 2,482.57 119,5 47,09 1.81 131,4 21,42 1.07 2,063,398.1 6 574,7 55.15 94.08 % 90.00 % Other Total 9,887,074,0 00.00 683,0 23,86 7.27 1,502,313,5 81.29 228,2 77,89 5.47 370,1 98,91 2.021 1,586,860,6 41.07 185,8 76.75 35,10 7.46 3.59% Note: 1. Other decreases refer to land use rights, software and low priced and easily worn articles transferred to intangible assets. 7.13.3. Impairment test of construction in progress □Applicable N/A 7.14. Right-of-use assets 7.14.1. Details of right-of-use assets Unit：CNY Item Land use right Buildings and constructions Total I. Original cost 1. Opening Balance 32,680,786.3324,896,637.0357,577,423.36 2. Increase in current period 519,991.71519,991.71 (1) Increase in leases 319,714.42319,714.42 (2) Changes of exchange rates 200,277.29200,277.29 3. Decrease in current period 1,892,463.9215,040,946.9016,933,410.82 (1) Lease expiration 773,499.69773,499.69 (2) Adjustment for change of lease term 1,892,463.9214,267,447.2116,159,911.13 4. Closing Balance 30,788,322.4110,375,681.8441,164,004.25 II. Accumulated amortization 1. Opening Balance 7,269,825.4010,355,072.3317,624,897.73 2. Increase in current period 3,634,912.696,357,470.879,992,383.56 (1) Provision 3,634,912.696,216,889.849,851,802.53 (2) Changes of exchange 140,581.03140,581.03 2023 Annual Report of Luzhou Laojiao Co., Ltd. 214 rates 3. Decrease in current period 630,821.319,083,410.969,714,232.27 (1) Disposal (2) Lease expiration 754,238.91754,238.91 (3) Adjustment for change of lease term 630,821.318,329,172.058,959,993.36 4. Closing Balance 10,273,916.787,629,132.2417,903,049.02 III. Provision for impairment 1. Opening Balance 2. Increase in current period (1) Provision 3. Decrease in current period (1) Disposal 4. Closing Balance IV. Book Value 1. Closing Book Value 20,514,405.632,746,549.6023,260,955.23 2. Opening Book Value 25,410,960.9314,541,564.7039,952,525.63 7.14.2. Impairment test of right-of-use assets □Applicable N/A 7.15. Intangible assets 7.15.1. Details of intangible assets Unit：CNY Item Land use right Patent right No-patent right technology Computer software Trademark right Total I. Original cost 1. Opening Balance 3,288,142,671.29 1,700,050.44 63,336,227.722,114,914.82 3,355,293,864.27 2. Increase in current period 368,803,115.5 5 26,364,659.693,801.27 395,171,576.5 1 (1) Acquired 5,882,033.16 5,882,033.16 (2) Internal developed (3) Business combination (4) Transferred from construction in progress/fixed assets 368,803,115.5 5 22,401,522.03 391,204,637.5 8 (5) Changes of exchange rates 3,801.273,801.27 (6) Adjustment for completion settlement -1,918,895.50 -1,918,895.50 2023 Annual Report of Luzhou Laojiao Co., Ltd. 215 3. Decrease in current period 1,984,960.84 1,984,960.84 (1) Disposal 1,984,960.84 1,984,960.84 4. Closing Balance 3,654,960,826.00 1,700,050.44 89,700,887.412,118,716.09 3,748,480,479.94 II. Accumulated amortization 1. Opening Balance 236,908,207.7 1 830,609.09 32,408,087.271,875,107.41 272,022,011.4 8 2. Increase in current period 73,369,622.06130,005.04 6,173,764.3820,647.0479,694,038.52 (1) Provision 73,369,622.06130,005.04 6,173,764.3820,647.0479,694,038.52 3. Decrease in current period 1,109,361.14 1,109,361.14 (1) Disposal 1,109,361.14 1,109,361.14 4. Closing Balance 309,168,468.6 3 960,614.13 38,581,851.651,895,754.45 350,606,688.8 6 III. Provision for impairment 1. Opening Balance 2. Increase in current period (1) Provision 3. Decrease in current period (1) Disposal 4. Closing Balance IV. Book Value 1. Closing Book Value 3,345,792,357.37 739,436.31 51,119,035.76222,961.64 3,397,873,791.08 2. Opening Book Value 3,051,234,463.58 869,441.35 30,928,140.45239,807.41 3,083,271,852.79 There is no proportion of intangible assets formed by internal development to the balance of intangible assets at the period-end. 7.15.2. Land use right without certification of right There was no land use right without certification of right at the period-end. 7.16. Long-term deferred expense Unit：CNY Item Opening Balance Increase Amortization Other decrease Closing Balance Improvement expense of rented fixed assets 710,010.92747,153.53498,487.93 -1,329.39960,005.91 Total 710,010.92747,153.53498,487.93 -1,329.391960,005.91 Note: 1 Other decrease was generated from changes of exchange rates. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 216 7.17. Deferred tax assets/ deferred tax liabilities 7.17.1. Deferred tax assets before offset Unit：CNY Item Closing Balance Opening Balance Deductible temporary differences Deferred tax assets Deductible temporary differences Deferred tax assets Provision for asset impairment 127,079,101.6831,572,482.83128,012,783.3631,895,371.12 Unrealized profits from internal transactions 1,533,438,058.70383,359,514.672,839,779,249.07709,944,812.27 Deductible losses 9,551,262.702,312,572.68 Impact from salary 466,715,045.27115,258,381.83630,936,117.63155,191,186.34 Impact from deferred earnings 27,772,083.746,943,020.9433,704,323.808,426,080.95 Impact from fixed assets depreciation 889,943.60233,853.09227,859.6237,596.84 Recognition costs of restricted shares for equity incentive in the vesting period 460,239,659.251112,958,934.99367,875,588.3289,288,197.09 Impact from fair value changes of other equity instrument investment 90,722,543.6722,680,635.925,752,926.371,438,231.59 Impact of income tax from fair value changes of held-for-trading financial assets 26,533,219.636,633,304.92 Impact of income tax from initial recognition of lease liabilities 8,994,376.391,422,793.65 Total 2,715,850,812.30674,429,617.924,042,373,330.501,005,167,353.80 Note: 1. Deductible temporary differences of CNY 460,239,659.25 of costs and expenses recognized during the vesting period of restricted shares for share incentives represent the estimated future pre-tax deductible amounts based on the Company's share price less the grant price at the end of the period. 7.17.2. Deferred tax liabilities before offset Unit：CNY Item Closing Balance Opening Balance Taxable temporary differences Deferred tax liabilities Taxable temporary differences Deferred tax liabilities Fair value changes of other equity instrument investment 219,911,911.7154,977,977.92495,124,314.68123,781,078.67 Fair value changes 26,992,098.766,748,024.69 2023 Annual Report of Luzhou Laojiao Co., Ltd. 217 of held-for-trading financial assets Impact from the policy of one-time pre-tax deduction of fixed assets 330,643,563.7280,965,673.53172,516,000.0742,262,585.21 Impact of income tax from initial recognition of right-of-use assets 345,267.4981,352.08 Total 577,892,841.68142,773,028.22667,640,314.75166,043,663.88 7.17.3. Details of unrecognized deferred tax assets Unit：CNY Item Closing Balance Opening Balance Deductible losses 253,464,624.6172,503,754.75 Credit impairment losses and asset impairment provision 1,505.2665.28 Impact from employee benefits payable 13,557,753.922,369,328.86 Total 267,023,883.7974,873,148.89 7.17.4. Deductible losses from unrecognized deferred tax assets will due on the following years Unit：CNY Year Closing Amount Opening Amount Notes The 1st year 14,491,365.446,496,423.50 The 2nd year 15,884,395.0014,491,365.44 The 3rd year 8,417,566.8721,651,366.58 The 4th year 33,125,772.2811,572,224.60 The 5th year 181,545,525.0218,292,374.63 Total 253,464,624.6172,503,754.75 7.18. Other non-current assets Unit：CNY Item Closing Balance Opening Balance Book balance Provision for impairment Book value Book balance Provision for impairment Book value Prepayment for long-term assets such as engineering equipment and land 358,900,430.1 3 358,900,430.1 31 196,095,702.0 9 196,095,702.0 9 Total 358,900,430.1 3 358,900,430.1 3 196,095,702.0 9 196,095,702.0 9 Note: 1. At the end of the period, there was an increase of CNY 162,804,728.04 compared to the 2023 Annual Report of Luzhou Laojiao Co., Ltd. 218 beginning of the period, representing a growth of 83.02%, which was mainly due to the ongoing construction projects of the subsidiary brewing companies, leading to a corresponding increase in advance payments for construction equipment. 7.19. Assets with restricted ownership or use rights Unit：CNY Item Period-end Period-beginning Book balance Book value Type of restriction Status of restriction Book balance Book value Type of restriction Status of restriction Cash and cash equivalents 48,222,88 2.52 48,222,88 2.52 Fixed deposit interest Provision for fixed deposit interest on an accrual basis 17,339,93 6.14 17,339,93 6.14 Fixed deposit interest Provision for fixed deposit interest on an accrual basis Cash and cash equivalents 10,772,93 0.90 10,772,93 0.90 Margin Bank cash deposits for L/G and E-commerce platform margin 10,000,00 0.00 10,000,00 0.00 Margin Bank cash deposits for L/G Cash and cash equivalents Litigation freeze Frozen fund by the court 1,181,683.24 1,181,683.24 Litigation freeze Frozen fund by the court Total 58,995,81 3.42 58,995,81 3.42 28,521,61 9.38 28,521,61 9.38 7.20. Held-for-trading financial liabilities Unit：CNY Item Closing Balance Opening Balance Held-for-trading financial liabilities 9,763.87 Including: Foreign exchange forward transaction 9,763.87 Including: Total 9,763.87 7.21. Accounts payable 7.21.1. Presentation of accounts payable Unit：CNY Category Closing Balance Opening Balance Materials and service expense 862,772,419.351,042,394,395.05 Engineering equipment expense 1,494,451,313.861,269,271,189.99 Total 2,357,223,733.212,311,665,585.04 2023 Annual Report of Luzhou Laojiao Co., Ltd. 219 7.21.2. Significant accounts payable whose aging is longer than 1 year Unit：CNY Category Closing Balance Reason for not payment or carrying forward China Construction First Group Corporation Limited 428,806,448.79 Project payment within the contract settlement period Luzhou Branch of Zhongqi Construction Group Huamao Co., Ltd. 24,762,560.05 Project payment within the contract settlement period Total 453,569,008.84 7.22. Other payables Unit：CNY Item Closing Balance Opening Balance Dividend payable 29,684,819.8216,594,850.58 Other payables 1,121,036,342.7111,185,814,427.91 Total 1,150,721,162.531,202,409,278.49 Note: 1. Other payables listed in the above table are other payables minus interest payable and dividend payable. 7.22.1. Dividend payable Unit：CNY Item Closing Balance Opening Balance Ordinary share dividends 29,684,819.82116,594,850.58 Total 29,684,819.8216,594,850.58 Note: 1. The closing balance refer to the dividends distributed but not yet paid to minority shareholders of the Company’s subsidiary Boda Marketing Company. 7.22.2. Other payables 7.22.2.1. Categories by nature Unit：CNY Item Closing Balance Opening Balance Security deposit 471,170,274.78527,881,969.37 Intercourse funds 26,994,900.0610,226,769.10 Repurchase obligations of restricted shares 616,743,610.59639,021,998.78 Others 6,127,557.288,683,690.66 Total 1,121,036,342.711,185,814,427.91 7.22.2.2. Significant other payables whose aging are longer than 1 year Unit：CNY Item Closing Balance Reason for not payment or carrying 2023 Annual Report of Luzhou Laojiao Co., Ltd. 220 forward Security deposits from suppliers 50,159,749.00 Within the contract performance period Security deposits from dealers 5,300,000.00 Within the contract performance period Total 55,459,749.001 Note: 1. Significant other payables whose aging are longer than 1 year are mainly security deposits collected from dealers and suppliers. 7.23. Contract liabilities Unit：CNY Category Closing Balance Opening Balance Within 1 year 2,648,369,042.142,540,635,630.98 1-2 years 11,257,914.7510,654,577.66 2-3 years 1,537,289.681,199,843.23 Over 3 years 11,812,843.7313,884,666.89 Total 2,672,977,090.302,566,374,718.76 Significant contract liabilities whose aging are longer than 1 year Unit：CNY Item Closing Balance Reason for not payment or carrying forward Advances from customers for goods 8,698,271.48 Within the contract settlement period Total 8,698,271.48 The Company shall comply with the disclosure requirements for companies engaging in food & liquor and wine production of the Guidelines No.3 of the Shenzhen Stock Exchange on Sel f-regulation of Listed Companies—Industry-specific Information Disclosure. The total amount of the top five companies in contract liabilities was CNY 909,316,825.12, accounting for 34.02%. 7.24. Employee benefits payable 7.24.1. Employee benefits payable shown as follows Unit：CNY Item Opening Balance Increase in current period Decrease in current period Closing Balance 1. Short-term benefits 655,612,131.74986,098,412.181,146,571,761.71495,138,782.21 2. Post-employment benefits- defined contribution plans 19,413,782.04152,464,396.28143,159,220.6528,718,957.67 3. Termination benefits 8,971.53201,782.75201,782.758,971.53 Total 675,034,885.311,138,764,591.211,289,932,765.11523,866,711.41 2023 Annual Report of Luzhou Laojiao Co., Ltd. 221 7.24.2. Short-term employee benefits payable shown as follows Unit：CNY Item Opening Balance Increase in current period Decrease in current period Closing Balance 1. Wages, bonuses, allowances and grants 611,845,393.45782,949,224.85953,572,824.59441,221,793.71 2. Employees’ welfare 21,197,780.0321,197,780.03 3. Social insurance premiums 2,037,299.4783,042,051.1774,756,274.3610,323,076.28 Work-related injury insurance 510,250.713,322,425.002,457,156.991,375,518.72 Medical and maternity insurance premium 1,527,048.7679,719,626.1772,299,117.378,947,557.56 4. Housing funds 2,088,245.5969,651,313.8966,166,907.535,572,651.95 5. Labor union expenditures and employee education funds 39,641,193.2329,258,042.2430,877,975.2038,021,260.27 Total 655,612,131.74986,098,412.181,146,571,761.71495,138,782.21 7.24.3. Defined contribution plan shown as follows Unit：CNY Item Opening Balance Increase in current period Decrease in current period Closing Balance 1. Basic endowment insurance premium 18,361,778.9693,441,846.2589,839,533.7321,964,091.48 2. Unemployment insurance premium 326,819.863,566,554.413,561,574.51331,799.76 3. Enterprise annuity 725,183.2255,455,995.6249,758,112.416,423,066.43 Total 19,413,782.04152,464,396.28143,159,220.6528,718,957.67 7.25. Taxes payable Unit：CNY Item Closing Balance Opening Balance Value-added tax 462,528,000.24502,641,326.22 Consumption tax 1,255,405,887.031,386,271,621.60 Enterprise income tax 998,666,442.521,345,243,541.07 Individual income tax 7,810,885.8810,295,445.63 Urban maintenance and construction tax 119,493,139.70131,841,222.44 Education surcharge 51,286,192.7956,445,651.96 Local education surcharge 34,299,228.8737,733,654.17 Stamp duty 9,347,536.019,937,931.91 Land use tax 437,618.74437,618.74 Others 352,601.22302,715.24 Total 2,939,627,533.003,481,150,728.98 2023 Annual Report of Luzhou Laojiao Co., Ltd. 222 7.26. Non-current liabilities due within one year Unit：CNY Item Closing Balance Opening Balance Long-term loans due within one year 25,000,000.0020,400,000.00 Lease liabilities due within one year 5,114,015.8914,530,370.36 Interest of long-term loans due within one year 7,379,478.991,984,027.78 Interest of bonds payable due within one year 41,424,657.5344,965,068.49 Total 78,918,152.4181,879,466.63 7.27. Other current liabilities Unit：CNY Item Closing Balance Opening Balance Output VAT to be transferred 347,485,071.57333,627,225.47 Total 347,485,071.57333,627,225.47 7.28. Long-term loans 7.28.1. Long-term loans Unit：CNY Item Closing Balance Opening Balance Credit loans 10,025,300,000.003,200,000,000.00 Less: Long-term loans due within one year -25,000,000.00 -20,400,000.00 Total 10,000,300,000.003,179,600,000.00 Other statements, including interest rate range: Loan prime rate (LPR) - corresponding basic points (BP) for 1-year/5-year and above loan terms. 7.29. Bonds payable 7.29.1. Bonds payable Unit：CNY Item Closing Balance Opening Balance Corporate bonds in 2020 (Phase I) 1,498,716,737.021,497,461,348.61 Corporate bonds in 2022 (Phase I) 1,498,638,223.25 Total 1,498,716,737.022,996,099,571.86 7.29.2. Increase/decrease of bonds payable (excluding other financial instrument classified as financial liabilities such as preferred shares and perpetual bonds) Unit：CNY Bond name Par value Coupon rate Issuing date Duration Issuing amount Opening Balance Issued in the curreWithdrawal of intereAmortization of premiRepayment in the Closing BalanDefault or not 2023 Annual Report of Luzhou Laojiao Co., Ltd. 223 nt period st by par value um and depreciation reporting period ce Corporate bonds in 2020 (Phase I) 1,500,000,000.0 0 3.50 % 16 March 2020 5 years 1,494,000,000.0 0 1,497,461,348.6 1 52,50 0,000.00 1,255,388.41 1,498,716,737.0 2 Not Corporate bonds in 2022 (Phase I)1 1,500,000,000.0 0 2.85 % 2 December 2022 3 years 1,498,800,000.0 0 1,498,638,223.2 5 42,75 0,000.00 1,361,776.75 1,500,000,000.0 0 Not Total —— 2,992,800,000.0 0 2,996,099,571.8 6 95,25 0,000.00 2,617,165.16 1,500,000,000.0 0 1,498,716,737.0 2 —— Note: 1. In October 2023, the Company made a suggestive announcement. In accordance with the provisions of the Prospectus for Luzhou Laojiao Co., Ltd.'s Corporate Bonds Publicly Offered in 2022 to Professional Investors (Tranche 1) (hereinafter referred to as the "Prospectus"), the Company, as the issuer of the 2022 corporate bond (Tranche 1) "22 Lujiao 01" (bond code: 148133), has the right to adjust the coupon rate for the first and second interest payment years of this bond issuance at the end of the first year of the bond's duration. According to the current market situation, the Company decided to reduce the coupon rate for the first and second interest payment years of this bond issuance by 158 basis points. Therefore, the coupon rate for the first and second interest payment years of the "22 Lujiao 01" bond issuance was adjusted from 2.85% to 1.00%. According to the investor resale option set forth in the Prospectus, investors have the right to register during the investor resale registration period to sell all or part of the current bonds held to the issuer at face value, or choose to continue holding the current bonds; the resale price is CNY 100 per bond (excluding interest); according to data provided by the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited, "22 Lujiao 01" had a valid resale declaration of 15,000,000 bonds during the two resale registration periods, with a resale amount of CNY 1,500,000,000, and the remaining unsold bonds quantity was 0. The Company has fully transferred the principal and interest payment for the resale portion of "22 Lujiao 01" to the designated bank account of the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited. The date of receipt of funds from the resale was 4 December 2023. This resale is for the full amount, and after its completion, "22 Lujiao 01" will be delisted from the Shenzhen Stock Exchange, with the delisting date set for 4 December 2023. 7.30. Lease liabilities Unit：CNY Item Closing Balance Opening Balance Lease payment 32,472,149.3348,776,000.46 Less: unrecognized financing cost -5,001,728.97 -5,148,660.44 2023 Annual Report of Luzhou Laojiao Co., Ltd. 224 Lease liabilities due within one year -5,114,015.89 -14,530,370.36 Total 22,356,404.4729,096,969.66 7.31. Deferred income Unit：CNY Item Opening Balance Increase in current period Decrease in current period Closing Balance Reason Government grants 33,704,323.803,364,559.089,296,799.1427,772,083.74 Reception of financial allocation Total 33,704,323.803,364,559.089,296,799.1427,772,083.74 -- Other statements: Details: Item Opening Balance Increase in current period Non-operating income in current period Other income in current period Cost reduction in current period Other decrease Closing Balance Related to assets/ income New mode application project of digital workshop for solid state baijiu production 4,684,300.00 364,559.08 1,553,495.14 3,495,363.94 Related to assets Construction project of liquor room of Luzhou Laojiao brewing technical renovation 4,550,000.00 3,000,000.00 1,507,142.80 6,042,857.20 Related to assets Luzhou Laojiao automatic baijiu production line technical renovation project 1,135,238.10 349,304.04 785,934.06 Related to assets Boiler reconstruction project of Luohan Brewing Base of Luzhou Laojiao 6,321,428.56 1,264,285.70 5,057,142.86 Related to assets Brewing wastewater 11,142,857.1 3,428,571.4 7,714,285.68 Related to 2023 Annual Report of Luzhou Laojiao Co., Ltd. 225 Item Opening Balance Increase in current period Non-operating income in current period Other income in current period Cost reduction in current period Other decrease Closing Balance Related to assets/ income treatment project 4 6 assets Improvement and technical renovation project of Luzhou Laojiao production supporting 5,870,500.00 1,194,000.00 4,676,500.00 Related to assets Total 33,704,323.80 3,364,559.08 9,296,799.14 27,772,083.74 7.32. Share capital Unit：CNY Opening Balance Increases/decreases in the current period (+, -) Closing Balance Issuance of new shares Bonds share Conversion of reserves funds into shares Others Subtotal Total number of shares 1,471,895,1 00.00 92,669.00 92,669.001 1,471,987,7 69.00 Note: 1. The Company's third grant of the restricted share incentive scheme in December 2022, consisted of 92,669 shares. On 15 January 2023, the Company received subscription payments in monetary assets for these restricted shares from 17 incentive recipients. These shares were listed on 17 February 2023. Thus, the total number of company shares increased from 1,471,895,100 shares to 1,471,987,769 shares. 7.33. Capital reserves Unit：CNY Item Opening Balance Increase in current period Decrease in current period Closing Balance Share premium (capital premium) 4,197,109,156.668,198,055.74 4,205,307,212.40 Other capital reserves 603,045,312.33377,128,998.49 980,174,310.82 Total 4,800,154,468.99385,327,054.23 5,185,481,523.22 Other statements, including increase/decrease and reasons thereof: Note 1: The increase of capital premium during the current period was attributed to the share premium payment received from the third grant of restricted shares. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 226 Note 2: For the increased amount in other capital reserve for the current period, CNY 376,901,172.48 represents the costs and expenses attributable to the parent company to be recognised in the current period for the issuance of restricted shares, and the income tax impact of the excess of the amount deductible before tax over the costs and expenses recognised in future periods. Additionally, CNY 227,826.01 is due to the impact of other equity changes in investees accounted for using the equity method. 7.34. Treasury shares Unit：CNY Item Opening Balance Increase in current period Decrease in current period Closing Balance Perform the repurchase obligations under the equity incentive 639,021,998.788,290,724.7430,569,112.93616,743,610.59 Total 639,021,998.788,290,724.7430,569,112.93616,743,610.59 Other statements, including notes to increase and decrease during the reporting period and the reasons for changes: Note: The Company recognized restricted shares repurchase obligations in the current period, raising the treasury stock by CNY 8,290,724.74; and the treasury stock was down by CNY 30,569,112.93 due to the expected cash dividend of unlockable restricted shares. 7.35. Other comprehensive income Unit：CNY Item Opening Balance Current Period Closing Balance Amount in current period before income tax Less: Previously recognized in other comprehensive income transferred to profit and loss Less: Previously recognized in other comprehensive income transferred to retained earnings Less: Income tax Amount attribute to parent company after tax Amount attribute to non-controlling shareholders after tax I. Other comprehensive income that will not be reclassified into profit and loss 366,978,5 41.23 - 253,814,3 24.14 16,215,65 3.21 - 270,029,9 77.35 96,948,56 3.88 Other comprehensive income that will not be 106,537.8 6 106,537.8 6 106,537.8 6 2023 Annual Report of Luzhou Laojiao Co., Ltd. 227 reclassified into profit and loss under equity method Fair value changes of other equity instrument investment 366,978,5 41.23 - 253,920,8 62.00 16,215,65 3.21 - 270,136,5 15.21 96,842,02 6.02 II. Other comprehensive income that will be reclassified into profit and loss - 36,227,29 5.39 2,744,132.59 2,409,201.02 334,931.5 7 - 33,818,09 4.37 Including: Other comprehensive income that will be reclassified into profit and loss under equity method - 38,784,74 0.65 2,000,549.31 2,000,549.31 - 36,784,19 1.34 Difference from conversion of financial statements in foreign currency 2,557,445.26 743,583.2 8 408,651.7 1 334,931.5 7 2,966,096.97 Total 330,751,2 45.84 - 251,070,1 91.55 16,215,65 3.21 - 267,620,7 76.33 334,931.5 7 63,130,46 9.51 7.36. Surplus reserves Unit：CNY Item Opening Balance Increase in current period Decrease in current period Closing Balance Statutory surplus reserves 1,471,895,100.0092,669.00 1,471,987,769.00 Total 1,471,895,100.0092,669.00 1,471,987,769.00 7.37. Undistributed profits Unit：CNY 2023 Annual Report of Luzhou Laojiao Co., Ltd. 228 Item Current Period Previous Period Undistributed profit before adjustment at the end of the last year 26,772,197,213.9821,187,860,235.89 Undistributed profit after adjustment at the beginning of year 26,772,197,213.9821,187,860,235.89 Plus: Net profit attributable to owners of the parent company for the current period 13,246,394,700.5910,365,383,281.80 Less: Provision of statutory surplus reserves 92,669.007,142,624.00 Ordinary share dividends payable 6,219,148,324.034,773,919,306.55 Plus: Other transfer in 16,215,653.21115,626.84 Undistributed profits at the end of the period 33,815,566,574.7526,772,197,213.98 Note: 1 Other transfers represent the Company's disposal of certain other equity instrument investments in the current period, which was due to the impact of transfer of fair value changes previously recognised in other comprehensive income to retained earnings. 7.38. Operating revenue and cost of sales Unit：CNY Item Current Period Previous Period Revenue Cost of sales Revenue Cost of sales Primary business 29,832,432,932.593,354,136,725.5724,766,121,998.493,214,253,716.91 Other business 400,868,455.67183,014,677.58357,441,273.13155,274,677.11 Total 30,233,301,388.263,537,151,403.1525,123,563,271.623,369,528,394.02 Whether the lower of the net profit before and after deduction of non-recurring gains and losses through audit is negative □Yes No Details: Unit：CNY Contract category Baijiu sales Total Operating revenue Cost of sales Operating revenue Cost of sales Commodity type Including: Medium and high grade baijiu 26,841,342,073.142,076,149,454.3426,841,342,073.142,076,149,454.34 Other baijiu 3,235,936,786.441,408,395,265.763,235,936,786.441,408,395,265.76 By operating segment Including: Domestic 29,900,173,530.223,458,773,542.0529,900,173,530.223,458,773,542.05 Outbound 177,105,329.3625,771,178.05177,105,329.3625,771,178.05 2023 Annual Report of Luzhou Laojiao Co., Ltd. 229 Market or customer type Including: Contract type Including: Commodity sales contract 30,077,278,859.583,484,544,720.1030,077,278,859.583,484,544,720.10 By commodity transfer time Including: By contract term Including: By sales channel Including: Total 30,077,278,859.583,484,544,720.1030,077,278,859.583,484,544,720.10 Other statements The Company's main business is the production and sale of baijiu. Revenue is recognised at the point when the Company transfers control of the relevant goods to the customer and fulfils its performance obligations. Information in relation to the transaction price apportioned to the residual contract performance obligation: The amount of revenue corresponding to performance obligations of contracts signed but not performed or not fully performed yet was CNY 2,664,278,818.82 at the period-end, among which CNY 2,664,278,818.82 was expected to be recognized in 2024. 7.39. Business taxes and surcharges Unit：CNY Item Current Period Previous Period Consumption tax 3,240,865,419.122,753,367,764.57 Urban maintenance and construction tax 441,952,895.02370,928,389.23 Educational surcharge 189,596,044.62158,966,546.28 Property tax 72,159,092.3975,661,405.90 Land use tax 34,404,828.3335,777,691.90 Stamp duty 27,591,982.9823,111,385.94 Local education surcharge 126,397,571.29105,978,159.07 Others 158,516.93156,944.59 Total 4,133,126,350.683,523,948,287.48 2023 Annual Report of Luzhou Laojiao Co., Ltd. 230 7.40. General and administrative expenses Unit：CNY Item Current Period Previous Period Employee compensation 438,391,560.79467,979,805.98 Depreciation and amortization 119,690,409.04132,084,757.27 Management fee and service expense 146,708,293.63115,361,022.69 Others 434,690,413.77446,996,671.29 Total 1,139,480,677.231,162,422,257.23 7.41. Selling and distribution expenses Unit：CNY Item Current Period Previous Period Advertising promotion expense 1,614,086,963.331,880,179,769.91 Promotion expense 1,479,620,839.26712,641,702.96 Employee compensation 297,757,314.24355,699,286.88 Storage and logistics costs 198,741,925.26138,589,417.94 Others 384,218,484.83361,660,868.33 Total 3,974,425,526.923,448,771,046.02 7.42. Research and development expenses Unit：CNY Item Current Period Previous Period Comprehensive research and development expenses 225,955,797.33206,248,486.57 Total 225,955,797.33206,248,486.57 7.43. Financial expenses Unit：CNY Item Current Period Previous Period Interest expenses 488,003,010.93229,673,136.36 Less: Interest income -864,006,165.58 -505,746,664.32 Losses from currency exchange -2,201,671.82 -16,072,149.45 Handling charges 6,292,845.934,070,627.61 Amortization of unrecognized financing costs 759,774.131,698,122.32 Total -371,152,206.41 -286,376,927.48 7.44. Other income Unit：CNY Item Current Period Previous Period Government grants 51,950,003.1134,931,161.52 Other refund 2,229,602.281,593,155.57 Total 54,179,605.3936,524,317.09 2023 Annual Report of Luzhou Laojiao Co., Ltd. 231 7.45. Gain on changes in fair value Unit：CNY Item Current Period Previous Period Held-for-trading financial assets 62,998,156.40 -12,023,622.50 Held-for-trading financial liabilities -9,694.10 Total 62,988,462.30 -12,023,622.50 7.46. Investment income Unit：CNY Item Current Period Previous Period Investment income from long-term equity investments under the equity method 66,927,156.6984,626,608.53 Investment income gained during the period of holding held-for-trading financial assets 2,391,009.806,813,617.83 Investment income from disposal of held-for-trading financial assets 5,290,247.469,438,465.78 Dividend income gained during the period of holding other equity instrument investment 11,268,626.398,078,717.93 Investment income from early redemption of bonds -1,055,251.33 -4,241,494.76 Investment losses from foreign exchange forward transaction -97,207.03 Total 84,724,581.98104,715,915.31 Other statements: Note: There is no major restriction on the repatriation of the Company's investment income. Including: investment income from long-term equity investments under the equity method: Item Current Period Previous Period Huaxi Securities Co., Ltd.44,167,627.4043,897,917.31 Luzhou Laojiao Postdoctoral Workstation Technology Innovation Co., Ltd. -1,846,843.26 185,894.77 Sichuan Development Liquor Investment Co., Ltd.8,326.61162,805.88 Sichuan Tongniang Baijiu Industry Technology Research Institute Co., Ltd. 253,536.99199,394.39 CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. 24,344,508.9540,180,596.18 Total 66,927,156.6984,626,608.53 Including: dividend income gained during the period of holding other equity instrument investment: Item Current Period Previous Period North Chemical Industries Co., Ltd.78,177.75 70,359.97 Guotai Junan Securities Co., Ltd.6,241,808.41 8,008,357.96 Luzhou Sanrenxuan Liquor Industry Co., Ltd.500,000.00 Luzhou Bank Co., Ltd.3,471,360.00 China Tourism Group Duty Free Corporation Limited 977,280.23 2023 Annual Report of Luzhou Laojiao Co., Ltd. 232 Total 11,268,626.398,078,717.93 7.47. Credit impairment loss Unit：CNY Item Current Period Previous Period Bad debt loss of accounts receivable -964,767.06 -240,771.03 Bad debt loss of other receivables 1,897,008.76 -924,947.31 Total 932,241.70 -1,165,718.34 7.48. Gains from disposal of assets Unit：CNY Item Current Period Previous Period Gains from disposal of non-current assets 44,694,238.3719,805,093.70 Including: Gains from disposal of fixed assets 35,447,138.0024,600.37 Gains from disposal of intangible assets 8,980,400.3019,786,813.38 Gains from disposal of use right assets 266,700.07 -6,320.05 Total 44,694,238.3719,805,093.70 7.49. Non-operating income Unit：CNY Item Current Period Previous Period The amount included in the extraordinary gains and losses of the current period Compensation for default 29,859,330.0119,506,788.7429,859,330.01 Gains from damage retirement of non-current assets 3,920,498.91 3,920,498.91 Others 2,424,034.258,326,631.572,424,034.25 Total 36,203,863.1727,833,420.3136,203,863.17 7.50. Non-operating costs Unit：CNY Item Current Period Previous Period The amount included in the extraordinary gains and losses of the current period Donation 21,381,120.008,710,000.0021,381,120.00 Losses from damage retirement of non-current assets 2,570,236.3110,778,148.072,570,236.31 Others 48,127,919.52471,344.9948,127,919.52 Total 72,079,275.8319,959,493.0672,079,275.83 2023 Annual Report of Luzhou Laojiao Co., Ltd. 233 7.51. Income tax expense 7.51.1. Statement of income tax expense Unit：CNY Item Current Period Previous Period Current period income tax 4,119,788,148.403,422,712,211.76 Deferred income tax 397,509,384.8321,450,324.10 Total 4,517,297,533.233,444,162,535.86 7.51.2. Adjustment for accounting profit and income tax expense Unit：CNY Item Current Period Total profit 17,805,957,556.44 Income tax expenses determined by statutory/applicable tax rate 4,451,489,389.11 Impact from subsidiaries’ different tax rates -8,637,270.57 Impact from adjust for impact from income tax expense in previous period -14,432,781.58 Impact from non-taxable income -14,161,986.04 Impact from non-deductible costs, expenses and losses 1,143,355.57 Impact from deductible loss of unrecognized deferred income tax assets in prior period -2,031,822.20 Impact from deductible temporary difference or losses due to unrecognized deferred tax asset in current period 44,740,360.47 Income tax impact of expected pre-tax deductible amounts of restricted shares in future periods that are less than the recognized cost and expenses 69,490,160.71 Deduction impact of research and development costs -16,556,031.98 Impact from reversal of deductible losses of deferred income tax assets recognized in prior period 6,254,159.74 Income tax expense 4,517,297,533.23 Other statements: Note 1: The increase compared to the previous period was CNY 1,073,134,997.37, representing a growth of 31.16%. This increase was mainly attributed to the growth in profit for the current period, resulting in a corresponding increase in enterprise income tax. Note 2: The income tax rate details are provided in Note 6. Taxes. 7.52. Other comprehensive income Details in Note 7.35. Other comprehensive income. 7.53. Notes to the statement of cash flow 7.53.1. Cash related to operating activities Cash received from other operating activities Unit：CNY 2023 Annual Report of Luzhou Laojiao Co., Ltd. 234 Item Current Period Previous Period Recovery of saving deposits involving contract disputes 1,484,623.483,327,415.45 Government grants 46,017,763.0540,104,471.04 Interest income from bank deposit 831,459,358.12582,623,274.18 Others 392,483,116.17242,137,090.66 Total 1,271,444,860.82868,192,251.33 Cash paid for other operating activities Unit：CNY Item Current Period Previous Period Cash paid for expenses 2,466,131,087.542,987,783,797.32 Restricted court frozen funds paid 1,181,683.24 Cash paid to E-commerce platform as security deposit 772,930.90 Total 2,466,904,018.442,988,965,480.56 7.53.2. Cash related to investing activities Cash received from significant investing activities Unit：CNY Item Current Period Previous Period Recovering the principal invested in held-for-trading financial assets 1,400,000,000.002,100,000,000.00 Total 1,400,000,000.002,100,000,000.00 Cash paid for other investing activities Unit：CNY Item Current Period Previous Period Loss on forward exchange settlement 97,207.03 Total 97,207.03 Cash paid for significant investing activities Unit：CNY Item Current Period Previous Period Cash paid for purchasing long-term assets 1,501,625,135.451,035,165,351.11 Cash paid for purchasing held-for-trading financial assets 1,700,000,000.002,500,000,000.00 Total 3,201,625,135.453,535,165,351.11 7.53.3. Cash related to financing activities Cash received from other financing activities Unit：CNY Item Current Period Previous Period Cash deposits received for L/G 509,017.10 Cash deposits received for travel 1,400,000.00 Total 1,909,017.10 Cash paid for other financing activities 2023 Annual Report of Luzhou Laojiao Co., Ltd. 235 Unit：CNY Item Current Period Previous Period Cash paid for reducing registered capital 5,574,626.46 Rating and registration fee for issuing bonds 1,394,339.62 Net losses from put-back of bonds 1,055,251.33117,924.53 Cash paid for rent of right-of-use assets 6,547,996.5614,508,022.38 Total 7,603,247.8921,594,912.99 Changes in liabilities arising from financing activities Applicable □ N/A Unit：CNY Item Opening Balance Increase in current period Decrease in current period Closing Balance Cash change Non-cash change Cash change Non-cash change Long-term loans (including long-term loans due within one year) 3,201,984,027.78 6,850,000,000.00 7,379,478.9924,700,000.001,984,027.78 10,032,679,47 8.99 Bonds payble (including bonds payable due within one year) 3,041,064,640.35 1,500,000,000.00 923,245.80 1,540,141,394.55 Lease liabilities (including lease liabilities due within one year) 43,627,340.02 224,568.666,547,996.569,833,491.7627,470,420.36 Other payables (Repurchase obligations of restricted shares) 639,021,998.7 8 8,290,724.74 30,569,112.93 616,743,610.5 9 Total 6,925,698,006.93 6,858,290,724.74 7,604,047.65 1,531,247,996.56 43,309,878.27 12,217,034,90 4.49 7.54. Supplementary information to statement of cash flow 7.54.1. Supplementary information to statement of cash flow Unit：CNY Item Current Period Previous Period 1. Reconciliation of net profit to cash flow from operating activities: Net profit 13,288,660,023.2110,410,589,104.43 2023 Annual Report of Luzhou Laojiao Co., Ltd. 236 Plus: Provision for asset impairment -932,241.701,165,718.34 Depreciation of fixed asset, oil and gas assets and productive biological assets 587,432,455.60547,618,213.97 Depreciation of right-of-use assets 9,851,802.5314,638,577.02 Amortization of intangible assets 79,694,038.5280,604,041.96 Amortization of long-term deferred expense 498,487.93872,334.97 Losses from disposal of fixed assets, intangible assets and other long-term assets (Gains use “-”) -44,694,238.37 -19,805,093.70 Losses from retirement of fixed assets (Gains use “-”) -1,350,262.6010,778,148.07 Losses from change in fair value (Gains use “-”) -62,988,462.3012,023,622.50 Financial expenses (Gains use “-”) 323,773,618.88114,617,073.40 Losses on investments (Gains use “-”) -84,724,581.98 -104,715,915.31 Decrease in deferred income tax assets (Increase uses “-”) 351,976,919.74 -19,224,200.66 Increase in deferred income tax liabilities (Decrease uses “-”) 45,532,465.0940,674,524.76 Decrease in inventories (Increase use “-”) -1,781,301,572.61 -2,563,169,208.05 Decrease in operating receivables (Increase use “-”) -1,506,903,239.71279,234,000.55 Increase in operating payables (Decrease use “-”) -556,160,276.77 -543,252,672.53 Others Net cash flows from operating activities 10,648,364,935.468,262,648,269.72 2. Significant investing and financing activities not involving cash: Conversion of debt into capital Convertible corporate bonds due within one year Fixed assets under financing lease 3.Net change in cash and cash equivalents: Closing balance of cash 25,893,029,277.86117,729,006,591.87 Less: Opening balance of cash 17,729,006,591.8713,402,528,941.83 Plus: Closing balance of cash equivalents Less: Opening balance of cash equivalents Net change in cash and cash equivalents 8,164,022,685.994,326,477,650.04 Note: 1. The amount of direct payment for goods and long-term assets (not involving cash flows) by the endorsement of bank acceptances receivable in the current and previous periods was CNY 799,668,426.34 and CNY 1,074,632,849.98, respectively, which were not included in "cash received from sales of goods or rendering of services", "cash paid for goods and services" and "cash paid for the purchase of fixed assets, intangible assets and other long-term assets" of the cash flow budget. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 237 7.54.2. Composition of cash and cash equivalent Unit：CNY Item Opening Balance Closing Balance 1. Cash 25,893,029,277.8617,729,006,591.87 Including: Cash on hand 24,059.2428,711.93 Unrestricted bank deposit 25,868,408,012.3117,711,121,431.52 Other unrestricted cash and cash equivalents 24,597,206.3117,856,448.42 3. Closing balance of cash and cash equivalents 25,893,029,277.8617,729,006,591.87 7.54.3. Monetary funds not classified as cash and cash equivalents Unit：CNY Item Current Period Previous Period Reason Other monetary funds 10,000,000.0010,000,000.00 Bank cash deposits for L/G Bank deposit 48,222,882.5217,339,936.14 Provision for fixed deposit interest on an accrual basis Bank deposit 1,181,683.24 Frozen fund by the court Other monetary funds 772,930.90 Restricted cash deposit in E-commerce platforms Total 58,995,813.4228,521,619.38 7.55. Notes to items of the statements of changes in owners' equity Notes to the name of “Other” of closing balance at the end of the previous year adjusted and the amount adjusted: N/A 7.56. Foreign currency transactions 7.56.1. Foreign currency transactions Unit：CNY Item Closing Balance in Foreign Currency Exchange Rate Closing Balance in CNY Cash at Bank and on Hand 87,009,233.85 Including: USD 12,063,932.877.082785,445,217.34 EUR 327.957.85922,577.42 HKD 1,720,811.800.906221,559,434.07 GBP 39.919.0411360.83 AUD 339.124.84841,644.19 Accounts Receivable 6,763,202.06 Including: USD 27,947.117.0827197,941.00 EUR HKD 7,244,665.820.906226,565,261.06 Long-term Loans Including: USD EUR 2023 Annual Report of Luzhou Laojiao Co., Ltd. 238 HKD Other Receivables 2,185,243.73 Including: HKD 2,411,383.250.906222,185,243.73 Accounts Payable 1,052,816.48 Including: USD 78,287.397.0827554,486.10 HKD 549,900.000.90622498,330.38 Other Payables 22,462,946.79 Including: USD 13,520.887.082795,764.34 HKD 24,681,845.970.9062222,367,182.45 Non-current liabilities due within one year 1,148,459.41 Including: USD 68,957.377.0827488,404.36 HKD 728,360.720.90622660,055.05 Lease liabilities 990,456.88 Including: USD 139,841.717.0827990,456.88 7.56.2. Description of the foreign business entity, including the important foreign business entity, shall disclose its main foreign business place, bookkeeping standard currency and selection basis, and shall also disclose the reason for the change of the bookkeeping standard currency Applicable □ N/A Company Operation site Bookkeeping currency Choosing Reason Luzhou Laojiao International Development (Hong Kong) Co., Ltd. Hong Kong, China HKD Currency in the registration place Luzhou Laojiao Commercial Development (North America) Co., Ltd. USAUSD Currency in the registration place Mingjiang Co., Ltd. USAUSD Currency in the registration place 7.57. Lease 7.57.1. The Company as lessee Applicable □ N/A Variable lease payments that are not covered in the measurement of the lease liabilities □Applicable N/A Simplified short-term lease or lease expense for low-value assets Applicable □ N/A The Company uses a simplified approach for short-term leases, where the right-of-use assets and lease liabilities are not recognised. Short-term leases accounted for as expenses in the current period are listed below: Item 20232022 Short-term lease expenses recognised as current profit or loss in the current period using the simplified approach 9,494,225.988,551,460.53 Total cash outflows related to leases 16,042,222.5423,059,482.91 2023 Annual Report of Luzhou Laojiao Co., Ltd. 239 Note: The leased assets of the Company include the buildings and constructions and the land use right involved in operation. The leasing period of land use right is normally 15-30 years and the lease contract of land use right generally includes the renewal option clause. Circumstances involving sale and leaseback transactions N/A 7.57.2. The Company as lessor Operating leases with the Company as lessor Applicable □ N/A Unit：CNY Item Rental income Of which: income related to variable lease payments not included in lease receipts Income from rental of buildings, equipment, etc. 9,076,179.71 Total 9,076,179.71 Finance leases with the Company as lessor □Applicable N/A Undiscounted lease receipts for each of the next five years □Applicable N/A 7.57.3. Recognition of gain or loss on sales under finance leases with the company as a manufacturer or dealer □Applicable N/A 7.58. Others N/A 8. Research and Development Expenditure Unit：CNY Item Current Period Previous Period Material consumption 45,375,170.0850,065,987.39 Research and development and technical services 69,745,731.0258,008,882.88 Share payment expense 25,097,365.6216,478,234.13 Other indirect costs 85,737,530.6181,695,382.17 Total 225,955,797.33206,248,486.57 Of which: Expensed research and development expenditure 225,955,797.33206,248,486.57 2023 Annual Report of Luzhou Laojiao Co., Ltd. 240 9. Changes in consolidated scope 9.1. Business combination not under common control 9.1.1. Business combination not under common control during current period There is no business combination not under common control during current period. 9.2. Business combination under common control 9.2.1. Business combination under common control during current period There is no business combination under common control during current period. 9.3. Reverse purchase The basic information of the transaction, the basis of the transaction constitutes the reverse purchase, whether the assets and liabilities retained by the listed company constitute the business and its basis, the determination of the merger cost, and the adjustment of the equity amount and its calculation according to the equity transaction: There is no reverse purchase during current period. 9.4. Disposing subsidiaries Whether there is a situation of losing control after disposing the investment in the subsidiary only once □ Yes No Whether there is a situation of disposing the investment in the subsidiary through several transactions step by step and losing control during the period □ Yes No 9.5. Consolidated scope changes due to other reasons Explain other reasons for changing consolidated scope (such as establishing a new subsidiary, liquidating a subsidiary) and its related situation: Two subsidiaries were liquidated and cancelled during the current period: Luzhou Baonuo Biotechnology Co., Ltd. was liquidated and cancelled in October 2023; Luzhou Laojiao Custom Liquor Co., Ltd. was liquidated and cancelled in December 2023. Since the cancellation of these two companies, they are no longer included in the scope of the consolidated financial statements. 9.6. Other No 2023 Annual Report of Luzhou Laojiao Co., Ltd. 241 10. Interests in other entities 10.1. Interests in subsidiaries 10.1.1. Group composition Unit：CNY Name of Subsidiaries Registered capital Major business location Place of registration Nature of business Shareholding Proportion Acquisition method Direct Indirect Luzhou Laojiao Brewing Co., Ltd. 310,500,00 0.00 Luzhou Luzhou Baijiu manufacture and sales 100.00% Investment Luzhou Red Sorghum Modern Agricultural Development Co., Ltd. 10,000,000.00 Luzhou Luzhou Agricultural product planting and sales 60.00% Business combination under common control Luzhou Laojiao Sales Co., Ltd. 100,000,00 0.00 Luzhou Luzhou Baijiu sales 100.00% Investment Luzhou Laojiao Nostalgic Liquor Marketing Co., Ltd. 5,000,000.0 0 Luzhou Luzhou Baijiu sales 100.00% Investment Luzhou Laojiao Custom Liquor Co., Ltd.1 5,000,000.0 0 Luzhou Luzhou Baijiu sales 15.00% Investment Luzhou Laojiao Selected Supply Chain Management Co., Ltd. 10,000,000.00 Luzhou Luzhou Baijiu sales 100.00% Investment Guangxi Luzhou Laojiao Imported Liquor Industry Co., Ltd. 10,000,000.00 Qinzhou Qinzhou Red wine production and sales 100.00% Investment Luzhou Dingli Liquor Industry Co., Ltd. 5,000,000.0 0 Luzhou Luzhou Baijiu sales 100.00% Investment Luzhou Laojiao Qiankun Cheteau Custom 5,000,000.0 0 Luzhou Luzhou Baijiu sales 100.00% Investment 2023 Annual Report of Luzhou Laojiao Co., Ltd. 242 Liquor Sales Co., Ltd.2 Luzhou Laojiao New Liquor Industry Co., Ltd. 5,000,000.0 0 Luzhou Luzhou Baijiu sales 100.00% Investment Luzhou Laojiao I & ECo., Ltd. 3,000,000.0 0 Luzhou Luzhou Liquor import and export trade 100.00% Investment Luzhou Laojiao Boda Liquor Industry Marketing Co., Ltd. 120,000,00 0.00 Luzhou Luzhou Baijiu sales 75.00% Investment Luzhou Laojiao Fruit Wine Industry Co., Ltd. 50,000,000.00 Luzhou Luzhou Fruit wine sales 41.00% Investment Mingjiang Co., Ltd. (USD) 6,000,000.0 0 America America Baijiu sales 54.00% Investment Luzhou Laojiao International Trade (Hainan) Co., Ltd. 20,000,000.00 Hainan Hainan Food import and export 100.00% Investment Luzhou Pinchuang Technology Co., Ltd. 50,000,000.00 Luzhou Luzhou Technology development and service 100.00% Investment Luzhou Laojiao International Development (Hong Kong) Co., Ltd. (HKD) 10,000.00 Hong Kong Hong Kong Liquor sales 55.00% Investment Luzhou Laojiao Commercial Development (North America) Co., Ltd. (USD) 500,000.00 America America Business development 100.00% Investment Luzhou Laojiao Electronic Commerce Co., Ltd. 60,000,000.00 Luzhou Luzhou Liquor sales 90.00% Investment Luzhou Laojiao Whitail Liquor Industry Co., Ltd. 10,000,000.00 Luzhou Luzhou Liquor sales 35.00% Investment 2023 Annual Report of Luzhou Laojiao Co., Ltd. 243 Luzhou Baonuo Biotechnology Co., Ltd.3 20,000,000.00 Luzhou Luzhou Fermented product manufacture 100.00% Investment Luzhou Laojiao Health Liquor Industry Co., Ltd. 10,000,000.00 Luzhou Luzhou Health care liquor manufacture and sales 100.00% Business combination under common control Luzhou Laojiao Health Sales Co., Ltd. 5,000,000.0 0 Luzhou Luzhou Health care liquor sales 100.00% Business combination under common control Luzhou Laojiao New Retail Co., Ltd. 50,000,000.00 Luzhou Luzhou Baijiu sales 40.00% 100.00% Investment Luzhou Laojiao Technology Innovation Co., Ltd. 500,000,00 0.00 Chengdu Chengdu Technology development and service 40.00% 60.00% Investment Note: 1. Luzhou Laojiao Custom Liquor Co., Ltd. was liquidated and cancelled on December 2023. 2. Luzhou Dingyi Liquor Sales Co., Ltd. changed its name to Luzhou Laojiao Qiankun Cheteau Custom Liquor Sales Co., Ltd. 3 Luzhou BaoNuo Biotechnology Co., Ltd. was liquidated and cancelled in October 2023. Statement for that the proportion of share-holding is different from the proportion of voting rights: Although the Company holds less than 51% of the equity in Luzhou Laojiao Custom Liquor Co., Ltd., Luzhou Laojiao Fruit Wine Industry Co., Ltd., and Luzhou Laojiao Whitail Liquor Industry Co., Ltd., of the five members of the board of directors of each of these companies, three members are appointed by the Company, which represents a majority, and the Company exercises substantive control over these companies. Therefore, they are included in the scope of consolidation. 10.1.2. Important non-wholly-owned subsidiaries Unit：CNY Name of subsidiary Proportion of share holdings of non-Controlling shareholders Gains and losses attributable to non-Controlling shareholders during current period Dividends paid to non-controlling shareholders during current period Closing balance of non-controlling shareholders interest Luzhou Laojiao Boda Liquor Industry Marketing Co., Ltd. 25.00% 29,684,819.8229,684,819.8261,843,872.29 10.1.3. Major financial information of important non-wholly-owned subsidiaries Unit：CNY Name of subsidiary Closing Balance Opening Balance Current assets Non-current Total assets Current liabilitiNon-current Total liabilities Current assets Non-current Total assets Current liabilitiNon-current Total liabilities 2023 Annual Report of Luzhou Laojiao Co., Ltd. 244 assets es liabilities assets es liabilities Luzhou Laojiao Boda Liquor Industry Marketing Co., Ltd. 569,3 77,54 4.62 569,3 77,54 4.62 322,0 02,05 5.47 322,0 02,05 5.47 275,4 19,42 1.12 275,4 19,42 1.12 28,04 3,931.97 28,04 3,931.97 Unit：CNY Name of subsidiary Current Period Previous Period Operating revenue Net profit Total comprehensive income Operating cash flow Operating revenue Net profit Total comprehensive income Operating cash flow Luzhou Laojiao Boda Liquor Industry Marketing Co., Ltd. 1,012,725,794.94 118,739,2 79.29 118,739,2 79.29 - 54,348,21 5.68 64,698,45 1.93 71,134,55 7.89 71,134,55 7.89 99,816,98 0.78 10.1.4. Significant restrictions on using the assets and liquidating the liabilities of the Company N/A 2023 Annual Report of Luzhou Laojiao Co., Ltd. 245 10.1.5. Financial support or other supports provided to structural entities incorporated into the scope of consolidated financial statements N/A 10.2. The transaction of the company with its owner's equity share changing but the company still controls the subsidiary 10.2.1. Note to the owner's equity share changed in subsidiary N/A 10.2.2. The transaction’s influence on the equity of non-controlling interests and the owner's equity attributable to the company as the parent N/A 10.3. Interests in joint ventures and associates 10.3.1. Important joint ventures and associates Name of joint venture/associates Major business location Place of registration Business nature Shareholding proportion Accounting Method Direct Indirect Important joint ventures: none Important associates: Huaxi Securities Co., Ltd. Chengdu, Sichuan Chengdu, Sichuan Securities 10.39% Equity method Basis of holding less than 20% of the voting rights but has a significant impact or holding 20% or more voting rights but does not have a significant impact: The Company has the substantive decision-making power, so the Company still has significant influence on Huaxi Securities. 10.3.2. Major financial information of important associates Unit：CNY Closing Balance/Amount in current period Opening Balance/Amount in previous period Current assets 80,257,215,749.7189,547,378,203.44 Non-current assets 8,633,260,818.248,199,779,781.47 Total assets 88,890,476,567.9597,747,157,984.91 Current liabilities 47,013,859,718.9754,767,331,978.36 Non-current liabilities 19,074,441,893.3520,539,402,724.68 Total liabilities 66,088,301,612.3275,306,734,703.04 Non-controlling shareholder interest 17,277,841.6422,000,726.84 2023 Annual Report of Luzhou Laojiao Co., Ltd. 246 Shareholder interest attributable to parent company 22,784,897,113.9922,418,422,555.03 Share of net assets calculated based on shareholding proportion 2,363,882,349.032,330,073,856.15 Adjusted --Goodwill --Unrealized profits of internal transactions --Others 167,466,735.90167,466,735.90 Book value of equity investments in associate companies 2,535,630,372.302,497,540,592.05 Fair value of equity investments in associate companies that have public quote 2,117,169,677.442,054,418,514.32 Operating revenue 3,180,917,154.723,375,583,530.03 Net profit 424,951,566.18422,356,594.84 Net profit from discontinued operation Other comprehensive income 20,272,992.78 -119,327,423.67 Total comprehensive income 445,224,558.96303,029,171.17 Dividends from associate companies this year 8,184,934.3227,283,114.40 10.3.3. Financial information summarized of unimportant joint ventures and associate companies Unit：CNY Closing Balance/Amount in current period Opening Balance/Amount in previous period Joint ventures: Total following items calculated on the basis of shareholding proportion Associate companies: Total book value of investments 172,624,461.20169,959,961.12 Total following items calculated on the basis of shareholding proportion --Net profit 2,436,674.07 -3,456,109.80 -- Total comprehensive income 2,436,674.07 -3,456,109.80 Other statements: Unimportant associate companies refer to Luzhou Laojiao Postdoctoral Workstation Technology Innovation Co., Ltd., Sichuan Development Liquor Investment Co., Ltd., Sichuan Tongniang Baijiu Industry Technology Research Institute Co., Ltd. and CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. 10.3.4. Notes to the significant restrictions on the ability of joint ventures or associate companies to transfer funds to the Company None 2023 Annual Report of Luzhou Laojiao Co., Ltd. 247 10.3.5. The excess loss of joint ventures or associate companies None 10.3.6. The unrecognized commitment related to investment to joint ventures None 10.3.7. Contingent liabilities related to investment to joint ventures or associate companies None 11. Government grants 11.1. Government grants recognized at the end of the reporting period at the amount receivable □Applicable N/A Reasons for failing to receive government grants in the estimated amount at the estimated point in time □Applicable N/A 11.2. Liability items involving government grants Applicable □ N/A Unit：CNY Item Opening Balance Increase in current period Non-operating income in current period Other income in current period Other changes Closing Balance Related to assets/ income Deferred income 33,704,323.80 3,364,559.0 8 9,296,799.1 4 27,772,083.74 Related to assets Total 33,704,323.80 3,364,559.0 8 9,296,799.1 4 27,772,083.74 11.3. Government grants recognized as current profit or loss Applicable □ N/A Unit：CNY Item Amount in current period Amount in previous period Other income 51,950,003.1134,931,161.52 Non-operating revenue Total 51,950,003.1134,931,161.52 Other statements: The detailed list of liability items related to government grants can be found in Note 7.31.2. The specific details of government grants included in current profit or loss are provided in Note 7.44. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 248 12. Risks related to financial instruments 12.1. Various types of risks arising from financial instruments The Company's primary financial instruments include monetary capital, trading financial assets, accounts receivable, receivables financing, receivables other than tax refundable, other equity instruments, held-for-trading financial liabilities, bills payable, accounts payable, other payables, lease liabilities, some other current liabilities and loans. A detailed description of each financial instrument is set out in Note V and notes to the Consolidated Financial Statement. Risks related to these financial instruments, and risk management policies the Company has adopted to reduce these risks are described as follows. The Company management manages and monitors the risk exposure to ensure the above risks are controlled in a limited scope. The Company adopts sensitivity analysis technology to analyze the possible impact of reasonable and possible changes of risk variables on current profits/losses or shareholders' equity. As any risk variable rarely changes in isolation, and the correlation between variables will have a significant effect on the final impact amount of the change of a risk variable, the following content is based on the assumption that the change of each variable is independent. Risk management objective: The Company strikes an appropriate balance between risk and return, and strives to minimize the negative impact of risk on the Company's operating performance and maximize the interests of shareholders and other equity investors. Risk management policy: The Board of Directors shall be responsible for planning and establishing a risk management framework, formulating risk management policies and related guidelines, and supervising the implementation of risk management measures. The Risk Management Committee shall carry out risk management through close collaboration (including the identification, evaluation and avoidance of relevant risks) with other business units of the Company in accordance with the policies approved by the Board of Directors. The internal audit department shall conduct regular audits on risk management controls and procedures and report the results to the Audit Committee. The Company has formulated risk management policies to identify and analyze the risks it faces, clarifying specific risks and covering many aspects such as credit risk, liquidity risk and market risk management. On a regular basis, the Company evaluates the specific marketing environment and various changes in the Company's business operations to determine whether any risk management policy and system should be updated. The Company diversifies the risks to financial instruments through appropriately diversified investments and business portfolios, and reduces the risk of concentration in any single industry, specific geographic area or specific counterparty by formulating appropriate risk management policies. 12.1.1. Credit risk Credit risk refers to the risk that one party to a financial instrument cannot perform its obligations, causing financial losses to the other party. The Company only trades with recognized, reputable, and 2023 Annual Report of Luzhou Laojiao Co., Ltd. 249 large third parties. In accordance with the Company's policy, the terms of sale with customers are based on transactions of payment before delivery, with only a small amount of credit transactions, and credit review for all customers who require credit to trade. In addition, the Company continuously monitors and controls the balance of the receivables to ensure that the Company does not face significant bad debt risks. In addition, the Company makes full provision for expected credit losses at each balance sheet date based on the collection of receivables. Therefore, the Company's management believes that the Company's credit risk has been greatly reduced. The Company's working capital is deposited in banks with high credit rating, so the credit risk of working capital is low. The Company's risk exposures are spread across multiple contract parties and customers in multiple geographies, with customers in the commerce industry in addition to the alcohol distribution industry (the main industry). No systemic risk has been identified in the relevant industries. Therefore, the Company has no significant credit concentration risk. As at 31 December 2023, the balance of the top five customers of the Company's accounts receivable amounted to CNY 18,671,700, accounting for 99.57% of the balance of the Company's accounts receivable. 12.1.2. Liquidity risk Liquidity risk refers to the risk unable to obtain sufficient funds in time to meet business development needs or to repay debts due and other payment obligations. The Company has sufficient working capital. The liquidity risk is extremely small. The Company's objective is to use a variety of financing instruments such as bank clearing, bank loans and issuing corporate bonds to maintain a balance between financing sustainability and flexibility. As at 31 December 2023, the Company has been able to meet its own continuing operation requirements through the use of cash flow from operations. The analysis of the financial liabilities held by the Company based on the maturity period of the undiscounted remaining contractual obligations is as follows: Item Closing Balance Book value Contract amount not discounted Within 1 year 1-2 years 2-3 years Over 3 years Held-for-trading financial liabilities 9,763.879,763.879,763.87 Accounts payable 2,357,223,733.21 2,357,223,733.212,357,223,733.2 1 Other payable 1,121,036,342.711,121,036,342.71 1,121,036,342.7 1 Non-current liabilities due within one year 78,918,152.4178,918,152.4178,918,152.41 Long-term 10,000,300,000.010,000,300,000.0 5,959,200,000.04,041,100,000.0 2023 Annual Report of Luzhou Laojiao Co., Ltd. 250 loans 0000 Bonds payable 1,498,716,737.021,500,000,000.00 1,500,000,000.0 0 Lease liabilities 22,356,404.4731,673,437.10 6,529,735.366,477,818.27 18,665,883.4 7 Total 15,078,561,133.6 9 15,089,161,429.3 0 3,557,187,992.2 0 7,465,729,735.3 6 4,047,577,818.2 7 18,665,883.4 7 12.1.3. Market risk ① Foreign exchange risk The foreign exchange risk refers to the risk of loss due to exchange rate changes. Apart from the three subsidiaries of the Company which make purchases and sales in USD and HKD, the other major business activities are denominated and settled in CNY. The Company closely monitors the impact of exchange rate fluctuations on its foreign exchange risk, and actively tracks the scale of foreign currency transactions, as well as foreign currency assets and liabilities, to minimise exposure to exchange rate risks. In order to hedge risks in the foreign exchange market, prevent adverse effects from significant fluctuations in exchange rates, control financial expenses and reduce exchange rate risks in overseas operations, the Company's subsidiary, Hong Kong Company, has engaged in forward foreign exchange contract transactions. As at 31 December 2023, the Company's assets and liabilities are mainly in CNY balance. At present, the Company's management considers the impact of changes in foreign exchange risk on the Company's financial statements to be less. ② Rate risk The Company's interest rate risk mainly arises from the long-term loans from banks. Financial liabilities based on the floating interest rate will cause the cash flow interest rate risk to the Company, and financial liabilities based on the fixed interest rate the fair value interest rate risk. The Company will determine the corresponding proportion between the contracts with fixed interest rate and those with floating interest rate in combination with current market condition. ③ Other price risks Other price risk refers to the risk of fluctuation caused by market price changes other than foreign exchange risk and interest rate risk, whether these changes are caused by factors related to a single financial instrument or its issuer or all similar financial instruments traded in the market. Other price risks faced by the Company mainly come from held-for-trading financial assets and investments in other equity instruments measured at fair value. 12.2. Financial assets 12.2.1. Classification of transfer methods Applicable □ N/A Unit：CNY Transfer method Nature of transferred financial assets Amount of transferred financial Derecognized or not Basis for derecognition 2023 Annual Report of Luzhou Laojiao Co., Ltd. 251 assets Endorsement of notes Outstanding bank acceptance bills in accounts receivable financing 232,918,694.19 Yes Almost all its risks and rewards have been transferred Discount of notes Outstanding bank acceptance bills in accounts receivable financing 6,920,708,963.77 Yes Almost all its risks and rewards have been transferred Total 7,153,627,657.96 12.2.2. Financial assets derecognized due to transfer Applicable □ N/A Unit：CNY Item Method of financial assets transfer Amount of derecognized financial assets Gains or losses related to derecognition Outstanding bank acceptance bills in accounts receivable financing Endorsement of notes 232,918,694.19 Outstanding bank acceptance bills in accounts receivable financing Discount of notes 6,920,708,963.77 -162,305,316.52 Total 7,153,627,657.96 -162,305,316.52 12.2.3. Continued involvement in the transfer of assets financial assets □Applicable N/A 13. Fair value disclosure 13.1. Closing fair value of assets and liabilities measured at fair value Unit：CNY Item Closing fair value Level 1 Level 2 Level 3 Total 1. Continuous measurement at fair value -- -- -- -- 1.1 Held-for-trading financial assets 1,426,992,098.831,426,992,098.83 1.1.1 Financial assets measured at fair value with their changes included into current profits/losses 1,426,992,098.831,426,992,098.83 1.1.1.4 Wealth management products 1,426,992,098.831,426,992,098.83 1.3 Investments in other equity 369,635,558.15 33,257,910.65402,893,468.80 2023 Annual Report of Luzhou Laojiao Co., Ltd. 252 instruments 1.6 Accounts receivable financing 5,938,171,007.935,938,171,007.93 Total assets continuously measured at fair value 369,635,558.15 7,398,421,017.417,768,056,575.56 Held-for-trading financial liabilities 9,763.879,763.87 Other 9,763.879,763.87 Total liabilities continuously measured at fair value 9,763.879,763.87 2. Discontinuous measurement at fair value -- -- -- -- 13.2. Determination basis of the market value of items measured continuously and discontinuously within Level 1 of the fair value hierarchy The listed companies in mainland China determine the fair value of other equity instrument investment according to the closing price on the last trading day of Shenzhen Stock Exchange or Shanghai Stock Exchange at the period-end. The companies listed in Hong Kong determine the fair value of other equity instrument investment according to the closing price of Hong Kong Dollar on the last trading day of Hong Kong Stock Exchange at the period-end and the median price of CNY exchange rate disclosed on the same day by China Foreign Exchange Trade System. 13.3. Valuation technique adopted and nature and amount determination of important parameters for continuously and discontinuously within Level 2 of the fair value hierarchy None 13.4. Valuation technique adopted and nature and amount determination of important parameters for continuously and discontinuously within Level 3 of the fair value hierarchy Trading financial assets are wealth management products of the collective asset management plan and are measured at fair value based on the amount calculated on the basis of the net unit value of the underlying assets as published on the official website of the asset manager. Accounts receivable financing: As the timing and price of bills discounted may not be reliably estimated due to the short maturity of the bills all being less than one year and the endorsement of the negotiable bills being valued at book value, the Company measures the bills receivable at their book value as a reasonable estimate of fair value. Other equity instrument investment: Due to no significant changes in business environment, business condition and financial situation of invested companies, the Company shall measure the fair value 2023 Annual Report of Luzhou Laojiao Co., Ltd. 253 according to the lower one between investment cost and the share of net assets enjoyed by invested companies on the base date as the reasonable estimation. Trading financial liabilities: The fair value is measured based on market quotations for similar types of instruments. 13.5. Continuous fair value measurement items at level 3, adjustment between the beginning carrying value and the ending carrying value and sensitivity analysis on unobservable parameters None 13.6. Explain the reason for conversion and the policy governing when the conversion happens if conversion happens among continuous fair value measurement items at different level None 13.7. Changes in valuation techniques in the reporting period and reasons for the changes None 13.8. Fair value of financial assets and liabilities not measured at fair value None 14. Related parties and related party transactions 14.1. The parent company of the Company Parent company Registration place Business nature Registered capital Shareholding proportion by the parent company Voting rights proportion by the parent company Luzhou Laojiao Group Co., Ltd. Luzhou, Sichuan Investment and asset management 2,798,818,800.0 0 25.89% 50.75% Statements for situation of parent company: Note: The reason for the inconsistency between the shareholding proportion and voting rights proportion by the parent company is that on 27 May 2021, Laojiao Group and XingLu Investment Group, the second biggest shareholder, renewed the concerted action agreement which is valid as of 1 June 2021 and ends on 31 May 2024. The agreement: when the parties in deal with the Company’s business development and make decisions by shareholders meeting and board of directors according to the company law and other relevant laws and regulations and the articles of association, the parties should adopt the consistent actions. During the effective period of this agreement, before any party submits proposals involving the major issues of the Company's business development to the 2023 Annual Report of Luzhou Laojiao Co., Ltd. 254 shareholders meeting or exercise the voting rights at the shareholders meeting and the board of directors, the internal coordination for relevant proposals and voting events shall be conducted by persons acting in concert. If there are different opinions, it will be subject to Laojiao Group’s opinion. The nature of parent company: Limited liability company (state-owned); Registration place: Ai Rentang Square, China Baijiu Golden Triangle Liquor Industry Park, Luzhou, Sichuan Province; Business Scope: General project: Social economy consulting services; business management consulting; financial consulting; business headquarters management; import and export agency; trade brokerage; crops planting services; trees planting operation; elder care services; tourism development project planning and consulting; technical agency services; engineering and technological research and experimental development; display device manufacturing; supply chain management services; technical services, technical development, technical consulting, technical communication, technical transfer, and technical promotion; domestic freight transport agency; equity fund-invested asset management services, passenger ticket agent and business agency service. It shall also include licensed projects (business activities can be carried out legally and independently with business license in addition to projects that must be approved by law): Agency bookkeeping; career intermediary activities; food production; food sales; medical services. (business activities that require approval in accordance with laws can be carried out upon approval of relevant authorities, and the specific business projects shall be subject to the approval document or license of relevant departments) The final control party of the Company is SASAC of Luzhou. 14.2. Subsidiaries of the Company For details please see Note 10.1. Interests in subsidiaries. 14.3. Joint ventures and associates of the Company For details please see Note 10.3. Interests in joint ventures and associates. Information on other joint ventures or associates that have related party transactions with the Company in the current period or in the previous period and result in balance: There are no other joint ventures or associates that have related party transactions with the Company in the current period or in the previous period and result in balance. 14.4. Other related party of the Company Name of Other Related Party Relationship with the Company Luzhou Jiachuang Liquor Supply Chain Management Co., Ltd. The same parent company Sichuan Lianzhong Supply Chain Service Co., Ltd. The same parent company Guangzhou Zhongying Gongyuan Energy Saving Technology Co., Ltd. Sub-subsidiary of parent company Luzhou Yuanhai Lianzhong Supply Chain Co., Ltd. Sub-subsidiary of parent company Luzhou Sanrenxuan Liquor Industry Co., Ltd. Joint venture of parent company CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. Joint venture 2023 Annual Report of Luzhou Laojiao Co., Ltd. 255 Luzhou XingLu Water (Group) Co., Ltd. Subsidiary of the second largest shareholder Luzhou XingLu Property Management Co., Ltd. Subsidiary of the second largest shareholder Luzhou Public Transport Group Co., Ltd. Subsidiary of the second largest shareholder Sichuan Meihe Winery Industry Co., Ltd. Minority shareholder of the subsidiary Fruit Wine Industry Sichuan Brewing Art E-business Co., Ltd. Minority shareholder of the subsidiary Custom Liquor Company Luzhou Yucheng Trading Co., Ltd. Minority shareholder of the subsidiary Custom Liquor Company Luzhou 2013 Liquor Marketing Co., Ltd. Minority shareholder of the subsidiary Custom Liquor Company Other subsidiaries of Luzhou Laojiao Group Co., Ltd. Other subsidiary of parent company Other subsidiaries of Luzhou XingLu Investment Group Co., Ltd. Other subsidiary of the second largest shareholder Other statements: Note: As the Note 14.1, the Company will disclose the transactions with XingLu Investment Group and its controlling enterprises as other related parties of the Company. 14.5. Related transactions 14.5.1. Related transactions of purchase and sales of goods / rendering and receipt of services Table of purchase of goods / receipt of services Unit：CNY Name of Related Party Transaction Amount in current period Approved trading amount Whether over approved trading amount Amount in previous period Receipt of services: Luzhou XingLu Investment Group Co., Ltd. and its other subsidiaries Property service, advertising service, etc. 28,275,528.70 26,186,859.88 Laojiao Group and its other subsidiaries Training, accommodation, warehousing, transportation services and property costs, etc. 49,154,313.56 27,895,483.79 CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. Conference fees, travel service fee, etc. 7,840,147.72 9,296,122.35 Luzhou Sanrenxuan Liquor Industry Co., Ltd. Advertising service 280,000.00 Purchase of goods: Laojiao Group and its other Raw materials, water, power, 193,980,923.60 106,345,871.05 2023 Annual Report of Luzhou Laojiao Co., Ltd. 256 subsidiaries etc. Luzhou XingLu Investment Group Co., Ltd. and its other subsidiaries Gas, water 14,191,020.92 11,773,961.98 Sichuan Meihe Winery Industry Co.,Ltd. Other wine 20,160.00 Total 293,742,094.50 181,498,299.05 Table of sales of goods and rendering of service Unit：CNY Name of Related Party Transaction Amount in current period Amount in previous period Sales of goods: Laojiao Group and its subsidiaries Liquor, etc. 41,823,418.4552,481,609.52 CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. Liquor 80,916,407.69134,111,657.39 Luzhou Sanrenxuan Liquor Industry Co., Ltd. Liquor 28,674,936.80162,125,345.72 Sichuan Brewing Art E-business Co., Ltd. Liquor 72,355,864.08 Luzhou Yucheng Trading Co., Ltd. Liquor 3,787,740.88 Luzhou 2013 Liquor Marketing Co., Ltd. Liquor 580.00 Total 227,558,947.90348,718,612.63 14.5.2. Related party leasing The Company as lessor: Unit：CNY Name of lessee Type of leased asset Leasing income recognized during current period Leasing income recognized during previous period Laojiao Group and its subsidiaries House lease 2,140,080.001,681,340.00 The Company as lessee: Unit：CNY Name of lessor Type of assets leased Rental expenses of short-term lease simplified treated and low-value asset lease (if applicable) Variable lease payments not included in the measurement of lease liabilities (if applicable) Paid rent Income expense of lease liabilities undertaken Increased use right assets Amount in current period Amount in previous period Amount in current period Amount in previous period Amount in current period Amount in previous period Amount in current period Amount in previous period Amount in current period Amount in previous period Laojiao Group and its House lease 2,480,516.20 1,924,834.44 2023 Annual Report of Luzhou Laojiao Co., Ltd. 257 subsidiaries 14.5.3. Key management compensation Unit：CNY Item Amount in current period Amount in previous period Key management compensation 14,678,785.2214,486,473.15 14.5.4. Other related transactions N/A 14.6. Receivables and payables of related parties 14.6.1. Receivables Unit：CNY Item Related party Closing Balance Opening Balance Book value Provision for bad debt Book value Provision for bad debt Prepayment Sichuan Meihe Winery Industry Co.,Ltd. 2,961,479.50 2,961,479.50 Prepayment CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. 518,886.00 2,379.50 Prepayment Luzhou XingLu Water (Group) Co., Ltd. 705,446.15 Prepayment Luzhou Public Transport Group Co., Ltd. 126,001.64 Prepayment Luzhou Laojiao Group Co., Ltd. 3,522,751.07 Other receivables CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. 5,111,743.43780,587.17 14.6.2. Payables Unit：CNY Item Related party Closing Balance Opening Balance Accounts payable Luzhou Yuanhai Lianzhong Supply Chain Co., Ltd. 109,200.00 Accounts payable Sichuan Lianzhong Supply Chain Service Co., Ltd. 10,583,919.376,993,503.13 Accounts payable Luzhou Public Transport Group Co., Ltd. 469,479.45 2023 Annual Report of Luzhou Laojiao Co., Ltd. 258 Contractual liabilities (tax inclusive) CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. 13,933,613.226,070,341.82 Contractual liabilities (tax inclusive) Luzhou Jiachuang Liquor Supply Chain Management Co., Ltd. 2,135.994,525,508.00 Contractual liabilities (tax inclusive) Luzhou Sanrenxuan Liquor Industry Co., Ltd. 2,553,000.001,621,994.29 Contractual liabilities (tax inclusive) Sichuan Lianzhong Supply Chain Service Co., Ltd. 2,508.0951,114.78 Other payables Sichuan Development Liquor Investment Co., Ltd. 4,494,000.00 Other payables Luzhou Xinglu Property Management Co., Ltd. 154,920.20 Other payables Sichuan Lianzhong Supply Chain Service Co., Ltd. 37,911,448.0017,633,148.00 Other payables CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. 1,050,000.00750,000.00 Other payables Luzhou Jiachuang Liquor Supply Chain Management Co., Ltd. 360,000.00 Other payables Luzhou Sanrenxuan Liquor Industry Co., Ltd. 150,000.00150,000.00 Other payables Guangzhou Zhongying Gongyuan Energy Saving Technology Co., Ltd. 140,444.35 Other payables Luzhou Laojiao Group Co., Ltd. 80,000.00 Other payables Luzhou Yuanhai Lianzhong Supply Chain Co., Ltd. 50,000.00 14.7. Commitments of the related parties None 15. Stock payment 15.1. The overall situation of share-based payments Applicable □ N/A Unit：CNY Type of granting object Granted in the Current Period Exercised in the Current Period Unlocked in the Current Period Invalid in the Current Period Number Amount Number Amount Number Amount Number Amount N/A Outstanding stock options or other equity instruments at the end of the reporting period □Applicable N/A Other statements: 2023 Annual Report of Luzhou Laojiao Co., Ltd. 259 Note 1: The Company's share capital increased by 92,669 shares during the current period, as a result of the third grant of restricted share incentive scheme in December 2022. On 15 January 2023, the Company received subscription payments in monetary assets for these restricted shares from 17 incentive recipients. These shares were listed on 17 February 2023. Note 2: There were no stock options or other equity instruments outstanding at the end of the current period. 15.2. Equity-settled share-based payments Applicable □ N/A Unit：CNY Method of determining the fair value of equity instruments on the grant date The closing price of restricted stocks on the grant date deducted the grant price thereof Important parameters of fair value of equity instruments on the grant date The closing price of restricted stocks on the grant date Basis to determine number of equity instrument that can be exercised The Company's management considered factors such as changes in the number of eligible employees for the latest exercisable options and the level of performance achievement to make the best estimate. Reason for remarkable difference between the estimate of the current period and that of previous period N/A Total amount of equity-settled share-based payments included into capital reserves 1,462,476,634.08 Total costs of recognizing equity-settled share-based payments in the current period 381,280,072.52 15.3. Cash-settled share-based payments □ Applicable N/A 15.4. Share-based payment expenses in the current period Applicable □ N/A Unit：CNY Type of granting object Expenses for equity-settled share-based payments Expenses for cash-settled share-based payments Production staff 50,891,052.88 Sales staff 98,732,302.98 Administrative staff 206,559,351.04 R&D staff 25,097,365.62 Total 381,280,072.52 15.5. Modification and termination of share-based payments None 2023 Annual Report of Luzhou Laojiao Co., Ltd. 260 16. Commitments and contingencies 16.1. Commitments Significant commitments at the balance sheet date None 16.2. Contingencies 16.2.1. Significant contingencies at the balance sheet date On 15 October 2014 and 10 January 2015, the Company disclosed three saving deposits involving contract disputes in Agricultural Bank of China Changsha Yingxin Sub-branch, Industrial and Commercial Bank of China Nanyang Zhongzhou Sub-branch and another bank, with a total amount of CNY 500 million. The public security organization has investigated, and the investigation of related cases and the preservation of assets are under way. The Company has initiated a civil procedure to recover the loss from the responsible unit. As of the period-end, the Company has recovered the abovementioned saving deposits involving contract disputes with CNY 372,435,100. Except for the above matters, the Company has no other significant contingencies that need to be disclosed as the end of 31 December 2023. 16.2.2. Explanation shall be given even if there is no significant contingency for the Company to disclose There was no significant contingency in the Company to disclose. 17. Post balance sheet event 17.1. Profit distribution Dividends to be distributed for every 10 existing shares held (CNY) 54.00 Profit distribution plan Upon the resolution of the Board of Directors, the 2023 profit distribution plan was approved: Based on the current 1,471,987,769 shares, a cash dividend of CNY 54.00 (tax included) will be distributed for every 10 existing shares held, representing a total cash dividend amount of CNY 7,948,733,952.60 (tax included). Where any change occurs to the Company's total share capital before the implementation of the distribution plan, relevant adjustments shall be made with the same total distribution amount. 17.2. Sales return There are no important sales returning after balance sheet date. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 261 17.3. Statement for other post balance sheet events 17.3.1. Repurchase and retirement of some restricted shares and adjustment of repurchase price According to the 38th meeting of the 10th Board of Directors held on 23 January 2024, the Proposal on the Repurchase and Retirement of Certain Restricted Shares and the Adjustment of Repurchase Price was deliberated and approved. With the implementation of the 2022 profit distribution plan of the Company completed, the Company agreed to adjust the repurchase price of restricted shares accordingly, from CNY 89.466 per share to CNY 85.241 per share based on the Company's 2021 Restricted Share Incentive Scheme (Draft). Meanwhile, as three incentive recipients no longer met the incentive conditions, the Company decided to repurchase and cancel a total of 15,266 restricted shares that were granted to these incentive recipients but have not been released from the restriction period. The total repurchase funds amounted to CNY 1,301,289.11. 17.3.2. The achievement of lifting the restriction conditions in the first restriction period under the 2021 Restricted Share Incentive Scheme At the 38th meeting of the 10th Board of Directors held on 23 January 2024, the Proposal on the Achievement of Lifting the Restriction Conditions in the First Restriction Period under the 2021 Restricted Share Incentive Scheme was reviewed and approved. In accordance with the relevant provisions of the 2021 Restricted Share Incentive Scheme (Draft) and the Performance Assessment Measures for the 2021 Restricted Share Incentive Scheme, the restriction conditions in the first restriction period under the 2021 Restricted Share Incentive Scheme have been achieved. The Company agreed to proceed with the restriction lifting procedures for 435 incentive recipients who met the conditions. Restricted shares eligible for release from restricted sale amounted to 2,734,640 shares, representing 0.19% of the current total share capital of the Company. This proposal was considered and approved by the Remuneration and Appraisal Committee of the Board of Directors of the Company. The date of listing for the restricted shares eligible for release from restricted sale was 22 February 2024. Except for the above matters, the Company has no other post balance sheet events that need to be disclosed as of 31 December 2023. 18. Other important information 18.1. Annuity plan The Company carried out the enterprise annuity payment work normally during the reporting period. The enterprise annuity funds are paid by both the Company and employees. The Company's contribution shall not exceed 8% of the Company's total salary in the previous year as stipulated by the state, and the individual contribution shall be withheld by the Company according to 1% of total salary of the employee in the previous year. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 262 18.2. Segment information 18.2.1 Recognition basis and accounting policies of reportable segment Except for the business on baijiu sales, the Company does not operate other businesses that have a significant impact on operation results. In addition, the Company operates mainly from China and main assets also located in China, so the Company does not need to disclose segment data. 18.3. Other significant events that can affect investors’ decision 18.3.1 Saving deposits involving contract disputes As stated in Note 16.2, three saving deposits involved contract disputes in Agricultural Bank of China Changsha Yingxin Sub-branch, Industrial and Commercial Bank of China Nanyang Zhongzhou Sub-branch and another bank, with a total amount of CNY 500 million. At present, the investigation of related cases and the preservation of assets have been under way. The Company has initiated a civil procedure to recover the loss from the responsible unit. Taking into account the current amount of assets preserved by the public security authorities and the contents of the professional legal opinion issued by Beijing Weiheng (Chengdu) Law Firm on 5 March 2023 that “given that since the issuance of the previous legal opinion, a few recovery has been achieved through the criminal and civil execution, totalling CNY 372 million. At the same time, it is suggested that the total amount of bad debt provision for the three aforementioned places remain CNY 120 million”, the Company has made a bad debt provision of CNY 120 million for savings deposit involved in contractual disputes as of the end of the period, and the amount of the bad debt provision may be adjusted in the future based on the litigation process and recovery. 18.3.2. Deliberating and approving the Proposal on the De-registration of Luzhou Laojiao Custom Liquor Co., Ltd. On 28 August 2023, at the 32nd meeting of the 10th Board of Directors, the Proposal on the De-registration of Luzhou Laojiao Custom Liquor Co., Ltd. was deliberated and approved. Luzhou Laojiao Custom Liquor Co., Ltd. ("Custom Liquor Company") is a subsidiary of Luzhou Laojiao Sales Co., Ltd., a wholly-owned subsidiary of the Company, and is mainly responsible for the development and sales of customised baijiu products for Luzhou Laojiao. According to the Company's plan for the custom baijiu business, the Company decided to transfer the custom baijiu business to Luzhou Laojiao Qiankun Distillery Custom Liquor Sales Co., Ltd, a wholly-owned subsidiary of Luzhou Laojiao Sales Co., Ltd. Therefore, the Custom Liquor Company was de-registered. Except for the above matters, the Company has no other significant events that can affect investors’ decision that need to be disclosed as of 31 December 2023. 2023 Annual Report of Luzhou Laojiao Co., Ltd. 263 19. Notes to the main Items of the financial statements of parent company (all currency unit is CNY, except other statements) 19.1. Accounts receivable 19.1.1. Disclosure by aging Unit：CNY Aging Closing book balance Opening book balance Within 1 year (including 1 year) 50,000.00 Total 0.0050,000.00 19.1.2. Disclosure by withdrawal methods for bad debts Unit：CNY Type Closing Balance Opening Balance Book balance Provision for bad debt Book value Book balance Provision for bad debt Book value Amount Proportion Amount Proportion Amount Proportion Amount Proportion Including: Accounts receivable tested for impairment by the portfolio 50,000.00 100.00 % 2,500.0 0 5.00% 47,500.00 Including: Accounts receivable tested for impairment on the portfolio with characteristics of credit risk 50,000.00 100.00 % 2,500.0 0 5.00% 47,500.00 Total 0.00 0.00 50,000.00 100.00 % 2,500.0 0 5.00% 47,500.00 Accounts receivable tested for impairment by the portfolio: CNY 0. If adopting the general mode of expected credit loss to withdraw provision for bad debt of accounts receivable 2023 Annual Report of Luzhou Laojiao Co., Ltd. 264 □Applicable N/A 19.1.3. Provision and recovery for bad and doubtful debt in the current period Allowance of provision for bad debt: Unit：CNY Type Opening Balance Changes in current period Closing Balance Allowance Reversal or recovery Write-off Other Provision allowance by individual item Provision allowance by risk portfolio 2,500.00 -2,500.00 Total 2,500.00 -2,500.00 Of which significant amount of recovered or transferred-back bad debt provision for the current period: Note: There is no significant provision in accounts receivable reversed or recovered in the reporting period. 19.1.4. Accounts receivable written-off in the current period Notes to verification of accounts receivable: There is no accounts receivable written-off in the current period. 19.2. Other receivables Unit：CNY Item Closing Balance Opening Balance Other receivables 14,844,650,322.98 1 12,042,401,844.84 Total 14,844,650,322.9812,042,401,844.84 Note: 1. Other receivables above-mentioned refer to other receivables after deducted interest receivable and dividend receivable. 19.2.1. Other receivables 19.2.1.1. Other receivables disclosed by nature Unit：CNY Nature Closing book balance Opening book balance Intercourse funds of subsidiaries in the consolidation scope 14,828,601,798.8912,023,243,459.84 Intercourse funds and others 9,004,523.7811,257,616.61 Saving deposits involving contract disputes1 127,564,873.50129,049,496.98 Total 14,965,171,196.1712,163,550,573.43 Note: 1. The saving deposits involving contract disputes refer to three deposits amounting to CNY 500,000,000.00 with Changsha Yingxin Sub-branch of Agricultural Bank of China and Nanyang Zhongzhou Sub-branch of Industrial and Commercial Bank of China disclosed by the Company in the 2023 Annual Report of Luzhou Laojiao Co., Ltd. 265 2014 Annual Report. The deposits have lost the nature of monetary fund due to their involvement in contract disputes and have thus been transferred into “other receivables”. As of 31 December 2023, the closing balance of that fund was CNY 127,564,873.50. 19.2.1.2. Disclosure by aging Unit：CNY Aging Closing book balance Opening book balance Within 1 year (including 1 year) 14,837,508,542.6712,030,843,921.37 1-2 years 72,855.08 2-3 years 13,480.003,511,500.00 Over 3 years 127,649,173.501129,122,296.98 3-4 years 11,500.0022,800.00 4-5 years 22,800.00 Over 5 years 127,614,873.50129,099,496.98 Total 14,965,171,196.1712,163,550,573.43 Note: 1 Other receivables with significant single amount exceeding three years in age relates to savings deposit of CNY 127,564,873.50, which are yet to be recovered due to contractual disputes. 19.2.1.3. Disclosure by withdrawal methods for bad debts Unit：CNY Type Closing balance Opening Balance Book balance Provision for bad debt Book value Book balance Provision for bad debt Book value Amount Proportion Amount Proportion Amount Proportion Amount Proportion Other receivables tested for impairment individually 127,564,873.50 0.85% 120,000,000.00 94.07% 7,564,8 73.50 129,049,496.98 1.06% 120,000,000.00 92.99% 9,049,4 96.98 Including: Other receivables that are individually material and for which a separate provision for bad debts 127,564,873.50 0.85% 120,000,000.00 94.07% 7,564,8 73.50 129,049,496.98 1.06% 120,000,000.00 92.99% 9,049,4 96.98 2023 Annual Report of Luzhou Laojiao Co., Ltd. 266 has been made Other receivables tested for impairment by the portfolio 14,837,606,322.67 99.15% 520,873.19 0.00% 14,837,085,449.48 12,034,501,076.45 98.94% 1,148,7 28.59 0.01% 12,033,352,347.86 Including: Other receivables tested for impairment on the portfolio with characteristics of credit risk 14,837,606,322.67 99.15% 520,873.19 0.00% 14,837,085,449.48 12,034,501,076.45 98.94% 1,148,7 28.59 0.01% 12,033,352,347.86 Total 14,965,171,196.17 100.00 % 120,520,873.19 0.81% 14,844,650,322.98 12,163,550,573.43 100.00 % 121,148,728.59 1.00% 12,042,401,844.84 Other receivables tested for impairment individually: CNY 120,000,000.00 Unit：CNY Name Opening Balance Closing Balance Book balance Provision for bad debt Book balance Provision for bad debt Proportion Reason Saving deposits involving contract disputes 129,049,496.9 8 120,000,000.0 0 127,564,873.5 0 120,000,000.0 0 94.07% Provision based on legal opinion Total 129,049,496.9 8 120,000,000.0 0 127,564,873.5 0 120,000,000.0 0 Other receivables tested for impairment by the portfolio: CNY 520,873.19 Unit：CNY Name Closing Balance Book balance Provision for bad debt Proportion Risk portfolio 9,004,523.78520,873.195.78% Including: within 1 year 8,906,743.78445,337.195.00% 1-2 years 2-3 years 13,480.002,696.0020.00% 3-4 years 11,500.004,600.0040.00% 4-5 years 22,800.0018,240.0080.00% Over 5 years 50,000.0050,000.00100.00% Other portfolio114,828,601,798.89 2023 Annual Report of Luzhou Laojiao Co., Ltd. 267 Total 14,837,606,322.67520,873.19 Note: 1 Other portfolios represent inter-subsidiary funds within the scope of consolidation in respect of receivables, which are deemed risk-free and thus no bad debt provision is made. Notes to the determination basis for the portfolio: Accounts receivable of the same age have similar credit risk characteristics. Allowance of provision for bad debt adopting the general mode of expected credit loss: Unit：CNY Provision for bad debt First stage Second stage Third stage Total Expected credit loss of the next 12 months Expected loss in the duration (credit impairment not occurred) Expected loss in the duration (credit impairment occurred) Balance of 1 January 2023 1,148,728.59 120,000,000.00121,148,728.59 Balance of 1 January 2023 in the current period Allowance of the current period -627,855.40 -627,855.40 Balance of 31 December 2023 520,873.19 120,000,000.00120,520,873.19 The basis for the division of each stage and the withdrawal proportion of bad debt provision The basis for division is that other receivables with single bad debt provision represent credit impairment losses incurred since initial recognition (Stage 3), while the remaining portion is categorised based on aging portfolio. Withdrawal proportions of bad debt provision are 0.004% for Stage 1 and 94.07% for Stage 3, totalling 0.81%. Changes of book balance with significant amount changed of loss provision in the current period □Applicable N/A 19.2.1.4. Provision and recovery for bad and doubtful debt in the current period Allowance of provision for bad debt: Unit：CNY Type Opening Balance Changes in current period Closing Balance Allowance Reversal or recovery Write-off or verification Other Other receivables tested for impairment individually 120,000,000.00 120,000,000.00 Other receivables tested for impairment by the portfolio 1,148,728.59 -627,855.40 520,873.19 Total 121,148,728.59 -627,855.40 120,520,873.19 2023 Annual Report of Luzhou Laojiao Co., Ltd. 268 Note: There is no significant provision in other receivables reversed or recovered in the reporting period. 19.2.1.5. Other receivables written-off in the current period Notes to verification of accounts receivable: There is no other receivables written-off in the current period. 19.2.1.6. Top five entities with the largest balances of the other receivables Unit：CNY Company Name Nature Closing Balance Aging Proportion in total receivables Provisioning amount at period end Luzhou Laojiao Brewing Co., Ltd. Internal transactions 11,593,102,922.5 7 Within 1 year 77.47% Luzhou Laojiao Sales Co., Ltd. Internal transactions 1,829,197,224.11 Within 1 year 12.22% Luzhou Laojiao Electronic Commerce Co., Ltd. Internal transactions 482,953,547.36 Within 1 year 3.23% Luzhou Dingli Liquor Industry Co., Ltd. Internal transactions 406,152,952.50 Within 1 year 2.71% Luzhou Laojiao Import and Export Trade Co., Ltd. Internal transactions 157,107,430.51 Within 1 year 1.05% Total 14,468,514,077.05 96.68% 19.2.1.7. Presentation in other receivables due to the centralized management of funds Other statements: There were no other receivables presented in due to the centralized management of funds in the current period. 19.3. Long-term equity investments Unit：CNY Item Closing Balance Opening Balance Book balance Provision for impairment Book value Book balance Provision for impairment Book value Investment in subsidiary 3,790,179,449.26 3,790,179,449.26 3,611,563,148.96 3,611,563,148.96 Investment in associates and joint venture 2,707,254,604.74 2,567,098.80 2,704,687,505.94 2,669,970,043.71 2,567,098.80 2,667,402,944.91 Total 6,497,434,054.00 2,567,098.80 6,494,866,955.20 6,281,533,192.67 2,567,098.80 6,278,966,093.87 2023 Annual Report of Luzhou Laojiao Co., Ltd. 269 19.3.1. Investment in subsidiary Unit：CNY Investee Opening Balance (book value) Changes in current period Closing Balance (book value) Closing balance of provision for impairment Investee Increase Decrease Provision for impairment Other Luzhou Pinchuang Technology Co., Ltd. 76,953,72 5.32 17,071,50 3.83 94,025,22 9.15 Luzhou Laojiao Sales Co., Ltd. 205,765,0 55.56 88,022,57 9.98 293,787,6 35.54 Luzhou Laojiao Brewing Co., Ltd. 3,234,179,228.31 57,597,38 8.59 3,291,776,616.90 Luzhou Laojiao International Development (Hong Kong) Co., Ltd. 9,023,636.96 3,707,195.23 12,730,83 2.19 Luzhou Laojiao Electronic Commerce Co., Ltd. 59,948,38 7.34 1,023,224.45 60,971,61 1.79 Luzhou Baonuo Biotechnology Co., Ltd. 20,000,00 0.00 20,000,00 0.001 Luzhou Laojiao New Retail Management Co., Ltd. 20,000,00 0.002 7,115,915.71 27,115,91 5.71 Luzhou Laojiao Health Liquor Industry Co., Ltd. 5,693,115.47 4,078,492.51 9,771,607.98 Total 3,611,563,148.96 20,000,00 0.00 20,000,00 0.00 178,616,3 00.303 3,790,179,449.26 Note: 1 The decrease in investment for the current period occurred as the subsidiary Luzhou Baonuo Biotechnology Co., Ltd. completed business and tax de-registration in October 2023 and the Company recovered the investment amount of CNY 20,000,000.00. 2. Additional investment for the current period represents the subscribed amount of capital 2023 Annual Report of Luzhou Laojiao Co., Ltd. 270 contribution of CNY 20,000,000.00 paid by the Company for the current period in accordance with the resolution of the general meeting of shareholders and the articles of association of the subsidiary Luzhou Laojiao New Retail Management Co., Ltd. 3. Other increases in the current period are due to the Company's restricted share incentive business, where the parent company (the settlement enterprise) is an investor in the recipient subsidiary (the service enterprise) and is recognised as a long-term equity investment in the subsidiary (the recipient service enterprise) based on the fair value of the equity instruments at the date of grant, and the capital reserve (other capital reserves) is recognised at the same time. 19.3.2. Investment in associate and joint venture Unit：CNY Investee Opening Balance (book value) Opening Balance of provision for impairment Changes in current period Closing Balance (book value) Closing Balance of provision for impairment Increase Decrease Gain or loss recognized under equity method Adjustments of other comprehensive income Other changes in equity Cash divided or profit declared Provision for impairment Other 1. Joint Ventures 2. Associate Huaxi Securities Co., Ltd. 2,497,540,5 92.05 2,567,098.8 0 44,16 7,627.40 2,107,087.1 7 8,184,934.3 2 2,535,630,3 72.30 2,567,098.8 0 Luzhou Laojiao Postdoctoral Workstation Technology Innovation Co., Ltd. 40,18 5,894.77 - 1,846,843.2 6 38,33 9,051.51 Sichuan Development Liquor Investment Co., Ltd. 5,889,654.2 4 8,326.61 5,897,980.8 5 CTS Luzhou Laojiao 123,7 86,80 3.85 805,4 71.42 227,8 26.01 124,8 20,10 1.28 2023 Annual Report of Luzhou Laojiao Co., Ltd. 271 Cultural Tourism Development Co., Ltd. Subtotal 2,667,402,9 44.91 2,567,098.8 0 43,13 4,582.17 2,107,087.1 7 227,8 26.01 8,184,934.3 2 2,704,687,5 05.94 2,567,098.8 0 Total 2,667,402,9 44.91 2,567,098.8 0 43,13 4,582.17 2,107,087.1 7 227,8 26.01 8,184,934.3 2 2,704,687,5 05.94 2,567,098.8 0 The recoverable amount is determined based on the net amount of the fair value minus disposal costs □Applicable N/A The recoverable amount is determined by the present value of the forecasted future cash flow □Applicable N/A The reason for the discrepancy between the foregoing information and the information used in the impairment tests in prior years or external information The reason for the discrepancy between the information used in the Company's impairment tests in prior years and the actual situation of those years 19.4. Operating revenue and cost of sales Unit：CNY Item Current Period Previous Period Revenue Cost of sales Revenue Cost of sales Primary business 9,122,675,610.696,913,171,144.798,390,524,714.126,176,755,863.73 Other business 22,784,970.561,890,828.1719,908,823.141,309,332.64 Total 9,145,460,581.256,915,061,972.968,410,433,537.266,178,065,196.37 Details: Unit：CNY Contract category Baijiu sales Total Operating revenue Cost of sales Operating revenue Cost of sales Business type Including: Medium and high grade baijiu 9,103,912,122.736,903,643,069.789,103,912,122.736,903,643,069.78 Other baijiu 18,763,487.969,528,075.0118,763,487.969,528,075.01 By operating 2023 Annual Report of Luzhou Laojiao Co., Ltd. 272 segment Including: Domestic 9,122,675,610.696,913,171,144.799,122,675,610.696,913,171,144.79 Outbound Market or customer type Including: Contract type Including: Commodity sales contract 9,122,675,610.696,913,171,144.799,122,675,610.696,913,171,144.79 By commodity transfer time Including: By contract term Including: By sales channel Including: Total 9,122,675,610.696,913,171,144.799,122,675,610.696,913,171,144.79 Other statements The Company's main business is the production and sale of baijiu. Revenue is recognised at the point when the Company transfers control of the relevant goods to the customer and fulfils its performance obligations. Information in relation to the transaction price apportioned to the residual contract performance obligation: The amount of revenue corresponding to performance obligations of contracts signed but not performed or not fully performed yet was CNY 0.00 at the period-end. 19.5. Investment income Unit：CNY Item Current Period Previous Period Investment income from long-term equity investments under cost method 9,903,401,819.297,777,018,295.87 Investment income from long-term equity investments under equity method 43,134,582.1745,123,842.50 Investment income gained during the period of holding held-for-trading financial assets 2,391,009.806,813,617.83 Investment income from disposal of held-for-trading financial assets 4,868,720.179,438,465.78 2023 Annual Report of Luzhou Laojiao Co., Ltd. 273 Dividends income gained during the period of holding other equity instrument investment 11,268,626.398,078,717.93 Investment income gained from put-back and early redemption of bonds -1,055,251.33 -4,241,494.76 Total 9,964,009,506.497,842,231,445.15 19.6. Other Note: There is no major restriction on the repatriation of the Company's investment income. Including: investment income from long-term equity investments under the cost method: Item Current Period Previous Period Luzhou Laojiao Sales Co., Ltd.9,870,272,284.787,709,806,254.66 Luzhou Baonuo Biotechnology Co., Ltd.11,201,166.63 10,515,293.70 Luzhou Pinchuang Technology Co., Ltd. 30,991,503.61 Luzhou Laojiao International Development（Hong Kong）Co., Ltd. 18,070,349.00 Luzhou Laojiao Tourism Culture Co., Ltd. 7,634,894.90 Luzhou Laojiao New Retail Management Co., Ltd.21,928,367.88 Total 9,903,401,819.297,777,018,295.87 Including: investment income from long-term equity investments under the equity method: Item Current Period Previous Period Huaxi Securities Co.,Ltd.44,167,627.4043,897,917.31 Luzhou Laojiao Postdoctoral Workstation Technology Innovation Co., Ltd. -1,846,843.26185,894.77 Sichuan Development Liquor Investment Co., Ltd.8,326.61162,805.88 CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd.805,471.42877,224.54 Total 43,134,582.1745,123,842.50 Including: dividend income gained during the period of holding other equity instrument investment: Item Current Period Previous Period North Chemical Industries Co., Ltd.78,177.7570,359.97 Guotai Junan Securities Co., Ltd.6,241,808.418,008,357.96 Luzhou Sanrenxuan Liquor Industry Co., Ltd.500,000.00 Luzhou Bank Co., Ltd.3,471,360.00 China Tourism Group Duty Free Corporation Limited 977,280.23 Total 11,268,626.398,078,717.93 20. Supplementary information 20.1. Detailed statement of non-recurring gains and losses in the current period (+ for gain, - for loss) Applicable □ N/A Unit：CNY Item Amount Note 2023 Annual Report of Luzhou Laojiao Co., Ltd. 274 Gains or losses on disposal non-current assets 44,694,238.37 For details please see Note 7.48 Government grants recognised in profit or loss (exclusive of those that are closely related to the Company's normal business operations and given in accordance with defined criteria and in compliance with government policies, and have a continuing impact on the Company's profit or loss) 51,950,003.11 For details please see Note 7.44 Gain or loss on fair-value changes in financial assets and liabilities held by a non-financial enterprise, as well as on disposal of financial assets and liabilities (exclusive of the effective portion of hedges that is related to the Company's normal business operations) 68,181,502.73 For details please see Note 7.45 and Note 7.46 Other non-operating income and expenditure except above-mentioned items -35,875,412.66 For details please see Note 7.49 and Note 7.50 Less: Corporate income tax 31,697,444.12 Minority interests (after tax) 1,250,993.49 Total 96,001,893.94 -- Other items that meet the definition of non-recurring gain/loss: □ Applicable N/A No such cases for the reporting period. Explain the reasons if the Company classifies any non-recurring gain/loss item mentioned in the Explanatory Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public-Non-Recurring Gains and Losses as a recurring gain/loss item. □ Applicable N/A 20.2. Return on equity and earnings per share Profit during reporting period Weighted average ROE EPS (CNY/Share) Basic EPSDiluted EPS Net profits attributable to common shareholders of the Company 35.07% 9.029.02 Net profits attributable to common shareholders of the Company before non-recurring gains and losses 34.81% 8.968.96 20.3. Differences between accounting data under domestic and overseas accounting standards 20.3.1. Differences of net profit and net assets disclosed in financial reports prepared under international and Chinese accounting standards □ Applicable N/A 2023 Annual Report of Luzhou Laojiao Co., Ltd. 275 20.3.2. Differences of net profit and net assets disclosed in financial reports prepared under overseas and Chinese accounting standards □ Applicable N/A 20.3.3. Explain reasons for the differences between accounting data under domestic and overseas accounting standards; for any adjustment made to the difference existing in the data audited by the foreign auditing agent, such foreign auditing agent’s name shall be clearly stated 20.4. Other N/A Section IImportant Statements, Contents and Definitions Section IICompany Profile and Key Financial Results 1. Corporate information 2. Contact us 3. Information disclosure and place where the annual report is kept 4. Company registration and alteration 5. Other relevant information Section IIIManagement Discussion and Analysis 4.3. Expenses 4.3.1. Breakdown of selling and distribution expenses 4.3.2. Breakdown of advertising expenses 4.4. R&D investments 4.5. Cash flows 5. Analysis of non-core business 6. Assets and liabilities 6.1. Significant change of asset items 6.2. Assets and liabilities measured at fair value 6.3. Restricted asset rights as of the end of this reporting period 7. Investment 7.1. Total investment 7.2. Significant equity investment made in the reporting period 7.3. Significant ongoing non-equity investment in the reporting period 7.4. Financial assets investment 7.4.1. Securities investment 7.4.2. Derivative investment A. Derivatives investments for hedging purposes in the reporting period B. Derivatives investments for speculative purposes in the reporting period 7.5. Use of funds raised 7.5.1. General use of funds raised 7.5.2. Fund raised for committed projects 7.5.3. Re-purposed funds raised 8. Sale of major assets and equity interests 8.1. Sale of major assets 8.2. Sale of major equity interests 9. Analysis of major subsidiaries 10. Structured entities controlled by the Company 11. Outlook for the future development of the Company 12. Visits paid to the Company for purposes of research, communication, interview, etc. in the reporting period 13. Implementation of the action plan for "Dual Enhancement of Development Quality and Shareholder Returns" 1. Basic situation of corporate governance 2. Independency of assets, personnel, finance, organizations and businesses which are separated from the controlling shareholder and the actual controller 3. Horizontal competition 4. Annual meeting of shareholders and special meetings of shareholders convened during the reporting period 4.1. Meetings of shareholders convened during the reporting period 4.2. Special meetings of shareholders convened at the request of preferred shareholders with resumed voting rights 5. Directors, supervisors, and senior management 5.1 General information 5.2 Employment information 5.3 Remuneration of directors, supervisors and senior management 6. Performance of directors during the reporting period 6.1. Board meetings convened during the reporting period 6.2. Attendance of directors in board meeting and general meeting of shareholders 6.3. Objections from directors in related issues of the Company 6.4. Other details about the performance of duties by directors 7. Activities of special committees under the Board of Directors during the reporting period 8. Performance of duties by the board of supervisors 9. Staff in the Company 9.1. Number, functions and educational backgrounds of the staff 9.2. Staff remuneration policy 9.3. Staff training plans 9.4. Labor outsourcing 10. Profit distribution and converting capital reserves into share capital 11. Implementation of any equity incentive plan, employee stock ownership plan or other incentive measures for employees 11.1. Equity incentives 11.2. Implementation of employee stock ownership plans 11.3. Other incentive measures for employees 12. Establishment and implementation of the internal control system during the reporting period 12.1. Establishment and implementation of the internal control system 12.2. Material internal control deficiencies found in the reporting period 13. The Company’s management and control of subsidiaries during the reporting period 14. Internal control assessment report and auditor report 14.1. Internal control assessment report 14.2. Internal control auditor report 15. Remediation of Problems Identified by Self-inspection in the Special Campaign on Listed Company Governance Section VEnvironmental and Social Responsibility 1. Information about environment protection 2. Social responsibility 3. Efforts in poverty alleviation and rural revitalization Section VISignificant Events 1. Performance of undertakings 1.1. Undertakings of the Company's actual controller, shareholders, related parties and acquirer, as well as the Company and other commitment makers fulfilled in the reporting period or ongoing by the end of this reporting period 1.2. Where any earnings forecast was made for any of the Company's assets or projects and the reporting period is still within the forecast period, the Company shall explain whether the performance of the asset or project reaches the earnings forecast... 2. Occupation of the Company's fund by the controlling shareholder or its related parties for non-operating purposes 3. Irregularities in the provision of guarantees 4. Explanation of the board of directors regarding the latest "non-standard audit opinion" 5. Explanation of the board of directors, the board of supervisors and non-executive directors (if any) regarding the "non-standard audit opinion" for the reporting period 6. Reason for changes in accounting policies and accounting estimates, as well as correction of major accounting errors compared to the financial report for the prior year 7. Reason for changes in scope of the consolidated financial statements compared to the financial report for the prior year 8. Engagement and disengagement of CPA firm 9. Possibility of delisting after disclosure of this annual report 10. Bankruptcy and reorganization 11. Material litigation and arbitration 12. Punishments and rectifications 13. Credit conditions of the Company as well as its controlling shareholder and actual controller 14. Significant related party transactions 14.1. Related party transactions arising from routine operation 14.2. Related party transactions regarding purchase or sales of assets or equity interests 14.3. Related party transitions arising from joint investments in external parties 14.4. Credits and liabilities with related parties 14.5. Transactions with related finance companies 14.6. Transactions between finance companies controlled by the Company and related parties 14.7. Other significant related party transactions 15. Significant contracts and their execution 15.1. Trusteeship, contracting and leasing 15.1.1. Trusteeship 15.1.2. Contracting 15.1.3. Leasing 15.2. Major guarantees 15.3. Entrusted cash asset management 15.3.1. Entrusted assets management 15.3.2 Entrust loans 15.4. Other significant contracts 16. Other significant events 17. Significant events of subsidiaries 1. Changes in shares 1.1 Changes in shares 1.2 Changes in restricted shares 2. Issuance and listing of securities 2.1 Securities (excluding preferred shares) issued in the reporting period 2.2 Changes in total shares of the Company and the shareholder structure, as well as the asset and liability structure 2.3 Existing staff-held shares 3. Shareholders and actual controller 3.1 Total number of shareholders and their shareholdings 3.2 Controlling shareholder 3.3 Actual controller and its persons acting in concert 3.4 Number of accumulative pledged shares held by the company’s controlling shareholder or the largest shareholder as well as its acting-in-concert parties accounts for 80% of all shares of the company held by them 3.5 Other corporate shareholders with a shareholding proportion over 10% 3.6 Limits on reduction of the Company’s shares held by its controlling shareholder, actual controller, restructuring party and other commitment entities. 4. Specific implementation of share repurchase during the reporting period Section VIIIPreferred Shares Section IXInformation about Bond 1. Enterprise bonds 2. Corporate bonds 2.1. Basic information about the corporate bond 2.2. Triggering and execution of issuer or investor option clauses and investor protection clauses 2.3. Information about the intermediaries 2.4. List of the usage of the raised funds Note: 1. Total Unused Raised Funds include a portion of the interest on the funds raised. 2.5. Changes in credit ratings in the reporting period 2.6. Execution and changes with respect to guarantees, repayment plans and other repayment-ensuring measures in the reporting period, as well as the impact on the interests of bond holders 3. Debt instruments as a non-financial enterprise 4. Convertible corporate bonds 5. Consolidated loss of the reporting period over 10% of net assets as at the end of last year 6. Matured interest-bearing debt excluding bonds up the period-end 7. Whether there was any violation of rules and regulations during the reporting period □Yes ( No 8. The major accounting data and the financial indicators of the recent 2 years of the company as of the end of the reporting period Section XFinancial Report 1. Auditor’s report 2. Financial statements Balance sheet of parent company As at 31 December 2022 Consolidated income statement Income statement of parent company Consolidated statement of cash flows Cash flow statements of parent company Consolidated statement of changes in owners' equity For the year ended 31 December 2023 Statement of changes in owners' equity of parent company For the year ended 31 December 2023 3. Company Profile 4. Basis of preparation of financial statements 4.1. Basis of preparation of financial statements 4.2. Going concern 5. Significant accounting policies and accounting estimates 5.1 The declaration about compliance with ASBE 5.2 Accounting period 5.3 Business Cycle 5.4 Functional currency 5.5 Methods for determining materiality standards and selection criteria 5.6 The accounting treatment of business combinations involving enterprises under common control and business combinations not involving enterprises under common control 5.7 Criteria for judging control and preparation of consolidated financial statements 5.8 Classification of joint venture arrangements and the accounting treatment method of common operation 5.9 Cash and cash equivalents 5.10 Foreign currency transactions and translation of foreign currency statements 5.11 Financial Instruments 5.12 Notes receivable 5.13 Accounts receivables 5.14 Accounts receivables financing 5.15 Other receivables 5.16 Contract assets 5.17 Inventory 5.18 Assets held for sale 5.19. Investments in debt obligations N/A 5.20 Investments in other debt obligations N/A 5.21 Long-term receivables 5.22 Long-term equity investment 5.23 Investment property 5.24. Fixed assets (1) Recognition of fixed assets (2) Depreciation of fixed assets (3) Impairment test method and impairment provision accrued method of fixed assets 5.25. Construction in progress 5.26. Borrowing costs 5.27. Biological assets N/A 5.28. Oil and gas assets N/A 5.29. Intangible assets (1) Useful life and the basis for its determination, estimation, amortization methodology or review procedures (2) The scope of research and development expenditure collection and the related accounting treatment 5.30. Long-term assets impairment 5.31. Long-term deferred expenses Long-term deferred expenses shall be initially measured according to the actual costs incurred. It is amortized using the straight-line method over the beneficial period. If it cannot benefit the following accounting period, the amortized value of the... 5.32. Contract liabilities 5.33. Employee benefits (1) Accounting treatment method of short-term benefits (2) Accounting treatment method of post-employment benefits (3) Accounting treatment method of termination benefits (4) Accounting treatment method of other long-term employee benefits 5.34. Estimated liabilities 5.35. Share-based payment 5.36. Other financial instruments such as preferred shares and perpetual bonds N/A 5.37. Revenue 5.38 Contract costs 5.39. Government grants 5.40. Deferred tax assets or deferred tax liabilities 5.41. Lease (1) Accounting treatment with the Company as lessee 5.42. Income tax expenses 5.43 Other significant accounting policies and accounting estimates 5.44 Changes in significant accounting policies and accounting estimates 5.44.1. Changes in significant accounting policies 5.44.2. Changes in significant accounting estimates 5.44.3. Adjustments to Financial Statement Items at the Beginning of the Year of the First Implementation of the New Accounting Standards Implemented since 2023 □Applicable ( N/A 6. Taxes 6.1. Major tax types and rates 6.2. Tax preferences 7. Notes to the main items of the consolidated financial statements (All currency unit is CNY, except other statements) 7.1. Cash and cash equivalents 7.2. Held-for-trading financial assets 7.3. Accounts receivable 7.3.1. Disclosure by aging 7.3.2. Disclosure by withdrawal methods for bad debts 7.3.3. Provision and recovery for bad and doubtful debt in the current period 7.3.4. Top five entities with the largest balances of accounts receivable and contract assets 7.4. Accounts receivable financing 7.4.1. Accounts receivable financing listed by category 7.4.2. Disclosure by withdrawal methods for bad debts 7.4.3. Accounts receivable financing that have been endorsed to other parties or discounted by the Company but have not expired at the end of the period 7.4.4. Changes in accounts receivable financing in the reporting period and fair value 7.4.5. Other statements 7.5. Other receivables 7.5.1. Other receivables 7.5.1.1. Other receivables disclosed by nature 7.5.1.2. Disclosure by aging 7.5.1.3. Disclosure by withdrawal methods for bad debts 7.5.1.4. Provision and recovery for bad and doubtful debt in the current period 7.5.1.5. Top five entities with the largest balances of the other receivables 7.6. Prepayment 7.6.1. Aging analysis 7.6.2. Top five entities with the largest balances of prepayment 7.7. Inventories 7.7.1. Categories of Inventories 7.7.2. Notes to the closing balance of inventories including capitalized borrowing expense 7.8. Other current assets 7.9. Other equity instrument investment 7.10. Long-term equity investments 7.11. Investment property 7.11.1. Investment property with cost measurement model 7.11.2. Investment property without certification of right 7.12. Fixed assets 7.12.1. Details of fixed assets 7.12.2. Fixed assets leased out through operating lease 7.12.3. Fixed assets without certification of right 7.12.4. Disposal of fixed assets 7.13. Construction in progress 7.13.1. Details of the construction in progress 7.13.2. Significant changes in construction in progress 7.13.3. Impairment test of construction in progress 7.14. Right-of-use assets 7.14.1. Details of right-of-use assets 7.14.2. Impairment test of right-of-use assets 7.15. Intangible assets 7.15.1. Details of intangible assets 7.15.2. Land use right without certification of right 7.16. Long-term deferred expense 7.17. Deferred tax assets/ deferred tax liabilities 7.17.1. Deferred tax assets before offset 7.17.2. Deferred tax liabilities before offset 7.17.3. Details of unrecognized deferred tax assets 7.17.4. Deductible losses from unrecognized deferred tax assets will due on the following years 7.18. Other non-current assets 7.19. Assets with restricted ownership or use rights 7.20. Held-for-trading financial liabilities 7.21. Accounts payable 7.21.1. Presentation of accounts payable 7.21.2. Significant accounts payable whose aging is longer than 1 year 7.22. Other payables 7.22.1. Dividend payable 7.22.2. Other payables 7.22.2.1. Categories by nature 7.22.2.2. Significant other payables whose aging are longer than 1 year 7.23. Contract liabilities 7.24. Employee benefits payable 7.24.1. Employee benefits payable shown as follows 7.24.2. Short-term employee benefits payable shown as follows 7.24.3. Defined contribution plan shown as follows 7.25. Taxes payable 7.26. Non-current liabilities due within one year 7.27. Other current liabilities 7.28. Long-term loans 7.28.1. Long-term loans 7.29. Bonds payable 7.29.1. Bonds payable 7.29.2. Increase/decrease of bonds payable (excluding other financial instrument classified as financial liabilities such as preferred shares and perpetual bonds) 7.30. Lease liabilities 7.31. Deferred income 7.32. Share capital 7.33. Capital reserves 7.34. Treasury shares 7.35. Other comprehensive income 7.36. Surplus reserves 7.37. Undistributed profits 7.38. Operating revenue and cost of sales 7.39. Business taxes and surcharges 7.40. General and administrative expenses 7.41. Selling and distribution expenses 7.42. Research and developmentexpenses 7.43. Financial expenses 7.44. Other income 7.45. Gain on changes in fair value 7.46. Investment income 7.47. Credit impairment loss 7.48. Gains from disposal of assets 7.49. Non-operating income 7.50. Non-operating costs 7.51. Income tax expense 7.51.1. Statement of income tax expense 7.51.2. Adjustment for accounting profit and income tax expense 7.52. Other comprehensive income 7.53. Notes to the statement of cash flow 7.53.1. Cash related to operating activities 7.53.2. Cash related to investing activities 7.53.3. Cash related to financing activities 7.54. Supplementary information to statement of cash flow 7.54.1. Supplementary information to statement of cash flow 7.54.2. Composition of cash and cash equivalent 7.54.3. Monetary funds not classified as cash and cash equivalents 7.55. Notes to items of the statements of changes in owners' equity 7.56. Foreign currency transactions 7.56.1. Foreign currency transactions 7.56.2. Description of the foreign business entity, including the important foreign business entity, shall disclose its main foreign business place, bookkeeping standard currency and selection basis, and shall also disclose the reason for the change o... 7.57. Lease 7.57.1. The Company as lessee 7.57.2. The Company as lessor 7.57.3. Recognition of gain or loss on sales under finance leases with the company as a manufacturer or dealer 7.58. Others 8. Research and Development Expenditure 9. Changes in consolidated scope 9.1. Business combination not under common control 9.1.1. Business combination not under common control during current period 9.2. Business combination under common control 9.2.1. Business combination under common control during current period 9.3. Reverse purchase 9.4. Disposing subsidiaries 9.5. Consolidated scope changes due to other reasons 9.6. Other 10. Interests in other entities 10.1. Interests in subsidiaries 10.1.1. Group composition Note: 1. Luzhou Laojiao Custom Liquor Co., Ltd. was liquidated and cancelled on December 2023. 2. Luzhou Dingyi Liquor Sales Co., Ltd. changed its name to Luzhou Laojiao Qiankun Cheteau Custom Liquor Sales Co., Ltd. 10.1.2. Important non-wholly-owned subsidiaries 10.1.3. Major financial information of important non-wholly-owned subsidiaries 10.1.4. Significant restrictions on using the assets and liquidating the liabilities of the Company 10.1.5. Financial support or other supports provided to structural entities incorporated into the scope of consolidated financial statements N/A 10.2. The transaction of the company with its owner's equity share changing but the company still controls the subsidiary 10.2.1. Note to the owner's equity share changed in subsidiary N/A 10.2.2. The transaction’s influence on the equity of non-controlling interests and the owner's equity attributable to the company as the parent N/A 10.3. Interests in joint ventures and associates 10.3.1. Important joint ventures and associates 10.3.2. Major financial information of important associates 10.3.3. Financial information summarized of unimportant joint ventures and associate companies 10.3.4. Notes to the significant restrictions on the ability of joint ventures or associate companies to transfer funds to the Company 10.3.5. The excess loss of joint ventures or associate companies 10.3.6. The unrecognized commitment related to investment to joint ventures 10.3.7. Contingent liabilities related to investment to joint ventures or associate companies None 11. Government grants 11.1. Government grants recognized at the end of the reporting period at the amount receivable 11.2. Liability items involving government grants 11.3. Government grants recognized as current profit or loss 12. Risks related to financial instruments 12.1. Various types of risks arising from financial instruments 12.2. Financial assets 12.2.1. Classification of transfer methods 12.2.2. Financial assets derecognized due to transfer 12.2.3. Continued involvement in the transfer of assets financial assets 13. Fair value disclosure 13.1. Closing fair value of assets and liabilities measured at fair value 13.2. Determination basis of the market value of items measured continuously and discontinuously within Level 1 of the fair value hierarchy 13.3. Valuation technique adopted and nature and amount determination of important parameters for continuously and discontinuously within Level 2 of the fair value hierarchy 13.4. Valuation technique adopted and nature and amount determination of important parameters for continuously and discontinuously within Level 3 of the fair value hierarchy 13.5. Continuous fair value measurement items at level 3, adjustment between the beginning carrying value and the ending carrying value and sensitivity analysis on unobservable parameters 13.6. Explain the reason for conversion and the policy governing when the conversion happens if conversion happens among continuous fair value measurement items at different level 13.7. Changes in valuation techniques in the reporting period and reasons for the changes 13.8. Fair value of financial assets and liabilities not measured at fair value None 14. Related parties and related party transactions 14.1. The parent company of the Company 14.2. Subsidiaries of the Company 14.3. Joint ventures and associates of the Company 14.4. Other related party of the Company 14.5. Related transactions 14.5.1. Related transactions of purchase and sales of goods / rendering and receipt of services 14.5.2. Related party leasing 14.5.3. Key management compensation 14.5.4. Other related transactions 14.6. Receivables and payables of related parties 14.6.1. Receivables 14.6.2. Payables 14.7. Commitments of the related parties 15. Stock payment 15.1. The overall situation of share-based payments Note 1: The Company's share capital increased by 92,669 shares during the current period, as a result of the third grant of restricted share incentive scheme in December 2022. On 15 January 2023, the Company received subscription payments in monetary ... 15.2. Equity-settled share-based payments 15.3. Cash-settled share-based payments 15.4. Share-based payment expenses in the current period 15.5. Modification and termination of share-based payments 16. Commitments and contingencies 16.1. Commitments 16.2. Contingencies 16.2.1. Significant contingencies at the balance sheet date 16.2.2. Explanation shall be given even if there is no significant contingency for the Company to disclose 17. Post balance sheet event 17.1. Profit distribution 17.2. Sales return 17.3. Statement for other post balance sheet events 18. Other important information 18.1. Annuity plan 18.2. Segment information 18.2.1 Recognition basis and accounting policies of reportable segment Except for the business on baijiu sales, the Company does not operate other businesses that have a significant impact on operation results. In addition, the Company operates mainly from China and main assets also located in China, so the Company does ... 18.3. Other significant events that can affect investors’ decision 19. Notes to the main Items of the financial statements of parent company (all currency unit is CNY, except other statements) 19.1. Accounts receivable 19.1.1. Disclosure by aging 19.1.2. Disclosure by withdrawal methods for bad debts 19.1.3. Provision and recovery for bad and doubtful debt in the current period 19.1.4. Accounts receivable written-off in the current period 19.2. Other receivables 19.2.1. Other receivables 19.2.1.1. Other receivables disclosed by nature 19.2.1.2. Disclosure by aging 19.2.1.3. Disclosure by withdrawal methods for bad debts 19.2.1.4. Provision and recovery for bad and doubtful debt in the current period 19.2.1.5. Other receivables written-off in the current period 19.2.1.6. Top five entities with the largest balances of the other receivables 19.2.1.7. Presentation in other receivables due to the centralized management of funds 19.3. Long-term equity investments 19.3.1. Investment in subsidiary 19.3.2. Investment in associate and joint venture 19.4. Operating revenue and cost of sales 19.5. Investment income 19.6. Other 20. Supplementary information 20.1. Detailed statement of non-recurring gains and losses in the current period (+ for gain, - for loss) 20.2. Return on equity and earnings per share 20.3. Differences between accounting data under domestic and overseas accounting standards 20.3.1. Differences of net profit and net assets disclosed in financial reports prepared under international and Chinese accounting standards 20.3.2. Differences of net profit and net assets disclosed in financial reports prepared under overseas and Chinese accounting standards 20.3.3. Explain reasons for the differences between accounting data under domestic and overseas accounting standards; for any adjustment made to the difference existing in the data audited by the foreign auditing agent, such foreign auditing agent’s n... 20.4. Other