泸州老窖：2023年半年度报告（英文版）

2023 Interim Report of Luzhou Laojiao Co., Ltd. 1 Luzhou Laojiao Co., Ltd. 2023 Interim Report August 2023 2023 Interim Report of Luzhou Laojiao Co., Ltd. 2 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 Yan Li, 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 Wang Hongbo Director Work Lin Feng Ying Hanjie Director Work Liu Miao 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 this 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 Company has no interim dividend plan, either in the form of cash or stock. 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 Interim 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 ......................................................9 Section IVCorporate Governance ............................................................................28 Section VEnvironmental and Social Responsibility ................................................32 Section VISignificant Events ...................................................................................40 Section VIIChanges in Shares and Information about Shareholders.......................47 Section VIIIPreferred Shares ...................................................................................54 Section IXInformation about Bond ..........................................................................55 Section XFinancial Report .......................................................................................582023 Interim 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); and 2. The originals of all company documents and announcements that are disclosed to the public during the reporting period. 2023 Interim 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. Sales Company Refer to Luzhou Laojiao Sales Co., Ltd. Brewing Company Refer to Luzhou Laojiao Brewing Co., Ltd. 2023 Interim 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 (if any) 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 2. Contact us Secretary of the board Representative for securities affairs Name Li Yong Wang Chuan Address Luzhou Laojiao Command Center, 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 3. Other Information 3.1. Contact Information of the Company Whether any change occurred to the registered address, office address and their zip codes, website address, email address and other contact information of the Company in the reporting period. Applicable N/A No change occurred to the said information in the reporting period, which can be found in the 2022 Annual Report. 3.2. Information disclosure and place where the interim report is kept Whether any change occurred to the information disclosure and place where the interim report is kept. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 7 Applicable N/A No change occurred to the website of the stock exchange, media and other websites designated by the Company for information disclosure, as well as to the place where the disclosed documents are kept in the reporting period. The said information can be found in the 2022 Annual Report. 3.3. Other information Whether any change occurred to other information in the reporting period. Applicable N/A 4. Key accounting data and financial indicators Whether the Company performed a retroactive adjustment to or restatement of accounting data. Yes No H12023 H12022 Change Operating revenues (CNY) 14,593,051,774.1411,664,377,552.9425.11% Net profits attributable to shareholders of the Company (CNY) 7,090,426,787.075,531,926,340.4428.17% Net profits attributable to shareholders of the Company before non-recurring gains and losses (CNY) 7,040,938,575.635,496,265,842.5028.10% Net cash flows from operating activities (CNY) 5,647,760,797.044,077,014,965.3438.53% Basic earnings per share (CNY/share) 4.823.7628.19% Diluted earnings per share (CNY/share) 4.823.7628.19% Weighted average ROE 18.79% 17.96% 0.83% 30 June 202331 December 2022 Change Total assets (CNY) 61,524,708,713.7151,385,481,354.5219.73% Net assets attributable to shareholders of the Company (CNY) 35,086,468,059.3434,207,871,130.032.57% 5. Differences in accounting data under domestic and overseas accounting standards 5.1. 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. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 8 5.2. 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. 6. Non-recurring gains and losses Applicable N/A Unit: CNY Item Amount Note Gain or loss from disposal of non-current assets (including the write-off portion of the impairment provision) -477,479.38 See "Section XNote 5.46" for details. 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 consistently given at a fixed amount or quantity in accordance with the national policies or standards) 21,166,337.88 See "Section XNote 5.42 and 5.47" for details. Gain or loss on fair-value changes on held-for-trading financial assets and liabilities & income from disposal of held-for-trading financial assets and liabilities and available-for-sale financial assets (exclusive of the effective portion of hedges that arise in the Company’s ordinary course of business) 37,839,310.52 See "Section XNote 5.43 and 5.44" for details. Other non-operating income and expenditure except above-mentioned items 7,506,932.03 See "Section XNote 5.47 and 5.48" for details. Less: Corporate income tax 16,427,670.44 Minority interests (after tax) 119,219.17 Total 49,488,211.44 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 No such cases for the reporting period. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 9 Section IIIManagement Discussion and Analysis 1. Business scope in the reporting period 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. Its primary products include baijiu series such as "National Cellar 1573" and "Luzhou Laojiao", and its main comprehensive performance indicators rank high in the baijiu industry. Affected by the population size, demographic structure as well as changes in supply and demand, the baijiu industry has entered into an era of competition for existing customers, facing multiple pressures such as consumption downturn and intensified competition. Since the beginning of the year, the domestic consumer market has been recovering. With favorable national policies for expanding domestic demand and boosting consumption, the demand side may continue to improve and bring new development opportunities for the industry. 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 Company holds five food business licenses, and its production model is self-production. The Company’s main business is the research and development, production and sales of baijiu series such as "National Cellar 1573" and "Luzhou Laojiao". During the Reporting Period, with a focus on the development theme of "promoting reform, enhancing collaboration, focusing on main areas and achieving leapfrog development", the Company seized the opportunities and went all out with a pragmatic and progressive attitude to promote the development of the Company to a new level. For H12023, operating revenue amounted to CNY 14.593 billion, up 25.11% year on year; and the net profit attributable to the shareholders of the listed company reached CNY 7.09 billion, up 28.17% year on year, maintaining good and rapid growth. A. Main operations and results in the Reporting Period a. Actively innovating marketing strategy and steadily enhancing market share and market competitiveness The Company continuously focused on consumer cultivation, strategic market building and key project support. The offline consumer operation system was continuously improved, the construction of the online sales shop matrix was completed, the "Hundred Cities Program" was steadily promoted, and the Chunlei Action was effective. The Company's ability to enhance market share and market competitiveness has improved dramatically. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 10 b. Continuously enhancing the brand connotation and achieving effective brand development Relying on mainstream media, the Company further enhanced the brand's influence through public relations communication on the themes of "Living Dual National Treasures" and technological innovation. The brand's reputation was further improved by constructing emotional resonance with consumers through the Fengcang Dadian, the poetic drama tour of "Yellow River" and other activities. The brand image of Luzhou Laojiao was comprehensively established by integrating Luzhou Laojiao's branding activities and integrating online and offline information dissemination. c. Continuously strengthening the reform of scientific research and making fruitful innovations and breakthroughs The Company launched the construction of a scientific research center platform to promote the win-win development of the university and enterprises, conducted analysis and inventory of the effectiveness of scientific and technological projects to enhance result orientation, and boosted technological publicity and promotion to achieve technology-empowered brand marketing. In the first half of 2023, the Company declared nine vertical scientific research projects at all levels, and won seven honors of scientific and technological awards from associations including China National Light Industry Council and China Alcoholic Drinks Association. It participated in the formulation and revision of two national standards and five group standards, and was granted 42 patents. In addition,17 scientific research papers of the Company were published. d. Making every effort to promote the development of major projects to a new level The Company accelerated the construction of the Technical Upgrade Project of Intelligent Brewing, completed the overall project plan design, preliminary design of the first phase of the project, bidding for participating units and project investigation. Major projects such as the display platform of the production scheduling command center and the Qu-preparation MES system of the Huangyi Brewery Eco-Park were advanced. The Company's intelligent brewing and supply chain system security achieved a higher level. e. Firmly fulfilling social responsibilities and achieving preliminary results in party building empowerment The Company continuously practiced the corporate philosophy of "Baijiu for the World, a Shared Future", and deeply implemented rural revitalization arrangements. The Company's village members stationed in Guntang Village, Maiwa Township, Hongyuan County, were awarded the "Excellent Village Members in Aba Prefecture", and Guntang Village under the paired assistance of the Company was awarded the "Excellent Key Village of Rural Revitalization in Aba Prefecture". The Company continuously played the integration role of party building position, and achieved preliminary results in "1 + N" party building clustering. The party group service center was upgraded, and a unique brand culture of party building was gradually formed. B. Priorities in the second half of the year a. Strengthening marketing and accelerating the layout of intelligent empowerment 2023 Interim Report of Luzhou Laojiao Co., Ltd. 11 By continuously following the marketing theme of "strategic concentration, accelerated breakthrough, operation upgrade, and full personnel activation", the Company will effectively promote the development of business standards. It will comprehensively advance the effective implementation of the "Hundred Cities Program" and fully integrate resources. With a focus on the digital upgrade of the front-line business, the Company will continuously improve the marketing service and guarantee capacity. Additionally, it will constantly boost digital empowerment for consumer development, adhere to the healthy and benign development of the market, and make every effort to promote sales expansion. b. Strengthening culture cultivation and boosting brand empowerment The Company will continuously integrate thematic marketing to effectively build consumer empathy and publicize brand stories. Activities such as poem and baijiu culture will be continuously organized to stimulate public resonance and enhance the enterprise's reputation. Platforms such as the mobile museum will be fully leveraged to revitalize the cultural communication of Luzhou Laojiao and shape a tangible and emotional brand culture. The publicity effect of creative activities will be strengthened to increase brand popularity and enhance consumer loyalty. c. Strengthening the management model and enhancing collaboration efficiency The Company will accelerate the formation of an integrated online and offline digital collaboration support system to promote professional, systematic and intelligent decision-making by the management. Centering on the actual needs of sales and production, the Company will make every effort to optimize procedures and policies. Information-based management will be enhanced to realize the empowerment of big data. The Company will strengthen the lean organization and management to improve collaboration efficiency. d. Boosting project construction and supporting industrial upgrade The Company will continue to promote the construction of major projects such as the Luzhou Laojiao Technical Upgrade Project of Intelligent Brewing, the conservation and restoration of cultural cellar caves of baijiu production workshops of Luzhou Laojiao in Xiaoshi region, the baijiu culture scenario building and the surrounding environment improvement project, and accelerate the layout of intelligent brewing, intelligent production as well as culture and tourism integration, to consolidate and expand the advantages of Luzhou Laojiao in production capacity guarantee and brand culture. e. Strengthening talent efficiency gains and promoting talent development Adhering to dynamic and fine management, the Company will continuously optimize talent allocation to support business development. Adhering to quality improvement and efficiency enhancement, the Company will continuously optimize the selection and appointment of talent to create a talent base. Adhering to the enhancement of personnel efficiency, the Company will optimize the talent structure and strengthened echelon building. Adhering to a multi-dimensional orientation, the Company will optimize talent incentives and stimulated self-motivation. Adhering to a people-oriented spirit, the Company will optimize employee services to create a harmonious corporate atmosphere. f. Enhancing the leadership of party building to boost the development of the Company 2023 Interim Report of Luzhou Laojiao Co., Ltd. 12 The Company will further play the integration role of party building position, and create a benchmark position in sales, production and other grassroots front lines to provide better education-based guidance and services to party members and present the Company's development achievements in a three-dimensional manner. It will refine work to support rural revitalization and social welfare, strongly promote regional development, and make due contribution to consolidating and expanding poverty alleviation results and comprehensively boosting rural revitalization. Brand operation The Company has always insisted on "dual brands, three product series, and major single products": The National Cellar 1573 series has been one of the three high-end baijiu products in China; Luzhou Laojiao's brand rejuvenation plan saw remarkable results, and the product series showed a good momentum of development; innovative products such as Health, Gogoon and Chinese-style fruit baijiu continued to be cultivated, and have become the driving force for the Company's young, fashionable, healthy and international development. 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 operation model 13,960,908,535.331,498,640,545.4989.27% 28.82% 1.93% 2.84% Emerging channel operation model 550,076,103.08171,370,733.3168.85% -22.73% 36.69% -13.54% 2. Distributors Unit: Number Region Number of Increased Decreased YoY change of Reason for any 2023 Interim Report of Luzhou Laojiao Co., Ltd. 13 distributors at the end of the reporting period number during the reporting period number during the reporting period number of distributors (%) significant change Domestic 1701131511.47% Overseas 111015 -0.89% 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 Total sales to top five customers（CNY） 9,102,705,218.08 Total sales to top five customers as % of the total sales 62.38% Total sales to related parties among top five customers as % of the total sales 0.00% The Company had no accounts receivable from the top five distributors at the end of the period. 5. Information on top five distributors No. Customer Sales amount (CNY) As % of the total sales for the reporting period 1 Customer A 6,911,120,831.8247.36% 2 Customer B 751,936,693.915.15% 3 Customer C 636,824,277.104.36% 4 Customer D 501,692,179.673.44% 5 Customer E 301,131,235.582.07% Total -- 9,102,705,218.0862.38% Store sales terminals accounted for more than 10% □ Applicable N/A Online direct sales Applicable □N/A For the main sales models of the Company, please refer to the contents under the heading “Distribution models” in “1. Business scope in the reporting period” of Section III. For the sales of the Company's main products, please refer to the contents under the heading "Business segment, products or geographical segments contributing over 10% of the operating revenues or profits" in “3. Analysis of main business” of Section III. The Company's main products are sold online. Its main cooperation platforms include 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 14 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 1,904,661,332.91 Purchase based on the unified pricing of the Development and Reform Commission of Luzhou and the Price Bureau of Luzhou, and purchase through bid invitation Fuels and energies 92,495,405.92 Purchase through bid invitation Low-value consumables 24,502,517.66 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 H12023 H12022 YoYChange Amount As % of cost of sales Amount As % of cost of sales Baijiu Raw materials 1,411,571,489.1184.52% 1,362,639,995.0885.40% 3.59% Baijiu Labor costs 117,395,758.18 7.03% 97,048,667.746.08% 20.97% Baijiu Manufacturing overhead 141,044,031.518.45% 135,902,902.048.52% 3.78% 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 16,156.9716,930.1742,103.81 -25.10% -3.00% -2.75% Other baijiu 25,552.9526,485.2610,763.1812.28% 21.20% -26.19% 2. Inventory at the end of the reporting period Unit: Ton Finished baijiu Semi-finished baijiu (including base baijiu) 52,866.99431,179.15 2023 Interim Report of Luzhou Laojiao Co., Ltd. 15 3. Capacity Unit: Ton Main products Design capacity Actual capacity Capacity in progress Baijiu 17000017000080000 2. Analysis of core competitiveness A. Geographical advantage Luzhou City, where the Company is located, 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 “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-2023 Interim Report of Luzhou Laojiao Co., Ltd. 16 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. 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 & automation. 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 Jiangnan 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,11 senior professor engineers,7 experts who receive special allowances from the State Council,4 national technicians,2 national model workers,5 national Labor Day Medal winners,3 academic and technologic leaders of Sichuan province,1 expert with outstanding contribution in Sichuan province,1 innovation leader of Tianfu,1 excellent engineer of Tianfu,3 craftsmen of Tianfu,2 craftsmen of Sichuan province,1 technological elite 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. 3. Analysis of main business Overview See contents under the heading “1. Business scope in the reporting period” above. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 17 Year-on-year changes in key financial data Unit：CNY H12023 H12022 YoY Change Reason for any significant change Operating revenues 14,593,051,774.1411,664,377,552.9425.11% Cost of sales 1,700,263,105.681,642,310,550.613.53% Selling and distribution expenses 1,463,196,830.611,213,861,984.6620.54% General and administrative expenses 539,879,241.31542,666,754.49 -0.51% Finance expenses -125,783,791.43 -126,988,421.10 Corporate income tax 2,385,359,516.121,800,020,542.3932.52% Mainly due to the increased sales revenue from baijiu, resulting in the increased profit R&D investments 85,012,075.0693,892,252.85 -9.46% Net cash flows from operating activities 5,647,760,797.044,077,014,965.3438.53% Mainly due to the increased cash received from sale of goods in the current period Net cash flows from investing activities 732,254,553.22 -1,158,401,612.09 Mainly due to the redemption of wealth management product (collective asset management plan) from securities firm in the current period Net cash flows from financing activities 6,194,950,118.71579,368,826.99969.26% Mainly due to the bank loans received in the current period Net increase in cash and cash equivalents 12,582,529,016.133,512,307,170.67258.24% Mainly due to the increased net cash flows from operating, investing and financing activities in the current period Significant changes to the profit structure or sources of the Company in the reporting period Applicable N/A No such changes in the Reporting Period. Breakdown of operating revenues Unit：CNY H12023 H12022 YoYChange Amount As % of operating revenues Amount As % of operating revenues Total 14,593,051,774.14100% 11,664,377,552.94100% 25.11% By business segment Baijiu 14,510,984,638.4199.44% 11,549,327,272.4499.01% 25.64% Other revenues 82,067,135.730.56% 115,050,280.500.99% -28.67% By product Mid- and high-end baijiu 12,990,085,081.5089.02% 10,372,408,380.4588.92% 25.24% Other baijiu 1,520,899,556.9110.42% 1,176,918,891.9910.09% 29.23% Other revenues 82,067,135.730.56% 115,050,280.500.99% -28.67% By geographical segment Domestic 14,516,179,307.8699.47% 11,570,386,785.0899.19% 25.46% Overseas 76,872,466.280.53% 93,990,767.860.81% -18.21% 2023 Interim Report of Luzhou Laojiao Co., Ltd. 18 Business segment, products or geographical segments 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 14,510,984,638.411,670,011,278.8088.49% 25.64% 4.66% 2.31% By product Mid- and high-end baijiu 12,990,085,081.50975,940,155.3392.49% 25.24% -2.31% 2.12% Other baijiu 1,520,899,556.91694,071,123.4754.36% 29.23% 16.35% 5.05% By geographical segment Domestic 14,516,179,307.861,688,065,142.7588.37% 25.46% 5.72% 2.17% 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 period is calculated based on adjusted statistical standards at the end of the reporting period Applicable N/A 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. A. Breakdown of selling and distribution expenses Unit：CNY Selling and distribution expenses H12023 H12022 YoYChange Reason for any significant change Advertising expenses 585,741,219.56 691,914,456.49 -15.34% Sales promotion expenses 486,391,918.30 142,494,942.50 241.34% Increased sales promotion activities in the current period Warehousing and logistics expenses 95,488,340.44 63,874,054.36 49.49% Increased stock for sale Labor costs 210,781,737.74 204,443,388.51 3.10% Other 84,793,614.57 111,135,142.80 -23.70% B. Breakdown of advertising expenses Unit：CNY Advertising Expenses 2023 Interim Report of Luzhou Laojiao Co., Ltd. 19 Online advertising (exclusive of TV advertising) 53,376,655.14 Offline advertising 161,825,375.75 TV advertising 138,219,714.09 Other (inclusive of branding ideas, exhibitions & showcases, advertising materials, activity planning, etc.) 232,319,474.58 4. Analysis of non-core business Applicable N/A 5. Assets and liabilities 5.1. Significant change of asset items Unit：CNY 30 June 202331 December 2022 Change in percentage Explanation about any material change Amount As % of total assets Amount As % of total assets Cash and cash equivalents 30,344,475,538.1349.32% 17,757,528,211.2534.56% 14.76% Mainly due to the positive net cash flows from operating activities and bank loans received in the current period Accounts receivable 14,720,743.590.02% 5,939,420.780.01% 0.01% Inventories 10,794,156,136.0017.54% 9,840,742,374.8519.15% -1.61% Investment property 38,467,435.500.06% 39,149,454.220.08% -0.02% Long-term equity investments 2,721,676,735.144.42% 2,667,500,553.175.19% -0.77% Fixed assets 8,616,388,591.1114.00% 8,856,258,598.7817.23% -3.23% Construction in progress 1,209,595,255.851.97% 808,919,047.211.57% 0.40% Right-of-use assets 29,616,062.330.05% 39,952,525.630.08% -0.03% Contract liabilities 1,933,610,554.943.14% 2,566,374,718.764.99% -1.85% Long-term loans 9,515,100,000.0015.47% 3,179,600,000.006.19% 9.28% Mainly due to the bank loans received in the current period Lease liabilities 26,095,309.940.04% 29,096,969.660.06% -0.02% 5.2. Main assets overseas Applicable N/A 5.3. Assets and liabilities measured at fair value Applicable □ N/A 2023 Interim Report of Luzhou Laojiao Co., Ltd. 20 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 32,781,678.42 200,000,000.00 1,106,191,7 42.66 200,056,716.13 4.Investments in other equity instruments 1,136,736,9 78.11 189,135,818.57 391,086,685.52 445,414,722.85 Accounts receivables financing 4,583,352,5 03.37 - 1,818,022,4 90.60 2,765,330,0 12.77 Subtotal of financial assets 6,793,556,2 61.85 32,781,678.42 189,135,818.57 200,000,000.00 1,497,278,4 28.18 - 1,818,022,4 90.60 3,410,801,4 51.75 Total 6,793,556,2 61.85 32,781,678.42 189,135,818.57 200,000,000.00 1,497,278,4 28.18 - 1,818,022,4 90.60 3,410,801,4 51.75 Financial liability 0.00 0.00 Information about other changes N/A Whether measurement attribution of main assets changes significantly in the reporting period Yes No 5.4. Restricted asset rights as of the end of this reporting period Unit：CNY Item Closing Balance Reason Bank deposits 22,939,930.13 Accrued interest on term deposits, and amount frozen by court of law Other cash and cash equivalents 10,000,000.00 Bank guarantees Total 32,939,930.13 6. Investment 6.1. Total investment Applicable N/A 2023 Interim Report of Luzhou Laojiao Co., Ltd. 21 Investment made in the reporting period (CNY) Investment made in the same period of last year (CNY) YoY change 686,415,706.041,669,795,904.73 -58.89%1 Note 1: Mainly due to the purchase of a larger amount of wealth management product (collective asset management plan product) from securities firm in the same period of last year. 6.2. Significant equity investment made in the reporting period Applicable N/A 6.3. 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 10,193,333.83 593,49 3,579.5 0 Self-financing 1.00% N/AN/AN/A 13 July 2022 Announcement No. 2022-24 on the Implementation of Luzhou Laojiao Technical Upgrade Project of Intelligent Brewing (Phase I) by Subsidiary Total -- -- -- 10,193,333.83 593,49 3,579.5 0 -- -- N/AN/A -- -- -- 2023 Interim Report of Luzhou Laojiao Co., Ltd. 22 6.4. Financial assets investment 6.4.1. 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 9,389.21 152,04 1,031.25 6,241,808.41 164,76 0,188.01 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 13,761,230.2 9 78,177.75 14,791,230.2 9 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 60,898,357.2 7 112,01 8,357.27 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 - 31,811,873.8 7 391,08 6,685.52 977,28 0.00 119,38 6,821.41 Investments in other equity instruments Own fund Total 607,15 4,537.56 -- 1,102,278,85 2.24 0.00 194,88 8,744.94 0.00 391,08 6,685.52 7,297,266.16 410,95 6,596.98 -- -- 6.4.2. Derivative investment □Applicable N/A No such cases in the reporting period 6.5. Use of funds raised Applicable N/A 2023 Interim Report of Luzhou Laojiao Co., Ltd. 23 6.5.1. General use of funds raised Applicable □ N/A Unit：CNY 10,000 Year Method Total amount of funds raised 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 149,400 12,139.3 7 98,243.6000.00% 59,296.1 6 Deposited in special account for raised funds 0 2022 Public offering of corporate bond 149,8800149,880000.00% 0 N/A 0 Total -- 299,280 12,139.3 7 248,123.6 000.00% 59,296.1 6 -- 0 Notes for general use of funds raised The total amounts of used and unused funds raised include interest on the funds. 6.5.2. 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 11,074.11 325,002.74 88.18% 30 June 2021 N/A Yes No Project of Intelligent Upgrading and Building of the Information Management System No 1,065.269,299.15 N/AN/ANo Project of Acquiring Sealing Equipment for the Cellar of No 012,043.3 30 June 2021 Yes No 2023 Interim Report of Luzhou Laojiao Co., Ltd. 24 Huangyi Brewing Base Project of Acquiring Accessory Equipment for Leaven Making for Huangyi Brewing Base No 04,980.25 30 June 2021 Yes No Subtotal of committed investment projects -- 398,4001398,400 12,139.3 7 351,325.44 -- -- N/A -- -- Use of over-raised funds None No Total -- 398,400398,400 12,139.3 7 351,325.44 -- -- 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 of investment projects N/A Adjustment of the implementation mode of raised N/A 2023 Interim Report of Luzhou Laojiao Co., Ltd. 25 funds investment projects 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 30 June 2023, the Company had replaced advance investments of self-pooled funds of CNY 573,178,496.64 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 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 30 June 2023, the Project of Intelligent Upgrading and Building of the Information Management System was in the process. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 26 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. 6.5.3. Re-purposed funds raised Applicable N/A No such cases in the reporting period 7. Sale of major assets and equity interests 7.1. Sale of major assets Applicable N/A No such cases in the reporting period. 7.2. Sale of major equity interests Applicable N/A 8. Analysis of major subsidiaries Applicable N/A 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 Luzhou Laojiao series unified package Baijiu sales 100,000,0 00.00 11,303,45 9,162.06 7,572,099,954.44 14,047,11 1,152.15 6,996,142,338.04 5,241,722,614.521 Note 1: Operating profit and net profit increased year on year, mainly due to the increased sales revenue in the current period. Acquisition and disposal of subsidiaries during the reporting period □ Applicable N/A 2023 Interim Report of Luzhou Laojiao Co., Ltd. 27 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. 9. Structured entities controlled by the Company Applicable N/A 10. Risks facing the Company and countermeasures A. Macroeconomic risk. The baijiu industry has a strong relevance with the macroeconomy. At present, the economy is in a major process of factor-driven shift to high-quality development, and there are problems such as insufficient domestic demand, complex and severe external environment, and tortuous economic recovery, which may have an impact on the industry and enterprises. In this regard, the Company will face up to the impact of the economic environment, maintain strategic determination, boost confidence in development, strengthen the spirit of optimism, competition, innovation and solidarity, and endeavor to embark on a new journey of high-quality development. B. Risk of aggravating industrial competition. In recent years, the baijiu output and the number of large enterprises have declined while the concentration has climbed, continuously intensifying the industry competition. To this end, the Company will adhere to the blueprint, always move forward in the right direction with exertion, courage and determination, and compete for new development opportunities in industry concentration and brand competition with a long history, deep culture, strong technology and excellent quality. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 28 Section IVCorporate Governance 1. Annual and extraordinary general meeting of shareholders convened during the reporting period 1.1 General meeting of shareholders convened during the reporting period Meeting Type Investor participation ratio Date of the meeting Date of disclosure Resolution of the meeting The 2022 Annual General Meeting of Shareholders Annual General Meeting of Shareholders 63.51% 29 June 202330 June 2023 Announcement No.: 2023-19 of Luzhou Laojiao Co., Ltd. on Resolutions of the 2022 Annual General Meeting of Shareholders (o.com.cn/) 1.2 Extraordinary general meetings of shareholders convened at the request of preference shareholders with resumed voting rights Applicable N/A 2. Changes in directors, supervisors, and senior management Applicable □ N/A Name Type Date Reason Li Yong Secretary of the board Appointed 9 March 2023 Wang Hongbo Secretary of the board Resignation 3 March 2023 Voluntary resignation 3. Profit distribution and converting capital reserves into share capital for the reporting period Applicable N/A The Company has no interim dividend plan, either in the form of cash or stock. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 29 4. Implementation of any equity incentive plan, employee stock ownership plan or other incentive measures for employees Applicable N/A 4.1. 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 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 30 matter. H. On 4 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. 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 31 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. 4.2. Implementation of employee stock ownership plans Applicable N/A 4.3. Other incentive measures for employees Applicable N/A 2023 Interim Report of Luzhou Laojiao Co., Ltd. 32 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 the first half of 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 approval 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 Interim Report of Luzhou Laojiao Co., Ltd. 33 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 IConstruction 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 IIConstruction 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 Interim Report of Luzhou Laojiao Co., Ltd. 34 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 21.72mg/L 50mg/L 4.2256t 23.183t/a No Luzhou Laojiao Co., Ltd. Water pollutant Ammonia nitrogen Direct discharge 1 Luohan Brewery Eco-Park 0.34mg/L 5mg/L 0.0385t 2.017t/a No Luzhou Laojiao Co., Ltd. Water pollutant Total nitrogen Direct discharge 1 Luohan Brewery Eco-Park 5.72mg/L 15mg/L 1.1287t 5.796t/a No Luzhou Laojiao Co., Ltd. Water pollutant Total phosphorus Direct discharge 1 Luohan Brewery Eco-Park 0.07mg/L 0.5mg/L 0.0116t 0.232t/a No Luzhou Laojiao Co., Ltd. Air pollutant PM Organized discharge 2 Luohan Brewery Eco-Park 0.95mg/L 20mg/m30.0640t 3.900t/a No Luzhou Laojiao Co., Ltd. Air pollutant Sulfur dioxide Organized discharge 2 Luohan Brewery Eco-Park 0.62mg/L 50mg/m30.0474t 11.500t/a No Luzhou Laojiao Co., Ltd. Air pollutant Oxynitride Organized discharge 2 Luohan Brewery Eco-Park 34.06mg/L 150mg/m3 2.3940t 45.400t/a No Luzhou Laojiao Co., Ltd. Water pollutant COD Indirect discharge 1 Huangyi Brewery Eco-Park 29.30mg/L 400mg/L 8.1865t 440.180t/a No Luzhou Laojiao Co., Ltd. Water pollutant Ammonia nitrogen Indirect discharge 1 Huangyi Brewery Eco-Park 0.57mg/L 30mg/L 0.1662t 33.010t/a No Luzhou Laojiao Co., Ltd. Water pollutant Total nitrogen Indirect discharge 1 Huangyi Brewery Eco-Park 16.94mg/L 50mg/L 4.7322t 55.020t/a No Luzhou Laojiao Co., Ltd. Water pollutant Total phosphorus Indirect discharge 1 Huangyi Brewery Eco-Park 0.74mg/L 3.0mg/L 0.2080t 3.300t/a No Luzhou Laojiao Brewing Co., Ltd. Air pollutant Dust Organized discharge 2 Energy Center of Sichuan Luzhou Baijiu Industrial Park 1.12mg/L 5mg/m30.4049t 5.640t/a No Luzhou Laojiao Brewing Co., Ltd. Air pollutant PM Organized discharge 1 Energy Center of Sichuan Luzhou Baijiu Industrial Park 020mg/m303.000t/a No Luzhou Laojiao Brewing Co., Ltd. Air pollutant Sulfur dioxide Organized discharge 2 Energy Center of Sichuan Luzhou Baijiu Industrial Park 0.49mg/L 35mg/m30.1578t 16.680t/a No Luzhou Laojiao Brewing Co., Ltd. Air pollutant Sulfur dioxide Organized discharge 1 Energy Center of Sichuan Luzhou Baijiu Industrial Park 050mg/m302.200t/a No Luzhou Laojiao Brewing Co., Ltd. Air pollutant Oxynitride Organized discharge 2 Energy Center of Sichuan Luzhou Baijiu Industrial 42.53mg/L 100mg/m3 15.1651t 113.400/a No capacity of 7,000 tons/year will be developed. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 35 Park Luzhou Laojiao Brewing Co., Ltd. Air pollutant Oxynitride Organized discharge 1 Energy Center of Sichuan Luzhou Baijiu Industrial Park 0 150mg/m3 0 22.680 t/a / 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 50.36%, and COD discharge by 6.36%. 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 24.96%, and sulphur dioxide discharge by 9.64%. Emergency plan for environmental emergencies In the first half of 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. Input in environmental management and protection and the payment of environmental protection-related taxes During the Reporting Period, more than CNY 4.9 million was input in environmental governance and protection, and CNY 83.2 thousand was paid in environmental protection tax as required. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 36 Environmental self-monitoring plan Monitoring site Monitoring indicator Implementation standard Emission limit Monitoring frequency Monitoring form Monitoring compliance rate in H12023 Unorganized monitoring points 1#-4# for the exhaust gas emission outlets of Luohan Brewery Eco-Park Odor concentration Emission Standards for Odor Pollutants (GB14554- 93) 20 (dimensionless) 1 time/half-year 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 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/m31 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 Boundary noise Emission Standard for Noise of Industrial Daytime: 60 dB (A); nighttime: 50 dB (A) 1 time/quarter Manual 100% 2023 Interim Report of Luzhou Laojiao Co., Ltd. 37 the boundary of Luohan Brewery Eco-Park Enterprises at Boundary (GB12348-2008) 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 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 DA087, DA096-DA097 and DA072-DA075 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/m31 time/half-year Manual 100% Main outlet of the wastewater Flow Standards for the Emission of Water / 1 time/quarter Automatic 100% PH value 6-9 2023 Interim Report of Luzhou Laojiao Co., Ltd. 38 treatment station of Huangyi Brewery Eco-Park CODPollutants in the Fermented Alcohol and Baijiu Industry (GB2731-2011) 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 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 of National Cellar and 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 and Zaojiaoxiang Brewery Bases 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 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 Other information about environmental protection that should be disclosed N/A 2023 Interim Report of Luzhou Laojiao Co., Ltd. 39 Measures taken to reduce carbon emissions during the reporting period and the results Applicable N/A The Company reduced CO2 emissions through resource recycling. It developed a WSR energy-saving system for bran steamers, and achieved the pressure recovery and utilization of waste heat steam through the exchange of waste heat steam of the bran steamer. During the Reporting Period, the energy-saving system saved steam of approximately 7,995 tons and reduced carbon dioxide of approximately 1,900 tons. The Company recycled the marsh gas generated from the wastewater treatment process as boiler fuel, with more than 1.7 million cubic meters of marsh gas recycled during the Reporting Period, and more than 25,000 tons of carbon dioxide emissions were reduced. Other information about environment protection N/A 2. Social responsibility The Company effectively enhanced its political and social responsibilities, thoroughly implemented the arrangements and deployments by the Party committees at all levels for rural revitalization, consolidated and expanded the results of poverty alleviation with high quality, and solidly promoted comprehensive rural revitalization. In the first half of 2023, the Company went to Xiangtian Village, Longshan Township, Gulin County, to carry out 2023 Chinese New Year greeting activities, distributing cash and supplies to 467 poverty-stricken households, needy households and ordinary farmers. It launched the 2022 Leaders in Rural Revitalization and Moral Awards as well as Advanced Models to select excellent contributors and distribute incentives to them. In addition, the Company launched public welfare activities such as the Public Service Action of the National Team and the "Rural Revitalization" Public Welfare Project of Luzhou Laojiao as well as the distribution of chicks in 2023. The Company visited Guntang Village, Maiwa Township, Hongyuan County for the 2023 Chinese New Year greeting activities, distributing cash and supplies to 101 assisted households. CNY 670,000 was donated to support rural revitalization projects such as infrastructure construction. The Company continuously carried out the activity of "purchase instead of donation" by buying designated supported agricultural products with CNY 1,011,200. The Company's village members stationed in Guntang Village, Maiwa Township, Hongyuan County, were awarded the "Excellent Village Members in Aba Prefecture", and Guntang Village under the paired assistance of the Company was awarded the "Excellent Key Village of Rural Revitalization in Aba Prefecture". 2023 Interim Report of Luzhou Laojiao Co., Ltd. 40 Section VISignificant Events 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 No such cases in the reporting period. 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. 4. Engagement and disengagement of CPAs firm Are the interim financial statements audited □ Yes No The interim financial statements are not audited. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 41 5. Explanation of the board of directors and the board of supervisors regarding the "Non-standard audit opinion" for the reporting period Applicable N/A 6. Explanations of the board of directors regarding the "Non-standard audit opinion" of Last Year Applicable N/A 7. Bankruptcy and reorganization Applicable N/A No such cases in the reporting period. 8. Litigation 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 15 October 2014 See Section VI “Other significant events” 2023 Interim Report of Luzhou Laojiao Co., Ltd. 42 compensations. 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” Other litigation 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 Other litigations that do not meet the standard of a material litigation which is required to be disclosed 539.08 No Pending No significant impact Pending 9. Punishments and rectifications Applicable N/A 2023 Interim Report of Luzhou Laojiao Co., Ltd. 43 10. Credit conditions of the Company as well as its controlling shareholder and actual controller Applicable N/A 11. Significant related party transactions 11.1. Related party transactions arising from routine operation Applicable N/A No such cases in the reporting period. 11.2. Related party transactions regarding purchase or sales of assets or equity interests Applicable N/A No such cases in the reporting period. 11.3. Related party transitions arising from joint investments in external parties Applicable N/A No such cases in the reporting period. 11.4. Credits and liabilities with related parties Applicable N/A No such cases in the reporting period. 11.5. 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 Interim Report of Luzhou Laojiao Co., Ltd. 44 11.6. 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. 11.7. Other significant related party transactions Applicable N/A No such cases in the reporting period. 12. Significant contracts and their execution 12.1. Trusteeship, contracting and leasing 12.1.1. Trusteeship Applicable N/A No such cases in the reporting period. 12.1.2. Contracting Applicable N/A No such cases in the reporting period. 12.1.3. Leasing Applicable N/A No such cases in the reporting period. 12.2. Major guarantees Applicable N/A No such cases in the reporting period. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 45 12.3. Entrust assets management Applicable N/A 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 company Own funds 60,00020,00000 Wealth management product of trust company Own funds 30,000000 Others Own funds 20,000000 Total 110,00020,00000 Particulars of high risk wealth management products with a significant single amount, low security, poor liquidity or no principal protection Applicable N/A Expected inability to recover the principal of entrusted assets management or other circumstances that may result in impairment Applicable N/A 12.4. Other significant contracts Applicable N/A No such cases in the reporting period. 13. 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 the date of this Report, the Company had recovered a total amount of CNY 371 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 Interim Report of Luzhou Laojiao Co., Ltd. 46 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 14. 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 Interim Report of Luzhou Laojiao Co., Ltd. 47 Section VIIChanges in Shares and Information about Shareholders 1. Changes in shares 1.1 Changes in shares Unit：Share Before Changes in this period (＋，－) 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 3. Overseas listed foreign shares 4. Other 2023 Interim Report of Luzhou Laojiao Co., Ltd. 48 III. Total shares 1,471,895,100100.00% 92,669 92,6691,471,987,769100.00% Reasons for the change in shares Applicable N/A The Company’s reserved restricted shares for 2021 Restricted Share Incentive Plan were listed on 17 February 2023 and 92,669 restricted shares were added. 14,625 locked-up shares of senior management of the Company’s Deputy General Manager Mr. Shen Caihong were lifted from restricted sales on 3 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. Transfer of share ownership Applicable N/A Implementation progress of shares repurchases □ Applicable N/A Implementation progress of share buyback reduction through centralized bidding □ 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 Decrease in restricted shares during Increase in restricted shares during Number of restricted shares held at Reason for restriction Date of unlocking 2023 Interim Report of Luzhou Laojiao Co., Ltd. 49 the beginning of the reporting period the reporting period the reporting period the end of the reporting period Shen Caihong 180,48114,6250165,856 Locked-up shares of senior management, and shares granted under restricted share incentive plan For locked-up shares of senior management, 25% of such shares are unlocked and become transferable on a yearly basis as legally allowed. For restricted shares, see Announcement No.2022-1 on the Completion of the Grant of Restricted Shares for the unlocking dates. 2021 Restricted Share Incentive Plan 7,142,624092,6697,235,293 Restricted shares for equity incentive In accordance with the relevant provisions governing lifting the restriction of the Company’s 2021 Restricted Share Incentive Plan Total 7,323,10514,62592,6697,401,149 -- -- 2. Issuance and listing of securities 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 Restricted shares CNY 89.466/share 92,669 17 February 2023 92,669 Announcement No. 2023-3 on 16 February 2023 2023 Interim Report of Luzhou Laojiao Co., Ltd. 50 the Completion of the Grant of Reserved Restricted Shares for 2021 Restricted Share Incentive Plan disclosed 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 See “4. Implementation of any equity incentive plan, employee stock ownership plan or other incentive measures for employees” in “Section IVCorporate Governance”. 3. Total number of shareholders and their shareholdings Unit：Share Total number of common shareholders at the end of the reporting period 94,905 Total number of preferred shareholders with resumed voting rights by the end of the reporting period (if any)(see Note 8) 0 Shareholdings of common shareholders with a shareholding percentage over 5% or the top 10 common shareholders Name of shareholder Nature of shareholder Shareholding percentage Total common shares held by the end of the reporting period Increase/decrease during the reporting period Number of holding restricted common shares Number of holding non-restricted common 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 Luzhou XingLu Investment Group Co., Ltd. State-owned corporation 24.86% 365,971,14200365,971,142 Hong Kong Securities Clearing Company Limited Outbound corporation 3.76% 55,338,7329,726,076055,338,732 Bank of China Co., Ltd. – Baijiu index classification securities investment fund by China Merchants Fund Other 2.33% 34,242,713 -11,833,513034,242,713 2023 Interim Report of Luzhou Laojiao Co., Ltd. 51 China Securities Finance Corporation Limited Other 2.30% 33,842,0590033,842,059 Bank of China Co., Ltd.－Blue chip selected hybrid securities investment fund by E Fund Other 1.48% 21,800,000 -1,130,000021,800,000 Industrial and Commercial Bank of China Co., Ltd.-Newly growth hybrid securities investment fund by Invesco Great Wall Other 1.01% 14,929,100 -2,744,677014,929,100 Central Huijin Asset Management Co., Ltd. State-owned corporation 0.92% 13,539,8620013,539,862 China Life Insurance Company Limited-Tradition-common insurance product-005L－CT001 Hu Other 0.67% 9,879,0801,285,06609,879,080 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 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 N/A 2023 Interim Report of Luzhou Laojiao Co., Ltd. 52 any) (see note 11) 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 55,338,732 CNY common shares 55,338,732 Bank of China Co., Ltd. – Baijiu index classification securities investment fund by China Merchants Fund 34,242,713 CNY common shares 34,242,713 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 21,800,000 CNY common shares 21,800,000 Industrial and Commercial Bank of China Co., Ltd.-Newly growth hybrid securities investment fund by Invesco Great Wall 14,929,100 CNY common shares 14,929,100 Central Huijin Asset Management Co., Ltd.13,539,862 CNY common shares 13,539,862 China Life Insurance Company Limited-Tradition-common insurance product-005L－CT001 Hu 9,879,080 CNY common shares 9,879,080 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 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 The top 10 non-restricted common shareholders, the top10 common shareholders did not conduct any promissory repurchase during the reporting period. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 53 4. Changes in shares held by directors, supervisors, and senior management Applicable □ N/A Name Office title Incumbent/former Opening shareholding (share) Increase in shareholding in the current period (share) Decrease in shareholding in the current period (share) Closing shareholding (share) Opening restricted shares held (share) Restricted shares granted in the current period (share) Closing restricted shares held (share) Shen Caihong Deputy general manager Incumbent 195,575015,094180,481000 Total -- -- 195,575015,094180,481000 5. Change of controlling shareholder or actual controller Change of the controlling shareholder during the reporting period Applicable N/A No such cases in the reporting period. 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. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 54 Section VIIIPreferred Shares Applicable N/A No preferred stock in the Company during the reporting period. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 55 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 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 01149062.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 principal. Shenzhen Stock Exchange 2022 Public Offering of Corporate Bond of Luzhou Laojiao Co., Ltd. for Professional Investors (Phase I) 22 Lu Jiao 01148133.SZ 2 December 2022 2 December 2022 2 December 2025 150,0002.85% 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 Shenzhen Stock Exchange 2023 Interim Report of Luzhou Laojiao Co., Ltd. 56 will be paid once every year and the interests for the last installment will be paid together with the principal. 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 2.3. Changes in credit ratings in the reporting period Applicable N/A 2.4. 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. 4. Convertible corporate bonds Applicable N/A 2023 Interim Report of Luzhou Laojiao Co., Ltd. 57 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. 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 30 June 202331 December 2022 Change Current ratio 3.263.153.49% Debt/asset ratio 42.72% 33.19% 9.53% Quick ratio 2.452.2011.36% H12023 H12022 Change Net profits before non-recurring gains and losses 704,093.86549,626.5828.10% EBITDA/debt ratio 80.25% 190.37% -110.12% Interest cover (times) 37.3562.60 -40.34% EBITDA-to-interest cover (times) 38.6465.13 -40.67% 2023 Interim Report of Luzhou Laojiao Co., Ltd. 58 Section XFinancial Report 1. Auditor’s report Are these interim financial statements audited by an independent auditor □Yes No The interim financial statements are not audited by an independent auditor. 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 30 June 2023 Monetary Unit: CNY Item Balance as at 30 June 2023 Balance as at 1 January 2023 Current assets: Cash and cash equivalents 30,344,475,538.1317,757,528,211.25 Settlement reserves Lending funds Held-for-trading financial assets 200,056,716.131,073,466,780.37 Derivative financial assets Notes receivables Accounts receivables 14,720,743.595,939,420.78 Accounts receivables financing 2,765,330,012.774,583,352,503.37 Prepayment 182,055,446.82114,257,506.26 Premiums receivable Reinsurance accounts receivable Reinsurance contract reserve Other receivables 31,543,283.0323,396,533.98 Including：Interests receivable Dividends receivable 15,482,200.48 Buying back the sale of financial assets Inventories 10,794,156,136.009,840,742,374.85 Contract assets Assets held for sale Non-current assets due within one year Other current assets 109,151,844.19153,035,946.94 Total current assets 44,441,489,720.6633,551,719,277.80 Non-current assets: Disbursement of loans and advances Investments in debt obligations Investments in other debt obligations Long-term receivables Long-term equity investments 2,721,676,735.142,667,500,553.17 Investments in other equity 445,414,722.851,136,736,978.11 2023 Interim Report of Luzhou Laojiao Co., Ltd. 59 instruments Other non-current financial assets Investment property 38,467,435.5039,149,454.22 Fixed assets 8,616,388,591.118,856,258,598.78 Construction in progress 1,209,595,255.85808,919,047.21 Productive biological assets Oil and gas assets Use right assets 29,616,062.3339,952,525.63 Intangible assets 3,057,058,000.963,083,271,852.79 Development expenses Goodwill Long-term deferred expenses 449,989.24710,010.92 Deferred tax assets 667,166,561.571,005,167,353.80 Other non-current assets 297,385,638.50196,095,702.09 Total non-current assets 17,083,218,993.0517,833,762,076.72 Total assets 61,524,708,713.7151,385,481,354.52 Current liabilities: Short-term loans Borrowings from the central bank Loans from other banks Held-for-trading financial liabilities Derivative financial liabilities Notes payable Accounts payable 2,164,798,164.422,311,665,585.04 Advance from customer Contract liabilities 1,933,610,554.942,566,374,718.76 Financial assets sold for repurchase Deposits from customers and inter-bank Customer brokerage deposits Securities underwriting brokerage deposits Employee benefits payable 512,496,183.96675,034,885.31 Taxes payable 1,266,525,574.183,481,150,728.98 Other payable 7,411,558,110.901,202,409,278.49 Including：Interests payable Dividends payable 6,235,743,174.6116,594,850.58 Handling charges and commissions payable Reinsurance accounts payable Liabilities held for sale Non-current liabilities due within one year 80,331,921.5781,879,466.63 Other current liabilities 251,369,372.14333,627,225.47 Total current liabilities 13,620,689,882.1110,652,141,888.68 Non-current liabilities: Insurance contract reserves Long-term loans 9,515,100,000.003,179,600,000.00 Bonds payable 2,996,918,980.272,996,099,571.86 Including：Preferred shares Perpetual bonds Lease liabilities 26,095,309.9429,096,969.66 Long-term payables Long-term payroll payables Accrued liabilities Deferred income 29,474,054.7433,704,323.80 Deferred tax liabilities 92,383,522.19166,043,663.88 Other non-current liabilities 2023 Interim Report of Luzhou Laojiao Co., Ltd. 60 Total non-current liabilities 12,659,971,867.146,404,544,529.20 Total liabilities 26,280,661,749.2517,056,686,417.88 Owners' equity Share capital 1,471,987,769.001,471,895,100.00 Other equity instruments Including: preferred shares Perpetual bonds Capital reserves 5,004,570,088.844,800,154,468.99 Less: treasury stock 616,743,610.59639,021,998.78 Other comprehensive income 95,067,381.86330,751,245.84 Special reserves Surplus reserves 1,471,895,100.001,471,895,100.00 General risk reserve Undistributed profits 27,659,691,330.2326,772,197,213.98 Total equity attributable to owners of the parent company 35,086,468,059.3434,207,871,130.03 Non-controlling interests 157,578,905.12120,923,806.61 Total owners' equity 35,244,046,964.4634,328,794,936.64 Total liabilities and owners' equity 61,524,708,713.7151,385,481,354.52 Legal representative：Liu Miao Person in charge of accounting affairs：Xie Hong Person in charge of accounting department：Yan Li Balance sheet of parent company As at 30 June 2023 Monetary Unit: CNY Item Balance as at 30 June 2023 Balance as at 1 January 2023 Current assets: Cash and cash equivalents 29,113,981,970.1117,009,231,873.64 Held-for-trading financial assets 200,056,716.13974,505,894.18 Derivative financial assets Notes receivables Accounts receivables 268,133.6447,500.00 Accounts receivables financing Prepayment 31,417,459.452,141,256.01 Other receivables 14,222,162,555.2212,042,401,844.84 Including：Interests receivable Dividends receivable 15,482,200.48 Inventories 2,109,542.022,499,333.08 Contract assets Assets held for sale Non-current assets due within one year Other current assets 1,583,315.1134,163.66 Total current assets 43,571,579,691.6830,030,861,865.41 Non-current assets: Investments in debt obligations Investments in other debt obligations Long-term receivables Long-term equity investments 6,441,833,480.016,278,966,093.87 Investments in other equity instruments 445,110,801.221,136,433,056.48 Other non-current financial assets Investment property 38,467,435.5039,149,454.22 2023 Interim Report of Luzhou Laojiao Co., Ltd. 61 Fixed assets 984,217,783.361,021,509,077.72 Construction in progress 53,342,460.8749,136,390.14 Productive biological assets Oil and gas assets Use right assets 394,608.65600,190.05 Intangible assets 605,083,818.49617,211,243.56 Development expenses Goodwill Long-term deferred expenses 311,133.65548,507.41 Deferred tax assets 165,886,388.87147,351,049.81 Other non-current assets 26,051,835.4214,808,459.12 Total non-current assets 8,760,699,746.049,305,713,522.38 Total assets 52,332,279,437.7239,336,575,387.79 Current liabilities: Short-term loans Held-for-trading financial liabilities Derivative financial liabilities Notes payable Accounts payable 14,098,047.0651,174,790.68 Advance from customer Contract liabilities 2,369,943.951,510,508.26 Employee benefits payable 234,339,145.78241,471,148.70 Taxes payable 205,614,877.02381,259,266.93 Other payables 14,293,353,474.501,730,335,596.91 Including：Interests payable Dividends payable 6,219,148,324.03 Liabilities held for sale Non-current liabilities due within one year 71,289,637.5867,673,936.27 Other current liabilities 308,092.71196,366.07 Total current liabilities 14,821,373,218.602,473,621,613.82 Non-current liabilities: Long-term loans 9,515,100,000.003,179,600,000.00 Bonds payable 2,996,918,980.272,996,099,571.86 Including：Preferred shares Perpetual bonds Lease liabilities 205,664.46203,920.20 Long-term payables Long-term payroll payables Accrued liabilities Deferred income Deferred tax liabilities 59,507,481.05132,565,131.74 Other non-current liabilities Total non-current liabilities 12,571,732,125.786,308,468,623.80 Total liabilities 27,393,105,344.388,782,090,237.62 Owners' equity Share capital 1,471,987,769.001,471,895,100.00 Other equity instruments Including: preferred shares Perpetual bonds Capital reserves 4,996,441,364.974,789,603,151.65 Less: treasury stock 616,743,610.59639,021,998.78 Other comprehensive income 91,695,375.87328,542,995.36 Special reserves Surplus reserves 1,471,895,100.001,471,895,100.00 Undistributed profits 17,523,898,094.0923,131,570,801.94 Total owners' equity 24,939,174,093.3430,554,485,150.17 2023 Interim Report of Luzhou Laojiao Co., Ltd. 62 Total liabilities and owners' equity 52,332,279,437.7239,336,575,387.79 Consolidated income statement Monetary Unit: CNY Item H12023 H12022 1. Total operating revenue 14,593,051,774.1411,664,377,552.94 Including: Operating revenue 14,593,051,774.1411,664,377,552.94 Interest income Earned premium Fee and commission income 2. Total operating costs 5,234,429,060.114,392,197,692.56 Including: Cost of sales 1,700,263,105.681,642,310,550.61 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 1,593,958,974.951,045,859,768.74 Selling and distribution expenses 1,463,196,830.611,213,861,984.66 General and administrative expenses 539,879,241.31542,666,754.49 Research and Development expenses 62,914,698.9974,487,055.16 Financial expenses -125,783,791.43 -126,988,421.10 Including：Interest expenses 261,543,693.36119,589,682.10 Interest income 384,116,432.10237,072,806.72 Plus: Other income 23,395,940.1610,744,728.17 Investment income ("-" for losses) 85,024,194.5557,499,481.86 Including: income from investment in associates and joint ventures 70,278,286.4937,796,914.64 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) 32,781,678.425,862,846.29 Credit impairment losses (“-” for losses) 130,161.94 -584,263.98 Impairment losses(“-“ for losses) Gains from disposal of assets("-" for losses) -477,479.3819,789,402.07 3. Operating profits ("-" for losses) 9,499,477,209.727,365,492,054.79 Plus: non-operating income 14,479,518.9811,135,733.33 Less: non-operating expenses 6,972,586.951,949,009.51 2023 Interim Report of Luzhou Laojiao Co., Ltd. 63 4. Total profits before tax ("-" for total losses) 9,506,984,141.757,374,678,778.61 Less: income tax expenses 2,385,359,516.121,800,020,542.39 5. Net profit ("-" for net loss) 7,121,624,625.635,574,658,236.22 5.1 By operating continuity 5.1.1 Net profit from continuing operation ("-" for losses) 7,121,624,625.635,574,658,236.22 5.1.2 Net profit from discontinued operation ("-" for losses) 5.2 By ownership 1) Attributable to shareholders of the parent company ("-" for losses) 7,090,426,787.075,531,926,340.44 2) Attributable to non-controlling interests ("-" for losses) 31,197,838.5642,731,895.78 6. Net of tax from other comprehensive income -218,514,527.93 -25,120,502.64 Net of tax from other comprehensive income to the owner of the parent company -219,468,210.77 -26,408,043.89 6.1 Other comprehensive income cannot reclassified into the profit and loss: -221,898,677.10 -18,914,133.57 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 131,244.39 3) Changes in fair value of investments in other equity instruments -222,029,921.49 -18,914,133.57 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 2,430,466.33 -7,493,910.32 1) Share in other comprehensive income that will be classified into profit and loss under equity method 1,266,710.82 -9,066,533.27 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 1,163,755.511,572,622.95 7) Others Net of tax from other comprehensive income to non-controlling interests 953,682.841,287,541.25 7. Total comprehensive income 6,903,110,097.705,549,537,733.58 Total comprehensive income attributable to owners of the parent company 6,870,958,576.305,505,518,296.55 Total comprehensive income attributable to non-controlling interests 32,151,521.4044,019,437.03 8. Earnings per share (1) Basic earnings per share 4.823.76 (2) Diluted earnings per share 4.823.76 2023 Interim Report of Luzhou Laojiao Co., Ltd. 64 Legal representative：Liu Miao Person in charge of accounting affairs：Xie Hong Person in charge of accounting department：Yan Li Income statement of parent company Monetary Unit: CNY Item H12023 H12022 1. Operating revenue 4,014,540,328.022,067,048,989.06 Less: Cost of sales 3,042,254,948.121,385,687,450.52 Taxes and surcharges 37,573,415.9621,846,321.17 Selling and distribution expenses General and administrative expenses 461,675,917.45471,587,969.18 Research and Development expenses 26,515,628.8121,774,399.61 Financial expenses -227,960,702.16 -213,866,445.14 Including：Interest expenses 160,806,004.0122,117,787.32 Interest income 389,316,203.47236,000,565.63 Plus: Other income 15,751,969.902,964,466.60 Investment income ("-" for losses) 69,703,790.6152,812,442.16 Including: income from investment in associates and joint ventures 55,379,409.8425,579,283.02 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) 30,742,662.635,862,846.29 Credit impairment losses (“-” for losses) 930,108.70 -103,576.90 Asset impairment losses (“-” for losses) Gains from disposal of assets("-" for losses) -651,767.4819,786,813.38 2. Operating profits ("-" for losses) 790,957,884.20461,342,285.25 Plus: non-operating income 11,214,036.195,439,905.79 Less: non-operating expenses 5,679,506.551,671,093.97 3. Total profits before tax ("-" for total losses) 796,492,413.84465,111,097.07 Less: income tax expenses 201,232,450.8785,788,728.92 4. Net profit ("-" for net loss) 595,259,962.97379,322,368.15 4.1 Net profit from continuing operation ("-" for losses) 595,259,962.97379,322,368.15 4.2 Net profit from discontinued operation ("-" for losses) 5. Net of tax from other comprehensive income -220,631,966.28 -27,980,666.84 5.1 Other comprehensive income cannot reclassified into the profit and loss: -221,898,677.10 -18,914,133.57 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 131,244.39 2023 Interim Report of Luzhou Laojiao Co., Ltd. 65 profit and loss under equity method 3) Changes in fair value of investments in other equity instruments -222,029,921.49 -18,914,133.57 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 1,266,710.82 -9,066,533.27 1) Share in other comprehensive income that will be classified into profit and loss under equity method 1,266,710.82 -9,066,533.27 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 374,627,996.69351,341,701.31 7. Earnings per share (1) Basic earnings per share 0.390.24 (2) Diluted earnings per share 0.390.24 Consolidated statement of cash flows Monetary Unit: CNY Item H12023 H12022 1. Cash flows from operating activities Cash received from sale of goods and rendering of services 17,584,367,655.4215,086,273,014.66 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 Net capital increase in repurchase business Net cash received from customer brokerage deposits Refunds of taxes and surcharges 268,904.2289,261,122.49 2023 Interim Report of Luzhou Laojiao Co., Ltd. 66 Cash received from other operating activities 459,253,580.98287,930,011.44 Subtotal of cash inflows from operating activities 18,043,890,140.6215,463,464,148.59 Cash paid for goods purchased and services received 3,091,976,431.753,622,026,296.99 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 742,681,965.47699,560,416.16 Cash paid for taxes and surcharges 7,376,131,406.365,713,535,332.59 Cash paid for other operating activities 1,185,339,540.001,351,327,137.51 Subtotal of cash outflows from operating activities 12,396,129,343.5811,386,449,183.25 Net cash flows from operating activities 5,647,760,797.044,077,014,965.34 2. Cash flows from investing activities Cash received from disposal of investments 1,502,335,883.94814,171,770.96 Cash received from returns on investments 2,391,009.806,795,921.96 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 6,151,397.9547,943,500.00 Net cash received from disposal of subsidiaries and other business units Cash received from other investing activities Subtotal of cash inflows from investing activities 1,510,878,291.69868,911,192.92 Cash paid to acquire and construct fixed assets, intangible assets and other long-term assets 578,623,738.47587,312,805.01 Cash paid for investments 200,000,000.001,440,000,000.00 Net increase in pledge loans Net cash paid to acquire subsidiaries and other business units Cash paid for other investing activities Subtotal of cash outflows from investing activities 778,623,738.472,027,312,805.01 Net cash flows from investing activities 732,254,553.22 -1,158,401,612.09 3. Cash flows from financing activities Cash received from investors 10,373,040.14636,231,646.00 Including: cash received by subsidiaries from investments by minority shareholders 2,082,314.40 Cash received from borrowings 6,350,000,000.00 Cash received from other financing activities Subtotal of cash inflows from financing activities 6,360,373,040.14636,231,646.00 2023 Interim Report of Luzhou Laojiao Co., Ltd. 67 Cash paid for debt repayments 10,100,000.00 Cash paid for distribution of dividends and profits or payment of interest 154,205,652.7952,502,625.00 Including: dividends and profits paid to minority shareholders by subsidiaries Cash paid for other financing activities 1,117,268.644,360,194.01 Subtotal of cash outflows from financing activities 165,422,921.4356,862,819.01 Net cash flows from financing activities 6,194,950,118.71579,368,826.99 4. Effect of fluctuation in exchange rate on cash and cash equivalents 7,563,547.1614,324,990.43 5. Net increase in cash and cash equivalents 12,582,529,016.133,512,307,170.67 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 30,311,535,608.0016,914,836,112.50 Cash flow statements of parent company Monetary Unit: CNY Item H12023 H12022 1. Cash flows from operating activities Cash received from sale of goods and rendering of services 4,537,069,372.712,334,856,499.28 Refunds of taxes and surcharges Cash received from other operating activities 4,098,127,059.263,758,977,124.59 Subtotal of cash inflows from operating activities 8,635,196,431.976,093,833,623.87 Cash paid for goods purchased and services received 2,851,101,478.661,596,587,859.22 Cash paid to and on behalf of employees 238,227,114.39639,918,889.87 Cash paid for taxes and surcharges 634,932,605.73451,760,425.43 Cash paid for other operating activities 134,540,090.19120,449,483.46 Subtotal of cash outflows from operating activities 3,858,801,288.972,808,716,657.98 Net cash flows from operating activities 4,776,395,143.003,285,116,965.89 2. Cash flows from investing activities Cash received from disposal of investments 1,400,914,454.67814,131,144.12 Cash received from returns on investments 2,391,009.806,795,921.96 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 271,899.3047,943,500.00 Net cash received from disposal of subsidiaries and other business units Cash received from other investing activities 2023 Interim Report of Luzhou Laojiao Co., Ltd. 68 Subtotal of cash inflows from investing activities 1,403,577,363.77868,870,566.08 Cash paid to acquire and construct fixed assets, intangible assets and other long-term assets 52,057,717.5953,052,249.25 Cash paid for investments 220,000,000.001,440,000,000.00 Net cash paid to acquire subsidiaries and other business units Cash paid for other investing activities Subtotal of cash outflows from investing activities 272,057,717.591,493,052,249.25 Net cash flows from investing activities 1,131,519,646.18 -624,181,683.17 3. Cash flows from financing activities Cash received from investors 8,290,725.74636,231,646.00 Cash received from loans 6,350,000,000.00 Cash received from other financing activities Subtotal of cash inflows from financing activities 6,358,290,725.74636,231,646.00 Cash paid for debt repayments 10,100,000.00 Cash paid for distribution of dividends and profits or payment of interest 154,205,652.7952,502,625.00 Cash paid for other financing activities 76,680.00261,142.60 Subtotal of cash outflows from financing activities 164,382,332.7952,763,767.60 Net cash flows from financing activities 6,193,908,392.95583,467,878.40 4. Effect of fluctuation in exchange rate on cash and cash equivalents 290,791.42 5. Net increase in cash and cash equivalents 12,102,113,973.553,244,403,161.12 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 29,094,005,911.0516,183,386,919.94 Consolidated statement of changes in owners' equity For the six months ended 30 June 2023 Monetary Unit: CNY Item H12023 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 1,47 1,89 5,10 0.00 4,80 0,15 4,46 8.99 639,021,998.78 330,751,245.84 1,47 1,89 5,10 0.00 26,7 72,1 97,2 13.9 8 34,2 07,8 71,1 30.0 3 120,923,806.61 34,3 28,7 94,9 36.6 4 Plus: adjustments 2023 Interim Report of Luzhou Laojiao Co., Ltd. 69 for changes in accounting policies Adjustments for correction of accounting errors in prior year Business combinations under common control Others 2. Balance as at 1 January of the current year 1,47 1,89 5,10 0.00 4,80 0,15 4,46 8.99 639,021,998.78 330,751,245.84 1,47 1,89 5,10 0.00 26,7 72,1 97,2 13.9 8 34,2 07,8 71,1 30.0 3 120,923,806.61 34,3 28,7 94,9 36.6 4 3.Increases/decreases in the current period (“-” for decreases) 92,6 69.0 0 204,415,619.85 - 22,2 78,3 88.1 9 - 235,683,863.98 887,494,116.25 878,596,929.31 36,6 55,0 98.5 1 915,252,027.82 (1) Total comprehensive income - 219,468,210.77 7,09 0,42 6,78 7.07 6,87 0,95 8,57 6.30 32,1 51,5 21.4 0 6,90 3,11 0,09 7.70 (2) Capital contributed or reduced by owners 92,6 69.0 0 204,415,619.85 - 22,2 78,3 88.1 9 226,786,677.04 4,50 3,57 7.11 231,290,254.15 Capital contributions by owners 92,6 69.0 0 8,19 8,05 5.74 8,29 0,72 4.74 2,08 2,31 4.40 2,08 2,31 4.40 Capital contributions by other equity instruments holders Amounts of share-based payments recognized in owners' equity 196,217,564.11 - 30,5 69,1 12.9 3 226,786,677.04 2,42 1,26 2.71 229,207,939.75 Others (3) Profit distribution - 6,21 9,14 8,32 4.03 - 6,21 9,14 8,32 4.03 - 6,21 9,14 8,32 4.03 Withdrawal of surplus reserves Withdrawal of general risk reserve Profit distributed to owners (or shareholders) - 6,21 9,14 8,32 - 6,21 9,14 8,32 - 6,21 9,14 8,322023 Interim Report of Luzhou Laojiao Co., Ltd. 70 4.034.034.03 Others (4) Internal carry-forward of owners' equity - 16,2 15,6 53.2 1 16,2 15,6 53.2 1 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 - 16,2 15,6 53.2 1 16,2 15,6 53.2 1 Others (5) Special reserves Withdrawal for the period Use for the period (6) Others 4. Balance as at 30 June of the current year 1,47 1,98 7,76 9.00 5,00 4,57 0,08 8.84 616,743,610.59 95,0 67,3 81.8 6 1,47 1,89 5,10 0.00 27,6 59,6 91,3 30.2 3 35,0 86,4 68,0 59.3 4 157,578,905.12 35,2 44,0 46,9 64.4 6 For the six months ended 30 June 2022 Monetary Unit: CNY Item H12022 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 1,46 4,75 2,47 6.00 3,75 5,35 4,66 5.73 167,527,152.32 1,46 4,75 2,47 6.00 21,1 87,8 60,2 35.8 9 28,0 40,2 47,0 05.9 4 97,0 14,1 16.8 9 28,1 37,2 61,1 22.8 3 Plus: adjustments for changes in accounting 2023 Interim Report of Luzhou Laojiao Co., Ltd. 71 policies Adjustments for correction of accounting errors in prior year Business combinations under common control Others 2. Balance as at 1 January of the current year 1,46 4,75 2,47 6.00 3,75 5,35 4,66 5.73 167,527,152.32 1,46 4,75 2,47 6.00 21,1 87,8 60,2 35.8 9 28,0 40,2 47,0 05.9 4 97,0 14,1 16.8 9 28,1 37,2 61,1 22.8 3 3.Increases/decreases in the current period (“-” for decreases) 6,86 2,60 0.00 817,869,393.67 613,969,371.60 - 26,4 08,0 43.8 9 758,022,660.74 942,377,238.92 46,2 60,1 43.5 6 988,637,382.48 (1) Total comprehensive income - 26,4 08,0 43.8 9 5,53 1,92 6,34 0.44 5,50 5,51 8,29 6.55 44,0 19,4 37.0 3 5,54 9,53 7,73 3.58 (2) Capital contributed or reduced by owners 6,86 2,60 0.00 817,869,393.67 613,969,371.60 210,762,622.07 2,24 0,70 6.53 213,003,328.60 Capital contributions by owners 629,369,046.00 636,231,646.00 - 6,86 2,60 0.00 - 6,86 2,60 0.00 Capital contributions by other equity instruments holders Amounts of share-based payments recognized in owners' equity 6,86 2,60 0.00 188,500,347.67 - 22,2 62,2 74.4 0 217,625,222.07 2,24 0,70 6.53 219,865,928.60 Others (3) Profit distribution - 4,77 3,91 9,30 6.54 - 4,77 3,91 9,30 6.54 - 4,77 3,91 9,30 6.54 Withdrawal of surplus reserves Withdrawal of general risk reserve Profit distributed to owners (or shareholders) - 4,77 3,91 9,30 6.54 - 4,77 3,91 9,30 6.54 - 4,77 3,91 9,30 6.54 2023 Interim Report of Luzhou Laojiao Co., Ltd. 72 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 earnings 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 15,6 26.8 4 15,6 26.8 4 15,6 26.8 4 4. Balance as at 30 June of the current year 1,47 1,61 5,07 6.00 4,57 3,22 4,05 9.40 613,969,371.60 141,119,108.43 1,46 4,75 2,47 6.00 21,9 45,8 82,8 96.6 3 28,9 82,6 24,2 44.8 6 143,274,260.45 29,1 25,8 98,5 05.3 1 Statement of changes in owners' equity of parent company For the six months ended 30 June 2023 Monetary Unit: CNY Item H12023 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 1,471,895,10 0.00 4,789,603,15 1.65 639,02 1,998.78 328,54 2,995.36 1,471,895,10 0.00 23,131,570,8 01.94 30,554,485,1 50.17 Plus: adjustments for changes in accounting policies Adjustments for correction of accounting 2023 Interim Report of Luzhou Laojiao Co., Ltd. 73 errors in prior year Others 2. Balance as at January 1 of the current year 1,471,895,10 0.00 4,789,603,15 1.65 639,02 1,998.78 328,54 2,995.36 1,471,895,10 0.00 23,131,570,8 01.94 30,554,485,1 50.17 3.Increases/decreases in the current period (“-” for decreases) 92,669.00 206,83 8,213.32 - 22,278,388.1 9 - 236,84 7,619.49 - 5,607,672,70 7.85 - 5,615,311,05 6.83 (1) Other comprehensive income - 220,63 1,966.28 595,25 9,962.97 374,62 7,996.69 (2) Capital contributed or reduced by owners 92,669.00 206,83 8,213.32 - 22,278,388.1 9 229,20 9,270.51 Capital contributions by owners 92,669.00 8,198,055.74 8,290,724.74 0.00 Capital contributions by other equity instruments holders Amounts of share-based payments recognized in owners' equity 198,64 0,157.58 - 30,569,112.9 3 229,20 9,270.51 Others (3) Profit distribution - 6,219,148,32 4.03 - 6,219,148,32 4.03 Withdrawal of surplus reserves Profit distributed to owners (or shareholders) - 6,219,148,32 4.03 - 6,219,148,32 4.03 Others (4) Internal carry-forward of owners' equity - 16,215,653.2 1 16,215,653.2 1 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 - 16,215 2023 Interim Report of Luzhou Laojiao Co., Ltd. 74 of retained earnings from other comprehensive income 16,215,653.2 1 ,653.2 1 Others (5) Special reserves Withdrawal for the period Use for the period (6) Others 4. Balance as at 30 June of the current year 1,471,987,76 9.00 4,996,441,36 4.97 616,74 3,610.59 91,695,375.8 7 1,471,895,10 0.00 17,523,898,0 94.09 24,939,174,0 93.34 For the six months ended 30 June 2022 Monetary Unit: CNY Item H12022 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 1,464,752,47 6.00 3,739,666,10 8.27 167,57 2,013.86 1,464,752,47 6.00 18,872,792,7 75.01 25,709,535,8 49.14 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 1,464,752,47 6.00 3,739,666,10 8.27 167,57 2,013.86 1,464,752,47 6.00 18,872,792,7 75.01 25,709,535,8 49.14 3.Increases/decreases in the current period (“-” for decreases) 6,862,600.00 819,95 2,517.52 613,96 9,371.60 - 27,980,666.8 4 - 4,394,596,93 8.39 - 4,209,731,85 9.31 (1) Other comprehensive income - 27,980,666.8 4 379,32 2,368.15 351,34 1,701.31 (2) Capital contributed or reduced by owners 6,862,600.00 819,95 2,517.52 613,96 9,371.60 212,84 5,745.92 Capital contributions by owners 629,36 9,046.00 636,23 1,646.00 - 6,862,600.00 Capital contributions by other equity instruments holders Amounts of share-based payments 6,862,600.00 190,58 3,471.- 22,262219,70 8,345.2023 Interim Report of Luzhou Laojiao Co., Ltd. 75 recognized in owners' equity 52,274.4 0 92 Others (3) Profit distribution - 4,773,919,30 6.54 - 4,773,919,30 6.54 Withdrawal of surplus reserves Profit distributed to owners (or shareholders) - 4,773,919,30 6.54 - 4,773,919,30 6.54 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 earnings 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 30 June of the current year 1,471,615,07 6.00 4,559,618,62 5.79 613,96 9,371.60 139,59 1,347.02 1,464,752,47 6.00 14,478,195,8 36.62 21,499,803,9 89.83 3. Company Profile 3.1 Company Overview Luzhou Laojiao Co., Ltd. (hereinafter referred to as "Company" or "the Company"), formerly known as Luzhou Laojiao Brewery, was established in March 1950. 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. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 76 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 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 77 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 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 this year 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 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 28 August 2023. 3.5 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. 3.6 Consolidated financial statement scope and their changes (1) The 25 subsidiaries included in the consolidated financial statements for the current period are listed as follows: Name of subsidiary Abbreviation Shareholding proportion(%) Voting rights (%) Direct Indirect Luzhou Laojiao Brewing Co., Ltd. Brewing Company 100.00 100.00 Luzhou Red Sorghum Modern Agricultural Development Co., Ltd. Red Sorghum Company 60.0060.00 2023 Interim Report of Luzhou Laojiao Co., Ltd. 78 Luzhou Laojiao Sales Co., Ltd. Sales Company 100.00 100.00 Luzhou Laojiao Nostalgic Liquor Marketing Co., Ltd. Nostalgic Company 100.00100.00 Luzhou Laojiao Custom Liquor Co., Ltd. Note 1 Custom Liquor Company 15.0060.00 Luzhou Laojiao Selected Supply Chain Management Co., Ltd. Selected Company 100.00100.00 Guangxi Luzhou Laojiao Imported Liquor Industry Co., Ltd. Guangxi Imported Liquor Industry 100.00100.00 Luzhou Dingli Liquor Industry Co., Ltd. Dingli Company 100.00100.00 Luzhou Dingyi Liquor Industry Sales Co., Ltd. Note 2 Dingyi Company 100.00100.00 Luzhou Laojiao New Liquor Industry Co., Ltd. New Liquor Industry Company 100.00100.00 Luzhou Laojiao I & ECo., Ltd. I & ECompany 100.00100.00 Luzhou Laojiao Boda Liquor Industry Marketing Co., Ltd. Boda Marketing 75.0075.00 Luzhou Laojiao Fruit Wine industry Co., Ltd. Note 3 Fruit Wine Industry 41.0060.00 Mingjiang Co., Ltd. Mingjiang Company 54.0054.00 Luzhou Laojiao International Trade (Hainan) Co., Ltd. Hainan Company 100.00100.00 Luzhou Pinchuang Technology Co., Ltd. Pinchuang Company 100.00 100.00 Luzhou Laojiao International Development（Hong Kong）Co., Ltd. Hong Kong Company 55.00 55.00 Luzhou Laojiao Commercial Development (North America) Co., Ltd. North America Company 55.0055.00 Luzhou Laojiao Electronic Commerce Co., Ltd. Electronic Commerce Company 90.00 90.00 Luzhou Laojiao Whitail Liquor Industry Co., Ltd. Note 4 Whitail Liquor Industry 31.5060.00 Luzhou Baonuo Biotechnology Co., Ltd. Baonuo Biotechnology 100.00 100.00 Luzhou Laojiao Health Liquor Industry Co., Ltd. Health Liquor Industry 100.00 100.00 Luzhou Laojiao Health Sales Co., Ltd. Health Sales 100.00100.00 Luzhou Laojiao New Retail Co., Ltd. New Retail Company 40.00100.00100.00 Luzhou Laojiao Technology Innovation Co., Ltd. Technology Innovation Company 40.00100.00100.00 Note 1: Although the Company holds less than 51% of the equity of Custom Liquor Company, among the five members of the board of directors, the Company has sent three people. The Company has actual control over Custom Liquor Company, so it is included in the scope of consolidation. Note 2: Luzhou Dingyi Liquor Industry Sales Co., Ltd. was renamed Luzhou Laojiao Chateau Qiankun Custom Liquor Sales Co., Ltd. in July 2023. Note 3: Although the Company holds less than 51% of the equity of Fruit Wine Industry, among the five members of the board of directors, the Company has sent three people, and the chairman of the board (legal representative) is the director sent by the Company. The Company has actual control over Fruit Wine Industry, so it is included in the scope of consolidation. Note 4: Although the Company holds less than 51% of the equity of Whitail Liquor Industry, among the seven members of the board of directors, the Company has sent five people. The Company has actual control over Whitail Liquor Industry and its subsidiaries, so it is included in the scope of consolidation. Details of the subsidiaries incorporated into the consolidated financial statements show on “7.1. Interests in subsidiaries” (2) Subsidiaries that are newly incorporated into the scope of consolidation in this period N/A (3) Liquidation and cancellation for subsidiaries in this period 2023 Interim Report of Luzhou Laojiao Co., Ltd. 79 N/A Details of changes in the scope of consolidation show on “6.5. Changes in consolidated scope for other reasons”. 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 (2014 Revision) issued by CSRC. 4.2. Going concern The Company’s business activities have adequate financial support. Based on the current information 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 disclosure requirements for related food and wine manufacturing business in the Self-regulatory Guidelines No.3 for Companies Listed on Shenzhen Stock Exchange - Industry Information Disclosure shall be observed by the Company. 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 2014. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 80 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 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. 5.6 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 81 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 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. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 82 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. 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 83 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 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 84 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. 5.7 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; 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. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 85 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. 5.8 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. 5.9 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 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 86 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. 5.10 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 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 87 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. 1) Financial liabilities measured at fair value with their changes included into current profits/losses 2023 Interim Report of Luzhou Laojiao Co., Ltd. 88 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. 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 89 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. 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 90 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” from instruments classified as equity instruments) are treated as profit distribution. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 91 (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 Interim Report of Luzhou Laojiao Co., Ltd. 92 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. 5.11 Notes receivable The method of determining the expected credit loss of notes receivables and accounting treatment method: 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 5.12 Accounts receivables The method of determining the expected credit loss of accounts receivables and accounting treatment method: 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 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 Interim Report of Luzhou Laojiao Co., Ltd. 93 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 5.13 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 5.10 Financial instruments. 5.14 Other receivables The method of determining the expected credit loss of other receivables and accounting treatment method: 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. 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 94 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 5.15 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 dispatched 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 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) Basis to determine net realizable values of inventories 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 95 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. 5.16 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 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 96 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. 5.18 Assets held for sale (1) Classification of 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 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) Measurement 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 97 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 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. The accounting treatment that does not continue to be classified as held-for-sale and the termination of recognition 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; 2023 Interim Report of Luzhou Laojiao Co., Ltd. 98 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 5.10 Financial instruments. 5.22 Long-term equity investment (1) Judgment criteria of common control and significant influence 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. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 99 (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 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. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 100 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 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 101 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. 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 102 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. 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 103 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) Recognition standard, valuation method and depreciation method for fixed assets acquired under financing lease 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. The policy for the accrual of the depreciation of the leasehold property for the fixed assets acquired under the finance lease was consistent with that adopted for the Company's fixed assets. If there is reasonable assurance that the Company will obtain the ownership of the leased assets when the lease term expires, the leased assets should be depreciated over its useful life; if there is no reasonable assurance that the Company will obtain the ownership of the leased assets when the lease term expires, the leased assets should be depreciated over the shorter of the lease term or the useful life of the leased assets. (4) 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 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 104 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 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 105 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 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. Using right assets Refer to Note 5.42 Lease for the detail. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 106 5.30. Intangible assets (1) Measurement method, useful life, impairment test 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. 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 amortization method 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. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 107 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) Internal research and development expenditure accounting policy 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 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; 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. 5.31. 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. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 108 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 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. 5.32. 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. 5.33. 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. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 109 5.34. 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 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. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 110 (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-term employee benefits shall be recognized and measured in accordance with the relevant principles of the defined benefits plan. 5.35. Lease liabilities Refer to the Note 5.42 Lease for details. 5.36. 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, 2023 Interim Report of Luzhou Laojiao Co., Ltd. 111 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. 5.37. 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. (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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 112 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). 5.38. Other financial instruments such as preferred shares and perpetual bonds N/A 5.39. Revenue Accounting policies for recognition and measurement of revenue (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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 113 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 are 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 mainly sells alcoholic products, which is a performance obligation performed at a certain point in time. The revenue identification of domestic products must meet the following requirements: a. The Company has delivered the products to the purchasers according to the contract and the purchasers have signed and confirmed the receipts. b. The amount of sales revenue has been identified. c. The payment has been received; the receipt of the document of title has been obtained and the relevant economic benefits are likely to flow in. d. The product-related costs can be reliably calculated. The following requirements must be met to confirm the revenue of export products: a. The Company has declared the products in accordance with the contract, obtained the bills of lading, received the payment or obtained the receipt of payment and related economic benefits that are likely to flow in. b. The main risks and rewards of the product ownership have been transferred. c. The legal ownership of the goods has been transferred. 5.40. 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 114 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. 5.41. 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: 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 115 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. 5.42. Lease (1) Lease From the effectiveness date of a contract, the Company assessed whether the contract was a lease or includes any lease. If a party to the contract transferred the right allowing the control over the use of one or more assets that had been identified within a certain period, in exchange for a consideration, such contract was a lease or includes a lease. (1) Accounting treatment with the Company as lessee On the commencement date of the lease term, the Company recognizes the right-of-use assets and lease liabilities for the lease, unless it is a simplified short-term lease or a low-value asset lease. 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. 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 116 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. The Company does not recognize the right-of-use assets and lease liabilities for short-term leases and leases of low-value assets, which are included in the profit or loss for the current period or the cost of relevant assets on a straight-line basis during each period of the lease term. (2) Accounting treatment with the Company as lessor ① Lease classification 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 Accounting treatment of 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. ③ Accounting treatment of 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. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 117 5.43. 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 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. 5.44 Changes in significant accounting policies and accounting estimates 5.44.1. Changes in significant accounting policies □Applicable N/A 5.44.2. Changes in significant accounting estimates □Applicable N/A 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 5.45. Other 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% 2023 Interim Report of Luzhou Laojiao Co., Ltd. 118 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), the Company's wholly-owned subsidiary, Luzhou Pinchuang Technology Co., Ltd., whose primary business income meet the requirements of scope 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. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 119 (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 Monetary Unit: CNY Item Closing Balance Opening Balance Cash 34,319.3528,711.93 Bank deposit 30,324,182,733.7817,729,643,050.90 Other cash and cash equivalents 20,258,485.0027,856,448.42 Total 30,344,475,538.1317,757,528,211.25 Including: Total deposit outbound 81,637,756.4268,948,954.39 Total amount with restriction to use due to mortgage, pledge or freeze 32,939,930.1328,521,619.38 Other statements: Note 1: The deposit outbound is the balance of cash and cash equivalents of the foreign holding subsidiary of the Company. Note 2: The closing balance of other cash and cash equivalents is the balance of CNY 10,258,485.00 deposited by the subsidiary, Luzhou Laojiao Electronic Commerce Co., Ltd., Luzhou Laojiao Selected Supply Chain Management Co., Ltd. and Luzhou Laojiao Nostalgic Liquor Marketing Co., Ltd. on the third-party e-commerce platform, and guaranty letter deposit of CNY 10,000,000.00 by the subsidiary, Luzhou Laojiao Sales Co., Ltd., in the bank. Note 3: The closing balance increased by CNY 12,586,947,326.88, up 70.88% compared with the beginning of the period, which was mainly due to the combined effect of net positive cash flows from operating activities and the acquisition of bank borrowings in the current period. Note 4: 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. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 120 □Applicable N/A 7.2. Held-for-trading financial assets Monetary Unit: CNY Item Closing Balance Opening Balance Financial assets measured at fair value with their changes included into current profits/losses 200,056,716.131,073,466,780.37 Including: Wealth management products measured at fair value with their changes included into current profits/losses 200,056,716.131,073,466,780.37 Including: Total 200,056,716.131,073,466,780.37 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. Note 2: The closing balance decreased by CNY 873,410,064.24, down 81.36% compared with the beginning of the period, which was mainly due to the redemption of wealth management products of the collective asset management plan from securities-type companies in the current period. 7.3. Accounts receivable 7.3.1. Classification of accounts receivable Monetary 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 15,537,126.37 100.00 % 816,382.78 5.25% 14,720,743.59 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 15,537,126.37 100.00 % 816,382.78 5.25% 14,720,743.591 6,265,8 90.81 100.00 % 326,470.03 5.21% 5,939,4 20.78 2023 Interim Report of Luzhou Laojiao Co., Ltd. 121 portfolio with characteristics of credit risk Total 15,537,126.37 100.00 % 816,382.78 5.25% 14,720,743.59 6,265,8 90.81 100.00 % 326,470.03 5.21% 5,939,4 20.78 Note: 1. The closing book value increased by CNY 8,781,322.81, up 147.85% compared with the opening book value, which was mainly due to the sales of overseas business. Accounts receivable tested for impairment on the portfolio: Monetary Unit: CNY Name Closing Balance Book balance Provision for bad debt Proportion Risk portfolio 15,537,126.37816,382.785.25% Other portfolio Total 15,537,126.37816,382.78 Please refer to the relevant information of disclosure of provision for bad debt of other accounts receivable if adopting the general mode of expected credit loss to withdraw provision for bad debt of accounts receivable □Applicable N/A Disclosure by aging Monetary Unit: CNY Aging Closing balance Within 1 year (including 1 year) 15,273,616.57 2-3 years 263,509.80 Total 15,537,126.37 7.3.2. Provision and recovery for bad and doubtful debt in the current period Allowance of provision for bad debt: Monetary Unit: CNY Type Opening Balance Current Period Closing Balance Allowance Reversal or recovery Write-off Other Provision allowance by risk portfolio 326,470.03489,912.75 816,382.781 Total 326,470.03489,912.75 816,382.78 Note: There is no significant provision in accounts receivable reversed or recovered in the reporting period. 7.3.3. Top five entities with the largest balances of accounts receivable Monetary Unit: CNY 2023 Interim Report of Luzhou Laojiao Co., Ltd. 122 Company name Closing Balance Proportion to total closing balance of accounts receivable Closing balance of provision for bad debt China Duty Free International LTD 12,586,453.7881.01% 629,322.69 Sazerac Distiller LLC 1,226,993.737.90% 61,349.69 BAIWANWINESINC.720,621.234.64% 36,031.06 Tai Fung Castelmor. Ltd 361,259.422.33% 18,062.97 Beijing Secoo Trading Limited 263,509.801.70% 52,701.96 Total 15,158,837.9697.58% 7.4. Accounts receivable financing Monetary Unit: CNY Item Closing Balance Opening Balance Bank acceptance bill 2,765,330,012.7714,583,352,503.37 Total 2,765,330,012.774,583,352,503.37 Note: 1. The business mode to manage notes receivable aims to collect contract cash flow as well as to sell the financial assets, and thus the notes receivable is presented as accounts receivable financing; since 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 face value is regarded as the fair value of accounts receivable financing by the Company. 2. There was no allowance of provision for bad debt at the end of the reporting period. 3. The closing balance decreased by CNY 1,818,022,490.60, down 39.67% compared with the opening balance, which was mainly due to the impact of bill discount and remittance of bills for collection at maturity. Changes in accounts receivable financing in the reporting period and fair value: □Applicable N/A Please refer to the relevant information of disclosure of impairment provision of other accounts receivable if adopting the general mode of expected credit loss to withdraw impairment provision of accounts receivable financing. □Applicable N/A Other statements: (1) There was no accounts receivable financing pledge at the end of the period. (2) There is CNY 11,948,776,869.96 as follows of accounts receivable financing that have been endorsed to other parties by the Company but have not expired at the end of the period: Item Derecognition at period-end Not derecognition at period-end Bank acceptance bill 11,948,776,869.96 Subtotal 11,948,776,869.96 Note: The acceptor of the bank acceptance bill is a commercial bank. The probability of not being paid due is very low, and the possibility of being recourse is very low, so the confirmation has been terminated. (3) There are no accounts receivable financing transferred to accounts receivable due to the non-2023 Interim Report of Luzhou Laojiao Co., Ltd. 123 performance of the agreements by the issuers. (4) There are no accounts receivable financing actually written off during the reporting period. 7.5. Prepayment 7.5.1. Aging analysis Monetary Unit: CNY Aging Closing Balance Opening Balance Amount Proportion Amount Proportion Within 1 year 176,583,433.3997.00% 108,917,843.7095.33% 1-2 years 4,448,878.902.44% 3,541,174.813.10% 2-3 years 894,649.470.49% 1,633,422.201.43% Over 3 years 128,485.0610.07% 165,065.550.14% Total 182,055,446.82 114,257,506.26 Note: 1. The Closing balance increased by CNY 67,797,940.56, up 59.34% compared with the opening balance, which was mainly due to the increase in prepayments for 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. 7.5.2. 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. 62,911,313.05 34.56% Sichuan Branch of Taiping Pension Co.,Ltd. 22,085,460.00 12.13% Luzhou Western Gas Co., Ltd. 18,236,095.48 10.02% Luzhou Power Supply Company of State Grid Sichuan Electric Power Company 6,984,742.47 3.84% Beijing Jingshi Satellite Media Co., Ltd. 5,885,135.14 3.23% Subtotal 116,102,746.1463.78% 7.6. Other receivables Monetary Unit: CNY Item Closing Balance Opening Balance Dividend receivable 15,482,200.48 Other receivables 16,061,082.5523,396,533.98 Total 31,543,283.0323,396,533.98 7.6.1. Dividend receivable 7.6.1.1. Classification of dividend receivable Monetary Unit: CNY Item (investee) Closing Balance Opening Balance Guotai Junan Securities Co., Ltd.6,241,808.41 Huaxi Securities Co., Ltd.8,184,934.32 2023 Interim Report of Luzhou Laojiao Co., Ltd. 124 North Chemical Industries Co., Ltd. 78,177.75 China Tourism Group Duty Free Corporation Limited 977,280.00 Total 15,482,200.48 7.6.1.2. Allowance of provision for bad debt □Applicable N/A Other statements: There was no allowance of provision for bad debt at the end of the reporting period. 7.6.2. Other receivables 7.6.2.1. Other receivables disclosed by nature Monetary Unit: CNY Nature Closing book balance Opening book balance Intercourse funds and others 10,522,277.2918,516,591.35 Petty cash 698,041.59326,785.39 Saving deposits involving contract disputes1 128,717,028.72129,049,496.98 Total 139,937,347.601147,892,873.72 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”. 7.6.2.2. Allowance of provision for bad debt Monetary 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 Recovery 620,074.69 620,074.69 Balance of 30 June 2023 3,876,265.05 120,000,000.00123,876,265.05 Changes of book balance with significant amount changed of loss provision in the current period □Applicable N/A 2023 Interim Report of Luzhou Laojiao Co., Ltd. 125 Disclosure by aging Monetary Unit: CNY Aging Closing balance Within 1 year (including 1 year) 7,268,179.00 1-2 years 159,551.76 2-3 years 331,759.00 Over 3 years 132,177,857.84 3-4 years 13,800.00 4-5 years 110,000.00 Over 5 years 132,054,057.84 Total 139,937,347.60 7.6.2.3. Provision and recovery for bad and doubtful other receivables in the current period Allowance of provision for bad debt: Monetary Unit: CNY Type Opening Balance Current Period Closing Balance Allowance Reversal or recovery Write-off Other Other receivables tested for impairment individually 120,000,000.00 120,000,000.00 Other receivables tested for impairment by the portfolio 4,496,339.74 620,074.69 3,876,265.05 Total 124,496,339.74 620,074.69 123,876,265.05 Of which, bad debt provision recovered or reversed with significant amount: No changes with significant amount of loss provision in the current period. 7.6.2.4. Top five entities with the largest balances of the other receivables Monetary Unit: CNY Company Name Nature Closing Balance Aging Proportion in total receivables Provisioning amount at period end 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 128,717,028.72 Over 5 years 91.98% 120,000,000.00 Longmatan Power Supply Bureau of Luzhou Power Bureau Security deposit 1,520,000.00 Over 5 years 1.09% 1,520,000.00 Online Banking Security deposit 300,000.002-3 years,4-50.21% 120,000.00 2023 Interim Report of Luzhou Laojiao Co., Ltd. 126 (Beijing) Technology Co., Ltd. years Luzhou Aopulan Beer Co., Ltd. Security deposit 300,000.00 Over 5 years 0.21% 300,000.00 Beijing Jingdong Century Trading Co.,Ltd. Security deposit 100,000.00 Over 5 years 0.07% 100,000.00 Total 130,937,028.72 93.56% 122,040,000.00 7.7. Inventories Whether the Company needs to comply with the disclosure requirements of real estate industry No 7.7.1. Categories of Inventories Monetary 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 65,344,880.14 65,344,880.14128,252,608.95 128,252,608.95 Goods in progress 8,352,044,350.69 8,352,044,350.697,305,642,685.28 7,305,642,685.28 Finished goods 2,364,086,883.35 2,364,086,883.352,382,939,263.97 2,382,939,263.97 Goods in transit 12,680,021.82 12,680,021.8223,907,816.65 23,907,816.65 Total 10,794,156,136.001 10,794,156,136.009,840,742,374.85 9,840,742,374.85 Note: 1. The closing balance of inventories included no capitalized amount of borrowing expenses. 2. The closing balance included no restricted balance. 3. There were no unsettled assets of finished job caused by the construction contract at the end of the period. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 127 7.8. Other current assets Monetary Unit: CNY Item Closing Balance Opening Balance Value-added tax 96,411,696.20139,165,221.10 Corporate income tax 7,333,423.799,447,204.77 Other taxes 5,406,724.204,423,521.07 Total 109,151,844.19153,035,946.94 Other statements: The value-added tax expected to be deducted in the subsequent accounting period and corporate income tax and other taxes are disclosed in other current assets. 7.9. Long-term equity investments Monetary Unit: CNY Investee Opening Balance (book value) 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. 2,497,540,59 2.05 54,493,747.5 7 1,397,955.21 8,184,934.32 2,545,247,36 0.51 2,567,098.80 Luzhou Laojiao Postdoctoral Workstation Technology Innovation Co., Ltd. 40,185,894.7 7 - 499,83 0.20 39,686,064.5 7 Sichuan Development Wine Investment Co., Ltd. 5,889,654.24 5,159.39 5,894,813.63 Sichuan Tongniang Baijiu Industry 8,086,855.91 6,025.99 8,092,881.90 2023 Interim Report of Luzhou Laojiao Co., Ltd. 128 Technology Research Institute Co., Ltd. Note CTS Luzhou Laojiao Cultural Tourism Development Co., Ltd. 115,79 7,556.20 6,958,058.33 122,75 5,614.53 Subtotal 2,667,500,55 3.17 60,963,161.0 8 1,397,955.21 8,184,934.32 2,721,676,73 5.14 2,567,098.80 Total 2,667,500,55 3.17 60,963,161.0 8 1,397,955.21 8,184,934.32 2,721,676,73 5.14 2,567,098.80 7.10. Other equity instrument investment Monetary Unit: CNY Item Closing Balance Opening Balance Financial assets designated to be measured at fair value through other comprehensive income Including: China Tourism Group Duty Free Corporation Limited 119,386,821.41807,139,120.07 Guotai Junan Securities Co., Ltd.164,760,188.01160,049,389.21 Luzhou Bank Co., Ltd.112,018,357.27120,158,392.72 Guotai Junan Investment Management Co., Ltd. 22,611,834.2422,611,834.24 North Chemical Industries Co.,Ltd.14,791,230.2914,931,950.24 Guojiu Big Data Co., Ltd.10,000,000.0010,000,000.00 Sichuan China Baijiu Golden Triangle Brand Operation Development Co., Ltd. and other equity instrument investments 1,846,291.631,846,291.63 Total 445,414,722.851,136,736,978.11 Note: 1. The closing balance decreased by CNY 691,322,255.26, down 60.82% compared with the opening balance, which was mainly due to the partial disposal of H shares of China Tourism Group Duty Free Corporation Limited held in the current period. Categories of non-trading equity instrument investment in the current period: Monetary Unit: CNY Item Recognized Accumulative Accumulative Amount of Reason for Reason of 2023 Interim Report of Luzhou Laojiao Co., Ltd. 129 dividends income gains losses other comprehensive income transferred to retained earnings assigning to measure at fair value and changes recorded into other comprehensive income other comprehensive income transferred to retained earnings China Tourism Group Duty Free Corporation Limited 977,280.00 31,811,873.8716,215,653.21 According to the mode of managing assets by management layer Partial disposal Guotai Junan Securities Co., Ltd. 6,241,808.41152,041,031.25 According to the mode of managing assets by management layer Luzhou Bank Co., Ltd. 60,898,357.27 According to the mode of managing assets by management layer Guotai Junan Investment Management Co., Ltd. According to the mode of managing assets by management layer North Chemical Industries Co.,Ltd. 78,177.7513,761,230.29 According to the mode of managing assets by management layer Guojiu Big Data Co., Ltd. According to the mode of managing assets by management layer Shenzhen Xingangfeng Development Co., Ltd. 2,354,000.00 According to the mode of managing assets by management layer Sichuan 2,000,000.00 According 2023 Interim Report of Luzhou Laojiao Co., Ltd. 130 Deyang Jintai Hotel to the mode of managing assets by management layer Hainan Huitong International Trust Company 1,000,000.00 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 398,926.37 According to the mode of managing assets by management layer Subtotal 7,297,266.16226,700,618.8137,564,800.2416,215,653.21 7.11. Investment property 7.11.1. Investment property with cost measurement model Applicable □ N/A Monetary 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 131 1.Opening Balance 15,125,126.702,613,513.22 17,738,639.92 2.Increase in current period 331,448.96350,569.76 682,018.72 (1) Provision or amortization 331,448.96350,569.76 682,018.72 3.Decrease in current period (1) Disposal (2) Other transfer out 4.Closing Balance 15,456,575.662,964,082.98 18,420,658.64 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 31,865,038.276,602,397.23 38,467,435.50 2.Opening Book Value 32,196,487.236,952,966.99 39,149,454.22 7.11.2. Investment property adopting the fair value measurement mode □Applicable Not applicable 7.11.3. Investment property without certification of right Monetary Unit: CNY Item Book value Reason for not having the certification of right Buildings of the Company 31,865,038.27 In procedure 7.12. Fixed assets Monetary Unit: CNY Item Closing Balance Opening Balance Fixed assets 8,599,184,607.118,853,348,204.83 Disposal of fixed assets 17,203,984.002,910,393.95 Total 8,616,388,591.118,856,258,598.78 7.12.1. Details of fixed assets Monetary Unit: CNY Item Buildings and constructions Specialized equipment General equipment Transportation equipment Other equipment Total 2023 Interim Report of Luzhou Laojiao Co., Ltd. 132 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 7,989,453.435,862,704.0035,363,784.86128,300.8916,193,648.3565,537,891.53 (1) External purchase 133,529.11434,513.284,509,914.68128,300.892,350,442.427,556,700.38 (2) Transfer from construction in progress 9,928,575.774,409,380.4929,556,708.22 14,465,281.2158,359,945.69 (3) Increase from business combination (4) Adjustment for completion settlement -2,072,651.451,018,810.231,266,947.89 -622,075.28 -408,968.61 (5) Changes of exchange rates 30,214.07 30,214.07 3.Decrease in current period 74,568,052.453,839,252.3910,684,164.03 4,734,301.1293,825,769.99 (1) Disposal or retirement 74,568,052.453,839,252.3910,684,164.03 4,734,301.1293,825,769.99 4.Closing Balance 7,517,562,872.93 1,176,134,543.86 1,117,700,766.46 46,492,895.93 1,616,052,602.16 11,473,943,68 1.34 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 124,927,931.5 2 68,724,090.3063,162,919.791,501,935.3833,608,050.98 291,924,927.9 7 (1) Provision 124,927,931.5 2 68,724,090.3063,140,194.011,501,935.3833,608,050.98 291,902,202.1 9 (2) Changes of exchange rates 22,725.78 22,725.78 3.Decrease in current period 48,686,667.202,814,782.9010,075,878.44 4,471,880.1766,049,208.71 (1) Disposal or retirement 48,686,667.202,814,782.9010,075,878.44 4,471,880.1766,049,208.71 4.Closing Balance 1,032,960,368.50 536,677,685.0 5 479,981,886.7 2 33,767,945.18 790,748,248.7 1 2,874,136,134.16 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 6,483,979,564.36 639,456,858.8 1 637,718,879.7 4 12,724,950.75 825,304,353.4 5 8,599,184,607.11 2.Opening Book Value 6,626,799,427703,342,714.6666,126,300.214,098,585.24842,981,177.08,853,348,2042023 Interim Report of Luzhou Laojiao Co., Ltd. 133 .70063.83 7.12.2. Fixed assets leased out through operating lease Monetary Unit: CNY Item Closing book value Buildings and constructions 22,719,987.17 Equipment 13,027,819.00 7.12.3. Fixed assets without certification of right Monetary Unit: CNY Item Book value Reason for not having the certification of right Buildings of the Company 23,174,737.57 The property ownership certificate has not been processed yet for the historical reasons, and it plans to be processed after gradually improving procedures. Buildings of the Company 229,630,310.67 In procedure Buildings of the subsidiary-brewing company 4,354,608,197.50 In procedure Buildings of the subsidiary- Guangxi Imported Liquor Industry 58,393,017.56 In procedure Subtotal 4,665,806,263.30 7.12.4. Disposal of fixed assets Monetary Unit: CNY Item Closing Balance Opening Balance Disposal and retirement of assets 17,203,984.002,910,393.95 Total 17,203,984.002,910,393.95 7.13. Construction in progress Monetary Unit: CNY Item Closing Balance Opening Balance Construction in progress 1,209,595,255.85808,919,047.21 Total 1,209,595,255.85808,919,047.21 7.13.1. Details of the construction in progress Monetary 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 900,179,496.39 900,179,496.39638,798,849.16 638,798,849.16 2023 Interim Report of Luzhou Laojiao Co., Ltd. 134 Laojiao Intelligent packaging center Technical renovation project of Luzhou Laojiao intelligent brewing (I) 22,477,396.18 22,477,396.1812,284,062.35 12,284,062.35 Other projects 286,938,363.28 286,938,363.28157,836,135.70 157,836,135.70 Total 1,209,595,255.851 1,209,595,255.85808,919,047.21 808,919,047.21 Note: 1. The closing balance increased by CNY 400,676,208.64, up 49.53% compared with the opening balance, which was mainly due to the increase in input in the technical renovation of Luzhou Laojiao Intelligent packaging center in the current period. 7.13.2. Significant changes in construction in progress Monetary 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 9.16 262,4 94,35 4.73 507,4 80.08 606,2 27.42 900,1 79,49 6.39 51.66 % 60.00 % 150,7 69.29 Other Technical renovation project of Luzhou Laojiao intellig4,782,509,0 00.00 12,28 4,062.35 10,19 3,333.83 22,47 7,396.18 12.28 % 1.00% Other 2023 Interim Report of Luzhou Laojiao Co., Ltd. 135 ent brewing (I) Total 6,668,685,0 00.00 651,0 82,91 1.51 272,6 87,68 8.56 507,4 80.08 606,2 27.42 922,6 56,89 2.57 150,7 69.29 7.14. Right-of-use assets Monetary 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 764,273.41764,273.41 (1) Lease in 320,211.86320,211.86 (2) Changes of exchange rates 444,061.55444,061.55 3. Decrease in current period 13,862,366.9113,862,366.91 (1) Adjustment for change of lease term 13,862,366.9113,862,366.91 4. Closing Balance 32,680,786.3311,798,543.5344,479,329.86 II. Accumulated amortization 1. Opening Balance 7,269,825.4010,355,072.3317,624,897.73 2. Increase in current period 1,817,456.354,423,463.026,240,919.37 (1) Provision 1,817,456.354,153,704.365,971,160.71 (2) Changes of exchange rates 269,758.66269,758.66 3. Decrease in current period 9,002,549.579,002,549.57 (1) Disposal (1) Adjustment for change of lease term 9,002,549.579,002,549.57 4. Closing Balance 9,087,281.755,775,985.7814,863,267.53 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 23,593,504.586,022,557.7529,616,062.33 2. Opening Book Value 25,410,960.9314,541,564.7039,952,525.63 2023 Interim Report of Luzhou Laojiao Co., Ltd. 136 7.15. Intangible assets 7.15.1. Details of intangible assets Monetary 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 14,120,082.63 14,120,082.63 (1) Acquired 1,540,088.66 1,540,088.66 (2) Internal developed (3) Business combination (4) Transferred from construction in progress 12,579,993.97 12,579,993.97 (5) Adjustment for completion settlement 3. Decrease in current period 1,984,960.84 247,433.63 2,232,394.47 (1) Disposal 1,984,960.84 1,984,960.84 (2) Other 247,433.63 247,433.63 4. Closing Balance 3,286,157,710.45 1,700,050.44 77,208,876.722,114,914.82 3,367,181,552.43 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 36,286,981.7765,002.52 2,838,932.0319,984.8139,210,901.13 (1) Provision 36,286,981.7765,002.52 2,838,932.0319,984.8139,210,901.13 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 272,085,828.3 4 895,611.61 35,247,019.301,895,092.22 310,123,551.4 7 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 3,014,071,882.11 804,438.83 41,961,857.42219,822.60 3,057,058,000.96 2. Opening 3,051,234,463869,441.35 30,928,140.45239,807.413,083,271,8522023 Interim Report of Luzhou Laojiao Co., Ltd. 137 Book Value .58.79 There is no proportion of intangible assets formed by internal development to the balance of intangible assets at the period-end. 7.16. Long-term deferred expense Monetary Unit: CNY Item Opening Balance Increase Amortization Other decrease Closing Balance Improvement expense of rented fixed assets 710,010.92 262,861.76 -2,840.08449,989.24 Total 710,010.92 262,861.76 -2,840.081449,989.24 Note: 1 Other decrease was generated from changes of exchange rates. 7.17. Deferred tax assets/ deferred tax liabilities 7.17.1. Deferred tax assets before offset Monetary Unit: CNY Item Closing Balance Opening Balance Deductible temporary differences Deferred tax assets Deductible temporary differences Deferred tax assets Provision for asset impairment 128,783,512.3231,786,044.68128,012,783.3631,895,371.12 Unrealized profits from internal transactions 1,487,258,579.16371,814,644.792,839,779,249.07709,944,812.27 Deductible losses 9,102,050.752,275,512.699,551,262.702,312,572.68 Impact from salary 497,857,634.85122,138,335.07630,936,117.63155,191,186.34 Impact from deferred earnings 29,474,054.747,368,513.6933,704,323.808,426,080.95 Impact from fixed assets depreciation 670,245.94110,590.58227,859.6237,596.84 Recognition costs of restricted shares for equity incentive in the vesting period 477,842,964.45116,997,834.101367,875,588.3289,288,197.09 Impact from fair value changes of other equity instrument investment 54,989,996.7213,747,499.185,752,926.371,438,231.59 Impact of income tax from fair value changes of held-for-trading financial assets 26,533,219.636,633,304.92 Lease liabilities 4,855,478.17927,586.79 Total 2,690,834,517.10667,166,561.57 2 4,042,373,330.501,005,167,353.80 Note: 1. Deductible temporary differences of CNY 477,842,964.45 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 138 period. 2. The closing balance decreased by CNY 338,000,792.23, down 33.63% compared with the opening balance, which was mainly due to decline in unrealized profits of internal transactions. 7.17.2. Deferred tax liabilities before offset Monetary 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 226,700,618.8156,675,154.71495,124,314.68123,781,078.67 Fair value changes of held-for-trading financial assets 56,716.1314,179.04 Impact from the policy of one-time pre-tax deduction of fixed assets 142,720,543.4435,056,395.58172,516,000.0742,262,585.21 Right-of-use assets 3,559,187.35637,792.86 Total 373,037,065.7392,383,522.191667,640,314.75166,043,663.88 Note: 1. The closing balance decreased by CNY 73,660,141.69, down 44.36% compared with the opening balance, which was mainly due to the decline in fair value of equity investments. 7.17.3. Details of unrecognized deferred tax assets Monetary Unit: CNY Item Closing Balance Opening Balance Deductible losses 158,312,771.2472,503,754.75 Credit impairment losses and Asset impairment losses 93,109.3765.28 Impact from employee benefits payable 2,369,328.86 Recognition costs of restricted shares for equity incentive in the lock-up period 9,725,391.12 Total 168,131,271.7374,873,148.89 7.17.4. Deductible losses from unrecognized deferred tax assets will due on the following years Monetary Unit: CNY Year Closing Amount Opening Amount Notes The 1st year 6,496,423.506,496,423.50 The 2nd year 14,491,365.4414,491,365.44 The 3rd year 21,641,111.9421,651,366.58 The 4th year 11,572,224.6011,572,224.60 The 5th year 104,111,645.7618,292,374.63 2023 Interim Report of Luzhou Laojiao Co., Ltd. 139 Total 158,312,771.2472,503,754.75 7.18. Other non-current assets Monetary Unit: CNY Item Closing Balance Opening Balance Book balance Provision for impairment Book value Book balance Provision for impairment Book value Prepaid equipment and land expense 278,333,803.0 8 278,333,803.0 8 196,095,702.0 9 196,095,702.0 9 Cultural relics assets 19,051,835.42 19,051,835.42 Total 297,385,638.5 01 297,385,638.5 0 196,095,702.0 9 196,095,702.0 9 Note: 1. The closing balance increased by CNY 101,289,936.41, up 51.65% compared with the opening balance, which was mainly due to the increase in prepayments for equipment to suppliers and lands in the current period. 7.19. Accounts payable 7.19.1. Presentation of accounts payable Monetary Unit: CNY Category Closing Balance Opening Balance Materials and service expense 879,280,312.671,042,394,395.05 Engineering equipment expense 1,285,517,851.751,269,271,189.99 Total 2,164,798,164.422,311,665,585.04 7.19.2. Significant accounts payable whose aging is longer than 1 year Monetary Unit: CNY Category Closing Balance Reason for not payment or carrying forward China Construction First Group Corporation Limited 323,441,430.59 Within the contract settlement period Total 323,441,430.59 7.20. Contract liabilities Monetary Unit: CNY Category Closing Balance Opening Balance Within 1 year 1,904,776,798.392,540,635,630.98 1-2 years 13,310,795.0610,654,577.66 2-3 years 1,868,476.861,199,843.23 Over 3 years 13,654,484.6313,884,666.89 Total 1,933,610,554.942,566,374,718.76 2023 Interim Report of Luzhou Laojiao Co., Ltd. 140 7.21. Employee benefits payable 7.21.1. Employee benefits payable shown as follows Monetary Unit: CNY Item Opening Balance Increase in current period Decrease in current period Closing Balance 1. Short-term benefits 655,612,131.74512,694,515.63680,657,948.81487,648,698.56 2. Post-employment benefits- defined contribution plans 19,413,782.0475,165,629.2269,740,897.3924,838,513.87 3. Termination benefits 8,971.5341,863.7541,863.758,971.53 Total 675,034,885.31587,902,008.60750,440,709.95512,496,183.96 7.21.2. Short-term employee benefits payable shown as follows Monetary Unit: CNY Item Opening Balance Increase in current period Decrease in current period Closing Balance 1. Wages, bonuses, allowances and grants 611,845,393.45425,110,167.32604,710,266.01432,245,294.76 2. Employees’ welfare 7,328,956.827,328,956.82 3. Social insurance premiums 2,037,299.4733,619,920.2023,465,176.7812,192,042.89 Including: Medical insurance premium 1,527,048.7631,894,383.9622,185,955.5111,235,477.21 Work-related injury insurance 510,250.711,725,536.241,279,221.27956,565.68 4. Housing funds 2,088,245.5935,071,357.3832,809,476.914,350,126.06 5. Labor union expenditures and employee education funds 39,641,193.2311,564,113.9112,344,072.2938,861,234.85 Total 655,612,131.74512,694,515.63680,657,948.81487,648,698.56 7.21.3. Defined contribution plan shown as follows Monetary Unit: CNY Item Opening Balance Increase in current period Decrease in current period Closing Balance 1. Basic endowment insurance premium 18,361,778.9646,536,369.7143,353,890.3121,544,258.36 2. Unemployment insurance premium 326,819.861,800,869.681,802,420.95325,268.59 3. Enterprise annuity 725,183.2226,828,389.8324,584,586.132,968,986.92 Total 19,413,782.0475,165,629.2269,740,897.3924,838,513.87 7.22. Taxes payable Monetary Unit: CNY 2023 Interim Report of Luzhou Laojiao Co., Ltd. 141 Item Closing Balance Opening Balance Value-added tax 150,481,155.11502,641,326.22 Consumption tax 74,507,439.631,386,271,621.60 Enterprise income tax 1,002,960,198.351,345,243,541.07 Individual income tax 5,129,262.4210,295,445.63 Urban maintenance and construction tax 15,224,919.52131,841,222.44 Education surcharge 6,502,982.9556,445,651.96 Local education surcharge 4,443,544.5137,733,654.17 Stamp duty 6,487,529.289,937,931.91 Land use tax 437,618.74437,618.74 Others 350,923.67302,715.24 Total 1,266,525,574.183,481,150,728.98 Other statements: The closing balance decreased by CNY 2,214,625,154.80, down 63.62% compared with the opening balance, mainly due to the taxes of the end of last year put into the treasury in the current period. 7.23. Other payables Monetary Unit: CNY Item Closing Balance Opening Balance Dividend payable 6,235,743,174.6116,594,850.58 Other payables 1,175,814,936.291,185,814,427.91 Total 7,411,558,110.901,202,409,278.49 7.23.1. Dividend payable Monetary Unit: CNY Item Closing Balance Opening Balance Ordinary share dividends 6,205,174,061.6816,594,850.58 Dividend of restricted shares 30,569,112.93 Total 6,235,743,174.6116,594,850.58 7.23.2. Other payables 7.23.2.1. Categories by nature Monetary Unit: CNY Item Closing Balance Opening Balance Security deposit 537,787,761.78527,881,969.37 Intercourse funds 10,271,629.1910,226,769.10 Repurchase obligations of restricted shares 616,743,610.59639,021,998.78 Others 11,011,934.738,683,690.66 Total 1,175,814,936.291,185,814,427.91 7.23.2.2. Significant other payables whose aging are longer than 1 year Other statements: 2023 Interim Report of Luzhou Laojiao Co., Ltd. 142 Other payables whose aging are longer than 1 year are mainly security deposits collected from dealers. 7.24. Non-current liabilities due within one year Monetary Unit: CNY Item Closing Balance Opening Balance Long-term loans due within one year 24,800,000.0020,400,000.00 Lease liabilities due within one year 9,311,083.9914,530,370.36 Interest of long-term loans due within one year 6,666,043.061,984,027.78 Interest of bonds payable due within one year 39,554,794.5244,965,068.49 Total 80,331,921.5781,879,466.63 7.25. Other current liabilities Monetary Unit: CNY Item Closing Balance Opening Balance Output VAT to be transferred 251,369,372.14333,627,225.47 Total 251,369,372.14333,627,225.47 7.26. Long-term loans 7.26.1. Long-term loans Monetary Unit: CNY Item Closing Balance Opening Balance Credit loans 9,539,900,000.003,200,000,000.00 Less: Long-term loans due within one year -24,800,000.00 -20,400,000.00 Total 9,515,100,000.003,179,600,000.00 7.27. Bonds payable 7.27.1. Bonds payable Monetary Unit: CNY Item Closing Balance Opening Balance Corporate bonds in 2020 (Phase I) 1,498,077,519.801,497,461,348.61 Corporate bonds in 2022 (Phase I) 1,498,841,460.471,498,638,223.25 Total 2,996,918,980.272,996,099,571.86 7.27.2. Increase/decrease of bonds payable (excluding other financial instrument classified as financial liabilities such as preferred shares and perpetual bonds) Monetary Unit: CNY Bond name Par value Issuing date Duration Issuing amounOpening Issued in the Withdrawal of Amortization Repayment in the Closing Balance 2023 Interim Report of Luzhou Laojiao Co., Ltd. 143 t Balance current period interest by par value of premium and depreciation reporting period Corporate bonds in 2020 (Phase I) 1,500,000,00 0.00 16 March 2020 5 1,494,000,00 0.00 1,497,461,34 8.61 25,890,410.9 6 616,17 1.19 1,498,077,519.80 Corporate bonds in 2022 (Phase I) 1,500,000,00 0.00 2 December 2022 3 1,498,800,00 0.00 1,498,638,22 3.25 21,199,315.0 7 203,23 7.22 1,498,841,460.47 Total 2,992,800,00 0.00 2,996,099,57 1.86 47,089,726.0 3 819,40 8.41 2,996,918,980.27 7.28. Lease liabilities Monetary Unit: CNY Item Closing Balance Opening Balance Lease payment 39,764,571.5748,776,000.46 Less: unrecognized financing cost -4,358,177.64 -5,148,660.44 Lease liabilities due within one year -9,311,083.99 -14,530,370.36 Total 26,095,309.9429,096,969.66 7.29. Deferred income Monetary Unit: CNY Item Opening Balance Increase in current period Decrease in current period Closing Balance Reason Government grants 33,704,323.80364,559.084,594,828.1429,474,054.74 Reception of financial allocation Total 33,704,323.80364,559.084,594,828.1429,474,054.74 Details: Monetary Unit: CNY Liability Item Opening Balance Increase in current period Non-operating income in current period Other income in current period Cost reduction in current period Other changes Closing Balance Related to assets/ income New mode application project of digital workshop for solid 4,684,300.00 364,559.0 8 776,747.5 5 4,272,111.53 Related to assets 2023 Interim Report of Luzhou Laojiao Co., Ltd. 144 state baijiu production Construction project of cellar of Luzhou Laojiao brewing technical renovation 4,550,000.00 700,000.0 0 3,850,000.00 Related to assets Luzhou Laojiao automatic wine production line technical renovation project 1,135,238.10 174,652.0 2 960,586.0 8 Related to assets Boiler reconstruction project of Luohan Brewing Base of Luzhou Laojiao 6,321,428.56 632,142.8 6 5,689,285.70 Related to assets Brewing wastewater treatment project 11,142,85 7.14 1,714,285.71 9,428,571.43 Related to assets Improvement and technical renovation project of Luzhou Laojiao production supporting 5,870,500.00 597,000.0 0 5,273,500.00 Related to assets Total 33,704,32 3.80 364,559.0 8 4,594,828.14 29,474,05 4.74 7.30. Share capital Monetary 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 1,471,895,100.0092,669.00 92,669.0011,471,987,769.00 2023 Interim Report of Luzhou Laojiao Co., Ltd. 145 shares Note: 1. In February 2023, the registration of 92,669 shares of the Restricted Share Incentive Plan granted by the Company for the third time was completed. So far, the total number of shares of the Company changed to 1,471,987,769 shares. 7.31. Capital reserves Monetary Unit: CNY Item Opening Balance Increase in current period Decrease in current period Closing Balance Share premium (capital premium) 4,197,109,156.668,198,055.741 4,205,307,212.40 Other capital reserves 603,045,312.33196,217,564.112 799,262,876.44 Total 4,800,154,468.99204,415,619.85 5,004,570,088.84 Note: 1. The increase of capital premium of the period is the premium payment received for the grant of restricted shares. 2. The increase in other capital reserves for the period was mainly due to the costs and expenses to be recognized in the period for the issuance of restricted shares. 7.32. Treasury shares Monetary 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: 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. 7.33. Other comprehensive income Monetary 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 366,978,5 - 16,215,65 - 128,864,22023 Interim Report of Luzhou Laojiao Co., Ltd. 146 comprehensive income that will not be reclassified into profit and loss 41.23221,898,6 77.10 3.21238,114,3 30.31 10.92 Other comprehensive income that will not be reclassified into profit and loss under equity method 131,244.3 9 131,244.3 9 131,244.3 9 Fair value changes of other equity instrument investment 366,978,5 41.23 - 222,029,9 21.49 16,215,65 3.21 - 238,245,5 74.70 128,732,9 66.53 II. Other comprehensive income that will be reclassified into profit and loss - 36,227,29 5.39 3,384,149.17 2,430,466.33 953,682.8 4 - 33,796,82 9.06 Including: Other comprehensive income that will be reclassified into profit and loss under equity method - 38,784,74 0.65 1,266,710.82 1,266,710.82 - 37,518,02 9.83 Difference from conversion of financial statements in foreign currency 2,557,445.26 2,117,438.35 1,163,755.51 953,682.8 4 3,721,200.77 Total 330,751,2 45.84 - 218,514,5 27.93 16,215,65 3.21 - 235,683,8 63.98 953,682.8 4 95,067,38 1.86 2023 Interim Report of Luzhou Laojiao Co., Ltd. 147 Other statements, including the adjustment of the effective gain/loss on cash flow hedges to the initial recognized amount: Note: The closing balance decreased by CNY 235,683,863.98, down 71.26% compared with the opening balance, which was mainly due to the decline in fair value of equity investments. 7.34. Surplus reserves Monetary Unit: CNY Item Opening Balance Increase in current period Decrease in current period Closing Balance Statutory surplus reserves 1,471,895,100.00 1,471,895,100.00 Total 1,471,895,100.00 1,471,895,100.00 7.35. Undistributed profits Monetary Unit: CNY 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 7,090,426,787.075,531,926,340.44 Ordinary share dividends payable 6,219,148,324.034,773,919,306.54 Plus: Other transfer in 16,215,653.21115,626.84 Undistributed profits at the end of the period 27,659,691,330.2321,945,882,896.63 Note: 1. Other transfers were the disposal of other equity instrument investments in the current period, which was due to the impact of transfers to retained earnings of relevant changes in fair value. 7.36. Operating revenue and cost of sales Monetary Unit: CNY Item Current Period Previous Period Revenue Cost of sales Revenue Cost of sales Primary business 14,369,036,994.331,591,479,349.3611,549,327,272.441,595,591,564.86 Other business 224,014,779.81108,783,756.32115,050,280.5046,718,985.75 Total 14,593,051,774.141,700,263,105.6811,664,377,552.941,642,310,550.61 Details: Monetary Unit: CNY Contract category Liquor sales Total Commodity type Including: Medium and high grade liquor 12,990,085,081.5012,990,085,081.50 2023 Interim Report of Luzhou Laojiao Co., Ltd. 148 Other liquor 1,520,899,556.911,520,899,556.91 By operating segment Including: Domestic 14,434,112,172.1314,434,112,172.13 Outbound 76,872,466.2876,872,466.28 Market or customer type Including: Contract type Including: Commodity sales contract 14,510,984,638.4114,510,984,638.41 By commodity transfer time Including: By contract term Including: By sales channel Including: Total 14,510,984,638.4114,510,984,638.41 Information on performance obligation: N/A Other statements N/A 7.37. Business taxes and surcharges Monetary Unit: CNY Item Current Period Previous Period Consumption tax 1,203,032,837.64759,217,972.85 Urban maintenance and construction tax 187,840,939.62131,976,380.41 Educational surcharge 80,502,780.1556,558,689.68 Property tax 39,107,945.8234,169,290.28 Land use tax 17,656,012.3417,874,337.59 Stamp duty 12,043,066.538,264,059.53 Local education surcharge 53,668,728.4737,706,254.75 Others 106,664.3892,783.65 Total 1,593,958,974.951,045,859,768.74 Other statements: Note: The current period increased by CNY 548,099,206.21, up 52.41% compared with the previous period, which was mainly due to the increase in consumption tax for the current period. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 149 7.38. Selling and distribution expenses Monetary Unit: CNY Item Current Period Previous Period Advertising promotion expense 585,741,219.56691,914,456.49 Promotion expense 486,391,918.30142,494,942.50 Employee compensation 210,781,737.74204,443,388.51 Storage and logistics costs 95,488,340.4463,874,054.36 Others 84,793,614.57111,135,142.80 Total 1,463,196,830.611,213,861,984.66 7.39. General and administrative expenses Monetary Unit: CNY Item Current Period Previous Period Employee compensation 234,498,550.74260,100,920.11 Depreciation and amortization 56,042,880.6055,428,718.37 Management fee and service expense 27,605,235.7215,223,826.86 Others 221,732,574.25211,913,289.15 Total 539,879,241.31542,666,754.49 7.40. Research and development expenses Monetary Unit: CNY Item Current Period Previous Period Comprehensive research and development expenses 62,914,698.9974,487,055.16 Total 62,914,698.9974,487,055.16 7.41. Financial expenses Monetary Unit: CNY Item Current Period Previous Period Interest expenses 261,543,693.36119,589,682.10 Less: Interest income 384,116,432.10237,072,806.72 Losses from currency exchange -5,091,874.65 -10,795,717.36 Handling charges 1,233,960.31913,004.25 Amortization of unrecognized financing costs 646,861.65377,416.63 Total -125,783,791.43 -126,988,421.10 7.42. Other income Monetary Unit: CNY Item Current Period Previous Period Government grants 21,166,337.889,141,196.38 Other refund 2,229,602.281,603,531.79 Total 23,395,940.16110,744,728.17 2023 Interim Report of Luzhou Laojiao Co., Ltd. 150 Note: 1. The current period increased by CNY 12,651,211.99, up 117.74% compared with previous period, which was mainly due to the increase in government grants received in the current period. 7.43. Investment income Monetary Unit: CNY Item Current Period Previous Period Investment income from long-term equity investments under the equity method 70,278,286.4937,796,914.64 Investment income gained during the period of holding held-for-trading financial assets 2,391,009.806,795,921.96 Investment income from disposal of held-for-trading financial assets 5,057,632.104,827,927.32 Dividend income gained during the period of holding other equity instrument investment 7,297,266.168,078,717.94 Total 85,024,194.5557,499,481.86 Other statements: Note: 1. There is no major restriction on the repatriation of the Company's investment income. 2. The current period increased by CNY 27,524,712.69, up 47.87% compared with previous period, which was mainly due to the increase in profitability of the investee Huaxi Securities Co., Ltd. 7.44. Gain on changes in fair value Monetary Unit: CNY Item Current Period Previous Period Held-for-trading financial assets 32,781,678.4215,862,846.29 Total 32,781,678.425,862,846.29 Note: 1. The current period increased by CNY 26,918,832.13 compared with previous period, which was mainly due to the increase in fair value of held-for-trading financial assets in the current period. 7.45. Credit impairment loss Monetary Unit: CNY Item Current Period Previous Period Bad debt loss of other receivables 620,074.69 -581,432.64 Bad debt loss of accounts receivable -489,912.75 -2,831.34 Total 130,161.94 -584,263.98 7.46. Gains from disposal of assets Monetary Unit: CNY Item Current Period Previous Period Gains from disposal of non-current assets -477,479.3819,789,402.07 Including: Gains from disposal of 223,832.222,588.69 2023 Interim Report of Luzhou Laojiao Co., Ltd. 151 fixed assets Gains from disposal of intangible assets -875,599.7019,786,813.38 Gains from disposal of use right assets 174,288.10 Total -477,479.38119,789,402.07 Note: 1. The current period decreased by CNY 20,266,881.45, down 102.41% compared with previous period, which was mainly due to the decrease in gains from disposal of intangible assets in the current period. 7.47. Non-operating income Monetary Unit: CNY Item Current Period Previous Period The amount included in the extraordinary gains and losses of the current period Compensation for default 2,393,459.623,384,765.952,393,459.62 Others 12,086,059.367,750,967.3812,086,059.36 Total 14,479,518.9811,135,733.3314,479,518.98 Other statements: Note: The current period increased by CNY 3,343,785.65, up 30.03% compared with previous period, which was mainly due to receiving income from anti-counterfeiting claims. 7.48. Non-operating costs Monetary Unit: CNY Item Current Period Previous Period The amount included in the extraordinary gains and losses of the current period Donation 4,171,120.001,500,000.004,171,120.00 Losses from damage retirement of non-current assets 1,164,068.3570,762.971,164,068.35 Others 1,637,398.60378,246.541,637,398.60 Total 6,972,586.951,949,009.516,972,586.95 7.49. Income tax expense 7.49.1. Statement of income tax expense Monetary Unit: CNY Item Current Period Previous Period Current period income tax 2,041,614,849.9711,366,370,466.01 Deferred income tax 343,744,666.15 2 433,650,076.38 Total 2,385,359,516.121,800,020,542.39 Note: 1. The current period increased CNY 585,338,973.73 compared with previous period with an increase by 32.52%, mainly due to the increase in profits with the increase in sales revenue of baijiu. 2. Details of income tax rates were shown on “6. Taxes”. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 152 7.49.2. Adjustment for accounting profit and income tax expense Monetary Unit: CNY Item Current Period Total profit 9,506,984,141.75 Income tax expenses determined by statutory/applicable tax rate 2,376,746,035.44 Impact from subsidiaries’ different tax rates -250,901.57 Impact from adjust for impact from income tax expense in previous period -1,041,798.80 Impact from non-taxable income -19,393,285.57 Impact from non-deductible costs, expenses and losses 2,138,983.12 Impact from deductible loss of unrecognized deferred income tax assets in prior period -2,261,434.67 Impact from deductible temporary difference or losses due to unrecognized deferred tax asset in current period 16,561,687.70 Income tax impact of expected pre-tax deductible amounts of restricted shares in future periods that are less than the recognized cost and expenses 18,617,925.26 Deduction of research and development costs -5,757,694.79 Income tax expense 2,385,359,516.12 7.50. Other comprehensive income Details in Note 7.33. Other comprehensive income. 7.51. Notes to the statement of cash flow 7.51.1. Cash received from other operation activities Monetary Unit: CNY Item Current Period Previous Period Recovery of saving deposits involving contract disputes 332,468.262,218,722.45 Government grants 16,936,068.825,906,207.21 Interest income from bank deposit 385,402,604.30210,646,002.01 Others 56,582,439.6069,159,079.77 Total 459,253,580.98287,930,011.44 7.51.2. Cash paid for other operating activities Monetary Unit: CNY Item Current Period Previous Period Cash paid for expenses 1,185,339,540.001,351,327,137.51 Total 1,185,339,540.001,351,327,137.51 7.51.3. Cash paid for other financing activities Monetary Unit: CNY Item Current Period Previous Period 2023 Interim Report of Luzhou Laojiao Co., Ltd. 153 Cash paid for rent of right-of-use assets 1,117,175.974,353,331.41 Registration fee for equity incentive stocks 92.676,862.60 Total 1,117,268.644,360,194.01 7.52. Supplementary information to statement of cash flow 7.52.1. Supplementary information to statement of cash flow Monetary Unit: CNY Item Current Period Previous Period 1. Reconciliation of net profit to cash flow from operating activities: Net profit 7,121,624,625.635,574,658,236.22 Plus: Provision for asset impairment -130,161.94584,263.98 Depreciation of fixed asset, oil and gas assets and productive biological assets 291,902,202.19261,325,836.44 Depreciation of right-of-use assets 5,971,160.717,440,461.35 Amortization of intangible assets 39,210,901.1333,148,347.68 Amortization of long-term deferred expense 262,861.76421,016.50 Losses from disposal of fixed assets, intangible assets and other long-term assets (Gains use “-”) 477,479.38 -19,789,402.07 Losses from retirement of fixed assets (Gains use “-”) Losses from change in fair value (Gains use “-”) -32,781,678.42 -5,862,846.29 Financial expenses (Gains use “-”) -125,783,791.43 -126,988,421.10 Losses on investments (Gains use “-”) -85,024,194.55 -57,499,481.86 Decrease in deferred income tax assets (Increase uses “-”) 350,308,835.48433,730,715.02 Increase in deferred income tax liabilities (Decrease uses “-”) -6,554,217.73 Decrease in inventories (Increase use “-”) -953,413,761.15 -1,435,707,467.48 Decrease in operating receivables (Increase use “-”) 1,792,662,781.413,179,384,157.51 Increase in operating payables (Decrease use “-”) -2,750,972,245.43 -3,767,830,450.56 Others Net cash flows from operating activities 5,647,760,797.044,077,014,965.34 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 154 equivalents: Closing balance of cash 30,311,535,608.0016,914,836,112.50 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 12,582,529,016.133,512,307,170.67 7.52.2. Composition of cash and cash equivalent Monetary Unit: CNY Item Opening Balance Closing Balance 1. Cash 30,311,535,608.0017,729,006,591.87 Including: Cash on hand 34,319.3528,711.93 Unrestricted bank deposit 30,301,242,803.6517,711,121,431.52 Other unrestricted cash and cash equivalents 10,258,485.0017,856,448.42 3. Closing balance of cash and cash equivalents 30,311,535,608.0017,729,006,591.87 Including: Cash and cash equivalent with restriction to use of parent company and subsidiaries 32,939,930.13128,521,619.38 Note: 1. The cash and cash equivalent with restriction to use are CNY 32,939,930.13, of which, CNY 10,000,000.00 is the bank cash deposits for L/G, CNY 21,982,447.95 is provision for fixed deposit interest on an accrual basis and CNY 957,482.18 is the frozen fund by the court. 7.53. Assets with restricted ownership or use rights Monetary Unit: CNY Item Closing book balance Reason for restriction Cash and cash equivalents 21,982,447.95 Provision for fixed deposit interest on an accrual basis Cash and cash equivalents 10,000,000.00 Bank cash deposits for L/G Cash and cash equivalents 957,482.18 Frozen fund by the court 1 Total 32,939,930.13 Note: 1. According to the civil ruling issued by People's Court of Dongchangfu District, Liaocheng City, Shandong Province, a total of CNY 957,482.18 bank deposits of Boda Marketing Company, a subsidiary of the Company, were frozen in accordance with laws for the case of contractual dispute. On 4 August 2023, People's Court of Dongchangfu District, Liaocheng City, Shandong Province made a ruling of first instance and rejected the claims of the plaintiff Liaocheng Shunkang Import and Export Co., Ltd. The frozen fund has been released in August. 7.54. Foreign currency transactions 7.54.1. Foreign currency transactions Monetary Unit: CNY Item Closing Balance in Foreign Currency Exchange Rate Closing Balance in CNY 2023 Interim Report of Luzhou Laojiao Co., Ltd. 155 Cash at Bank and on Hand Including: USD 33,841,630.757.2258244,532,855.47 EUR 11,706.917.877192,216.50 HKD 2,121,252.230.92201,955,794.56 GBP 39.899.1432364.72 AUD 2,367.124.799211,360.28 Accounts Receivable Including: USD 191,311.937.22581,382,381.75 EUR HKD 14,083,424.850.922012,984,917.71 Long-term Loans Including: USD EUR HKD Other Receivables Including: HKD 31,660.810.922029,191.27 Accounts Payable Including: USD 273,541.407.22581,976,555.45 HKD 707,457.290.9220652,275.62 Other Payables Including: HKD 17,821,977.820.922016,431,863.55 Non-current liabilities due within one year Including: USD 61,439.227.2258443,947.54 HKD 2,891,683.100.92202,666,131.82 Lease liabilities Including: USD 177,499.097.22581,282,572.96 HKD 7.54.2. 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 7.55. Government grants 7.55.1. Details of government grants Monetary Unit: CNY 2023 Interim Report of Luzhou Laojiao Co., Ltd. 156 Item Amount Presentation Amount included in profit or loss of the current period Related to assets 29,474,054.74 Deferred income 4,594,828.14 Related to income 16,571,509.74 Other income 16,571,509.74 Total 46,045,564.48 21,166,337.88 7.55.2. Return of government grants □Applicable N/A 8. Changes in consolidated scope 8.1. Business combination not under common control 8.1.1. Business combination not under common control during current period Other statements: There is no business combination not under common control during current period. 8.2. Business combination under common control 8.2.1. Business combination under common control during current period Other statements: There is no business combination under common control during current period. 8.3. 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. 8.4. 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 8.5. 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: 2023 Interim Report of Luzhou Laojiao Co., Ltd. 157 There are no consolidated scope changes due to other reasons during current period. 9. Interests in other entities 9.1. Interests in subsidiaries 9.1.1. Group composition Name of Subsidiaries Major business location Place of registration Nature of business Shareholding Proportion Acquisition method Direct Indirect Luzhou Laojiao Brewing Co., Ltd. Luzhou Luzhou Baijiu manufacture and sales 100.00% Investment Luzhou Red Sorghum Modern Agricultural Development Co., Ltd. Luzhou Luzhou Agricultural product planting and sales 60.00% Business combination under common control Luzhou Laojiao Sales Co., Ltd. Luzhou Luzhou Baijiu sales 100.00% Investment Luzhou Laojiao Nostalgic Liquor Marketing Co., Ltd. Luzhou Luzhou Baijiu sales 100.00% Investment Luzhou Laojiao Custom Liquor Co., Ltd. Note Luzhou Luzhou Baijiu sales 15.00% Investment Luzhou Laojiao Selected Supply Chain Management Co., Ltd. Luzhou Luzhou Baijiu sales 100.00% Investment Guangxi Luzhou Laojiao Imported Liquor Industry Co., Ltd. Qinzhou Qinzhou Red wine production and sales 100.00% Investment Luzhou Dingli Liquor Industry Co., Ltd. Luzhou Luzhou Baijiu sales 100.00% Investment Luzhou Dingyi Liquor Industry Sales Co., Ltd. Luzhou Luzhou Baijiu sales 100.00% Investment Luzhou Laojiao New Liquor Luzhou Luzhou Baijiu sales 100.00% Investment 2023 Interim Report of Luzhou Laojiao Co., Ltd. 158 Industry Co., Ltd. Luzhou Laojiao I & E Co., Ltd. Luzhou Luzhou Wine import and export trade 100.00% Investment Luzhou Laojiao Boda Liquor Industry Marketing Co., Ltd. Luzhou Luzhou Baijiu sales 75.00% Investment Luzhou Laojiao Fruit Wine Industry Co., Ltd. Note Luzhou Luzhou Fruit wine sales 41.00% Investment Mingjiang Co., Ltd. America America Baijiu sales 54.00% Investment Luzhou Laojiao International Trade (Hainan) Co., Ltd. Hainan Hainan Food import and export 100.00% Investment Luzhou Pinchuang Technology Co., Ltd. Luzhou Luzhou Technology development and service 100.00% Investment Luzhou Laojiao International Development (Hong Kong) Co., Ltd. Hong Kong Hong Kong Wine sales 55.00% Investment Luzhou Laojiao Commercial Development (North America) Co., Ltd. America America Business development 55.00% Investment Luzhou Laojiao Electronic Commerce Co., Ltd. Luzhou Luzhou Wine sales 90.00% Investment Luzhou Laojiao Whitail Liquor Industry Co., Ltd. Note Luzhou Luzhou Wine sales 31.50% Investment Luzhou Baonuo Biotechnology Co., Ltd. Luzhou Luzhou Fermented product manufacture 100.00% Investment Luzhou Laojiao Health Liquor Industry Co.,Ltd. Luzhou Luzhou Health care wine manufacture and sales 100.00% Business combination under common control Luzhou Laojiao Health Sales Co., Luzhou Luzhou Health care wine sales 100.00% Business combination under 2023 Interim Report of Luzhou Laojiao Co., Ltd. 159 Ltd. common control Luzhou Laojiao New Retail Co., Ltd. Luzhou Luzhou Baijiu sales 40.00% 100.00% Investment Luzhou Laojiao Technology Innovation Co., Ltd. Chengdu Chengdu Technology development and service 40.00% 100.00% Investment Statement for that the proportion of share-holding is different from the proportion of voting rights: Note: As the Note 3.6, the Company holds less than 51% shares of Luzhou Laojiao Custom Liquor Co., Ltd., Luzhou Laojiao Fruit Liquor Industry Co., Ltd., and Luzhou Laojiao Whitail Liquor Industry Co., Ltd. but in these companies’ board members, two thirds or more are dispatched by the Company. The Company has substantial control over these companies, so they are included in the consolidation scope. 9.1.2. Important non-wholly-owned subsidiaries Monetary 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% 5,962,144.09 67,806,016.38 9.1.3. Major financial information of important non-wholly-owned subsidiaries Monetary Unit: CNY Name of subsidiary Closing Balance Opening Balance Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Luzhou Laojiao Boda Liquor Industry Marketing Co., Ltd. 534,4 38,45 3.08 534,4 38,45 3.08 263,2 14,38 7.58 263,2 14,38 7.58 275,4 19,42 1.12 275,4 19,42 1.12 28,04 3,931.97 28,04 3,931.97 Monetary Unit: CNY Name of subsidiary Current Period Previous Period Operating revenue Net profit Total compreheOperating cash flow Operating revenue Net profit Total compreheOperating cash flow 2023 Interim Report of Luzhou Laojiao Co., Ltd. 160 nsive income nsive income Luzhou Laojiao Boda Liquor Industry Marketing Co., Ltd. 175,125,5 21.07 23,848,57 6.35 23,848,57 6.35 22,046,02 3.55 64,606,73 3.54 71,068,50 1.83 71,068,50 1.83 - 4,572,218.59 9.1.4. Significant restrictions on using the assets and liquidating the liabilities of the Company No such cases for the reporting period. 9.1.5. Financial support or other supports provided to structural entities incorporated into the scope of consolidated financial statements There is no structural entity incorporated into the scope of consolidated financial statements in the reporting period. 9.2. Interests in joint ventures and associates 9.2.1. 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 method1 Note: 1. The Company has the substantive decision-making power, so the Company still has significant influence on Huaxi Securities. 9.2.2. Major financial information of important associates Monetary Unit: CNY Closing Balance/Amount in current period Opening Balance/Amount in previous period Current assets 91,527,562,209.6689,547,378,203.44 Non-current assets 5,780,617,417.098,199,779,781.47 Total assets 97,308,179,626.7597,747,157,984.91 Current liabilities 55,374,217,751.7954,767,331,978.36 Non-current liabilities 19,026,581,515.1020,539,402,724.68 Total liabilities 74,400,799,266.8975,306,734,703.04 Non-controlling shareholder interest 20,333,266.9922,000,726.84 2023 Interim Report of Luzhou Laojiao Co., Ltd. 161 Shareholder interest attributable to parent company 22,887,047,092.8722,418,422,555.03 Share of net assets calculated based on shareholding proportion 2,378,780,663.292,330,073,856.15 Adjusted --Goodwill --Unrealized profits of internal transactions --Others 167,466,735.90167,466,735.90 Book value of equity investments in associate companies 2,545,247,360.512,497,540,592.05 Fair value of equity investments in associate companies that have public quote 2,267,226,806.642,054,418,514.32 Operating revenue 2,021,251,360.101,749,801,559.42 Net profit 522,815,192.43290,468,284.96 Net profit from discontinued operation Other comprehensive income 22,891,885.56 -77,784,068.34 Total comprehensive income 545,707,077.99212,684,216.62 Dividends from associate companies this year 9.2.3. Financial information summarized of unimportant joint ventures and associate companies Monetary 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 176,429,374.63169,959,961.12 Total following items calculated on the basis of shareholding proportion --Net profit 2,204,555.93 -11,746,550.86 -- Total comprehensive income 2,204,555.93 -11,746,550.86 Other statements: Unimportant associate companies refer to Luzhou Laojiao Postdoctoral Workstation Technology Innovation Co., Ltd., Sichuan Development Wine Investment Co., Ltd., Sichuan Tongniang Baijiu Industry Technology Research Institute Co., Ltd. and CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. 9.2.4. Notes to the significant restrictions on the ability of joint ventures or associate companies to transfer funds to the Company None 2023 Interim Report of Luzhou Laojiao Co., Ltd. 162 9.2.5. The excess loss of joint ventures or associate companies Other statements None 9.2.6. The unrecognized commitment related to investment to joint ventures None 9.2.7. Contingent liabilities related to investment to joint ventures or associate companies None 9.3. Significant common operation Statement for that the proportion of shareholdings or shares in common operation is different from the proportion of voting rights: None 9.4. Equity in the Structured Entity Excluded in the Scope of Consolidated Financial Statements Statement for the structured entity excluded in the scope of consolidated financial statements: None 10. Risks related to 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, 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 163 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. 10.1. 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 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 30 June 2023, the balance of the top five customers of the Company's accounts receivable amounted to CNY 15,158,800, accounting for 97.58% of the balance of the Company's accounts receivable. 10.2. Liquidity risk Liquidity risk refers to the risk unable to obtain sufficient funds in time to meet business development 2023 Interim Report of Luzhou Laojiao Co., Ltd. 164 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 and bank loans to maintain a balance between financing sustainability and flexibility. As at 30 June 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 Notes payable Accounts payable 2,164,798,164.422,164,798,164.422,164,798,164.42 Other payable 1,175,814,936.291,175,814,936.291,175,814,936.29 Non-current liabilities due within one year 80,331,921.5780,331,921.5780,331,921.57 Other current liabilities 251,369,372.14251,369,372.14251,369,372.14 Long-term loans 9,515,100,000.009,515,100,000.00 24,800,000.00 8,260,300,000.00 1,230,000,000.00 Bonds payable 2,996,918,980.273,000,000,000.00 1,500,000,000.00 1,500,000,000.00 Lease liabilities 26,095,309.9430,453,487.58 5,697,572.625,195,257.7419,560,657.22 Subtotal 16,210,428,684.6316,217,867,882.003,672,314,394.421,530,497,572.629,765,495,257.741,249,560,657.22 10.3. Market risk 10.3.1. 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 movements on the Company's foreign exchange risk. As at 30 June 2023, the Company's assets and liabilities are mainly in CNY balance. The Company's management considers the impact of changes in foreign exchange risk on the Company's financial statements to be minimal. 10.3.2. Rate risk The Company's interest rate risk mainly arises from the borrowings. 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. 10.3.3. 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 2023 Interim Report of Luzhou Laojiao Co., Ltd. 165 financial instrument or its issuer or all similar financial instruments traded in the market. Other price risks faced by the Company mainly come from investments in other equity instruments measured at fair value. 11. Fair value disclosure 11.1. Closing fair value of assets and liabilities measured at fair value Monetary 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 200,056,716.13200,056,716.13 1.1.1 Financial assets measured at fair value with their changes included into current profits/losses 200,056,716.13200,056,716.13 1.1.1.4 Wealth management products 200,056,716.13200,056,716.13 1.3 Investments in other equity instruments 410,956,596.98 34,458,125.87445,414,722.85 1.6 Accounts receivable financing 2,765,330,012.772,765,330,012.77 Total assets continuously measured at fair value 410,956,596.98 2,999,844,854.773,410,801,451.75 2. Discontinuous measurement at fair value -- -- -- -- 11.2. 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. 11.3. Valuation technique adopted and nature and amount determination of important parameters for continuously and discontinuously within Level 2 of the fair value hierarchy None 2023 Interim Report of Luzhou Laojiao Co., Ltd. 166 11.4. 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 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. 11.5. 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 11.6. 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 11.7. Changes in valuation techniques in the reporting period and reasons for the changes None 11.8. Fair value of financial assets and liabilities not measured at fair value None 12. Related parties and related party transactions 12.1. The parent company of the Company Parent company Registration place Business nature Registered capital Shareholding proportion by the parent Voting rights proportion by the parent company 2023 Interim Report of Luzhou Laojiao Co., Ltd. 167 company Luzhou Laojiao Group Co., Ltd. Luzhou, Sichuan Investment and asset management 2,798,818,800.0025.89% 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 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; and equity fund-invested asset management services. 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, passenger ticket agent and business agency service. (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. 12.2. Subsidiaries of the Company For details please see Note 9.1. Interests in subsidiaries. 12.3. Joint ventures and associates of the Company For details please see Note 9.3. Interests in joint ventures and associates. 12.4. Other related party of the Company Name of Other Related Party Relationship with the Company 2023 Interim Report of Luzhou Laojiao Co., Ltd. 168 Luzhou Jiachuang Wine Supply Chain Management Co., Ltd. The same parent company Luzhou Laojiao Zhitong Trading Co., Ltd. The same parent company Sichuan Hongxin Financing Guarantee Co., Ltd. The same parent company Sichuan Lianzhong Supply Chain Service Co., Ltd. The same parent company New Shottes Brook Private Company The same parent company Guangzhou Zhongying Gongyuan Energy Saving Technology Co., Ltd. Sub-subsidiary of parent company Sichuan Yukun Logistics Co., Ltd. Sub-subsidiary of parent company Sichuan Kangrun Group Construction and Installation Engineering Co., Ltd. Sub-subsidiary of parent company Luzhou Qingxigu Scenic Area Management 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 Luzhou XingLu Water (Group) Co., Ltd. Subsidiary of the second largest shareholder Luzhou China Resources Xinglu Gas Co., Ltd. Subsidiary of the second largest shareholder Luzhou XingLu Property Management Co., Ltd. Subsidiary of the second largest shareholder Sichuan Meihe Winery Industry Co.,Ltd. Minority shareholder of the subsidiary Fruit Wine Industry Luzhou Public Transport Group Co., Ltd. Subsidiary of the second largest shareholder Other subsidiaries of Luzhou XingLu Investment Group Co., Ltd. Other subsidiary of the second largest shareholder Other subsidiaries of Luzhou Laojiao Group Co., Ltd. Other subsidiary of parent company Other statements: Note: As the Note 10.1, the Company will disclose the transactions with XingLu Investment Group and its controlling enterprises as other related parties of the Company. 12.5. Related transactions 12.5.1. Related transactions of purchase and sales of goods / rendering and receipt of services Table of purchase of goods / receipt of services Monetary 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. 13,051,954.87 11,777,837.70 Laojiao Group and its other subsidiaries Training, accommodation, warehousing, transportation services and property costs, 24,310,894.35 10,038,101.46 2023 Interim Report of Luzhou Laojiao Co., Ltd. 169 etc. CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. Conference fees, travel service fee, etc. 4,694,551.04 43,818.00 Purchase of goods: Laojiao Group and its other subsidiaries Raw materials, water, power, etc. 92,192,358.30 15,407,103.04 Luzhou XingLu Investment Group Co., Ltd. and its other subsidiaries Gas, water 7,936,512.69 6,281,248.54 Total 142,186,271.25 43,548,108.74 Table of sales of goods and rendering of service Monetary Unit: CNY Name of Related Party Transaction Amount in current period Amount in previous period Sales of goods: Laojiao Group and its subsidiaries Wine, water, power, etc.25,081,222.0052,806.72 Luzhou Sanrenxuan Liquor Industry Co., Ltd. Wine 1,572,136.8032,528,587.08 CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. Wine 36,413,711.3430,708,670.79 Total 63,067,070.1463,290,064.59 12.5.2. Related party leasing The Company as lessor: Monetary 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 1,070,040.001,111,300.02 Total 1,070,040.001,111,300.02 The Company as lessee: Monetary 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 House 446,32 2023 Interim Report of Luzhou Laojiao Co., Ltd. 170 Group and its subsidiaries lease 8.00 Total 446,32 8.00 12.5.3. Key management compensation Monetary Unit: CNY Item Amount in current period Amount in previous period Key management 3,760,964.303,813,084.72 12.6. Receivables and payables of related parties 12.6.1. Receivables Monetary Unit: CNY Item Related party Closing Balance Opening Balance Book value Provision for bad debt Book value Provision for bad debt Accounts receivable CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. 14,000.00700.00 Prepayment CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. 2,379.50 2,379.50 Prepayment Luzhou Laojiao Group Co., Ltd. 3,528,831.55 Prepayment Luzhou China Resources Xinglu Gas Co., Ltd. 31,289.09 Prepayment Luzhou XingLu Water (Group) Co., Ltd. 807,625.52 Prepayment Luzhou Public Transport Group Co., Ltd. 258,393.78 Prepayment Sichuan Meihe Winery Industry Co.,Ltd. 2,961,479.50 2,961,479.50 Other receivables CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. 70,025.333,501.275,111,743.43780,587.17 Other receivables Luzhou Laojiao Group Co., Ltd. 7,877.23393.86 2023 Interim Report of Luzhou Laojiao Co., Ltd. 171 12.6.2. Payables Monetary Unit: CNY Item Related party Closing Balance Opening Balance Accounts payable Sichuan Lianzhong Supply Chain Service Co., Ltd. 16,498,808.486,993,503.13 Accounts payable Luzhou Public Transport Group Co., Ltd. 469,479.45 Accounts payable CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. 168,775.00 Contractual liabilities (tax inclusive) Luzhou Sanrenxuan Liquor Industry Co., Ltd. 2,424,657.481,621,994.29 Contractual liabilities (tax inclusive) Sichuan Lianzhong Supply Chain Service Co., Ltd. 73,608.7951,114.78 Contractual liabilities (tax inclusive) Luzhou Jiachuang Wine Supply Chain Management Co., Ltd. 5,109,850.004,525,508.00 Contractual liabilities (tax inclusive) CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. 4,295,273.486,070,341.82 Contractual liabilities (tax inclusive) Luzhou Laojiao Qingxigu Cultural Tourism Investment Co., Ltd. 3,861,920.00 Contractual liabilities (tax inclusive) Sichuan Zhitong Data Information Co., Ltd. 45,704.00 Contractual liabilities (tax inclusive) Yuanquan Cultural Tourism Co., Ltd. 2,043,896.00 Other payables Luzhou Jiachuang Wine Supply Chain Management Co., Ltd. 360,000.00 Other payables Luzhou Sanrenxuan Liquor Industry Co., Ltd. 150,000.00150,000.00 Other payables Sichuan Lianzhong Supply Chain Service Co., Ltd. 36,790,948.0017,633,148.00 Other payables Luzhou Laojiao Group Co., Ltd. 80,000.00 Other payables Guangzhou Zhongying Gongyuan Energy Saving Technology Co., Ltd. 140,444.35 Other payables CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. 1,050,000.00750,000.00 Other payables Luzhou Xinglu Property Management Co., Ltd. 154,920.20 12.7. Commitments of the related parties None 2023 Interim Report of Luzhou Laojiao Co., Ltd. 172 13. Stock payment 13.1. The overall situation of share-based payments Applicable □ N/A Monetary Unit: CNY Total equity instruments granted by the Company in the reporting period 0.00 Total equity instruments exercised by the Company in the reporting period 0.00 Total equity instruments of the Company expired in the reporting period 0.00 Scope of the exercise price of outstanding stock options of the Company at the end of the reporting period and remaining contract term N/A Scope of the exercise price of other outstanding equity instruments of the Company at the end of the reporting period and remaining contract term N/A Other statements The Company granted 92,669 shares of the Restricted Share Incentive Plan for the third time in December 2022 and completed the registration in February 2023. 13.2. Equity-settled share-based payments Applicable □ N/A Monetary 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 Basis to determine number of equity instrument that can be exercised Making the best estimate based on the latest number of persons who can exercise rights 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 1,281,793,025.71 Total costs of recognizing equity-settled share-based payments in the current period 198,641,381.90 13.3. Cash-settled share-based payments □ Applicable N/A 13.4. Modification and termination of share-based payments None 2023 Interim Report of Luzhou Laojiao Co., Ltd. 173 14. Commitments and contingencies 14.1. Commitments Significant commitments at the balance sheet date None 14.2. Contingencies 14.2.1. 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 371,283,000. Except for the above matters, the Company has no other significant contingencies that need to be disclosed as the end of 30 June 2023. 14.2.2. 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. 15. Post balance sheet event 15.1. Profit distribution Profit distribution plan In accordance with resolutions of shareholders’ meeting, a cash dividend of CNY 42.25 (tax inclusive) will be distributed for every 10 existing shares held, which has been carried out on 28 August 2023. 15.2. Sales return There are no important sales returning after balance sheet date. 15.3. Statement for other post balance sheet events None 2023 Interim Report of Luzhou Laojiao Co., Ltd. 174 16. Other important information 16.1. 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. 16.2. Segment information 16.2.1 Recognition basis and accounting policies of reportable segment Except for the business on wine 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. 16.3. Other significant events that can affect investors’ decision Saving deposits involving contract disputes: As stated in Note 12.2, 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 24 February 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 371 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. Except for the above matters, the Company has no other significant events that can affect investors’ decision that need to be disclosed as of 30 June 2023. 2023 Interim Report of Luzhou Laojiao Co., Ltd. 175 17. Notes to the main Items of the financial statements of parent company (all currency unit is CNY, except other statements) 17.1. Accounts receivable 17.1.1. Analysis by categories Monetary 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 receivables tested for impairment by the portfolio 271,333.64 100.00 % 3,200.0 0 1.18% 268,133.64 50,000.00 100.00 % 2,500.0 0 5.00% 47,500.00 Including: Accounts receivables tested for impairment on the portfolio with characteristics of credit risk 271,333.64 100.00 % 3,200.0 0 1.18% 268,133.64 50,000.00 100.00 % 2,500.0 0 5.00% 47,500.00 Total 271,333.64 100.00 % 3,200.0 0 1.18% 268,133.64 50,000.00 100.00 % 2,500.0 0 5.00% 47,500.00 Please refer to the relevant information of disclosure of provision for bad debt of other accounts receivable if adopting the general mode of expected credit loss to withdraw provision for bad debt of accounts receivable. Applicable □N/A Accounts receivables tested for impairment by the portfolio: Item Closing Balance Book balance Provision for bad debt Proportion Risk portfolio 64,000.083,200.005.00% 2023 Interim Report of Luzhou Laojiao Co., Ltd. 176 Other portfolios 207,333.560.000.00% Total 271,333.643,200.001.18% Disclosure by aging Monetary Unit: CNY Aging Book balance Within 1 year (including 1 year) 271,333.64 Total 271,333.64 17.1.2. Provision and recovery for bad and doubtful debt in the current period Allowance of provision for bad debt: Monetary Unit: CNY Type Opening Balance Current Period Closing Balance Allowance Reversal or recovery Write-off Other Accounts receivables tested for impairment by the portfolio 2,500.00700.00 3,200.00 Total 2,500.00700.00 3,200.001 Note: 1. There is no accounts receivable reversed or recovered with significant amount during the reporting period. 17.1.3. Top five entities with the largest balances of accounts receivable Monetary Unit: CNY Company Name Closing Balance Proportion to total closing balance of accounts receivable Closing Balance of provision for bad debt Luzhou Laojiao Custom Liquor Co., Ltd. 207,333.5676.41% CTSLuzhou Laojiao Cultural Tourism Development Co., Ltd. 14,000.005.16% 700.00 One-time sporadic customers 50,000.0818.43% 2,500.00 Total 271,333.64100.00% 17.2. Other receivables Monetary Unit: CNY Item Closing Balance Opening Balance Dividends receivable 15,482,200.48 Other receivables 14,206,680,354.7412,042,401,844.84 Total 14,222,162,555.2212,042,401,844.84 2023 Interim Report of Luzhou Laojiao Co., Ltd. 177 17.2.1. Dividend receivable 17.2.1.1. Classification of dividend receivable Monetary Unit: CNY Item Closing Balance Opening Balance Guotai Junan Securities Co., Ltd.6,241,808.41 Huaxi Securities Co., Ltd.8,184,934.32 North Chemical Industries Co.,Ltd.78,177.75 China Tourism Group Duty Free Corporation Limited 977,280.00 Total 15,482,200.48 17.2.2. Other receivables 17.2.2.1. Other receivables disclosed by nature Monetary Unit: CNY Nature Closing book balance Opening book balance Intercourse funds of subsidiaries receivable 14,195,106,499.9612,023,243,459.84 Intercourse funds and others 3,074,745.9511,257,616.61 Saving deposits involving contract disputes 128,717,028.721129,049,496.98 Total 14,326,898,274.6312,163,550,573.43 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 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 30 June 2023, the closing balance of that fund was CNY 128,717,028.72. 17.2.2.2. Provision for bad and doubtful other receivables in the current period Monetary 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 Recovery 930,808.70 930,808.70 Balance of 30 June 2023 217,919.89 120,000,000.00120,217,919.89 Changes of carrying amount with significant amount changed of loss provision in the current period □ Applicable N/A Disclosure by aging 2023 Interim Report of Luzhou Laojiao Co., Ltd. 178 Monetary Unit: CNY Aging Closing balance Within 1 year (including 1 year) 14,198,050,594.15 1-2 years 39,751.76 2-3 years 18,100.00 Over 3 years 128,789,828.72 3-4 years 12,800.00 4-5 years 10,000.00 Over 5 years 128,767,028.72 Total 14,326,898,274.63 17.2.2.3. Provision and recovery for bad and doubtful other receivables in the current period Allowance of provision for bad debt: Monetary Unit: CNY Type Opening Balance Current Period Closing Balance Allowance Reversal or recovery Write-off Other Other receivables tested for impairment individually 120,000,000.00 120,000,000.00 Other receivables tested for impairment by the portfolio 1,148,728.59 930,808.70 217,919.89 Total 121,148,728.59 930,808.70 120,217,919.89 17.2.2.4. Top five entities with the largest balances of the other receivables Monetary Unit: CNY Company Name Nature Closing Balance Aging Proportion in total receivables Provisioning amount at period end Luzhou Laojiao Brewing Co., Ltd. Internal transactions 13,180,347,168.61 Within 1 year 92.00% Luzhou Dingyi Liquor Industry Sales Co., Ltd. Internal transactions 541,438,112.66 Within 1 year 3.78% Luzhou Laojiao Electronic Commerce Co., Ltd. Internal transactions 286,577,336.91 Within 1 year 2.00% 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 128,717,028.72 Over 5 years 0.90% 120,000,000.00 Luzhou Laojiao Import and Internal transactions 122,233,953.48 Within 1 year 0.85% 2023 Interim Report of Luzhou Laojiao Co., Ltd. 179 Export Trade Co., Ltd. Total 14,259,313,600.38 99.53% 120,000,000.00 17.3. Long-term equity investments Monetary Unit: CNY Item Closing Balance Opening Balance Book balance Provision for impairment Book value Book balance Provision for impairment Book value Investment in subsidiary 3,725,838,104.37 3,725,838,104.37 3,611,563,148.96 3,611,563,148.96 Investment in associates and joint venture 2,718,562,474.44 2,567,098.80 2,715,995,375.64 2,669,970,043.71 2,567,098.80 2,667,402,944.91 Total 6,444,400,578.81 2,567,098.80 6,441,833,480.01 6,281,533,192.67 2,567,098.80 6,278,966,093.87 17.3.1. Investment in subsidiary Monetary Unit: CNY Investee Opening Balance (book value) Changes in current period Closing Balance (book value) Closing balance of provision for impairment Increase Decrease Provision for impairment Other Luzhou Pinchuang Technology Co., Ltd. 76,953,725.32 9,309,400.9 8 86,263,126.30 Luzhou Laojiao Sales Co., Ltd. 205,765,05 5.56 46,077,237.40 251,842,29 2.96 Luzhou Laojiao Brewing Co., Ltd. 3,234,179,2 28.31 30,451,978.18 3,264,631,2 06.49 Luzhou Laojiao International Development (Hong Kong) Co., Ltd. 9,023,636.9 6 1,926,237.7 8 10,949,874.74 Luzhou Laojiao Electronic Commerce Co., Ltd. 59,948,387.34 535,408.14 60,483,795.48 Luzhou Baonuo Biotechnology Co., Ltd. 20,000,000.00 20,000,000.00 Luzhou Laojiao 5,693,115.4 7 2,344,366.2 5 8,037,481.7 2 2023 Interim Report of Luzhou Laojiao Co., Ltd. 180 Health Liquor Industry Co., Ltd. Note Luzhou Laojiao New Retail Co., Ltd. 20,000,000.00 3,630,326.6 8 23,630,326.68 Total 3,611,563,1 48.96 20,000,000.00 94,274,955.411 3,725,838,1 04.37 Note: 1. The other increase in the current period is 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 recognized 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 recognized at the same time. 17.3.2. Investment in associate and joint venture Monetary Unit: CNY Investee Opening Balance (book value) 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 Changes in other equity Cash divided or profit declared Provision for impairment Other 1. Joint Venture 2. Associate Huaxi Securities Co., Ltd. 2,497,540,59 2.05 54,493,747.5 7 1,397,955.21 8,184,934.32 2,545,247,36 0.51 2,567,098.80 Luzhou Laojiao Postdoctoral Workstation Technology Innovation Co., Ltd. 40,185,894.7 7 - 499,83 0.20 39,686,064.5 7 Sichuan Development Wine Investment Co., Ltd. 5,889,654.24 5,159.39 5,894,813.63 CTS 123,78 1,380, 125,16 2023 Interim Report of Luzhou Laojiao Co., Ltd. 181 Luzhou Laojiao Cultural Tourism Development Co., Ltd. 6,803.85 333.087,136.93 Subtotal 2,667,402,94 4.91 55,379,409.8 4 1,397,955.21 8,184,934.32 2,715,995,37 5.64 2,567,098.80 Total 2,667,402,94 4.91 55,379,409.8 4 1,397,955.21 8,184,934.32 2,715,995,37 5.64 2,567,098.80 17.4. Operating revenue and cost of sales Monetary Unit: CNY Item Current Period Previous Period Revenue Cost of sales Revenue Cost of sales Primary business 3,999,775,395.423,041,281,547.342,054,885,320.691,385,149,822.80 Other business 14,764,932.60973,400.7812,163,668.37537,627.72 Total 4,014,540,328.023,042,254,948.122,067,048,989.061,385,687,450.52 Details: Monetary Unit: CNY Contract category Liquor sales Total Commodity type Including: Medium and high grade liquor 3,990,677,380.303,990,677,380.30 Other liquor 9,098,015.129,098,015.12 By operating segment Including: Domestic 3,999,775,395.423,999,775,395.42 Outbound Market or customer type Including: Contract type Including: Commodity sales contract 3,999,775,395.423,999,775,395.42 By commodity transfer time Including: By contract term Including: 2023 Interim Report of Luzhou Laojiao Co., Ltd. 182 By sales channel Including: Total 3,999,775,395.423,999,775,395.42 Information on performance obligation: None Other statements: None 17.5. Investment income Monetary Unit: CNY Item Current Period Previous Period Investment income from long-term equity investments under cost method 7,530,591.92 Investment income from long-term equity investments under equity method 55,379,409.84125,579,283.02 Investment income gained during the period of holding held-for-trading financial assets 2,391,009.806,795,921.96 Investment income from disposal of held-for-trading financial assets 4,636,104.814,827,927.32 Dividends income gained during the period of holding other equity instrument investment 7,297,266.168,078,717.94 Total 69,703,790.6152,812,442.16 Note: 1. There is no major restriction on the repatriation of the Company's investment income. 18. Supplementary information 18.1. Detailed statement of non-recurring gains and losses in the current period (+ for gain, - for loss) Applicable □ N/A Monetary Unit: CNY Item Amount Note Gains or losses on disposal non-current assets (including the write-off portion of the impairment provision) -477,479.38 For details please see Note 7.46 Government grants included into current profits and losses (other than government grants closely related to enterprise business and granted by quota or quantity according to national unified standard) 21,166,337.88 For details please see Note 7.42 and Note 7.47 Gain or loss on fair-value changes on held-for-trading financial assets and liabilities & income from disposal of 37,839,310.52 For details please see Note 7.43 and Note 7.44 2023 Interim Report of Luzhou Laojiao Co., Ltd. 183 held-for-trading financial assets and liabilities and available-for-sale financial assets (exclusive of the effective portion of hedges that arise in the Company’s ordinary course of business) Other non-operating income and costs other than above items 7,506,932.03 For details please see Note 7.47 and Note 7.48 Less: Impact from income tax 16,427,670.44 Impact from non-controlling shareholders’ equity 119,219.17 Total 49,488,211.44 -- 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 18.2. 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 18.79% 4.824.82 Net profits attributable to common shareholders of the Company before non-recurring gains and losses 18.66% 4.794.79 18.3. Differences between accounting data under domestic and overseas accounting standards 18.3.1. Differences of net profit and net assets disclosed in financial reports prepared under international and Chinese accounting standards □ Applicable N/A 18.3.2. Differences of net profit and net assets disclosed in financial reports prepared under overseas and Chinese accounting standards □ Applicable N/A 18.3.3. 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 Section IImportant Statements, Contents and Definitions Section IICompany Profile and Key Financial Results 1. Corporate information 2. Contact us 3. Other Information 3.1. Contact Information of the Company 3.2. Information disclosure and place where the interim report is kept 3.3. Other information 4. Key accounting data and financial indicators Section IIIManagement Discussion and Analysis A. Breakdown of selling and distribution expenses B. Breakdown of advertising expenses 4. Analysis of non-core business 5. Assets and liabilities 5.1. Significant change of asset items 5.3. Assets and liabilities measured at fair value 5.4. Restricted asset rights as of the end of this reporting period 6. Investment 6.1. Total investment 6.2. Significant equity investment made in the reporting period 6.3. Significant ongoing non-equity investment in the reporting period 6.4. Financial assets investment 6.4.1. Securities investment 6.4.2. Derivative investment 6.5. Use of funds raised 6.5.1. General use of funds raised 6.5.2. Fund raised for committed projects 6.5.3. Re-purposed funds raised 7. Sale of major assets and equity interests 7.1. Sale of major assets 7.2. Sale of major equity interests 8. Analysis of major subsidiaries 9. Structured entities controlled by the Company 10. Risks facing the Company and countermeasures Section IVCorporate Governance 1. Annual and extraordinary general meeting of shareholders convened during the reporting period 1.1 General meeting of shareholders convened during the reporting period 1.2 Extraordinary general meetings of shareholders convened at the request of preference shareholders with resumed voting rights 2. Changes in directors, supervisors, and senior management 3. Profit distribution and converting capital reserves into share capital for the reporting period 4. Implementation of any equity incentive plan, employee stock ownership plan or other incentive measures for employees 4.1. Equity incentives 4.2. Implementation of employee stock ownership plans 4.3. Other incentive measures for employees Section VEnvironmental and Social Responsibility 1. Information about environment protection 2. Social responsibility Section VISignificant Events 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 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. Engagement and disengagement of CPAs firm 5. Explanation of the board of directors and the board of supervisors regarding the "Non-standard audit opinion" for the reporting period 6. Explanations of the board of directors regarding the "Non-standard audit opinion" of Last Year 7. Bankruptcy and reorganization 8. Litigation 9. Punishments and rectifications 10. Credit conditions of the Company as well as its controlling shareholder and actual controller ( Applicable ( N/A 11. Significant related party transactions 11.1. Related party transactions arising from routine operation 11.2. Related party transactions regarding purchase or sales of assets or equity interests 11.3. Related party transitions arising from joint investments in external parties 11.4. Credits and liabilities with related parties 11.5. Transactions with related finance companies 11.6. Transactions between finance companies controlled by the Company and related parties 11.7. Other significant related party transactions 12. Significant contracts and their execution 12.1. Trusteeship, contracting and leasing 12.1.1. Trusteeship 12.1.2. Contracting 12.1.3. Leasing 12.2. Major guarantees 12.3. Entrust assets management ( Applicable ( N/A 12.4. Other significant contracts 13. Other significant events 14. 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 3. Total number of shareholders and their shareholdings 4. Changes in shares held by directors, supervisors, and senior management 5. Change of controlling shareholder or actual controller 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. Changes in credit ratings in the reporting period 2.4. 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. 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 30 June 2023 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 six months ended 30 June 2023 Statement of changes in owners' equity of parent company 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 The accounting treatment of business combinations involving enterprises under common control and business combinations not involving enterprises under common control 5.6 Preparation of consolidated financial statements 5.7 Classification of joint venture arrangements and the accounting treatment method of common operation 5.8 Cash and cash equivalents 5.9 Foreign currency transactions and translation of foreign currency statements 5.10 Financial Instruments 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. 5.11 Notes receivable 5.12 Accounts receivables 5.13 Accounts receivables financing 5.14 Other receivables 5.15 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 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 investme... 5.23 Investment property 5.24. Fixed assets (1) Recognition of fixed assets (2) Depreciation of fixed assets (3) Recognition standard, valuation method and depreciation method for fixed assets acquired under financing lease (4) 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. Using right assets 5.30. Intangible assets (1) Measurement method, useful life, impairment test 5.31. Long-term assets impairment 5.32. 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... 5.33. Contract liabilities 5.34. 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 5.35. Lease liabilities 5.36. Estimated liabilities 5.37. Share-based payment 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 ... 5.38. Other financial instruments such as preferred shares and perpetual bonds N/A 5.39. Revenue 5.40. Government grants 5.41. Deferred tax assets or deferred tax liabilities 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 in... 5.42. Lease 5.43. Income tax expenses 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 in... 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 5.45. Other 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. Classification of accounts receivable 7.3.2. Provision and recovery for bad and doubtful debt in the current period 7.3.3. Top five entities with the largest balances of accounts receivable 7.4. Accounts receivable financing 7.5. Prepayment 7.5.1. Aging analysis 7.5.2. Top five entities with the largest balances of prepayment 7.6. Other receivables 7.6.1. Dividend receivable 7.6.1.1. Classification of dividend receivable 7.6.1.2. Allowance of provision for bad debt 7.6.2. Other receivables 7.6.2.1. Other receivables disclosed by nature 7.6.2.2. Allowance of provision for bad debt 7.6.2.3. Provision and recovery for bad and doubtful other receivables in the current period 7.6.2.4. Top five entities with the largest balances of the other receivables 7.7. Inventories 7.7.1. Categories of Inventories 7.8. Other current assets 7.9. Long-term equity investments 7.10. Other equity instrument investment 7.11. Investment property 7.11.1. Investment property with cost measurement model 7.11.2. Investment property adopting the fair value measurement mode 7.11.3. 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 7.14. Right-of-use assets 7.15. Intangible assets 7.15.1. Details of intangible assets 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. Accounts payable 7.19.1. Presentation of accounts payable 7.19.2. Significant accounts payable whose aging is longer than 1 year 7.20. Contract liabilities 7.21. Employee benefits payable 7.21.1. Employee benefits payable shown as follows 7.21.2. Short-term employee benefits payable shown as follows 7.21.3. Defined contribution plan shown as follows 7.22. Taxes payable 7.23. Other payables 7.23.1. Dividend payable 7.23.2. Other payables 7.23.2.1. Categories by nature 7.23.2.2. Significant other payables whose aging are longer than 1 year 7.24. Non-current liabilities due within one year 7.25. Other current liabilities 7.26. Long-term loans 7.26.1. Long-term loans 7.27. Bonds payable 7.27.1. Bonds payable 7.27.2. Increase/decrease of bonds payable (excluding other financial instrument classified as financial liabilities such as preferred shares and perpetual bonds) 7.28. Lease liabilities 7.29. Deferred income 7.30. Share capital 7.31. Capital reserves 7.32. Treasury shares 7.33. Other comprehensive income 7.34. Surplus reserves 7.35. Undistributed profits 7.36. Operating revenue and cost of sales 7.37. Business taxes and surcharges 7.38. Selling and distribution expenses 7.39. General and administrative expenses 7.40. Research and developmentexpenses 7.41. Financial expenses 7.42. Other income 7.43. Investment income 7.44. Gain on changes in fair value 7.45. Credit impairment loss 7.46. Gains from disposal of assets 7.47. Non-operating income 7.48. Non-operating costs 7.49. Income tax expense 7.49.1. Statement of income tax expense 7.49.2. Adjustment for accounting profit and income tax expense 7.50. Other comprehensive income 7.51. Notes to the statement of cash flow 7.51.1. Cash received from other operation activities 7.51.2. Cash paid for other operating activities 7.51.3. Cash paid for other financing activities 7.52. Supplementary information to statement of cash flow 7.52.1. Supplementary information to statement of cash flow 7.52.2. Composition of cash and cash equivalent 7.53. Assets with restricted ownership or use rights 7.54. Foreign currency transactions 7.54.1. Foreign currency transactions 7.54.2. 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... 7.55. Government grants 7.55.1. Details of government grants 7.55.2. Return of government grants 8. Changes in consolidated scope 8.1. Business combination not under common control 8.1.1. Business combination not under common control during current period 8.2. Business combination under common control 8.2.1. Business combination under common control during current period 8.3. Reverse purchase 8.4. Disposing subsidiaries 8.5. Consolidated scope changes due to other reasons 9. Interests in other entities 9.1. Interests in subsidiaries 9.1.1. Group composition 9.1.2. Important non-wholly-owned subsidiaries 9.1.3. Major financial information of important non-wholly-owned subsidiaries 9.1.4. Significant restrictions on using the assets and liquidating the liabilities of the Company 9.1.5. Financial support or other supports provided to structural entities incorporated into the scope of consolidated financial statements 9.2. Interests in joint ventures and associates 9.2.1. Important joint ventures and associates 9.2.2. Major financial information of important associates 9.2.3. Financial information summarized of unimportant joint ventures and associate companies 9.2.4. Notes to the significant restrictions on the ability of joint ventures or associate companies to transfer funds to the Company 9.2.5. The excess loss of joint ventures or associate companies 9.2.6. The unrecognized commitment related to investment to joint ventures 9.2.7. Contingent liabilities related to investment to joint ventures or associate companies None 9.3. Significant common operation 9.4. Equity in the Structured Entity Excluded in the Scope of Consolidated Financial Statements 10. Risks related to financial instruments 11. Fair value disclosure 11.1. Closing fair value of assets and liabilities measured at fair value 11.2. Determination basis of the market value of items measured continuously and discontinuously within Level 1 of the fair value hierarchy 11.3. Valuation technique adopted and nature and amount determination of important parameters for continuously and discontinuously within Level 2 of the fair value hierarchy 11.4. Valuation technique adopted and nature and amount determination of important parameters for continuously and discontinuously within Level 3 of the fair value hierarchy 11.5. 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 11.6. 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 11.7. Changes in valuation techniques in the reporting period and reasons for the changes 11.8. Fair value of financial assets and liabilities not measured at fair value None 12. Related parties and related party transactions 12.1. The parent company of the Company 12.2. Subsidiaries of the Company 12.3. Joint ventures and associates of the Company 12.4. Other related party of the Company 12.5. Related transactions 12.5.1. Related transactions of purchase and sales of goods / rendering and receipt of services 12.5.2. Related party leasing 12.5.3. Key management compensation 12.6. Receivables and payables of related parties 12.6.1. Receivables 12.6.2. Payables 12.7. Commitments of the related parties 13. Stock payment 13.1. The overall situation of share-based payments 13.2. Equity-settled share-based payments 13.3. Cash-settled share-based payments 13.4. Modification and termination of share-based payments 14. Commitments and contingencies 14.1. Commitments 14.2. Contingencies 14.2.1. Significant contingencies at the balance sheet date 14.2.2. Explanation shall be given even if there is no significant contingency for the Company to disclose 15. Post balance sheet event 15.1. Profit distribution 15.2. Sales return 15.3. Statement for other post balance sheet events 16. Other important information 16.1. Annuity plan 16.2. Segment information 16.2.1 Recognition basis and accounting policies of reportable segment Except for the business on wine 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 no... 16.3. Other significant events that can affect investors’ decision 17. Notes to the main Items of the financial statements of parent company (all currency unit is CNY, except other statements) 17.1. Accounts receivable 17.1.1. Analysis by categories 17.1.2. Provision and recovery for bad and doubtful debt in the current period 17.1.3. Top five entities with the largest balances of accounts receivable 17.2. Other receivables 17.2.1. Dividend receivable 17.2.1.1. Classification of dividend receivable 17.2.2. Other receivables 17.2.2.1. Other receivables disclosed by nature 17.2.2.2. Provision for bad and doubtful other receivables in the current period 17.2.2.3. Provision and recovery for bad and doubtful other receivables in the current period 17.2.2.4. Top five entities with the largest balances of the other receivables 17.3. Long-term equity investments 17.3.1. Investment in subsidiary 17.3.2. Investment in associate and joint venture 17.4. Operating revenue and cost of sales 17.5. Investment income 18. Supplementary information 18.1. Detailed statement of non-recurring gains and losses in the current period (+ for gain, - for loss) 18.2. Return on equity and earnings per share 18.3. Differences between accounting data under domestic and overseas accounting standards 18.3.1. Differences of net profit and net assets disclosed in financial reports prepared under international and Chinese accounting standards 18.3.2. Differences of net profit and net assets disclosed in financial reports prepared under overseas and Chinese accounting standards 18.3.3. 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...