Luzhou Laojiao Co., Ltd.2019 Annual Report
April 2020
Section I Important Statements, Contents and Definitions
The Board of Directors, Board of Supervisors, directors, supervisors and senior management guaranteethat the information presented in this report is free of any false records, misleading statements ormaterial omissions, and shall individually and together be legally liable for truthfulness, accuracy andcompleteness of its contents.
Mr. Liu Miao, responsible person for the Company, Ms. Xie Hong, responsible person for accountingand Ms. Yan Li, responsible person for the Company’s financial affairs (Accounting Supervisor) havewarranted that the financial statements in this report are true and complete.
Other directors attended the board meeting to deliberate this report by themselves except the followingdirectors.
| 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 |
| Lin Feng | Director | Work | Liu Miao |
Affected by risks, uncertainties and assumptions, the forward-looking statements concerning businessobjectives and future plans made in this report based on the subjective assumptions and judgments ofthe future policies and economic conditions may be significantly different from the actual results. Suchstatements shall not be considered as virtual promises of the Company to investors, and the investorsand relevant persons shall maintain adequate risk awareness and shall understand the differencesbetween plans, forecasts and commitments.
In the annual report, the potential risks in the operation of the Company have been disclosed. Investorsare kindly reminded to pay attention to possible investment risks.
The profit distribution plan approved by the board of directors: based on 1,464,752,476 shares, a cashdividend of CNY 15.9 (tax inclusive) will be distributed for every 10 existing shares held, 0 shares ofbonus shares (tax inclusive), and reserves would not be converted into share capital.
This Report has been prepared in both Chinese and English. Should there be any discrepancies ormisunderstandings between the two versions, the Chinese version shall prevail.
Contents
Section I Important Statements, Contents and Definitions ...... 2
Section II Company Profile and Key Financial Results ...... 5
Section III Business Profile ...... 10
Section IV Performance Discussion and Analysis ...... 13
Section V Significant Events ...... 34
Section VI Changes in Shares and Information about Shareholders ...... 51
Section VII Preference Shares ...... 59
Section VIII Information about Convertible Corporate Bond ...... 60Section IX Profiles of Directors, Supervisors, Senior Management and Employees .61Section X Corporate Governance ...... 74
Section XI Information about Corporate Bond ...... 81
Section XII Financial Report ...... 87
Section XIII Documents Available for Preference ...... 240
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. |
| CICC | Refer to | China International Capital Corporation Limited |
| Luzhou Bank | Refer to | Luzhou Bank Co., Ltd. |
| Sales Company | Refer to | Sales Company of Luzhou Laojiao Co., Ltd. |
| Brewing Company | Refer to | Luzhou Laojiao Brewing Co., Ltd. |
Section II Company Profile and Key Financial Results
1. Corporate information
| Stock abbreviation | Luzhou Laojiao | Stock code | 000568 |
| Stock exchange where the shares of the Company are listed | Shenzhen Stock Exchange | ||
| Name of the Company in Chinese | 泸州老窖股份有限公司 | ||
| Abbr. of the Company name in Chinese | 泸州老窖 | ||
| Name of the Company in English (if any) | Luzhou Laojiao Co., Ltd. | ||
| Abbr. of the Company name in English (if any) | LZLJ | ||
| Legal representative | Liu Miao | ||
| Registered address | Guojiao Square, Luzhou City, Sichuan Province, China | ||
| Postal code | 646000 | ||
| Business address | Luzhou Laojiao Marketing Network Command Center, Nanguang Road, Luzhou City, Sichuan Province, China | ||
| Postal code | 646000 | ||
| Company website | www.lzlj.com | ||
| lzlj@lzlj.com | |||
2. Contact us
| Secretary of the board | Representative for securities affairs | |
| Name | Wang Hongbo | Wang Chuan |
| Address | Luzhou Laojiao Marketing Network Command Center, Nanguang Road, Luzhou City, Sichuan Province, China | |
| Tel. | (0830)2398826 | (0830)2398826 |
| Fax | (0830)2398864 | (0830)2398864 |
| dsb@lzlj.com | dsb@lzlj.com |
3. Information disclosure and place where the annual report is kept
| Newspaper designated by the Company for information disclosure | China Securities Journal, Securities Times, Securities Daily |
| Website designated by the China Securities Regulatory Commission (CSRC) for the publication of the Annual Report | http://www. cninfo.com.cn |
| Place where the annual report of the Company is kept | Board office |
4. Company registration and alteration
| Organization code | 91510500204706718H |
| Changes in main business activities since the Company was listed (if any) | None |
| Changes of controlling shareholders of the Company (if any) | Before September 2009, the controlling shareholder was the SASAC of Luzhou. After the equity transfer in September 2009, the controlling shareholder was changed to Laojiao Group, but the actual controller is still the SASAC of Luzhou. |
5. Other relevant information
Accounting firm engaged by the Company
| Name of the accounting firm | Sichuan Huaxin (Group) CPA Firm |
| Business address of the accounting firm | 28/F., South Jinmaolidu, NO.18 Ximianqiao Street, Chengdu City, Sichuan Province. |
| Name of accountants for writing signature | Tang Fangmo, Feng Yuan |
Sponsors engaged by the Company to continuously perform its supervisory function during the reportingperiod
□ Applicable √ N/A
Financial adviser engaged by the Company to continuously perform its supervisory function during thereporting period.? Applicable √ N/A
6. Key accounting data and financial indicators
Whether the Company performed a retroactive adjustment to or restatement of accounting data.? Yes √ No
| 2019 | 2018 | YoY Change | 2017 | |
| Operating revenues (CNY) | 15,816,934,272.86 | 13,055,465,761.55 | 21.15% | 10,394,867,493.46 |
| Net profits attributable to shareholders of the Company (CNY) | 4,641,988,857.03 | 3,485,643,008.98 | 33.17% | 2,557,944,598.97 |
| Net profits attributable to shareholders of the Company before non-recurring gains and losses (CNY) | 4,600,916,766.09 | 3,483,173,302.46 | 32.09% | 2,539,601,364.06 |
| Net cash flows from operating activities (CNY) | 4,841,619,203.86 | 4,297,916,018.24 | 12.65% | 3,703,734,061.89 |
| Basic earnings per share (CNY/share) | 3.17 | 2.38 | 33.19% | 1.798 |
| Diluted earnings per share (CNY/share) | 3.17 | 2.38 | 33.19% | 1.798 |
| Weighted average ROE | 25.50% | 21.81% | 3.69% | 20.30% |
| At the end of 2019 | At the end of 2018 | YoY Change | At the end of 2017 | |
| Total assets (CNY) | 28,919,969,078.32 | 22,604,929,596.42 | 27.94% | 19,755,761,074.20 |
| Net assets attributable to shareholders of the Company (CNY) | 19,406,845,725.61 | 16,964,671,475.96 | 14.40% | 15,171,448,756.68 |
7. Differences in accounting data under domestic and overseasaccounting standards
7.1. Differences in the net profits and net assets disclosed in the financial reportsprepared under the international and China accounting standards
? Applicable √ N/ANo such differences for the reporting period.
7.2. Differences in the net profits and net assets disclosed in the financial reportsprepared under the overseas and China accounting standards? Applicable √ N/ANo such differences for the reporting period.
8. Key financial results by quarter
Unit: CNY
| Q1 | Q2 | Q3 | Q4 | |
| Operating revenues | 4,169,227,565.29 | 3,843,807,454.43 | 3,463,860,724.49 | 4,340,038,528.65 |
| Net profits attributable to shareholders of the Company | 1,514,560,516.51 | 1,235,220,524.91 | 1,045,505,627.15 | 846,702,188.46 |
| Net profits attributable to shareholders of the Company before non-recurring gains and losses | 1,509,954,666.54 | 1,217,827,861.02 | 1,064,362,543.26 | 808,771,695.27 |
| Net cash flows from operating activities | 561,024,531.75 | 1,145,726,058.59 | 1,638,528,733.43 | 1,496,339,880.09 |
Whether there are any material differences between the financial indicators above or their summationsand those which have been disclosed in quarterly or semi-annual reports? Yes √ No
9. Non-recurring profits and losses
√ Applicable ? N/A
Unit: CNY
| Item | 2019 | 2018 | 2017 | Note |
| Profit or loss from disposal of non-current assets (including the write-off portion of the impairment provision) | 23,211,482.49 | -13,885,991.18 | -4,256,543.78 | See "Section XII Note 5.38, 5.39, 5.40" 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 given at a fixed amount or quantity in accordance with the national uniform standards) | 43,969,302.07 | 22,342,598.30 | 27,087,985.92 | See "Section XII Note 5.34" for details. |
| Net profit and loss of subsidiaries arising from business combination under the common control from the beginning of the period to the date of merger | -269,195.68 | |||
| Other non-operating income and expenditure except above-mentioned items | -11,510,048.21 | -4,902,369.83 | 5,512,918.43 | See "Section XII Note 5.39, 5.40" for details. |
| Less: Corporate income tax | 13,076,295.35 | 316,133.32 | 5,357,931.72 | |
| Minority interests (after tax) | 1,522,350.06 | 768,397.45 | 4,373,998.26 | |
| Total | 41,072,090.94 | 2,469,706.52 | 18,343,234.91 | -- |
Explain the reasons if the Company classifies an item as a non-recurring profit/loss according to thedefinition in the Explanatory Announcement No. 1 on Information Disclosure for Companies OfferingTheir Securities to the Public-Non-Recurring Profits and Losses, or classifies any non-recurringprofit/loss item mentioned in the said explanatory announcement as a recurring profit/loss item.? Applicable √ N/ANo such cases for the reporting period.
Section III Business Profile
1. Business scope in the reporting period
The Company stands on liquor subdivision industry which belongs to liquor, beverage and refined teamanufacturing industry with the specialized liquor product design, production and sales as the mainbusiness model. The main business is the research and development, production and sales of liquorseries such as "National Cellar 1573" and "Luzhou Laojiao", and the main comprehensive performanceindicators rank high in the liquor industry.Currently, China’s liquor market shares are concentrated in brands with superior reputation, high quality,convoluted cultural background, and close relationship with origins. Brands and products are made toappeal more to younger consumers, and are made more stylish, healthier and more international. Inparticular, market competition will become fiercer as China adopts an opening-up policy for the liquorindustry. During the reporting period, closely adhering to the development theme of “firmness,management, scale”, the Company enhanced its foundation, built up growth momentum and maderemarkable efforts to accomplish key tasks. As a result, the Company continued to grow in a healthy way,with its operating results hitting a record high.
2. Significant changes in the main assets
2.1. Significant changes in the main assets
| Main assets | Reasons for any significant change |
| Equity assets | N/A |
| Fixed assets | The closing balance increased by CNY 489,198,482.44 compared to opening balance, indicating an increase of 47.51 percent. It was mainly due to the increase in construction in progress that met the expected conditions for use and was transferred to fixed assets in the current period. |
| Intangible assets | The closing balance increased by CNY 100,266,659.59 compared to opening balance, indicating an increase of 43.22 percent. It was mainly due to the acquisition of land use rights of CNY 84,360,783.58 in the current period. |
| Construction in progress | The closing balance increased by CNY 4,256,903,837.70 compared to opening balance, indicating an increase of 141.87 percent. It was mainly due to the increased input to the technical renovation project of brewing. |
2.2. Main assets overseas
? Applicable √ N/A
3. Analysis of core competitiveness
A. Geographical advantageLuzhou City, where the Company is located, sits in the transitional area between the southern rim of theSichuan Basin and the Yunnan-Guizhou Plateau, which features a warmer and more humid sub-tropicalclimate compared to other areas at the same latitude, with a temperature always above 0℃ throughoutthe year. The unique climate and soil are agreeable to grow grains for liquor brewing. The glutinous redsorghum and soft wheat grown in this area are the primary raw materials for the liquor of the Company.The cellars in which the Company brews its liquor are made of the local loessal clay characteristic ofstrong viscosity, a variety of minerals and excellent moisture retention. In addition, the abundant andquality water in the region, creates a unique geographical advantage for the production of theCompany’s liquor.
B. Advantage of cellars and brewing techniqueAged cellars are the most essential condition for a strong aromatic liquor maker to produce good qualityliquor. The Cellars of National Treasure 1573, founded in 1573, was granted by the State Council as thefirst Cultural Relic of National Importance in the industry under the Protection of the State in December1996. 1,619 cellars of Luzhou Laojiao which have been continuously used for over 100 years, togetherwith its 16 ancient brewing workshops and three natural cellar holes, were all selected as the fourthbatch of Cultural Relics of National Importance under the Protection of the State in 2013. They areunique resources that cannot be replicated. In both 2006 and 2012, Luzhou Laojiao Daqu Cellars weretwice selected into the preliminary list of China for World Heritage. In November 2018, Luzhou LaojiaoCellars and Brewing Workshops were selected into China’s Industrial Heritage List. The time-honoredTraditional Brewing Technique of Luzhou Laojiao is a 23-generation inheritance and a classic brewingtechnique for strong aromatic liquor. This technique was selected as the first batch of National IntangibleCultural Heritage in May 2006. The Cellars of National Treasure 1573 and the Traditional BrewingTechnique of Luzhou Laojiao together provide the most essential basis and assurance for the quality ofthe product series of National Cellar 1573 and Luzhou Laojiao.
C. Brand advantageBrand is a key business resource for liquor producers. The Company’s reputation is greatly built on itssuperiority in brand. National Cellar 1573, which is of a connoisseurship level, is a world-famoushigh-end brand. Luzhou Laojiao Tequ, a classic brand for strong aromatic liquor, was selected in 1952by the first national tasting competition judges as one of the four most famous liquor brands in China. It isthe only strong aromatic liquor brand that won the title of “National Famous Liquor” for five consecutivetimes, as well as the pioneer with regard to the “Tequ” variety of liquor. In recent years, the Companyhas successfully put in place a brand system of “dual brands, three product series, and five major singleproducts” with great clarity and focus. The programs carried out to promote the brand of National Cellar1573 and revive the brand of Luzhou Laojiao have produced remarkable results, with significantimprovement in brand influence. The Company’s liquor is increasingly known by consumers as anational brand of strong aromatic liquor and of authentic flavor.
D. Quality and R&D advantageThe Company is committed to producing high-quality liquor, advocating a healthy lifestyle and “makingthe quality visible”. The first “Organic Sorghum Planting Base” was established and the six-factormanagement system (including organic, quality, safety, environment, measurement and energy) wasbuilt and improved. The eight research platforms are established, including National EngineeringResearch 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 recentyears, 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 DesignCenter, and continuously deepening the cooperation with universities and scientific research institutesincluding the Chinese Academy of Sciences and the Jiangnan University, the Company has undertakendozens of national- or provincial-level projects and has been granted hundreds of invention or utilitymodel patents. And remarkable results have been achieved with respect to improvement of the quality ofbase liquor, as well as production efficiency improvement.
E. Talent advantageThe Company has built up the richness in its talent pool throughout the years. It has 1 inheritor ofnational intangible cultural heritage, 2 masters of Chinese brewing, 2 masters of Chinese liquor, 3masters of Chinese liquor technique, 2 Chinese liquor connoisseurs, 4 senior professor engineers, 6experts who receive special allowances from the State Council, 3 national technicians, 3 academic andtechnologic leaders of Sichuan province, 1 excellent expert with special contribution of Sichuan province,1craftsman of Sichuan province, 1 technological elite of Sichuan province, as well as hundreds of highlyskilled personnel including national liquor judges, senior brewing technicians and brewing technicians.The comprehensive and professional personnel system assures the sound development of theCompany.
Section IV Performance Discussion and Analysis
1. Overview
2019 marked the end of the three-year sprint to the fulfillment of the Company’s development strategy.Centering on the strategic planning and business objectives, the Company’s management andemployees implemented the development theme of “firmness, management, scale” to promote a solidand rapid development. For 2019, operating revenue amounted to CNY 15.817 billion, up 21.15% yearon year; and the net profit attributable to the shareholders of the listed company reached CNY 4.642billion, up 33.17% year on year. As such, the development objectives for the year have been achieved!Over the past year, the Company's main work and performance included:
A. Significant ramp-up of quality production capacity and enhanced quality foundation forfurther growthIn 2019, Luzhou Laojiao Huangyi Brewery Eco-Park (focusing on the brewing technical innovationprogram) was put into production. The liquor produced in the new cellars in the eco-park is of excellentquality due to the application of technological achievements in relation to cellar mud cultivation, cellarsealing technology, etc. The liquor production system led by the Huangyi Brewery Eco-Park will promotefast growth in sales and help achieve a leading market share with better quality and taste. Active effortswere made to build a national traceability system of liquor safety, carry out a pilot program of qualityimprovement targeted at the entire industrial chain, as well as strengthen quality management programssuch as “comprehensive quality improvement” and “research on technology standards for packagingmaterials”. Additionally, the Company has issued several white papers on product quality and safety. Ithas also won a variety of accolades in this respect, including the “Nationwide Advanced Enterprise inQuality”, the “Nationwide Iconic Enterprise in Quality”, the “Workshop of National Masters”, and the“Sichuan Craftsman”.
B. Steady progress in brand value return, with historic and fundamental revival for core productseriesFor the product series of National Cellar 1573, the Company firmly implemented a retail quotamechanism and a price circuit breaker mechanism. Continual optimization in channel inventories,increased rationale in market prices, and the fundamental shift from lower expense driven growth tobrand driven growth were all accomplished. The package of the Tequ series was upgraded, and theproduction of Jiaoling Liquor ramped up. Both the sales volume and prices of 60 Tequ rose, and theLuzhou Laojiao brand revival campaign produced fruitful results. The marketing models of the Touquand Erqu series took shape smoothly, and brand coverage was expanding. As such, the Company istaking solid steps on the path of brand revival and value return.
C. Significant improvement in the management system, with more scientific corporategovernanceThe Company fully fulfilled the requirements of the “management year” by carrying out solidimprovement and innovative optimization in internal control, project management, financial management,asset management, production safety, environmental protection, among others. The reporting periodsaw a significant improvement in the Company’s business planning and budgetary management
capabilities. The business and marketing plans were successfully devised, indicating that the Companywas well positioned to carry out the plans in 2020. Meanwhile, substantial progress was made inenvironmental protection. Key projects such as environment-related risk screening and rectification,waste water treatment plant upgrading, diversion of rain and waste water in all production bases, andrenovation of the cooling water circulation system were smoothly completed, with all the productionemissions complying with the applicable standards.
D. Further progress in team building, with a considerable improvement in the sense of honor, thesense of belonging and the sense of achievement among employeesThe Company further expanded its talent pool through campus and social recruitment during thereporting period. The “Hang” plan, a talent cultivation system, was put in place, the P3-level talent reviewwas concluded, and the “dual channel” career promotion mechanism was implemented in a deepermanner. In addition to the “352” appraisal and motivation model that was promoted in the front line ofsales, training programs including the “Operator Plan”, the “Commander Plan” and “Speed up” werecarried out in a deep manner to fully enhance the practical ability of marketing personnel. Meanwhile, theCompany kept improving employee benefits. It adopts a mechanism of “seven insurance payments,housing funds and annuities” for employees, as well as a well-established occupational healthmanagement system, reaching yet another new height of the Company as an “employees’ paradise” and“talent paradise”.
2. Analysis of main business
2.1. Overview
Same with the contents presented in “1.Overview” of this section.
2.2. Revenues and cost of sales
2.2.1. Breakdown of operating revenues
Unit：CNY
| 2019 | 2018 | YoY Change | |||
| Amount | As a percentage of operating revenues | Amount | As a percentage of operating revenues | ||
| Total | 15,816,934,272.86 | 100% | 13,055,465,761.55 | 100% | 21.15% |
| By business segment | |||||
| Liquor | 15,615,719,102.43 | 98.73% | 12,859,523,825.56 | 98.50% | 21.43% |
| Other | 201,215,170.43 | 1.27% | 195,941,935.99 | 1.50% | 2.69% |
| By product | |||||
| High-grade liquor | 8,595,855,288.20 | 54.35% | 6,377,822,866.84 | 48.85% | 34.78% |
| Mid-grade liquor | 3,748,895,591.48 | 23.70% | 3,674,967,125.89 | 28.15% | 2.01% |
| Low-grade liquor | 3,270,968,222.75 | 20.68% | 2,806,733,832.83 | 21.50% | 16.54% |
| Other | 201,215,170.43 | 1.27% | 195,941,935.99 | 1.50% | 2.69% |
| By geographical segment | |||||
| Domestic | 15,674,636,458.22 | 99.10% | 12,950,439,919.30 | 99.20% | 21.04% |
| Overseas | 142,297,814.64 | 0.90% | 105,025,842.25 | 0.80% | 35.49% |
2.2.2. 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 | ||||||
| Liquor | 15,615,719,102.43 | 2,974,484,362.13 | 80.95% | 21.43% | 3.32% | 3.34% |
| By product | ||||||
| High-grade liquor | 8,595,855,288.20 | 617,861,758.74 | 92.81% | 34.78% | 18.84% | 0.96% |
| Mid-grade liquor | 3,748,895,591.48 | 667,389,589.67 | 82.20% | 2.01% | -10.48% | 2.49% |
| Low-grade liquor | 3,270,968,222.75 | 1,689,233,013.72 | 48.36% | 16.54% | 4.69% | 5.85% |
| By geographical segment | ||||||
| Domestic | 15,674,636,458.22 | 3,046,516,937.67 | 80.56% | 21.04% | 5.29% | 2.90% |
Under the circumstances that the statistical standards for the Company’s main business data adjusted inthe reporting period, the Company’s main business data in the current year is calculated based onadjusted statistical standards at the end of the reporting period
□ Applicable √N/A
2.2.3. Whether revenue from sales of goods is higher than revenue of renderingservices
√ Yes ? No
| By business segment | Item | Unit | 2019 | 2018 | YoY Change |
| Liquor | Sales volume | ton | 142,684.91 | 146,426.14 | -2.56% |
| Output volume | ton | 137,865.2 | 156,750.5 | -12.05% | |
| Stock | ton | 45,350.24 | 50,169.95 | -9.61% |
Reason for any over 30% YoY movements in the data above? Applicable √ N/A
2.2.4. Execution of significant sales contracts in the reporting period
? Applicable √ N/A
2.2.5. Breakdown of cost of sales
By business segment
Unit：CNY
| By business segment | Item | 2019 | 2018 | YoY Change | ||
| Amount | As a percentage of cost of sales | Amount | As a percentage of cost of sales | |||
| Liquor | Raw materials | 2,618,480,096.93 | 85.42% | 2,493,466,778.30 | 84.99% | 5.01% |
| Liquor | Labor costs | 170,437,243.49 | 5.56% | 176,446,424.13 | 6.01% | -3.41% |
| Liquor | Manufacturing overhead | 276,500,707.96 | 9.02% | 263,794,683.61 | 8.99% | 4.82% |
2.2.6. Change in the scope of the consolidated financial statements for the reportingperiod
√ Yes ? No
Luzhou Boda Brewing Co., Ltd. was deconsolidated for it was de-registered.
The following entities were newly consolidated for they were newly incorporated subsidiaries with theCompany’s investment: Guangxi Luzhou Laojiao Imported Liquor Industry Co., Ltd., Chengdu TianfuPanda Whitail Liquor Industry Co., Ltd., Luzhou Whitail Tongdao Uncle Constellation Wine Sales Co.,Ltd., Luzhou Laojiao Whitail Innovative Electronic Commerce Co., Ltd., Luzhou Laojiao SelectedElectronic Commerce Co., Ltd., and Luzhou Laojiao Commercial Development (North America) Co., Ltd.
2.2.7. Major changes in the business, products or services in the reporting period? Applicable √ N/A
2.2.8. Main customers and suppliers
Sales to major customers of the Company
| Total sales from top five customers（CNY） | 10,447,279,425.97 |
| Total sales from top five customers as a percentage of the total sales | 66.05% |
| Total sales from related parties among top five customers as a percentage of the total sales | 0.00% |
Information on top five customers
| No. | Customer | Sales amount (CNY) | As a percentage of the total sales for the year |
| 1 | Customer A | 7,229,818,651.23 | 45.71% |
| 2 | Customer B | 1,601,232,211.38 | 10.12% |
| 3 | Customer C | 941,829,400.97 | 5.95% |
| 4 | Customer D | 454,487,975.98 | 2.87% |
| 5 | Customer E | 219,911,186.41 | 1.39% |
| Total | -- | 10,447,279,425.97 | 66.05% |
Other information on major customers? Applicable √ N/A
Major suppliers of the Company
| Total sales from top five suppliers（CNY） | 1,230,215,105.39 |
| Total sales from top five suppliers as a percentage of the total sales | 38.97% |
| Total sales from related parties among top five suppliers as a percentage of the total purchase | 0.00% |
Information on top five suppliers
| No. | Supplier | Purchases(CNY) | As a percentage of the total purchase for the year |
| 1 | Supplier A | 354,223,472.83 | 11.22% |
| 2 | Supplier B | 279,764,450.95 | 8.86% |
| 3 | Supplier C | 231,425,892.63 | 7.33% |
| 4 | Supplier D | 188,694,909.68 | 5.98% |
| 5 | Supplier E | 176,106,379.30 | 5.58% |
| Total | -- | 1,230,215,105.39 | 38.97% |
Other information on major suppliers? Applicable √ N/A
2.3. Expenses
Unit：CNY
| 2019 | 2018 | YoY Change | Reason for any significant change | |
| Selling and distribution expenses | 4,186,102,153.59 | 3,392,721,432.33 | 23.38% | |
| General and administrative expenses | 828,945,024.92 | 722,448,972.80 | 14.74% | |
| Finance expenses | -205,084,493.69 | -215,066,482.79 | ||
| R&D expenses | 71,643,099.77 | 62,172,210.70 | 15.23% |
2.4. R&D expenses
√ Applicable ? N/A
In 2019, the Company’s research interests included research on breeding and standardized cultivationof sorghum varieties for brewing, research on brewing microorganism fermentation mechanism andapplication, development of new brewed tonic liquor products, research and application of liquor foodsafety and quality improvement technology, research on production techniques of different styles of baseliquor, and research on comprehensive utilization of brewing by-products. The Company passed theinspection of science and technology authorities for 10 provincial and municipal science and technologyprojects, including Research and Application of Microorganism Enhanced Co-culture Technology Basedon Flavor Fingerprint and Integration and Industrial Demonstration of Key Technologies in Intelligent andAutomatic Production of Luzhou-Flavor Liquor, and won three awards for scientific and technologicalresearch results, including one Second Prize of China Alcoholic Drinks Association for Scientific andTechnological Progress and two Outstanding Paper Awards of China Alcoholic Drinks Association. Thepromotion and application of related technological achievements in the Company has helped to enrichits product categories, ensure product quality, enhance liquor yield and high-quality liquor yield, saveenergy, reduce the discharge of brewing waste and minimize labor, laying a technical foundation for theCompany’s positive and scientific development.
Information about R&D input
| 2019 | 2018 | YoY Change | |
| Number of R&D personnel | 454 | 452 | 0.44% |
| R&D personnel as a percentage in total employees | 14.06% | 15.69% | -1.63% |
| R&D input (CNY) | 86,837,791.61 | 85,334,100.70 | 1.76% |
| R&D input as a percentage in operating revenues | 0.55% | 0.65% | -0.10% |
| Capitalized R&D input (CNY) | 0.00 | 0.00 | |
| Capitalized R&D input as a percentage in total R&D input | 0.00% | 0.00% |
Reason for any significant YoY change in the percentage of the R&D input in the operating revenues? Applicable √ N/A
Reason for any sharp variation in the percentage of the capitalized R&D input and rationale? Applicable √ N/A
2.5. Cash flows
Unit：CNY
| Item | 2019 | 2018 | YoY Change |
| Subtotal of cash inflows from operating activities | 19,116,354,312.63 | 15,316,815,981.72 | 24.81% |
| Subtotal of cash outflows from operating activities | 14,274,735,108.77 | 11,018,899,963.48 | 29.55% |
| Net cash flows from operating activities | 4,841,619,203.86 | 4,297,916,018.24 | 12.65% |
| Subtotal of cash inflows from investing activities | 62,529,093.56 | 19,702,964.73 | 217.36% |
| Subtotal of cash outflows from investing activities | 4,613,226,214.50 | 1,485,118,936.65 | 210.63% |
| Net cash flows from investing activities | -4,550,697,120.94 | -1,465,415,971.92 | |
| Subtotal of cash inflows from financing activities | 2,493,834,692.00 | 4,482,764.00 | 55,531.63% |
| Subtotal of cash outflows from financing activities | 2,400,399,307.80 | 1,921,149,867.51 | 24.95% |
| Net cash flows from financing activities | 93,435,384.20 | -1,916,667,103.51 | |
| Net increase in cash and cash equivalents | 386,279,899.10 | 916,564,472.77 | -57.86% |
Explanation of why the data above varied significantly
√ Applicable ? N/A
Net cash flows from investing activities decreased by CNY 3,085,281,149.02 year-on-year, mainly due
to the increase in cash paid for investments in the technical renovation project of brewing during thereporting period.Net cash flows from financing activities increased by CNY 2,010,102,487.71 year-on-year, mainly due tothe issue of corporate bond by the Company.
Explanation of main reasons leading to the material difference between net cash flows from operatingactivities during the reporting period and net profit for the year? Applicable √ N/A
3. Analysis of non-core business
? Applicable √ N/A
4. Assets and liabilities
4.1 Significant change of asset items
Adjustments to the financial statements at the beginning of the first execution year of any new standardsgoverning financial instruments, revenue or leases since 2019
√ Applicable □ N/A
Unit：CNY
| At the end of 2019 | At the end of 2018 | Change in percentage | Explanation about any material change | |||
| Amount | As a percentage of total assets | Amount | As a percentage of total assets | |||
| Cash and cash equivalents | 9,753,666,526.78 | 33.73% | 9,367,386,627.68 | 41.34% | -7.61% | |
| Accounts receivable | 18,293,914.23 | 0.06% | 10,333,728.87 | 0.05% | 0.01% | |
| Inventories | 3,641,235,092.33 | 12.59% | 3,230,415,749.95 | 14.26% | -1.67% | |
| Long-term equity investments | 2,230,721,725.72 | 7.71% | 2,092,554,736.09 | 9.24% | -1.53% | |
| Fixed assets | 1,518,865,397.91 | 5.25% | 1,029,666,915.47 | 4.54% | 0.71% | |
| Construction in progress | 7,257,393,087.56 | 25.09% | 3,000,489,249.86 | 13.24% | 11.85% | Mainly due to the increase of input in the technical renovation project of brewing industry. |
4.2 Assets and liabilities measured at fair value
√ Applicable □ N/A
Unit：CNY
| Item | Opening balance | Changes in fair value through profit or loss | Changes in cumulative fair value recorded into equity | Provision for impairment | Amount of purchase | Amount of sale | Other changes | Closing balance |
| Financial asset | ||||||||
| 4. Investments in other equity instruments | 327,036,804.62 | 25,358,451.16 | 247,832,416.78 | 352,395,255.78 | ||||
| Total | 327,036,804.62 | 25,358,451.16 | 247,832,416.78 | 352,395,255.78 | ||||
| Financial liability | 0.00 | 0.00 | 0.00 | 0.00 | ||||
Information about other changesWhether measurement attribution of main assets changes significantly in this year?Yes √ No
4.3 Restricted asset rights as of the end of this reporting period
| Item | Closing Balance | Reason |
| Other cash and cash equivalents | 1,400,000.00 | According to regulations of Tourism Bureau, the travel service deposit was deposited in a designated bank |
| Total | 1,400,000.00 |
5. Investment
5.1. Total investment
√ Applicable ? N/A
| Investment made in the reporting period (CNY) | Investment made in the prior year (CNY) | YoY change |
| 5,033,329,478.98 | 1,527,400,090.76 | 229.54% |
5.2. Significant equity investment made in the reporting period? Applicable √ N/A
5.3. 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) |
| Technical renovation project of brewing | Self-built | Yes | Liquor | 4,000,207,095.68 | 6,362,690,798.07 | Fund-raising+self-finance | 85.00% | 0.00 | 0.00 | N/A | 28 April 2016 | Announcement of About subsidiary technical renovation project of brewing No：2016-12（http://www.cninfo.com.cn/） |
| Total | -- | -- | -- | 4,000,207,095.68 | 6,362,690,798.07 | -- | -- | 0.00 | 0.00 | -- | -- | -- |
5.4. Financial assets investment
5.4.1. Securities investment
√ Applicable □ N/A
Unit: CNY
| Category of | Stock | Abbreviation of | Initial investme | Accounting | Beginning book | Changes in fair | Changes in the | Amount of | Amount | Profit and loss | Closing book | Accounti | Capital |
| securities | code | securities | nt cost | measurement model | balance | value recognized in profit or loss | cumulative fair value recorded into equity | purchase | of sale | during the reporting period | balance | ng item | source |
| Domestic and foreign stock | 601211 | GTJA | 12,719,156.76 | Fair value measurement | 180,423,594.04 | 37,333,080.48 | 205,037,517.76 | 3,238,674.18 | 217,756,674.52 | Investments in other equity instruments | Owned fund | ||
| Domestic and foreign stock | 002246 | SNC | 1,030,000.00 | Fair value measurement | 10,335,098.55 | 1,422,835.05 | 10,727,933.60 | 85,995.53 | 11,757,933.60 | Investments in other equity instruments | Owned fund | ||
| Domestic and foreign stock | 01983 | LZBANK | 51,120,000.00 | Fair value measurement | 102,337,356.16 | -13,260,992.96 | 37,956,363.20 | 5,424,000.00 | 89,076,363.20 | Investments in other equity instruments | Owned fund | ||
| Total | 64,869,156.76 | -- | 293,096,048.75 | 25,494,922.57 | 253,721,814.56 | 0.00 | 0.00 | 8,748,669.71 | 318,590,971.32 | -- | -- | ||
5.4.2. Derivative investment
□Applicable √ N/A
No such cases in the reporting period
5.5. Use of fund-raising
√ Applicable ? N/A
5.5.1. General use of fund-raising
√ Applicable □ N/A
Unit：CNY 10,000
| Year | Method | Total amount of fund-raising | Total amount of used fund-raising in the reporting period | Total amount of accumulated used fund-raising | Total amount of re-purposed fund-raising in the reporting period | Total amount of accumulated re-purposed fund-raising | Accumulated re-purposed fund-raising as a percentage in total fund-raising | Total amount of unused fund-raising | Purpose and direction of unused fund-raising | Amount of fund-raising idle for more than two years |
| 2017 | Non-public offering | 295,273.5 | 120,199.79 | 258,227.26 | 0 | 0 | 0.00% | 50,015.16 | Deposited in special account of fund-raising and purchase of structured deposit products | 0 |
| 2019 | Public offering of corporate bond | 249,000 | 200,381.5 | 200,381.5 | 0 | 0 | 0.00% | 50,001.54 | Deposited in special account of fund-raising | 0 |
| Total | -- | 544,273.5 | 320,581.29 | 458,608.76 | 0 | 0 | 0.00% | 100,016.7 | -- | 0 |
| Notes for general use of fund-raising | ||||||||||
| The total amount of unused fund-raising includes funds interests. | ||||||||||
5.5.2. Fund-raising for committed projects
√ Applicable □ N/A
Unit：CNY 10,000
| Committed investment projects and direction of over-raised funds | Whether the project has been | Total amount of fund-raising for | Adjusted Investment total amount (1) | Investment amount in the reporting | Accumulated input by the end of the | Investment progress by the end of | Date of the projects reach the | Realized benefits during the reporting | Whether the expected benefits | Whether the feasibility of the project |
| changed (including partial change) | committed investment | period | reporting period (2) | reporting period (3)＝(2)/(1) | working condition for their intended use | period | have been achieved | has changed significantly | ||
| Committed investment projects | ||||||||||
| Technical Renovation Project of Brewing Phrase I | No | 295,273.5 | 295,273.5 | 120,199.79 | 258,227.26 | 87.45% | 31 December 2020 | 0 | N/A | No |
| Technical Renovation Project of Brewing Phrase II | No | 398,400.00 | 398,400.00 | 200,381.5 | 200,381.5 | 50.30% | 31 December 2020 | 0 | N/A | No |
| Project of Intelligent Upgrading and Building of the Information Management System | No | 0 | 0 | 30 June 2022 | 0 | N/A | No | |||
| Project of Acquiring Sealing Equipment for the Cellar of Huangyi Brewing Base | No | 0 | 0 | 31 December 2020 | 0 | N/A | No | |||
| Project of Acquiring Accessory Equipment for Leaven Making for Huangyi Brewing Base | No | 0 | 0 | 31 December 2020 | 0 | N/A | No | |||
| Subtotal of committed investment projects | -- | 693,673.5 | 693,673.5 | 320,581.29 | 458,608.76 | -- | -- | -- | -- | |
| Direction of over-raised funds | ||||||||||
| None | ||||||||||
| Total | -- | 693,673.51 | 693,673.5 | 320,581.29 | 458,608.76 | -- | -- | 0 | -- | -- |
| Situation and reason for not reaching plan progress or expected benefits (by specific items) | None | |||||||||
| Significant changes | None | |||||||||
| of project feasibility | |
| Amount, propose and progress of over-raised funds | N/A |
| Change of implementation site of investment projects | N/A |
| Adjustment of the implementation mode of raised funds investment projects | N/A |
| Situation of prior-period investment and replacement of the projects | Applicable |
| Fundraising through non-public offering: On 30 November 2017, the Company held the 24th meeting of the eighth board of directors and the 13th meeting of the eighth supervisory committee. At the meetings, the Proposal on Using Raised Funds to Replace Up-front Costs was considered and approved, which agreed to the Company’s replacement of the up-front self-raised fund of CNY 581,774,996.30 using the fund-raising. Non-executive directors of the Company issued independent opinions of consent. Sichuan Huaxin (Group) CPA Firm (Limited Liability Partnership) verified the matter on up-front investment in the fundraising project with self-raised fund and produced the Special Report (CHXZ (2017) No. 534) on 14 November 2017. Fundraising through public offering of corporate bond: On 14 May 2019, the Company held the 1st special meeting of shareholders in 2019, which considered and approved the Proposal on Requesting the Company’s General Meeting 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 pay up-front costs using other funds (including self-owned funds, bank project loans, etc.) according to the actual situation, and replace fund investment other than capital fund when the raised funds are in place. As of 31 December 2019, the Company had replaced an up-front self-raised fund of CNY 425,897,677.24 using the fund-raising. | |
| Idle fund-raising used for temporary supplementary liquidity | N/A |
| Amount and reason for surplus of fund-raising | N/A |
| Propose and direction of unused | Of the idle fund-raising through non-public offering, CNY 500 million is under the procedures for structured deposits with Chengdu Xiti North Road Sub-branch of China Merchants Bank Co., Ltd. for the purpose of cash management; the remaining part is deposited in the bank accounts with |
| fund-raising | Chengdu Branch of China Minsheng Banking Co., Ltd. and Chengdu Xiti North Road Sub-branch of China Merchants Bank Co., Ltd. specifically for fundraising. Idle fund-raising through public offering of corporate bond are deposited in the bank accounts with CGB Chengdu Branch, BOC Luzhou Branch and Fucheng Avenue Sub-branch of Chengdu Branch of China Merchants Bank specifically for fundraising. |
| Problems and other situation when fund-raising is used and disclosed | None |
Note: 1. The total amount of investment committed through fundraising is CNY 6,936,735,000, includinga fund of CNY 2,952,735,000 actually raised through non-public offering and a fund of CNY3,984,000,000 actually raised through public offering of corporate bond respectively in August 2019 andMarch 2020. The total amount of investment committed and total amount of investment after adjustmenthave not been stated separately for Technical Renovation Project of Brewing Phase II, Project ofIntelligent Upgrading and Building of the Information Management System, Project of Acquiring SealingEquipment for the Cellar of Huangyi Brewing Base and Project of Acquiring Accessory Equipment forLeaven Making for Huangyi Brewing Base. This is because that there are uncertainties in the approvaland issue time for public offering of corporate bond in the review of issue plans. To ensure smoothprogress of the projects and guarantee the interests of the Company’s shareholders, the investmentsequence and specific amounts of corresponding fund-raising should be determined by Chairman asauthorized by the general meeting or some other person as authorized by the board of directors in thescope of the four projects according to the actual needs, provided that the capital fund for each project isno less than 20% of the total investment.
5.5.3. Change the use for fund-raising
? Applicable √ N/ANo such cases in the reporting period
6. Sale of major assets and equity interests
6.1. Sale of major assets
? Applicable √ N/ANo such cases in the reporting period.
6.2. Sale of major equity interests
? Applicable √ N/A
7. 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 |
| Sales Company of Luzhou Laojiao Co., Ltd. | Subsidiary | Luzhou Laojiao series unified package liquor sales | 100,000,000.00 | 5,104,555,531.72 | 1,650,609,366.02 | 15,093,167,596.91 | 5,356,088,801.02 | 4,027,236,019.99 |
Acquisition and disposal of subsidiaries during the reporting period
□ Applicable √N/A
Notes for major holding companies and joint stock companiesThe operating profit and net profit of Sales Company increased 44.65% and 45.35% year on year,mainly due to increased sale revenue during the reporting period.
8. Structured entities controlled by the Company
? Applicable √ N/A
9. Outlook for the future development of the Company
9.1 Industry pattern and trends
According to the data of National Bureau of Statistics, the number of liquor companies above the scaledesignated by the Bureau was 1,176 during January-December 2019, down by 269 from the previousyear; total production of brewed liquor of those 1,176 companies was 7.8595 million kl, down by 0.76%year-on-year; total sales revenue reached CNY 561.782 billion, up by 8.24% year-on-year; total profit ofCNY 140.409 billion was realized, up by 14.54% year-on-year.
Under the joint influence of the macro-economic environment, population aging, consumption upgradingand other related factors, the liquor industry has declined year by year since 2016, with faster withdrawalof low-end capacity. China’s liquor market shares are concentrated in brands with superior reputation,high quality, convoluted cultural background, and close relationship with origins. Brands and products
are made to appeal more to younger consumers, and are made more stylish, healthier and moreinternational. The rising prices of mid- and high-end liquors have reduced the impact of declinedproduction on total sales. Sales growth of liquor companies comes more from the competition in existingmarkets and market competition of the liquor industry will be more intense in the future.
9.2 Company’s development strategy
9.2.1. Development opportunities in the future
(1) In the future, the international political and economic environments will usher in deeper reforms andadjustments. China’s economy and enterprises will experience the leap from quantitative to qualitativechanges in the global economic and trade systems. As a result, China will achieve its milestone target ofbuilding a moderately prosperous society in all aspects as planned. Luzhou Laojiao will face a diversityof historical opportunities for high-quality development, including the expansion of opening-up on allfronts, rising of city clusters, faster rural revitalization and upgrading of middle-class consumption.
(2) Over recent years of efforts, development and accumulation of experience and power, the Companyhas gained solid strength in capacity, a positive development structure, prominent advantages in scaleand a robust momentum for growth, building a sound foundation for its faster development andrevitalization. As a series of prospective key projects are being put into production, the Company willusher in opportunities for expansion of advantages, market shares and growth drivers.
9.2.2. Possible challenges and risks in the future
(1) As the rising international trade protectionism in recent years causes impact to export, themacro-economic environment remains intense. In particular after 2020, with great fluctuations in theinternational financial market and bulk commodity market, the world economy faces big chances ofrecession, injecting more uncertainties to domestic macro economy, which will in turn affect liquorconsumption.
(2) The COVID-19 outbreak since the end of 2019 has brought huge impact to global economy andchanged consumption patterns and behaviors during the epidemic period. It has greatly impacted on theconsumption environment and product sales of the liquor industry. Since the fight against COVID-19kicked off, the Company has attached great importance to the epidemic prevention and control,prioritized staff safety and health, and focused on the anti-epidemic efforts. It has quickly set up aCOVID-19 prevention and control leading group and built a comprehensive prevention and controlsystem that comprises an “all-level” prevention and control organ, an “all-day” prevention and controlreport mechanism, an “all-round” prevention and control range, and an “all-coverage” prevention andcontrol identification. It has taken a number of measures, including communication and education on theepidemic prevention and control, survey of personnel & follow-ups, testing and monitoring of staff healthconditions, preparations for work and production recovery and guaranteed inventory of supplies.Through the responsive and scientific approaches, the Company aims to carry forward the businessoperations while all departments are dutifully performing the epidemic prevention & control, on the basisof no infected and no suspected cases. As of now, the epidemic impact continues, restricting furtherdevelopment on domestic liquor consumption. The recovery of the liquor industry is not known yet. TheCompany will continue to keep track of the pandemic, assess and proactively deal with the impact on its
operation conditions and operating results.
9.2.3. The Company's "13th five-year" development strategyAs of the Company's "13th five-year" period, the overall plan is "12345" strategy, namely: the goal ofclearly return to China's liquor industry "top three"; adhering to the two principles of "profession andstrength" and "harmonious coexistence"; thoroughly carrying out the "three strengthening" includingstrengthening sales, strengthening management and strengthening talent team construction; Graspingthe four key development steps of stability period, adjustment period, sprint period and achievementperiod between 2015 and 2020; Achieving the leading in China's liquor industry market, corporategovernance, brand culture, quality and technology, and talent resources.
9.3 Completion of the business plan in 2019
In 2019, the Company achieved the operating revenue of CNY 15.817 billion, up by 21.15%year-on-year. The net profit attributable to shareholders of the listed company reached CNY 4.642 billion,up by 33.17% year-on-year. The Company has successfully completed its business target of ayear-on-year growth in operating revenue by 15%-25% as set by the board of directors at the beginningof 2019.
9.4 Business plan in 2020
2020 marks the year for the Company to achieve the “13
thFive-year” plan. The Company will closelycenter on the development theme of “Firm Determination, Strong Confidence, Strict Management,Targeted Audit, Talent Development and All-out Efforts”, seize development opportunities and strive tomaintain the momentum of positive development. Due to the great uncertainties brought by theCOVID-19, the board deems that it will be difficult for the Company to quantify accurate business targets.Despite that, the Company will keep close track of the pandemic, make proactive steps to deal with thechanges, maintain the positive momentum and industrial reputation, and take efforts to narrow the gapbetween industry leaders.
The main measures are as follows:
A. Enhancing efforts in brand promotion, increasing brand visibility and accelerating brandrevitalizationThe Company will implement the double brand strategy and the major single product strategy at anin-depth level, strengthen brand management, regulate the use of bar codes and continue to shape thebrand system of “double brands, three categories and five single products”. It will intensify, deepen andrefine cooperation with mainstream media, carry out targeted promotion that directly reaches consumers,drive brand resources to focus on the first tier of market and on consumers, and continue to promote thepositive growth of “National Cellar 1573”. On the basis of strategic return, the old-time Tequ will firmlydress up to achieve the return of consumers, brand image and the status of renowned liquor. ForJiaoling Baijiu, the Company will focus on key markets and continuously reinforce its brand supportstrength. For Touqu, the Company will continue to increase profit margins and enhance the power ofchannel recommendation. The Company will extend coverage of the “See-through Bottle” strategy on allfronts and continue to raise the brand image. It will persist in developing and expanding overseasconsumption circles and “let the world taste China” by high-quality products and services.
B. Strengthening efforts in quality, building a solid quality foundation and maintaining a leadingposition for qualityWith a goal of full-scale production of Luzhou Laojiao Huangyi Brewing Eco-park in 2021, the Companywill speed up the project construction progress and ensure a leading construction speed in the industry.It will persist in the parallel application of “process” and “innovation” by continuing to use traditionalbrewing techniques in old cellars, together with boldly automatic equipment and the latest technologiesin new cellars. It will advance the project of technical improvements in the intelligent packaging center,accelerate the construction of intelligent package production lines & automatic dimensional warehouses,expedite the construction of information systems for warehouse management & purchase management,and improve the overall synergistic effect & execution of supply chains. It will speed up the research andreserve of innovative, cutting-edge and game-changing quality monitoring technologies to secure itsindustrial leading position for its quality technology. It will continue to explore the quality regulation &tracing system under the automatic and intelligent production model, improve the quality standards ofpre-mixed liquor, fruit wine, cocktails & other innovative products, and make consistent high quality ofLuzhou Laojiao.
C. Intensifying efforts in management, delivering innovation in management and promoting theexercise of managementThe Company will accelerate innovation in the structural design, authorization management, businessprocess and communication mechanisms of brewing, production and product guarantee systems, andestablish a management system matching mechanization and intelligence. It will vigorously performidentification of potential safety and environmental risks and tangibly fulfill its responsibilities in safetyand environmental protection.Centering around the theme of “strict management”, the Company will strictly carry out inspection ofpolicy and process execution, continue to strengthen business risk control, take tough measures toprevent financial, legal, internal control and public opinion risks. It will implement the “key audit” theme,conduct post audit, verification and calculation of fund and human resources after utilization and ensureyear-on-year improvement in human resource efficiency. It will continuously beef up fee audit of salesand management systems, further integrate the “eye in the sky” project and market regulation forces,and perform “site audit” and “process audit” for front lines of sales.
D. Making unswerving efforts to drive talent development, improving the talent system andunleashing talent efficacyBased on consolidating and enhancing the quality and quantity of existing talents, the Company willcontinue to rapidly increase the number of pioneering, capital operation and top design talents and builda human resource system covering various types of talents. It will continue the recruitment of freshgraduates and experienced professionals, and reasonably introduce talents to different brands ofLuzhou Laojiao. It will further implement the “double channel” mechanism, build a talent developmentsystem under the targeted training program, and extend specialized training to more trainees. It willstrictly implement the principle of “no promotion for five types of employees” for the promotion of salespersonnel, create a three-tier talent pool for the sales system, and conduct alternate training for regionalmanagers to fully improve the abilities, competitiveness and execution of marketing personnel. It will
further implement the “352” incentive model, continuously reinforce appraisal on per capita production,and develop iron fighters for the sales of Luzhou Laojiao who are able to stand market test, addressindustrial pressure and fight tough fights.
E. Initiating efforts in innovation and sticking to innovation-driven growth with continuousinnovation and achievementsThe Company will speed up the formulation of the “14
thFive-year” research plan, give full play to theroles of such platforms as National Solid-state Fermentation Center, and continue to improve theconversion rate of scientific research results. It will create new product sequencing methods, make plansfor tonic liquor, pre-mixed liquor and fruit wine and achieve growth amid stable sales. It will develop newbespoke liquor services and enhance the level of such services to meet individualized demands ofcustomers. It will design new experience-based marketing approaches to enhance consumers’ senseand participation and obtainment in “Fine Liquor DIY” and raise its visibility and reputation amongconsumers. It will continue to build its e-commerce network and create and operate internet products. Itwill exercise strict management of its franchise store system, resolutely control expenses, logistics andprices, and promote healthy development of franchise stores. It will conscientiously run brand imagestores, make itself a model for price and image and enhance its visibility, accessibility and reputationamong more consumers.
F. Promoting efforts in culture shaping, building a cultural high ground and driving culturalempowermentThe Company will continue to cultivate the historical and cultural resources of Luzhou Laojiao,commence the construction of Luzhou Laojiao National Cellar Culture Park on all fronts, focus onbuilding a “Pilgrim’s Destination of Chinese Liquor” with international influence and visibility, and furtherpromote the integrated development of liquor with tourism, culture and other industries. It will planmuseum construction on a scientific basis, continue to strengthen the management of existing museums,and boldly adopt modern technologies, such as 5G, VR and holographic projection to give an account ofthe historical and cultural stories of Luzhou Laojiao to consumers nationwide. It will continue to developits cultural IPs, including “International Festival of Poetry & Liquor” and “Storage Ceremony”, deepenscooperation with China National Opera & Dance Drama Center and masters of culture and art, andfurther enhance the fashion and influence of the brand culture of Luzhou Laojiao.
10. Visits paid to the Company for purposes of research, communication,interview, etc.
10.1 In the reporting period
√ Applicable ? N/A
| Date of visit | Way of visit | Type of visitor | Index to main inquiry information |
| 17 March 2019 | Field survey | Institution | Industry Trends and Company |
| Performance (http://www.cninfo.com.cn/) | ||||
| 22 March 2019 | Field survey | Institution | Company Performance (http://www.cninfo.com.cn/) | |
| 14 May 2019 | Field survey | Institution | Company Performance (http://www.cninfo.com.cn/) | |
| 30 May 2019 | Field survey | Institution | Industry Trends and Company Performance (http://www.cninfo.com.cn/) | |
| 27 June 2019 | Field survey | Institution | Industry Trends and Company Performance (http://www.cninfo.com.cn/) | |
| 11 September 2019 | Field survey | Institution | Industry Trends, Company Performance and Plan (http://www.cninfo.com.cn/) | |
| 6 November 2019 | Field survey | Institution | Company Performance (http://www.cninfo.com.cn/) | |
| Number of reception | 7 | |||
| Number of reception of institutions | 352 | |||
| Number of reception of individuals | 2 | |||
| Number of reception of others | 5 | |||
| Whether to disclose or divulge material information that has not been made public | NO | |||
Section V Significant Events
1. Profit distribution and converting capital reserves into share capitalfor common shareholders
Formulation, execution or adjustments of profit distribution policy, especially cash dividend policy, forcommon shareholders in the reporting period.
√ Applicable ? N/A
According to the plan for profit distribution for 2018 was deliberated and approved by 2018 annualshareholders' meeting. Based on its total of 1,464,752,476 shares, the Company distributed a cashdividend of CNY 15.50 (tax inclusive) per 10 shares to all shareholders. The distribution plan wasimplemented on 22 August 2019.
| A special statement of the policy of cash dividends | |
| Whether it meets the requirements of the articles of corporation or the resolution of shareholders' meeting: | Yes |
| Whether the standard and proportion of dividends are clear: | Yes |
| Whether the relevant decision-making process and systems are complete: | Yes |
| Whether non-executive directors perform their duties and play their due role: | Yes |
| Whether the minority shareholders have the opportunity to fully express their opinions and appeals and whether their legitimate rights and interests have been adequately protected: | Yes |
| Whether the conditions and procedures are compliant and transparent and whether the cash dividend policy is adjusted or changed: | The Company's cash dividend policy has not been adjusted or changed in the reporting period |
Plans (or preliminary plans) for profit distribution and converting capital reserves into share capital forcommon shareholders for the recent three years (including the reporting period) are as following:
Preliminary plan for profit distribution for 2019: Based on its total shares, the Company is to distribute acash dividend of CNY 15.90 (tax inclusive) per 10 shares to all shareholders.
Preliminary plan for profit distribution for 2018: Based on its total shares, the Company distributed a cashdividend of CNY 15.50 (tax inclusive) per 10 shares to all shareholders.
Plan for profit distribution for 2017: Based on its total shares, the Company distributed a cash dividend ofCNY 12.50 (tax inclusive) per 10 shares to all shareholders.
Cash dividend distribution over the recent three years (including the reporting period)
Unit: CNY
| Year | Cash dividends (tax included) | Net profit attributable to common shareholders in the consolidated statement in the year | Ratio to net profit attributable to common shareholders in the consolidated statement in the year | Cash dividends in other forms | Ratio of cash dividends in other forms | Total cash dividends (including other forms) | Ratio of cash dividends (including other forms) |
| 2019 | 2,328,956,436.84 | 4,641,988,857.03 | 50.17% | 0.00 | 0.00% | 2,328,956,436.84 | 50.17% |
| 2018 | 2,270,366,337.80 | 3,485,643,008.98 | 65.13% | 0.00 | 0.00% | 2,270,366,337.80 | 65.13% |
| 2017 | 1,830,940,595.00 | 2,557,944,598.97 | 71.58% | 0.00 | 0.00% | 1,830,940,595.00 | 71.58% |
The Company made a profit in the reporting period and the profit distributed to common shareholders ofthe Company was positive, but it did not put forward a preliminary plan for cash dividend distribution tocommon shareholders.? Applicable √ N/A
2. Preliminary plan for profit distribution and converting capital reservesinto share capital for the reporting period
√ Applicable ? N/A
| Bonus shares for every 10 shares (share) | 0 |
| Dividends for every 10 shares (CNY) (tax included) | 15.9 |
| Total shares as the basis for the preliminary plan for profit distribution (share) | 1,464,752,476 |
| Total cash dividends (CNY) (tax included) | 2,328,956,436.84 |
| Cash dividends in other forms (e.g. repurchase share) | 0.00 |
| Total cash dividends (CNY) (including other forms) | 2,328,956,436.84 |
| Distributable profit (CNY) | 12,599,746,579.91 |
| Percentage of cash dividends in the total | 100% |
| distributed profit (including other forms) | |
| Information of the cash dividends | |
| The development stage of the Company is mature and the Company has major fund expenditure arrangement. When the profit distribution is carried out, the proportion of cash dividends in this profit distribution should at least reach 40%. | |
| Details of preliminary plan for profit distribution and converting capital reserves into share capital | |
| After taking minority shareholders’ advice, the board of directors plans to distribute a cash dividend of CNY 15.90 (tax inclusive) per 10 shares to all shareholders based on its total of 1,464,752,476 shares, according to the Company's actual conditions. The remaining undistributed profit shall be carried forward for future distribution. | |
3. Performance of undertakings
3.1. Undertakings of the Company's actual controller, shareholders, related partiesand acquirer, as well as the Company and other commitment makers fulfilled in thereporting period or ongoing by the end of this reporting period
√ Applicable ? N/A
| Undertaking reasons | Undertaking giver | Type of undertakings | Details of undertakings | Undertaking date | Term | Particulars on the performance |
| Stock reform undertaking | ||||||
| Undertaking made in the report of acquisition or change of interest | ||||||
| Undertaking made in the reorganization of assets | ||||||
| Undertakings given in time of IPO or refinancing | Luzhou Liquor Industry Investment Co., Ltd. | Restricted shares | For the shares of Luzhou Laojiao by non-public offering purchased, I/The unit undertakes that the shares will be not transferred within 36 months from new shares offering, including but | 14 September 2017 | 36 months | In progress |
| not limited to public transfer and negotiating transfer. If laws and regulations have other rules on restricted period, it follows the rules. | ||||||
| Equity incentive commitment | ||||||
| Other undertakings to non-controlling shareholders | ||||||
| Whether the undertaking is fulfilled on time | Yes | |||||
| Specific reasons for failing to fulfill any undertakings and plan for the next step | None | |||||
3.2. Where any earnings forecast was made for any of the Company's assets orprojects and the reporting period is still within the forecast period, the Companyshall explain whether the performance of the asset or project reaches the earningsforecast and reasons? Applicable √ N/A
4. Occupation of the Company's fund by the controlling shareholder orits related parties for non-operating purposes
? Applicable √ N/ANo such cases in the reporting period.
5. Explanation of the board of directors, the supervisory committee andnon-executive directors (If Any) regarding the "Non-standard auditopinion" for the reporting period
? Applicable √ N/A
6. Reason for changes in accounting policies, accounting estimates andaccounting methods compared to the financial report for the prior year
√ Applicable □ N/A
1. The Company held the 7
thmeeting of the ninth board of directors on 25 April 2019, reviewed andapproved the Proposal on Execution of Newly Revised Accounting Standards for Business Enterprisesin 2019 and decided to implement four new standards governing financial instruments revised by theMinistry of Finance in 2017 since 1 January 2019 as required by the Ministry of Finance includingAccounting Standards for Business Enterprises No.22-Recognition and Measurement of FinancialInstruments, Accounting Standards for Business Enterprises No.23-Transfer of Financial Assets,Accounting Standards for Business Enterprises No.24-Hedge Accounting and Accounting Standards forBusiness Enterprises No.37-Presentation of Financial Instruments. The influence of implementing thenew standards governing financial instruments on financial statements was shown in the Note 3-44.Changes in significant accounting policies and accounting estimates.
2. The Company held the 9
thmeeting of the ninth board of directors on 27 August 2019, reviewed andapproved the Proposal on Changes in Accounting Policies and decided to implement new regulations asrequired by Notice on Revising and Issuing 2019 Formats of Financial Statements for GeneralEnterprises (CK[2019]No.6) issued by the Ministry of Finance since the Interim Report of 2019.Information about adjustment of financial statements was shown in the Note 3-44. Changes in significantaccounting policies and accounting estimates.
7. Reason for retrospective restatement of major accounting errorsduring the reporting period? Applicable √ N/ANo such cases in the reporting period.
8. Reason for changes in scope of the consolidated financial statementscompared to the financial report for the prior year
√ Applicable ? N/A
Newly incorporated subsidiaries in this period
| Name | Reason for change |
| Guangxi Luzhou Laojiao Imported Liquor Industry Co., Ltd. | Establishment |
| Luzhou Laojiao Whitail Innovative Electronic Commerce Co., Ltd. | Establishment |
| Luzhou Laojiao Selected Electronic Commerce Co., | Establishment |
| Ltd. | |
| Chengdu Tianfu Panda Whitail Liquor Industry Co., Ltd. | Establishment |
| Luzhou Whitail Tongdao Uncle Constellation Wine Sales Co., Ltd. | Establishment |
| Luzhou Laojiao Commercial Development (North America) Co., Ltd. | Establishment |
Liquidation and cancellation for subsidiaries in this period
| Name | Reason for change |
| Luzhou Boda Brewing Co., Ltd. | Liquidation and cancellation |
9. Engagement and disengagement of CPAs firm
CPAs firm at present
| Name of the domestic CPAs firm | Sichuan Huaxin (Group) CPA Firm |
| The Company’s payment for the domestic CPAs firm (CNY’0,000) | 90 |
| Consecutive years of the audit service provided by the domestic CPAs firm | 21 |
| Names of the certified public accountants from the domestic CPAs firm | Tang Fangmo, Feng Yuan |
| Consecutive years of the audit service provided by the certified public accountants | Tang Fangmo 1 year, Feng Yuan 2 years |
Whether the CPAs firm was changed in the current period? Yes √ No
Engagement of any CPAs firm for internal control audit, financial advisor or sponsor
√ Applicable ? N/A
The Company appointed Sichuan Huaxin (Group) CPA Firm as the internal control auditor for this year.The remuneration of audit in total paid by the Company was CNY 450 thousand.
10. Possibility of listing suspension and termination after disclosure ofthis annual report? Applicable √ N/A
11. Bankruptcy and reorganization
? Applicable √ N/ANo such cases in the reporting period.
12. Material litigation and arbitration
√ Applicable ? N/A
| Profile of litigation (arbitration) | Amount involved in the case (CNY’ 0,000) | 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 | 14,942.5 | No | The second trial has been concluded | 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. | Not executed | 15 October 2014 | See Section V “Other significant events” |
| The Company filed a lawsuit with ICBC Nanyang Zhongzhou Branch over a deposit dispute, and the case has been transferred to Henan Province Higher People’s Court. | 15,000 | No | Resume to be handled | The case is still pending. | The case is still pending. | 10 January 2015 | See Section V “Other significant events” |
13. Punishments and rectifications
? Applicable √ N/ANo such cases in the reporting period.
14. Credit conditions of the Company as well as its controllingshareholder and actual controller
? Applicable √ N/A
15. Implementation of any equity incentive plan, employee stockownership plan or other incentive measures for employees? Applicable √ N/ANo such cases in the reporting period.
16. Significant related party transactions
16.1. Related party transactions arising from routine operation
? Applicable √ N/ADuring the reporting period, the Company does not have any related party transactions with a total ofmore than CNY 30 million and accounting for more than 5% of the Company’s audited net assets in thelatest period.
The Company’s 2019 daily affiliated transactions shall be implemented in accordance with the “Proposalon the estimated 2019 annual daily affiliated transactions” reviewed and approved at the 7
thmeeting ofthe ninth board of directors. For details, please refer to Section XII “12. Related parties and related partytransactions”
16.2. Related party transactions regarding purchase or sales of assets or equityinterests
? Applicable √ N/ANo such cases in the reporting period.
16.3. Related party transitions arising from joint investments in external parties? Applicable √ N/ANo such cases in the reporting period.
16.4. Credits and liabilities with related parties
? Applicable √ N/ANo such cases in the reporting period.
16.5. Other significant related party transactions
√ Applicable □ N/A
1. On 15 October 2019, the Company held the 11
th
meeting of the ninth board of directors, on which the“Proposal on the affiliated transaction regarding assets purchase” was reviewed and approved and theCompany decided to purchase the land use right, construction in progress and equipment assets fromthe subsidiary of Laojiao Group with its owned fund of CNY 287,550,400.
2. On 13 December 2019, the Company held the 15
thmeeting of the ninth board of directors, on whichthe “Proposal on the affiliated transaction regarding assets purchase for the technical renovation projectof intelligent packaging center” was reviewed and approved and the Company decided to purchase landuse right from the subsidiary of Laojiao Group with its owned fund of CNY 100,776,700.
Index to the current announcements about the said affiliated transactions disclosed:
| Title of announcement | Disclosure date | Disclosure website |
| Announcement on the Affiliated Transaction regarding Assets Purchase | 16 October 2019 | (http://www.cninfo.com.cn/) |
| Announcement on the Affiliated Transaction regarding Assets Purchase for the Technical Renovation Project of Intelligent Packaging Center | 14 December 2019 | (http://www.cninfo.com.cn/） |
17. Significant contracts and their execution
17.1. Trusteeship, contracting and leasing
17.1.1. Trusteeship
? Applicable √ N/ANo such cases in the reporting period.
17.1.2. Contracting
? Applicable √ N/ANo such cases in the reporting period.
17.1.3. Leasing
? Applicable √ N/ANo such cases in the reporting period.
17.2. Major guarantees
? Applicable √ N/ANo such cases in the reporting period.
17.3. Entrusted cash asset management
17.3.1. Entrust assets management
? Applicable √ N/ANo such cases in the reporting period.
17.3.2 Entrust loans
? Applicable √ N/ANo such cases in the reporting period.
17.4 Other significant contracts
? Applicable √ N/ANo such cases in the reporting period.
18. Social Responsibilities
18.1 Information about taking social responsibilities
See details in 2019 Annual Social Responsibilities Report on the same date of the announcement.
18.2 Information about targeted poverty alleviation
18.2.1 Targeted poverty alleviation plan
A. Basic StrategyUnder the leadership of the central, provincial and municipal party committees and governments, theCompany implements poverty alleviation plans of party committees of all levels, closely centers ontargeted poverty alleviation, focuses on supporting two villages and one district, (Xiangtian Village, GulinCounty, Luzhou; Guntang Village, Hongyuan County, Ngawa Prefecture; and Longmatan District,Luzhou), and provides strong human, material and financial resources, contributing to local povertyalleviation and rural revitalization.
B. Overall ObjectiveThe Company puts full effect into the requirements of party committees and governments at all levels forpoverty alleviation, as well as consolidates and enhances the achievements on all fronts based onsuccessful poverty alleviation of two target villages. Anchored by the “rural revitalization strategy” ,andaimed at building “new villages of civilization” & “new villages of four goodness”, the Company will taketough measures and address tough challenges to counter weaknesses of villages and towns, furtherimprove the regulation of ecological environment, enhance the competence of villages, strengthen theircompetitiveness to shake off poverty and become prosperous, and facilitate the high-quality and leapingdevelopment of the two villages and one district.
C. Key tasksThe Company persists in the support principle of placing equal importance on “blood transfusion,production and activation” and follows the concepts of providing support based on actual needs andsustainable development. Led by party building, anchored by industrial poverty alleviation, and based oneducational poverty alleviation, the Company explores approaches of comprehensive development thatsolve both superficial and underlying problems, tangibly promotes poverty alleviation and regulation ofenvironment, and ultimately aims to substantially enhance the level of economy, life quality, ecologicalenvironment, social governance and cultural education in the two villages and one district.
D. Guarantee measuresThe Company fulfills its support responsibilities of “five ones”, which means the work mechanism of “oneresponsible unit, one person in charge, one support project team, one chief secretary and one residentwork team”; consolidates “five pivots”, which refers to “setting the ledger for poverty alleviation, definingthe concept of poverty alleviation, drawing the blueprint for poverty alleviation, improving the team forpoverty alleviation and building a stricter accountability system”, so as to ensure orderly implementationof poverty alleviation.
18.2.1 Outline of annual targeted poverty alleviation
A. The Company made joint efforts to help consolidate the achievements of poverty alleviation inHongyuan County and Guntang Village. Based on the conditions of Hongyuan County, the Companyfollowed the principle of “alleviating veritable poverty and veritably alleviating poverty”, conducteddetailed study of alleviation projects, implemented alleviation measures and highlighted alleviationeffects. It conducted star-rate appraisal and boosted the morale of impoverished people; reinforcedtalent training and rolled out talent projects; intensified cultural poverty alleviation and enriched spirituallife; developed animal husbandry industry and expanded collective economy; carried out donationactivities of “indirect donation through buying and creating wealth through selling”; took actions ofconsolation and charity.
B. The Company made tangible efforts to help consolidate the achievements of poverty alleviation inXiangtian Village of Gulin County. It upheld the principle of placing equal importance on “bloodtransfusion, production and activation”. Led by party building, anchored by industrial poverty alleviationand based on educational poverty alleviation, the Company fulfilled its responsibilities of povertyalleviation for Xiangtian Village on all fronts, and continued to consolidate and enhance theachievements of poverty alleviation in Xiangtian Village. It continued to consolidate the “fish farming onrice fields” project to drive industrial sustainable development; made donations to the “top three projects”of the village to build “inhabitable new homes”; and made donations to Xiangyang Primary School toimprove the teaching and learning environment.
C. The Company made active efforts to support the environmental protection in Longmatan District. Itdonated CNY 40 million for the environmental improvement project along the Yangtze River inLongmatan District to improve the living environment there and facilitate rural revitalization along theRiver.
18.2.3 Poverty alleviation achievement
| Indicator | Unit | Amount/Implementation situation |
| A. Overall situation | —— | —— |
| Including：1. Fund | CNY 10,000 | 4,434.29 |
| 3. Number of establishing card for archives of poor people out of poverty | Person | 443 |
| B. Input by project | —— | —— |
| 1. Industrial development | —— | —— |
| Including：1.1 Type of poverty alleviation projects for industrial development | —— | Poverty alleviation through agriculture and forestry, poverty alleviation through electronic commerce, others |
| 1.2 Number of poverty alleviation projects for industrial development | Item | 5 |
| 1.3 Amount invested in poverty alleviation projects for industrial development | CNY 10,000 | 50 |
| 1.4 Number of establishing card for archives of poor people out of poverty | Person | 358 |
| 2. Transfer and employment | —— | —— |
| Including: 2.1 Amount invested in vocational training | CNY 10,000 | 183 |
| 2.2 Number of persons engaging in vocational training | Person | 929 |
| 2.3 Number of establishing card for archives of poor people out of unemployment | Person | 25 |
| 3. Removal and relocation | —— | —— |
| 4. Educational poverty alleviation | —— | —— |
| Including：4.1 Input of aiding poor students | CNY 10,000 | 13.5 |
| 4.2 Number of aiding poor students | Person | 27 |
| 4.3 Amount invested in improving the educational resources in poor areas | CNY 10,000 | 13 |
| 5. Health poverty alleviation | —— | —— |
| 6. Ecological protection | —— | —— |
| Including: 6.1 Type of projects | —— | Conduct ecological protection and construction |
| 6.2 Input amount | CNY 10,000 | 4,000 |
| 7. Basic guarantee | —— | —— |
| 8. Social poverty alleviation | —— | —— |
| 9. Other project | —— | —— |
| Including：9.1. Item | Item | 10 |
| 9.2 .Input amount | CNY 10,000 | 174.79 |
| 9.3. Number of establishing card for archives of poor people out of poverty | Person | 85 |
| C. Awards（content and level） | —— | —— |
| National level | “China Red Cross Contribution Medal” granted by Red Cross Society of China | |
| Provincial level | Outstanding Chief Secretary of Sichuan Province for Yang Guangrong, Chief Secretary sent to Xiangtian Village by the Company | |
| Provincial level | Demonstration Village for Cultural Poverty Alleviation of Sichuan Province for Xiangtian Village under support of the Company | |
| Provincial level | Provincial “Six Nos” Safe Village for Xiangtian Village under support of the Company | |
| Municipal level | “Advanced Enterprise for 100 Enterprises-100 Villages” of Luzhou for the Company | |
| Municipal level | Demonstration Base for Farmers’ Night School of Luzhou for Xiangtian Village under support of the Company |
18.2.4 Follow-up poverty alleviation plan
The Company will continue to carry out poverty alleviation in Xiangtian Village of Gulin County,Hongyuan County and Guntang Village, focus on strengthening support to the ideology, concept,confidence, knowledge, technology and mentality of the people in those places, and improve the level ofeconomy, life quality, ecological environment, social governance and education in the two villages. Interms of poverty alleviation to Xiangtian Village of Gulin County, the Company will address problems ininfrastructure and public services, make efforts in stabilizing production, guaranteeing supply, increasingfarmers’ income and revitalizing villages, make donations to build the base for Chinese herbs, continuevigorous efforts to develop courtyard economy and expand the project of fish farming on rice fields. Interms of poverty alleviation to Hongyuan County and Guntang Village, the Company will continue toincrease forces, fund and policy support, consolidate the achievements of poverty alleviation bycentering around industrial poverty alleviation, development of product sales channels and cultural andeducational poverty alleviation, further improve infrastructure, enhance villagers’ competence, optimize
the rural and community environment, assist to build livestock lanes, remote graze sites, bridges,pasture lane rings, etc., and continue to address problems in Hongyuan County and Guntang Village.
18.3 Information about environment protection
Whether the listed company and its subsidiaries belong to heavy polluting industries prescribed by theenvironmental protection departmentYes
| Company name | Name of main pollutant and particular pollutant | Discharge type | Number of discharge outlet | Distribution of discharge outlet | Emission concentration | Pollution discharge standard | Total emission | Approved total emission | Excessive discharge |
| Luzhou Laojiao Co.,Ltd. | COD | Continuous discharge | 1 | Luohan Base | 41.073mg/L | 50mg/L | 8.091t | 25t/a | No |
| Luzhou Laojiao Co.,Ltd. | Ammonia nitrogen | Continuous discharge | 1 | Luohan Base | 1.38mg/L | 5mg/L | 0.313t | 2.5t/a | No |
| Luzhou Laojiao Co.,Ltd. | Total phosphorus | Continuous discharge | 1 | Luohan Base | 0.198 mg/L | 0.5 mg/L | 0.003t | 0.25t/a | No |
| Luzhou Laojiao Co.,Ltd. | Total nitrogen | Continuous discharge | 1 | Luohan Base | 10.079 mg/L | 15 mg/L | 0.179t | 7.5t/a | No |
| Luzhou Laojiao Co.,Ltd. | Sulfur dioxide | Continuous discharge | 2 | Luohan Base | 0.37mg/m? | 50mg/m? | 0.44t | 4.7t/a | No |
| Luzhou Laojiao Co.,Ltd. | Oxynitride | Continuous discharge | 2 | Luohan Base | 26.18mg/m? | 200mg/m? | 20.585t | 22.1t/a | No |
| Luzhou Laojiao Co.,Ltd. | PM | Continuous discharge | 2 | Luohan Base | 8.093mg/m? | 20 mg/m? | 0.41t | 2.8t/a | No |
Information about construction and operation of anti-pollution installationsWaste water: The Company has a waste water treatment station in Luohan Base, which is equippedwith an automatic online monitoring instrument for COD, ammonia nitrogen, total phosphorus, totalnitrogen PH and flow. The real-time monitoring data is connected with the superior environmentalprotection department (Luzhou Environmental Information Center) for operation. The waste water
treatment facilities are in normal operation, and the waste water discharge indexes are up to thestandard. All production areas of the Company (Luohan Base, National Cellar Base, Xiaoshi Base,Zaojiaoxiang Work Team, Anning Park), have implemented the rainwater and sewage diversion, and thehigh-concentration waste-water from the old brewery workshops in the urban area has been treated bythe truck transportation to the waste water treatment station of Luohan Base for discharge up to thestandard, which reduced and controlled the hazards of wastewater pollutants to the Yangtze River.
Waste gas: The Company's old brewery in the urban area adopts natural gas boiler which belongs toclean fuel. The boiler of Luohan Base is natural gas boiler after the technical transformation from coal togas for boilers with low-nitrogen combustion. The online automatic monitoring instrument for waste gasis installed and the waste gas treatment facilities are in normal operation, and the waste gas dischargeare up to the standard, which reduced and controlled the hazards of waste gas pollutants to theatmosphere.
Environmental impact assessment for construction project and other environmental protectionadministrative permissionAll construction projects are in accordance with the requirements of the state environmental protectionlaws and regulations. The Company carries out environmental impact assessment and obtains theenvironmental protection administrative permission. The brewing engineering technical upgradingproject, Luzhou Laojiao intelligent packaging center technological upgrading project, sewage stationtechnical upgrading project and boiler upgrading project were carried out environment impactassessment and the Company obtained environmental protection administrative permission.
Emergency plan for environmental emergenciesThe Company has prepared the "Emergency plan for environmental emergencies" and reported it toLuzhou environmental emergency center for the record. The Company organizes all departments (units)to study the emergency plan, and carries out a comprehensive emergency plan drill every year toimprove the emergency handling capacity of all staff for environmental emergencies.
Environmental self-monitoring programThe Company has developed an environmental self-monitoring program and reported it to the superiorenvironmental protection department for the record. The automatic monitoring system will be connectedwith the superior environmental protection department for operation. Relevant self-monitoringinformation will be disclosed on the "pollution source monitoring information management and sharingplatform of Sichuan province" as required to receive social supervision.
Other information about environmental protection that should be disclosed:
N/A
Other information about environment protectionN/A
19. Other significant events
√ Applicable ? N/A
A. The Company’s three savings deposits of CNY 500 million, including ABC Changsha Yingxin Branchand ICBC Nanyang Zhongzhou Branch are involved in contract disputes. The Company has reported tothe public security authorities for intervention with the assets preservation measure and filed civil claimsfor two contract disputes among the three cases. Combined with the assets preservation situation of thepublic security authorities and professional legal advice issued by lawyers, the Company has made aprovision of CNY 200 million for bad debts for the deposit of CNY 500 million for contract disputes.During the reporting period, the Supreme People’s Court made a final judgment on the dispute arisingout of the deposit contract between the Company and ABC Changsha Yingxin Branch. In respect of thelosses that couldn’t be recovered through criminal procedures, ABC Changsha Yingxin Branch shouldbear 40% of the compensation liability, ABC Changsha Hongxing Branch 20%, and the remaining lossesshould be borne by the Company. As of 31 March 2020, the Company had recovered an amount of CNY214,859,700 for three of the disputes. The case between the Company and ICBC Nanyang ZhongzhouBranch is still under trial. Adjustment may be made to the amount of bad debt provisions as the caseproceeds.
See details in the Company’s announcements:
| Date of announcement | No. | Catalogue | Official website |
| 15 October 2014 | 2014-35 | Announcement of significant litigation | http://www.cninfo.com.cn/ |
| 12 November 2014 | 2014-41 | Announcement of significant litigation progress | |
| 6 December 2014 | 2014-43 | Announcement of significant litigation progress part II | |
| 10 January 2015 | 2015-1 | Announcement of significant events | |
| 4 February 2015 | 2015-4 | Announcement of significant events progress | |
| 25 March 2015 | 2015-11 | Announcement of significant litigation progress part III | |
| 18 April 2015 | 2015-20 | Announcement of significant litigation progress part IV | |
| 22 April 2015 | 2015-21 | Announcement of significant events progress part II | |
| 24 April 2015 | 2015-25 | Announcement of significant litigation progress part V | |
| 15 July 2015 | 2015-44 | Announcement of significant litigation progress part VI |
| 22 July 2015 | 2015-45 | Announcement of significant litigation progress part VII |
| 6 June 2018 | 2018-17 | Announcement of significant litigation progress part VIII |
| 7 May 2019 | 2019-11 | Announcement of significant litigation progress part IX |
| 17 May 2019 | 2019-13 | Announcement of significant litigation progress part X |
| 24 March 2020 | 2020-7 | Announcement of significant litigation progress part XI |
B. The Company held the 7
th meeting of the ninth board of directors on 25 April 2019 and the 1
stspecialmeeting of shareholders in 2019 on 14 May 2019, reviewed and approved the Proposal on theCompany’s Eligibility for Public Offering of Corporate Bond for Qualified Investors and Proposal on Planof Public Offering of Corporate Bond and agreed the Company’s application of public offering ofcorporate bond for qualified investors. On 26 July 2019, the Company received the Reply on Approval ofLuzhou Laojiao Co., Ltd. Public Offering of Corporate Bond for Qualified Investors (ZJXK(2019)No. 1312)issued by China Securities Regulatory Commission. On 28 August 2019, the 2019 public offering ofcorporate bond for qualified investors (Phase I) finished with the issue price of CNY 100 per piece. Thefinal issue scale is CNY 2.5 billion and the final coupon rate is 3.58%. The said bonds were traded inShenzhen Stock Exchange on 4 September 2019. On 17 March 2020, the 2020 public offering ofcorporate bond for qualified investors (Phase I) finished with the issue price of CNY 100 per piece. Thefinal issue scale is CNY 1.5 billion and the final coupon rate is 3.50%. The said bonds were traded inShenzhen Stock Exchange on 25 March 2020.
20. Significant events of subsidiaries
√ Applicable □ N/A
The Company disclosed the technical renovation project of brewing invested by Brewing Company, asubsidiary of the Company. The total investment amount is CNY 7,414,280,000. See details in theannouncement About subsidiary technical renovation project of brewing , No：2016-12(http://www.cninfo.com.cn/). As of the end of the reporting period, 85% of this project has beencompleted.
Section VI Changes in Shares and Information about
Shareholders
1. Changes in shares
1.1 Changes in shares
Unit：Share
| Before | Changes in this year (＋，－) | After | |||||||
| Number | Proportion | Issuance of new shares | Bonus shares | Capitalization of capital reserves | Other | Subtotal | Number | Proportion | |
| I. Restricted shares | 4,647,181 | 0.32% | 4,647,181 | 0.32% | |||||
| 2. Shares held by state-owned corporations | 4,166,666 | 0.28% | 4,166,666 | 0.28% | |||||
| 3. Shares held by other domestic investors | 480,515 | 0.03% | 480,515 | 0.03% | |||||
| Shares held by domestic individuals | 480,515 | 0.03% | 480,515 | 0.03% | |||||
| II. Non-restricted shares | 1,460,105,295 | 99.68% | 1,460,105,295 | 99.68% | |||||
| 1.CNY common shares | 1,460,105,295 | 99.68% | 1,460,105,295 | 99.68% | |||||
| III. Total shares | 1,464,752,476 | 100.00% | 1,464,752,476 | 100.00% | |||||
Reasons for the change in shares? Applicable √ N/A
Approval of share changes? Applicable √ N/A
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 commonshareholders 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 regulatoryauthorities to disclose? Applicable √ N/A
1.2 Changes in restricted shares
? Applicable √ N/A
2. Issuance and listing of securities
2.1 Securities（excluding preference shares） issued in the reporting period
√ Applicable □ N/A
| Name of stock and its derivative securities | Issuance date | Issuance price (or interest rate) | Numbers | Listing date | Approved numbers for trading | Expiry date of the trading |
| Stock | ||||||
| Convertible corporate bonds, separate bargaining convertible corporate bonds and corporate bonds | ||||||
| 2019 Public Offering of Corporate Bond of Luzhou Laojiao Co., Ltd. for Qualified Investors (Phase I) | 28 August 2019 | 3.58% | 25,000,000 | 4 September 2019 | 25,000,000 | |
| Other derivative securities | ||||||
Information about securities (excluding preference shares) issued in the reporting periodOn 28 August 2019, the Company completed the issuance of 2019 Public Offering of Corporate Bond ofLuzhou Laojiao Co., Ltd. for Qualified Investors (Phase I) at CNY 100 per piece. The final actualissuance scale was CNY 2.5 billion and the final coupon rate was 3.58%. The said bonds were traded onShenzhen Stock Exchange on 4 September 2019.
2.2 Changes in total shares of the Company and the shareholder structure, as well asthe asset and liability structure
√ Applicable □ N/A
In accordance with the document of ZJXK(2019)No. 1312 issued by China Securities RegulatoryCommission, the Company is allowed to publicly offer corporate bonds with face value not exceedingCNY 4 billion for qualified investors. During the reporting period, the Company accomplished theissuance of corporate bonds of CNY 2.5 billion bringing about the increase in total assets and totalliabilities of the Company. For more details about changes in structure of the Company’s assets andliabilities, please refer to “Section IV Performance Discussion and Analysis” and “Section XI Informationabout Corporate Bond”.
2.3 Existing staff-held shares
? Applicable √ N/A
3. Shareholders and actual controller
3.1 Total number of shareholders and their shareholdings
Unit：Share
| Total number of common shareholders at the end of the reporting period | 93,643 | Total number of common shareholders at the prior month-end before the disclosure date of the annual report | 99,589 | Total number of preference shareholders with resumed voting rights by the end of the reporting period (if any)(see Note 8) | 0 | Total number of preference shareholders with resumed voting rights by the end of the reporting period (if any)(see Note 8) | 0 | ||||||||
| Shareholdings of shareholders with a shareholding percentage over 5% or the top 10 shareholders | |||||||||||||||
| Name of shareholder | Nature of shareholder | Shareholding percentage | Total shares held by the end of the reporting period | Increase/decrease during the reporting period | Number of holding restricted shares | Number of holding non-restricted shares | Pledged or frozen shares | ||||||||
| Status of shares | Number of shares | ||||||||||||||
| Luzhou Laojiao Group Co., Ltd. | State-owned corporation | 26.02% | 381,088,389 | 0 | 0 | 381,088,389 | |||||||||
| Luzhou XingLu Investment Group Co., Ltd. | State-owned corporation | 24.99% | 365,971,142 | 0 | 0 | 365,971,142 | Pledged | 165,980,000 | |||||||
| Hong Kong | Outbound | 2.75% | 40,310,275 | -7,630,905 | 0 | 40,310,275 | |||||||||
| Securities Clearing Company Limited | corporation | |||||||
| China Securities Finance Corporation limited | State-owned corporation | 2.31% | 33,842,059 | 0 | 0 | 33,842,059 | ||
| Bank of China Co.,Ltd. – Middle and small capital stock s hybrid securities investment fund by E fund | Other | 1.46% | 21,379,566 | 921,183 | 0 | 21,379,566 | ||
| Central Huijin Asset Management Co.,Ltd. | State-owned | 1.43% | 20,937,500 | 0 | 0 | 20,937,500 | ||
| Agricultural Bank of China Co.,Ltd. - Consumption industry stock - based securities investment fund by E fund | Other | 1.42% | 20,829,830 | -3,874,761 | 0 | 20,829,830 | ||
| Bank of China Co.,Ltd. – Liquor index classification securities investment fund by China Merchants Fund | Other | 1.24% | 18,105,061 | -2,027,296 | 0 | 18,105,061 | ||
| Industrial and Commercial Bank of China Co., Ltd.-Newly growth hybrid securities investment fund by Invesco Great Wall | Other | 1.09% | 15,912,158 | — | 0 | 15,912,158 | ||
| China Life Insurance Co.,Ltd. - Traditional - general insurance products -005L-CT001 SHEN | Other | 0.80% | 11,781,095 | -4,072,007 | 0 | 11,781,095 | ||
| 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. Laojiao Group and Xinglu Group are both wholly 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 (http://www.cninfo. com.cn/) 2. In addition, whether there is an association between the remaining shareholders or they belong to persons acting in concert is unknown. | ||
| 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 | 40,310,275 | CNY common shares | 40,310,275 |
| China Securities Finance Corporation limited | 33,842,059 | CNY common shares | 33,842,059 |
| Bank of China Co.,Ltd. – Middle and small capital stock s hybrid securities investment fund by E fund | 21,379,566 | CNY common shares | 21,379,566 |
| Central Huijin Asset Management Co.,Ltd. | 20,937,500 | CNY common shares | 20,937,500 |
| Agricultural Bank of China Co.,Ltd. - Consumption industry stock - based securities investment fund by E fund | 20,829,830 | CNY common shares | 20,829,830 |
| Bank of China Co.,Ltd. – Liquor index classification securities investment fund by China Merchants Fund | 18,105,061 | CNY common shares | 18,105,061 |
| Industrial and Commercial Bank of China Co., Ltd.-Newly growth hybrid securities investment fund by Invesco Great Wall | 15,912,158 | CNY common shares | 15,912,158 |
| China Life Insurance Co.,Ltd. - Traditional - general insurance products -005L-CT001 SHEN | 11,781,095 | CNY common shares | 11,781,095 |
| 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 | See the table above | ||
| shareholders | |
| Explanation on the top 10 common shareholders participating in the securities margin trading（if any）(see Note 4) | During the reporting period, Xinglu Group took its 57,000,000 shares of our company as collateral to participate in financing business through Citic Securities Company Limited |
Did any of the top 10 common shareholders or the top non-restricted common shareholders of theCompany conduct any promissory repurchase during the reporting period.? Yes √ NoThe top 10 non-restricted common shareholders, the top10 common shareholders did not conduct anypromissory repurchase during the reporting period.
3.2 Controlling shareholder
Nature of controlling shareholder：Local state-ownedType of controlling shareholder：Corporation
| Name of controlling shareholder | Legal representative/Company principal | Date of establishment | Credibility code | Main business scope |
| Luzhou Laojiao Group Co.,Ltd. | Zhang Liang | 21 December 2000 | 91510500723203346U | Investment and asset management; Investment in wine, food, finance, trade, logistics, education, medical and health care, cultural tourism and Internet industries; Holding company services; Social and economic consulting, enterprise management consulting, enterprise management services; Supply chain management services; Import and export business and trade agents; Food production and sales (including online); Crop cultivation and marketing services (including online). |
| Shareholdings of the controlling shareholder in other controlled or non-controlled listed companies at home or abroad during the reporting period | 1. As of 30 June 2019, Laojiao Group holds 70,406,310 shares of Luzhou Xinglu Water (Group) Co., Ltd. (02281.HK), accounting for 8.19% of the total issued shares. 2. As of 30 September 2019, Laojiao Group holds 212,954,666 shares of Hongli Zhihui Group Co., Ltd. (300219.SZ) through its wholly-owned subsidiary, Sichuan Jinduo investment Co., Ltd., accounting for 29.94% of the total issued shares. | |||
Change of the controlling shareholder during the reporting period?Applicable √N/ANo such cases in the reporting period
3.3 Actual controller and its persons acting in concert
Nature of actual controller：Local State-owned Assets Supervision and Administration CommissionType of actual controller：Corporation
3. As of 31 December 2019, Laojiao Group holds 475,940,143 shares of Huaxi Securities Co., Ltd.(002926.SZ), accounting for 18.13% of the total issued shares.
4. As of 30 June 2019, Laojiao Group holds 325,440,000 shares of Luzhou Bank (01983.HK), accounting for
14.37% of the total issued shares.
Name of actual controller
| Name of actual controller | Legal representative/Company principal | Date of establishment | Credibility code | Main business scope |
| SASAC of Luzhou | Yu Zhiqiang | 1 March 2005 | 11510400771686813T | State-owned assets supervision and administration department |
| Share holdings of the controlling shareholder in other controlled or non-controlled listed companies at home or abroad during the reporting period. | 1. As of 30 June 2019, XingLu Group, a wholly-owned subsidiary of SASAC of Luzhou, holds 511,654,127 shares of Luzhou Xinglu Water (Group) Co., Ltd. (02281.HK), accounting for 59.51% of the total issued shares. Luzhou Infrastructure Construction Investment Co., Ltd., a holding subsidiary of XingLu Group, holds 62,709,563 shares of Luzhou Xinglu Water (Group) Co., Ltd. (02281.HK), and accounting for 7.29% of the total issued shares. Laojiao Group, a wholly-owned subsidiary under SASAC of Luzhou, holds 70,406,310 shares of Luzhou Xinglu Water (Group) Co., Ltd. (02281.HK), accounting for 8.19% of the total issued shares. 2. As of 30 September 2019, Laojiao Group holds 212,954,666 shares of Hongli Zhihui Group Co., Ltd. (300219.SZ) through its wholly-owned subsidiary, Sichuan Jinduo investment Co., Ltd., accounting for 29.94% of the total shares issued. 3. As of 31 December 2019, Luzhou Industrial Investment Group Co., Ltd., a holding Company under the jurisdiction of SASAC of Luzhou, holds 115,064,610 shares of Sichuan Lutianhua Company Limited (000912.SZ), accounting for 7.34% of the total shares issued. Lutianhua Group Company Limited, a wholly-owned subsidiary of Luzhou Industrial Investment Group Co., Ltd., holds 289,858,993 shares of Sichuan Lutianhua Company Limited (000912.SZ), and accounting for 18.49% of the total issued shares. 4. As of 31 December 2019, Laojiao Group, a wholly-owned subsidiary under SASAC of Luzhou, holds 475,940,143 shares of Huaxi Securities Co., Ltd. (002926.SZ), accounting for 18.13% of the total issued shares. 5. As of 30 June 2019, Laojiao Group, a wholly-owned subsidiary under SASAC of Luzhou, holds 325,440,000 shares of Luzhou Bank (01983.HK), accounting for 14.37% of the total issued shares. XingLu Group, a wholly-owned subsidiary under SASAC of Luzhou, holds 40,549,462 shares of Luzhou Bank (01983.HK), accounting for 1.79% of the total issued shares. | |||
Change of the actual controller during the reporting period?Applicable √ N/AThe actual controller of the Company has not changed during the reporting period.
Ownership and control relations between the actual controller and the Company
The actual controller control the company through a trust or other ways of assets management?Applicable √ N/A
3.4 Other corporate shareholders with a shareholding proportion over 10%
√Applicable ? N/A
| Name of actual controller | Legal representative/Company principal | Date of establishment | Registered capital (CNY) | Main business scope |
| Luzhou XingLu Investment Group Co., Ltd. | Yuan Douquan | 28 January 2003 | 4,934,049,244 | Investment and asset management; Project management services; Self-finance real estate business activities; Investment advisory services, financial advisory services |
3.5 Limits on reduction of the Company’s shares held by its controlling shareholder,actual controller, restructuring party and other commitment entities.?Applicable √ N/A
Section VII Preference Shares? Applicable √ N/ANo preferred stock in the Company during the reporting period.
Section VIII Information about Convertible Corporate Bond? Applicable √ N/ANo convertible corporate bond in the Company during the reporting period.
Section IX Profiles of Directors, Supervisors, Senior
Management and Employees
1. Changes in shares held by directors, supervisors, and seniormanagement
| Name | Title | Incumbent/ Former | Gender | Age | Period of service | Shares held by the beginning of the reporting period (share) | Shares increased during the reporting period (share) | Shares decreased during the reporting period (share) | Other increase/ decrease (share) | Shares held by the end of the reporting period (share) |
| Liu Miao | Chairman of the board, Secretary of the party committee | Incumbent | Male | 50 | 2015.6.30-2021.6.27 | 192,187 | 0 | 0 | 0 | 192,187 |
| Lin Feng | Director, general manager, Deputy secretary of the party committee | Incumbent | Male | 46 | 2015.6.30-2021.6.27 | 0 | 0 | 0 | 0 | 0 |
| Wang Hongbo | Director, Deputy general manager, member of the party committee, Secretary of the board | Incumbent | Male | 56 | 2015.3.06-2021.6.27 | 0 | 0 | 0 | 0 | 0 |
| Jiang Yuhui | Director, Deputy general manager, | Incumbent | Female | 57 | 2009.5.20-2021.6.27 | 254,000 | 0 | 0 | 0 | 254,000 |
| member of the party committee, chairman of the labor union | ||||||||||
| Shen Caihong | Director, Deputy general manager | Incumbent | Male | 54 | 2002.6.30-2021.6.27 | 184,500 | 0 | 46,125 | 0 | 138,375 |
| Du Kunlun | Non-executive director | Incumbent | Male | 51 | 2015.6.30-2021.6.27 | 0 | 0 | 0 | 0 | 0 |
| Xu Guoxiang | Non-executive director | Incumbent | Male | 60 | 2015.6.30-2021.6.27 | 0 | 0 | 0 | 0 | 0 |
| Tan Lili | Non-executive director | Incumbent | Female | 65 | 2015.6.30-2021.6.27 | 0 | 0 | 0 | 0 | 0 |
| Liu Junhai | Non-executive director | Incumbent | Male | 50 | 2018.6.27-2021.6.27 | 0 | 0 | 0 | 0 | 0 |
| Qian Xu | External director | Incumbent | Male | 56 | 2015.6.30-2021.6.27 | 0 | 0 | 0 | 0 | 0 |
| Ying Hanjie | External director | Incumbent | Male | 50 | 2016.9.13-2021.6.27 | 0 | 0 | 0 | 0 | 0 |
| Lian Jing | Supervisor | Incumbent | Male | 50 | 2012.6.27-2021.6.27 | 0 | 0 | 0 | 0 | 0 |
| Yang Benhong | Supervisor | Incumbent | Female | 53 | 2009.5.20-2021.6.27 | 10,000 | 0 | 0 | 0 | 10,000 |
| Cao Cong | Supervisor | Incumbent | Male | 35 | 2015.6.30-2021.6.27 | 0 | 0 | 0 | 0 | 0 |
| Li Guangjie | Supervisor | Incumbent | Male | 50 | 2018.6.27-2021.6.27 | 0 | 0 | 0 | 0 | 0 |
| Wu Qin | Deputy general manager | Incumbent | Male | 58 | 2020.1.10-2021.6.27 | 0 | 0 | 0 | 0 | 0 |
| Xie Hong | CFO | Incumbent | Female | 50 | 2015.3.06-2021.6.27 | 0 | 0 | 0 | 0 | 0 |
| He Cheng | Deputy general manager | Incumbent | Male | 53 | 2015.6.30-2021.6.27 | 0 | 0 | 0 | 0 | 0 |
| Zhang | Deputy | Incumbent | Male | 48 | 2015.12.29-2021.6.27 | 0 | 0 | 0 | 0 | 0 |
| Suyi | general manager | |||||||||
| Wu Qin | Chairman of supervisory committee | Former | Male | 58 | 2015.6.30-2019.12.30 | 0 | 0 | 0 | 0 | 0 |
| Total | -- | -- | -- | -- | -- | 640,687 | 0 | 46,125 | 0 | 594,562 |
2. Changes in directors, supervisors, and senior management
√ Applicable □ N/A
3. Employment information
Professional background, work experience and major duties of current directors, supervisors and seniormanagement.Mr. Liu Miao, Male, born in 1969, MBA of Wright State University in the USA, Craft Master of Chineseliquor, senior marketing specialist. He used to serve as planning minister, general manager of SalesCompany, general manager assistant, and deputy general manager of the Company. At present, he ischairman of the board and secretary of the party committee in the Company.
Mr. Lin Feng, Male, born in 1973, Master degree, senior marketing specialist. He was deputy generalmanager and general manager of Sales Company, director of marketing, director of human resources,chief dispatcher, deputy general manager of the Company. At present, he is director, deputy secretary ofthe party committee, general manager of the Company and general manager of Sales Company.
Mr. Wang Hongbo, Male, born in 1964, Master degree. He was director and secretary of party committeeof Luzhou Commerce Bureau, director of Luzhou Liquor Industry Development Bureau, director ofLuzhou branch of China council for the promotion of international trade, deputy secretary general, office
| Name | Title | Type | Date | Reason |
| Wu Qin | Chairman of supervisory committee | Leave | 2019.12.30 | Leave voluntarily |
| Wu Qin | Deputy general manager | Appoint | 2020.1.10 | Appointed |
| Jiang Yuhui | Deputy general manager | Appoint | 2020.1.10 | Appointed |
director of Luzhou Municipal Party Committee and deputy secretary of the party committee of theCompany. At present, he is director, deputy general manager, secretary of the board, and member of theparty committee of the Company and chairman of the board of Luzhou Laojiao InternationalDevelopment（Hong Kong）Co.,Ltd.
Ms. Jiang Yuhui, Female, born in 1962, Master degree, senior political engineer. She used to serve ashead of personnel education management section of the Company, deputy director and director of partycommittee office, deputy secretary of commission for discipline inspection, chairman of the supervisorycommittee, deputy secretary of the party committee, secretary of committee for discipline inspection ofthe Company. At present, she is director, deputy general manager, chairman of the labor union andmember of the party committee of the Company.
Mr. Shen Caihong, Male, born in 1966, Master degree, professor-level senior engineer, one of the firstbatch of representative inheritors of national intangible cultural heritage, one of the first batch of"Sichuan craftsmen". He was manager of the Company’s leaven-making branch, manager of base liquorcompany, general manager assistant and director of production department. At present, he is director,deputy general manager, chief engineer, director of national solid brewing engineering technologyresearch center and chairman of the board of Luzhou Pinchuang Technology Co.,Ltd..
Mr. Du Kunlun, Male, born in 1969, Doctor of Economic, researcher, senior accountant, CPA, CPV. Hewas the investigator of CSRC Sichuan Supervision Bureau, member of the 12th and 13th mainboardcommittee of CSRC, deputy director of the Sichuan Province Institute of Finance and Trade Economicsof Social Sciences Academy, non-executive director of Sichuan Chengfei Integration TechnologyCo.,Ltd., Aecc Aero Science And Technology Co., Ltd and Tianfu (Sichuan) United Equity ExchangeCenter Co., Ltd. At present, he is researcher, Master supervisor of Finance and Trade EconomicsInstitute of Social Sciences Academy in Sichuan Province, non-executive director of Tongwei Co., Ltd,Sichuan Tianqi Lithium Industries Co.,Ltd. SCIMEE Tech.&Sci.Co.,Ltd. and Chengdu Jule Food Co., Ltd(company planning to be listed). He has served as a non-executive director of the Company since June2015.
Mr. Xu Guoxiang, Male, born in 1960, Doctor of Economic, National Second-level Professor, Doctoralsupervisor. He used to be the director of statistics department of Shanghai University of Finance andEconomics. At present, he is the director of Shanghai University of Finance and Economics AppliedStatistics Research Center, professor of Statistics and Management College of Shanghai University ofFinance and Economics and deputy director of the teaching steering committee for statistics majors ininstitutions of higher learning of Ministry of Education, expert of the discipline planning evaluation groupof national social science fund, executive director of China Statistical Society, member of ShanghaiStock Exchange Index Expert Committee, member of Index Expert Committee of China Securities IndexCo. Ltd, director of the Branch Center of Shanghai University of Finance and Economics, supervisor ofShanghai Xintonglian Packaging Co.,Ltd. and Dazhong Transportation（Group）Co.,Ltd., non-executivedirector of Orient Securities Co., Ltd.. He has served as a non-executive director of the Company sinceJune 2015.
Ms. Tan Lili, Female, born in 1954, Bachelor degree, professor-level senior accountant, professor-levelsenior engineer, senior auditor. She was director of audit department and financial department, leader ofenterprise management consulting and guidance group of Wuhan Iron and Steel Co., Ltd.; deputygeneral manager, deputy chairman of the board of supervisors of Sany Heavy Industry Co., Ltd.,non-executive director of Zhejiang Tiantie Industry Co.,Ltd.. At present, she is deputy director ofBusiness School of Enterprise Financial Management Association of China and non-executive directorof Guangzhou Metro Design Institute. She has served as a non-executive director of the Company sinceJune 2015.
Mr. Liu Junhai, Male, born in 1969, PhD, Doctoral supervisor. He was director assistant, office directorand researcher of Law School of Chinese Academy of Social Sciences. At present, he is professor ofRenmin University of China, director of the institute of commercial law, and non-executive director ofTus-Sound Environmental Resources Co., Ltd., China Resources Double-Crane Pharmaceutical Co.,Ltd., and China Investment Securities Co., Ltd. He has served as a non-executive director of theCompany since June 2018.
Mr. Qian Xu, Male, born in 1963, EMBA. He was general manager and chairman of the board of BeijingEnterprises Real-Estate Group Co.,Ltd.. At present, he is chairman of the board and general manager ofBeijing Enterprises Urban Development (Group) Co.,Ltd., chairman of the board of Beijing Properties（Holdings） Limited (Listed on the Hong Kong Stock Exchange), non-executive director of CAQHoldings Limited (Listed on the Australian Stock Exchange). He has served as a non-executive directorof the Company since June 2015.
Mr. Ying Hanjie, Male, born in 1969, Doctor of Biochemistry, and professor. He was deputy director ofPharmacy and Life Sciences School of Nanjing University of Technology. At present, he is deputydirector of National Biochemical Engineering Technology Research Center of Nanjing Tech University,chairman of the board of Nanjing Biotogether Co., Ltd. and director of Nanjing High Tech UniversityBiological Technology Research Institute Co., Ltd. He has served as a non-executive director of theCompany since September 2016.
Mr. Lian Jing, Male, born in 1969, Bachelor degree. He was director of Economic Information PublicityDepartment of Luzhou Economic and Trade Commission; director of Fixed Assets InvestmentDepartment of Luzhou Development Planning Committee; director of Fixed Assets InvestmentDepartment of Luzhou Development and Reform Committee; chairman of the board and generalmanager of Luzhou State-owned Gongfang Operation Management Co., Ltd.; chairman of the board andgeneral manager of Luzhou State-Owned Assets Management Co.,Ltd.; director, deputy generalmanager, general manager of Luzhou Hongyang State-Owned Assets Management Co.,Ltd; deputysecretary of the party committee, director, general manager of Luzhou Industrial Investment GroupCo.,Ltd. At present, he is chairman of the supervisory committee of Luzhou State-Owned Capitaloperation and management Co. Ltd; executive director and general manager of Luzhou Guoxin AssetManagement Co. Ltd; external director of Luzhou XingLu Investment Group Co., Ltd., Luzhou LiquorIndustrial Park Development and Investment Co. Ltd., Luzhou Public Transportation Group Co. Ltd.,Luzhou Culture Tourism Development Investment Group Co. Ltd. and Sichuan Rongtong Security
Investment Group Co. Ltd. He has served as a supervisor of the Company since June 2012.
Ms. Yang Benhong, Female, born in 1966, Bachelor degree, senior political engineer. She was head ofpublicity section, director of education department and deputy director, director of human resourcesdepartment of the Company. At present, she is supervisor and deputy chairman of labour union in theCompany.
Mr. Cao Cong, Male, born in 1984, Bachelor degree. He was deputy manager of accounting departmentof Luzhou Winery Industry Jizhong Development District Co., Ltd., financial executive of Luzhou RedSorghum Modern Agricultural Development Co., Ltd., and deputy director of audit department of theCompany. At present, he is supervisor and director of audit department of the Company.
Mr. Li Guangjie, Male, born in 1969, Master degree, economist. He was manager of PlanningDepartment of the Company, deputy director of Sales Company, manager of Import and Exportcompany, general manager assistant of Sales Company. At present, he is supervisor and deputygeneral manager of Sales Company.
Mr. Wu Qin, Male, born in 1962, Bachelor degree. He was deputy director of Luzhou EconomicCommission, deputy director of Luzhou Economic and Information Technology Commission, deputydirector of Luzhou Development and Reform Commission, director of Luzhou Railway ConstructionOffice and the chairman of the Company’s supervisory committee. At present, he is the deputy generalmanager of the Company.
Ms. Xie Hong, Female, born in 1969, Master degree, senior economist. She was section chief ofTreasury Section of the Finance Bureau, section chief of Non-tax Revenue Collection ManagementSection, director of Luzhou Municipal Finance Treasury Payment Center, chief accountant of LuzhouFinance Bureau. At present, she is CFO of the Company.
Mr. He Cheng, Male, born in 1966, Master of Management Economics of Nanyang TechnologicalUniversity, senior engineer. He was director of business administration department, director of humanresources department, general manager of Brewing Company, chief dispatcher and director of qualitydepartment of the Company. At present, he is deputy general manager and chief quality officer.
Mr. Zhang Suyi, Male, born in 1971, PhD, professor-level senior engineer, representative inheritor ofSichuan Intangible Cultural Heritage. He was director of Gouchu Center, deputy chief engineer, deputygeneral manager of Brewing Company and director of Liquor Body Design Center. At present, he isdeputy general manager and director of safety and environmental protection of the Company.
Position in shareholder-holding companies
√ Applicable ? N/A
| Name | Name of shareholder-holding companies | Position in shareholder- | Beginning date of term | Ending date of term | Any remunerations |
Position in other companies
√ Applicable ? N/A
| holding companies | received from shareholder-holding companies | ||||
| Lian Jing | Laojiao Group | Chairman of the supervisory committee | No | ||
| Lian Jing | Xinglu Group | Outsider director | No |
| Name | Name of other companies | Position in other companies | Beginning date of term | Ending date of term | Any remunerations received from other companies |
| Du Kunlun | Tongwei Co., Ltd, Sichuan Tianqi Lithium Industries Co.,Ltd. SCIMEE Tech.&Sci.Co.,Ltd., Chengdu Jule Food Co., Ltd (company planning to be listed) | Non-executive director | |||
| Du Kunlun | Sichuan Province Institute of Finance and Trade Economics of Social Sciences Academy | Deputy director | |||
| Xu Guoxiang | Shanghai University of Finance and Economics Applied Statistics Research Center | Director | |||
| Xu Guoxiang | Shanghai Xintonglian Packaging Co.,Ltd. and Dazhong Transportation（Group）Co.,Ltd. | Supervisor | |||
| Xu Guoxiang | Orient Securities Co.,Ltd. | Non-executive director | |||
| Tan Lili | Business School of Enterprise Financial Management Association of China | Deputy director | |||
| Tan Lili | Guangzhou Metro Design Institute | Non-executive director | |||
| Liu Junhai | Institute of Commercial Law of Renmin University of China | Director | |||
| Liu Junhai | Tus-Sound Environmental Resources Co., Ltd., China Resources | Non-executive director |
Punishments imposed in the recent three years by the securities regulators on the incumbent directors,supervisors and senior management as well as those who left in the reporting period? Applicable √ N/A
4. Remuneration of directors, supervisors and senior managementThe following describes the decision-making procedures, grounds on which decisions are made and
| Double-Crane Pharmaceutical Co., Ltd., China Investment Securities Co., Ltd | |||||
| Qian Xu | Beijing Enterprises Urban Development (Group) Co.,Ltd. | Chairman of the board, general manager | |||
| Qian Xu | Beijing Properties （Holdings） Limited | Chairman of the board | |||
| Qian Xu | CAQ Holdings Limited. | Non-executive director | |||
| Ying Hanjie | National Biochemical Engineering Technology Research Center of Nanjing University of Technology | Deputy director | |||
| Ying Hanjie | Nanjing Biotogether Co., Ltd. | Chairman of the board | |||
| Ying Hanjie | Nanjing High Tech University Biological Technology Research Institute Co., Ltd. | Director | |||
| Lian Jing | Luzhou State-Owned Capital Operation and Management Co. Ltd | Chairman of the supervisory committee | |||
| Lian Jing | Luzhou Guoxin Asset Management Co. Ltd. | Executive director, general manager | |||
| Lian Jing | Luzhou Liquor Industrial Park Development and Investment Co. Ltd., Luzhou Public Transportation Group Co. Ltd., Luzhou Culture Tourism Development Investment Group Co. Ltd., Sichuan Rongtong Security Investment Group Co. Ltd | External director |
actual remuneration payment of directors, supervisors and senior management.
Remuneration of directors, supervisors and senior management during the reporting period
Unit CNY 10,000
| Decision-making procedures for directors, supervisors and senior management | The remuneration of non-executive directors, external directors and external supervisors shall be determined by the general meeting of shareholders, and the remuneration of directors, supervisors and senior management who hold positions within the Company shall be determined by relevant rules of SASAC of Luzhou and relevant rules of the Company |
| Grounds on which decisions are made of directors, supervisors and senior management | Calculate according to the assessment index and weight established at the beginning of the year. |
| Actual remuneration payment of directors, supervisors and senior management | Details refer to “Remuneration of directors, supervisors and senior management during the reporting period”. |
| Name | Position | Gender | Age | Incumbent/ Former | Total before-tax remuneration from the Company | Remuneration from related parties of the Company |
| Liu Miao | Chairman of the board, Secretary of the party committee | Male | 50 | Incumbent | 70 | No |
| Lin Feng | Director, general manager, Deputy secretary of the party committee | Male | 46 | Incumbent | 70 | No |
| Wang Hongbo | Director, Deputy general manager, member of the party committee, Secretary of the board | Male | 56 | Incumbent | 56 | No |
| Jiang Yuhui | Director, Deputy general manager, member of the | Female | 57 | Incumbent | 56 | No |
Share incentives for directors, supervisors and senior executives in the reporting period? Applicable √ N/A
5. Staff in the Company
5.1 Number, functions and educational backgrounds of the staff
| party committee, chairman of the labor union | ||||||
| Shen Caihong | Director, Deputy general manager | Male | 54 | Incumbent | 56 | No |
| Du Kunlun | Non-executive director | Male | 51 | Incumbent | 9.52 | No |
| Xu Guoxiang | Non-executive director | Male | 60 | Incumbent | 9.52 | No |
| Tan Lili | Non-executive director | Female | 65 | Incumbent | 9.52 | No |
| Liu Junhai | Non-executive director | Male | 50 | Incumbent | 9.52 | No |
| Qian Xu | External director | Male | 56 | Incumbent | 9.52 | No |
| Ying Hanjie | External director | Male | 50 | Incumbent | 9.52 | No |
| Lian Jing | Supervisor | Male | 50 | Incumbent | 0 | No |
| Yang Benhong | Supervisor | Female | 53 | Incumbent | 46.63 | No |
| Cao Cong | Supervisor | Male | 35 | Incumbent | 41.32 | No |
| Li Guangjie | Supervisor | Male | 50 | Incumbent | 69.71 | No |
| Wu Qin | Deputy general manager | Male | 58 | Incumbent | 56 | No |
| Xie Hong | CFO | Female | 50 | Incumbent | 56 | No |
| He Cheng | Deputy general manager | Male | 53 | Incumbent | 56 | No |
| Zhang Suyi | Deputy general manager | Male | 48 | Incumbent | 56 | No |
| Total | -- | -- | -- | -- | 746.78 | -- |
| Number of in-service staff of the parent company | 1,125 |
5.2 Staff remuneration policy
In 2019, the Company established the distribution policy of "sharing benefits, paying for losses,classification and setting, and long-term policy effects", continuously strengthened the digitalassessment, linked individual performance with organizational performance, and highlighted thedistribution according to performance. The Company implemented the post rating wage system andstrengthened the performance management of all employees. According to the following principles:
Link individual performance with organizational performance: The increase of wages is linked to theincrease of the Company's operating performance and profit growth; Under the same caliber, theproportion of increase in salaries shall not exceed the proportion of increase in performance and profitgrowth.
Salary and its changes based on position, ability and performance: The salary of employee shall bedetermined by position and the depth of their expertise. The salary shall be adjusted accordingly whenthe position, ability and performance change.
| Number of in-service staff of main subsidiaries | 2,103 |
| Total number of in-service staff | 3,228 |
| Total number of staff with remuneration in the period | 3,228 |
| Number of retirees to whom the Company or its main subsidiaries need to pay retirement pension | 861 |
| Functions | |
| Function by category | Number of staff |
| Production staff | 1,128 |
| Sales staff | 824 |
| R&D staff | 593 |
| Financial staff | 106 |
| Administrative staff | 577 |
| Total | 3,228 |
| Educational backgrounds | |
| Educational background by category | Number of staff |
| Senior high school and below | 610 |
| Junior college | 1,069 |
| Bachelor | 1,278 |
| Master | 264 |
| Doctor | 7 |
| Total | 3,228 |
Performance orientation, bonus and forfeit: Performance assessment is conducted according to theactual contributions of employees, and the salary distribution is inclined to the employees with excellentperformance.
The principle of equal wage negotiation: Abide by the principles that both sides of labor and capitalagrees in collective negotiation, so as to realize the unity of benefit and fairness.
5.3 Staff training plans
In 2019, based on the staff career development system and job qualification standards, the Companyimplemented a targeted training system comprising different levels to meet demands for staff abilityimprovement for different positions and different career development stages.
Sail Program: The “Sail Program” training was conducted for new employees hired through campus andsocial recruitment and for other grassroots employees. The purpose was to enhance new employees’understanding and recognition of the Company’s core values, familiarize them with the Company’sproduction and operation statuses and their work procedures, and allow them to accumulateprofessional knowledge and skills and improve their ability to work independently.
Dive Program: The “Dive Program” training was conducted for general employees on specialized lines.The purpose was to strengthen their specialty knowledge and ability to solve specialty problems,enhance their basic management skills, improve their competency and raise their performance. Due tothe huge coverage of trainees across different business segments, the training was conducted in theform of sub-programs, such as “Happy Learning Sub-program” and “Craftsman Sub-program” to providespecialty knowledge and skills of different systems.
Voyage Program: The “Voyage Program” training was conducted for key personnel with a systematicdesign of three-year development plans and a focus on three themes, including “self-management”,“work management” and “interpersonal management”. The purpose was to enrich employees’knowledge on corporate business management, improve their knowledge structure, and enhance theirstrategic understanding and abilities of work and team management.
Steering Program: The “Steering Program” training was conducted for middle management personneland department experts in the form of online and offline combined, “coming in” and “going out” combinedand ability enhancement and work style building combined. Through the learning of advancedmanagement concepts and practices, the training aimed to drive employees to broaden their mind,expand their vision, strengthen their leadership skills and enhance their level of corporate management.
In addition, in terms of professional talents training, in combination with the strategic needs of talentdevelopment and relevant policies of provinces and cities, the Company actively carries out the work ofstaff title appraisal, skill appraisal, recommendation and assessment and so on.
5.4 Labor outsourcing
? Applicable √ N/A
Section X Corporate Governance
1. Basic situation of corporate governance
Since it was listed, in accordance with the Corporate Law, the Securities Law, The Listed CompanyGovernance Standards and other laws, administrative regulations and departmental rules and normativedocuments, the Company has constantly perfected corporate governance structure, standardized itsoperation, established the rules and system on the basis of the Company's articles of association whosemain framework is the rules of procedure of the shareholders' general meeting, rules of procedure of theboard of directors and rules of procedure of the board of supervisors, which is formed the managementsystem whose main structure is the shareholders meeting, board of directors, board of supervisors andmanagement. During the reporting period, the Company won a number of honors and awards, including“Top 100 Value” for main board listed companies by Securities Times, “2019 Golden Bull Prize for Top100 Chinese Listed Company” and “2019 Golden Bull Prize for Gold Board Secretary” by ChinaSecurities Journal, and “Excellent Board Secretary Award for Listed Companies of Sichuan” by The ListCompany Association of Sichuan.
Any incompliance with the regulatory documents related to the governance of listed companies issuedby the CSRC?Yes√ NoThere is no incompliance with the regulatory documents related to the governance of listed companiesissued by the CSRC.
2. Independency of businesses, personnel, assets, organizations andfinance which are separated from the controlling shareholderThe Company has an independent and complete production and operation system and independentdecision-making ability. There is no horizontal competition between the Company and the controllingshareholders and its subsidiaries. The Company has daily affiliated transactions with the controllingshareholders and its subsidiaries. Such daily affiliated transactions belong to the need of rationalallocation of resources and do not affect the independence of the Company. For affiliated transactions,the Company has strictly fulfilled the relevant decision-making procedures and information disclosureobligations, and implemented the system of Non-executive directors' prior examination and avoidancesystem of related directors (shareholders).
2.1 In the aspect of assets
Asset integrity. There are clear ownership and independency of the Company's assets invested bycontrolling shareholders. The Company has an independent and complete production, supply, salessystem and auxiliary production system and supporting facilities. The industrial property rights,trademarks and non-patented technology and other intangible assets are owned by the Company. There
is no situation that the controlling shareholders occupy and transfer the assets of the company.
2.2. In the aspect of business
Business apart. The Company is totally independent in the operation, production and sales of liquorseries of “Luzhou Laojiao” and “National Cellar 1573”. It has the ability to operate independently in themarket. The board of directors and the management can independently make production and operationdecisions within the corresponding authority.
2.3 In the aspect of personnel
The Company has built independent labor management, personnel management and salarymanagement. The Company has established a relatively complete labor management system and postresponsibility system. Meanwhile, the Company's senior management personnel all receive salary in theCompany, but not at the controlling shareholders.
2.4 In the aspect of organization
Organization independence. The Company has independent production management organization andsystem, independent office and production management place, and independent managementorganization, functional organization and branch.
2.5 In the aspect of finance
Financial independence. The Company has completed and independent financial department.Independent accounting system and financial management are established. The Company separatelysets bank accountants, conducts external settlement and pays taxes according to law.
3. Horizontal competition
?Applicable √ N/A
4. Annual meeting of shareholders and special meetings of shareholdersconvened during the reporting period
4.1. Meetings of shareholders convened during the reporting period
| Meeting | Type | Investor participation ratio | Convened date | Disclosure date | Disclosure index |
| The First Special Meeting of Shareholders in 2019 | Special meeting of shareholders | 59.32% | 14 May 2019 | 15 May 2019 | “Luzhou Lao Jiao Co., Ltd. The First Special Meeting Resolution Announcement” No:2019-12, |
| (http://www.cninfo.com.cn/) | |||||
| 2018 Annual General Meeting of Shareholders | General Meeting of Shareholders | 55.84% | 27 June 2019 | 28 June 2019 | “Luzhou Lao Jiao Co.,Ltd. 2018 Annual General Meeting Resolution Announcement” Announcement No:2019-17, (http://www.cninfo.com.cn/) |
4.2. Special meetings of shareholders convened at the request of preferenceshareholders with resumed voting rights?Applicable √ N/A
5. Performance of non-executive directors during the reporting period
5.1. Attendance of non-executive directors in board meeting and meeting ofshareholders
| Attendance of non-executive director in board meeting | |||||||
| Non-executive director | Attendance due in the reporting period (times) | Attendance on site (times) | Attendance by telecommunication (times) | Attendance through a proxy (times) | Absence (times) | Absence for two consecutive times | Attendance (times) |
| Du Kunlun | 10 | 1 | 9 | 0 | 0 | No | 1 |
| Xu Guoxiang | 10 | 1 | 9 | 0 | 0 | No | 0 |
| Tan Lili | 10 | 1 | 9 | 0 | 0 | No | 1 |
| Liu Junhai | 10 | 0 | 10 | 0 | 0 | No | 0 |
5.2. Objections from non-executive in related issues of the CompanyWere there any objections on related issues of the Company from non-executive director? Yes √ NoNon-executive director has no objection on related issues of the Company during the reporting period.
5.3. Other details about the performance of duties by non-executive directorsWas there any advice from non-executive directors adopted by the Company?
√ Yes ? No
Explanation about advice of non-executive directors is adopted or not adopted by the Company or notThe Company adopted the advice of non-executive directors in respect of safe production, systemimprovement, and internal control construction.
6. Performance of duties by special committees under the broad duringthe reporting periodThe board of directors of the Company has four special committees including the Strategic Committee,the Remuneration and Appraisal Committee, the Nominations Committee and the Audit Committee.Each committee has a clear division of labor, clear responsibilities and effective operation. During thereporting period, the committees held 7 meetings, providing important support to the decisions of theboard. The Audit Committee provided proactive guidance for internal audit, dutifully reviewed theCompany’s financial report and issued audit opinions in the audit procedures, and raised suggestions onfurther appointment of the accountant firm; the Strategic Committee conducted careful research on themacro-economic environment and industrial development trends, provided professional opinions oninvestment in external parties and other issues and effectively guaranteed the strategic orientation of theCompany; the Nomination Committee continued to update and improve the Company’s database ofhigh-level professionals, providing assurance for the Company’s healthy and sustained development;the Remuneration and Appraisal Committee made active steps to urge the Company to establish andoptimize a remuneration and appraisal mechanism that conforms with the management policies ofmodern enterprises and conducted review on the payment and disclosure of the remuneration of theCompany’s directors and senior management.
7. Performance of duties by the supervisory committeeWere there any risks to the Company identified by supervisory committee when performing its dutiesduring the reporting period? Yes √ NoThe supervisory committee has no objection during the reporting period.
8. Evaluation and motivation mechanism for the senior managementRemuneration and evaluation for the senior management can be found in section VIII: Profiles ofDirectors, Members of Supervisory Committee, Senior Management and Employees.
9. Internal control
9.1. Significant internal control deficiencies found in the reporting period? Yes √ No
9.2. Internal control self-assessment report
| Disclosure date of the internal control self-assessment report | 29 April 2020 | |
| Disclosure index of the internal control self-assessment report | 2019 Internal Control Self-assessment Report （http://www.cninfo.com.cn/） | |
| Ratio of the total assets of the appraised entitles to the consolidated total assets | 90.00% | |
| Ratio of the operating revenues of the appraised entitles to the consolidated operating revenue | 90.00% | |
| Deficiencies identification standard | ||
| Type | Financial report | Non-financial report |
| Qualitative standard | Significant deficiencies：（1）Correction of material errors in financial reports that have been announced (except retroactive adjustment of previous years due to changes in policies or other objective factors)；（2）Material misstatement of current financial report which was unrecognized but found by the auditor；（3） Corrupt transaction of senior management；（4）Audit committee and internal audit department are not effective to the internal control supervision . | Significant deficiencies：（1）violate national regulations and laws；（2）The Company suffer from lake of major decision-making procedures or unscientific procedures；if there is a decision-making misplay, it will result in significant deal failure（3）The substantial loss of managerial or technical staff；（4）Important business lacks system control or system failure, important economic business has internal control system guidance, but with no effective operation；（5）significant deficiencies of internal control cannot be rectified in time. |
| Quantitative standard | 1. Significant deficiencies：Misstatement ≥ 5% of total profits；Misstatement ≥ 1% of total assets；Misstatement ≥ 5% of total operating revenue；Misstatement ≥5% of owner's equity 2. Material deficiencies：3% of gross profits≤Misstatement<5% of gross profits；0.5% of total | 1. Significant deficiencies：ratio of loss of net profits≥5%. 2. Material deficiencies：3%≤ratio of loss of net profits＜5%. 3. General deficiencies：ratio of loss of net profits＜3% |
| assets≤Misstatement<1% of total assets；3% of total operating revenue≤Misstatement<5% of total operating revenue；3% of owner's equity≤Misstatement<5% of owner's equity. 3. General deficiencies：Misstatement<3% of gross profits；Misstatement<0.5% of total assets；Misstatement<3% of total operating revenue；Misstatement<3% of owner's equity. | ||
| Number of financial-report significant deficiencies | 0 | |
| Number of non-financial-report significant deficiencies | 0 | |
| Number of important financial-report related deficiencies | 0 | |
| Number of important Non-financial-report related deficiencies | 0 | |
10. Internal control auditor report
√ Applicable ? N/A
| Deliberation opinion section in the internal control audit report | |
| The Company has maintained effective internal control of financial reports in accordance with the Basic Rules for Internal Control of Enterprises and relevant regulations. | |
| Disclosure of internal control audit report | Disclosed |
| Disclosure date of the internal control audit report | 29 April 2020 |
| Disclosure index of the internal control audit report | 2019 Internal Control Auditor Report （http://www.cninfo.com.cn/） |
| Type of the audit’s opinion | Standard without reserved opinion |
| Significant deficiencies found in the non-financial report | No |
The accounting firm issued the internal control audit report of non-standard opinions? Yes √ No
Whether the internal control audit report issued by the accounting firm is consistent with theself-assessment report issued by the board of directors.
√ Yes ? No
Section XI Information about Corporate Bond
Whether there exists a public issue and listing of corporate bond that is not yet due or failed to beredeemed at the date of the financial report authorized.Yes
1. Basic information about the corporate bond
| Name | Abbr. | Code | Issue date | Due date | Bond balance (CNY 10,000) | Interest rate | Way of redemption |
| 2019 Public Offering of Corporate Bond of Luzhou Laojiao Co., Ltd. for Qualified Investors (Phase I) | 19 Lao Jiao 01 | 112959.SZ | 27 August 2019 | 28 August 2024 | 250,000 | 3.58% | 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. |
| 2020 Public Offering of Corporate Bond of Luzhou Laojiao Co., Ltd. for Qualified Investors (Phase I) | 20 Lao Jiao 01 | 149062.SZ | 17 March 2020 | 17 March 2025 | 150,000 | 3.50% | 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. | ||
| Listed or transferred trading place of corporate bond | Shenzhen Stock Exchange | |
| Appropriate arrangement of the investors | 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) | |
| Interest payment during the reporting period | “19 Lao Jiao 01” and “20 Lao Jiao 02” have not reached the interests payment period; | |
| Execution of the relevant regulations during the reporting period such as the affiliated option clause of the issuers or investors, special clauses such as the exchangeable regulations of corporate bond (if applicable) | The term of “19 Lao Jiao 01” is five years with the issuer’s option for adjustment to the stated interest rate and the investor’s option for sell back at the end of the 3rd year | |
2. List of the bond trustee and the rating organization
| Bond trustee: | |||||||
| Name | China International Capital Corporation Limited. | Office address | 27th and 28th Floor, China World Office 2, No. 1 Jianguomenwai Avenue, Chaoyang | Contact person | Ma Sichong, Huang Jiening, Pan Xiaofei, Xie Ci, Qi Qin, Feng Jin, Yan Jie, Wang | Contact number | （010）65051166 |
| District, Beijing | Yiqiu, Jiang Lijia | |||||
| Rating organization executed the tracking rating of the corporate bonds of the reporting period: | ||||||
| Name | China Chengxin International Credit Rating Co., Ltd. | Office address | Building 6, Galaxy SOHO, No.2 Nanzhugan hutong,Chaoyangmennei Avenue, Dongcheng District, Beijing | |||
| Alternation reasons, execution process and influences on the investors’ interests etc. if there was alternation of the bond trustees and the credit rating agencies engaged by the Company during the reporting period (if applicable) | N/A | |||||
3. Information about usage of fund-raising of the corporate bond
| Information about usage of fund-raising and the execution process of corporate bond | The Company raised a fund of CNY 2.5 billion through the issue of corporate bonds on 26 August 2019. After deduction of the issue fees, the balance amount was set to use in the technical renovation project of brewing (Phase II), Project of Intelligent Upgrading and Building of the Information Management System, Project of Acquiring Sealing Equipment for the Cellar of Huangyi Brewing Base and Project of Acquiring Accessory Equipment for Leaven Making for Huangyi Brewing Base. As of 31 December 2019, CNY 2,003,815,000 of the fund-raising through the issue of corporate bonds had been used. |
| Closing balance (CNY 10,000) | 50,001.54 |
| Operating situation of the fund-raising special account | In accordance with related laws and regulations, the Company has designated an account specifically for fundraising to receive, deposit and transfer funds raised through the issue of corporate bonds and pay interests and principals. Details of this bank account are as follows: account name: Luzhou Laojiao Co., Ltd.; bank: CGB Chengdu Branch; account number: 9550880046723000135. The Company has signed a third-party regulation agreement with the bank and the trustee. |
| Whether the usage of the fund-raising met with the usage, using plan and other agreements committed on the prospectus | The usage of the fund-raising met with the usage committed on the prospectus |
4. Rating situation of corporate bond information
On 15 August 2019, China Chengxin Securities Rating Co., Ltd. issued a credit rating report for “19 LaoJiao 01”. The Company’s main body has a credit rating of AAA and a stable rating outlook; the bond’scredit rating is AAA.
On 2 March 2020, China Chengxin International Credit Rating Co., Ltd. issued a credit rating report for“20 Lao Jiao 01”. The Company’s main body has a credit rating of AAA and a stable rating outlook; thebond’s credit rating is AAA.
5. Credit-adding mechanism, repayment plan and other repaymentguarantee measures of the corporate bondNot applicable
6. Information about convening of the bondholders meeting during thereporting periodThe Company did not convene bondholders meeting during the reporting period.
7. Information about duty execution of bond trustee during the reportingperiod
During the validity of the corporate bond, the trustee performed continuous tracking of the Company’scredit information and management and utilization of the fund-raising strictly in accordance with theBonds Trusteeship Agreement, urged the Company to fulfill its obligations agreed in the prospectus ofthe corporate bond, proactively exercised its duties as a bonds trustee and safeguarded the legitimaterights and interests of the bondholders.
CICC produced an interim report on the trusteeship affairs for the Company’s involvement of significantlitigation and disclosed it synchronously on cninfo (www.cninfo.com.cn).
8. The major accounting data and the financial indicators of the recent 2years of the company as of the end of the reporting period
Unit：CNY 10,000
| Item | 2019 | 2018 | YoY change |
| EBITDA | 641,080.79 | 488,743.51 | 31.17% |
| Current ratio | 240.36% | 286.11% | -45.75% |
| Asset-liability ratio | 32.38% | 24.25% | 8.13% |
| Quick ratio | 184.48% | 223.93% | -39.45% |
| Total debt ratio of EBITDA | 257.37% | 0.00% | |
| Times interest earned | 41.31 | 73.01 | -43.42% |
| Times interest earned of EBITDA | 42.42 | 75.54 | -43.84% |
Main reason of the above accounting data and the financial indicators with the YoY change exceeded30%
√ Applicable □ N/A
1. EBITDA increased 31.17% year-on-year, mainly due to increase in sales revenue and net profit for thereporting period.
2. Current ratio decreased 45.75% year-on-year, mainly due to increase in advances from customer andaccounts payable of current liabilities for the reporting period.
3. Quick ratio decreased 39.45% year-on-year, mainly due to increase in advances from customer andaccounts payable of current liabilities for the reporting period.
4. Times interest earned decreased 43.42% year-on-year, mainly due to increase in interest expense forthe reporting period.
5. Times interest earned of EBITDA decreased 43.84% year-on-year, mainly due to increase in interestexpense for the reporting period.
9. Information about interest payment of other bonds and debt financinginstruments during the reporting periodNot applicable
10. Information about acquired bank credit lines, usage and repaymentof the bank loans during the reporting periodNot applicable
11. Information about the execution of the agreements or thecommitments related to the corporate bond fund-raising specificationduring the reporting periodDuring the reporting period, the Company used the raised funds strictly according to the agreement srelated to the corporate bond fund-raising specification.
12. Significant events occurring during the reporting periodNo significant events during the reporting period.
13. Whether there was guarantor of the corporate bond
□ Yes √ No
Section XII Financial Report
1. Auditor’s report
| Type of audit report | Standard without reserved opinion |
| Signing date of auditor’s report | 27 April 2020 |
| Name of Audit | Sichuan Huaxin (Group) CPA Firm |
| No. of auditor’s report | Chuan Huaxin Audit [2020] No.0032 |
| Names of auditors | Feng Yuan, Tang Fangmo |
Auditor’s Report
To the shareholders of Luzhou Laojiao Co., Ltd.:
OpinionWe have audited the financial statements of Luzhou Laojiao Co., Ltd. (hereinafter referred to as the“Company”), which comprise the consolidated balance sheet and balance sheet as at 31 December2019, consolidated income statement and income statement, consolidated cash flow statement andcash flow statement, consolidated statement of changes in owners' equity and statement of changes inowners' equity for the year then ended; and notes to the financial statements.
In our opinion, the attached financial statements are prepared, in all material respects, in accordancewith Accounting Standards for Business Enterprises and present fairly the financial position of thecompany as at 31
December 2019 and its operating results and cash flow for the year then ended.
Basis for opinionWe conducted our audit in accordance with China Standards on Auditing (“CSAs”) for Certified PublicAccountants. Our responsibilities under those standards are further described in the Auditor'sResponsibilities for the Audit of the Financial Statements section of our report. We are independent ofthe Company in accordance with the Code of professional ethics for Certified Public Accountants inChina (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour opinion.
Key audit mattersKey audit matters are those matters that, in our professional judgment, were of most significance in ouraudit of the consolidated financial statements of the current period. These matters were addressed in thecontext of our audit of the consolidated financial statements as a whole and, in forming our opinion
thereon, and we do not provide a separate opinion on these matters. Key audit matters identified in ouraudit are summarized as follows:
| 1. Key audit matters-Recognition of domestic liquor sales revenue | |
| Key audit matters | How our audit addressed the Key Audit Matter |
| In 2019, the Company's total operating revenue is CNY 15.817 billion, including CNY 15.473 billion of domestic liquor sales revenue, accounting for 97.83% of the total operating revenue. Considering the significant amount of the Company's domestic liquor sales revenue, we pay attention to it as a key audit matter. | Our procedures in relation to recognition of domestic liquor sales revenue included: 1. Understood, evaluated and tested the reasonableness and effectiveness of the internal control design related to the Company's revenue. Particular attention was paid to the appropriateness of specific conditions for recognition of revenue. 2. Compared the key indicators such as sales volume, revenue cost and gross profit rate of the Company in the current period with those in the previous period, so as to identify the rationality of changes in key indicators and reasons for changes. 3. The income of the top five customers totaled CNY 10.447 billion, accounting for 66.05% of the total business income. For the top five customers, we carried out the following audit procedures to verify the occurrence, completeness and accuracy of the revenue recognized by the management: (1) Obtained the sales contract signed by the Company and the customer, carefully read the key terms of the contract, and understand the implementation of the contract; (2) Performed the confirmation procedure. We sent confirmation letters to verify the amount of sales revenue in the reporting period and the closing balance of accounts receivables or advance from customer during the reporting period. For local customers in Luzhou, we went to their office to carry out confirmation procedure and obtained the situation of purchase, sales and storage of Luzhou Laojiao brand liquor during the reporting period, so as to analyze and judge whether there are abnormal fluctuations in its inventory and its rationality; For customers outside Luzhou, we mailed confirmation letters and controlled the whole process of reply letter by ourselves. (3) Inquired the customer's business information and key personnel information, and checked whether they are |
| related party of the Company. 4. For other customers, randomly checked sales contracts, customers' purchase orders, shipping documents, transport documents, accounting vouchers, payment receipts, customer signature records and other materials to verify the occurrence, completeness and accuracy of the revenue recognized by the management. 5. Selected the confirmation voucher of large amount of sales before and after the balance sheet date, paid attention to the date of sales invoice and customer receipt, and paid attention to whether there is a large amount of return after the period, so as to verify whether the corresponding revenue is included in the appropriate accounting period. The evidence obtained from the above audit procedures can support the Company's management's recognition of domestic liquor sales revenue. | |
| 2. Key audit matters-Existence of bank deposits | |
| Key audit matters | How our audit addressed the Key Audit Matter |
| As of 31 December 2019, the bank balance of the Company is CNY 9.744 billion, accounting for 33.69% of the total assets. Bank deposits are high-risk assets. Therefore, we pay attention to the existence of bank deposits as a key audit matter. | Our procedures in relation to existence of bank deposits included: 1. Understood and tested the design and implementation of key internal controls related to the funds management cycle to confirm the effectiveness of relevant internal controls. 2. Accompanied by relevant personnel of the Company, auditors went to the bank by themselves where the Company opens a basic bank account to print the account opening list of the Company and check the account opening information individually. 3. Checked the carrying amount of all bank accounts with the original amount of bank statements and certificates of deposit, and obtained all copies. 4. Based on the results of checking the amount of bank statements, obtained the balance reconciliation of all bank accounts compiled by the Company, and check all the outstanding items, whether there are any important overdue items that are not booked in time. 5. Implemented the confirmation procedure for the Company's bank deposits, in which the local deposit accounts in Luzhou were confirmed by auditors and the Company's cashier in the bank; The confirmation letters |
| of deposit accounts outside Luzhou were sent out by mailing after auditors checked the address and the receiver through telephone, network and other public information, and we controlled the whole reply letter process by ourselves. 6. Obtained and reviewed time deposits or structured deposit agreements, identified the types of relevant bank deposits, analyzed the principal and interest recovery risks, and judged the adequacy of the disclosure. 7. Inquired the management and relevant personnel about the purpose of all bank accounts on the Company's books and analyzed whether there are abnormal use or bank accounts opened for unknown reasons. The evidence obtained from the above audit procedures can support the Company's management's assertion of the existence of bank deposits. | |
| 3. Key audit matters-Recognition of the book value of technical renovation project of brewing industry | |
| Key audit matters | How our audit addressed the Key Audit Matter |
| As of 31 December 2019, an amount of CNY 6.363 billion was spent on the technical renovation project of brewing, one of the construction in progress; the closing balance was CNY 6.072 billion, accounting for 21.00% of the total assets; an amount of CNY 4 billion was spent in 2019. Some sub-projects had reached the expected usable state and been transferred into fixed assets. The total increase in fixed assets from the transfer was CNY 290 million, all of which was from transfer in 2019. Because the amount spent on the technical renovation project of brewing is significant, the amount of transfer from construction in progress to fixed assets involves the estimation and judgment of the management, and the withdrawal of depreciation costs has direct impact on the current profit, we have paid attention to the recognition of the book value of the technical renovation project of brewing as a key audit matter. | Our procedures in relation to the recognition of the book value of the technical renovation project of brewing included: 1. Understood and tested the design and implementation of key internal controls related to the assets management cycle to confirm the effectiveness of relevant internal controls. 2. We selected samples for new important amounts occurred in the current period with regard to the technical renovation project of brewing, reviewed the ledger of the project contracts, and examined supporting documents related to it, including tender and bidding documents, project establishment or budget documents, project contracts and invoices, final statement of the project, procurement contracts and invoices, and payment approvals. 3. We selected samples for new important amounts transferred into fixed assets in the current period with regard to the technical renovation project of brewing, examined reports on final statement for completed sub-projects and inspection reports or information on pre-transfers into fixed assets, and confirmed the accuracy of the time point of transfers from projects in |
Other informationThe directors of the Company are responsible for the other information. The other information comprisesthe information included in the annual report, but does not include the financial statements and ourauditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express anyform of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other informationand, in doing so, consider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this otherinformation, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of directors and those charged with governance for the financial statementsThe directors of the Company are responsible for the preparation of the financial statements that give atrue and fair view in accordance with the disclosure requirements of Accounting Standards for BusinessEnterprises, and designing, implementing and maintaining internal control that is necessary to ensurethe financial statements are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company’s abilityto continue as a going concern, disclosing, as applicable, matters related to going concern and using thegoing concern basis of accounting unless the directors either intend to liquidate the Company or tocease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reportingprocess.
Auditor's responsibilities for the audit of the financial statementsOur objectives are to obtain reasonable assurance about whether the financial statements as a wholeare free from material misstatement, whether due to fraud or error, and to issue an auditor’s report thatincludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with CSAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if, individually or in theaggregate, they could reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
As part of an audit in accordance with CSAs, we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidencethat is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error, as fraud may involvecollusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
(2) Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control.
(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by the directors.
(4) Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Company’s ability to continue as a going concern. If weconclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to therelated disclosures in the financial statements or, if such disclosures are inadequate, to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.However, future events or conditions may cause the Company to cease to continue as a going concern.
(5) Evaluate the overall presentation, structure and content of the financial statements, and whether thefinancial statements represent the underlying transactions and events in a manner that achieves fairpresentation.
(6) Obtain sufficient and appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Company to express an opinion on the financial statements. We areresponsible for the direction, supervision and performance of the group audit. We remain solelyresponsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
We also provide the governance with a statement that we have complied with relevant ethicalrequirements regarding independence, and to communicate with them all relationships and othermatters that may reasonably be thought to bear on our independence, and where applicable, relatedsafeguards.
From the matters communicated with the governance, we determine those matters that were of mostsignificance in the audit of the consolidated financial statements of the current period and are thereforethe key audit matters. We describe these matters in our auditor’s report unless law or regulationprecludes public disclosure about the matter or when, in extremely rare circumstances, we determinethat a matter should not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of such communication.
2. Financial statements
Prepared by: Luzhou Laojiao Co.,Ltd.
Consolidated balance sheet
As at 31 December 2019
Monetary Unit: CNY
| Item | Balance as at 31 December 2019 | Balance as at 31 December 2018 |
| Current assets: | ||
| Cash and cash equivalents | 9,753,666,526.78 | 9,367,386,627.68 |
| Settlement reserves | ||
| Lending funds | ||
| Held-for-trading financial assets | ||
| Financial assets measured at fair value through current profit or loss | ||
| Derivative financial assets | ||
| Notes receivables | 2,388,326,476.15 | |
| Accounts receivables | 18,293,914.23 | 10,333,728.87 |
| Accounts receivables financing | 2,393,797,259.80 | |
| Prepayment | 151,818,448.48 | 137,243,573.66 |
| Premiums receivable | ||
| Reinsurance accounts receivable | ||
| Reinsurance contract reserve | ||
| Other receivables | 159,753,421.64 | 166,525,010.16 |
| Including：Interests receivable | 45,636,744.44 | 29,970,944.44 |
| Dividends receivable | ||
| Buying back the sale of financial assets | ||
| Inventories | 3,641,235,092.33 | 3,230,415,749.95 |
| Contractual assets | ||
| Assets held for sale | ||
| Non-current assets due within one year | ||
| Other current assets | 195,174,048.57 | 194,237,237.02 |
| Total current assets | 16,313,738,711.83 | 15,494,468,403.49 |
| Non-current assets: | ||
| Disbursement of loans and advances | ||
| Investments in debt obligations | ||
| Available-for-sale financial assets | 275,819,448.46 | |
| Investments in other debt obligations | ||
| Held-to-maturity investments | ||
| Long-term receivables | ||
| Long-term equity investments | 2,230,721,725.72 | 2,091,103,348.61 |
| Investments in other equity instruments | 352,395,255.78 | |
| Other non-current financial assets | ||
| Investment property | ||
| Fixed assets | 1,518,865,397.91 | 1,029,666,915.47 |
| Construction in progress | 7,257,393,087.56 | 3,000,489,249.86 |
| Productive biological assets | ||
| Oil and gas assets | ||
| Use right assets | ||
| Intangible assets | 332,234,032.47 | 231,967,372.88 |
| Development expenses | ||
| Goodwill | ||
| Long-term deferred expenses | 928,805.23 | |
| Deferred tax assets | 676,152,614.07 | 436,434,961.24 |
| Other non-current assets | 237,539,447.75 | 44,979,896.41 |
| Total non-current assets | 12,606,230,366.49 | 7,110,461,192.93 |
| Total assets | 28,919,969,078.32 | 22,604,929,596.42 |
| Current liabilities: | ||
| Short-term loans | ||
| Borrowings from the central bank | ||
| Loans from other banks | ||
| Held-for-trading financial liabilities | ||
| Financial liabilities measured at fair value through current profit or loss | ||
| Derivative financial liabilities | ||
| Notes payable | ||
| Accounts payable | 1,868,623,958.02 | 1,292,050,954.06 |
| Advance from customer | 2,244,442,643.64 | 1,604,425,189.96 |
| Contractual liabilities | ||
| Financial assets sold for repurchase | ||
| Deposits from customers and inter-bank | ||
| Customer brokerage deposits | ||
| Securities underwriting brokerage deposits | ||
| Employee benefits payable | 342,025,687.49 | 268,092,193.50 |
| Taxes payable | 1,633,044,231.67 | 1,648,028,076.07 |
| Other payable | 698,942,399.37 | 602,887,024.88 |
| Including：Interests payable | 30,650,684.93 | |
| Dividends payable | ||
| Handling charges and commissions payable | ||
| Reinsurance accounts payable | ||
| Liabilities held for sale | ||
| Non-current liabilities due within one year | ||
| Other current liabilities | ||
| Total current liabilities | 6,787,078,920.19 | 5,415,483,438.47 |
| Non-current liabilities: |
| Insurance contract reserves | ||
| Long-term loans | ||
| Bonds payable | 2,490,883,676.39 | |
| Including：Preference shares | ||
| Perpetual bonds | ||
| Lease liabilities | ||
| Long-term payables | ||
| Long-term payroll payables | ||
| Accrued liabilities | ||
| Deferred income | 23,845,000.00 | 20,981,155.00 |
| Deferred tax liabilities | 63,430,453.64 | 44,252,383.96 |
| Other non-current liabilities | ||
| Total non-current liabilities | 2,578,159,130.03 | 65,233,538.96 |
| Total liabilities | 9,365,238,050.22 | 5,480,716,977.43 |
| Shareholders' equity | ||
| Share capital | 1,464,752,476.00 | 1,464,752,476.00 |
| Other equity instruments | ||
| Including: preference shares | ||
| Perpetual bonds | ||
| Capital reserves | 3,722,777,063.13 | 3,716,675,022.48 |
| Less: treasury stock | ||
| Other comprehensive income | 194,817,130.57 | 136,592,276.64 |
| Special reserves | ||
| Surplus reserves | 1,464,752,476.00 | 1,464,752,476.00 |
| General risk reserve | ||
| Undistributed profits | 12,559,746,579.91 | 10,181,899,224.84 |
| Total equity attributable to owners of the parent company | 19,406,845,725.61 | 16,964,671,475.96 |
| Non-controlling interests | 147,885,302.49 | 159,541,143.03 |
| Total owners' equity | 19,554,731,028.10 | 17,124,212,618.99 |
| Total liabilities and owners' equity | 28,919,969,078.32 | 22,604,929,596.42 |
Legal representative：Liu MiaoPerson in charge of accounting affairs：Xie HongPerson in charge of accounting department：Yan Li
Balance sheet of parent company
As at 31 December 2019
Monetary Unit: CNY
| Item | Balance as at 31 December 2019 | Balance as at 31 December 2018 |
| Current assets: | ||
| Cash and cash equivalents | 8,872,692,385.79 | 6,189,473,157.83 |
| Held-for-trading financial assets | ||
| Financial assets measured at fair value through current profit or loss | ||
| Derivative financial assets | ||
| Notes receivables | ||
| Accounts receivables | 21,562.85 | 67,698.43 |
| Accounts receivables financing | ||
| Prepayment | 11,682,593.27 | 7,212,512.57 |
| Other receivables | 5,850,481,480.50 | 4,657,727,046.02 |
| Including：Interests receivable | 40,570,144.44 | 29,970,944.44 |
| Dividends receivable | ||
| Inventories | 1,049,384.24 | 383,404.53 |
| Contractual assets | ||
| Assets held for sale | ||
| Non-current assets due within one year | ||
| Other current assets | 5,562,360.72 | 1,761,708.33 |
| Total current assets | 14,741,489,767.37 | 10,856,625,527.71 |
| Non-current assets: | ||
| Investments in debt obligations | ||
| Available-for-sale financial assets | 275,490,526.83 | |
| Investments in other debt obligations | ||
| Held-to-maturity investments | ||
| Long-term receivables | ||
| Long-term equity investments | 5,636,681,853.83 | 5,494,914,376.71 |
| Investments in other equity instruments | 352,066,334.15 | |
| Other non-current financial assets |
| Investment property | ||
| Fixed assets | 601,481,983.81 | 701,870,689.02 |
| Construction in progress | 967,953,263.55 | 511,528,278.96 |
| Productive biological assets | ||
| Oil and gas assets | ||
| Use right assets | ||
| Intangible assets | 297,830,285.02 | 224,039,846.61 |
| Development expenses | ||
| Goodwill | ||
| Long-term deferred expenses | 777,834.15 | |
| Deferred tax assets | 75,249,717.72 | 71,119,598.96 |
| Other non-current assets | ||
| Total non-current assets | 7,932,041,272.23 | 7,278,963,317.09 |
| Total assets | 22,673,531,039.60 | 18,135,588,844.80 |
| Current liabilities: | ||
| Short-term loans | ||
| Held-for-trading financial liabilities | ||
| Financial liabilities measured at fair value through current profit or loss | ||
| Derivative financial liabilities | ||
| Notes payable | ||
| Accounts payable | 87,652,671.29 | 38,984,611.48 |
| Advance from customer | 9,712,630.35 | 12,229,153.62 |
| Contractual liabilities | ||
| Employee benefits payable | 116,124,722.19 | 67,383,911.98 |
| Taxes payable | 82,399,599.18 | 115,424,262.03 |
| Other payables | 1,099,598,588.83 | 1,788,068,491.88 |
| Including：Interests payable | 30,650,684.93 | |
| Dividends payable | ||
| Liabilities held for sale | ||
| Non-current liabilities due within one year | ||
| Other current liabilities | ||
| Total current liabilities | 1,395,488,211.84 | 2,022,090,430.99 |
| Non-current liabilities: |
| Long-term loans | ||
| Bonds payable | 2,490,883,676.39 | |
| Including：Preference shares | ||
| Perpetual bonds | ||
| Lease liabilities | ||
| Long-term payables | ||
| Long-term payroll payables | ||
| Accrued liabilities | ||
| Deferred income | 2,380,000.00 | 12,593,640.12 |
| Deferred tax liabilities | 63,430,453.64 | 44,252,383.96 |
| Other non-current liabilities | ||
| Total non-current liabilities | 2,556,694,130.03 | 56,846,024.08 |
| Total liabilities | 3,952,182,341.87 | 2,078,936,455.07 |
| Shareholders' equity | ||
| Share capital | 1,464,752,476.00 | 1,464,752,476.00 |
| Other equity instruments | ||
| Including: preference shares | ||
| Perpetual bonds | ||
| Capital reserves | 3,706,816,950.12 | 3,706,816,950.12 |
| Less: treasury stock | ||
| Other comprehensive income | 192,332,738.05 | 134,386,305.26 |
| Special reserves | ||
| Surplus reserves | 1,464,752,476.00 | 1,464,752,476.00 |
| Undistributed profits | 11,892,694,057.56 | 9,285,944,182.35 |
| Total owners' equity | 18,721,348,697.73 | 16,056,652,389.73 |
| Total liabilities and owners' equity | 22,673,531,039.60 | 18,135,588,844.80 |
Consolidated income statement
Monetary Unit: CNY
| Item | Year 2019 | Year 2018 |
| 1. Total operating revenue | 15,816,934,272.86 | 13,055,465,761.55 |
| Including: Operating revenue | 15,816,934,272.86 | 13,055,465,761.55 |
| Interest income | ||
| Earned premium |
| Fee and commission income | ||
| 2. Total operating costs | 9,922,882,478.20 | 8,502,113,044.92 |
| Including: Cost of sales | 3,065,418,048.38 | 2,934,001,858.91 |
| 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 | 1,975,858,645.23 | 1,605,835,052.97 |
| Selling and distribution expenses | 4,186,102,153.59 | 3,392,721,432.33 |
| General and administrative expenses | 828,945,024.92 | 722,448,972.80 |
| Research and Development expenses | 71,643,099.77 | 62,172,210.70 |
| Financial expenses | -205,084,493.69 | -215,066,482.79 |
| Including：Interest expenses | 139,603,113.82 | 64,698,037.12 |
| Interest income | 344,656,931.22 | 280,805,447.66 |
| Plus: Other income | 43,969,302.07 | 24,092,326.81 |
| Investment income ("-" for losses) | 154,711,995.41 | 97,993,563.50 |
| Including: income from investment in associates and joint ventures | 145,963,325.70 | 88,881,022.50 |
| 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) | ||
| Credit impairment losses (“-” for losses) | -618,334.74 | |
| Impairment losses(“-“ for losses) | 2,035,339.62 | |
| Gains from disposal of assets("-" for losses) | 27,180,182.25 | -492,389.13 |
| 3. Operating profits ("-" for losses) | 6,119,294,939.65 | 4,676,981,557.43 |
| Plus: non-operating income | 44,307,757.49 | 31,232,477.21 |
| Less: non-operating expenses | 59,786,505.46 | 49,528,449.09 |
| 4. Total profits before tax ("-" for total losses) | 6,103,816,191.68 | 4,658,685,585.55 |
| Less: income tax expenses | 1,461,580,689.27 | 1,148,219,697.12 |
| 5. Net profit ("-" for net loss) | 4,642,235,502.41 | 3,510,465,888.43 |
| 5.1 By operating continuity | ||
| 5.1.1 Net profit from continuing operation ("-" for losses) | 4,642,235,502.41 | 3,510,465,888.43 |
| 5.1.2 Net profit from discontinued operation ("-" for losses) | ||
| 5.2 By ownership | ||
| 1) Attributable to owners of the parent company | 4,641,988,857.03 | 3,485,643,008.98 |
| 2) Attributable to non-controlling interests | 246,645.38 | 24,822,879.45 |
| 6. Net of tax from other comprehensive income | 25,099,247.90 | -33,987,321.62 |
| Net of tax from other comprehensive income to the owner of the parent company | 24,585,285.17 | -34,635,015.55 |
| 6.1 Other comprehensive income cannot reclassified into the profit and loss: | 19,018,838.37 | |
| 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 | ||
| 3) Changes in fair value of investments in other equity instruments | 19,018,838.37 | |
| 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 | 5,566,446.80 | -34,635,015.55 |
| 1) Share in other comprehensive income that will be classified into profit and loss under equity method | 4,938,830.88 | -359,548.90 |
| 2) Changes in fair value of investments in other debt obligations | ||
| 3) Changes in fair value of available-for-sale financial assets | -35,066,257.04 | |
| 4) Other comprehensive income arising from the reclassification of financial assets | ||
| 5) Held-to-maturity investment reclassified into available-for sale financial assets | ||
| 6) Allowance for credit impairments in investments in other debt obligations | ||
| 7) Reserve for cash-flow hedge | ||
| 8) Balance arising from the translation of foreign currency financial statements | 627,615.92 | 790,790.39 |
| 9) Others | ||
| Net of tax from other comprehensive income to non-controlling interests | 513,962.73 | 647,693.93 |
| 7. Total comprehensive income | 4,667,334,750.31 | 3,476,478,566.81 |
| Total comprehensive income attributable to owners of the parent company | 4,666,574,142.20 | 3,451,007,993.43 |
| Total comprehensive income attributable to non-controlling interests | 760,608.11 | 25,470,573.38 |
| 8. Earnings per share | ||
| (1) Basic earnings per share | 3.17 | 2.38 |
| (2) Diluted earnings per share | 3.17 | 2.38 |
Legal representative：Liu MiaoPerson in charge of accounting affairs：Xie HongPerson in charge of accounting department：Yan Li
Income statement of parent company
Monetary Unit: CNY
| Item | Year 2019 | Year 2018 |
| 1. Operating revenue | 4,886,810,422.27 | 3,361,304,739.27 |
| Less: Cost of sales | 3,494,194,921.16 | 2,268,904,672.24 |
| Taxes and surcharges | 35,721,430.12 | 37,365,858.48 |
| Selling and distribution expenses | ||
| General and administrative expenses | 667,996,227.68 | 581,921,594.90 |
| Research and Development expenses | 29,631,770.27 | 21,001,230.12 |
| Financial expenses | -234,014,687.01 | -129,471,683.37 |
| Including：Interest expenses | 40,008,978.03 | 7,971,444.41 |
| Interest income | 275,281,390.78 | 138,532,722.84 |
| Plus: Other income | 21,882,835.13 | 17,701,808.96 |
| Investment income ("-" for losses) | 4,196,863,510.68 | 2,113,902,599.28 |
| Including: income from investment in associates and joint ventures | 145,963,325.70 | 88,881,022.50 |
| Income from the derecognition of financial assets at amortized cost (“-” for losses) | ||
| Net gain on exposure hedges (“-” for losses) | ||
| Gains from the changes in fair values(“-“ for losses) | ||
| Credit impairment losses (“-” for losses) | -58,058.02 | |
| Asset impairment losses (“-” for losses) | 2,965,798.28 |
| Gains from disposal of assets("-" for losses) | 27,050,240.74 | -492,389.13 |
| 2. Operating profits ("-" for losses) | 5,139,019,288.58 | 2,715,660,884.29 |
| Plus: non-operating income | 24,397,783.88 | 21,778,771.14 |
| Less: non-operating expenses | 56,307,795.01 | 39,292,792.61 |
| 3. Total profits before tax ("-" for total losses) | 5,107,109,277.45 | 2,698,146,862.82 |
| Less: income tax expenses | 235,868,705.50 | 140,164,527.27 |
| 4. Net profit ("-" for net loss) | 4,871,240,571.95 | 2,557,982,335.55 |
| 4.1 Net profit from continuing operation ("-" for losses) | 4,871,240,571.95 | 2,557,982,335.55 |
| 4.2 Net profit from discontinued operation ("-" for losses) | ||
| 5. Net of tax from other comprehensive income | 23,957,669.25 | -35,425,805.94 |
| 5.1 Other comprehensive income cannot reclassified into the profit and loss: | 19,018,838.37 | |
| 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 | ||
| 3) Changes in fair value of investments in other equity instruments | 19,018,838.37 | |
| 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 | 4,938,830.88 | -35,425,805.94 |
| 1) Share in other comprehensive income that will be classified into profit and loss under equity method | 4,938,830.88 | -359,548.90 |
| 2) Changes in fair value of investments in other debt obligations | ||
| 3) Changes in fair value of available-for-sale financial assets | -35,066,257.04 | |
| 4) Other comprehensive income arising from the reclassification of financial assets | ||
| 5) Held-to-maturity investment reclassified into available-for sale financial assets | ||
| 6) Allowance for credit impairments in investments in other debt obligations | ||
| 7) Reserve for cash-flow hedge | ||
| 8) Balance arising from the translation of foreign currency financial statements | ||
| 9) Others |
| 6. Total comprehensive income | 4,895,198,241.20 | 2,522,556,529.61 |
| 7. Earnings per share | ||
| (1) Basic earnings per share | ||
| (2) Diluted earnings per share |
Consolidated statement of cash flows
Monetary Unit: CNY
| Item | Year 2019 | Year 2018 |
| 1. Cash flows from operating activities | ||
| Cash received from sale of goods and rendering of services | 18,483,174,163.09 | 14,828,436,081.11 |
| 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 | 5,043,369.84 | 5,786,338.67 |
| Cash received from other operating activities | 628,136,779.70 | 482,593,561.94 |
| Subtotal of cash inflows from operating activities | 19,116,354,312.63 | 15,316,815,981.72 |
| Cash paid for goods purchased and services received | 5,306,328,780.97 | 3,826,697,226.55 |
| Net increase in loans and advances to customers | ||
| Net increase in deposits in central bank and other banks and financial institutions | ||
| Cash paid for original insurance contract claims | ||
| Net increase in lending funds | ||
| Cash paid for interests, handling charges and commissions | ||
| Cash paid for policy dividends | ||
| Cash paid to and on behalf of employees | 765,303,405.29 | 569,194,842.30 |
| Cash paid for taxes and surcharges | 4,932,650,062.18 | 3,545,440,004.11 |
| Cash paid for other operating activities | 3,270,452,860.33 | 3,077,567,890.52 |
| Subtotal of cash outflows from operating activities | 14,274,735,108.77 | 11,018,899,963.48 |
| Net cash flows from operating activities | 4,841,619,203.86 | 4,297,916,018.24 |
| 2. Cash flows from investing activities | ||
| Cash received from disposal of investments | ||
| Cash received from returns on investments | 29,483,836.65 | 19,480,124.47 |
| Net cash received from disposal of fixed assets, intangible assets and other long-term assets | 33,045,256.91 | 222,840.26 |
| Net cash received from disposal of subsidiaries and other business units | ||
| Cash received from other investing activities | ||
| Subtotal of cash inflows from investing activities | 62,529,093.56 | 19,702,964.73 |
| Cash paid to acquire and construct fixed assets, intangible assets and other long-term assets | 4,605,226,214.50 | 1,468,482,777.22 |
| Cash paid for investments | 8,000,000.00 | 16,636,159.43 |
| 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 | 4,613,226,214.50 | 1,485,118,936.65 |
| Net cash flows from investing activities | -4,550,697,120.94 | -1,465,415,971.92 |
| 3. Cash flows from financing activities | ||
| Cash received from investors | 3,834,692.00 | 4,482,764.00 |
| Including: cash received by subsidiaries from investments by minority shareholders | 3,834,692.00 | |
| Cash received from borrowings | ||
| Cash received from bonds issue | 2,490,000,000.00 | |
| Cash received from other financing activities | ||
| Subtotal of cash inflows from financing activities | 2,493,834,692.00 | 4,482,764.00 |
| Cash paid for debt repayments | ||
| Cash paid for distribution of dividends and profits or payment of interest | 2,390,250,207.80 | 1,911,545,067.51 |
| Including: dividends and profits paid to minority shareholders by subsidiaries | ||
| Cash paid for other financing activities | 10,149,100.00 | 9,604,800.00 |
| Subtotal of cash outflows from financing activities | 2,400,399,307.80 | 1,921,149,867.51 |
| Net cash flows from financing activities | 93,435,384.20 | -1,916,667,103.51 |
| 4. Effect of fluctuation in exchange rate on cash and cash equivalents | 1,922,431.98 | 731,529.96 |
| 5. Net increase in cash and cash equivalents | 386,279,899.10 | 916,564,472.77 |
| Plus: balance of cash and cash equivalents at the beginning of the period | 9,365,986,627.68 | 8,449,422,154.91 |
| 6. Balance of cash and cash equivalents at the end of the period | 9,752,266,526.78 | 9,365,986,627.68 |
Cash flow statements of parent company
Monetary Unit: CNY
| Item | Year 2019 | Year 2018 |
| 1. Cash flows from operating activities | ||
| Cash received from sale of goods and rendering of services | 5,524,665,200.15 | 3,872,690,184.06 |
| Refunds of taxes and surcharges | ||
| Cash received from other operating activities | 336,073,969.61 | 285,339,299.49 |
| Subtotal of cash inflows from operating activities | 5,860,739,169.76 | 4,158,029,483.55 |
| Cash paid for goods purchased and services received | 4,128,632,128.61 | 2,706,797,292.39 |
| Cash paid to and on behalf of employees | 277,720,935.68 | 253,037,938.15 |
| Cash paid for taxes and surcharges | 458,233,955.78 | 304,535,780.73 |
| Cash paid for other operating activities | 209,925,720.97 | 179,745,316.75 |
| Subtotal of cash outflows from operating activities | 5,074,512,741.04 | 3,444,116,328.02 |
| Net cash flows from operating activities | 786,226,428.72 | 713,913,155.53 |
| 2. Cash flows from investing activities | ||
| Cash received from disposal of investments | ||
| Cash received from returns on investments | 4,071,635,351.92 | 2,035,389,160.25 |
| Net cash received from disposal of fixed assets, intangible assets and other long-term assets | 32,304,306.23 | 92,898.13 |
| Net cash received from disposal of subsidiaries and other business units | ||
| Cash received from other investing activities | ||
| Subtotal of cash inflows from investing activities | 4,103,939,658.15 | 2,035,482,058.38 |
| Cash paid to acquire and construct fixed assets, intangible assets and other long-term assets | 497,241,658.62 | 150,107,386.59 |
| Cash paid for investments | 10,149,100.00 | 26,240,959.43 |
| Net cash paid to acquire subsidiaries and other business units | ||
| Cash paid for other investing activities | ||
| Subtotal of cash outflows from investing activities | 507,390,758.62 | 176,348,346.02 |
| Net cash flows from investing activities | 3,596,548,899.53 | 1,859,133,712.36 |
| 3. Cash flows from financing activities | ||
| Cash received from investors | ||
| Cash received from loans | ||
| Cash received from bonds issue | 2,490,000,000.00 | |
| Cash received from other financing activities | 1,830,167,429.42 | |
| Subtotal of cash inflows from financing activities | 2,490,000,000.00 | 1,830,167,429.42 |
| Cash paid for debt repayments | ||
| Cash paid for distribution of dividends and profits or payment of interest | 2,278,840,954.51 | 1,844,793,539.38 |
| Cash paid for other financing activities | 1,910,715,145.78 | |
| Subtotal of cash outflows from financing activities | 4,189,556,100.29 | 1,844,793,539.38 |
| Net cash flows from financing activities | -1,699,556,100.29 | -14,626,109.96 |
| 4. Effect of fluctuation in exchange rate on cash and cash equivalents | ||
| 5. Net increase in cash and cash equivalents | 2,683,219,227.96 | 2,558,420,757.93 |
| Plus: balance of cash and cash equivalents at the beginning of the period | 6,189,473,157.83 | 3,631,052,399.90 |
| 6. Balance of cash and cash equivalents at the end of the period | 8,872,692,385.79 | 6,189,473,157.83 |
Consolidated statement of changes in shareholders' equity
For the year ended 31 December 2019
Monetary Unit: CNY
| Item | Year 2019 | ||||||||||||||
| Equity attributable to owners of the parent company | Non-controlling interests | Total shareholders' 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 | 1,464, | 3,716,6 | 136,59 | 1,464,7 | 10,181, | 16,964, | 159,54 | 17,124, | |||||||
| 31 December of last year | 752,476.00 | 75,022.48 | 2,276.64 | 52,476.00 | 899,224.84 | 671,475.96 | 1,143.03 | 212,618.99 | |||||||
| Plus: adjustments for changes in accounting policies | 33,639,568.76 | 6,224,835.84 | 39,864,404.60 | 39,864,404.60 | |||||||||||
| 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 | 1,464,752,476.00 | 3,716,675,022.48 | 170,231,845.40 | 1,464,752,476.00 | 10,188,124,060.68 | 17,004,535,880.56 | 159,541,143.03 | 17,164,077,023.59 | |||||||
| 3.Increases/decreases in the current year (“-” for decreases) | 6,102,040.65 | 24,585,285.17 | 2,371,622,519.23 | 2,402,309,845.05 | -11,655,840.54 | 2,390,654,004.51 | |||||||||
| (1) Total comprehensive income | 24,585,285.17 | 4,641,988,857.03 | 4,666,574,142.20 | 760,608.11 | 4,667,334,750.31 | ||||||||||
| (2) Capital contributed or reduced by owners | 1,334,692.00 | 1,334,692.00 | |||||||||||||
| Capital contributions by owners | 1,334,692.00 | 1,334,692.00 | |||||||||||||
| Capital contributions by other equity instruments holders | |||||||||||||||
| Amounts of share-based payments recognized in |
| owners' equity | |||||||||||||||
| Others | |||||||||||||||
| (3) Profit distribution | -2,270,366,337.80 | -2,270,366,337.80 | -2,270,366,337.80 | ||||||||||||
| Withdrawal of surplus reserves | |||||||||||||||
| Withdrawal of general risk reserve | |||||||||||||||
| Profit distributed to owners (or shareholders) | -2,270,366,337.80 | -2,270,366,337.80 | -2,270,366,337.80 | ||||||||||||
| 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 | 6,102,040.65 | 6,102,040.65 | -13,751,140.65 | -7,649,100.00 | |||||||||||
| 4. Balance as at 31 December of the current year | 1,464,752,476.00 | 3,722,777,063.13 | 194,817,130.57 | 1,464,752,476.00 | 12,559,746,579.91 | 19,406,845,725.61 | 147,885,302.49 | 19,554,731,028.10 |
For the year ended 31 December 2018
Monetary Unit: CNY
| Item | Year 2018 | ||||||||||||||
| Equity attributable to owners of the parent company | Non-controlling interests | Total shareholders' 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 | 1,464,752,476.00 | 3,543,519,701.63 | 171,227,292.19 | 1,464,752,476.00 | 8,527,196,810.86 | 15,171,448,756.68 | 141,145,455.42 | 15,312,594,212.10 | |||||||
| Plus: adjustments for changes in accounting policies | |||||||||||||||
| Adjustments for correction of accounting errors in prior year | |||||||||||||||
| Business combinations under common control | |||||||||||||||
| Others | |||||||||||||||
| 2. Balance as at January 1 of the current year | 1,464,752,476.00 | 3,543,519,701.63 | 171,227,292.19 | 1,464,752,476.00 | 8,527,196,810.86 | 15,171,448,756.68 | 141,145,455.42 | 15,312,594,212.10 | |||||||
| 3.Increases/dec | 173,15 | -34,635 | 1,654,7 | 1,793,2 | 18,395,6 | 1,811,61 | |||||||||
| reases in the current year (“-” for decreases) | 5,320.85 | ,015.55 | 02,413.98 | 22,719.28 | 87.61 | 8,406.89 | |||||||||
| (1) Total comprehensive income | -34,635,015.55 | 3,485,643,008.98 | 3,451,007,993.43 | 25,470,573.38 | 3,476,478,566.81 | ||||||||||
| (2) Capital contributed or reduced by owners | 4,237,764.00 | 4,237,764.00 | |||||||||||||
| Capital contributions by owners | 4,237,764.00 | 4,237,764.00 | |||||||||||||
| Capital contributions by other equity instruments holders | |||||||||||||||
| Amounts of share-based payments recognized in owners' equity | |||||||||||||||
| Others | |||||||||||||||
| (3) Profit distribution | -1,830,940,595.00 | -1,830,940,595.00 | 28,144.89 | -1,830,912,450.11 | |||||||||||
| Withdrawal of surplus reserves | |||||||||||||||
| Withdrawal of general risk reserve | |||||||||||||||
| Profit distributed to owners (or shareholders) | -1,830,940,595.00 | -1,830,940,595.00 | 28,144.89 | -1,830,912,450.11 | |||||||||||
| 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 | 173,155,320.85 | 173,155,320.85 | -11,340,794.66 | 161,814,526.19 | |||||||||||
| 4. Balance as at 31 December of the current year | 1,464,752,476.00 | 3,716,675,022.48 | 136,592,276.64 | 1,464,752,476.00 | 10,181,899,224.84 | 16,964,671,475.96 | 159,541,143.03 | 17,124,212,618.99 |
Statement of changes in shareholders' equity of parent company
For the year ended 31 December 2019
Monetary Unit: CNY
| Item | Year 2019 | |||||||||
| Share | Other equity | Capital | Less： | Other | Special | Surplus | Undistr | Other | Total | |
| capital | instruments | reserve | Treasury stock | Comprehensive Income | reserve | reserve | ibuted profit | shareholders' equity | ||||
| Preferred stock | Perpetual bond | Other | ||||||||||
| 1. Balance as at 31 December of last year | 1,464,752,476.00 | 3,706,816,950.12 | 134,386,305.26 | 1,464,752,476.00 | 9,285,944,182.35 | 16,056,652,389.73 | ||||||
| Plus: adjustments for changes in accounting policies | 33,988,763.54 | 5,875,641.06 | 39,864,404.60 | |||||||||
| Adjustments for correction of accounting errors in prior year | ||||||||||||
| Others | ||||||||||||
| 2. Balance as at January 1 of the current year | 1,464,752,476.00 | 3,706,816,950.12 | 168,375,068.80 | 1,464,752,476.00 | 9,291,819,823.41 | 16,096,516,794.33 | ||||||
| 3.Increases/decreases in the current year (“-” for decreases) | 23,957,669.25 | 2,600,874,234.15 | 2,624,831,903.40 | |||||||||
| (1) Other comprehensive income | 23,957,669.25 | 4,871,240,571.95 | 4,895,198,241.20 | |||||||||
| (2)Capital contributed or reduced by owners | ||||||||||||
| Capital contributions by owners | ||||||||||||
| Capital contributions by other equity instruments holders | ||||||||||||
| Amounts of share-based payments | ||||||||||||
| recognized in owners' equity | ||||||||||||
| Others | ||||||||||||
| (3)Profit distribution | -2,270,366,337.80 | -2,270,366,337.80 | ||||||||||
| Withdrawal of surplus reserves | ||||||||||||
| Profit distributed to owners (or shareholders) | -2,270,366,337.80 | -2,270,366,337.80 | ||||||||||
| 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 31 December of the current year | 1,464,752,476.00 | 3,706,816,950.12 | 192,332,738.05 | 1,464,752,476.00 | 11,892,694,057.56 | 18,721,348,697.73 |
For the year ended 31 December 2018
Monetary Unit: CNY
| Item | Year 2018 | |||||||||||
| Share capital | Other equity instruments | Capital reserve | Less：Treasury stock | Other Comprehensive Income | Special reserve | Surplus reserve | Undistributed profit | Other | Total shareholders' equity | |||
| Preferred stock | Perpetual bond | Other | ||||||||||
| 1. Balance as at 31 December of last year | 1,464,752,476.00 | 3,535,397,623.93 | 169,812,111.20 | 1,464,752,476.00 | 8,558,902,441.80 | 15,193,617,128.93 | ||||||
| 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 | 1,464,752,476.00 | 3,535,397,623.93 | 169,812,111.20 | 1,464,752,476.00 | 8,558,902,441.80 | 15,193,617,128.93 | ||||||
| 3.Increases/decreases in the current year (“-” for decreases) | 171,419,326.19 | -35,425,805.94 | 727,041,740.55 | 863,035,260.80 | ||||||||
| (1) Other comprehensive income | -35,425,805.94 | 2,557,982,335.55 | 2,522,556,529.61 | |||||||||
| (2)Capital contributed or reduced by owners | ||||||||||||
| Capital contributions by owners | ||||||||||||
| Capital contributions by other equity instruments holders | ||||||||||||
| Amounts of share-based payments recognized in owners' equity | ||||||||||||
| Others | ||||||||||||
| (3)Profit distribution | -1,830,940,595.00 | -1,830,940,595.00 | ||||||||||
| Withdrawal of surplus reserves | ||||||||||||
| Profit distributed to owners (or shareholders) | -1,830,940,595.00 | -1,830,940,595.00 | ||||||||||
| 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 | 171,419,326.19 | 171,419,326.19 | ||||||||||
| 4. Balance as at 31 December of the current year | 1,464,752,476.00 | 3,706,816,950.12 | 134,386,305.26 | 1,464,752,476.00 | 9,285,944,182.35 | 16,056,652,389.73 |
3. Company Profile
3.1 Company Overview
Luzhou Laojiao Co., Ltd. (hereinafter referred to as "Company" or "the Company"), formerly known asLuzhou Laojiao Brewery, was established in March 1950. On 20 September 1993, Luzhou Laojiaobrewery established a joint-stock limited company with fund-raising exclusively from its operationalassets. On 25 October 1993, the public offering of shares was approved by Sichuan Provincial People'sGovernment 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 inShenzhen stock exchange on 9 May 1994.
As the end of 31 December 2004, the Company's total share capital reached 841,399,673 shares aftermultiple rights issues, among which the controlling shareholder, State Assets Management Bureau ofLuzhou (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 ashareholding ratio of 69.56%.
On 27 October 2005, the Company implemented the non-tradable share reform. After theimplementation, the total share capital remained unchanged, and the shareholding ratio of SASAC ofLuzhou decreased from 69.56% to 60.43%.
In November 2006, the Company implemented private placement, and the total share capital increasedfrom 841,399,673 shares to 871,399,673 shares. The shareholding ratio of SASAC of Luzhou decreasedfrom 60.43% to 58.35%.
As the end of 27 February 2007, SASAC of Luzhou sold 42,069,983 shares of the Company, and afterthe 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 capitalreserve and undistributed profits transferred to increase capital stock. After the implementation, the totalshare capital reached 1,394,239,476 shares, among which, SASAC of Luzhou held 746,200,250 sharesof 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 Luzhouwere separately transferred to Luzhou Laojiao Group Co., Ltd. (hereinafter referred to as the "LaojiaoGroup") 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 300,000,000shares, 280,000,000 shares and 166,200,250 shares. So far, Laojiao Group became the first majorityshareholder 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 incentiveplan were exercised. After the exercise, the total share capital of the Company was changed to1,402,252,476 shares.
On 10 April 2014 and 18 July 2016, SASAC of Luzhou transferred 81,088,300 shares and 84,000,000shares to Laojiao Group and Xinglu Group respectively. In addition, Laojiao Group has increased itsequity stake through the secondary market of 13,137,100 shares. So far, Laojiao Group, Xinglu Groupand 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, raisinga total capital of CNY 3,000,000,000. After the additional issuance, the total capital stock of theCompany was changed to 1,464,752,476 shares. In addition, from 2017 to 2018, Laojiao Groupdecreased 13,137,100 shares that were increased through the secondary market from April 2014 toDecember 2015. After share reduction, Laojiao Group, Xinglu Group and SASAC of Luzhou held381,088,389 shares, 365,971,142 shares and 1,111,930 shares respectively, with the shareholdingratios of 26.02%, 24.99% and 0.08% respectively. Laojiao Group still was the first majority shareholderand SASAC of Luzhou still was the actual controller.
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 LaojiaoSquare and company type is other incorporated company (Listed).
3.3 Business nature of the Company and main business activityIndustry of the Company is food and beverage manufacturing industry.The main activity are research and development, production and sales of “National Cellar 1573”,”LuzhouLaojiao” and other liquor series.The main products are: “National Cellar 1573 Series”,”Century-old Luzhou Laojiao JiaolingSeries” ,”Luzhou Laojiao Tequ”,”Touqu”,”Erqu” and other liquor series.
3.4 The name of the controlling shareholder and the ultimate substantive controllerThe controlling shareholder is Luzhou Laojiao Group Co., Ltd.; the ultimate substantive control isSASAC of Luzhou.
3.5 Approval and submission of the financial report and its date
The financial report is approved and submitted by the board of directors of the Company on 27 April2020.
3.6 Consolidated financial statement scope and their changes
(1) The 29 subsidiaries included in the consolidated financial statements for the current period are listedas follows:
| Name of subsidiary | Abbreviation | Shareholding proportion(%) | Voting rights (%) | |
| Direct | Indirect | |||
| Luzhou Laojiao Brewing Co., Ltd. | Brewing company | 100.00 | 100.00 | |
| Luzhou Boda Brewing Co., Ltd. Note 1 | Boda brewing | 100.00 | 100.00 |
| Luzhou Red Sorghum Modern Agricultural Development Co., Ltd. | Red sorghum company | 60.00 | 60.00 | |
| Sales Company of Luzhou Laojiao Co., Ltd. | Sales company | 100.00 | 100.00 | |
| Luzhou Laojiao Nostalgic Liquor Marketing Co., Ltd. | Nostalgic company | 100.00 | 100.00 | |
| Luzhou Laojiao Custom Liquor Co., Ltd. Note 2 | Custom liquor company | 15.00 | 60.00 | |
| Luzhou Laojiao Selected Supply Chain Management Co., Ltd. | Selected company | 100.00 | 100.00 |
| Guangxi Luzhou Laojiao Imported Liquor Industry Co., Ltd. | Guangxi Imported Liquor Industry | 100.00 | 100.00 |
| Luzhou Dingli Liquor Industry Co., Ltd. | Dingli company | 100.00 | 100.00 | |
| Luzhou Dingyi Liquor Industry Sales Co., Ltd. | Dingyi company | 100.00 | 100.00 |
| Luzhou Dinghao Liquor Industry Sales Co., Ltd. | Dinghao company | 100.00 | 100.00 | |
| Luzhou Laojiao Import and Export trade Co., Ltd. | Import and export company | 100.00 | 100.00 | |
| Luzhou Laojiao Boda Liquor Industry Marketing Co., Ltd. | Boda marketing | 75.00 | 75.00 |
| Luzhou Laojiao Bosheng Hengxiang Liquor Sales Co., Ltd. | Bosheng Hengxiang | 100.00 | 100.00 | |
| Luzhou Laojiao fruit wine industry Co., Ltd. Note 3 | Fruit wine industry | 41.00 | 60.00 |
| Mingjiang Co., Ltd. | Mingjiang company | 54.00 | 54.00 | |
| Luzhou Pinchuang Technology Co., Ltd. Note 4 | Pinchuang company | 100.00 | 100.00 |
| Luzhou Laojiao Tourism Culture Co., Ltd. | Tourism culture | 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. | Commercial Development | 100.00 | 100.00 |
| Luzhou Laojiao Electronic Commerce Co., Ltd. | Electronic Commerce | 90.00 | 90.00 | |
| Luzhou Laojiao Whitail Innovative Electronic Commerce Co., Ltd. | Whitail Electronic Commerce | 100.00 | 100.00 | |
| Luzhou Laojiao Selected Electronic Commerce Co., Ltd. | Selected Electronic Commerce | 100.00 | 100.00 |
| Luzhou Laojiao Whitail Liquor Industry Co., Ltd. Note 5 | Whitail liquor industry | 35.00 | 60.00 | |
| Chengdu Tianfu Panda Whitail Liquor Industry Co., Ltd. Note 5 | Panda Whitail | 60.00 | 60.00 | |
| Luzhou Whitail Tongdao Uncle Constellation Wine Sales Co., Ltd. Note 5 | Whitail Tongdao Uncle | 70.00 | 70.00 |
| 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 | 100.00 | 100.00 |
Note 1: Due to changes in market of liquor industry, for further integration of internal resources, the Company has decidedto cancel Boda brewing. Boda brewing has obtained the notice of approval of cancellation registration on 25 March 2019.Note 2: Although the Company holds less than 51% of the equity of Custom liquor company, among the five members ofthe board of directors, the Company has sent three people, and the chairman of the board (legal representative) is thedirector sent by the Company. The Company has actual control over Custom liquor company, so it is included in the scopeof consolidation.Note 3: Although the Company holds less than 51% of the equity of Fruit wine industry, among the five members of theboard of directors, the Company has sent three people, and the chairman of the board (legal representative) is the directorsent by the Company. The Company has actual control over Fruit wine industry, so it is included in the scope ofconsolidation.Note 4: On 28 December 2018, the 5
thmeeting of the ninth board of directors reviewed and approved the “Proposal onrelated party transaction regarding partial equity acquisition of Luzhou Pinchuang Technology Co., Ltd. By 30 June 2019,the part of the purchase has been completed and Pinchuang company became the Company’s wholly-owned subsidiary.Note 5: Although the Company holds less than 51% of the equity of Whitail liquor industry and its subsidiaries, among thefive members of the board of directors, the Company has sent three people. The Company has actual control over Whitailliquor 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. Interestsin subsidiaries”
(2) Subsidiaries that are newly incorporated into the scope of consolidation in this period
| Name | Reason |
| Guangxi Luzhou Laojiao Imported Wine & Spirits Industry Co., Ltd. | Establishment |
| Luzhou Laojiao Whitail Innovative Electronic Commerce Co., Ltd. | Establishment |
| Luzhou Laojiao Selected Electronic Commerce Co., Ltd. | Establishment |
| Chengdu Tianfu Panda Whitail Liquor Industry Co., Ltd. | Establishment |
| Luzhou Whitail Tongdao Uncle Constellation Wine Sales Co., Ltd. | Establishment |
| Luzhou Laojiao Commercial Development (North America) Co., Ltd. | Establishment |
(3) Liquidation and cancellation for subsidiaries in this period
| Name | Reason |
| Luzhou Boda Brewing Co., Ltd. | Liquidation and cancellation |
Details of changes in the scope of consolidation show on “6. Changes in consolidated scope”.
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 isbased on actual transactions and events in compliance with Accounting Standards for BusinessEnterprises and relevant guidance and explanation (the following called the ASBE) issued by Ministry ofFinance, and Rules on Company Information Disclosure and Preparation of Publicly Issued SecuritiesNo.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 informationobtained by the Company, comprehensively considering factors such as macro-policy risk, marketoperation risk, current or long-term profitability, debt repayment ability of the Company, as well as itsresource of financial support, the Company believes that it is reasonable to prepare the financialstatements on a going concern basis and there are no events or situations resulting in significant doubtsover going concern for at least 12 months.
5. Significant accounting policies and accounting estimates
The notes of detailed accounting policies and accounting estimates:
No
5.1 The declaration about compliance with ASBE
The financial statements of the Company have been prepared in accordance with ASBE, and presenttruly and completely, the financial position as of 31 December 2019, and the Company’s and results ofoperations and cash flows for the year then ended. In addition, in all material respects, the financialstatements of the Company comply with disclosure requirements of the financial statements and theirnotes in accordance with Rules on Company Information Disclosure and Preparation of Publicly IssuedSecurities No.15- General Rules on Financial Reporting Rules revised by CSRC in 2014.
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 undercommon control and business combinations not involving enterprises undercommon control
(1) Business combination under common control
Assets and liabilities obtained by the Company from the combine through business combination undercommon control shall be measured at the book value as stated in the consolidated financial statementsof ultimate controlling party at the combination date. The share of the book value of the merged party’sowner’s equity in the consolidated financial statements is taken as the initial investment cost of long-termequity investments in individual financial statements. The capital reserve (stock premium or capitalpremium) is adjusted according to the difference between the book value of net asset acquired throughcombination and the book value of consideration paid for the combination (or total par value of sharesissued). If the capital reserve (stock premium or capital premium) is insufficient to offset, the retainedearnings shall be adjusted.
(2) Business combination not under common control
Assets paid, liabilities incurred or assumed and the equity securities issued as consideration forcombination shall be measured based on fair value on the acquisition date, the difference between fairvalue and its book value shall be included in current profit and loss. The Company shall recognize thedifference of the combination costs in excess of the fair value of the net identifiable asset acquired fromthe acquiree through combination as goodwill. After the review, if the combination costs are still in shortof 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 ascombination consideration in the business combination shall be included in the initial measurementamount 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 subsidiariescontrolled 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 itssubsidiaries, and are prepared by the parent company with other relevant information. When preparingconsolidated financial statement, the Company considers the Group as an accounting entity, adoptsunified accounting policies, and applies the requirements of ASBE related to recognition, measurementand 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 thesame accounting policies and accounting periods as those of the Company. If the accounting policies oraccounting periods of a subsidiary are different from those of the Company, the financial statements ofthe subsidiary, upon preparation of consolidated financial statements, shall be made necessaryadjustment based on its own accounting policies and accounting periods of the Company.
For subsidiaries acquired from the business combination not under common control, the financialstatements shall be adjusted on the basis of the fair value of identifiable net assets on the date ofpurchase. For the subsidiary acquired from the business combination under common control, its assetsand liabilities (including the goodwill formed by the acquisition of the subsidiary by the ultimatecontrolling party) shall be adjusted on the basis of the book value in the consolidated statements of theultimate controlling party.
The portion of a subsidiary’s equity, the current net profit and loss of subsidiaries, and the currentcomprehensive income attributable to non-controlling interests shall be separately presented asnon-controlling interests in consolidated balance sheet within owners' equity, below the net profit lineitem and below the total comprehensive income line item in the consolidated income statementrespectively. When the amount of current loss attributable to non-controlling shareholders of a subsidiaryexceeds the balance of the non-controlling shareholders’ portion in the opening balance of owner'sequity of the subsidiary, the excess shall be allocated against the non-controlling interests.
Acquisition of subsidiaries or businessDuring the reporting period, if the Company acquires subsidiaries from the business combination undercommon 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 acquiredsubsidiaries from the beginning to the end of the reporting period shall be included in the consolidatedstatement of cash flows. At the same time, the relevant items of the comparative information shall beadjusted as the combined entity existed since the control point of the ultimate controlling party.
If the Company can control the investee from the business combination under common control due toadditional investment or other reasons, the parties involved in the combine shall be deemed to adjust inthe current state when the ultimate controlling party starts to control them. For the equity investmentbefore obtaining control of the investee, the recognized relevant profit or loss and other comprehensiveincome and other changes in net assets between the later of acquisition date of previous equity and thedate on which both the investor and the investee are under common control and the combination dateshall respectively write-down the beginning retained earnings or current profits and losses during theperiod of comparative information.
During the reporting period, if the Company acquires subsidiaries from the business combination notunder 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 endof the reporting period shall be included in the consolidated income statement. The cash flows of thenewly acquired subsidiaries from the acquisition date to the end of the reporting period shall be includedin the consolidated statement of cash flows.
When the Company becomes capable of exercising control over an investee not under common controldue to additional investment or other reasons, the Company shall re-measure the previously held equityinterests to its fair value on the acquisition date, and the difference shall be recognized as investmentincome.
When the previously held equity investment is accounted for under equity method, any othercomprehensive income previously recognized and other equity changes (excluding othercomprehensive, net profit and loss and profit distribution ) in relation to the acquiree’s equity changesshall be transferred to profit and loss for the current period when acquisition took place, except for othercomprehensive income resulting from changes in net liabilities or net assets due to re-measurement ofdefined benefit plan by investee.
Disposal of subsidiaries and businessGeneral treatmentsDuring the reporting period, if the Company disposes subsidiaries, the income, expenses and profits ofthe newly disposed subsidiaries from the beginning to the disposal date shall be included in theconsolidated income statement. The cash flows from the beginning to the disposal date shall be includedin the consolidated statement of cash flows.
In case of loss of control over the investee due to partial disposal of the equity investment or otherreasons, the Company shall re-measure the remaining equity investment at its fair value at the date ofloss of control. The amount of the consideration obtained from the disposal of the equity and the fair
value of the remaining equity, minus the net asset shares calculated continuously from the acquisitiondate based on the previous shareholding proportion and the goodwill, the difference shall be included inthe 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 inowners' equity excluding net profit and loss, other comprehensive income and profit distribution shall betransferred to investment income for the current period when control is lost. Other comprehensiveincome resulting from changes in net liabilities or net assets due to re-measurement of defined benefitplan by investee is excluded.
Disposal of subsidiaries by stepIf 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 ofthe following conditions may indicate that multiple transactions should be treated as a package oftransactions 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 consideredtogether with other arrangements
If the transactions of the disposal of the equity investment of the subsidiary until the loss of controlbelong to a package transaction, the Company shall account for as a transaction; However, thedifference between each disposal consideration received and the corresponding proportion of thesubsidiary’s net assets before the loss of control shall be recognized as other comprehensive income inthe consolidated financial statements and transferred into the profit and loss of the current period whenthe control is lost.
If the transactions from the disposal of the equity investment of the subsidiary to the loss of control arenot considered as a package transactions, the accounting treatment shall be conducted according to therelevant policies on the partial disposal of the equity investment of the subsidiary where control isretained before the loss of control. When the control is lost, the disposal shall be accounted for accordingto the general treatment.
Purchase of non-controlling interestsThe difference between the increase in the cost of long-term equity investment result from acquisition ofnon-controlling shareholders and the share of net assets of the subsidiary calculated continuously fromthe acquisition date or combination date based on newly shareholding proportion shall be adjusted toequity (share) premium of capital reserves in the consolidated balance sheet. If the capital reserve isinsufficient, 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 ofcontrol, the difference between disposal consideration and net assets of the subsidiary calculatedcontinuously since the acquisition date or the combination date related to the disposal of long-termequity investment shall be adjusted to equity (share) premium of capital reserves in the consolidatedbalance sheet. If the capital reserve is insufficient, any excess shall be adjusted against retainedearnings.
5.7 Classification of joint venture arrangements and the accountingtreatment 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 thatis structured through a separate vehicle is usually classified as a joint venture. However, when a jointarrangement provides clear evidence that it meets any of the following requirements and complies withapplicable 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 tothe 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 theassets, 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, andthe arrangement depends on the parties that have joint control on a continuous basis for settling theliabilities of the arrangement.
A joint arrangement that is not structured through a separate vehicle shall be classified as a jointoperation. A separate vehicle refers to a separately identifiable financial structure, including separatelegal entities or entities without a legal personality but recognized by statute.
(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, andaccount 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; ande. Its solely-incurred expenses and its share of any expenses incurred jointly.
The Company shall only recognize the portion of the profit and loss attributable to other participants inthe 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. TheCompany shall fully recognize impairment loss when there are any impairment loss of invested or sold
assets occurring in accordance with the ASBE No.8-Asset Impairment. The Company shall onlyrecognize the part of the profit and loss attributable to other participants in the joint venture before sellingthe assets and other assets purchased from the joint venture (excluding those assets constituting thebusiness) to a third party. When the impairment loss of the purchased assets is in accordance with theASBE No.8-Asset Impairment, the Company shall recognize such losses according to its share. Whenthe Company does not have common control over the joint venture, if the Company enjoys the assetsrelated to the joint venture and assumes the liabilities related to the joint venture, the accountingtreatment shall be conducted according to the above principles. Otherwise, the accounting treatmentshall 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 canbe readily withdrawn on demand as cash. Cash equivalents are the Company’s short-term (due within 3months from purchase date), highly liquid investments that are readily convertible to known amounts ofcash and which are subject to an insignificant risk of changes in value. Restricted bank deposits are notrecognized 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 theforeign currency shall be translated into the amount in CNY currency at the spot exchange rate of thetransaction date. For the monetary items of foreign currencies, the translation is done according to spotrate of the balance sheet date. The exchange difference generated from the difference of spot rate of thecurrent balance sheet date and the time of initial recognition of a foreign currency or the previousbalance sheet date is charged to the profit or loss of the current period except that the exchangedifference generated from foreign currency borrowings relating to assets of which the acquisition orproduction satisfies the capitalization conditions is capitalized. Non-monetary items measured at fairvalue that is reflected in foreign currency at the end of the period, the Company shall firstly translate theforeign currency into the amount in functional currency at the spot exchange rate on the date when thefair value is determined, and then compare it with the original functional currency amount. Differencebetween the translated functional currency amount and the original functional currency amount is treatedas profit or loss from changes in fair value (including changes in exchange rate) and is recognized incurrent profit and loss. If there is a non-monetary item of available-for-sale financial assets, thedifferences 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 balancesheet date. Shareholders’ equity items, except for the item of "undistributed profits", are translated at thespot exchange rates on the dates when the transactions occur. Revenue and expense items in theincome statement are translated at the spot exchange rates on the dates when the transactions occur orat the exchange rate determined in a systematical and reasonable method and similar to the spotexchange rate on the day when the transactions occur. Differences arising from the above translations offoreign currency financial statements are separately listed under other comprehensive income in theconsolidated 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 andtransferred to gain or loss on disposal for the current period. Foreign currency cash flow and cash flow offoreign subsidiaries shall be translated at approximate exchange rate of spot rate on the date of cashflow.
5.10 Financial Instruments
A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liabilityor equity instrument of another entity. When the Company becomes a party to a financial instrumentcontract, 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 characteristicsof financial assets, the Company classifies financial assets into: financial assets measured at amortizedcost; financial assets measured at fair value with their changes included into other comprehensiveincome; and financial assets measured at fair value with their changes included into currentprofits/losses.
At the initial recognition, financial assets are measured at fair value. For financial assets measured at fairvalue with their changes included into current profits/losses, the expenses involved in the transaction aredirectly recorded into current profits/losses; for other financial liabilities, the expenses involved in thetransaction 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 aimsto receive contract cash flow. Furthermore, the characteristics of the contract cash flow of such financialassets are consistent with basic borrowing and lending arrangements, which means that cash flowgenerated on a specific date serves only as payment for principal and interests based on the amount ofunpaid 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 fromderecognition, changes or impairment of them into current profits/losses.
2) Financial assets measured at fair value with their changes included into other comprehensive incomeThe business model in which the Company manages such financial assets both aims to receive contractcash flow and for the purpose of sale. Furthermore, the characteristics of the contract cash flow of suchfinancial assets are consistent with basic borrowing and lending arrangements. The Company measuresuch financial assets at fair value and include their changes into other comprehensive income, butrecord impairment losses or gains, exchange gains or losses and interest income calculated in theeffective interest method into current profits/losses.
At the initial recognition, the Company may specify non-trading equity instrument investment as afinancial asset measured at fair value with its changes included into other comprehensive income andshould recognize the dividend income according to regulations; the specification is irrevocable oncemade. 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/lossesFor financial assets other than the above financial assets measured at amortized cost and financialassets measured at fair value with their changes included into other comprehensive income, theCompany classifies them as financial assets measured at fair value with their changes included intocurrent profits/losses. In addition, at the initial recognition, the Company specifies partial financial assetsas financial assets measured at fair value with their changes included into current profits/losses, in orderto eliminate or substantially reduce accounting mismatch. For such financial assets, the Companyperforms subsequent measurement using fair value and records changes in the fair value into currentprofits/losses.
(2) Classification, recognition and measurement of financial liabilities
At their initial recognition, financial liabilities are divided into financial liabilities measured at fair valuewith their changes included into current profits/losses and other financial liabilities. For financial liabilitiesmeasured at fair value with their changes included into current profits/losses, the expenses involved inthe transaction are directly recorded into the current profits/losses. For other financial liabilities, theexpenses 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/lossesFinancial liabilities measured at fair value with their changes included into current profits/losses includetrading financial liabilities (including derivatives classified as financial liabilities) and the financialliabilities specified to be measured at fair value with their changes included into current profits/losses atthe initial recognition.
Trading financial liabilities (including derivatives classified as financial liabilities) are subsequentlymeasured at fair value, with changes in fair value recorded into current profits/losses, except for thoserelated to hedge accounting.
For those specified as financial liabilities measured at fair value with their changes included into currentprofits/losses, changes in the fair value of such liabilities caused by changes in the Company’s owncredit 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 intoother comprehensive income should be transferred into retained earnings. Other changes in their fairvalue should be recorded into current profits/losses. If treatment of the impact of the Company’s owncredit risk changes of such financial liabilities in the above manner causes or expands accountingmismatch 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 currentprofits/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 outsidefinancial guarantee contracts are classified as financial liabilities measured at amortized cost. Suchfinancial liabilities should be subsequently measured at amortized cost and the gains or losses fromderecognition or amortization should be included into current profits/losses.
(3) Recognition basis and measurement method of transfer of financial assetsIf a financial asset meets any of the following conditions, it shall be derecognized: 1)The contractual rightfor collecting the cash flow of the financial asset has been terminated; 2)The financial asset has beentransferred and almost all the risks and remunerations in respect of the ownership of the financial assethas been transferred to the transferee; 3)The financial asset has been transferred, and although theenterprise neither transfers nor retains almost all the risks and remunerations in respect of the ownershipof 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 theownership of the financial asset and does not abandon its control over the asset, the involved financialasset shall be recognized according to the level of continuous involvement of the transferred financialasset and the relevant liabilities shall be recognized accordingly. The level of continuous involvement ofthe transferred financial asset refers to the level of risk faced by the enterprise due to changes in thevalue of the financial asset.
If the overall transfer of the financial asset meets the recognition conditions, the difference between thecarrying value of the transferred financial asset as well as the consideration received from the transferand the cumulative amount of fair value changes originally-recorded into other comprehensive incomesshall be recorded into the current profits/losses.
If partial transfer of the financial asset meets the recognition conditions, the carrying value of thetransferred financial asset shall be apportioned at the relative fair value between the derecognition andunderecognition part. The difference between the summation of the consideration received from thetransfer and the cumulative amount of fair value changes originally-recorded into other comprehensiveincomes that should be apportioned to the derecognition part and the apportioned aforementionedcarrying 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 ofthe financial asset should be transferred. If they are transferred, the financial asset shall bederecognized; if they are retained, the financial asset shall not be derecognized; if they are neithertransferred nor retained, the Company will continue to decide whether the enterprise should retaincontrol over the asset and perform the accounting treatment according to the principles stated inprevious paragraphs.
(4) Derecognition of financial liabilities
When the current obligation of a financial liability (or a part of it) is relieved, the Company willderecognize 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 thecontract terms for the new financial liability differ from those for the original in substance, the originalfinancial liability should be derecognized and the new one should be recognized. When the Companymakes substantial changes to the contract terms of an original financial liability (or a part of it), theoriginal financial liability should be derecognized and a new financial liability should be recognizedaccording to the amended contract terms.
When a financial liability (or a part of it) is derecognized, the Company will include the differencebetween its carrying value and the consideration paid (including non-cash assets or liabilities borne thatare 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 andmay execute the legal right currently and simultaneously, the Company plans to settle or simultaneouslyencash the financial assets in net amounts and pay off the financial liabilities, the financial assets andthe 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 liabilitiesFair value refers to the price that a market participant can receive for selling an asset or transferring aliability in an orderly transaction on the measurement date. For an existing financial instrument in anactive 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 markettransactions happening in a fair trade. For a non-existing financial instrument in an active market, theCompany adopts the valuation technique to determine its fair value. The valuation technique includesreferences to familiar situations and the prices used by the parties voluntarily participating in the recentmarket transactions, as well as references to the present fair value of other financial instruments of thesame nature, discounted cash flow method and options pricing model. In the valuation, the Companyuses a valuation technique that is applicable in the current situation with sufficient data available andother information support, chooses input values that are consistent with the asset or liabilitycharacteristics considered by market players in related asset or liability transactions, and makemaximum effort to use related observable input values on a preferential basis. When it is unable orunfeasible 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 thededuction of all liabilities. The Company’s issuance (including refinancing), repurchase, sale orcancellation of equity instruments serve as the change treatment of equity. Transaction expensesrelated to the equity transactions are deducted from the equity. The Company does not recognizechanges 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.
(8) Impairment of financial instruments
Based on the expected credit loss, the Company treats financial assets measured at amortized cost anddebt instrument investment measured at fair value with its changes included into other comprehensiveincome by impairment and recognizes the provision for loss.
Credit loss means the difference between all contract cash flow discounted at the original effectiveinterest 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 byor originated from the Company, it should be discounted by the effective interest rate after creditadjustment to the financial asset.
For accounts receivable that do not contain significant financing components, the Company adoptssimplified measurement to measure loss provisions according to the amount equivalent to the expectedcredit loss for the entire duration.
For a financial asset other than those using the above simplified measurement, the Company assesseson 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 amountequivalent to the expected credit loss for the next 12 months and calculate the interest income accordingto the book balance and the effective interest rate; if it has substantially increased since the initialrecognition without credit impairment and is in the second stage, the Company will measure the lossprovision at the amount equivalent to the expected credit loss for the entire duration and calculate theinterest income according to the book balance and the effective interest rate; if credit impairment hasoccurred since the initial recognition and is in the third stage, the Company will measure the lossprovision by the amount equivalent to the expected credit loss for the entire duration and calculate theinterest income according to the amortization cost and the effective interest rate. For financialinstruments with low credit risks on balance sheet dates, the Company assumes that their credit riskshave not substantially increased since the initial recognition.
The Company assesses expected credit losses of financial instruments based on individual and groupassessment. The Company considers the credit risk characteristics of different customers and assessesthe 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-foundedinformation on past matters, present conditions and forecast of future economic conditions.
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 treatmentmethod:
Divide notes receivables into various portfolios according to common risk characteristics based on thecredit risk characteristics of acceptors and determine the accounting estimate policies of expected creditloss:
| 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 treatmentmethod:
As for accounts receivables, regardless of whether there is a significant financing component, theCompany always measures the provision for loss based on the amount equivalent to the expected creditloss over the entire life, and the resulting increase or reversal of provision for loss shall be included in thecurrent 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 expectedcredit loss.
(2) When the information about the expected credit loss of a single financial asset cannot be evaluatedat a reasonable cost, the Company shall divide the accounts receivables portfolio according to credit riskcharacteristics 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 thesame control, the recovery of which are controllable with no risks. Thus, no bad debt provision wasmade.The Company combines the accounts receivables classified as risk portfolio in accordance with similarcredit risk characteristics (aging), and calculates the expected credit loss through the exposure at defaultand expected credit loss rate over the entire life based on the current situation and prediction of futureeconomic situation consulting historical credit loss experience. The comparative table of the credit lossrate 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 valuethrough other comprehensive income on the balance sheet date. For more details, see Note 3-10Financial instruments.
5.14 Other receivables
The method of determining the expected credit loss of other receivables and accounting treatmentmethod:
As for other receivables, regardless of whether there is a significant financing component, the Companyalways measures the provision for loss based on the amount equivalent to the expected credit loss overthe entire life, and the resulting increase or reversal of provision for loss shall be included in the currentprofit 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 creditloss.
(2) When the information about the expected credit loss of a single financial asset cannot be evaluatedat a reasonable cost, the Company shall divide the other receivables portfolio according to credit riskcharacteristics 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 thesame control, the recovery of which are controllable with no risks. Thus, no bad debt provision wasmade.The Company combines the other receivables classified as risk portfolio in accordance with similar creditrisk characteristics (aging), and calculates the expected credit loss through the exposure at default andexpected credit loss rate over the entire life based on the current situation and prediction of futureeconomic situation consulting historical credit loss experience. The comparative table of the credit lossrate 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, semi-finished goods, stock commodities,dispatched inventories, revolving materials (including packing materials and low-cost consumables).
(2) Measurement method of dispatched inventories
The standard cost is used for daily accounting of raw materials, and the difference of material costshould be carried forward on a monthly basis to adjust the standard cost into the actual cost; The goodsin progress and semi-finished goods shall be accounted according to the actual cost, and the weightedaverage method shall be used when they are received and delivered. The actual cost of the inventory atthe end of the month above shall be taken as the standard cost, and the delivery shall be pricedaccording to the standard cost. At the end of the month, the standard cost of the inventory at the end ofthe 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 stockobsolescenceAt 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 stockobsolescence , which is recorded into current profit and loss. For inventories that are related to productranges produced and sold in the same district or used for the same or similar ultimate purpose and aredifficult to be measured separately from other inventories, the Company provides for stock obsolescenceas a whole. For inventories that have large quantities but low value, the Company provides for stockobsolescence on a category basis.The materials held for production shall be measured at cost if the net realizable value of the finishedproducts is higher than the cost. If a decline in the value of materials shows that the net realizable valueof the finished products is lower than the cost, the materials shall be measured at the net realizablevalue.
(4) Inventory system
The Company adopts perpetual inventory system.
(5) Amortization method of packing materials and low-cost consumablesIt is amortized in full at once.
5.16 Assets held for sale
(1) Classification of non-current assets held for sale or disposal groupsThe Company shall classify the non-current assets or disposal group meeting the following conditionsinto the held-for-sale category: The assets (or disposal group) must be available for immediate sale in itspresent condition subject only to terms that are usual and customary for sales of such assets (ordisposal groups); Its sale must be highly probable.; The Company has already made a decision todispose the component and has a commitment from the purchaser, the transfer will be completed withinone year.
The non-current assets or disposal group acquired by the Company for resale shall be divided into theheld-for-sale category on the acquisition date if it meets the condition that "the sale is expected to becompleted within one year" and if it is likely to meet other conditions for the held-for-sale category withina short period (usually three months).
Due to one of the following reasons that the Company is unable to control, leading to the transactionsuncompleted with non-related party within one year, and the Company still commits to sale non-currentassets or disposal groups, it can continue to account for non-current assets or disposal groups asheld-for-sale: the buyer or any other party accidentally set sale extension condition. The Company has totake action in time according to these conditions and the extension problem is expected to be solvedwithin one year; In rare cases, the Company has taken the necessary steps and re-satisfy the hold forsale category condition within the first year for the new circumstances which caused it unable tocomplete the sale of the non-current assets or disposal group within one year.
Measurement of non-current assets or disposal groups held for salea. Initial measurement and subsequent measurementWhen the Company measure a non-current asset or disposal group held for sale initially or re-measureat balance sheet date subsequently, the impairment loss should be recognized if the book value ishigher than fair value less costs to sell at the amount of the difference of these two in profit and loss, theprovision 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 afterdeducting the selling expenses from the fair value under the assumption that it is not divided intoheld-for-sale categories at the initial measurement. Except for the non-current assets or the disposalgroups obtained in the enterprise merger, the difference caused by the non-current assets or thedisposal groups taking the net amount after the fair value minus the selling expenses as the initialmeasurement 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 therelated assets proportionally. Depreciation or amortization should cease for the non-current asset heldfor sale. Interest and other charges on liabilities in the disposal groups held for sale continue to berecognized.
b. Accounting treatment of reversal of impairment lossIf the net amount of the non-current assets held for sale on the subsequent balance sheet date increasesafter 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 bereversed, and the reversed amount shall be included in the current profit and loss. The impairment lossrecognized 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 increasesafter 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 theheld-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 beforethe 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 saleshall be increased in proportion to the book value of non-current assets except goodwill in the disposalgroups.
c. The accounting treatment that does not continue to be classified as held-for-sale and the terminationof recognitionNon-current assets or disposal groups that are no longer divided into held-for-sale category ornon-current assets are removed from disposal groups held for sale because of no longer meeting thecondition of classification of held-for-sale, they are measured at lower of the following two: book valuebefore being classified as the held-for-sale considering depreciation, amortization or impairment thatshould have been recognized under the assumption that it is not divided into held-for-sale categories;and recoverable amount.
When terminating the recognition of the non-current assets held for sale or the disposal groups, theunrecognized gains or losses shall be recorded into the current profit and loss.
5.17 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 otherparticipants on an arrangement according to relevant conventions, which exists only when decisionsabout the relevant activities require the unanimous consent of the parties sharing control. Thisarrangement belongs to joint venture. Where the joint venture arrangement is made by a separate entityand the Company is judged to have rights to the net assets of such a separate entity according to therelevant conventions. Such a separate entity shall be regarded as a joint venture and accounted by theequity method. If the Company is judged to be not entitled to the net assets of the separate entityaccording to relevant conventions, the separate entity shall be regarded as a joint venture and theCompany shall recognize the items related to the shares of the joint venture and perform accountingtreatment in accordance with relevant accounting standards.The term ‘significant influence’ refers to the power to participate in decision-making on the financial andoperating 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 thefollowing situations and taking all the facts and circumstances into consideration:
Dispatch representatives to the board of directors or similar authorities of the investee.To participate in the financial and business policy making process of the investee.Significant transactions with the investee.Dispatch management personnel to the investee.
To provide key technical data to the investee.
(2) Determination of the initial investment cost
a. Long-term equity investment resulting from combinationBusiness combination under common control：
For the long-term equity investments obtained by cash paid, non-monetary assets paid or assumedliabilities and the equity securities issued by the acquirer, on the merger date, the initial investment costof long-term equity investment shall be taken as the share of the owner's equity of the investee in thebook value of the final control party's consolidated financial statements. If the investee under businesscombination under common control can be controlled due to additional investment or other reasons, theinitial investment cost of long-term equity investment shall be determined on the merger date accordingto the share of the net assets of the investee in the book value of the final control party's consolidatedfinancial statements. The difference between the initial investment cost of the long-term equityinvestment on the merger date and sum of the book value of the long-term equity investment before themerger and the new consideration of acquiring shares on the merger date shall be recorded to adjust theequity premium. If the equity premium is insufficient to be written down, the retained earnings shall bewritten down.
Business combination not under common control：The Company takes the initial investment cost oflong-term equity investment as the merger cost determined on the purchase date. If the investee can becontrolled under business combination not under common control due to additional investment or otherreasons, the previous book value of the equity investment held plus the sum of the newly addedinvestment cost shall be taken as the initial investment cost calculated according to the cost method.
b. Long-term equity investment obtained by other meansFor the long-term equity investments obtained by cash paid, the Company recognizes their fair value asthe initial investment costs.
For the long-term equity investments acquired by the issue of equity securities, the initial investment costshall be the fair value of the equity securities issued.
For long-term equity investments obtained by non-monetary assets exchange, under the condition thatan exchange of non-monetary assets is of commerce nature and the fair value of assets exchanged canbe reliably measured, non-monetary assets traded in is initially stated at the fair value of the assetstraded out, unless there is conclusive evidence indicating that the fair value of the assets traded in ismore reliable; if the above conditions are not satisfied, initial investment costs of long-term equityinvestments traded in shall be recognized at the book value of the assets traded out and the relevanttaxes and surcharges payable.
For long-term equity investments obtained by debt restructuring, the Company recognizes the fair valueof shares of debt-for-equity swap as the initial investment costs.
Subsequent measurement and recognition of profit and lossa. Long-term equity investments measured under the cost methodLong-term equity investments that can control the investee are measured under the cost method. Forlong-term equity investments accounted at the cost method, except cash dividends or profits declaredbut not yet distributed which are included in the actual payments or the consideration actually paid forthe investment, the cash dividends or profits declared by the investee shall be recognized as theinvestment income irrespective of net profits realized by the investee before investment or afterinvestment.
b. Long-term equity investments measured under the equity methodFor the long-term equity investment which has joint control or significant influence over the investee, theequity method is adopted for accounting. For long-term equity investments measured at the equitymethod, if the initial investment costs are higher than the investor’s attributable share of the fair value ofthe investee’s identifiable net assets, no adjustment will be made to the initial costs of the long-termequity investments; if the initial investment costs are lower than the investor’s attributable share of thefair value of the investee’s identifiable net assets, the difference shall be recognized in current profit andloss.
The Company shall, according to the shares of net profits and other comprehensive income realized bythe investee that shall be enjoyed or borne by the Company, recognize the profit and loss on theinvestments and adjust the book value of the long-term equity investments. When recognizing the netprofits 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 theinvestee after appropriate adjustments. However, where the Company is unable to obtain the relevantinformation 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 netbook profits and losses of the investee. The Company shall calculate the part distributed from cashdividends or profits declared by the investee and correspondingly reduce the book value of the long-termequity investments.
When recognizing the income from investments in associates and joint ventures, the Company shallwrite off the part of incomes from internal unrealized transactions between the Company and associatesand joint ventures which are attributable to the Company and recognize the profit and loss oninvestments on such basis. Where the losses on internal transactions between the Company and theinvestee are impairment of related assets, full amounts of such losses shall be recognized. Profit andloss from internal unrealized transactions between the Company’s subsidiaries included into thecombination scope and associates and joint ventures shall be written off according to the aboveprinciples 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 thefollowing sequence: Firstly, write off the book value of the long-term equity investments; where the bookvalue 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 inother substances and the book value of long-term receivables shall be written off; after all the abovetreatments, if the Company still assumes additional obligation according to investment contracts oragreements, the obligation expected to be assumed should be recognized as provision and included intothe 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 deductingunrecognized share of loss: i.e. write down the book value of the recognized provision, then restore thebook value of long-term interests which substantially form net investments in the investee, then restorethe book value of long-term investments, and recognize investment income at the same time.
5.18 Investment property
Measurement model of investment propertyCost modelMethod of depreciation or amortizationInvestment property is the property that is held to earn rent or capital appreciation or both and can bemeasured 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.
Initial RecognitionWhen the Company can obtain the rental income or value-added income related to the investmentproperty and the cost of the investment property that can be measured reliably, the Company will initiallymeasure it according to the actual expenditure of purchase or construction:
The cost of the purchased investment property includes the purchase price and related taxes directlyattributable to the asset;The cost of self-built investment property consists of the necessary expenses incurred before the assetreaches the intended use condition;The cost of the investment property obtained by other means shall be recognized in accordance withrelevant accounting standards.
Subsequent measurementIn general, the Company adopts the cost model to measure the follow-up expenditure of investmentproperty. The depreciation or amortization of investment property shall be carried out in accordance withthe 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 valuecontinuously and reliably, the Company can use fair value model for subsequent measurement. For theinvestment property measured at fair value model, the Company does not provide depreciation oramortization and adjusts its book value based on the fair value of investment property at the balancesheet 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 betransferred to other assets.
5.19. 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 arerecognized when the following criteria are satisfied simultaneously: It is probable that the economicbenefits relating to the fixed assets will flow into the Company; the cost of the fixed assets can bemeasured 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 | 10－45 | 5 | 9.50－2.11 |
| Special equipment | Straight-line method | 5－35 | 5 | 19.00－2.71 |
| Universal equipment | Straight-line method | 4－25 | 5 | 23.75－3.80 |
| Transportation equipment | Straight-line method | 6 | 5 | 15.83 |
| Other equipment | Straight-line method | 4－16 | 5 | 23.75－5.94 |
Except for fixed assets still in use after full depreciation, the Company depreciates all fixed assets andcalculates the depreciation in the straight-line depreciation method.Based on the nature and use of fixed assets, the Company determines their service life and estimatednet salvage value and reviews their service life, estimated net salvage value and depreciation method atthe end of the year. Changes in the service life, estimated net salvage value and depreciation method ofthe same type of assets are treated as changes in accounting estimation.The Company’s newly-built brewing production lines, packaging production lines and warehousingassets, and the houses and buildings, special and general equipment formed thereof are obviouslydifferent from the existing same types of assets and have obviously longer estimated service life than thesame types of fixed assets. The maximum years of depreciation for different types of the newly-builtfixed assets are as follows: 45 years for houses and buildings; 35 years for special equipment and 25years for general equipment.During the year, some of the Company’s projects in progress reached the expected usable state andwere transferred into fixed assets.
(3) Recognition standard, valuation method and depreciation method for fixed assets acquiredunder financing leaseIf the purchase price of a fixed asset exceeds the normal credit conditions and the payment is delayed,which has a financing nature, the cost of the fixed asset shall be determined on the basis of the presentvalue of the purchase price. The difference between the actual price paid and the present value of thepurchase price, unless it should be capitalized, shall be recorded into the current profit and loss in thecredit period.For fixed assets acquired under financing lease, at the inception of the lease, the Company shallrecognizes it at the lower of the fair value of the leased assets or the present value of the minimum leasepayments.Fixed assets acquired under financing lease is adapted the same depreciation method as the one usedon other fixed assets owned by the Company. If there is reasonable assurance that the Company willobtain the ownership of the leased assets when the lease term expires, the leased assets should bedepreciated over its useful life; if there is no reasonable assurance that the Company will obtain theownership of the leased assets when the lease term expires, the leased assets should be depreciatedover the shorter of the lease term or the useful life of the leased assets.
5. 20. Construction in progress
(1) Construction in progress refers to various construction and installation works carried out for theconstruction 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 andexpansion projects.
(2) Construction in progress is accounted on an individual project basis with actual cost valuationmethod. The borrowing costs incurred before the projects reach the intended use condition shall beincluded in the project cost. The fixed assets shall be carried forward in the month when the project isqualified for acceptance and delivery for use. For those that have reached the intended use condition buthave 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 tothe fixed assets shall be determined according to the estimated value, and the depreciation shall berecognized; After the completion of the final account, the original provisional value shall be adjustedaccording 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 capitalizedinto 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 andrecoverable amount.
5. 21. Borrowing costs
(1) Scope of borrowing costs and its capitalization conditions
The Company’s borrowing costs capitalized during period of capitalization are relevant loan expensesdirectly attributable to the assets eligible for capitalization, including interest thereon, amortization ofdiscounts 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 assetexpenditure has occurred, ② the borrowing costs have occurred, ③ the purchase and constructionactivities 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 theloans unused and deposited in bank or return on temporary investment should be recognized as thecapitalization amount of borrowing costs. As for general loans used for acquiring and constructing orproducing assets eligible for capitalization, the interest of general loans to be capitalized should becalculated by multiplying the weighted average of asset disbursements of the part of accumulated assetdisbursements in excess of special loans by the capitalization rate of used general loans. During theperiod of capitalization, the capitalized amount of interest of each accounting period shall not exceed thecurrent actual interest of the relevant loans. Where there are discounts or premiums on loans, theamounts of interest for each accounting period should be adjusted taking account of amortizablediscount or premium amounts for the period by effective interest method. Auxiliary expenses incurredfrom special loans before the acquired or constructed assets eligible for capitalization reach the workingcondition for their intended use or sale should be capitalized when they incur and charged to the costs ofassets eligible for capitalization; those incurred after the acquired or constructed assets eligible forcapitalization reach the working condition for their intended use or sale should be recognized as costsaccording 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 interestrate of the loan;For more than one special loan for the acquisition and construction of fixed assets, the capitalization rateis 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 areinterrupted abnormally and this condition lasts for more than three months, the capitalization ofborrowing costs should be suspended. The borrowing costs incurred during interruption are charged toprofit or loss for the current period, and the capitalization of borrowing costs continues when theacquisition 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 assetseligible for capitalization have reached the working condition for their intended use or sale. Borrowingcosts incurred after the assets eligible for capitalization have reached the working condition for theirintended 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 orsold externally until overall completion, the capitalization of borrowing costs should cease at the time ofoverall completion of the said assets.
5. 22. Intangible assets
(1) Measurement method, useful life, impairment test
Measurement methoda. Costs of intangible assets purchased include purchase price, related tax and expenses and otherexpenditure 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 investmentcontract or agreement;c. Expenses on the research phase of internally researched and developed intangible assets shall beincluded in the current profit and loss when they incur; The expenditures incurred in the developmentstage of the internal research and development projects shall be recognized as intangible assets whenthe following conditions are met; otherwise, they shall be recorded into the current profit and loss whenthey 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 applyingthe intangible assets or there is a potential market for the intangible assets themselves or theintangible assets will be used internally;iv. It is able to finish the development of the intangible assets, and able to use or sell the intangibleassets, 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 measuredreliably.d. If payment of the purchase price of intangible assets can be deferred and exceeds normal creditconditions, the purchase has the nature of finance in fact and cost of the intangible asset shall bedetermined on the basis of present value of the purchase price. The difference between the amountactually paid and the present value of the purchase price should be recorded into current profit or lossother than those should be capitalized during the credit period.Useful life and amortization methodFor intangible assets with limited useful life, amortization shall be carried out according to thestraight-line method within the period that brings economic benefits to the enterprise. At the end of eachperiod, the useful life and amortization method of intangible assets with limited service life shall bereviewed. If there are differences with the original estimates, corresponding adjustments shall be made.Intangible assets whose useful life is uncertain shall be regarded as intangible assets if it is impossible toforesee the term in which intangible assets bring economic benefits to the enterprise. Intangible assetswith uncertain useful life shall not be amortized during the holding period, and the life of intangible assetsshall 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 testOn the balance sheet date, intangible assets are valued at the lower of book value and recoverableamount.
(2) Internal research and development expenditure accounting policyThe expenditures incurred in the development stage of the internal research and development projectsshall be recognized as intangible assets when the following conditions are met; otherwise, they shall berecorded 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 applyingthe intangible assets or there is a potential market for the intangible assets themselves or the intangibleassets will be used internally;d. It is able to finish the development of the intangible assets, and able to use or sell the intangibleassets, 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 measuredreliably.Development expenditures that have been recorded into profit and loss in previous periods are notrecognized as assets in subsequent periods. The capitalized expenditure in the development stage islisted as development expenditure in the balance sheet, and it will be recorded into intangible assetsfrom the date when the project reaches its intended purpose.
5. 23. Non-current assets impairment
On the balance sheet date, the Company makes a judgment on whether there are signs of possibleimpairment of long-term assets. If there are impairment indicators of non-current assets, the Companyestimates the recoverable amount based on individual asset. If recoverable amount of individual asset isdifficult to be estimated, the Company should recognize the recoverable amount of the asset groupwhich the individual asset belongs to.The recoverable amount is the higher of fair values less costs of disposal and the present values of thefuture cash flows expected to be derived from the asset.If the measurement result of recoverable amount shows that recoverable amount of the non-currentassets is less than its book value, the book value shall be written down to the recoverable amount, andthe amount written down shall be recognized as the impairment loss of assets, recorded into the currentprofit 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 accountingperiods.After the recognition of the impairment loss, the depreciation or amortization expense of the impairmentasset shall be adjusted accordingly in the future period so as to systematically apportion the adjustedbook 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 atleast 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 animpairment test. When the Company performs an impairment test on relevant asset group or assetgroup portfolio including goodwill, if there are signs of impairment, the Company shall firstly perform animpairment test on asset group or asset group portfolio excluding goodwill and calculate the recoverableamount, 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 includinggoodwill, and compares the book value of the relevant asset groups or asset group portfolio (includingproportional book value of goodwill) with its recoverable amount. If the recoverable amount of relevantasset group or asset group portfolio is less than its book value, the Company shall recognize impairmentloss of goodwill.
5. 24. Long-term deferred expenses
Long-term deferred expenses shall be initially measured according to the actual costs incurred. It isamortized using the straight-line method over the beneficial period. If it cannot benefit the followingaccounting period, the amortized value of the item that has not been amortized will be transferred to thecurrent profit and loss.
5. 25. 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 thereporting period in which the employee provided relevant services, excluding the compensation foremployment termination. Accrued short term benefits will be recognized as liability during the accountingperiod in which the employee is providing the relevant service to the Company. The liability will beincluded in the current profit and loss or the relevant assets cost.
(2) Accounting treatment method of post-employment benefits
a. Defined contribution planThe defined contribution plan of the Company includes payments of basic pension and unemploymentinsurance calculated according to the local payment base and proportion. The amount shall be includedinto the profit and loss or the relevant assets cost for the accounting period in which the employeeprovides the service to the Company.b. Defined benefit planAccording to the formula determined by the expected accumulative projected unit credit method, theCompany will record the benefit obligation generated by the defined benefit plan belonging to the periodduring in which the employee provides the service into the current profit and loss or the relevant assetscost.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 thedefined benefit plan, the net assets of the defined benefit plan shall be measured at the lower of thesurplus 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 monthsfollowing the end of the annual reporting period in which the employee provides the service, arediscounted based on the market yield and high quality corporate bonds in an active market that matchthe 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 netassets 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 areincluded in other comprehensive income and are not reversed to profit and loss in subsequentaccounting periods.At the time of settlement of the defined benefit plan, the settlement gains or losses shall be recognizedaccording to the difference between the present value of the obligations of the defined benefit plan andthe settlement price determined on the settlement date.
(3) Accounting treatment method of termination benefits
Employee benefits liabilities shall be recognized and included into profit or loss for the current period onthe earlier date of the two following circumstances:
a. When the Company is not able to withdraw the benefits from termination of employment or resignationpersuasion unilaterally;b. When the Company recognizes costs and fees relevant to reforming the termination benefitspayment.As for the termination benefits that cannot be fully paid within 12 months after the end of the annualreport period, the Company shall choose an appropriate discount rate and record it into current profit andloss based on it.
(4) Accounting treatment method of other long-term employee benefitsOther 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 conditionsof the defined contribution plan shall be treated in accordance with the same principles of the definedcontribution plan; If the conditions for defined benefits are met, net liabilities or net assets of otherlong-term employee benefits shall be recognized and measured in accordance with the relevantprinciples of the defined benefits plan.
5. 26. Estimated liabilities
(1) Recognition criteria of estimated liabilities
If the contingent obligations meet the following conditions simultaneously, the Company shall recognizeit 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 bemeasured reliably.
(2) Measurement method of estimated liabilities
The Company's estimated liabilities are initially measured in terms of the best estimate of theexpenditure of fulfilling the relevant current obligations.For determining the best estimate, the Company takes various factors into account such as the risk,uncertainty and time value of money related to contingencies. If the time value of money has a significantimpact, 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 theoccurrence of various results within the range is same, the best estimate is determined according to themean 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 continuousrange but the possibility of various outcomes within the range is different, if the contingencies involve asingle item, the best estimate is determined according to the most likely amount; If the contingenciesinvolve more than one item, the best estimate is calculated and determined according to variouspossible results and relevant probabilities.Where all or part of the expenses required for the liquidation of the estimated liabilities of the Companyare expected to be compensated by a third party, the amount of compensation shall be recognized as anasset when it is basically confirmed that it can be received, and the confirmed amount of compensationshall not exceed the book value of the estimated liabilities.
5. 27. Share-based payment
(1) The type of share-based payment
Share-based payment is classified as equity-settled share-based payment and cash-settledshare-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 atfair value. The cash-settled share-based payment shall be measured according to the fair value of theliabilities calculated and determined on the basis of shares or other equity instruments undertaken by theCompany.For the fair value of the stock option granted, the fair value is determined by using the stock optionpricing 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 exercisedFor the equity-settled share-based payment settled immediately after the grant, the fair value of theequity instrument shall be included in the relevant costs or expenses on the grant date, and the capitalreserve 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 completedand the performance conditions are met, in return for services of employees, on each balance sheetdate during waiting period, the current obtained service shall be included in the relevant costs orexpenses and the capital reserves in accordance with the fair value of the equity instruments on thegrant date, based on best estimate of the number of vested equity instruments, and the subsequentchanges in fair value shall not be recognized. On each balance sheet date during waiting period, theCompany makes the best estimate based on the latest available employee number change and othersubsequent information, and modifies the number of equity instruments for the estimated vesting. On thevesting date, the final expected number of vesting instruments is the same as the actual number ofvesting instruments.
(4) Relevant accounting treatment of implement, modification and termination of share-based paymentplanFor equity-settled share-based payment, no adjustments will be made to the recognized costs and totalowners' equity after the vesting date. On the vesting date, the Company shall recognize the share capitaland the equity premium according to the exercise situation, and carry forward the capital reserverecognized in the waiting period.No matter how it modifies the terms and conditions of the granted equity instruments or it cancels thegranted equity instruments or its settlement, the equity instruments granted by the Company shall berecognized at fair value on the grant date and it measures obtained the corresponding services, unless itcannot be vested because it cannot meet the vesting conditions of equity instruments (except marketconditions).
5. 28. Revenue
Whether the Company has implemented the new revenue standards? Yes √ No
(1) Recognition of revenue from sales of goods
Revenue is recognized when the following conditions can be met: it has transferred significant risks andrewards of ownership of the goods to the purchaser; the Company retains neither continuing managerialinvolvement usually related to the ownership nor effective control over the sold goods; the relevanteconomic benefits are highly likely to flow into the Company; relevant revenues and the costs can bemeasured reliably.
(2) Recognition principals of revenue from transfer of asset use right.
The specific conditions of the Company’s recognition of revenue: for domestic sales, it shall specify thesales items and rights and obligations of both parties according to the signed sales contract oragreement. The Company shall take the receipt of the payment or the receipt voucher as the basis andrecognize the revenue after the customer signs for the receipt of the goods. For export commodities, therevenue shall be recognized when the Company receives the customs declaration form of export goods(export tax rebate copy) and issues export invoices after certifying an agent export certificate in taxbureau.
(3) Revenues of rendering of services
If the service is commenced and completed within the same fiscal year, the Company recognizesrevenue from rendering of service when the service is completed. If the commencement and completionof services are in separate fiscal years, the Company recognizes revenue from rendering of serviceusing the percentage-of-completion method on the balance sheet date when the outcome of servicetransactions can be estimated reliably. When the outcome of service transactions cannot be estimatedreliably, the Company recognizes and measures revenue according to the principle of prudence.
(4) Revenue from transfer of asset use right
Revenue is recognized when the following conditions can be met: the relevant economic benefits canflow into the Company; relevant revenues can be measured reliably.
5. 29. Government grants
Government grants are monetary assets and non-monetary assets acquired free of charge by theCompany from the government like fiscal subsidies.
(1) Judgment basis and accounting treatment method of government grants related to assetsGovernment grants related to assets are government grants that are acquired by the Company and usedfor forming long-term assets through purchasing and constructing or other ways. If the governmentdocuments do not clearly specify the target of the subsidy, the Company shall separately explainjudgment basis of classifying the government grants into the government grants related to assets orincome.Accounting method: it shall be recognized as deferred income allocated evenly over the useful lives (theperiod of depreciation and amortization) of the relevant assets from the month of commence ofdepreciation or amortization when the relevant assets reaching the intended use condition, and includedin the current profit or loss. However, government grants measured at the nominal amount shall bedirectly included in current profit and loss.
(2) Judgment basis and accounting treatment method of government grants related to incomeGovernment grants related to income are government grants other than government grants related toassets;Accounting method:
a. If it is used to compensate the Company’s relevant expenses or losses in future periods, it should berecognized as deferred income and included into the current profit and loss or written off of the relatedcosts 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 includedinto the current profit and loss on acquisition or written off of the related costs.c. Recognition time-point of government grantsGovernment grants are recognized when the Company can meet the attached conditions for thegovernment grants and the Company can receive the grants.d. Measurement of government grantsIf 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 itsfair value cannot be obtained in a reliable way, it shall be measured at a nominal amount.
5. 30. 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 beobtained 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 orprior periods shall be measured by the Company in light of the expected payable (refundable) amount ofincome taxes according to the tax law; The deferred income tax assets and deferred income taxliabilities shall be measured at the tax rate applicable to the period during which the assets are expectedto 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 sheetdate. The current income tax and deferred income tax shall be recorded into the current profit and lossas 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. 31. Lease
(1) Accounting treatment of operating lease
a. The Company records rents of leased assets into current expense using straight line method in eachperiod of the lease term including rent-free period. Initial direct expenses incurred are recorded intocurrent expense. Contingent rents are recorded into current profit or loss when occur. When the lessorbears the leasehold expenses which shall be borne by the Company, the expenses shall be deductedfrom total rents and the residual rent is recognized into current profit or loss in each period of the leaseterm.b. The rents arising from leasing assets shall be recorded into rent revenue using straight line method ineach period of the lease term including rent-free period. Initial direct expenses incurred are recorded intocurrent expense. If the amount is large, it shall be capitalized and recorded into current income ininstallment in the period of lease term according to the same recognition base of rent revenue. When thelessee bears the leasehold expenses which shall be borne by the Company, the expenses shall bededucted from total rents and the residual rent is amortized in each period of the lease term.
(2) Accounting treatment of finance lease
a. As the lessee, it recognizes the lower of fair value of lease asset and minimum lease payment at thebeginning day of the lease as the initial value of the asset leased in and the minimum lease payment aslong-term payable, the difference as unrealized finance expense. Unrealized finance expense isamortized in the period during the lease term and recognized as current finance expenses using actualeffective rate method.
b. As the lessor, it recognizes the difference between the total of minimum lease amount received andresidual amount not guaranteed and the present value of that as unrealized finance income. Itrecognizes unrealized finance income as rent revenue in the period of lease term when the Companyreceives rent. The initial direct expense related to the lease transaction shall be recorded in the initialrecognition of finance lease receivable and be deducted from recognized income in the period of leaseterm.
5. 32 Income tax expense
The Company’s income tax is calculated in the balance sheet liability method.The Company recognized deferred tax assets when both of the following conditions are met:
(1) Temporary differences are very likely to reverse in foreseeable future;
(2) It is very likely in the future that the taxable income amount can be obtained and used to offset thedeductible temporary differences, which is capped at the taxable income amount that is very likely toobtain.On the balance sheet date, the current income tax liabilities (or assets) formed in the current period andprevious periods are measured at the expected income tax amount payable (or returnable) calculatedaccording to tax laws. For deferred tax assets and deferred tax liabilities, in accordance with tax law,they shall be measured at the applicable tax rate during the period of expected recovery of such assetsor satisfaction of such liabilities.On the balance sheet date, the Company reviews the carrying values of deferred tax assets anddeferred tax liabilities. The Company’s current income tax and deferred tax will be treated as income taxexpenses or income, except for income tax from business combinations or transactions or mattersrecognized directly in owners’ equity.
5. 33 Changes in significant accounting policies and accounting estimates
5.33.1. Changes in significant accounting policies
√Applicable ?N/A
| Content and reason of changes | Approval procedures | Note |
| The Company started to implement Accounting Standards for Business Enterprises No.22-Recognition and Measurement of Financial Instruments, Accounting Standards for Business Enterprises No.23-Transfer of Financial Assets, Accounting Standards for Business Enterprises No.24-Hedge Accounting and Accounting Standards for Business | Approved on the 7th Meeting of the 9th Board of Directors |
| Enterprises No.37-Presentation of Financial Instruments (hereinafter referred to as ”new standards governing financial instruments”) revised and issued in March 2017 by the Ministry of Finance from 1 January 2019. Note 1 | ||
| Notes of Revising and Printing the Format of 2019 General Enterprises Financial Statement (CK [2019] No. 6) was issued by the Ministry of Finance on 30 April 2019, and the Notes of Revising and Printing the Format of 2018 General Enterprises Financial Statement (CK [2018] No. 15) issued by the Ministry of Finance on 15 June 2018 was abolished at the same time; according to the Notes, the Company has revised the format of financial statements. Note 2 | Approved on the 9th Meeting of the 9th Board of Directors |
Note 1: The new standards governing financial instruments stipulated that on the implementation date ofnew standards, the enterprises shall classify and measure the financial instruments in line with thestipulations. As the data involved in comparative financial statements in the prior period are inconsistentwith the requirements of the new standard, the Company does no need to adjust the information duringthe comparable period; the difference between the original book value of financial instruments and newbook value on the implementation date shall be included into the retained earnings, othercomprehensive income and other item of financial statements on 1 January 2019.Note 2: The Company has revised and consolidated the format of financial statements, which the item“notes receivable and accounts receivable” was divided into “note receivable” and “accounts receivable”,and the item “notes payable and accounts payable” was divided into “notes payable” and “accountspayable” as well; the Company has adjusted the comparative data during the comparable periodaccording to the document (CK [2019] No. 6); the change merely influenced the presentation of financialstatements, without impact on total assets, net assets and net profit.There was no other change in significant accounting policies in the Reporting Period other than theabove changes.
5.33.2. Changes in significant accounting estimates
? Applicable √ N/A
5.33.3. Adjustments to the financial statements at the beginning of the execution year of any newstandard governing financial instruments, revenue or leases from 2019
√Applicable ?N/A
Consolidated balance sheet
Monetary Unit: CNY
| Item | 31 December 2018 | 1 January 2019 | Adjusted |
| Current assets: | |||
| Cash and cash equivalents | 9,367,386,627.68 | 9,367,386,627.68 | |
| Settlement reserves | |||
| Lending funds | |||
| Trading financial assets | |||
| Financial assets measured at fair value through current profit or loss | |||
| Derivative financial assets | |||
| Notes receivables | 2,388,326,476.15 | -2,388,326,476.15 | |
| Accounts receivables | 10,333,728.87 | 10,333,728.87 | |
| Accounts receivables financing | 2,388,326,476.15 | 2,388,326,476.15 | |
| Prepayment | 137,243,573.66 | 137,243,573.66 | |
| Premiums receivable | |||
| Reinsurance accounts receivable | |||
| Reinsurance contract reserve | |||
| Other receivables | 166,525,010.16 | 166,525,010.16 | |
| Including：Interests receivable | 29,970,944.44 | 29,970,944.44 | |
| Dividends receivable | |||
| Buying back the sale of financial assets | |||
| Inventories | 3,230,415,749.95 | 3,230,415,749.95 | |
| Contractual assets | |||
| Assets held for sale | |||
| Non-current assets due |
| within one year | |||
| Other current assets | 194,237,237.02 | 194,237,237.02 | |
| Total current assets | 15,494,468,403.49 | 15,494,468,403.49 | |
| Non-current assets: | |||
| Disbursement of loans and advances | |||
| Investment in debt obligations | |||
| Available-for-sale financial assets | 275,819,448.46 | -275,819,448.46 | |
| Investment in other debt obligations | |||
| Held-to-maturity investments | |||
| Long-term receivables | |||
| Long-term equity investments | 2,091,103,348.61 | 2,092,554,736.09 | 1,451,387.48 |
| Other equity instrument investment | 327,036,804.62 | 327,036,804.62 | |
| Other non-current financial assets | |||
| Investment property | |||
| Fixed assets | 1,029,666,915.47 | 1,029,666,915.47 | |
| Construction in progress | 3,000,489,249.86 | 3,000,489,249.86 | |
| Productive biological assets | |||
| Oil and gas assets | |||
| Right-to-use assets | |||
| Intangible assets | 231,967,372.88 | 231,967,372.88 | |
| Development expenses | |||
| Goodwill | |||
| Long-term deferred expenses | |||
| Deferred tax assets | 436,434,961.24 | 436,434,961.24 | |
| Other non-current assets | 44,979,896.41 | 44,979,896.41 | |
| Total non-current assets | 7,110,461,192.93 | 7,163,129,936.57 | 52,668,743.64 |
| Total assets | 22,604,929,596.42 | 22,657,598,340.06 | 52,668,743.64 |
| Current liabilities: | |||
| Short-term loans | |||
| Borrowings from the central bank | |||
| Loans from other banks | |||
| Trading financial liabilities | |||
| Financial liabilities measured at fair value through current profit or loss | |||
| Derivative financial liabilities | |||
| Notes payable | |||
| Accounts payable | 1,292,050,954.06 | 1,292,050,954.06 | |
| Advance from customer | 1,604,425,189.96 | 1,604,425,189.96 | |
| Contractual liabilities | |||
| Financial assets sold for repurchase | |||
| Customers deposits and deposits from banks and other financial institutions | |||
| Customer brokerage deposits | |||
| Securities underwriting brokerage deposits | |||
| Employee benefits payable | 268,092,193.50 | 268,092,193.50 | |
| Taxes payable | 1,648,028,076.07 | 1,648,028,076.07 | |
| Other payable | 602,887,024.88 | 602,887,024.88 | |
| Including：Interests payable | |||
| Dividends payable | |||
| Handling charges and commissions payable | |||
| Reinsurance accounts payable | |||
| Liabilities held for sale |
| Non-current liabilities due within one year | |||
| Other current liabilities | |||
| Total current liabilities | 5,415,483,438.47 | 5,415,483,438.47 | |
| Non-current liabilities: | |||
| Insurance contract reserves | |||
| Long-term loans | |||
| Bonds payable | |||
| Including: Preference shares | |||
| Perpetual bonds | |||
| Lease liabilities | |||
| Long-term payables | |||
| Long-term payroll payables | |||
| Accrued liabilities | |||
| Deferred income | 20,981,155.00 | 20,981,155.00 | |
| Deferred tax liabilities | 44,252,383.96 | 57,056,723.00 | 12,804,339.04 |
| Other non-current liabilities | |||
| Total non-current liabilities | 65,233,538.96 | 78,037,878.00 | 12,804,339.04 |
| Total liabilities | 5,480,716,977.43 | 5,493,521,316.47 | 12,804,339.04 |
| Shareholders' equity: | |||
| Share capital | 1,464,752,476.00 | 1,464,752,476.00 | |
| Other equity instruments | |||
| Including: Preference shares | |||
| Perpetual bonds | |||
| Capital reserves | 3,716,675,022.48 | 3,716,675,022.48 | |
| Less: Treasury stock | |||
| Other comprehensive income | 136,592,276.64 | 170,231,845.40 | 33,639,568.76 |
| Special reserves | |||
| Surplus reserves | 1,464,752,476.00 | 1,464,752,476.00 | |
| General risk reserve | |||
| Undistributed profits | 10,181,899,224.84 | 10,188,124,060.68 | 6,224,835.84 |
| Total equity attributable to owners of the parent company | 16,964,671,475.96 | 17,004,535,880.56 | 39,864,404.60 |
| Non-controlling interests | 159,541,143.03 | 159,541,143.03 | |
| Total owners' equity | 17,124,212,618.99 | 17,164,077,023.59 | 39,864,404.60 |
| Total liabilities and owners' equity | 22,604,929,596.42 | 22,657,598,340.06 | 52,668,743.64 |
Statement for adjustmentThe Ministry of Finance revised the Accounting Standards for Business Enterprises No.22-Recognitionand Measurement of Financial Instruments, Accounting Standards for Business EnterprisesNo.23-Transfer of Financial Assets, Accounting Standards for Business Enterprises No.24-HedgeAccounting and Accounting Standards for Business Enterprises No.37-Presentation of FinancialInstruments on 31 March 2017, and required the domestic listed companies to implement from 1January 2019.On 25 April 2019, the 7
th Meeting of the 9
th
Board of Directors reviewed and approved the Proposal onImplementation of Newly-revised Accounting Standards in 2019, which decided to implement the abovenew standards governing financial instruments from 1 January 2019. As for cumulative effects arisingfrom the first execution of new standards, the Company adjusted the retained earnings and the amountof other relevant items in financial statements at the beginning of 2019, while the comparative financialstatements of 2018 were not rearranged.
Balance sheet of parent company
Monetary Unit: CNY
| Item | 31 December 2018 | 1 January 2019 | Adjusted |
| Current assets: | |||
| Cash and cash equivalents | 6,189,473,157.83 | 6,189,473,157.83 | |
| Trading financial assets | |||
| Financial assets measured at fair value through current profit or loss | |||
| Derivative financial assets | |||
| Notes receivables | |||
| Accounts receivables | 67,698.43 | 67,698.43 | |
| Accounts receivables financing | |||
| Prepayment | 7,212,512.57 | 7,212,512.57 | |
| Other receivables | 4,657,727,046.02 | 4,657,727,046.02 | |
| Including: Interests receivable | 29,970,944.44 | 29,970,944.44 |
| Dividends receivable | |||
| Inventories | 383,404.53 | 383,404.53 | |
| Contractual assets | |||
| Assets held for sale | |||
| Non-current assets due within one year | |||
| Other current assets | 1,761,708.33 | 1,761,708.33 | |
| Total current assets | 10,856,625,527.71 | 10,856,625,527.71 | |
| Non-current assets: | |||
| Investment in debt obligations | |||
| Available-for-sale financial assets | 275,490,526.83 | -275,490,526.83 | |
| Investment in other debt obligations | |||
| Held-to-maturity investments | |||
| Long-term receivables | |||
| Long-term equity investments | 5,494,914,376.71 | 5,496,365,764.19 | 1,451,387.48 |
| Other equity instrument investment | 326,707,882.99 | 326,707,882.99 | |
| Other non-current financial assets | |||
| Investment property | |||
| Fixed assets | 701,870,689.02 | 701,870,689.02 | |
| Construction in progress | 511,528,278.96 | 511,528,278.96 | |
| Productive biological assets | |||
| Oil and gas assets | |||
| Right-to-use assets | |||
| Intangible assets | 224,039,846.61 | 224,039,846.61 | |
| Development expenses | |||
| Goodwill | |||
| Long-term deferred expenses |
| Deferred tax assets | 71,119,598.96 | 71,119,598.96 | |
| Other non-current assets | |||
| Total non-current assets | 7,278,963,317.09 | 7,331,632,060.73 | 52,668,743.64 |
| Total assets | 18,135,588,844.80 | 18,188,257,588.44 | 52,668,743.64 |
| Current liabilities: | |||
| Short-term loans | |||
| Trading financial liabilities | |||
| Financial liabilities measured at fair value through current profit or loss | |||
| Derivative financial liabilities | |||
| Notes payables | |||
| Accounts payable | 38,984,611.48 | 38,984,611.48 | |
| Advance from customer | 12,229,153.62 | 12,229,153.62 | |
| Contractual liabilities | |||
| Employee benefits payable | 67,383,911.98 | 67,383,911.98 | |
| Taxes payable | 115,424,262.03 | 115,424,262.03 | |
| Other payables | 1,788,068,491.88 | 1,788,068,491.88 | |
| Including：Interests payable | |||
| Dividends payable | |||
| Liabilities held for sale | |||
| Non-current liabilities due within one year | |||
| Other current liabilities | |||
| Total current liabilities | 2,022,090,430.99 | 2,022,090,430.99 | |
| Non-current liabilities: | |||
| Long-term loans | |||
| Bonds payable | |||
| Including: Preference shares | |||
| Perpetual |
| bonds | |||
| Lease liabilities | |||
| Long-term payables | |||
| Long-term payroll payables | |||
| Accrued liabilities | |||
| Deferred income | 12,593,640.12 | 12,593,640.12 | |
| Deferred tax liabilities | 44,252,383.96 | 57,056,723.00 | 12,804,339.04 |
| Other non-current liabilities | |||
| Total non-current liabilities | 56,846,024.08 | 69,650,363.12 | 12,804,339.04 |
| Total liabilities | 2,078,936,455.07 | 2,091,740,794.11 | 12,804,339.04 |
| Shareholders' equity | |||
| Share capital | 1,464,752,476.00 | 1,464,752,476.00 | |
| Other equity instruments | |||
| Including: Preference shares | |||
| Perpetual bonds | |||
| Capital reserves | 3,706,816,950.12 | 3,706,816,950.12 | |
| Less: Treasury stock | |||
| Other comprehensive income | 134,386,305.26 | 168,375,068.80 | 33,988,763.54 |
| Special reserves | |||
| Surplus reserves | 1,464,752,476.00 | 1,464,752,476.00 | |
| Undistributed profits | 9,285,944,182.35 | 9,291,819,823.41 | 5,875,641.06 |
| Total owners' equity | 16,056,652,389.73 | 16,096,516,794.33 | 39,864,404.60 |
| Total liabilities and owners' equity | 18,135,588,844.80 | 18,188,257,588.44 | 52,668,743.64 |
Statement for adjustmentThe Ministry of Finance revised the Accounting Standards for Business Enterprises No.22-Recognitionand Measurement of Financial Instruments, Accounting Standards for Business EnterprisesNo.23-Transfer of Financial Assets, Accounting Standards for Business Enterprises No.24-HedgeAccounting and Accounting Standards for Business Enterprises No.37-Presentation of FinancialInstruments on 31 March 2017, and required the domestic listed companies to implement from 1January 2019.On 25 April 2019, the 7
th
Meeting of the 9
thBoard of Directors reviewed and approved the Proposal onImplementation of Newly-revised Accounting Standards in 2019, which decided to implement the abovenew standards governing financial instruments from 1 January 2019. As for cumulative effects arising
from the first execution of new standards, the Company adjusted the retained earnings and the amountof other relevant items in financial statements at the beginning of 2019, while the comparative financialstatements of 2018 were not rearranged.
5.33.4. Retrospective restatement of previous comparative data due to the execution of any newstandard governing financial instruments or lease from 2019
√ Applicable ? N/A
According to relevant stipulations in new standard governing financial instruments, for cumulative effectsarising from the first execution of new standard, the Company adjusted the amount of relevant items infinancial statements at the beginning of 2019, and didn’t adjust the comparative financial statements of2018.The impact on relevant items in consolidated balance sheet at the period-begin by implementing newstandard governing financial instruments is as follows:
| Item | Balance on 31 December 2018 | Adjusted | Balance on 1 January 2019 |
| Notes receivable | 2,388,326,476.15 | -2,388,326,476.15 | |
| Accounts receivable financing | 2,388,326,476.15 | 2,388,326,476.15 | |
| Long-term equity investments | 2,091,103,348.61 | 1,451,387.48 | 2,092,554,736.09 |
| Available-for-sale financial assets | 275,819,448.46 | -275,819,448.46 | |
| Other equity instrument investment | 327,036,804.62 | 327,036,804.62 | |
| Deferred tax liabilities | 44,252,383.96 | 12,804,339.04 | 57,056,723.00 |
| Other comprehensive income | 136,592,276.64 | 33,639,568.76 | 170,231,845.40 |
| Undistributed profit | 10,181,899,224.84 | 6,224,835.84 | 10,188,124,060.68 |
The impact on relevant items in balance sheet of parent company at the period-begin by implementingnew standards governing financial instruments is as follows:
| Item | Balance on 31 December 2018 | Adjusted | Balance on 1 January 2019 |
| Long-term equity investments | 5,494,914,376.71 | 1,451,387.48 | 5,496,365,764.19 |
| Available-for-sale financial assets | 275,490,526.83 | -275,490,526.83 | |
| Other equity instrument investment | 326,707,882.99 | 326,707,882.99 | |
| Deferred tax liabilities | 44,252,383.96 | 12,804,339.04 | 57,056,723.00 |
| Other comprehensive income | 134,386,305.26 | 33,988,763.54 | 168,375,068.80 |
| Undistributed profit | 9,285,944,182.35 | 5,875,641.06 | 9,291,819,823.41 |
6. Taxes
6.1. Major tax types and rates
| Tax type | Tax base | Tax rate |
| Value-added tax | Taxable sales income | 16%, 13%, 11%, 10%, 9%, 6% |
| Urban maintenance and construction tax | Taxable turnover tax | 7% |
| Corporate income tax | Taxable income | 25%, 15%, 16.5%, 9%, 0% |
| Consumption tax (based on price) | Liquor tax price or ex-factory price | 20% |
| Consumption tax (based on quantity) | Quantity of wine | 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 asfollows:
| Company name | Corporate income tax rate |
| Luzhou Pinchuang Technology Co., Ltd. | 15% |
| Luzhou Laojiao International Development (Hong Kong) Co., Ltd. | 16.5% |
| Mingjiang Co., Ltd. | 21%-40% |
| Luzhou Laojiao Commercial Development (North America) 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% |
6.2. Tax preferences
(1) According to Announcement of the State Administration of Taxation on Corporate Income TaxQuestions Concerning the Further Implementation of the Western Development Strategy (StateAdministration of Taxation Announcement No.12 of 2012), from 1 January 2011 to 31 December 2020,companies are located in the western region whose primary business is listed in the Catalogue of
Encouraged Industries in the Western Region, and the annual primary business income accounting forover 70% of the total enterprise income. These companies can be subject to the corporate income tax ata reduced rate of 15%. The Company's holding subsidiary, Luzhou Pinchuang Technology Co., Ltd.,whose primary business income meet the requirements of scope and amount of the Catalogue ofEncouraged 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 andArticle 86, Item 1 of the Implementation Regulations of the Corporate Income Tax Law, companies areexempted from enterprise income tax when they engage in agricultural, forestry, animal husbandry andfishery industries. The holding subsidiary of the Company, Luzhou Red Sorghum Modern AgriculturalDevelopment Co., Ltd., is engaged in the cultivation and sale of organic sorghum and enjoys thereduction of corporate income tax preferences.
(3) According to the Article 15, Item 1 of the Provisional Regulations on Value-Added Tax, agriculturalproducers sell self-produced agricultural products exempt from value-added tax. The holding subsidiaryof the Company, Luzhou Red Sorghum Modern Agricultural Development Co., Ltd., is engaged in thecultivation and sale of organic sorghum and enjoys the value-added tax exemption.
(4) According to the Article 3, Item 7 of the Notice on Revise of Interim Measures of Accelerating theDevelopment in Headquarters Economy of China-Malaysia Qinzhou Industrial Park, till 31 December2020, the enterprises in the Qinzhou Industrial Park that enjoy 15% of tax rate of Western Developmentwith the half reduction in the tax period of preferential policies shall enjoy the local share of corporateincome tax exemption (namely 40% of corporate income tax was exempted, and the proportion adjustedby the state shall be executed according to new proportion); Guangxi Luzhou Laojiao Imported LiquorIndustry Co., Ltd., the wholly-owned subsidiary of the Company, pays corporate income tax at the rate of9% according to the tax preference policies.
7. Notes to the main items of the consolidated financial statements (All currency unitis CNY, except other statements)
7.1. Cash and cash equivalents
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Cash | 28,776.67 | 4,420.76 |
| Bank deposit | 9,744,243,225.66 | 9,364,716,075.36 |
| Other cash and cash equivalents | 9,394,524.45 | 2,666,131.56 |
| Total | 9,753,666,526.78 | 9,367,386,627.68 |
| Including: Total deposit outbound | 61,031,136.88 | 57,439,384.10 |
| Total amount with restriction to use due to mortgage, pledge or freeze | 1,400,000.00 | 1,400,000.00 |
Other statements:
Note 1: The total amount of funds deposited outbound is CNY 61,031,136.88, including: Luzhou LaojiaoInternational Development (Hong Kong) Co., Ltd., the holding subsidiary of the Company, with a totalamount of CNY 58,205,456.37, and CNY 2,825,680.51 of Mingjiang Co., Ltd., the holding subsidiary ofthe Company.Note 2: The closing balance of other cash and cash equivalents is the travel service deposit of CNY1,400,000.00 deposited by the Company's wholly-owned subsidiary, Luzhou Laojiao Tourism CultureCo., Ltd., in the designated bank according to the regulations of the tourism bureau, and balance of CNY7,994,524.45 deposited by the Company's holding subsidiary, Luzhou Laojiao Electronic Commerce Co.,Ltd. on the third-party e-commerce platform.
7.2. Accounts receivable
7.2.1. 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 | 19,266,797.97 | 100.00% | 972,883.74 | 5.05% | 18,293,914.23 | 10,922,591.46 | 100.00% | 588,862.59 | 5.39% | 10,333,728.87 |
| Including: | ||||||||||
| Accounts receivable tested for impairment on the portfolio with characteristics of credit risk | 19,266,797.97 | 100.00% | 972,883.74 | 5.05% | 18,293,914.23 | 10,922,591.46 | 100.00% | 588,862.59 | 5.39% | 10,333,728.87 |
| Total | 19,266,797.971 | 100.00% | 972,883.74 | 5.05% | 18,293,914.23 | 10,922,591.46 | 100.00% | 588,862.59 | 5.39% | 10,333,728.87 |
Note: 1. The closing book balance at the period-end increased CNY 8,344,206.51 compared with theperiod-begin, with an increase by 76.39%, primarily driven by the influence of the credit policy tooverseas business in the Hong Kong company.
Accounts receivable tested for impairment on the portfolio: characteristics of credit risk
Monetary Unit: CNY
| Name | Closing Balance | ||
| Book balance | Provision for bad debt | Proportion | |
| Risk portfolio | 19,266,797.97 | 972,883.74 | 5.05% |
| Total | 19,266,797.97 | 972,883.74 | -- |
Statements for determining the portfolio:
The Company will combine the accounts receivable divided into credit risk portfolio according to similarcharacteristics of credit risk (aging), and calculate expected credit loss with the reference of historicalcredit loss experience and combination of present condition and prediction of future financial situation,as well as through default risk exposure and expected credit loss rate in the duration.Statements for determining the portfolio:
Please refer to the relevant information of disclosure of provision for bad debt of other accountsreceivable if adopting the general mode of expected credit loss to withdraw provision for bad debt ofaccounts receivable? Applicable √ N/A
Disclosure by aging
Monetary Unit: CNY
| Aging | Book balance |
| Within 1 year (including 1 year) | 19,195,772.10 |
| 1-2 years | 11,100.41 |
| 2-3 years | 59,925.46 |
| Total | 19,266,797.97 |
7.2.2. Provision and recovery for bad and doubtful debt in the current periodAllowance 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 | 588,862.59 | 384,021.15 | 972,883.74 | |||
| Total | 588,862.59 | 384,021.15 | 972,883.74 | |||
There is no significant provision in accounts receivable reversed or recovered in the reporting period.
7.2.3. 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 |
| China Duty Free Group Co., Ltd. | 9,518,039.01 | 49.40% | 475,901.95 |
| Zhejiang Tmall Technology Co., Ltd. | 6,175,675.26 | 32.05% | 308,783.76 |
| China Duty Free International Co., Ltd. | 1,155,684.03 | 6.00% | 57,784.20 |
| Beijing Jiuxian Network Technology Co., Ltd. | 812,753.36 | 4.22% | 40,637.67 |
| Hangzhou Youzan Technology Co., Ltd. | 253,617.22 | 1.32% | 12,680.86 |
| Total | 17,915,768.88 | 92.99% |
7.3. Accounts receivable financing
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Bank acceptance bill | 2,393,797,259.80 | 2,388,326,476.15 |
| Total | 2,393,797,259.801 | 2,388,326,476.15 |
Note: 1. The business mode to manage notes receivable aims to collect contract cash flow as well as tosell the financial assets, and thus the notes receivable is presented as accounts receivable financing;due to the short term of notes receivable less than 1 year, and the sales time, sales price and saleproportion cannot be estimated reliably, the face value is regarded as the fair value of accountsreceivable financing by the Company.
Changes in accounts receivable financing in the reporting period and fair value:
? Applicable √ N/APlease refer to the relevant information of disclosure of impairment provision of other accountsreceivable if adopting the general mode of expected credit loss to withdraw impairment provision ofaccounts receivable financing.? Applicable √ N/A
Other statements:
(1) There is no account receivable financing pledged.
(2) There is CNY 4,270,000,000 as follows of accounts receivable financing that have been endorsed toother parties by the Company but have not expired at the end of year:
| Item | Derecognition at period-end | Not derecognition at period-end |
| Bank acceptance bill | 4,270,000,000.00 |
| Subtotal | 4,270,000,000.00 |
Note: The acceptor of the bank acceptance bill is a commercial bank. The probability of not being paiddue is very low, and the possibility of being recourse is very low, so the confirmation has beenterminated.
(3) There are no accounts receivable financing transferred to accounts receivable due to thenon-performance of the agreements by the issuers.
(4) There are no accounts receivable financing actually written off during the reporting period.
7.4. Prepayment
7.4.1. Aging analysis
Monetary Unit: CNY
| Aging | Closing Balance | Opening Balance | ||
| Amount | Proportion | Amount | Proportion | |
| Within 1 year | 150,806,477.44 | 99.33% | 130,442,246.83 | 95.04% |
| 1-2 years | 861,490.00 | 0.57% | 6,801,326.83 | 4.96% |
| 2-3 years | 150,481.04 | 0.10% | ||
| Total | 151,818,448.48 | -- | 137,243,573.66 | -- |
Statements for significant prepayment whose aging longer than 1 year and unsettled in time:
There is no significant prepayment whose aging is longer than 1 year.
7.4.2. Top five entities with the largest balances of prepayment
| Company Name | Closing Balance | Proportion to the total closing balance of prepayment |
| New Shottes Brook Private Company | 32,149,113.33 | 21.18% |
| Shanghai Merlot Advertising Co., Ltd. | 27,769,124.00 | 18.29% |
| Australian Tennis Co., Ltd. | 9,208,237.50 | 6.07% |
| Shanghai Endeavor Culture Development Co., Ltd. | 8,005,949.99 | 5.27% |
| Luzhou Western Gas Co., Ltd. | 8,000,000.00 | 5.27% |
| Subtotal | 85,132,424.82 | 56.08% |
7.5 Other receivables
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Interest receivable | 45,636,744.44 | 29,970,944.44 |
| Other receivables | 114,116,677.20 | 136,554,065.72 |
| Total | 159,753,421.64 | 166,525,010.16 |
7.5.1. Interest receivable
7.5.1.1. Classification of interest receivable
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Fixed deposits | 45,636,744.441 | 29,970,944.44 |
| Total | 45,636,744.44 | 29,970,944.44 |
Note: 1. The closing balance increased CNY 15,665,800.00 compared with opening balance, with anincrease by 52.27%, mainly due to the increase of interest income on fixed deposit resulting from stockfunds in the reporting period.
7.5.2. Other receivables
7.5.2.1. Other receivables disclosed by nature
Monetary Unit: CNY
| Nature | Closing book balance | Opening book balance |
| Intercourse funds | 27,025,658.11 | 26,300,395.29 |
| Petty cash | 2,184,482.07 | 2,963,363.02 |
| Saving deposits involving contract disputes | 287,400,297.52 | 307,456,275.25 |
| Other | 1,902,662.52 | 6,805,467.11 |
| Total | 318,513,100.22 | 343,525,500.67 |
7.5.2.2. 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 2019 | 6,971,434.95 | 200,000,000.00 | 206,971,434.95 |
| Balance of 1 January 2019 in the current period | —— | —— | —— | —— |
| Allowance of the current period | 234,313.59 | 234,313.59 | ||
| Verification of the current period | 2,809,325.52 | 2,809,325.52 | ||
| Balance of 31 December 2019 | 4,396,423.02 | 200,000,000.00 | 204,396,423.02 |
Changes of book balance with significant amount changed of loss provision in the current period? Applicable √ N/A
Disclosure by aging
Monetary Unit: CNY
| Aging | Book balance |
| Within 1 year (including 1 year) | 24,393,757.76 |
| 1-2 years | 2,325,254.36 |
| 2-3 years | 414,000.00 |
| Over 3 years | 291,380,088.10 |
| 3-4 years | 1,807,606.93 |
| 4-5 years | 166,583.65 |
| Over 5 years | 289,405,897.52 |
| Total | 318,513,100.22 |
7.5.2.3. Provision and recovery for bad and doubtful other receivables in the current periodAllowance 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 Note1 | 200,000,000.00 | 200,000,000.00 | ||||
| Other | 6,971,434.9 | 234,313.59 | 2,809,325.5 | 4,396,423.02 | ||
| receivables tested for impairment by the portfolio | 5 | 2 | ||||
| Total | 206,971,434.95 | 234,313.59 | 2,809,325.52 | 204,396,423.02 |
Note 1: In the 2014 Annual Report, the Company disclosed the information about three depositsamounting to CNY 500,000,000.00 with Changsha Yingxin Sub-branch of Agricultural Bank of China andNanyang Zhongzhou Sub-branch of Industrial and Commercial Bank of China. The deposits have lostthe nature of monetary fund due to their involvement in contract disputes and have thus been transferredinto “other receivables”. As of 31 December 2019, of the deposits involved in contract disputes, theamount that was not recovered was CNY 287,400,297.52. Related attorneys of W&H Law Firm Chengduproduced the Legal Opinions on the Allowance of Provision for Bad Debt of Luzhou Laojiao Co., Ltd. forAbnormal Deposits in Three Places Including Changsha and Nanyang on 17 March 2020. According tothe opinions, “Whereas during the period from 25 March 2016 till this production of legal opinions on theallowance proportion of provision for bad debt, there is no matter that occurred and affected or changedthe provision for bad debt, and thus the judgment on the allowance of provision for bad debt at CNY 200million shall remain”. Refer to Note 12.2. for details.Of which provision for bad debt with significant amount reversed or recovered:
There is no provision for bad debt with significant amount in other receivables reversed or recovered.
7.5.2.4. Other receivables actually written off during the reporting period
Monetary Unit: CNY
| Item | Written off amount |
| Other receivables actually written off | 2,809,325.52 |
Of which significant other receivables written off:
Monetary Unit: CNY
| Company Name | Nature | Amount | Reason | Write-off procedures | Whether generated from related transaction |
| China Real Estate Development Corporation Luzhou Branch | Intercourse funds | 1,500,000.00 | Irrecoverable | Managed according to lawyer’s investigation report and approved by manager’s office of the Company | No |
| Luzhou Tuojiang Market | Intercourse funds | 1,233,098.00 | Irrecoverable | Managed according to lawyer’s investigation report | No |
| and approved by manager’s office of the Company | |||||
| Total | -- | 2,733,098.00 | -- | -- | -- |
7.5.2.5. 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 |
| Saving deposits involving contract disputes | 287,400,297.52 | Over 5 years | 90.23% | 200,000,000.00 | |
| Housing and Urban-Rural Development Bureau of Longmatan District, Luzhou | Security deposit | 3,052,930.23 | Within 1 year | 0.96% | 152,646.51 |
| Treasury payment center of Jiangyang District, Luzhou | Security deposit | 1,828,350.00 | Within 1 year | 0.57% | 91,417.50 |
| Luzhou Electric Power Bureau of Longmatan District, Luzhou | Security deposit | 1,520,000.00 | 3-4 years | 0.48% | 608,000.00 |
| Administration Bureau of Construction Engineering of Luzhou | Security deposit | 1,043,000.00 | Over 5 years | 0.33% | 1,043,000.00 |
| Total | -- | 294,844,577.75 | -- | 92.57% | 201,895,064.01 |
7.6 Inventories
Whether the Company has implemented the new revenue standards? Yes √ No
7.6.1. Categories of Inventories
Monetary Unit: CNY
| Category | Closing Balance | Opening Balance | ||||
| Book Balance | Provision for stock obsolescence | Book Value | Book Balance | Provision for stock obsolescence | Book Value | |
| Raw materials | 59,935,022.20 | 59,935,022.20 | 68,423,897.18 | 68,423,897.18 | ||
| Goods in progress | 201,122,739.38 | 201,122,739.38 | 138,889,316.08 | 138,889,316.08 | ||
| Finished goods | 1,136,393,394.73 | 1,136,393,394.73 | 1,181,824,032.21 | 1,181,824,032.21 | ||
| Revolving materials | 18,778,952.72 | 18,778,952.72 | 8,812,993.84 | 8,812,993.84 | ||
| Goods in transit | 110,174,419.64 | 110,174,419.64 | 90,817,775.95 | 90,817,775.95 | ||
| Self-made semi-finished goods | 2,114,830,563.66 | 2,114,830,563.66 | 1,741,647,734.69 | 1,741,647,734.69 | ||
| Total | 3,641,235,092.33 | 3,641,235,092.33 | 3,230,415,749.95 | 3,230,415,749.95 | ||
7.6.2. Provision for stock obsolescence
The net realizable value is not lower than book cost in the closing balance of inventory, so there is noprovision for decline in value of inventories.
7.6.3. Statements for borrowing cost capitalized and included in the closing balance of inventoryThere is no borrowing cost capitalized and included in the closing balance of inventory.
7.6.4. Closing conditions of assets completed but not settled through construction contractsOther statements:
There are no closing conditions of assets completed but not settled through construction contracts.
7.7. Other current assets
Whether the Company has implemented the new revenue standards? Yes √ No
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Value-added tax | 112,912,411.46 | 121,918,815.13 |
| Corporate income tax | 78,049,453.69 | 70,659,379.26 |
| Other taxes | 4,212,183.42 | 1,659,042.63 |
| Total | 195,174,048.57 | 194,237,237.02 |
Other statements:
The value-added tax expected to be deducted in the next fiscal year and corporate income tax and othertaxes are disclosed in other current assets.
7.8. 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. | 2,076,748,196.31 | 148,787,121.31 | 4,938,830.87 | 20,735,166.94 | 2,209,738,981.55 | 2,567,098.80 | |||||
| Sichuan Development Wine Investment Co., Ltd. | 15,806,539.78 | -2,823,795.61 | 12,982,744.17 | ||||||||
| Sichuan Tongniang Liquor | 8,000,000.00 | 8,000,000.00 | |||||||||
| Industry Technology Research Institute Co., Ltd. Note | |||||||||||
| Subtotal | 2,092,554,736.09 | 8,000,000.00 | 145,963,325.70 | 4,938,830.87 | 20,735,166.94 | 2,230,721,725.72 | 2,567,098.80 | ||||
| Total | 2,092,554,736.09 | 8,000,000.00 | 145,963,325.70 | 4,938,830.87 | 20,735,166.94 | 2,230,721,725.72 | 2,567,098.80 |
Other statementsOn 10 September 2019, the Proposal on the Subsidiary Participating in the Investment to EstablishSichuan Tongniang Liquor Industry Technology Research Institute Co., Ltd. was reviewed and approvedat the 10
th Meeting of the 9
thBoard of Directors of the Company. It was agreed that seven corporateentities, including the Company’s subsidiary Luzhou Pinchuang Technology Co., Ltd. and SichuanJingwei Education Management Group Co., Ltd. would jointly invest to establish Sichuan TongniangLiquor Industry Technology Research Institute Co., Ltd.. The registered capital of the company would beCNY 50 million, with Pinchuang contributing CNY 20 million in the monetary form, accounting for 40% ofthe equity. According to the resolution at the annual general meeting, all shareholders gave the consentthat the board of directors of the company would comprise five members, including two from Pinchuang,one from Sichuan Jingwei Education Management Group Co., Ltd., one from Luzhou Liquor IndustrialPark Development and Investment Co., Ltd. and one from Sichuan Huayu Ruide Technology Co., Ltd..The voting proportion of Pinchuang would be 40%, constituting significant influence, and thus theaccounting would be done in the equity method.
7.9. Other equity instrument investment
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Financial assets assigned measured by fair value and the changes be included in the current gains and losses: | ||
| Including: | ||
| Guotai Junan Investment Management Co., Ltd. | 22,611,834.24 | 22,611,834.24 |
| Guojiu Big Data Co., Ltd. | 10,000,000.00 | 10,000,000.00 |
| Sichuan Nitrocell Co., Ltd. | 11,757,933.60 | 10,335,098.55 |
| Luzhou Bank Co., Ltd. | 89,076,363.20 | 102,337,356.16 |
| Guotai Junan Securities Co., Ltd. | 217,756,674.52 | 180,423,594.04 |
| Sichuan China Liquor Golden Triangle Brand Operation Development Co., Ltd. and other equity instrument investments | 1,192,450.22 | 1,328,921.63 |
| Total | 352,395,255.78 | 327,036,804.62 |
Categories of non-trading equity instrument investment in the current period:
Monetary Unit: CNY
| Item | Recognized dividends income | Accumulative gains | Accumulative losses | Amount of other comprehensive income transferred to retained earnings | Reason for assigning to measure at fair value and changes recorded into other comprehensive income | Reason of other comprehensive income transferred to retained earnings |
| Shenzhen Xingangfeng Development Co., Ltd. | 2,354,000.00 | According to the mode of managing assets by management layer | ||||
| Sichuan Deyang Jintai Hotel | 2,000,000.00 | According 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 | ||||
| Guotai Junan Investment Management Co., Ltd. | 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 | |||||
| Sichuan China Liquor Golden Triangle Brand Operation Development Co., Ltd. | 136,471.41 | According to the mode of managing assets by management layer | ||||
| Sichuan Nitrocell Co., Ltd. | 85,995.53 | 10,727,933.60 | According to the mode of managing assets by management layer | |||
| Luzhou Bank Co., Ltd. | 5,424,000.00 | 37,956,363.20 | According to the mode of managing assets by management layer | |||
| Guotai Junan Securities Co., Ltd. | 3,238,674.18 | 205,037,517.76 | According to the mode of managing assets by management layer | |||
| Sichuan Zhonghe Tongchuang Maca Investment Co., Ltd. | 200,000.00 | According to the mode of managing assets by management layer | ||||
| Luzhou Enterprise Union Trading Co., Ltd. | 198,926.37 | According to the mode of managing assets by management |
| layer | ||||||
| Luzhou Zunchi Auto Service Co., Ltd. | According to the mode of managing assets by management layer |
7.10. Fixed assets
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Fixed assets | 1,516,871,720.00 | 1,028,995,516.07 |
| Disposal of fixed assets | 1,993,677.91 | 671,399.40 |
| Total | 1,518,865,397.91 | 1,029,666,915.47 |
7.10.1. Details of fixed assets
Monetary Unit: CNY
| Item | Buildings and constructions | Specialized equipment | General equipment | Transportation equipment | Other equipment | Total |
| I. Original cost: | ||||||
| 1.Opening balance | 1,172,053,577.25 | 512,078,313.99 | 262,080,975.99 | 36,934,689.93 | 559,470,748.39 | 2,542,618,305.55 |
| 2.Increase in current period | 150,625,771.28 | 207,122,983.03 | 117,051,574.77 | 5,447,941.48 | 173,004,258.08 | 653,252,528.64 |
| (1) External purchase | 47,301,562.45 | 9,833,330.49 | 4,398,053.09 | 4,414,693.22 | 65,947,639.25 | |
| (2) Transfer from construction in progress | 150,625,771.28 | 159,821,420.58 | 107,218,244.28 | 1,049,888.39 | 168,589,564.86 | 587,304,889.39 |
| (3) Increase from business combination | ||||||
| 3.Decrease in current period | 53,997,503.14 | 1,477,675.73 | 11,867,065.83 | 4,539,608.27 | 10,052,844.94 | 81,934,697.91 |
| (1) Disposal or | 53,997,503.14 | 1,477,675.73 | 11,867,065.83 | 4,539,608.27 | 10,052,844.94 | 81,934,697.91 |
| retirement | ||||||
| 4.Closing Balance | 1,268,681,845.39 | 717,723,621.29 | 367,265,484.93 | 37,843,023.14 | 722,422,161.53 | 3,113,936,136.28 |
| II. Accumulated depreciation | ||||||
| 1.Opening Balance | 604,436,216.79 | 465,805,851.13 | 172,225,392.15 | 30,583,944.02 | 239,948,445.32 | 1,512,999,849.41 |
| 2.Increase in current period | 39,631,814.79 | 36,010,822.34 | 37,051,486.86 | 1,541,304.20 | 41,851,514.60 | 156,086,942.79 |
| (1) Provision | 39,631,814.79 | 36,010,822.34 | 37,051,486.86 | 1,541,304.20 | 41,851,514.60 | 156,086,942.79 |
| 3.Decrease in current period | 48,132,409.93 | 1,189,274.49 | 10,861,516.91 | 3,796,437.02 | 8,665,677.64 | 72,645,315.99 |
| (1) Disposal or retirement | 48,132,409.93 | 1,189,274.49 | 10,861,516.91 | 3,796,437.02 | 8,665,677.64 | 72,645,315.99 |
| 4.Closing Balance | 595,935,621.65 | 500,627,398.98 | 198,415,362.10 | 28,328,811.20 | 273,134,282.28 | 1,596,441,476.21 |
| 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 | 672,123,283.67 | 217,096,222.31 | 168,850,122.83 | 9,514,211.94 | 449,287,879.25 | 1,516,871,720.00 |
| 2.Opening Book Value | 566,994,420.39 | 46,272,462.86 | 89,855,583.84 | 6,350,745.91 | 319,522,303.07 | 1,028,995,516.07 |
7.10.2. Fixed assets without certification of right
Monetary Unit: CNY
| Item | Book value | Reason for not having the certification of right |
| Buildings | 28,149,660.22 | The property ownership certificate has not been processed yet for the historical reasons, and it plans to be processed after gradually improving procedures. |
7.10.3. Disposal of fixed assets
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Disposal and retirement of assets | 1,993,677.91 | 671,399.40 |
| Total | 1,993,677.91 | 671,399.40 |
7.11. Construction in progress
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Construction in progress | 7,257,393,087.56 | 3,000,489,249.86 |
| Total | 7,257,393,087.56 | 3,000,489,249.86 |
7.11.1. 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 project of brewing | 6,072,403,009.71 | 6,072,403,009.71 | 2,362,483,702.39 | 2,362,483,702.39 | ||
| Technical renovation of | 8,079,135.92 | 8,079,135.92 | 2,639,877.96 | 2,639,877.96 | ||
| Luzhou Laojiao Intelligent packaging center | ||||||
| Construction project of Luzhou Laojiao Liquor Culture Museum and supporting facility | 401,316,175.65 | 401,316,175.65 | 396,458,270.43 | 396,458,270.43 | ||
| Improvement and technical renovation project of Luzhou Laojiao production supporting | 11,346,483.95 | 11,346,483.95 | ||||
| Marketing network command center office area reconstruction and expansion project | 220,539,935.89 | 220,539,935.89 | 41,727,132.77 | 41,727,132.77 | ||
| New model application project of intelligent production workshop of solid state liquor | 189,417,456.65 | 189,417,456.65 | 41,628,781.02 | 41,628,781.02 | ||
| Guojiao Culture Park Qiankun Wine Castle Cultural Tourism project | 229,262,370.65 | 229,262,370.65 | 2,800,622.50 | 2,800,622.50 | ||
| Technical upgrading project of sewage station | 2,006.06 | 2,006.06 | 7,019,543.87 | 7,019,543.87 |
| Luohan brewing production automation equipment renovation project | 669,025.61 | 669,025.61 | 18,143,603.80 | 18,143,603.80 | ||
| Transformation of production line of Luzhou Laojiao packaging workshop (Huangyi North District) | 17,329,425.02 | 17,329,425.02 | 60,095.77 | 60,095.77 | ||
| Other projects | 107,028,062.45 | 107,028,062.45 | 127,527,619.35 | 127,527,619.35 | ||
| Total | 7,257,393,087.561 | 7,257,393,087.56 | 3,000,489,249.86 | 3,000,489,249.86 |
Note: 1.The closing balance increased CNY 4,256,903,837.70 compared with the opening balance, withan increase by 141.87%, because of the increase in investment of the technical renovation project ofbrewing.
7.11.2. 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 project of brewing | 7,414,280,000.00 | 2,362,483,702.39 | 4,000,207,095.68 | 290,287,788.36 | 6,072,403,009.71 | 85.82% | 85.00% | 11,815,117.50 | 11,815,117.50 | 3.67% | Capital raised and other | |
| Technical renovation of | 1,577,913,400.00 | 2,639,877.96 | 5,439,257.96 | 8,079,135.92 | 0.51% | 1.00% | Other |
| Luzhou Laojiao Intelligent packaging center | ||||||||||||
| Construction project of Luzhou Laojiao Liquor Culture Museum and supporting facility | 1,500,000,000.00 | 396,458,270.43 | 4,857,905.22 | 401,316,175.65 | 26.75% | 26.00% | Other | |||||
| Improvement and technical renovation project of Luzhou Laojiao production supporting | 888,544,100.00 | 11,346,483.95 | 11,346,483.95 | 1.28% | 1.00% | Other | ||||||
| Marketing network command center office area | 271,500,000.00 | 41,727,132.77 | 178,812,803.12 | 220,539,935.89 | 81.23% | 85.00% | Other |
| reconstruction and expansion project | ||||||||||||
| New model application project of intelligent production workshop of solid state liquor | 245,100,000.00 | 41,628,781.02 | 147,788,675.63 | 189,417,456.65 | 77.28% | 80.00% | Other | |||||
| Guojiao Culture Park Qiankun Wine Castle Cultural Tourism project | 337,885,813.44 | 2,800,622.50 | 226,461,748.15 | 229,262,370.65 | 67.85% | 70.00% | Other | |||||
| Technical upgrading project of sewage station | 77,050,000.00 | 7,019,543.87 | 43,209,449.99 | 50,226,987.80 | 2,006.06 | 65.19% | 99.00% | Other | ||||
| Luohan brewing production automat | 59,870,000.00 | 18,143,603.80 | 16,216,244.31 | 33,690,822.50 | 669,025.61 | 83.96% | 99.00% | Other |
| ion equipment renovation project | ||||||||||||
| Transformation of production line of Luzhou Laojiao packaging workshop (Huangyi North District) | 57,774,100.00 | 60,095.77 | 39,396,441.57 | 11,781,660.36 | 10,345,451.96 | 17,329,425.02 | 68.29% | 70.00% | Other | |||
| Total | 12,429,917,413.44 | 2,872,961,630.51 | 4,673,736,105.58 | 385,987,259.02 | 10,345,451.96 | 7,150,365,025.11 | -- | -- | 11,815,117.50 | 11,815,117.50 | -- |
7.12. Intangible assets
7.12.1. 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 | 303,836,329.47 | 567,975.00 | 32,577,520.89 | 1,864,746.08 | 338,846,571.44 | |
| 2. Increase in current period | 105,912,993.40 | 1,132,075.44 | 8,078,043.80 | 50,000.00 | 115,173,112.64 | |
| (1) Acquired | 84,360,783.58 | 1,132,075.44 | 8,078,043.80 | 50,000.00 | 93,620,902.82 | |
| (2) Internal developed | ||||||
| (3) Business |
| combination | ||||||
| (4) Transferred from construction in progress | 21,552,209.82 | 21,552,209.82 | ||||
| 3. Decrease in current period | 6,207,684.98 | 24,000.00 | 6,231,684.98 | |||
| (1) Disposal | 6,207,684.98 | 24,000.00 | 6,231,684.98 | |||
| 4. Closing Balance | 403,541,637.89 | 1,700,050.44 | 40,655,564.69 | 1,890,746.08 | 447,787,999.10 | |
| II. Accumulated amortization | ||||||
| 1. Opening Balance | 87,906,483.14 | 423,796.46 | 17,038,895.83 | 1,510,023.13 | 106,879,198.56 | |
| 2. Increase in current period | 7,326,345.14 | 16,797.50 | 3,799,460.14 | 132,560.69 | 11,275,163.47 | |
| (1) Provision | 7,326,345.14 | 16,797.50 | 3,799,460.14 | 132,560.69 | 11,275,163.47 | |
| 3. Decrease in current period | 2,586,535.41 | 13,859.99 | 2,600,395.40 | |||
| (1) Disposal | 2,586,535.41 | 13,859.99 | 2,600,395.40 | |||
| 4. Closing Balance | 92,646,292.87 | 440,593.96 | 20,838,355.97 | 1,628,723.83 | 115,553,966.63 | |
| 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 | 310,895,345.02 | 1,259,456.48 | 19,817,208.72 | 262,022.25 | 332,234,032.471 | |
| 2. Opening Book Value | 215,929,846.33 | 144,178.54 | 15,538,625.06 | 354,722.95 | 231,967,372.88 |
Note: 1. The closing balance increased CNY 100,266,659.59 compared with the opening balance, withan increase by 43.22%, primarily driven by the impact of acquisition of and with CNY 84,360,783.58 inthe current period.There is no proportion of intangible assets formed by internal development to the balance of intangibleassets at the period-end.
7.12.2. Details of land use right without the certification of right
Monetary Unit: CNY
| Item | Book value | Reason for not having the certification of right |
| Land use right | 35,497.96 | The ownership certificate has not been processed yet for the historical reasons, and it plans to be processed after gradually improving procedures. |
Other statements:
The net value of Luohan production area land is CNY 131,928.99, which has completed process of theland property rights in the first half of 2019. As of the period-end, the net value of the rest land withoutthe certificate of right is CNY 35,497.96.
7.13. Long-term deferred expense
Monetary Unit: CNY
| Item | Opening Balance | Increase | Amortization | Other decrease | Closing Balance |
| Improvement expense of rented fixed assets | 955,342.52 | 26,537.29 | 928,805.23 | ||
| Total | 955,342.52 | 26,537.29 | 928,805.23 |
Other statementsThe closing balance at the period-end is mainly the expense for the laboratory improvement in Chengduby operating lease.
7.14. Deferred tax assets/ deferred tax liabilities
7.14.1. 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 | 208,551,338.49 | 52,073,505.61 | 210,745,239.94 | 52,686,154.86 |
| Unrealized profits from internal transactions | 2,194,391,801.31 | 548,597,950.33 | 1,309,793,977.06 | 327,531,965.78 |
| Deductible losses | 4,745,206.42 | 1,186,301.61 | 872,951.87 | 218,237.97 |
| Impact from salary | 269,597,906.46 | 66,865,466.60 | 201,262,655.64 | 50,030,751.13 |
| Impact from deferred earnings | 23,845,000.00 | 5,961,250.00 | 18,840,778.20 | 4,555,670.74 |
| Impact from fixed assets depreciation | 277,518.07 | 45,790.48 | 145,146.51 | 23,949.17 |
| Impact from fair value changes of other equity instrument investment | 5,689,397.78 | 1,422,349.44 | 5,552,926.37 | 1,388,231.59 |
| Total | 2,707,098,168.53 | 676,152,614.07 | 1,747,213,675.59 | 436,434,961.24 |
7.14.2. 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 | 253,721,814.56 | 63,430,453.64 | 228,226,891.99 | 57,056,723.00 |
| Total | 253,721,814.56 | 63,430,453.64 | 228,226,891.99 | 57,056,723.00 |
7.14.3. Deferred tax assets or liabilities presented as net value after offset
Monetary Unit: CNY
| Item | Closing offset amount of deferred tax assets | Closing balance of deferred tax assets or | Opening offset amount of deferred tax assets | Opening balance of deferred tax assets or |
| and deferred tax liabilities | deferred tax liabilities after offset | and deferred tax liabilities | deferred tax liabilities after offset | |
| Deferred tax assets | 676,152,614.07 | 436,434,961.24 | ||
| Deferred tax liabilities | 63,430,453.64 | 57,056,723.00 |
7.14.4. Details of unrecognized deferred tax assets
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Deductible losses | 16,684,718.93 | 17,608,147.09 |
| Impact from employee benefits payable | 3,997,637.66 | 1,618,142.01 |
| Impact from provision for impairment of assets | 8,007.14 | 5,096.46 |
| Impact from fair value changes of other equity instrument investment | 200,000.00 | 200,000.00 |
| Total | 20,890,363.73 | 19,431,385.56 |
7.14.5. Deductible losses from unrecognized deferred tax assets will due on the following years
Monetary Unit: CNY
| Year | Closing Amount | Opening Amount | Notes |
| 2019 | |||
| 2020 | 1,320,354.35 | 2,954,015.20 | |
| 2021 | 2,942,475.67 | 8,109,464.53 | |
| 2022 | 668,388.33 | 6,544,667.36 | |
| 2023 | 760,000.23 | ||
| 2024 | 10,993,500.35 | ||
| Total | 16,684,718.93 | 17,608,147.09 | -- |
7.15. Other non-current assets
Whether the Company has implemented the new revenue standards? Yes √ No
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Value-added tax to be deducted | 4,314.05 | |
| Prepaid equipment and land expense | 237,539,447.75 | 43,682,373.94 |
| Others | 1,293,208.42 | |
| Total | 237,539,447.75 | 44,979,896.41 |
Other statements:
The closing balance increased CNY 192,559,551.34 compared with the opening balance, with anincrease by 428.10%, mainly due to the impact of increase in the new prepayment on construction andpayment on land in the current period in the Brewing Company, a Company's subsidiary.
7.16. Accounts payable
7.16.1. Presentation of accounts payable
Monetary Unit: CNY
| Category | Closing Balance | Opening Balance |
| Materials and service expense | 656,206,916.53 | 959,423,097.59 |
| Engineering equipment expense | 1,212,417,041.49 | 332,627,856.47 |
| Total | 1,868,623,958.021 | 1,292,050,954.06 |
Note: 1. The closing balance increased CNY 576,573,003.96 compared with the opening balance, withan increase by 44.62%, mainly due to the successive investment in brewing technical renovation projectof capital raised project and the increase in engineering equipment expense payable.
7.17. Advance from customers
Whether the Company has implemented the new revenue standards? Yes √ No
7.17.1. Presentation of advances from customers
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Within 1 year | 2,189,574,440.25 | 1,548,909,002.82 |
| 1-2 years | 20,802,869.90 | 31,636,485.70 |
| 2-3 years | 14,155,802.38 | 4,230,033.33 |
| Over 3 years | 19,909,531.11 | 19,649,668.11 |
| Total | 2,244,442,643.641 | 1,604,425,189.96 |
Note: 1. The closing balance increased CNY 640,017,453.68 compared with the opening balance, withan increase by 39.89%, mainly due to the increase in the sales volume and the impact of correspondingincrease in payment of liquor sales in advance.
7.18. Employee benefits payable
7.18.1. 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 | 236,094,159.99 | 757,581,087.94 | 706,450,458.57 | 287,224,789.36 |
| 2. Post-employment benefits- defined contribution plans | 31,989,061.98 | 103,208,722.92 | 80,405,858.30 | 54,791,926.60 |
| 3. Termination benefits | 8,971.53 | 8,971.53 | ||
| Total | 268,092,193.50 | 860,789,810.86 | 786,856,316.87 | 342,025,687.49 |
7.18.2. 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 | 200,721,738.21 | 574,691,016.42 | 576,099,632.91 | 199,313,121.72 |
| 2. Employees’ welfare | 53,898,804.41 | 53,898,804.41 | ||
| 3. Social insurance premiums | 14,111,862.70 | 33,676,427.92 | 28,306,766.35 | 19,481,524.27 |
| Including: Medical insurance premium | 10,973,576.03 | 27,957,395.32 | 24,608,379.75 | 14,322,591.60 |
| Work-related injury insurance | 1,416,940.47 | 2,590,934.45 | 1,700,567.22 | 2,307,307.70 |
| Maternity insurance premium | 1,721,346.20 | 3,128,098.15 | 1,997,819.38 | 2,851,624.97 |
| 4. Housing funds | 116,008.79 | 42,604,558.15 | 35,077,052.88 | 7,643,514.06 |
| 5. Labor union expenditures and employee education funds | 21,144,550.29 | 52,710,281.04 | 13,068,202.02 | 60,786,629.31 |
| Total | 236,094,159.99 | 757,581,087.94 | 706,450,458.57 | 287,224,789.36 |
7.18.3. 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 | 17,763,604.32 | 78,306,031.58 | 55,421,509.20 | 40,648,126.70 |
| 2. Unemployment insurance premium | 7,159,873.96 | 2,533,558.86 | 1,997,307.73 | 7,696,125.09 |
| 3. Enterprise annuity | 7,065,583.70 | 22,369,132.48 | 22,987,041.37 | 6,447,674.81 |
| Total | 31,989,061.98 | 103,208,722.92 | 80,405,858.30 | 54,791,926.60 |
7.19. Taxes payable
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Value-added tax | 130,301,346.24 | 416,220,575.79 |
| Consumption tax | 706,805,251.73 | 544,950,527.72 |
| Enterprise income tax | 663,458,294.52 | 580,497,468.84 |
| Individual income tax | 24,337,261.47 | 9,702,128.37 |
| Urban maintenance and construction tax | 56,353,741.57 | 55,496,044.38 |
| Education surcharge | 24,151,666.39 | 22,601,336.84 |
| Local education surcharge | 16,101,110.87 | 13,211,282.71 |
| Property tax | 1,017,585.02 | 389,027.85 |
| Stamp duty | 438,646.53 | 4,300,446.09 |
| Land use tax | 9,891,132.70 | 616,031.18 |
| Others | 188,194.63 | 43,206.30 |
| Total | 1,633,044,231.67 | 1,648,028,076.07 |
7.20. Other payables
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Dividends payable | 30,650,684.93 | |
| Other payables | 668,291,714.44 | 602,887,024.88 |
| Total | 698,942,399.37 | 602,887,024.88 |
7.20.1. Interest payable
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Interest of corporate bonds | 30,650,684.93 | |
| Total | 30,650,684.931 |
Note: 1. The Company has obtained approval from China Securities Regulatory Commission with thedocument “ZJXK [2019] No. 1312” for public issue of corporate bonds capped at CNY 4 billion.According to the Announcement on the Public Issuance of Corporate Bonds (Phase I) to EligibleInvestors by Luzhou Laojiao Co., Ltd. in 2019, the Company’s public issue of corporate bonds to eligibleinvestors in 2019 shall be capped at CNY 2.5 billion (inclusive of CNY 2.5 billion) with an issue price ofCNY 100 per bond through off-market inquiry and allotment of institutional investors. The period of theissue started on 27 August 2019 and ended on 28 August 2019; the final amount actually issued wasCNY 2.5 billion and the final stated interest rate was 3.58%.
Information of significant overdue but unpaid interest:
There is no significant overdue but unpaid interest.
7.20.2. Other payables
7.20.2.1. Categories by nature
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Security deposit | 637,133,029.48 | 543,339,684.25 |
| Intercourse funds | 5,009,860.11 | 28,265,598.58 |
| Others | 26,148,824.85 | 31,281,742.05 |
| Total | 668,291,714.44 | 602,887,024.88 |
7.21. Bonds payable
7.21.1. Bonds payable
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Corporate bonds in 2019 (Phase I) | 2,490,883,676.39 | |
| Total | 2,490,883,676.39 |
7.21.2. Increase/decrease of bonds payable (excluding other financial instrument classified asfinancial liabilities such as preferred shares and perpetual bonds)
Monetary Unit: CNY
| Bond name | Par value | Issuing date | Duration | Issuing amount | Opening Balance | Issued in the current period | Withdrawal of interest by par value | Amortization of premium and depreciation | Repayment in the reporting period | Closing Balance | |
| Corporate bonds in 2019 (Phase I) | 2,500,000,000.00 | 27 August 2019 | 3+2 | 2,490,000,000.00 | 2,490,000,000.00 | 30,650,684.93 | 883,676.39 | 2,490,883,676.39 | |||
| Total | -- | -- | -- | 2,490,000,000.00 | 2,490,000,000.00 | 30,650,684.93 | 883,676.39 | 2,490,883,676.391 |
Note: 1. On 18 July 2019, the Company obtained approval from CSRC with the document “ZJXK [2019]No. 1312” for public issue of corporate bonds capped at CNY 4 billion (inclusive of CNY 4 billion) toeligible investors (hereinafter referred to as “the bonds”). The bonds would be issued in phases withoutguarantee. The Company’s public issue of corporate bonds (Phase I) to eligible investors in 2019(hereinafter referred to as “the bonds of 2019”) started on 27 August 2019 and ended on 28 August 2019;the final amount actually issued was CNY 2.5 billion and the final stated interest rate was 3.58%. Theshort name of the bonds of 2019 was “19 Laojiao 01” and the code was “112959”. The nominal value ofeach bond was CNY 100, issue quantity 25 million, and issue price CNY 100 per bond. The term of thebonds of 2019 is five years, with the issuer’s option for adjustment to the stated interest rate and theinvestor’s option for sell back at the end of the third year.
7.22. Deferred income
Monetary Unit: CNY
| Item | Opening Balance | Increase in current period | Decrease in current period | Closing Balance | Reason |
| Government grants | 20,981,155.00 | 17,020,000.00 | 14,156,155.00 | 23,845,000.00 | Reception of financial allocation |
| Total | 20,981,155.00 | 17,020,000.00 | 14,156,155.00 | 23,845,000.00 | -- |
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 |
| Demonstration and application | 2,380,000.00 | 20,000.00 | 20,000.00 | 2,380,000.00 | Relevant to asset |
| project of intelligent production line for liquor brewing and qu-making | ||||||||
| Standardization demonstration base project | 1,890,376.80 | 1,890,376.80 | Related to assets | |||||
| The second batch of provincial strategic emerging industry project | 366,666.67 | 366,666.67 | Relevant to asset | |||||
| New mode application project of digital workshop for solid state liquor production | 3,465,000.00 | 3,465,000.00 | Relevant to asset | |||||
| Solid state brewing engineering capacity improvement project | 750,000.00 | 750,000.00 | Related to assets | |||||
| The national service industry development guidance fund central base constructio | 428,571.41 | 428,571.41 | Relevant to asset |
| n project | ||||||||
| Luzhou Lao jiao Co., Ltd. Logistics business spin-off project | 1,150,000.00 | 1,150,000.00 | Relevant to asset | |||||
| Construction project of spirit room of Luzhou Laojiao brewing technical renovation | 7,000,000.00 | 7,000,000.00 | Related to assets | |||||
| Luzhou Laojiao automatic wine production line technical renovation project | 500,000.00 | 500,000.00 | Relevant to asset | |||||
| Luzhou agricultural science and technology park construction project | 600,000.00 | 600,000.00 | Related to assets | |||||
| Demonstration project of science and technology service of solid brewing industry for food safety and | 1,225,773.16 | 1,225,773.16 | Relevant to asset |
| efficient production | ||||||||
| Cooling water circulation and waste heat recovery of steamed bran in brewing workshop | 500,000.00 | 500,000.00 | Related to assets | |||||
| Demonstration project of thermochemical energy and drying of brewing waste and coupling technology of brewing process | 586,000.00 | 586,000.00 | Relevant to asset | |||||
| Demonstration project of thermochemical soil improvement materials and green planting of brewery waste | 620,000.00 | 620,000.00 | Related to income | |||||
| Demonstration project of biomass gas technology and equipment | 733,333.33 | 733,333.33 | Relevant to asset |
| industrialization from solid waste of brewing | ||||||||
| Brewing wastewater treatment project | 10,000,000.00 | 10,000,000.00 | Related to assets | |||||
| Luzhou-flavor liquor brewing intelligent workshop new mode application project | 4,000,000.00 | 4,000,000.00 | Relevant to asset | |||||
| Other projects - related to assets | 1,785,433.63 | 1,785,433.63 | Related to assets |
7.23. 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 shares | 1,464,752,476.00 | 1,464,752,476.00 | |||||
7.24. Capital reserves
Monetary Unit: CNY
| Item | Opening Balance | Increase in current period | Decrease in current period | Closing Balance |
| Share premium (capital premium) | 3,536,865,466.83 | 6,102,040.65 | 3,542,967,507.48 | |
| Other capital reserves | 179,809,555.65 | 179,809,555.65 | ||
| Total | 3,716,675,022.48 | 6,102,040.65 | 3,722,777,063.13 |
Statements of capital reserves include increase or decrease changes of various categories and reasonsof changes in the current period:
The increase in share premium in the current period was the difference between the acquisition priceand the proportion of the identifiable net assets that Pinchuang Technology continues to calculate fromthe purchase date when the company acquired a minority shareholding in the subsidiary company,Pinchuang Technology.
7.25. 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 comprehensive income that will not be reclassified into profit and loss | 166,805,474.21 | 25,358,451.16 | 6,339,612.79 | 19,018,838.37 | 185,824,312.58 | |||
| Fair value changes of other equity instrument investment | 166,805,474.21 | 25,358,451.16 | 6,339,612.79 | 19,018,838.37 | 185,824,312.58 | |||
| II. Other comprehensive income that will be reclassified into profit and loss | 3,426,371.19 | 6,080,409.53 | 5,566,446.80 | 513,962.73 | 8,992,817.99 | |||
| Including: Other comprehensive income that will be reclassified into profit and loss under equity method | 1,220,399.81 | 4,938,830.88 | 4,938,830.88 | 6,159,230.69 | ||||
| Difference from conversion of financial statements in foreign currency | 2,205,971.38 | 1,141,578.65 | 627,615.92 | 513,962.73 | 2,833,587.30 | |||
| Total | 170,231,845.40 | 31,438,860.69 | 6,339,612.79 | 24,585,285.17 | 513,962.73 | 194,817,130.57 | ||
7.26. Surplus reserves
Monetary Unit: CNY
| Item | Opening Balance | Increase in current period | Decrease in current period | Closing Balance |
| Statutory surplus reserves | 1,464,752,476.00 | 1,464,752,476.00 | ||
| Total | 1,464,752,476.00 | 1,464,752,476.00 |
Statements for surplus reserves include increase or decrease changes and change reasons this period:
The statutory surplus reserve is drawn at 10% of the parent company's net profit, and shall not be drawnwhen the accumulated amount of the statutory surplus reserve has reached 50% of the registeredcapital.
7.27. Undistributed profits
Monetary Unit: CNY
| Item | Current Period | Previous Period |
| Undistributed profit before adjustment at the end of the last year | 10,181,899,224.84 | 8,527,196,810.86 |
| Total adjustment for undistributed profit at the beginning of year | 6,224,835.84 | |
| Undistributed profit after adjustment at the beginning of year | 10,188,124,060.68 | 8,527,196,810.86 |
| Plus: Net profit attributable to owners of the parent company for the current period | 4,641,988,857.03 | 3,485,643,008.98 |
| Ordinary share dividends payable | 2,270,366,337.80 | 1,830,940,595.00 |
| Undistributed profits at the end of the period | 12,559,746,579.91 | 10,181,899,224.84 |
List of adjustment of opening retained profits:
1) CNY 6,224,835.84 opening retained profits was affected by retrospective adjustment conductedaccording to the Accounting Standards for Business Enterprises and relevant new regulations.
2) CNY opening retained profits was affected by changes in accounting policies.
3) CNY opening retained profits was affected by correction of significant accounting errors.
4) CNY opening retained profits was affected by changes in combination scope arising from samecontrol.
5) CNY opening retained profits was affected totally by other adjustments.
7.28. Operating revenue and cost of sales
Monetary Unit: CNY
| Item | Current Period | Previous Period |
| Revenue | Cost of sales | Revenue | Cost of sales | |
| Primary business | 15,615,719,102.43 | 2,974,484,362.13 | 12,859,523,825.56 | 2,878,994,470.11 |
| Other business | 201,215,170.43 | 90,933,686.25 | 195,941,935.99 | 55,007,388.80 |
| Total | 15,816,934,272.86 | 3,065,418,048.38 | 13,055,465,761.55 | 2,934,001,858.91 |
Whether the Company has implemented the new revenue standards? Yes √ No
7.29. Business taxes and surcharges
Monetary Unit: CNY
| Item | Current Period | Previous Period |
| Consumption tax | 1,614,253,353.53 | 1,254,699,216.54 |
| Urban maintenance and construction tax | 194,163,333.35 | 186,133,761.82 |
| Educational surcharge | 83,212,857.10 | 79,725,865.40 |
| Property tax | 10,863,342.07 | 11,252,344.25 |
| Land use tax | 8,802,817.64 | 9,618,415.36 |
| Stamp duty | 7,717,838.58 | 11,077,748.47 |
| Local education surcharge | 55,475,238.14 | 53,171,925.46 |
| Others | 1,369,864.82 | 155,775.67 |
| Total | 1,975,858,645.23 | 1,605,835,052.97 |
7.30. Selling and distribution expenses
Monetary Unit: CNY
| Item | Current Period | Previous Period |
| Advertising promotion and marketing expense | 3,308,474,818.22 | 2,641,767,107.45 |
| Transportation and storage costs | 267,723,621.05 | 215,414,715.67 |
| Others | 609,903,714.32 | 535,539,609.21 |
| Total | 4,186,102,153.59 | 3,392,721,432.33 |
7.31. General and administrative expenses
Monetary Unit: CNY
| Item | Current Period | Previous Period |
| Employee compensation | 416,563,694.87 | 354,105,514.18 |
| Depreciation and amortization | 123,738,753.48 | 136,785,444.52 |
| Management fee and service expense | 70,060,721.26 | 55,198,156.70 |
| Others | 218,581,855.31 | 176,359,857.40 |
| Total | 828,945,024.92 | 722,448,972.80 |
7.32. Research and development expenses
Monetary Unit: CNY
| Item | Current Period | Previous Period |
| Comprehensive research and development expenses | 71,643,099.77 | 62,172,210.70 |
| Total | 71,643,099.77 | 62,172,210.70 |
7.33. Financial expenses
Monetary Unit: CNY
| Item | Current Period | Previous Period |
| Interest expenses | 139,603,113.82 | 64,698,037.12 |
| Less: Interest income | 344,656,931.22 | 280,805,447.66 |
| Losses from currency exchange | -1,922,431.98 | -731,529.96 |
| Handling charges | 1,891,755.69 | 1,772,457.71 |
| Total | -205,084,493.69 | -215,066,482.79 |
7.34. Other income
Monetary Unit: CNY
| Item | Current Period | Previous Period |
| Government grants | 43,319,756.65 | 22,342,598.30 |
| Individual income tax commission refund | 649,545.42 | 1,749,728.51 |
7.35. Investment income
Monetary Unit: CNY
| Item | Current Period | Previous Period |
| Investment income from long-term equity investments under the equity method | 145,963,325.70 | 88,881,022.50 |
| Investment income gained during the period of holding the available-for-sale | 9,112,541.00 |
| financial assets | ||
| Investment income gained during the period of holding other equity instrument investment | 8,748,669.71 | |
| Total | 154,711,995.41 | 97,993,563.50 |
Other statements:
There is no major restriction on the repatriation of the Company's investment income.
7.36. Credit impairment loss
Monetary Unit: CNY
| Item | Current Period | Previous Period |
| Bad debt loss of other receivables | -234,313.59 | |
| Bad debt loss of accounts receivable | -384,021.15 | |
| Total | -618,334.74 |
7.37. Assets impairment loss
Whether the Company has implemented the new revenue standards? Yes √ No
Monetary Unit: CNY
| Item | Current Period | Previous Period |
| I. Bad debt loss | 2,035,339.62 | |
| Total | 2,035,339.62 |
7.38. Gains from disposal of assets
Monetary Unit: CNY
| Item | Current Period | Previous Period |
| Gains from disposal of non-current assets | 27,180,182.25 | -492,389.13 |
| Including: Gains from disposal of fixed assets | 14,030,349.78 | -492,389.13 |
| Gains from disposal of intangible assets | 13,149,832.47 |
7.39. 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 | 29,331,754.71 | 26,772,376.92 | 29,331,754.71 |
| Gains from damage retirement of non-current assets | 84,375.58 | 84,375.58 | |
| Others | 14,891,627.20 | 4,460,100.29 | 14,891,627.20 |
| Total | 44,307,757.49 | 31,232,477.21 | 44,307,757.49 |
7.40. 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 | 55,224,710.00 | 32,585,518.55 | 55,224,710.00 |
| Losses from damage retirement of non-current assets | 4,053,075.34 | 13,393,602.05 | 4,053,075.34 |
| Others | 508,720.12 | 3,549,328.49 | 508,720.12 |
| Total | 59,786,505.46 | 49,528,449.09 | 59,786,505.46 |
7.41. Income tax expense
7.41.1. Statement of income tax expense
Monetary Unit: CNY
| Item | Current Period | Previous Period |
| Current period income tax | 1,701,264,224.25 | 1,173,293,516.03 |
| Deferred income tax | -239,683,534.98 | -25,073,818.91 |
| Total | 1,461,580,689.27 | 1,148,219,697.12 |
7.41.2. Adjustment for accounting profit and income tax expense
Monetary Unit: CNY
| Item | Current Period |
| Total profit | 6,103,816,191.68 |
| Income tax expenses determined by statutory/applicable | 1,525,954,047.92 |
| tax rate | |
| Impact from subsidiaries’ different tax rates | -4,736,962.49 |
| Impact from adjust for impact from income tax expense in previous period | 13,839,831.13 |
| Impact from non-taxable income | -41,585,497.67 |
| Impact from non-deductible costs, expenses and losses | 8,026,376.03 |
| Impact from deductable losses of unrecognized deferred income tax at the beginning of the reporting period | -26,726,526.34 |
| Impact from deductible temporary difference or losses due to unrecognized deferred tax asset in current period | 2,891,592.65 |
| Impact from research and development expense deduction | -16,082,171.96 |
| Income tax expense | 1,461,580,689.27 |
7.42. Other comprehensive income
Details in Note 5.25. Other comprehensive income.
7.43. Notes to the statement of cash flow
7.43.1. Cash received from other operation activities
Monetary Unit: CNY
| Item | Current Period | Previous Period |
| Government grants | 46,183,601.65 | 23,331,024.45 |
| Interest income from bank deposit | 328,991,131.22 | 263,400,471.52 |
| Others | 252,962,046.83 | 195,862,065.97 |
| Total | 628,136,779.70 | 482,593,561.94 |
7.43.2. Cash paid for other operating activities
Monetary Unit: CNY
| Item | Current Period | Previous Period |
| Cash paid for expenses | 3,270,452,860.33 | 3,076,367,890.52 |
| Payment of tourism bureau deposit | 1,200,000.00 | |
| Total | 3,270,452,860.33 | 3,077,567,890.52 |
7.43.3. Cash paid for other investing activities
Monetary Unit: CNY
| Item | Current Period | Previous Period |
| Cash paid for buying equity of subsidiary | 10,149,100.00 | 9,604,800.00 |
| Total | 10,149,100.00 | 9,604,800.00 |
7.44. Supplementary information to statement of cash flow
7.44.1. 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 | 4,642,235,502.41 | 3,510,465,888.43 |
| Plus: Provision for asset impairment | 618,334.74 | -2,035,339.62 |
| Depreciation of fixed asset, oil and gas assets and productive biological assets | 156,086,942.79 | 154,991,709.23 |
| Amortization of intangible assets | 11,275,163.47 | 9,059,775.10 |
| Amortization of long-term deferred expense | 26,537.29 | |
| Losses from disposal of fixed assets, intangible assets and other long-term assets (Gains use “-”) | -27,180,182.25 | 492,389.13 |
| Losses from retirement of fixed assets (Gains use “-”) | 3,968,699.76 | 13,393,602.05 |
| Financial expenses (Gains use “-”) | 137,680,681.84 | 63,966,507.16 |
| Losses on investments (Gains use “-”) | -154,711,995.41 | -97,993,563.50 |
| Decrease in deferred income tax assets (Increase uses “-”) | -239,717,652.83 | -25,073,818.91 |
| Decrease in inventories (Increase use “-”) | -410,819,342.38 | -418,549,226.69 |
| Decrease in operating receivables (Increase use “-”) | -21,852,590.05 | 233,990,726.21 |
| Increase in operating payables (Decrease use “-”) | 744,009,104.48 | 855,207,369.65 |
| Net cash flows from operating activities | 4,841,619,203.86 | 4,297,916,018.24 |
| 2. Significant investing and financing activities not involving cash: | -- | -- |
| 3.Net change in cash and cash equivalents: | -- | -- |
| Closing balance of cash | 9,752,266,526.78 | 9,365,986,627.68 |
| Less: Opening balance of cash | 9,365,986,627.68 | 8,449,422,154.91 |
| Net change in cash and cash equivalents | 386,279,899.10 | 916,564,472.77 |
7.44.2. Composition of cash and cash equivalent
Monetary Unit: CNY
| Item | Opening Balance | Closing Balance |
| 1. Cash | 9,752,266,526.78 | 9,365,986,627.68 |
| Including: Cash on hand | 28,776.67 | 4,420.76 |
| Unrestricted bank deposit | 9,744,243,225.66 | 9,364,716,075.36 |
| Other unrestricted cash and cash equivalents | 7,994,524.45 | 1,266,131.56 |
| 3. Closing balance of cash and cash equivalents | 9,752,266,526.78 | 9,365,986,627.68 |
| Including: Cash and cash equivalent with restriction to use of parent company and subsidiaries | 1,400,000.00 | 1,400,000.00 |
Other statements:
The difference between the closing balance of cash and cash equivalents and cash at bank and on handis CNY 1,400,000.00, which is a travel service deposit with limited use rights in other cash and cashequivalents.
7.45. Assets with restricted ownership or use rights
Monetary Unit: CNY
| Item | Closing book balance | Reason for restriction |
| Other cash and cash equivalents | 1,400,000.00 | According to the regulations of tourism bureau, travel service deposit is deposited in a designated bank. |
| Total | 1,400,000.00 | -- |
7.46. Foreign currency transactions
7.46.1. Foreign currency transactions
Monetary Unit: CNY
| Item | Closing Balance in Foreign | Exchange Rate | Closing Balance in CNY |
| Currency | |||
| Cash at Bank and on Hand | -- | -- | 189,983,949.92 |
| Including: USD | 26,555,613.02 | 6.97620 | 185,257,267.55 |
| EUR | 25,041.10 | 7.81550 | 195,708.72 |
| HKD | 4,718,143.04 | 0.89578 | 4,226,418.17 |
| GBP | 32,368.51 | 9.15010 | 296,175.10 |
| AUD | 1,715.78 | 4.88430 | 8,380.38 |
| Accounts Receivable | -- | -- | 19,246,231.88 |
| Including: USD | 47,330.54 | 6.97620 | 330,187.31 |
| EUR | |||
| HKD | 21,116,841.83 | 0.89578 | 18,916,044.57 |
| Long-term Loans | -- | -- | |
| Including: USD | |||
| EUR | |||
| HKD | |||
| Other Receivables | 3,288,597.93 | ||
| Including: USD | 2,107.00 | 6.97620 | 14,698.85 |
| HKD | 3,654,802.61 | 0.89578 | 3,273,899.08 |
| Accounts Payable | 8,581,256.24 | ||
| Including: USD | 46,209.75 | 6.97620 | 322,368.46 |
| HKD | 9,219,772.47 | 0.89578 | 8,258,887.78 |
| Other Payables | 27,118,301.10 | ||
| Including: USD | 148,747.31 | 6.97620 | 1,037,690.98 |
| HKD | 29,114,972.56 | 0.89578 | 26,080,610.12 |
7.46.2. Description of the foreign business entity, including the important foreign business entity,shall disclose its main foreign business place, bookkeeping standard currency and selectionbasis, 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 |
| Mingjiang Co., Ltd. | New York, USA | USD | Currency in the registration |
7.47. Government grants
7.47.1. Details of government grants
Monetary Unit: CNY
place
Item
| Item | Amount | Presentation | Amount included in profit or loss of the current period |
| Related to assets | 37,381,155.00 | Deferred income | 13,536,155.00 |
| Related to income | 620,000.00 | Deferred income | 620,000.00 |
| Related to income | 29,163,601.65 | Other income | 29,163,601.65 |
7.47.2. Return of government grants
? Applicable √ N/AOther statements:
8. Changes in consolidated scope
8.1. Business combination not under common control
8.1.1. Business combination not under common control during current periodOther 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 periodOther 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 calculationaccording 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 transactionsstep 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.
(1) The decrease of consolidated company at the period-end is deregistration of the subsidiary, LuzhouBoda Brewing Co., Ltd.
(2) The increase of consolidated company at the period-end is establishment of subsidiaries viainvestment including Guangxi Luzhou Laojiao Imported Liquor Industry Co., Ltd., Chengdu Tianfu PandaWhitail Liquor Industry Co., Ltd., Luzhou Whitail Tongdao Uncle Constellation Wine Sales Co., Ltd.,Luzhou Laojiao Whitail Innovated Electronic Commerce Co., Ltd., Luzhou Laojiao Selected ElectronicCommerce Co., Ltd. and Luzhou Laojiao Commercial Development (North America) Co., Ltd.
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 | Liquor manufacture and sales | 100.00% | Investment | |
| Luzhou Boda Brewing Co., Ltd. | Luzhou | Luzhou | Liquor 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 | |
| Sales Company | Luzhou | Luzhou | Liquor sales | 100.00% | Investment | |
| of Luzhou Laojiao Co., Ltd. | ||||||
| Luzhou Laojiao Nostalgic Liquor Marketing Co., Ltd. | Luzhou | Luzhou | Liquor sales | 100.00% | Investment | |
| Luzhou Laojiao Custom Liquor Co., Ltd. | Luzhou | Luzhou | Liquor sales | 15.00% | Investment | |
| Luzhou Laojiao Selected Supply Chain Management Co., Ltd. | Luzhou | Luzhou | Liquor 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 | Liquor sales | 100.00% | Investment | |
| Luzhou Dingyi Liquor Industry Sales Co., Ltd. | Luzhou | Luzhou | Liquor sales | 100.00% | Investment | |
| Luzhou Dinghao Liquor Industry Sales Co., Ltd. | Luzhou | Luzhou | Liquor sales | 100.00% | Investment | |
| Luzhou Laojiao Import and Export Trade Co., Ltd. | Luzhou | Luzhou | Wine import and export trade | 100.00% | Investment | |
| Luzhou Laojiao Boda Liquor Industry Marketing Co., Ltd. | Luzhou | Luzhou | Liquor sales | 75.00% | Investment | |
| Luzhou Laojiao Bosheng Hengxiang Liquor Sales | Luzhou | Luzhou | Liquor sales | 100.00% | Investment |
| Co., Ltd. | ||||||
| Luzhou Laojiao Fruit Wine Industry Co., Ltd. | Luzhou | Luzhou | Fruit wine sales | 41.00% | Investment | |
| Mingjiang Co., Ltd. | America | America | Liquor sales | 54.00% | Investment | |
| Luzhou Pinchuang Technology Co., Ltd. | Luzhou | Luzhou | Technology development and service | 100.00% | Investment | |
| Luzhou Laojiao Tourism Culture Co., Ltd. | Luzhou | Luzhou | Liquor sales, tourism | 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 | 100.00% | Investment | |
| Luzhou Laojiao Electronic Commerce Co., Ltd. | Luzhou | Luzhou | Wine sales | 90.00% | Investment | |
| Luzhou Laojiao Whitail Innovated Electronic Commerce Co., Ltd. | Luzhou | Luzhou | Wine sales | 100.00% | Investment | |
| Luzhou Laojiao Selected Electronic Commerce Co., Ltd. | Luzhou | Luzhou | Wine sales | 100.00% | Investment | |
| Luzhou Laojiao Whitail Liquor | Luzhou | Luzhou | Wine sales | 35.00% | Investment |
| Industry Co., Ltd. | ||||||
| Chengdu Tianfu Panda Whitail Liquor Industry Co., Ltd. | Chengdu | Chengdu | Wine sales | 60.00% | Investment | |
| Luzhou Whitail Tongdao Uncle Constellation Wine Sales Co., Ltd. | Luzhou | Luzhou | Wine sales | 70.00% | 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., Ltd. | Luzhou | Luzhou | Health care wine sales | 100.00% | Business combination under common control |
Statement for that the proportion of share-holding is different from the proportion of voting rights:
As the Note 3.6, the Company holds less than 51% shares of Luzhou Laojiao Custom Liquor Co., Ltd.,Luzhou Laojiao fruit wine industry Co., Ltd., and Luzhou Laojiao Whitail Liquor Industry Co., Ltd. but inthese companies’ board, among the five members, the Company has sent three persons, which is in themajority. The Company has substantial control over these companies, so they are included in theconsolidation 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% | 5,056,555.26 | 88,344,176.52 |
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. | 1,314,554,833.37 | 2,881,595.65 | 1,317,436,429.02 | 964,059,722.96 | 964,059,722.96 | 1,166,879,541.23 | 8,708.99 | 1,166,888,250.22 | 833,737,765.21 | 833,737,765.21 | ||
Monetary Unit: CNY
| Name of subsidiary | Current Period | Previous Period | ||||||
| Operating revenue | Net profit | Total comprehensive income | Operating cash flow | Operating revenue | Net profit | Total comprehensive income | Operating cash flow | |
| Luzhou Laojiao Boda Liquor Industry Marketing Co., Ltd. | 2,787,789,690.74 | 20,226,221.05 | 20,226,221.05 | -335,380,170.98 | 2,493,854,876.92 | -303,651.51 | -303,651.51 | 16,457,683.16 |
9.1.4. Significant limitations for using group assets and paying off group liabilitiesThere are no significant limitations for using group assets and paying off group liabilities.
9.1.5. Financial support and other support provided to the structure subjects that areincorporated into the scope of consolidated financial statementsThere are no structure subjects that are incorporated into the scope of consolidated financial statements.Other statements:
9.2. Transactions that change owners’ equity share of the subsidiary and still control thesubsidiary
9.2.1. Statements for the changes of owners’ equity share of the subsidiaryAs stated in Note1.6 note 4, on 28 December 2018, the 5
th Meeting of the 9
thBoard of Directorsreviewed and approved the Proposal on Acquisition of Partial Equity in Luzhou Pinchuang TechnologyCo., Ltd. and Related Transaction, and as of the period-end, the acquisition was completed, amongwhich the Company has contributed CNY 50 million with 100% of shareholding.
9.2.2. Impact of the transactions on non-controlling interests and equity attributable to the parentcompany
Monetary Unit: CNY
| Luzhou Pinchuang Technology Co., Ltd. | |
| --Cash | 10,149,100.00 |
| Total purchase cost/ disposal consideration | 10,149,100.00 |
| Less: share of net assets of the subsidiary calculated at the proportion acquired /disposed | 16,251,140.65 |
| Difference | -6,102,040.65 |
| Including: Adjustment of capital reserves | 6,102,040.65 |
9.3. Interests in joint ventures and associates
9.3.1. Important joint ventures and associates
| Name of joint venture/associates | Major business location | Place of registration | Business nature | Shareholding proportion | Accounting Method | |
| Direct | Indirect | |||||
| Important joint ventures: none | ||||||
| Important associates: | ||||||
| Huaxi Securities Co., Ltd. | Chengdu, Sichuan | Chengdu, Sichuan | Securities | 10.39% | Equity method | |
Statement for that the proportion of shareholdings in joint ventures or associates is different from theproportion of voting rights:
The basis of holding less than 20% of the voting rights in other entities but having significant influence orholding 20% or more than 20% of the voting rights in other entities but having insignificant influence:
The Company has sent directors to the board of Huaxi Securities and has the corresponding substantivedecision-making power, so the Company still has significant influence on Huaxi Securities.
9.3.2. Major financial information of important associates
Monetary Unit: CNY
| Closing Balance/Amount in current period | Opening Balance/Amount in previous period | |
| Huaxi Securities Co., Ltd. | Huaxi Securities Co., Ltd. | |
| Current assets | 57,134,274,353.71 | 40,401,035,988.45 |
| Non-current assets | 10,693,128,565.71 | 6,394,133,262.77 |
| Total assets | 67,827,402,919.42 | 46,795,169,251.22 |
| Current liabilities | 39,721,993,771.95 | 22,367,046,060.48 |
| Non-current liabilities | 8,411,797,290.51 | 6,014,025,121.83 |
| Total liabilities | 48,133,791,062.46 | 28,381,071,182.31 |
| Non-controlling shareholder interest | 44,225,184.16 | 44,260,373.43 |
| Shareholder interest attributable to parent company | 19,649,386,672.80 | 18,369,837,695.48 |
| Share of net assets calculated based on shareholding proportion | 2,042,272,245.65 | 1,909,281,460.40 |
| --Others | 167,466,735.90 | 167,466,735.90 |
| Book value of equity investments in associate companies | 2,209,738,981.55 | 2,076,748,196.31 |
| Fair value of equity investments in associate companies that have public quote | 3,003,870,895.44 | 2,283,596,675.28 |
| Operating revenue | 3,937,424,572.74 | 2,545,233,363.80 |
| Net profit | 1,431,540,167.66 | 845,132,348.07 |
| Other comprehensive income | 47,518,149.37 | -9,197,741.57 |
| Total comprehensive income | 1,479,058,317.03 | 835,934,606.50 |
| Dividends from associate companies this year | 20,735,166.94 | 10,367,583.46 |
9.3.3. 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 | 20,982,744.17 | 15,806,539.78 |
| Total following items calculated on the basis of shareholding proportion | -- | -- |
| --Net profit | -2,823,795.61 | -829,619.65 |
| -- Total comprehensive income | -2,823,795.61 | -829,619.65 |
10. Risks related to financial instruments
Business activities of a company usually face various financial risks, mainly credit risk, liquidity risk andmarket risk. The Company's overall risk management plan addresses the unpredictability of financialmarkets and seeks to reduce potential adverse effects on the Company's financial performance.
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, andlarge third parties. In accordance with the Company's policy, the terms of sale with customers are basedon transactions of payment before delivery, with only a small amount of credit transactions, and creditreview for all customers who require credit to trade. In addition, the Company continuously monitors andcontrols the balance of the receivables to ensure that the Company does not face significant bad debtrisks.
10.2. Liquidity risk
Liquidity risk refers to the risk unable to obtain sufficient funds in time to meet business developmentneeds or to repay debts due and other payment obligations. The Company has sufficient working capital,and in recent years there has been no external borrowing to supplement the working capital of dailyoperating activities. The liquidity risk is extremely small.
10.3. Market risk
Market risk refers to the risk that the fair value or future cash flow of financial instruments will fluctuatedue to changes in market prices, including foreign exchange risk, interest rate risk and other price risks.
10.3.1. Foreign exchange risk
The Company's main business is located in the mainland of China, and main business is settled in CNY.Only two subsidiaries, Hong Kong company and Mingjiang company, settle in HKD in Hong Kong andUSD in the United States respectively. The proportion and impact of their income and profit scale arenegligible, and the foreign exchange risk is minimal.
10.3.2. Rate risk
The Company's operating capital is sufficient and in recent years there has been no external borrowing,so interest rate risk is minimal.
10.3.3. Other price risks
Other price risk refers to the risk of fluctuation caused by market price changes other than foreignexchange risk and interest rate risk, whether these changes are caused by factors related to a single
financial instrument or its issuer or all similar financial instruments traded in the market. Other price risksfaced by the Company mainly come from available-for-sale financial assets 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 | -- | -- | -- | -- |
| 1.3 Other equity instrument investment | 318,590,971.32 | 33,804,284.46 | 352,395,255.78 | |
| 1.6 Accounts receivable financing | 2,393,797,259.80 | 2,393,797,259.80 | ||
| 2. Discontinuous measurement at fair value | -- | -- | -- | -- |
11.2. Determination basis of the market value of items measured continuously anddiscontinuously within Level 1 of the fair value hierarchyThe listed companies in mainland China determine the fair value of other equity instrument investmentaccording to the closing price on the last trading day of Shenzhen Stock Exchange or Shanghai StockExchange at the period-end. The companies listed in Hong Kong determine the fair value of other equityinstrument investment according to the closing price of Hong Kong Dollar on the last trading day of HongKong Stock Exchange at the period-end and the median price of RMB exchange rate disclosed on thesame day by China Foreign Exchange Trade System.
11.3. Valuation technique adopted and nature and amount determination of important parametersfor continuously and discontinuously within Level 3 of the fair value hierarchyAccounts receivable financing: Due to the short term of notes receivable less than 1 year, and the salestime, sales price and sale proportion cannot be estimated reliably, the Company shall measure the fairvalue by regarding the face value as the reasonable estimation.
Other equity instrument investment: Due to no significant changes in business environment, businesscondition and financial situation of invested companies, the Company shall measure the fair valueaccording to the lower one between investment cost and the share of net assets enjoyed by investedcompanies on the base date as the reasonable estimation.
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 company | Voting rights proportion by the parent company |
| Luzhou Laojiao Group Co., Ltd. | Luzhou, Sichuan | Investment and asset management | 2,798,818,800.00 | 26.02% | 51.01% |
Statements for situation of parent company:
The nature of parent company: Limited liability company (wholly state-owned);Registration place: Ai Rentang Square, China Liquor Golden Triangle Wine Industry Park, Luzhou,Sichuan Province; Business Scope: Investment and asset management; investment in liquor, food,finance, trade, logistics, education, medical and health, cultural tourism, Internet industry; holdingcompany services; social economic consulting, business management consulting; enterprisemanagement services; supply chain management services; import and export business and tradeagency; food production, sales (including online); planting and sales of crops (including online). (TheCompany cannot start business activities until projects subject to approval according to law areapproved by relevant departments.)The final control party of the Company is SASAC of Luzhou.
12.2. Subsidiaries of the Company
For details please see Note 7.1. Interests in subsidiaries
12.3. Joint ventures and associates of the Company
For details please see Note 7.3. Interests in joint ventures and associates.Other statementsThere are no other joint ventures or associates that have related party transactions with the Company inthe current period or in the previous period and result in balance.
12.4. Other related party of the Company
| Name of Other Related Party | Relationship with the Company |
| Luzhou Jiaxin Holding Group Co., Ltd. Note 2 | The same parent company |
| Luzhou Liquor Industry Central Development Area Brewing Co., Ltd. | The same parent company |
| Sichuan Kangrun Group Construction and Installation Engineering Co., Ltd. Note 3 | The same parent company |
| Luzhou Laojiao Zhitong Trading Co., Ltd. | The same parent company |
| Luzhou Lianzhong Logistics Co. Ltd. | The same parent company |
| Luzhou COSCO Lianzhong Logistics Co., Ltd. | The same parent company |
| Luzhou Laojiao Commercial College of Luzhou | The same parent company |
| Sichuan Kangrun Group Yongsheng Asset Operation Management Co., Ltd. Note 4 | The same parent company |
| Sichuan Wine & Spirits Trading Center Co., Ltd. | The same parent company |
| Sichuan Kangrun Group Real Estate Development Co., Ltd. Note 5 | The same parent company |
| Sichuan Kangrun Investment Group Co., Ltd. Note 6 | The same parent company |
| New Shottes Brook Private Company | The same parent company |
| Huaxi Securities Co., Ltd. | Associate company and the same parent company |
| Laojiao Group and its other subsidiaries | The same parent company |
| Luzhou Communication Investment Group Auto Service Co., Ltd. | Subsidiary of the second largest shareholder |
| Luzhou Huarun XingLu Gas Co., Ltd. | Subsidiary of the second largest shareholder |
| Luzhou XingLu Water (Group) Co., Ltd. | Subsidiary of the second largest shareholder |
| Luzhou XingLu Property Management Co., Ltd. | Subsidiary of the second largest shareholder |
| Luzhou XingLu Investment Group Co., Ltd. and its other subsidiaries | Other subsidiary of the second largest shareholder |
Other statements:
Note 1: On 31 December 2015, Laojiao Group and XingLu Investment Group, the second biggestshareholder, signed a concerted action agreement that when the parties in deal with the Company’sbusiness development and make decisions by shareholders meeting and board of directors according tothe company law and other relevant laws and regulations and the articles of association, the partiesshould adopt the consistent actions. The agreement is valid as of 13 December 2015 and ends on 1June 2021. During the effective period of this agreement, before any party submits proposals involvingthe major issues of the Company's business development to the shareholders meeting or exercise thevoting rights at the shareholders meeting and the board of directors, the internal coordination for relevantproposals and voting events shall be conducted by persons acting in concert. If there are differentopinions, it will be subject to Laojiao Group’s opinion. In view of this, the Company will disclose thetransactions with XingLu Investment Group and its controlling enterprises as other related parties of theCompany.Note 2: Luzhou Laojiao Industrial Investment Management Co., Ltd. was renamed Luzhou JiaxinHolding Group Co., Ltd. in November 2019.Note 3: Luzhou Laojiao Construction and Installation Engineering Co., Ltd. was renamed SichuanKangrun Group Construction and Installation Engineering Co., Ltd. in October 2019.Note 4: Luzhou Yongsheng Asset Operation Management Co., Ltd. was renamed Sichuan KangrunGroup Yongsheng Asset Operation Management Co., Ltd. in December 2019.Note 5: Luzhou Laojiao Real Estate Development Co., Ltd. was renamed Sichuan Kangrun Group RealEstate Development Co., Ltd. in October 2019.
Note 6: Luzhou Laojiao Yongsheng Property Investment Management Co., Ltd. was renamed SichuanKangrun Investment Group Co., Ltd. in March 2018.
12.5. Related transactions
12.5.1. Related transactions of purchase and sales of goods / rendering and receipt of servicesTable 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 management fee ,etc. | 3,909,858.41 | 1,911,100.00 | ||
| Laojiao Group and its other subsidiaries | Training, accommodation, storage, transportation services, etc. | 46,058,991.08 | 18,260,072.47 | ||
| Purchase of goods: | |||||
| Sichuan Wine & Spirits Trading Center Co., Ltd. | Housing construction fee , land expense, etc. | 287,389,843.001 | |||
| Luzhou Jiaxin Holding Group Co., Ltd. | Land expense, etc. | 26,292,000.00 | |||
| Laojiao Group and its other subsidiaries | Red wine, water, power, etc. | 41,924,295.93 | 67,306,259.50 | ||
| Luzhou XingLu Investment Group Co., Ltd. and its other subsidiaries | Water, gas, etc. | 7,153,652.03 | 8,224,842.06 | ||
| Luzhou Laojiao Group Co., Ltd. | Acquisition of 30% equity of | 10,594,650.00 |
Note: 1. The 11
th Meeting of the 9
thBoard of Directors held on 15 October 2019 reviewed and approvedthe Proposal on Acquisition of Assets and Related Transaction; in order to upgrade and constructLuzhou Laojiao Liquor Culture and Tourism Industrial Park Scenic Area, the Company decided topurchase the land use right, construction in progress and equipment assets of Sichuan Wine & SpiritsTrading Center Co., Ltd., the wholly-owned subsidiary of controlled shareholder Luzhou Laojiao Groupby self-owned fund of CNY 287.3898 million (including transaction VAT) according to asset appraisalvalue. The transaction is paid in installment in line with the asset transfer price under the appraisal valuein assessment report (YXPBZ [2019] Hu No. 0659) issued by Yinxin Appraisal Co., Ltd..
Table of sales of goods and rendering of service
Monetary Unit: CNY
SichuanDevelopmentWine InvestmentCo., Ltd. held byLaojiao GroupName of Related Party
| Name of Related Party | Transaction | Amount in current period | Amount in previous period |
| Sales of goods: | |||
| Laojiao Group and its subsidiaries | Wine, etc. | 3,985,144.32 | 318,580.42 |
| XingLu Investment Group and its subsidiaries | Wine | 156,000.00 | 586,044.00 |
| Rendering of service: | |||
| Luzhou Laojiao Group Co., Ltd. | Rendering of service | 1,190,880.00 |
12.5.2. Related party leasing
The Company as lessee:
Monetary Unit: CNY
| Name of lessor | Type of leased asset | Leasing fee recognized during current period | Leasing fee recognized during previous period |
| Laojiao Group and its subsidiaries | House lease | 1,551,064.09 | 1,851,227.44 |
12.5.3. Key management compensation
Monetary Unit: CNY
| Item | Amount in current period | Amount in previous period |
| Key management | 7,467,800.00 | 6,977,200.00 |
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 | ||
| Other non-current assets (transfer prepayment of land use right) | Luzhou Jiaxin Holding Group Co., Ltd. | 70,994,300.001 | |||
| Prepayment | New Shottes Brook private company | 32,149,113.33 | 18,086,370.77 | ||
| Prepayment | Luzhou XingLu Water (Group) Co., Ltd. | 3,145.70 | 4,377.45 | ||
| Other receivables | Sichuan Kangrun Investment Group Co., Ltd. | 10,000.00 | |||
| Prepayment | Sichuan Kangrun Investment Group Co., Ltd. | 10,000.00 | |||
| Accounts receivable | Sichuan Kangrun Group Yongsheng Asset Operation Management Co., Ltd. | 1,526.40 | |||
Note: 1. The 15
th
Meeting of the 9
thBoard of Directors held on 13 December 2019 reviewed andapproved the Proposal on the Acquisition of Land for Technical Renovation Project of IntelligentPackaging Center and Related Transaction; the Company made the decision that the wholly-ownedsubsidiary, Luzhou Laojiao Brewing Co., Ltd. purchased the 5 cases of land use right with 204.82 mu ofLuzhou Jiaxin Holding Group Co., Ltd., the wholly-owned subsidiary of the controlled shareholderLuzhou Laojiao Group, in Luzhou Liquor Industry Central Development Area by self-owned fund of CNY
100.7767 million (including transaction VAT) according to appraisal value, which was used forconstruction of technical renovation of intelligent packaging center. The transaction is paid in installmentin line with the asset transfer price under the appraisal value in assessment report (BJYCPBZ [2019] No.A212) issued by Beijing Yachao Asset Appraisal Co., Ltd..
12.6.2. Payables
Monetary Unit: CNY
| Item | Related party | Closing Balance | Opening Balance |
| Accounts payable | Sichuan Kangrun Group Real Estate Development Co., Ltd. | 372,467.29 | 20,255.07 |
| Accounts payable | Luzhou XingLu Water (Group) Co., Ltd. | 297,019.53 | |
| Accounts payable | Luzhou Lianzhong Logistics Co. Ltd. | 135,824.73 | 946,701.22 |
| Accounts payable | Luzhou Huarun XingLu Gas Co., Ltd. | 382,967.14 | |
| Accounts payable | Luzhou Laojiao Commercial College | 4,100.00 | |
| Accounts payable | Luzhou Communication Investment Group Auto Service Co., Ltd. | 13,950.00 | |
| Accounts payable | Luzhou Jiaxin Holding Group Co., Ltd. | 178,170.40 | |
| Advance from customers | Luzhou Laojiao Zhitong Trading Co., Ltd. | 900,866.00 | |
| Advance from customers | Luzhou Lianzhong Logistics Co. Ltd. | 2,628.03 | |
| Advance from customers | Luzhou Laojiao Group Co., Ltd. | 1,680.00 | 1,680.00 |
| Advance from customers | Luzhou Laojiao Commercial College | 840.00 | 840.00 |
| Other payables | Luzhou Lianzhong Logistics Co. Ltd. | 750,000.00 | |
| Other payables | Luzhou XingLu Property Management Co., Ltd. | 100,000.00 | |
| Other payables | Luzhou COSCO Lianzhong Logistics Co., Ltd. | 200,000.00 | |
| Other payables | Sichuan Kangrun Group Construction and Installation Engineering Co., Ltd. | 34,175.78 | |
| Other payables | Luzhou Liquor Industry Central Development Area Brewing Co., Ltd. | 154,352.70 |
13. Commitments and contingencies
13.1. Contingencies
13.1.1. Significant contingencies at the balance sheet date
On 15 October 2014 and 10 January 2015, the Company disclosed three saving deposits involvingcontract disputes in Agricultural Bank of China Changsha Yingxin Sub-branch, Industrial andCommercial Bank of China Nanyang Zhongzhou Sub-branch and another bank, with a total amount ofCNY 500 million. The public security organization has investigated, and the investigation of relatedcases and the preservation of assets are under way. The Company has initiated a civil procedure torecover the loss from the responsible unit, among them:
The criminal case with saving deposits involving contract disputes in Agricultural Bank of ChinaChangsha Yingxin Sub-branch with amount of CNY 150 million was concluded, and the amount involvedin the case was ultimately determined to be CNY 149.425 million, which was executed by criminal case.As of 30 June 2019, CNY 17.9799 million was recovered. The civil case has been decided by HunanHigher People's Court in the first instance, and now is under the second trial of the Supreme People’sCourt.
The Company has filed a lawsuit with Sichuan Higher People's Court about the saving deposits involvingcontract disputes in Industrial and Commercial Bank of China Ltd. Nanyang Zhongzhou Sub-branch withamount of 150 million. Sichuan Higher People's Court ruled that the case should be transferred to theHenan Higher People's Court. Henan Higher People's Court considered that due to the involvement ofcriminal cases, its trial should be based on the results of criminal case, and judged to suspend in 2015.Now the case has been settled, and the case of civil action is reopened, which is under trial of HenanHigher People's Court.
Another deposit in the Notice of Significant Events No. 2015-1 has been recovered a total of CNY
194.6198 million as of the period-end, and the residual amount is recovering actively.
The Company has recovered the abovementioned saving deposits involving contract disputes with CNY
212.5997 million, and the relevant progress will be announced subsequently.
Except for the above matters, the Company has no other significant contingencies that need to bedisclosed as the end of 31 December 2019.
13.1.2. In despite of no significant contingency to disclose, the Company shall also makerelevant statementsThere is no significant contingency to disclose.
14. Post balance sheet event
14.1. Profit distribution
Monetary Unit: CNY
| Profits or dividends planned to distribute | 2,328,956,436.84 |
| Reviewed and approved profits or dividends declared to distribute | 2,328,956,436.84 |
14.2. Sales return
There are no important sales returning after balance sheet date.
14.3. Statement for other post balance sheet events
(1) The public issuance of corporate bonds (Phase I) to eligible investors in 2020The Company has obtained the approval from the CSRC with the document the “ZJXK [2019] No. 1312”on 18 July 2019 for public issue of corporate bonds (hereinafter referred to as “the bonds”) with total facevalue of no more than CNY 4 billion (inclusive of CNY 4 billion) to eligible investors.The bonds would be issued in phases without guarantee. The Company’s public issue of corporatebonds (Phase I) to eligible investors in 2020 (hereinafter referred to as “the bonds of 2020”) shall becapped at CNY 1.5 billion (inclusive of CNY 1.5 billion). The short name of the bonds of 2020 will be “20Laojiao 01” and the code “149062”. The nominal value of each bond will be CNY 100, issue quantitycapped at 15 million (inclusive of 15 million), and issue price CNY 100 per bond. The bonds will have aterm of five years and be issued through off-market inquiry and allotment of institutional investors.The period of the issue started on 16 March 2020 and ended on 17 March 2020; the final amountactually issued was CNY 1.5 billion and the final interest rate was 3.50%.
(2) The acquisition of assets from related party by subsidiary
The 18
th
Meeting of the 9
thBoard of Directors held on 18 March 2019 reviewed and approved theProposal on Acquisition of Assets by Subsidiary and Related Transaction; in order to construct theregion-concentrated modern production base, the Company decided that Luzhou Laojiao Brewing Co.,Ltd., the wholly-owned subsidiary, purchased the land and supporting structures of Luzhou JiaxinHolding Co., Ltd., the wholly-owned subsidiary of the controlled shareholder Luzhou Laojiao Group byself-owned fund with CNY 227.5466 million (including transaction VAT)according to appraisal value,which was used for base liquor storage; the transaction is paid in installment in line with the assettransfer price under the appraisal value in assessment report (BJYCPBZ [2019] No. A213) issued byBeijing Yachao Asset Appraisal Co., Ltd., namely the total price including tax of CNY 227.5466 million;the related transaction doesn’t constitute the major assets restructuring, and restructuring and listingstipulated in the Measures for the Administration of Major Assets Restructuring of Listed Companies,which is no need to be submitted to the general meeting for deliberation.
(3) The progress of saving deposits involving the contract disputesThe Company has obtained the Paper of Civil Judgment concerning the saving deposit case of
Changsha by Supreme People’s Court. According to the paper, the Supreme People’s Court hasrejected the appeal of the Company and affirmed the original judgment, so the judgment was the finaljudgment. As of the reporting date, the Company has recovered CNY 20.2399 million in saving depositscase of Changsha involving contract disputes. The judgment has no significant influence to the profit inor after the current period.
(4) The impact evaluation of COVID-19 epidemic situation
Since the COVID-19 outbreak across the country in January 2020, efforts have been made continuouslyto prevent and control the epidemic in the whole country. The Company has made active response toand strictly implemented all regulations and requirements of the party and governments at all levels forthe epidemic prevention and control. To juggle anti-epidemic work and production, the Company and itssubsidiaries have orderly resumed business in a bid to support the country’s strategic decisions in anumber of aspects, including guarantee of supplies, social responsibilities and internal management.As part of its tangible effort to perform its social responsibilities as a listed company, the Company heldthe 17
th Meeting of the 9
th
Board of Directors on 27 January 2020. The Proposal on Fighting COVID-19through Donation of Medical Supplies and Cash Support was reviewed and approved. Based on theProposal, the Company decided to donate medical supplies and cash worth about CNY 20 million in theCOVID-19 prevention and treatment.The Company anticipates that the epidemic and prevention and control measures will cause temporaryimpact to its production and operation, with the severity of impact depending on the progress andduration of the epidemic prevention and control and the implementation of prevention and controlpolicies in different places. The Company will continue to keep close watch on the developments of theepidemic, and assess and actively respond to its impact on the Company’s financial status and operatingresults. As at the date of this report, the assessment is still in progress.Except for the above matters, the Company has no other post balance sheet events that need to bedisclosed as of 27 April 2020.
15. Other important information
15.1. Annuity plan
The Company carried out the enterprise annuity payment work normally in 2018. In 2018, according tothe relevant provisions of the Enterprise Annuity Methods (Order No. 36 of the Ministry of HumanResources and Social Security), the Company revised the Luzhou Laojiao Co., Ltd. Enterprise AnnuityPlan on 1 December 2018. After discussion and decision of the Workers' Congress on 28 December2018, it was filed a record through the Ministry of Human Resources and Social Security of Luzhou on25 February 2019.After the revision of the new enterprise annuity method, the enterprise annuity funds are paid by both theCompany and employees. The Company's contribution shall not exceed 8% of the Company's totalsalary in the previous year as stipulated by the state, and the individual contribution shall be withheld bythe Company according to 1% of total salary of the employee in the previous year.
15.2. Segment information
15.2.1. If the Company has no reporting segment or cannot disclose total assets and totalliabilities of reporting segments, the reason should be disclosed.Except for the business on wine sales, the Company does not operate other businesses that have asignificant impact on operation results. In addition, the Company operates mainly in one area, revenuemainly from China and main assets also located in China, so the Company does not need to disclosesegment data.
15.3. Other significant events that can affect investors’ decision
(1) Saving deposits involving contract disputes
As stated in Note 12.2, three saving deposits involved contract disputes in Agricultural Bank of ChinaChangsha Yingxin Sub-branch, Industrial and Commercial Bank of China Nanyang ZhongzhouSub-branch and another bank, with a total amount of CNY 500 million. At present, the investigation ofrelated cases and the preservation of assets have been under way. The Company has initiated a civilprocedure to recover the loss from the responsible unit.Based on the amount of assets preserved by the public security organization at present and professionallegal opinions issued by Beijing Weiheng (Chengdu) Law Firm on 17 March 2020, the Company hasmade provision for bad debts on savings deposits involving contract disputes of CNY 200 million. In thefuture, the amount of bad debts may be adjusted along with the process and recovery of cases.
(2) Progress of technical renovation project of brewing investmentBased on the Company ‘s development strategy, the "13th Five-Year Plan" and deep analysis of theliquor industry and the actual situation of the Company itself, the Company invested in theimplementation of technical renovation project of brewing with Brewing Company, the wholly-ownedsubsidiary, as the main body. The total investment of the project is CNY 7,414.28 million, and therequired funds are solved by the Company with self-owned funds and other financing methods. Atpresent, the project has invested a total of CNY 6362.6908 million, and the completion ratio has been85%.
(3) State-owned shareholders signed a concerted action agreementOn 31 December 2015, the state-owned shareholders and XingLu Investment Group signed a concertedaction agreement that when the parties in deal with the Company’s business development and makedecisions by shareholders meeting and board of directors according to the Company law and otherrelevant laws and regulations and the articles of association, the parties should adopt the consistentactions. The agreement is valid as of 31 December 2015 and ends on 1 June 2021. The signedagreement helps state-owned shareholders further improve and clear ownership relations, standardizecorporate governance. After the signing, the Company's shareholding structure has not changed. Thecontrolling shareholder is still Laojiao group, and the ultimate controlling is still SASAC of Luzhou.Except for the above matters, the Company has no other significant events that can affect investors’decision that need to be disclosed as of 31 December 2019.
16. Notes to the main Items of the financial statements of parent company (allcurrency unit is CNY, except other statements)
16.1. Accounts receivable
16.1.1. 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 | 21,759.06 | 100.00% | 196.21 | 0.90% | 21,562.85 | 68,103.61 | 100.00% | 405.18 | 0.59% | 67,698.43 |
| Including: | ||||||||||
| Accounts receivables tested for impairment on the portfolio with characteristics of credit risk | 21,759.06 | 100.00% | 196.21 | 0.90% | 21,562.85 | 68,103.61 | 100.00% | 405.18 | 0.59% | 67,698.43 |
| Total | 21,759.06 | 100.00% | 196.21 | 0.90% | 21,562.85 | 68,103.61 | 100.00% | 405.18 | 0.59% | 67,698.43 |
Accounts receivables tested for impairment by the portfolio: characteristics of credit risk
Monetary Unit: CNY
| Item | Closing Balance | ||
| Book balance | Provision for bad debt | Proportion | |
| Risk portfolio | 21,759.06 | 196.21 | 0.90% |
| Other portfolios | |||
Statements for determining the portfolio:
The Company will combine the accounts receivable divided into credit risk portfolio according to similarcharacteristics of credit risk (aging), and calculate expected credit loss with the reference of historicalcredit loss experience and combination of present condition and prediction of future financial situation,as well as through default risk exposure and expected credit loss rate in the duration.Statements for determining the portfolio:
Please refer to the relevant information of disclosure of provision for bad debt of other accountsreceivable if adopting the general mode of expected credit loss to withdraw provision for bad debt ofaccounts receivable.? Applicable √ N/A
Disclosure by aging
Monetary Unit: CNY
| Aging | Book balance |
| Within 1 year (including 1 year) | 21,759.06 |
| Total | 21,759.06 |
16.1.2. Provision and recovery for bad and doubtful debt in the current periodAllowance 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 | 405.18 | 208.97 | 196.21 | |||
| Total | 405.18 | 208.97 | 196.21 | |||
There is no accounts receivable reversed or recovered with significant amount during the reportingperiod.
16.1. 3. Accounts receivable actually written off during the reporting periodOf which significant accounts receivable written off:
Statements for accounts receivable written off:
There is no accounts receivable actually written off during the reporting period.
16.1. 4. 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 Brewing Co., | 17,834.94 | 81.97% |
| Ltd. | |||
| Suchuan Fifth Construction Co., Ltd. | 3,924.12 | 18.03% | 196.21 |
| Total | 21,759.06 | 100.00% |
16.1. 5. Derecognition of accounts receivables due to transfer of financial assetsThere is no derecognition of accounts receivables due to transfer of financial assets during the reportingperiod.
16.1.6. Amount of assets and liabilities resulting from transfer of accounts receivables andcontinuing involvementThere are no assets and liabilities resulting from transfer of accounts receivables and continuinginvolvement during the reporting period.
16.2. Other receivables
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Interest receivable | 40,570,144.44 | 29,970,944.44 |
| Other receivables | 5,809,911,336.06 | 4,627,756,101.58 |
| Total | 5,850,481,480.50 | 4,657,727,046.02 |
16.2.1. Interest receivable
16.2.1.1. Classification of interest receivable
Monetary Unit: CNY
| Item | Closing Balance | Opening Balance |
| Fixed deposits | 40,570,144.44 | 29,970,944.44 |
| Total | 40,570,144.44 | 29,970,944.44 |
16.2.1.2. Significant interest receivable overdue
Other statements:
There is no significant interest receivable overdue at the period-end.
16.2.1.3. Provision for bad and doubtful debt
? Applicable √ N/A
16.2.2. Other receivables
16.2.2.1. Other receivables disclosed by nature
Monetary Unit: CNY
| Nature | Closing book balance | Opening book balance |
| Intercourse funds of subsidiaries receivable | 5,709,914,323.15 | 4,510,110,733.71 |
| Intercourse funds | 14,258,750.49 | 14,282,195.47 |
| Petty cash | 454,894.47 | 698,657.73 |
| Saving deposits involving contract disputes | 287,400,297.52 | 307,456,275.25 |
| Total | 6,012,028,265.63 | 4,832,547,862.16 |
16.2.2.2. 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 2019 | 4,791,760.58 | 200,000,000.00 | 204,791,760.58 | |
| Balance of 1 January 2019 in the current period | —— | —— | —— | —— |
| Allowance of the current period | 58,266.99 | 58,266.99 | ||
| Verification of the current period | 2,733,098.00 | 2,733,098.00 | ||
| Balance of 31 December 2019 | 2,116,929.57 | 200,000,000.00 | 202,116,929.57 |
Changes of carrying amount with significant amount changed of loss provision in the current period? Applicable √ N/A
Disclosure by aging
Monetary Unit: CNY
| Aging | Book balance |
| Within 1 year (including 1 year) | 5,721,939,715.25 |
| 1-2 years | 1,176,427.93 |
| 2-3 years | 65,000.00 |
| Over 3 years | 288,847,122.45 |
| 3-4 years | 47,606.93 |
| 4-5 years | 166,218.00 |
| Over 5 years | 288,633,297.52 |
| Total | 6,012,028,265.63 |
16.2.2.3. Provision and recovery for bad and doubtful other receivables in the current periodAllowance 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 Note 1 | 200,000,000.00 | 200,000,000.00 | ||||
| Other receivables tested for impairment by the portfolio | 4,791,760.58 | 58,266.99 | 2,733,098.00 | 2,116,929.57 | ||
| Total | 204,791,760.58 | 58,266.99 | 2,733,098.00 | 202,116,929.57 | ||
Note 1: Refer to Note 5.5, 12.2 for details.Of which provision for bad debt reversed or recovered with significant amount:
There is no provision for bad debt reversed or recovered of other receivables with significant amount inthe reporting period.
16.2.2.4. Other receivables actually written off during the reporting period
Monetary Unit: CNY
| Item | Written off amount |
| Other receivables actually written off | 2,733,098.00 |
Of which significant other receivables written off:
Monetary Unit: CNY
| Company Name | Nature | Amount | Reason | Written-off procedures | Whether generated from related transaction |
| China Real Estate Development Corporation Luzhou Branch | Intercourse funds | 1,500,000.00 | Irrecoverable | Managed according to lawyer’s investigation report and approved by manager’s office of the Company | No |
| Luzhou Tuojiang Market | Intercourse funds | 1,233,098.00 | Irrecoverable | Managed according to lawyer’s investigation report and approved by manager’s office of the Company | No |
| Total | -- | 2,733,098.00 | -- | -- | -- |
16.2.2.5. 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 | 4,736,901,888.26 | Within 1 year | 78.79% | |
| Luzhou Laojiao Bosheng Hengxiang Liquor Sales Co., Ltd. | Internal transactions | 379,412,818.63 | Within 1 year | 6.31% | |
| 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 | 287,400,297.52 | Over 5 years | 4.78% | 200,000,000.00 |
| Luzhou Laojiao Electronic Commerce Co., Ltd. | Internal transactions | 277,873,441.14 | Within 1 year | 4.62% | |
| Luzhou Laojiao Import and Export Trade Co., Ltd. | Internal transactions | 147,987,109.34 | Within 1 year | 2.46% | |
| Total | -- | 5,829,575,554.89 | -- | 96.96% | 200,000,000.00 |
16.2.2.6. Other receivables involving government grants
There are no other receivables involving government subsidy during the reporting period.
16.2.2.7. Other receivables derecognized arising from financial assets transferThere are no other receivables derecognized arising from financial assets transfer during the reportingperiod.
16.2.2.8. Amount of assets and liabilities resulting from transfer of other receivables andcontinuing involvementThere are no assets and liabilities resulting from transfer of other receivables and continuinginvolvement during the reporting period.
16.3. 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 | 3,413,960,128.11 | 3,413,960,128.11 | 3,403,811,028.11 | 3,403,811,028.11 | ||
| Investment in associates and joint venture | 2,225,288,824.52 | 2,567,098.80 | 2,222,721,725.72 | 2,095,121,834.88 | 2,567,098.80 | 2,092,554,736.08 |
| Total | 5,639,248,952.63 | 2,567,098.80 | 5,636,681,853.83 | 5,498,932,862.99 | 2,567,098.80 | 5,496,365,764.19 |
16.3.1. Investment in subsidiary
Monetary Unit: CNY
| Investee | Opening Balance (book value) | Changes in current period | Closing Balance (book value) | Closing balance of provision for | |||
| Increase | Decrease | Provision for | Other | ||||
| impairment | impairment | ||||||
| Luzhou Pinchuang Technology Co., Ltd. | 47,500,000.00 | 10,149,100.00 | 57,649,100.001 | ||||
| Sales Company of Luzhou Laojiao Co., Ltd. | 103,162,447.09 | 103,162,447.09 | |||||
| Luzhou Laojiao Brewing Co., Ltd. | 3,172,109,991.25 | 3,172,109,991.25 | |||||
| Luzhou Laojiao International Development (Hong Kong) Co., Ltd. | 5,433,789.77 | 5,433,789.77 | |||||
| Luzhou Laojiao Electronic Commerce Co., Ltd. | 51,604,800.00 | 51,604,800.00 | |||||
| Luzhou Baonuo Biotechnology Co., Ltd. | 20,000,000.00 | 20,000,000.00 | |||||
| Luzhou Laojiao Tourism Culture Co., Ltd. | 4,000,000.00 | 4,000,000.00 | |||||
| Luzhou Laojiao Health Liquor Industry Co., Ltd. | 0.00 | 0.002 | |||||
| Total | 3,403,811,028.11 | 10,149,100.00 | 3,413,960,128.11 |
Note: 1. As stated in Note 1.6 note 4, the Company acquired the subscribed equity of PinchuangTechnology held by non-controlling shareholders according to evaluated price by self-owned fund; as of31 December 2019, the Company has completed the acquisition of subscribed equity, and has paid theacquisition price of CNY 10,149,100.00.
2. The Company obtained 100% of equity in Health Liquor Industry by the business combination underthe same control. The net assets of Health Liquor Industry were negative on the M&A date, and the bookcost of long-term equity investment was limited to 0 by the Company.
16.3.2. 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. | 2,076,748,196.30 | 148,787,121.31 | 4,938,830.88 | 20,735,166.94 | 2,209,738,981.55 | 2,567,098.80 | |||||
| Sichuan Development Wine Investment Co., Ltd. | 15,806,539.78 | -2,823,795.61 | 12,982,744.17 | ||||||||
| Subtotal | 2,092,554,736.08 | 145,963,325.70 | 4,938,830.88 | 20,735,166.94 | 2,222,721,725.72 | 2,567,098.80 | |||||
| Total | 2,092,554,736.08 | 145,963,325.70 | 4,938,830.88 | 20,735,166.94 | 2,222,721,725.72 | 2,567,098.80 | |||||
16.4. Operating revenue and cost of sales
Monetary Unit: CNY
| Item | Current Period | Previous Period | ||
| Revenue | Cost of sales | Revenue | Cost of sales | |
| Primary business | 4,860,840,693.18 | 3,494,170,203.81 | 3,325,711,704.83 | 2,268,801,347.29 |
| Other business | 25,969,729.09 | 24,717.35 | 35,593,034.44 | 103,324.95 |
| Total | 4,886,810,422.27 | 3,494,194,921.16 | 3,361,304,739.27 | 2,268,904,672.24 |
Whether the Company has implemented the new revenue standards? Yes √ No
16.5. Investment income
Monetary Unit: CNY
| Item | Current Period | Previous Period |
| Investment income from long-term equity investments under cost method | 4,042,151,515.27 | 2,015,909,035.78 |
| Investment income from long-term equity investments under equity method | 145,963,325.70 | 88,881,022.50 |
| Investment income gained during the period of holding other equity instrument investment | 8,748,669.71 | 9,112,541.00 |
| Total | 4,196,863,510.68 | 2,113,902,599.28 |
17. Supplementary information
17.1. Detailed statement of extraordinary gain and loss in the current period (+ for gain, - for loss)
√ Applicable ? N/A
Monetary Unit: CNY
| Item | Amount | Remark |
| Gains or losses on disposal non-current assets | 23,211,482.49 | For details please see Note 5.38, 5.39, 5.40. |
| 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) | 43,969,302.07 | For details please see Note 5.34. |
| Other non-operating income and costs other than above items | -11,510,048.21 | For details please see Note 5.39, 5.40. |
| Less: Impact from income tax | 13,076,295.35 | |
| Impact from non-controlling shareholders’ equity | 1,522,350.06 |
| Total | 41,072,090.94 | -- |
Statement for extraordinary gain and loss items that the Company defines according to the definition in“Explanatory Announcement of Information Disclosure of Company that Issues Securities publicly NO.1-Extraordinary Gain and Loss” and definition of recurrent gain and loss items that are listed asextraordinary gain and loss in the “Explanatory Announcement of Information Disclosure of Companythat Issues Securities publicly NO.1- Extraordinary Gain and Loss”:
? Applicable √ N/A
17.2. Return on equity and earnings per share
| Profit during reporting period | Weighted average ROE | EPS(CNY/Share) | |
| Basic EPS | Diluted EPS | ||
| Net profits attributable to ordinary shareholders of the Company | 25.50% | 3.17 | 3.17 |
| Net profits attributable to ordinary shareholders of the Company after deduction of extraordinary gain and loss | 25.28% | 3.14 | 3.14 |
Section XIII Documents Available for Preference
1. Financial statements signed and stamped by the legal representative, person in charge of accountingaffairs and person in charge of accounting department;
2. The original of the auditor’s report with the seal of the accounting firm, and signed and stamped byCPAs;
3. The originals of all company documents and announcements that are disclosed on the public websitedesignated by CSRC during the reporting period.