Gujinggong Liquor Aged Original Liquor Annual Report 2019 (Summary) Stock Code: 000596, 200596 Stock Name: Gujing Distillery, Gujing Distillery-B Announcement No. 2020-005 ANHUI GUJING DISTILLERY COMPANY LIMITED ANNUAL REPORT 2019 (SUMMARY) Part I Important Notes This Summary is based on the full text of the 2019 Annual Report of Anhui Gujing Distillery Company Limited (together with its consolidated subsidiaries, the “Company”, except where the context otherwise requires). In order for a full understanding of the Company’s operating results, financial position and future development plans, investors should carefully read the aforesaid full text, which has been disclosed together with this Summary on the media designated by the China Securities Regulatory Commission (the “CSRC”). Independent auditor’s modified opinion: □ Applicable √ Not applicable Board-approved final cash and/or stock dividend plan for ordinary shareholders for the Reporting Period: √ Applicable □ Not applicable Bonus issue from capital reserves: □ Yes √ No The Board has approved a final dividend plan for the ordinary shareholders as follows: based on the Company’s total shares on 31 December 2019, a cash dividend of RMB15.00 (tax inclusive) per 10 shares is to be distributed to the shareholders, with no bonus issue from either profit or capital reserves. Board-approved final cash and/or stock dividend plan for preferred shareholders for the Reporting Period: □ Applicable √ Not applicable This Report and its summary have been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese versions shall prevail. Part II Key Corporate Information 1. Stock Profile Stock name Gujing Distillery, Gujing Stock code 000596, 200596 Distillery-B Stock exchange for stock listing Shenzhen Stock Exchange Contact information Board Secretary Securities Representative Name Ye Changqing Mei Jia Gujing Town, Bozhou City, Anhui Province, Gujing Town, Bozhou City, Anhui Province, Address P.R.China P.R.China 1 Gujinggong Liquor Aged Original Liquor Annual Report 2019 (Summary) Fax (0558)5710099 (0558)5710099 Tel. (0558)5712231 (0558)5710057 Email address gjzqb@gujing.com.cn gjzqb@gujing.com.cn 2. Principal Activities or Products in the Reporting Period The Company primarily produces and markets liquor and spirits. As one of China’s traditional top eight liquor brands, the Company is the first listed liquor and spirits company with both A and B stocks. It is located in Bozhou City, Anhui Province in China, the hometown of historic figures Cao Cao and Hua Tuo, as well as one of the world’s top 10 liquor-producing areas. No changes have occurred to the main business of the Company in the Reporting Period. As the main product of the Company, the Gujing spirit originated as a “JiuYunChun Spirit”, together with its making secrets, being presented as a hometown specialty by Cao Cao, a famous warlord in China’s history, to Emperor Han Xiandi (name: Liu Xie) in A.D. 196, and was continually presented to the royal house since then. With crystalline liquid, rich aroma, a fine flavor and a lingering aftertaste, the Gujing spirit has helped the Company win four national distilled spirit golden awards, a golden award at the 13th SIAL Paris, the title of China’s “Geographical Indication Product”, the recognition as a “Key Cultural Relics Site under the State Protection”, the recognition with a “National Intangible Cultural Heritage Protection Project”, a Quality Award from the Anhui provincial government, a title of “National Quality Benchmark”, among other honors. 3. Key Financial Information (1) Key Financial Information of the Past Three Years Indicate by tick mark whether there is any retrospectively restated datum in the table below. □ Yes √ No Unit: RMB 2019-over-2018 change 2019 2018 2017 (%) Operating revenue (RMB) 10,416,961,584.23 8,686,140,336.89 19.93% 6,968,325,048.55 Net profit attributable to the listed 2,097,527,739.86 1,695,231,643.05 23.73% 1,148,740,644.93 company’s shareholders (RMB) Net profit attributable to the listed company’s shareholders before 1,891,097,157.37 1,638,204,454.34 15.44% 1,069,457,368.70 exceptional gains and losses (RMB) Net cash generated from/used in 192,447,063.45 1,440,881,285.95 -86.64% 930,914,712.78 operating activities (RMB) Basic earnings per share 4.17 3.37 23.74% 2.28 (RMB/share) Diluted earnings per share 4.17 3.37 23.74% 2.28 (RMB/share) Weighted average return on equity 25.55% 24.03% 1.52% 19.09% (%) Change of 31 31 December 2019 31 December 2018 December 2019 over 31 December 2017 31 December 2018 (%) Total assets (RMB) 13,871,297,363.16 12,509,928,449.72 10.88% 10,152,862,119.05 Equity attributable to the listed 8,944,111,764.44 7,601,984,024.58 17.65% 6,459,078,378.38 company’s shareholders (RMB) (2) Key Financial Information by Quarter Unit: RMB Q1 Q2 Q3 Q4 2 Gujinggong Liquor Aged Original Liquor Annual Report 2019 (Summary) Operating revenue 3,668,502,474.92 2,319,610,524.17 2,214,767,350.88 2,214,081,234.26 Net profit attributable to the listed 783,389,904.73 464,926,409.28 493,294,846.62 355,916,579.23 company’s shareholders Net profit attributable to the listed company’s shareholders before 749,094,364.21 416,776,614.89 444,504,344.99 280,721,833.28 exceptional gains and losses Net cash generated from/used in 1,010,701,440.91 31,032,307.92 1,199,637,755.93 -2,048,924,441.31 operating activities Indicate by tick mark whether any of the quarterly financial data in the table above or their summations differs materially from what have been disclosed in the Company’s quarterly or interim reports. □ Yes √ No 4. Share Capital and Shareholder Information at the Period-End (1) Numbers of Ordinary Shareholders and Preferred Shareholders with Resumed Voting Rights as well as Holdings of Top 10 Shareholders Unit: share Number of Number of preferred Number of ordinary shareholders with Number of preferred shareholders at resumed voting ordinary shareholders with 21,204 the month-end 29,696 0 rights at the 0 shareholders at resumed voting prior to the month-end prior to the period-end rights at the disclosure of this the disclosure of this period-end Report Report Top 10 shareholders Total shares Shares in pledge or frozen Name of Nature of Shareholding held at the Restricted shares held shareholder shareholder percentage Status Shares period-end ANHUI GUJING GROUP State-owned 53.89% 271,404,022 In pledge 114,000,000 COMPANY legal person LIMITED GAOLING Foreign 2.47% 12,446,408 FUND,L.P. legal person AGRICULTURAL BANK OF CHINA- E FUND CONSUMPTION Other 2.45% 12,324,779 SECTOR STOCK SECURITIES INVESTMENT FUND CHINA INT'L CAPITAL CORP Foreign HONG KONG 1.96% 9,871,986 legal person SECURITIES LTD HONG KONG SECURITIES Foreign 1.72% 8,672,976 CLEARING legal person COMPANY LTD. INDUSTRIAL Other 1.49% 7,500,000 AND 3 Gujinggong Liquor Aged Original Liquor Annual Report 2019 (Summary) COMMERCIAL BANK OF CHINA LIMITED- INVESCO GREAT WALL EMERGING GROWTH HYBRID SECURITIES INVESTMENT FUND UBS (LUX) EQUITY FUND - Foreign CHINA 1.40% 7,068,861 legal person OPPORTUNITY (USD) CENTRAL HUIJIN ASSET State-owned 1.30% 6,543,600 MANAGEMENT legal person CO., LTD. GREENWOODS Foreign CHINA ALPHA 1.12% 5,657,150 legal person MASTER FUND Foreign NORGES BANK 1.03% 5,211,411 legal person Among the shareholders above, the Company’s controlling shareholder—Anhui Gujing Group Company Limited—is not a related party of other shareholders; nor are they parties acting in Related or acting-in-concert concert as defined in the Administrative Measures on Information Disclosure of Changes in parties among the shareholders Shareholding of Listed Companies. As for the other shareholders, the Company does not know above whether they are related parties or whether they belong to parties acting in concert as defined in the Administrative Measures on Information Disclosure of Changes in Shareholding of Listed Companies. Shareholders involved in securities margin trading (if N/A any) (2) Number of Preferred Shareholders and Shareholdings of Top 10 of Them □ Applicable √ Not applicable No preferred shareholders in the Reporting Period. 4 Gujinggong Liquor Aged Original Liquor Annual Report 2019 (Summary) (3) Ownership and Control Relations between the Actual Controller and the Company 5. Corporate Bonds Does the Company have any corporate bonds publicly offered on the stock exchange, which were outstanding before the date of this Report’s approval or were due but could not be redeemed in full? No. Part III Operating Performance Discussion and Analysis 1. Business Overview of the Reporting Period Is the Company subject to any industry-specific disclosure requirements? No. In 2019, under the guidance of the spirit of the 19th National Congress of the Communist Party of China and President Xi Jinping’s thought on socialism with Chinese characteristics for a new era, the Company further implemented various guidelines and policies. Upholding the values of “Be Honest, Offer Quality Spirits, Be Stronger and Be Helpful to the Society”, the Company beefed up the implementation of the new strategy of “Digitalization, Internationalization, and Stricter Compliance with Law and Regulations”, as well as promoted the “Nie Guangrong Spirit”. It further improved corporate management, motivated employees, accelerated transformation and upgrading, further implemented the “Distilled Spirits 5.0” strategy, and successfully achieved all the operating objectives. For 2019, the Company recorded operating revenue of RMB 10.417 billion, up 19.93% compared to 2018; a net profit attributable to the Company as the parent of RMB 2.098 billion, rising 23.73% from the year earlier; earnings per share of RMB4.17, 23.74% higher than 2018; and net cash generated from operating activities of RMB192 million, going down 86.64% on a year-on-year basis. Meanwhile, the brand value reached a new high of RMB146.98 billion. The Company’s Overall Operation During the Reporting Period 1. Strengthen market construction to continuously rise the brand influence 5 Gujinggong Liquor Aged Original Liquor Annual Report 2019 (Summary) By strengthening the market construction, the Company further enhanced the organization-driven. Focused on systemic competition, the Company established a new marketing mechanism of upstream-downstream linkage, information exchange, quick response, and overall coordination. The brand construction has been strengthened to gradually increase brand influence. 2. Accelerate the transformation of the Company and continuously improve the management The Company stands firmly on Strategy 5.0 and promotes the depth of digital transformation. During the Reporting Period, the digital marketing, Gujing SAP ERP and CRM projects were completed, and at the same time, these projects were successfully switched online. The digital operation structure system with digital marketing (CRM) in the front line and SAP ERP as the main channel in the backstage has been completed to lay a foundation for a new digital Gujing. 3. Stably optimize quality control and boost the application of scientific research transformation The Company strengthened the management of production process, established a sound quality control system and standard, optimized the inspection project of raw and auxiliary materials into the factory, standardized inspection standards and inspection operations, improved supply efficiency, and avoided behavioral risks. The Company’s two technological innovation achievements have reached the international leading level, one scientific achievement has reached the domestic leading level, one scientific achievement has won a prize awarded by China Light Industry Council, one has won the third prize of Provincial Science and Technology Award, and two scientific research achievements have been transformed within the company. Gujing Distillery Product Design Center was recognized by the “National Industrial Design Center” and “China Light Industry Engineering Technology Research Center”. 4. In-depth collaboration between production and sales ensures a prominent effect of balanced production The Company implemented a coordinate mechanism between production and sales to continuously improve production efficiency and supply satisfaction. A logistics system and a planting model with high-quality raw grain base have been built to ensure the quality of raw materials and reduce supply risks. 5. Strictly abide by the bottom line of environmental protection and constantly improve the environmental protection infrastructure The Company continued to increase investment in environmental protection, and achieved the “Four Goals” for safe production throughout 2019. The Company’s main pollutant indicators for environmental protection was stable and reached the standard, which effectively controlled the energy loss rate and equipment failure rate. In the whole year, all the main environmental pollution discharge pollutants met the standard, and no environmental pollution accidents occurred. The company was successfully selected into the “National Green Factory” list. 6. Adhere to the guidance of the Party building and promote the “Nie Guangrong Spirit” The Company implemented an in-depth educational activity on the theme of “Remain true to our original aspiration and keep our mission firmly in mind”. According to the arrangement of the Central Committee, the Provincial Party Committee and the Municipal Party Committee, the Company resolutely follows the main line of learning and implementing Xi Jinping’s Thought on Socialism with Chinese Characteristics for a New Era. Focused on the general requirements of “remain true, fulfill the Mission, find the reasons of falling behind, and emphasize the implementation”, the Company spared no effort to study and education, investigation and research, inspection of problems, rectification and implementation throughout the entire process and yielded prominent fruits. During this period, the Company held a grand activity “Report on Comrade Nie Guangrong’s Advanced Deeds” in the Great Hall of the People in Beijing, making “Nie Guangrong Spirit” well spread and promoted. 7. During the Reporting Period, the Company still had the following pressures and inadequacies (1) The complex macroeconomic environment has brought many uncertainties to the development of the liquor industry. (2) The level of lean management of the Company falls behind the pace of the Company’s development. (3) The system, mechanism and the vitality of the Company need to be further activated. (4) Bold innovation is required in cultivating talents, inspiring talents, and retaining talents by system. 2. Significant Change to Principal Activities in the Reporting Period □ Yes √ No 6 Gujinggong Liquor Aged Original Liquor Annual Report 2019 (Summary) 3. Product Category Contributing over 10% of Principal Business Revenue or Profit √ Applicable □ Not applicable Unit: RMB YoY change in YoY change in YoY change in Gross profit Product category Operating revenue Operating profit operating revenue operating profit gross profit margin (%) (%) margin (%) Distilled spirits 10,164,144,471.76 2,713,088,216.06 77.79% 19.30% 20.38% -0.24% 4. Business Seasonality that Calls for Special Attention □ Yes √ No 5. Significant YoY Changes in Operating Revenue, Cost of Sales and Net Profit Attributable to the Listed Company’s Ordinary Shareholders or Their Compositions □ Applicable √ Not applicable 6. Possibility of Listing Suspension or Termination □ Applicable √ Not applicable 7. Matters Related to Financial Reporting (1) YoY Changes to Accounting Policies, Accounting Estimates or Measurement Methods √ Applicable □ Not applicable Contents and reasons Approval procedures Notes The Ministry of Finance issued Accounting Standards for Business Enterprises No.22-Recognition and Measurement of Financial Instruments (CK [2017] No. 7), Accounting Standards for Business Enterprises No.23-Transfer of Financial Assets (CK [2017] No. 8), Accounting Standards for Business Enterprises No.24-Hedge Accounting (CK [2017] No. 9) and Accounting Standards for Business Enterprises No.37-Presentation of Refer to Announcement on Changes in th Financial Instrument (CK [2017] No. 14). Reviewed and approved on the 9 Meeting Accounting Policy on The Company started to implement the th of the 8 Board of Directors and the 8th http://www.cninfo.com.cn disclosed on the abovementioned new standards from 1 Meeting of the 8th Supervisory Committee same date for details. January 2019. According to the above requirements, the Company implemented the above new standards governing financial instrument from 1 January 2019, and changed relevant accounting polices in line with the stipulations of the above new standards governing financial instrument. In accordance with the relevant requirements of new standard governing financial instrument, the retroactive adjustment was not conducted to the same 7 Gujinggong Liquor Aged Original Liquor Annual Report 2019 (Summary) period of last year, and no impact the changes of accounting policies will occur to the financial situation and operating results in the prior period. On 30 April 2019, Notes of Revising and Printing the Format of 2019 General Enterprises Financial Statement (CK [2019] No. 6) (hereinafter referred to as “Notes of Revising”) was issued by the Ministry of Finance, making partial amendments to the format of general enterprises financial statements, stipulated that the format is applicable to the interim Reviewed and approved on the 10th Refer to Announcement on Changes in and annual financial statements in and after Meeting of the 8th Board of Directors and Accounting Policy on 2019 of non-financial business executing the 9th Meeting of the 8th Supervisory http://www.cninfo.com.cn disclosed on the ASBE and the regulations of Notes of Committee same date for details. Revising. The Company belongs to the enterprise executed the new standards governing financial instrument but not new standards governing revenue and leases, and shall adjust correspondingly to the format of financial statements and part of course presentation combined with the requirements of Notes of Revising. (2) Retrospective Restatements due to Correction of Material Accounting Errors in the Reporting Period □ Applicable √ Not applicable No such cases. (3) YoY Changes to the Scope of Consolidated Financial Statements √ Applicable □ Not applicable Principal stake(%) Name of Nature of the place of registered Make way subsidiary business directly indirect business Hubei Yellow Crane Tower Hubei Hubei Production and 51.00 Set up beverage co. xianning xianning manufacturing LTD 8