The Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. TSINGTAO BREWERY COMPANY LIMITED (a Sino-foreign joint stock limited company established in the People s Republic of China) (Stock Code: 168) 2016 Third Quarterly Report This announcement is made pursuant to the disclosure requirements of Rule 13.09 (2) and 13.10B of Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ( Listing Rules ), and the provisions of inside information (as defined in the Listing Rules) under Part XIVA of Securities and Futures Ordinance (Chapter 571 of Laws of Hong Kong). The 2016 third quarterly report (unaudited, the Quarterly Report ) contained in this announcement has been prepared in accordance with China Accounting Standards of Business Enterprises and the requirements on preparation and disclosure of quarterly report issued by China Securities Regulatory Commission, and has been approved by the Board of Directors (the Board ) of Tsingtao Brewery Company Limited (the Company or the Company ). I. IMPORTANT NOTICE 1.1 The Board, Board of Supervisors, directors, supervisors and senior management officers of the Company undertake the authenticity, accuracy and completeness of the contents contained in this Quarterly Report without false representation, misleading statement or material omission, and they jointly and severally accept full responsibility. 1.2 The Quarterly Report has been considered and approved at the fourteenth meeting of the eighth session of the Board ( the Meeting ) through communications. 9 of the total 9 directors attended the Meeting and voted. 1.3 Unless otherwise stated in this report, monetary units are denominated in Renminbi. 1.4 SUN Ming Bo, the legal representative of the Company, YU Zhu Ming, the person in charge of the accounting work (CFO), and HOU Qiu Yan, the person in charge of the accounting department (accounting director) warrant that the financial statements contained in this Quarterly Report are authentic, accurate and complete. 1.5 The third quarterly financial report of the Company has been reviewed by the Audit and Internal Control Committee under the Board, but has not been audited. 1
II. CHANGES IN MAJOR FINANCIAL DATA AND SHAREHOLDERS OF THE COMPANY 2.1 Major financial data Unit: Yuan Currency: RMB As at the end of this reporting period As at the end of prior year Increase/Decrease (%) Total assets 31,572,707,581 28,500,590,128 10.78 Net assets attributable to shareholders of the Company 17,135,445,174 16,458,062,033 4.12 From the beginning of the year to the end of the reporting period (Jan. Sep.) From the beginning of prior year to the end of the reporting period of prior year (Jan. Sep.) Increase/Decrease (%) Net amount of cash flows from operating activities 4,582,133,974 4,863,609,613-5.79 From the beginning of the year to the end of the reporting period (Jan. Sep.) From the beginning of prior year to the end of the reporting period of prior year (Jan. Sep.) Increase/Decrease (%) Revenue 23,036,385,101 24,314,979,550-5.26 Net profits attributable to shareholders of the Company 1,840,050,057 1,745,316,492 5.43 Net profits attributable to shareholders of the Company after deducting non-recurring profits or losses 1,386,315,680 1,521,868,697-8.91 Weighted average return on net assets (%) 10.97 10.87 Increased by 0.10 percentage points Basic earnings per share (Yuan/share) 1.362 1.292 5.43 Diluted earnings per share (Yuan/share) 1.362 1.292 5.43 2
Items and amounts of non-recurring profits or losses: 3Applicable N/A Item Unit: Yuan Currency: RMB Amount of this period (Jul. Sep.) Amount from the beginning of the year to the end of the reporting period (Jan. Sep.) Profits/(Losses) on disposal of non-current assets -25,385,986-179,594,847 Government grants recognized in profits/(losses) of this period, but excluding those closely related to the usual operations of the Company, in compliance with the State policies, and continuously received in set amount or quantities by certain standards. 83,557,050 345,902,518 Reversal of bad debt provision for accounts receivable which provision is provided on the individual basis 600,000 1,300,000 Other non-operating income and expenses other than the aforesaid items 6,098,276 12,711,139 Influence of Suntory transaction to investment income 129,787,586 129,787,586 Influence of Suntory transaction to non-operating income 177,701,522 177,701,522 Affected amount of income tax -7,826,629-25,311,038 Affected amount of non-controlling interests (after-tax) -2,803,278-8,762,503 Total 361,728,541 453,734,377 3
2.2 List of total number of shareholders, and particulars of top ten shareholders, top ten holders of listed shares (or holders of shares not subject to sales restriction) as at the end of the reporting period Unit: share Total number of shareholders 27,471 shareholders including 27,189 holders of A-share and 282 holders of H-share Particulars of top ten shareholders Name of shareholder (full name) Number of shares held as at the end of the reporting period Percentage (%) Number of shares subject to sales restriction held Pledged or frozen shares Nature of shareholder Status Number Tsingtao Brewery Group Company Limited 416,448,055 30.83 0 Nil 0 State-owned legal person HKSCC Nominees Limited 370,403,449 27.42 0 Unknown Overseas legal person Asahi Group Holdings Ltd. 270,127,836 19.99 0 Unknown Overseas legal person China Securities Finance Corporation 40,395,975 2.99 0 Unknown Others Company PICC Life Insurance Co., Ltd. 29,006,916 2.15 0 Unknown Others Dividends Dividends for personal insurance China Jianyin Investment Company Ltd. 17,574,505 1.30 0 Unknown Others Central Huijin Asset Management Ltd. 10,517,500 0.78 0 Unknown Others Guosen Securities Co., Ltd. 9,861,974 0.73 0 Unknown Others Hong Kong Securities Clearing Co., Ltd. 7,401,356 0.55 0 Unknown Others China Galaxy Securities Co., Ltd. 6,752,519 0.50 0 Unknown Others 4
Particulars of top ten holders of shares not subject to sales restriction Name of shareholder Number of listed shares not subject to sales restriction held Class Class and number of shares Number Tsingtao Brewery Group Company Limited ( Tsingtao Group, Note 1) HKSCC Nominees Limited (Note 2) 416,448,055 RMB-denominated Overseas listed foreign shares 370,403,449 Overseas listed foreign shares: Asahi Group Holdings Ltd. 270,127,836 Overseas listed foreign shares China Securities Finance Corporation Company PICC Life Insurance Co., Ltd. Dividends Dividends for personal insurance China Jianyin Investment Company Ltd. Central Huijin Asset Management Ltd. 40,395,975 RMB-denominated 29,006,916 RMB-denominated 17,574,505 RMB-denominated 10,517,500 RMB-denominated Guosen Securities Co., Ltd. 9,861,974 RMB-denominated Hong Kong Securities Clearing Co., Ltd. 7,401,356 RMB-denominated China Galaxy Securities Co., Ltd. 6,752,519 RMB-denominated 405,132,055 11,316,000 370,403,449 270,127,836 40,395,975 29,006,916 17,574,505 10,517,500 9,861,974 7,401,356 6,752,519 Explanation of associations or actions in concert among the above shareholders 1. The total number of shares held by Tsingtao Group includes 11,316,000 shares of H-share held in the Company by itself and through a wholly-owned subsidiary, and 405,132,055 shares of A-share held in the Company by itself. 5
2. The H-shares are held by HKSCC Nominees Limited on behalf of different clients, excluding the H-shares held by Tsingtao Group through its wholly-owned subsidiary. 3. The Company is unaware of whether there are any associations among the top ten shareholders or whether they are of the parties acting in concert. Explanation of holders of preferred shares with resumed voting right and the number of shares held N/A 2.3 Brief analysis of the overall situation of operating activities of the Company during the reporting period During the reporting period, under the situation of the stagnation of the domestic mid-and-highend catering consumption, and the unobvious improvements in the overall environment of the beer market, the Company continued to actively explore the domestic and overseas markets, and strengthened the market expansion through various channels and marketing modes. In the past three quarters of this year, the Company had accumulatively sold 70.4 million hl of beer, including 32.9 million hl of its principal brand, Tsingtao Beer, and 13.6 million hl of high value-added products of Hongyundangtou (Good Fortune), Augerta, Classic 1903, draft beer, canned beer and smallbottled beer. During the period between January and September 2016, the Company received revenue of RMB23.036 billion, and net profits attributable to shareholders of the Company of RMB1.840 billion. 6
III. Significant Events 3.1 Material changes in major accounting items and financial indicators and the reasons 3Applicable N/A 3.1.1 Analysis of changes in major items in balance sheet Items in balance sheet As at the end of this reporting period As at the end of corresponding reporting period in prior year Unit: 000 Yuan Currency: RMB Increased/ Decreased amount Increased/ Decreased percentage (%) Cash at bank and on hand 10,723,948 8,401,752 2,322,196 27.64 Notes receivable 48,000 22,770 25,230 110.80 Accounts receivable 184,684 117,991 66,693 56.52 Interests receivable 85,748 148,581-62,833-42.29 Long-term equity interests investment 393,150 1,507,745-1,114,595-73.92 Deferred income tax assets 1,131,700 769,159 362,541 47.13 Short-term borrowings 327,598 810,387-482,789-59.58 Notes payable 326,868 100,142 226,726 226.41 Advances from suppliers 392,453 1,000,313-607,860-60.77 Taxes payable 764,932 261,889 503,043 192.08 Interests payable 824 1,486-662 -44.52 Other payables 5,346,738 4,061,298 1,285,440 31.65 Deferred income tax liabilities 256,294 133,868 122,426 91.45 Non-controlling interests 593,238-292,051 885,289 303.13 (1) Cash at bank and on hand Cash at bank and on hand as at the end of the reporting period increased by 27.64% from the beginning of the reporting period, which was mainly due to the increase in net cash flows from operating activities during the reporting period. (2) Notes receivable Notes receivable as at the end of the reporting period increased by 110.80% from the beginning of the reporting period, which was mainly due to the increase in accepted bank drafts received by some subsidiaries at the end of the reporting period. 7
(3) Accounts receivable Accounts receivable as at the end of the reporting period increased by 56.52% from the beginning of the reporting period, which was mainly due to the increase in balance of accounts receivable of some subsidiaries at the end of the reporting period. (4) Interests receivable Interests receivable as at the end of the reporting period decreased by 42.29% from the beginning of the reporting period, which was mainly due to the decrease in receivable interests of savings deposited by Tsingtao Brewery Finance LLC ( Finance Company ), a wholly-owned subsidiary of the Company, in the external financial institutes during the reporting period. (5) Long-term equity interests investment Long-term equity interests investment as at the end of the reporting period decreased by 73.92% from the beginning of the reporting period, which was mainly due to the off-set of the long-term equity interests investment in the consolidated statements by the acquisition of the equity interests of Tsingtao Brewery (Shanghai) Investing Company Limited ( Shanghai Investing Company ) during the reporting period. (6) Deferred income tax assets Deferred income tax assets as at the end of the reporting period increased by 47.13% from the beginning of the reporting period, which was mainly due to the increase in deferred income tax assets caused by the increase in outstanding expenses during the reporting period. (7) Short-term borrowings Short-term borrowings as at the end of the reporting period decreased by 59.58% from the beginning of the reporting period, which was mainly due to the repayment of external borrowings made by several subsidiaries during the reporting period. (8) Notes payable Notes payable as at the end of the reporting period increased by 226.41% from the beginning of the reporting period, which was mainly due to the increase in ratio of settlement of goods amount with notes during the reporting period. (9) Advances from suppliers Advances from suppliers as at the end of the reporting period decreased by 60.77% from the beginning of the reporting period, which was mainly due to the decrease in advances for beer during the reporting period. 8
(10) Taxes payable Taxes payable as at the end of the reporting period increased by 192.08% from the beginning of the reporting period, which was mainly due to the increase in income tax payable, value-added tax payable and consumption tax payable at the end of the reporting period. (11) Interests payable Interests payable as at the end of the reporting period decreased by 44.52% from the beginning of the reporting period, which was mainly due to the decrease in payable interests of borrowings caused by the decrease in external borrowings of some subsidiaries during the reporting period. (12) Other payables Other payables as at the end of the reporting period increased by 31.65% from the beginning of the reporting period, which was mainly due to the increase in outstanding expenses and cash pledges during the reporting period. (13) Deferred income tax liabilities Deferred income tax liabilities as at the end of the reporting period increased by 91.45% from the beginning of the reporting period, which was mainly due to the increase in deferred income tax liabilities caused by the increase in asset valuation of Shanghai Investing Company which equity interests were acquired during the reporting period. (14) Non-controlling interests Non-controlling interests as at the end of the reporting period increased by 303.13% from the beginning of the reporting period, which was mainly due to that the former non-controlling shareholders no longer shared the net assets of Tsingtao Brewery (Shanghai) Industrial Company Limited ( Shanghai Industrial Company ) after its non-controlling equity interests were acquired during the reporting period. 9
3.1.2 Analysis of changes in major items in income statement Items in income statement Jan. Sep. 2016 Jan. Sep. 2015 Unit: 000 Yuan Currency: RMB Increased/ Decreased amount Increased/ Decreased percentage (%) Revenue 23,036,385 24,314,980-1,278,595-5.26 Cost of sales 13,155,393 14,896,923-1,741,530-11.69 Selling and distribution expenses 5,083,309 4,810,746 272,563 5.67 Asset Impairment losses/(reversal) 3,073-393 3,466 882.55 Investment income 149,326 47,058 102,268 217.32 Non-operating income 538,438 379,749 158,689 41.79 Non-operating expenses 181,717 94,494 87,223 92.30 Non-controlling profits/losses 83,336-6,591 89,927 1,364.45 (1) Revenue Revenue during the period between January and September 2016 decreased by 5.26% from the corresponding period in prior year, which was mainly due to the decrease in revenue caused by the decline of sales volume during the reporting period. (2) Cost of sales Cost of sales during the period between January and September 2016 decreased by 11.69% from the corresponding period in prior year, which was mainly due to the decrease in cost of sales caused by the decline of sales volume, and the transformation from external purchasing mode into internal transaction of purchasing products after acquiring the equity interests of Shanghai Investing Company during the reporting period. (3) Selling and distribution expenses Selling and distribution expenses during the period between January and September 2016 increased by 5.67% from the corresponding period in prior year, which was mainly due to the increase in investment to some regional markets during the reporting period. (4) Asset impairment losses/(reversal) Asset impairment losses/(reversal) during the period between January and September 2016 increased by 882.55% from the corresponding period in prior year, which was mainly due to the increase in accrued fixed asset impairment losses of several subsidiaries during the reporting period. 10
(5) Investment income Investment income during the period between January and September 2016 increased by 217.32% from the corresponding period in prior year, which was mainly due to that the difference of the higher fair value of the 50% equity interests previously held in Shanghai Investing Company than the book value was recognized in investment income after acquiring the equity interests of Shanghai Investing Company during the reporting period. (6) Non-operating income Non-operating income during the period between January and September 2016 increased by 41.79% from the corresponding period in prior year, which was mainly due to that the negative goodwill, caused by acquiring the equity interests of Shanghai Investing Company during the reporting period which therefore became a controlling subsidiary, was recognized in non-operating income. (7) Non-operating expenses Non-operating expenses during the period between January and September 2016 increased by 92.30% from the corresponding period in prior year, which was mainly due to the increase in losses caused by the disposal of fixed assets and land use right of some subsidiaries during the reporting period. (8) Non-controlling profits/losses Non-controlling profits/losses during the period between January and September 2016 increased by 1,364.45% from the corresponding period in prior year, which was mainly due to that the former non-controlling shareholders no longer shared the operating losses after acquiring the non-controlling equity interests of Shanghai Industrial Company during the reporting period. 11
3.1.3 Analysis of changes in major items in cash flow statement Items in cash flow statement Jan. Sep. 2016 Jan. Sep. 2015 Unit: 000 Yuan Currency: RMB Increased/ Decreased amount Increased/ Decreased percentage (%) Net cash flows from operating activities 4,582,134 4,863,610-281,476-5.79 Net cash flows from investing activities -819,653-1,354,838 535,185 39.50 Net cash flows from financing activities -1,422,781-387,051-1,035,730-267.60 (1) Net cash flows from operating activities decreased by 5.79% from the corresponding period in prior year, which was mainly due to the decrease in cash received caused by the decline of sales income during the reporting period. (2) Net cash flows from investing activities increased by 39.50% from the corresponding period in prior year, which was mainly due to the increase in principal of wealth management products received by the Finance Company during the reporting period. (3) Net cash flows from financing activities decreased by 267.60% from the corresponding period in prior year, which was mainly due to the increase in cash for repaying the debts during the reporting period. 3.2 Analysis and explanation of the progress of significant events and their impacts and solutions 3Applicable N/A Pursuant to the Framework Agreement of Transfer of Equity Interests and Permission for Use of Label and Technologies ( Framework Agreement ) entered into between the Company and Suntory (China) Holding Co., Ltd. ( Suntory Company ) on 18 October 2015, the Company would acquire 50% equity interests in Shanghai Investing Company (former Suntory-Tsingtao (Shanghai) Co., Ltd.) and 50% equity interests in Shanghai Industrial Company (former Tsingtao-Suntory (Shanghai) Sales Co., Ltd.) held by Suntory Company for a consideration based on the sum of RMB822,912,001, which would be adjusted and determined according to the price adjusting factors as agreed in the Framework Agreement. 12
On 27 October 2016, both parties of the agreement entered into a supplementary agreement to the Framework Agreement, pursuant to which both parties confirmed that the final price of transferring the equity interests was RMB675,311,059, after deducting the price adjustment of RMB147,600,942. As at the disclosure date of this announcement, the Company had made two payments for transferring the equity interests for a total amount of RMB622,912,001 to Suntory Company as agreed in the Framework Agreement, and the outstanding transferring price of RMB52,399,058 will be made in two payments as agreed in the Framework Agreement and its supplementary agreement. As of 30 September 2016, Shanghai Investing Company and its subsidiaries had been included into the consolidated statements of Tsingtao Group, and Shanghai Investing Company and Shanghai Industrial Company had therefore become the wholly-owned subsidiaries of the Company. The transactions resulted in the increase in net profits attributable to shareholders of the Company by around RMB307.49 million owing to that, firstly, the negative goodwill caused by acquiring the equity interests of Shanghai Investing Company and making it a wholly-owned subsidiary of the Company, was recognized in non-operating income for an amount of around RMB177.70 million, and, secondly, the difference between the book costs and the fair value of the equity interests previously held in Shanghai Investing Company was recognized in investment income for an amount of around RMB129.79 million; and furthermore, the decrease in capital reserve due to acquiring the non-controlling equity interests of Shanghai Industrial Company by around RMB630.89 million. 3.3 Implementation of undertakings made by the Company and its shareholders holding over 5% of the shares 3Applicable N/A During the Company s share reform, the State-owned Assets Supervision and Administration Commission of the People s Government of Qingdao ( SASACQ ), the former controlling shareholder, committed to proposing to the Board for setting up and implementing long-term incentive schemes including the stock option incentive after the completion of the share reform. In April 2007, after Tsingtao Group had become the Company s controlling shareholder through the unconditional transfer, it had accepted all obligations which should be undertaken and all undertakings which were made by SASACQ after the implementation of the share reform of the Company. On 25 June 2014, the Company received a notice from its controlling shareholder, Tsingtao Group, that, to better combine the interests among the Company s management team, shareholders and the Company, and to implement the undertakings made in the share reform and comply with the regulatory requirements, Tsingtao Group would, pursuant to the relevant laws and regulations, urge the Company to propose long-term incentive schemes of the management team before the end of June 2020, which would be submitted to the Company s general meeting for consideration and approval of putting into practice after obtaining approval from related authorities. 13
3.4 Any predictable substantial losses in accumulated net profit from the beginning of the year to the end of next reporting period or warnings or causes for any substantial variance from the corresponding period in prior year Applicable 3N/A For the unaudited balance sheet, income statement and cash flow statement of the Company as at 30 September 2016, please refer to the websites of Shanghai Stock Exchange (http://www.sse.com.cn) and the Company (http://stock.tsingtao.com.cn). By Order of the Board Tsingtao Brewery Company Limited ZHANG Rui Xiang Company Secretary Qingdao, the People s Republic of China 28 October 2016 Directors of the Company as at the date of this announcement are: Executive Directors: Non-executive Directors: Mr. SUN Ming Bo (Chairman), Mr. HUANG Ke Xing, Mr. FAN Wei and Mr. YU Zhu Ming Mr. Yasutaka SUGIURA Independent Non-executive Directors: Mr. WANG Xue Zheng, Mr. YU Zeng Biao, Mr. BEN Sheng Lin and Mr. JIANG Min 14