Chairman's Statement

On behalf of the board of directors (the"Board")of Beijing Capital Grand Limited("Capital    Grand"or    the    “Company”,together with its subsidiaries,the "Group"),I  am  pleased  to  present  the  interim results of the Group for the period ended 30 June 2023.

During the first half of 2023,although the major economies across the world have emerged   from   the   shadow   of   the pandemic,hyperinflation remained around the world where the manifestation of austerity and spillover effects in monetary policies of major economies restricted the recovery of the global economy.With the volatility and uncertainty in the macro environment worldwide,China adhered to the general principle of making progress while ensuring stability.The policies stabilizing economic growth,employment rate and commodity prices began to take effect,including the increasing construction of development landscape,the vigorous promotion of high-quality development,the gradual resumption of market demands,the sustainable growth of production and supply,the overall stability of employment and commodity prices,the progressive increase of resident income,as well as the general recovery of economic performance. During the first half of 2023,calculation suggested that the GDP of China reached RMB59,303.4 billion,which with the price held constant,represented a growth of 5.5%as compared to the corresponding period last year.China's economic growth rate was faster than that of last year at 3%and the first quarter of 2023 at 4.5%.This is higher than the world's major developed economies,which in turn demonstrated the strong resilience of China's economic development.

During the period,with the implementation of various domestic policies and measures to expand domestic demand,the potential of domestic demand continued to show through,especially the consumption impetus to economic growth being significantly strengthened.During the first half of 2023,the customer traffic flow of major shopping malls across the country has rebounded significantly.According to the surveillance data published by Winneryun Data Monitoring Platform (汇客云数据平台),daily  average customer traffic for each shopping mall throughout China  amounted to 18,500  visits, representing an increase of 30.4% as compared to the corresponding period last year.During the period,the  social consumptive potentiality as released has contributed to a total retail sales of consumer goods in China amounting to RMB22,758.8 billion,representing an increase of 8.2% as compared to the corresponding period last year.The Chinese economy continues to demonstrate  great  resilience,promising  potential  and  sufficient  vitality,as  well  as  the  basic conditions supporting high-quality development.

As a greatly important form of domestic retail business,Outlets play the role of crucial infrastructure that integrates the domestic and international circulation by supplying superior but inexpensive commodities alongside providing a unique experience,becoming an important consumer's option in the post-pandemic era with a stable and positive business development prospect.In anticipation of market development and in virtue of elaborate preparations,the Group achieved a total sales of RMB5.318 billion in the first half of the year relying on the effective support of private traffic,representing an increase of 42%over the same period last year.Customer traffic flow amounted to 26.95 million visits,representing an increase of 34%over the same period last year.The Group seized the opportunity of consumption recovery for various Outlets projects,seized the opportunity and timing for marketing,increased its penetration rate in regional markets,and explored the growth points of target customer base.By making the utmost of emerging media platforms such as Tik Tok and Xiaohongshu to form a matrix of topic propagation and make targeted promotion,our rapid traffic growth magnifiesthe marketing effect to elevate stores'customer traffic and sales.By reinforcing the advantages of ultra-low discounts,  refining customer experience,and premiumising the shopping environment,we could improve the customer retention ratio  and satisfaction of customers.We have performed well during New Year's Day,Spring Festival,Women's Day,May Day, Dragon Boat Festival and other holidays.Especially during the "May Day"holidays,Outlets in 15 cities across the country have created an outstanding five-day sales volume of over RMB410 million.

During  the  period,the  Group  continued  to  provide  members  with  fresh  shopping  experiences  to  enhance  member stickiness,and set Saturdays and Sundays of each month as members'super discount days to concentrate our resources on sales increase.In the first half of the year,the activities of members'super discount days created sales of RMB580 million,bringing  about  2.59  million  store  visits.Meanwhile,the  increasingly  diversified  member  registration  channels, including the newly-introduced registration method via WeChat,have improved the experience for member registration. During the period,the number of new members was 319,100,of which 250,800 were active members,accounting for 78%.  The  customer orders  contributed  by  members  increased  by  11%compared  with  the  same  period  last  year,and  the repurchase rate of members increased by  12%compared with the same period last year.The quality of membership showed a sustained upward trend.

During the period,the Group focused on synergistic development and expanded sales from group purchase.Through the development of member tools for the  purpose of directional traffic attraction,Outlets  in  15  cities  across  the  country specially  invited  158  enterprises  to  participate  in  in-house  purchases  during  Women's  Day,with  a  19%year-on-year increase in customer traffic.Leveraging the connection with third-party platforms such as Meituan and Tik Tok,we realized the  self-service  redemption  for  users  in  group  buying  activities,improved  our  customer  satisfaction,enhanced  the efficiency of coupon verification,and increased sales therewith.During the period,with the transformation of our mindset in self-operated business and the synergistic effect created by resources of multiple parties,we strengthened the efforts in destocking through a series of activities such as the in-house purchase carnival of famous products and participation in the 2023 Annual Summit of Automobile Brands in Beijing Worker's Gymnasium.Our inventory structure has experienced robust optimization with our profitability substantially improved.

During the period,favorable policies were continuously introduced.In March 2023,the National Development and Reform Commission published the Notice on Regulating and Efficiently Implementing the Application and Recommendation of Real Estate  Investment  Trusts(REITs)Projects  in  the  Infrastructure  Sector,signifying  the  official  inclusion  of  consumption infrastructure into the scope of REITs issuance.It was an important initiative for China to release consumption potential, expand domestic demand,and support consumption recovery by virtue of comprehensive policies,which has also provided policy conditions for the Group's asset-light transformation.The Group will seize the window period stipulated in the policies and is dedicated to smoothen the closed-loop asset circulation featuring "investment-financing-management- withdrawal” (投-融-管-退),accelerate the improvement of business management capabilities,and gradually realize the transformation of assets "from heavy to light,from light to premium"(由重变轻、由轻变精).

During the period,the Group optimized its debt structure in an all-round effort,and effectively improved the Company's  overall financial safety margin through comprehensive measures,such as premature repayment of the Senior Class ABS worth RMB2.6 billion,structural adjustments to the outstanding debts,and reduction of the comprehensive financing costs.  During the period,the Group has intended to sell its two Outlets in Wuhan and Jinan,the proceeds from which will be used to repay the Group's interest-bearing debts and supplement its general working capital.At the same time,the Group will be entrusted with the management of these two Outlets in Wuhan and Jinan.Taking this opportunity,while consolidating its  leading position in the Outlet track and achieving diversified revenue growth,the Group will also take an important step  towards the established strategic orientation shifting from asset-heavy business model to asset-light business model.

During the period under review,the Group achieved an operating revenue of approximately RMB625 million,representing an increase of 36.33%over the same period last year and recorded a net profit attributable to the parent of approximately RMB87.00 million.The Board has resolved not to declare an annual dividend for the year ended 30 June 2023.

The domestic consumer market recovered at a relatively rapid pace in the first half of 2023,where the optimization and upgrading of the consumption structure continued to  be fueled.Nevertheless,it  must  be  noted  that the consumption capacity and confidence of residents still need to be strengthened,and the basis for the recovery and expansion of consumption requires further consolidation.After the May Day holidays,the recovery trend of consumption has weakened, and more efforts are indispensable to promote the continuous upturn of the economy.However,advantages of China as a hyperscale market still exist,and it is in a stage of rapid upgrading of consumption structure.In view of the steady progress of  new-type  urbanization,the  effective  implementation  of  rural  revitalization,and  the  continuous  improvement  of consumption-related infrastructure,there remains enormous consumption potential.It is expected that in the second half of the year,with the refined implementation of various consumption-promoting policies and the continuous deepening of measures tailored to improve residents'consumption capacity,the foundation for consumption growth will be continuously consolidated,which will help the consumption market continue to recover steadily.

In the second half of 2023,the Group will closely follow the national policies and rely on the core competitive advantages of "popular brand,discount and leisure"to create a one-stop shopping experience for customers of all hierarchies,further  optimize and improve the consumers'service experience,and comprehensively improve the core capabilities involving tenants attraction,operation and digital marketing.In terms of tenants attraction,the Group will further make up for the shortcomings  in  attracting  international  brands,and  establish  the  data  connection  between  tenants  attraction  and operation,so as to build a more scientific and efficient system attractive to smart tenants.In terms of operation,the Group will continue to promote cost optimization and standardization,strengthen the quality improvement and upgrading of  customer service centers,and accelerate the deployment of commercial service systems,so as to provide brand owners with better and timely services to achieve a win-win landscape.In terms of marketing,the Group will actively pilot Outlet- themed bazaars to create its own bazaar IP;innovate online marketing models,explore new formats of live broadcasting,  upgrade the membership system,establish malls with the function of "reward points for cash coupons",and continuously  improve member loyalty and repurchase rate.The improvement of digital capabilities will fundamentally enhance the Company's brand perception and core competitiveness.The Group is also committed to becoming a digitization-driven benchmarking retail enterprise.

On behalf of the Board,I would like to express our sincere gratitude to all our shareholders,partners and clients for their  care and strong support to Capital Grand.The Group will keep abreast of the times,seize the opportunities of consumer  market  recovery and sustainable development,strengthen the construction of talent teams,continuously optimize the  management  system,continue to  improve  its  capabilities  of  lean  operation,consolidate  its  customer-oriented  service concept,and enhance its innovation capabilities in tenant attraction,break the traditional pattern of onefold marketing method,and increase the innovative application at digital consumption scenarios.Adhering to the culture of striving hard,  Capital Grand will seek for progressive development towards excellence,while relentlessly striving to become the "most  valuable outlets operator in China which provides excellent experience for consumers".

Mr.Fan    Shubin
Beiing,28 August 2023