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Dear Shareholders

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 annual results of the Group for the year ended 31 December 2021.

During 2021, the COVID-19 pandemic continued to evolve, imposing daunting challenges globally. Coupled with the international political sophistication, more uncertainties were exposed in the development of global economy. Despite this, the Chinese economy has weathered various stresses successfully. The total GDP of China was worth RMB114 trillions in 2021, representing a year-on-year growth of 8.1%, which was much higher than market expectation; meanwhile, the GDP per capita in China reached RMB80,976, hitting a new high.

With the adverse factors such as the locally recurring pandemic and extreme weather, the customer traffic in China’s physical retail industry was highly impacted. In 2021, the accumulated customer traffic flow of all shopping malls throughout China amounted to 28.7 billion visits, representing a year-on-year growth of 9.6% from 2020 and a year-on-year decrease of 25.2% from 2019. To enhance consumption, various local governments launched diverse policies of promoting consumption such as offering consumption vouchers, reducing tax liabilities, encouraging consumption in commercial areas and food and beverage successfully, thereby securing well-functioning of the consumer market. In the meantime, to accommodate with the up-to-date changes in the retail market, companies in retail industry continued to innovate their marketing approaches and develop the new and intelligent retail landscape, providing consumers with precise services and innovated shopping experience.

With the impact of the pandemic and extreme weather during the period, certain stores of the Group experienced temporary closure and major sales promotion events were affected to some extent accordingly. Amidst the hardship, the Group persisted its strict prevention and control measures to fight the pandemic to ensure “zero infection” of employees on one hand, and gave full play to the advantages of outlets in terms of counter economic cycles, chain operation and economies of scale on the other hand. The Group implemented precise policies oriented with the results growth of the projects to increase revenue and cost effectiveness at less expenses, resulting in significantly enhanced operating results of all projects in operation. With the strenuous efforts and dedication of all our employees, the Group recorded a customer traffic of 48.92 million throughout 2021, representing a year-on-year growth of 28% from 2020. The turnover in outlets operation attained a new high exceeding RMB10 billion for the first time, up 35% year-on-year from 2020, laying a new milestone for the development of the Group’s outlets business.

During the period, the Group responded proactively to the retail market changes by strengthening the characteristic IP of “Come Together to Capital Outlets and Celebrate each Festival (來首創奧萊過節)”. Based on offline operation, the Group fueled the development of digital outlets in full swing, improved the online and offline omni-channel sales network, enhanced the precise marketing capability, further explored the potential value of private traffic and developed the characteristic member operating system to provide consumers with precise services and innovated shopping experience. Meanwhile, the Group enhanced the integrated operation of seeking business partners and business operation to achieve win-win situation and collaborative creativity for the brand, increased comprehensive deduction rate and enhanced the quality of revenue. Through approaches such as collaboration with tenants and cross-industry cooperation, it transformed the outlets marketing platform from a cost-centre into a profit-centre gradually. In addition, the Group consolidated the refined operation to achieve more highly efficient and energy-saving operations of various equipment and facilities, thus reducing energy consumption effectively. Capitalizing on the business process reengineering and the management on the value of data assets, the online and digital full-business, full-process and full-dimension business management was accomplished. As such, the communication and assessment were based on data and indicators respectively, ensuring objective and comparable process control and management as well as added-value operation of its data assets.

During the period under review, the Group achieved an operating revenue of RMB1,341,049,000, representing an increase of 31% over the same period of last year, and recorded a net loss attributable to the parent of RMB223,947,000. The Board has resolved not to declare an annual dividend for the year ended 31 December 2021.

Looking into 2022, the domestic macroeconomic policies will focus on “Prioritizing stability while pursuing progress, driving the steady qualitative growth and rational quantitative growth of the economy (穩字當頭、穩中求進,推動經濟實現質的穩步提升和量的合理增長)”. Despite the fact that the pandemic containment remains critical and many uncertainties continue to exist in the recovery of consumer market, the consumption growth in China will tend to be supported in the long-term by the precise pandemic prevention and control, the formation of the new development landscape under the dual circulation economy at home and abroad, the further increase in the rate of urbanization, promotion of the common prosperity policy, launch of the double reduction policy, popularity of social welfare such as pension, medical care and insurance in China, thereby anticipating the further increase in consumption, which will be the main engine for the future economic growth of China.

In 2022, by pursuing the value increase of consumers and value creation of tenants, the Group will continue to actively embrace the changes in retail market landscape and the trend of changes in consumer demands, adjust and optimize the operation philosophy, strengthen the empowering ability of the headquarters office, continue to enhance its capability in lean operation and digital operation and implement the “store-oriented policy” in operation in a more scientific and effective manner. Furthermore, the Group will increase revenue and save costs, enhance quality and cost-effectiveness, continue to increase the flexibility and resilience of sales so as to boost the profitability of projects effectively.

In 2022, with the launch of outlets projects in Qingdao and Xiamen, the strategic goal of the layout plan of business expansion based on self-ownership mode will then be basically fulfilled, thus further consolidating the economies of scale of the Group in the industry. On this basis, the Group will further integrate its brand resources and business operational capabilities and fully develop the two major system capabilities of business management and asset management with comprehensive outlets operation as its core. In addition, by active brand development and output management and promoting the orderly withdrawal from mature projects proactively, the Group expects to realize the transformation and upgrading planned in the corporate development strategy, while continuing to consolidate and enhance the connotation and value of the “most valuable comprehensive outlets operator in China”.

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. Amidst the new market situation, making timely and precise responses and adjustments is the key to success of the retail enterprises. We believe only by gaining insights into the changes in consumer demand, precisely leveraging the rigid demand of consumers and the unique advantage of price-performance ratio of the business forms of outlets, lean operation and innovative development, making quick responses, enhancing quality and cost-effectiveness, the Group’s outlets business will make further breakthroughs against the headwind, continuing to deliver operating results of steady growth. Persisting in efforts to promote the transformation and upgrading planned in the corporate development strategy, the Group will seek breakthroughs with qualitative changes from quantitative changes and seize the market opportunities arising therefrom based on its leading position and economies of scale in the industry. With the two-wheel drive of business management and asset management, we will capitalize on these opportunities to continuously create value for our shareholders, customers and partners!

Mr. Fan Shubin
8 March 2022

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