Lu Thai Textile Co., Ltd. Interim Report 2018
LU THAI TEXTILE CO., LTD.
INTERIM REPORT 2018
August 2018
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Lu Thai Textile Co., Ltd. Interim Report 2018
Part I Important Notes, Table of Contents and Definitions
The Board of Directors (or the “Board”), the Supervisory Committee as well as the directors,
supervisors and senior management of Lu Thai Textile Co., Ltd. (hereinafter referred to as the
“Company”) hereby guarantee the factuality, accuracy and completeness of the contents of
this Report and its summary, and shall be jointly and severally liable for any
misrepresentations, misleading statements or material omissions therein.
Liu Zibin, the Company’s legal representative, Zhang Hongmei, the Company’s Chief
Accountant, and Zhang Keming, the Company’s Financial Manager hereby guarantee that
the Financial Statements carried in this Report are factual, accurate and complete.
Except for the following directors, all the other directors attended in person the Board
meeting for the review of this Report and its summary.
Reason for not attending in Proxy entrusted to attend the
Name Office title
person meeting
Xu Zhinan Director For reason of work Liu Zibin
Zeng Facheng Director For reason of work Qin Guiling
Bi Xiuli Independent Director For reason of work Xu Jianjun
Zhao Yao Independent Director For reason of work Wang Xinyu
The Company has described in detail in this Report the possible risks. Please refer to the
contents under the subheading “Risks Facing the Company and Countermeasures” in “Part
IV Operating Performance Discussion and Analysis” of this Report. Securities Times,
Shanghai Securities News, China Securities Journal, Ta Kung Pao (HK) and
www.cninfo.com.cn have been designated by the Company for its information disclosure in
2018. And all information about the Company shall be subject to what’s disclosed by the
Company on the aforesaid media. Investors are kindly reminded to pay attention to
investment risks.
The Company has no interim dividend plan, either in the form of cash or stock.
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.
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Lu Thai Textile Co., Ltd. Interim Report 2018
Table of Contents
Part I Important Notes, Table of Contents and Definitions ......................................................................................................................2
Part II Corporate Information and Key Financial Information ................................................................................................................5
Part III Business Summary ......................................................................................................................................................................9
Part IV Operating Performance Discussion and Analysis ...................................................................................................................... 12
Part V Significant Events....................................................................................................................................................................... 22
Part VI Share Changes and Shareholder Information ............................................................................................................................ 32
Part VII Preferred Shares ....................................................................................................................................................................... 36
Part VIII Directors, Supervisors and Senior Management ..................................................................................................................... 36
Part IX Corporate Bonds ....................................................................................................................................................................... 39
Part X Financial Report ......................................................................................................................................................................... 40
Part XI Documents Available for Reference ........................................................................................................................................ 153
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Lu Thai Textile Co., Ltd. Interim Report 2018
Definitions
Term Definition
Lu Thai Textile Co., Ltd. and its consolidated subsidiaries, except where the
The “Company”, “LTTC”, “Issuer” or “we”
context otherwise requires
The Board of Directors The Board of Directors of Lu Thai Textile Co., Ltd.
The Supervisory Committee The Supervisory Committee of Lu Thai Textile Co., Ltd.
CSRC The China Securities Regulatory Commission
Expressed in the Chinese currency of Renminbi, expressed in ten thousand
RMB, RMB’0,000
Renminbi
The “Company Law” The “Company Law of the People‘s Republic of China”
The “Securities Law” The “Securities Law of the People‘s Republic of China”
The “Reporting Period” or “Current Period” The period from 1 January 2018 to 30 June 2018
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Lu Thai Textile Co., Ltd. Interim Report 2018
Part II Corporate Information and Key Financial Information
I Corporate Information
Stock name LTTC, LTTC-B Stock code 000726, 200726
Changed stock name (if any) N/A
Stock exchange for stock
Shenzhen Stock Exchange
listing
Company name in Chinese 鲁泰纺织股份有限公司
Abbr. (if any) 鲁泰纺织
Company name in English (if
LU THAI TEXTILE CO., LTD.
any)
Abbr. (if any) LTTC
Legal representative Liu Zibin
II Contact Information
Board Secretary Securities Representative
Name Qin Guiling Zheng Weiyin and Li Kun
No. 81, Songling East Road, Zichuan No. 81, Songling East Road, Zichuan
Address
District, Zibo, Shandong, P.R.China District, Zibo, Shandong, P.R.China
Tel. 0533-5266188 0533-5285166
Fax 0533-5418805 0533-5418805
Email address qinguiling@lttc.com.cn wyzheng@lttc.com.cn，likun@lttc.com.cn
III Other Information
1. Contact Information of the Company
Indicate by tick mark whether any change occurred to the registered address, office address and their zip codes, website address and
email address of the Company in the Reporting Period.
□ Applicable √ Not applicable
No change occurred to the said information in the Reporting Period, which can be found in the 2017 Annual Report.
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Lu Thai Textile Co., Ltd. Interim Report 2018
2. Media for Information Disclosure and Place where this Report is Kept
Indicate by tick mark whether any change occurred to the information disclosure media and the place for keeping the Company’s
periodic reports in the Reporting Period.
□ Applicable √ Not applicable
The newspapers designated by the Company for information disclosure, the website designated by the CSRC for disclosing the
Company’s periodic reports and the place for keeping such reports did not change in the Reporting Period. The said information can
be found in the 2017 Annual Report.
IV Key Financial Information
Indicate by tick mark whether there is any retrospectively restated datum in the table below.
√ Yes □ No
Business combination under common control resulted in the retrospective restatements in the following table.
H1 2017 Change (%)
H1 2018
Before Restated Restated
Operating revenue (RMB) 3,281,014,155.43 2,990,459,696.43 2,997,093,395.84 9.47%
Net profit attributable to the listed
377,355,959.02 393,069,981.55 395,130,296.26 -4.50%
company’s shareholders (RMB)
Net profit attributable to the listed
company’s shareholders before 366,948,339.88 385,081,158.45 387,141,210.63 -5.22%
exceptional items (RMB)
Net cash generated from/used in operating
697,784,710.77 342,919,758.30 343,246,750.57 103.29%
activities (RMB)
Basic earnings per share (RMB/share) 0.41 0.43 0.43 -4.65%
Diluted earnings per share (RMB/share) 0.41 0.43 0.43 -4.65%
Weighted average return on equity (%) 5.13% 5.58% 5.58% -0.45%
31 December 2017 Change (%)
30 June 2018
Before Restated Restated
Total assets (RMB) 10,233,390,492.09 10,170,624,027.75 10,170,624,027.75 0.62%
Equity attributable to the listed company’s
7,060,561,399.27 7,230,942,770.16 7,230,942,770.16 -2.36%
shareholders (RMB)
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Lu Thai Textile Co., Ltd. Interim Report 2018
V Accounting Data Differences under China’s Accounting Standards for Business Enterprises
(CAS) and International Financial Reporting Standards (IFRS) and Foreign Accounting
Standards
1. Net Profit and Equity Differences under CAS and IFRS
√ Applicable □ Not applicable
Unit: RMB
Net profit attributable to the listed company’s Equity attributable to the listed company’s
shareholders shareholders
H1 2018 H1 2017 Ending amount Beginning amount
Under CAS 377,355,959.02 395,130,296.26 7,060,561,399.27 7,230,942,770.16
Adjustments as per IFRS
Effect of tax credit from
homemade equipment
164,500.00
purchases being recognized as
deferred income under IFRS
Under IFRS 377,355,959.02 395,294,796.26 7,060,561,399.27 7,230,942,770.16
2. Net Profit and Equity Differences under CAS and Foreign Accounting Standards
□ Applicable √ Not applicable
No such differences for the Reporting Period.
3. Reasons for Accounting Data Differences Above
□ Applicable √ Not applicable
XI Exceptional Gains and Losses
√ Applicable □ Not applicable
Unit: RMB
Item Reporting Period Note
Gain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) -1,603,714.32
Government subsidies charged to current profit or loss (exclusive of government subsidies
given in the Company’s ordinary course of business at fixed quotas or amounts as per 39,071,113.48
government’s uniform standards)
Gain or loss on fair-value changes in trading financial assets and liabilities & investment
income from disposal of trading financial assets and liabilities and available-for-sale financial
-22,104,388.63
assets (exclusive of effective portion of hedges that arise in the Company’s ordinary course of
business)
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Lu Thai Textile Co., Ltd. Interim Report 2018
Non-operating income and expense other than above 2,097,576.54
Less: Income tax effects 5,975,920.72
Non-controlling interests effects (net of tax) 1,077,047.21
Total 10,407,619.14 --
Explanation of why the Company classifies a gain/loss item as exceptional according to the definition in the Explanatory
Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Exceptional Gain/Loss
Items, or reclassifies any exceptional item listed in the said explanatory announcement as recurrent:
□ Applicable √ Not applicable
No such cases for the Reporting Period.
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Lu Thai Textile Co., Ltd. Interim Report 2018
Part III Business Summary
I Core Business Scope of the Company in Reporting Period
Is the Company subject to any disclosure requirements for special industries?
No.
No changes occurred to the Company’s core businesses, primary products, business models and major growth drivers in the
Reporting Period.
Lu Thai has always adhered to its mission of “creating wealth, contributing to the society, clothing the world and weaving our way to
every corner of the globe”, as well as to its values of “people foremost policy, rigorous scientific attitude, client oriented principle
and integrity for win-win outcome” for a long time. It is devoted to improving and expanding its industrial chain, making it a
renowned textile and garment business group combing cotton growing, spinning, bleaching and dyeing, neatening, testing, garment
making and marketing. Lu Thai produces and sells middle and high-grade yarn-dyed fabric and dyeing fabric for shirts and garment.
It claimed its fame for its comprehensive management, R&D ability, advanced technology, international development plan and stable
quality. Moreover, it also attaches great importance to improve the added value of its products, explore the emerging market and
renew its service philosophy. With natural fabric as its flagship, multi-component functional fiber fabric as its spearhead and
wash-and-wear non-ironing technology as its core competency, the Company kept a watchful eye on the latest consumption trend.
Great attention was paid to improve its healthy product series so as to satisfy the needs from the diversified and personalized market.
Lu Thai has become the world’s largest high-grade yarn dyed fabric producer and a world-class premium shirt provider. It had paved
its development pattern featured in going green, low-carbon growth, science and technology and humanism. Its operation
performance was always among the top comparing to its peers. 70% of Lu Thai’s products are exported to over 30 countries and
regions including America, the EU and Japan, of which more than 70% is under the Company’s own brand. So far, the Company has
taken up around 18% of the world market of yarn dyed fabric for medium- and high-end shirts.
II Material Changes in Major Assets
1. Material Changes in Major Assets
Major assets Main reason for material changes
The amount as at 30 June 2018 was RMB212,917,526.85, up 35.25% from the beginning amount, primarily
Construction in
driven by increased investments in Lu Thai Vietnam’s second phase project and the construction projects of the
progress
Company as the parent.
Engineering The amount as at 30 June 2018 was RMB152,136,560.03, up 167.31% from the beginning amount, primarily
materials driven by a rise in Lu Thai Vietnam’s equipment to be installed.
2. Major Assets Overseas
√ Applicable □ Not applicable
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Lu Thai Textile Co., Ltd. Interim Report 2018
Control
In the Major
Operating measures to
Asset Formation Asset size Location Earnings Company’s impairment
model ensure asset
net assets (%) risk
safety
Main
Lu Thai management
(Hong Kong) Incorporate Hong personnel sent
149,581,052.94 Marketing 1,455,136.51 1.96% None
Textile Co., d Kong by the
Ltd. Company as
the parent
Main
Lu Thai management
(America) Incorporate personnel sent
8,038,525.46 New York Marketing -922,064.37 0.11% None
Textile Co., d by the
Ltd. Company as
the parent
Main
Lu Thai management
(Cambodia) Incorporate Svay Manufacturi personnel sent
143,111,761.17 6,698,530.22 1.88% None
Textile Co., d Rieng ng by the
Ltd. Company as
the parent
Main
Lu Thai management
(Burma) Incorporate Manufacturi personnel sent
73,656,698.21 Rangoon -708,600.57 0.97% None
Textile Co., d ng by the
Ltd. Company as
the parent
Main
Lu Thai management
(Vietnam) Incorporate Manufacturi personnel sent
1,437,372,805.22 Tay Ninh 40,012,706.19 18.87% None
Textile Co., d ng by the
Ltd. Company as
the parent
Main
management
Lu An
Incorporate Anjiang, Manufacturi personnel sent
Garments 129,387,425.52 -2,713,164.81 1.70% None
d Vietnam ng by the
Co., Ltd.
Company as
the parent
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Lu Thai Textile Co., Ltd. Interim Report 2018
III Core Competitiveness Analysis
Is the Company subject to any disclosure requirements for special industries?
No.
The comprehensive management ability, research and development ability, technological accumulation and global planning of the
Company’s whole industry chain are the Company's core competitiveness, which did not change during the Reporting Period.
1. A complete industrial chain and a global network: The Company boasts a complete industrial chain from cotton planting, yarning,
dyeing, weaving and post-processing to cloth manufacturing, and thus enjoys the cost advantage brought by complete steps for
producing high-end dyed textile. The Company has set up production bases in Cambodia, Burma, Vietnam, etc., a design agency in
Italy and a market service agency in America, which helps give full play to its international resources, form a global business
network and solidify its internationally leading position as a yarn-dyed fabric maker.
2. The sound comprehensive management capacity and an efficient quality control system: The Company has passed ISO9000
quality management system, ISO14000 environmental management system, OHSAS18000 occupational health safety management
system, and SA8000 social accountability management system successively from 1995. Ever since 2007, the Company has also
passed WRAP: 1999 global garment production social accountability standard, C-TPAT: 2004 anti-terrorism standard, OE100 and
GOTS organic cotton system certification and CNAS national laboratory recognition, to realize the internationalization and
standardization of the Company’s management. In order to pursue the operational management of performance excellence and better
the Company’s performance and capability, the Company has gradually introduced GB/T19580-2004 -Standards for Performance
Excellence Evaluation, created “Great Quality” system and promoted management innovation, to ensure the Company’s business
quality.
3. It enjoyed strong R&D capability and high-end technological platform for cooperation. The Company highly valued
self-dependent innovation and made full use of various technology platforms, inclusive of the National Enterprise Technical Center,
National Talent-in draught Demonstration Base and Shandong Engineering and Technological Research Center. Moreover, Lu Thai
also reinforced its technical cooperation with scientific research institutes, colleges and universities, strategic clines and major
suppliers. It was committed to cutting-edge technical research, and transformed itself from product development to technical
researches step by step. What’s more, the Company also upgraded itself from overcoming key technological difficulties to master
technical principles and set up industrial standards. In the past, it only focused on technical innovation, but now, it is exploring new
technology on one hand and boosting innovation on the other for better growth. Consequently, the Company pushed forward its
development in a green, low-carbon and cyclic manner and strengthened its vitality and growing momentum. Meanwhile, the share
of technology to its development was also increased, which could push forward industrial up gradation.
4. It boasted considerate and efficient customer’s service. With customer-oriented principle as its guidance, the Company
comprehensively enhanced its quality control so as to persistently provide high standard service and set up an industry-leading brand
image, which, in return, could help to win customer’s satisfaction and market recognition. Quality awareness was weaved into every
step of the manufacturing process and the impeccable quality traceability ensured product reputation. Objective analysis and thinking
in the customer’s perspective was the Company’s service rule, which also helped to win the customers’ trust.
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Lu Thai Textile Co., Ltd. Interim Report 2018
Part IV Operating Performance Discussion and Analysis
I Overview
For the Reporting Period, the Company recorded operating revenue of RMB3,281 million, an operating profit of RMB452 million, a
net profit attributable to the listed company’s shareholders of RMB377 million and a net profit before exceptional items of RMB367
million, up 9.47%, -7.99%, -4.50% and -5.22% respectively from the same period of last year. No changes have occurred to the core
businesses, the main profit sources and structure of the Company in this period.
During the Reporting Period, the Company continued to steadily promote “Improving Quality and Efficiency” and “Comprehensive
Internationalization”, maintaining the sound, stable and sustained development trend; made smooth progress in overseas projects and
basically achieved the design expectation; initiated the establishment of the new retail platform Luthai1987 based on the S2B2C
mode and opened up online and offline OMO mode, enabling Luthai to better serve end customers together with its partners. The
Company deepened its relationship with customers through proactive measures such as adjustment of product structure, integration
of supply chains, design and development connection, brand cooperation, overseas expansion and e-commerce platforms and facing
new characteristics and new demands of the market, kept improving product design concept and innovating service mode to satisfy
customers’ demands and market trend. During the Reporting Period, the Company was named as “2018 Top Twenty Enterprise of
China Dyeing and Printing Industry” by CDPA, won the title of “China Quality Award for Textile Industry” granted by CNTAC, was
ranked among the top 50 in the field of textile, garments, shoes and hats by China Council for Brand Development, was named as
“2017 Top Ten Enterprise for Key Business Revenue in Yarn-Dyed Fabric Industry” and “2017 Top 100 Enterprise for Key Business
Revenue in Cotton Textile Industry” by China Cotton Textile Association and as “Demonstration Enterprise of Social Responsibilities
in Shandong”.
During the Reporting Period, the Company intensified the building and training of its team of design talents and kept deepening the
early-stage communication and cooperation with strategic customers in the design of fabrics and shirts, gaining favorable market
response. The Company won the Award of Best Market Application for its works Modest Luxury Distinctive Flowers in 2018 China
International Fabrics Design Competition and appraising of 2019 Spring-Summer China Fashionable Fabrics. Luthai Textile won the
title of “Fifth China Advanced Unit for Development of Textile Fabric Designers”.
During the Reporting Period, the Company continued to persist in R&D investments, making new achievements in two national key
R&D projects of the 13th Five-Year Plan as well as in the application of new materials, research of new fabrics, key technologies of
new product development and research of equipment upgrading. As of the reporting period, the Company had been granted a total of
301 licensing patents, and 1 software copyright; and hosted or participated in the formulation of 40 national and industrial standards.
At the current stage, Lu Thai, with natural fabric as its flagship, multi-component functional fiber fabric as its spearhead,
wash-and-wear non-ironing technology as its core competency, the latest consumption trend as its guidance and internationalized
industrial manufacturing as its basis, is sparing every effort to attain a global integrated development, so as to ensure its leading
position in the yarn-dyed shirt fabric sector.
II Analysis of Core Businesses
Summary:
For the Reporting Period, operating revenue, cost of sales and administrative expense increased 9.47%, 15.08% and 3.77%
respectively on a year-on-year basis; and selling expense, finance costs and income tax expense went down 2.08%, 1.31% and
20.36% respectively from a year earlier. Net cash generated from operating activities went up 103.29% mainly due to a rise in cash
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Lu Thai Textile Co., Ltd. Interim Report 2018
proceeds from product sales. Net cash generated from investing activities dropped 90.13% mainly because of a rise in cash payments
for fixed assets in the Current Period and the same period of last year seeing proceeds from selling marketable securities. Net cash
generated from financing activities were down 74.51% mainly because of the payments for the B-stock repurchase programme. And
net increase in cash and cash equivalents went up 91.18% mainly owing to a rise in net cash generated from operating activities.
Year-on-year changes in key financial data:
Unit: RMB
H1 2018 H1 2017 Change (%) Main reason for change
Operating revenue 3,281,014,155.43 2,997,093,395.84 9.47%
Cost of sales 2,360,836,431.41 2,051,483,003.79 15.08%
Selling expense 66,941,088.56 68,365,512.22 -2.08%
Administrative expense 325,870,756.50 314,037,319.49 3.77%
Finance costs 30,525,225.31 30,930,178.28 -1.31%
Income tax expense 63,275,514.57 79,455,627.02 -20.36%
R&D expense 162,596,245.80 158,802,502.01 2.39%
Net cash generated from/used in A rise in cash proceeds from product
697,784,710.77 343,246,750.57 103.29%
operating activities sales
A rise in cash payments for fixed
assets in the Current Period and the
Net cash generated from/used in
-423,627,352.67 -222,814,977.08 -90.13% same period of last year seeing
investing activities
proceeds from selling marketable
securities
Net cash generated from/used in Payments for the B-stock repurchase
-285,883,409.46 -163,823,565.09 -74.51%
financing activities programme
Net increase in cash and cash A rise in net cash generated from
-5,067,323.02 -57,458,811.02 91.18%
equivalents operating activities
Material changes to the profit structure or sources of the Company in the Reporting Period:
□ Applicable √ Not applicable
No such changes in the Reporting Period.
Breakdown of core businesses:
Unit: RMB
YoY change in YoY change in
Operating Gross profit YoY change in
Cost of sales operating revenue gross profit
revenue margin cost of sales (%)
(%) margin (%)
By operating division
Textile and
2,921,119,883.93 2,058,587,657.40 29.53% 5.70% 11.01% -3.36%
apparel
Cotton 101,088,256.72 93,918,390.99 7.09% 204.77% 208.99% -1.27%
Electricity and 101,760,249.29 98,746,424.74 2.96% 62.49% 41.84% 14.12%
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Lu Thai Textile Co., Ltd. Interim Report 2018
steam
Other 37,033,179.78 35,574,083.44 3.94% 86.89% 135.64% -19.87%
By product category
Fabric products 2,320,025,830.76 1,619,838,034.26 30.18% 8.28% 13.77% -3.37%
Shirts 601,094,053.17 438,749,623.14 27.01% -3.19% 1.88% -3.63%
Cotton 101,088,256.72 93,918,390.99 7.09% 204.77% 208.99% -1.27%
Electricity and
101,760,249.29 98,746,424.74 2.96% 62.49% 41.84% 14.12%
steam
Other 37,033,179.78 35,574,083.44 3.94% 86.89% 135.64% -19.87%
By operating segment
Hong Kong 184,569,814.29 129,348,144.91 29.92% -8.43% -3.72% -3.43%
Japan And South
211,981,297.61 151,618,766.06 28.48% -6.51% -1.50% -3.63%
Korea
Southeast Asia 760,347,221.55 531,269,449.03 30.13% 25.33% 31.67% -3.36%
Europe and
577,623,099.67 412,656,452.50 28.56% -1.14% 3.63% -3.29%
America
Other 320,588,111.47 225,341,185.18 29.71% -5.58% -0.74% -3.43%
Mainland China 1,105,892,025.13 836,592,558.89 24.35% 20.16% 28.19% -4.74%
III Non-Core Business Analysis
√ Applicable □ Not applicable
Unit: RMB
Amount In total profits (%) Source/reason Continuity
Gains on delivery of financial assets (liabilities)
Investment gains 4,646,023.78 1.02% such as forward exchange settlement, and losses No
on equities investment.
Gains/losses on fair Losses on fair value changes of financial assets
-28,481,010.00 -6.28% No
value changes and financial liabilities
Asset impairment 2,121,494.84 0.47% Losses on bad-debt provision for inventory No
Non-operating
3,011,072.58 0.66% Claim for compensation No
revenue
Non-operating
1,994,923.71 0.44% Losses on damage and scrap of non-current assets No
expense
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Lu Thai Textile Co., Ltd. Interim Report 2018
IV Analysis of Assets and Liabilities
1. Material Changes in Asset Composition
Unit: RMB
30 June 2018 30 June 2017 Change in Reason for
As % of total percentage material
Value As % of total assets Value
assets (%) change
Monetary funds 671,721,970.36 6.56% 601,918,539.58 6.27% 0.29%
Accounts
356,818,963.69 3.49% 284,403,883.10 2.96% 0.53%
receivable
Inventories 2,017,424,627.73 19.71% 2,062,727,887.61 21.48% -1.77%
Investment
23,856,705.69 0.23% 25,220,354.21 0.26% -0.03%
property
Long-term equity
95,806,134.43 0.94% 0.00% 0.94%
investment
Fixed assets 5,359,308,862.06 52.37% 5,182,031,627.12 53.96% -1.59%
Construction in
212,917,526.85 2.08% 267,448,802.45 2.78% -0.70%
progress
Short-term
1,458,058,962.33 14.25% 1,170,346,491.12 12.19% 2.06%
borrowings
Long-term
69,431,359.47 0.68% 0.00 0.00% 0.68%
borrowings
2. Assets and Liabilities at Fair Value
√ Applicable □ Not applicable
Unit: RMB
Gain/loss on Cumulative
Impairment
fair-value fair-value Purchased in Sold in
Beginning allowance for
Item changes in changes Reporting Reporting Ending amount
amount Reporting
Reporting charged to Period Period
Period
Period equity
Financial assets
1. Financial
assets at fair
value through
0.00
profit or loss
(exclusive of
derivatives)
Subtotal of 0.00
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Lu Thai Textile Co., Ltd. Interim Report 2018
financial assets
Total of above 0.00 0.00
Financial
0.00 -28,481,010.00 28,481,010.00
liabilities
Material changes in the measurement attributes of the major assets in the Reporting Period:
□ Yes √ No
3. Restricted Asset Rights as of End of the Reporting Period
Not applicable
V Investments Made
1. Total Investments Made
√ Applicable □ Not applicable
Investments made in the Reporting Period Investments made in same period of last
+/-%
(RMB) year (RMB)
0.00 0.00 0.00%
2. Significant Equity Investments Made in the Reporting Period
□ Applicable √ Not applicable
3. Significant Non-Equity Investments Ongoing in the Reporting Period
□ Applicable √ Not applicable
4. Financial Investments
(1) Securities Investments
□ Applicable √ Not applicable
No such cases in the Reporting Period.
(2) Investments in Derivative Financial Instruments
√ Applicable □ Not applicable
Unit: RMB'0,000
Operat Relati Con Type of Initial Starting Ending Begin Purchased Sold in the Impair Ending Proporti Actual
or onship nect derivative investment date date ning in the Reporting ment investment on of gain/lo
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Lu Thai Textile Co., Ltd. Interim Report 2018
with ed amount invest Reporting Period provisi amount closing ss in
the trans ment Period on (if investme the
Comp actio amoun any) nt Report
any n t amount ing
in the Period
Compan
y’s
ending
net
assets
Comm Non-c Forward 22 25
ercial onnect No exchange 59,531.89 February January 0 59,531.89 21,477.86 38,054.03 5.00% 68.43
bank ed settlement 2018 2019
Comm Non-c Foreign 30 28
ercial onnect No exchange 219,775.64 Novemb Decemb 19,800 199,975.64 134,129.87 85,645.77 11.24% 540.37
bank ed option er 2017 er 2018
Forward
Comm Non-c 14 7
exchange
ercial onnect No 24,216.03 March Decemb 0 24,216.03 16,881 7,335.03 0.96% 24.92
transaction
bank ed 2018 er 2018
s
Comm Non-c Foreign 21
11 April
ercial onnect No exchange 5,925.81 March 0 5,925.81 5,925.81 0 3.95
2018
bank ed swap 2018
Total 309,449.37 -- -- 19,800 289,649.37 178,414.54 131,034.83 17.20% 637.67
Capital source for derivative
Self-owned funds
investment
Lawsuit (if applicable) Naught
Disclosure date of board of
directors announcement on
28 April 2017
approval of derivative
investment (if any)
Disclosure date of general
meeting of shareholders
announcement on approval of
derivative investment (if any)
Analysis on risks and control The Company conducted derivatives products transaction in order for hedging. And the forward
measures of derivative products settlement hedging was operated by installments, with the relevant amount not more than the planned
held in the Reporting Period derivatives products transactions. And all derivatives products transaction was zero-deposit. Meanwhile,
(including but not limited to the Company had a complete risk control system for sufficient analysis and prevention of possible risks
market risk, liquidity risk, credit such as market risk, liquidity risk and credit risk, operation risk and risk of laws and regulation.
risk, operation risk, law risk, 1. Market risk: when the international and domestic economic situations change, the corresponding
17
Lu Thai Textile Co., Ltd. Interim Report 2018
etc.) changes in exchange rates and interest rates may have an adverse impact on the financial derivatives
transactions of the Company. Precautionary measures to be taken include: the Company chooses
risk-controlled financial derivative tools with simple structure and good liquidity to carry out the hedging
business, strictly controls the scale of financial derivatives trading by staged operations, and adjusts the
strategy according to market changes in a timely manner.
2. Liquidity risk and credit risk: a credit risk arising from failure of the contractually due Company or
counterparty in performing the contract due to liquidity or factors other than liquidity. Precautionary
measures to be taken include: the Company determines the upper limit of derivatives transaction amounts
according to production and operation scale as well as foreign exchange income, and conducts operations
by stage according to the budget of future collections and disbursement. The derivative trades are free of
guarantee deposit and can still be guaranteed in performance after the contract expires by means of
extension and balance settlement etc. to prevent the Company from credit damages due to lack of
liquidity. The Company selects financial institutions with strong capability and good reputation as a
counterparty and signs standard derivative trading contracts to strictly control credit risk of the
counterparty.
3. Operation risk:
The derivatives had high specialty and complexity, so imperfect internal operation procedures, staffs and
external events would make the Company to undertake risks during the transaction. Risk control
measures: The Company promulgated strict authorization and approval system and perfect regulatory
mechanism, fixed the operation procedures and approval procedures system to conduct derivative
products transaction, established special risk control positions, implemented strict authorization and post
checks and balances system, meanwhile, it improved the overall quality of relevant personnel through
strengthening the professional ethics education and business training for them. Besides, it established the
System of Reporting the Abnormal Situation Timely so as to ensure to lower the operation risks to the
maximum.
4. Risk of laws and regulation:
The Company conducted derivatives products transaction in strict accordance with relevant laws and
rules. If there were no standard operation procedures and strict approval procedures, it was easy to cause
compliant and regulatory risks existing in the validity and feasibility of contract, commitments and other
legal documents signed. Risk control measures: The Company carefully studied and mastered laws,
regulations and policies relevant to derivative products transaction, formulated internal control rules for
the forward settlement hedging business, standardized the operation procedures. And strengthened the
compliant examination on derivative products transaction business. The Company conducted derivative
transaction business according to the relevant approval procedure, which was in line with relevant laws,
regulations, the Company’s Articles of Association, the Management Rules for Derivative Transaction of
Lu Thai Textile Co., Ltd. and the Proposal on the Plan of Lu Thai Textile Co., Ltd. for Derivative
Transactions approved at the 7th Meeting of the 8th Board of Directors on 26 April 2017, and performed
relevant information disclosure responsibilities.
Changes of market prices or fair 1. As of 30 June 2018, the Company held a total of 50 immature derivative contracts worth
values in the Reporting Period US$204,285,800 in total, which were forward settlement of exchange, foreign exchange options portfolio
of the invested derivatives. And and forward foreign exchange trading. The latest contract expiration date was January 2019. Financial
the analysis on the fair value of derivatives occupied 17.20% of the net assets as at the period end.
the derivatives should include 2. From January to June 2018, the total amount of the Company’s matured financial derivatives was
18
Lu Thai Textile Co., Ltd. Interim Report 2018
the specific use methods and the US$287,412,400, including an execution of US$284,412,400 with the gains of RMB6,376,700 and an
relevant assumptions and extension of US$3 million. Of all the derivatives, the matured forward settlement of exchange was
parameters. US$33.5 million, which had been delivered in full with the gains of RMB684,300; the matured foreign
exchange options was US$219 million, including an execution of US$216 million in accordance with the
contracts with the gains of RMB5,403,700 and an extension of US$3 million; the matured foreign
exchange trading was US$25,513,100, which had been delivered in full with the gains of RMB249,200;
the matured foreign exchange swap was US$9,399,300, which had been delivered in full with the gains
of RMB39,500.
Whether significant changes
occurred to the Company’s
accounting policy and specific
accounting principles of No significant changes
derivatives in the Reporting
Period compared to the previous
Reporting Period
The Company’s independent directors Xu Jianjun, Zhao Yao, Bi Xiuli, Pan Ailing and Wang Xinyu,
concerning conducting derivatives business, have issued the following professional advice: We are of the
Specific opinion from opinion that it will strengthen the Company’s competitiveness to use derivative transactions with focus
independent directors on the on forward settlement and purchase as an effective tool to avoid foreign exchange risks, to strengthen the
Company’s derivatives relevant internal control and to carry out the loss and risk prevention measures so as to improve the
investment and risk control operation and management. In conducting derivative transactions with focus on forward settlement and
purchase, the Company follows a legal approval procedure, has sound relevant institutions and keeps the
risks relatively controllable. No harm has been done to the interests of the Company’s shareholders.
VI Sale of Major Assets and Equity Interests
1. Sale of Major Assets
□ Applicable √ Not applicable
No such cases in the Reporting Period.
2. Sale of Major Equity Interests
□ Applicable √ Not applicable
VII Main Controlled and Joint Stock Companies
√ Applicable □ Not applicable
Main subsidiaries and joint stock companies with an over 10% influence on the Company’s net profit
Unit: RMB
Main
Company Relation Registered Total assets Net assets Operating Operating Net profit
busine
19
Lu Thai Textile Co., Ltd. Interim Report 2018
name ship ss capital revenues profit
with the scope
Compan
y
Lu Thai
(Vietnam) Subsidia
Fabric 632,855,310.00 1,437,372,805.22 620,547,451.12 249,790,705.43 40,008,592.34 40,012,706.19
Textile Co., ry
Ltd.
Subsidiaries obtained or disposed in the Reporting Period
□ Applicable √ Not applicable
Particulars about the main controlled and joint stock companies:
Lu Thai (Vietnam) Co., Ltd. is a wholly-owned subsidiary of the Company established in Vietnam in 2015. With a total investment
of US$150 million, the subsidiary now has 60,000 spindles and a capacity of 30 million meters of yarn-dyed fabrics. The
establishment of the subsidiary will give better play to the Company’s technical experience and brand advantages in the yarn-dyed
fabric industry, integrate domestic and foreign advantageous resources, effectively avoid the impact of potential trade barriers,
increase the Company’s internationalized production scale and maintain the Company’s leading position in the global yarn-dyed
fabric industry. As of the end of the Reporting Period, Lu Thai (Vietnam) Co., Ltd. had total assets of RMB1.437 billion and net
assets of RMB621 million and achieved operating revenues of RMB250 million and net profits of RMB40 million. During the
Reporting Period, the subsidiary achieved steady improvements in production and operation and synchronous growth of operating
revenues and net profits. Currently, the introduction of the new 76,000-spinning production line to Phase II Spinning and the
expansion of the annual capacity of 40 million meters of yarn-dyed fabrics are under construction as scheduled.
VIII Structured Bodies Controlled by the Company
□ Applicable √ Not applicable
IX Performance Forecast for January-September 2018
Warning of possible loss or considerable YoY change in the accumulative net profit made during the period-beginning to the end of
the next reporting period, as well as the reasons:
□ Applicable √ Not applicable
X Risks Facing the Company and Countermeasures
Risks that bring adverse impact to company development strategy and business objectives and countermeasures of the Company
(1) Economic environment: the world economy is getting better, but trade protectionism and economic policies of advanced
economies, especially the uncertain risks of monetary policy, pose greater threats to the recovery of the world economy, producing a
certain degree of uncertainty on the market environment that the Company faces. Meanwhile, the new development of China’s
economy shows more characteristics such as speed change, structural adjustment and dynamic changes. The economic trend is
towards stability. To cope with these impacts, the Company will work hard to maintain the international market and develop the
domestic market to balance development of domestic and foreign sales.
20
Lu Thai Textile Co., Ltd. Interim Report 2018
(2) Fluctuations in raw material prices: the raw cotton used by the Company is long-staple cotton, whose price is affected by many
factors such as market supply and demand, climate, policies, exchange rates and quotas. Furthermore, with the development of
environmental protection policies, the cost of dyeing auxiliaries also increased. Therefore, besides ensuring the stable supply of
long-staple cotton by the subsidiary in Xinjiang, the Company must study the market dynamics to reduce the cost fluctuations due to
changes in raw cotton price, and develop with the concept of green and environmental protection to meet environmental protection
requirements.
(3) Exchange rate changes: at present and in the future, the Company will continue to sell its products mainly in the international
market for a long period of time, and US dollars will account for a relatively larger portion in sales revenue. In addition, the main
machinery and equipment and some of its raw materials of the Company are also imported. The foreign currencies payment for
imports includes US dollar and other currencies. Moreover, the commissioning of the Company's overseas production base and
subsequent expansion of investment will increase the use of US dollar. Therefore, the Company will still be sensitive to the impact of
exchange rate changes.
In order to reduce adverse influence of exchange rate fluctuation, the Company adopted the following measures: firstly, the Company
conducted foreign exchange hedging, using forward FX sales and purchase, forward foreign exchange trading and option portfolios
to avoid some risks Secondly, the Company made reasonable arrangement on settlement day and currency structure and conclusion
of agreements on fixed foreign exchange rate to avoid exchange rate-related risks. Thirdly, the Company adjusted the Renminbi and
foreign-currency liabilities structure to control financial costs. Fourthly, according to the fluctuation trend of exchange rates, the
Company properly adjusted imports of raw and auxiliary materials to partially offset the influence of exchange rate fluctuations on
the Company.
21
Lu Thai Textile Co., Ltd. Interim Report 2018
Part V Significant Events
I Annual and Extraordinary General Meeting Convened during the Reporting Period
1. General Meeting Convened during the Reporting Period
Investor
Meeting Type Convened date Disclosure date Index to disclosed information
participation ratio
Announcement of Resolution (No.
2018-007) published on Securities
The 1st Extraordin
Times, China Securities Journal,
Extraordinary ary
0.00% 8 February 2018 9 February 2018 Shanghai Securities News, and Hong
General Meeting General
Kong Ta Kung Pao and
of 2018 Meeting
http://www.cninfo.co on 9 February
2018.
Announcement of Resolution (No.
2018-013) published on Securities
The 2nd Extraordin
Times, China Securities Journal,
Extraordinary ary
0.00% 23 March 2018 24 March 2018 Shanghai Securities News, and Hong
General Meeting General
Kong Ta Kung Pao and
of 2018 Meeting
http://www.cninfo.co on 24 March
2018.
Announcement of Resolution (No.
2018-025) published on Securities
The 2017 Annual
Times, China Securities Journal,
Annual General General 0.00% 16 May 2018 17 May 2018
Shanghai Securities News, and Hong
Meeting Meeting
Kong Ta Kung Pao and
http://www.cninfo.co on 17 May 2018.
2. Extraordinary General Meeting Convened at Request of Preference Shareholders with Resumed Voting
Rights
□ Applicable √ Not applicable
II Interim Dividend Plan for the Reporting Period
□ Applicable √ Not applicable
The Company has no interim dividend plan.
22
Lu Thai Textile Co., Ltd. Interim Report 2018
III Commitments of the Company’s Actual Controller, Shareholders, Connected Parties and
Acquirer, as well as the Company and Other Commitment Makers, Fulfilled in the Reporting
Period or still Ongoing at Period-End
□ Applicable √ Not applicable
The Company has no interim dividend plan.
IV Engagement and Disengagement of CPAs Firm
Has the Interim financial report been audited?
□Yes √ No
This Interim Report is unaudited.
V Explanations Given by Board of Directors and Supervisory Committee Regarding
“Modified Auditor’s Report” Issued by CPAs Firm for the Reporting Period
□ Applicable √ Not applicable
VI Explanations Given by Board of Directors Regarding “Modified Auditor’s Report” Issued
for Last Year
□ Applicable √ Not applicable
VII Bankruptcy and Restructuring
□ Applicable √ Not applicable
No such cases in the Reporting Period.
VIII Legal Matters
Significant lawsuits or arbitrations:
□ Applicable √ Not applicable
No such cases in the Reporting Period.
Other legal matters:
□ Applicable √ Not applicable
23
Lu Thai Textile Co., Ltd. Interim Report 2018
IX Punishments and Rectifications
□ Applicable √ Not applicable
No such cases in the Reporting Period.
X Credit Conditions of the Company as well as its Controlling Shareholder and Actual
Controller
□ Applicable √ Not applicable
XI Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures for
Employees
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XII Significant Connected Transactions
1. Connected Transactions Relevant to Routine Operations
□ Applicable √ Not applicable
No such cases in the Reporting Period.
2. Connected Transactions Regarding Purchase or Sales of Assets or Equity Interests
□ Applicable √ Not applicable
No such cases in the Reporting Period.
3. Connected Transactions Regarding Joint Investments in Third Parties
□ Applicable √ Not applicable
No such cases in the Reporting Period.
4. Credits and Liabilities with Connected Parties
□ Applicable √ Not applicable
No such cases in the Reporting Period.
24
Lu Thai Textile Co., Ltd. Interim Report 2018
5. Other Significant Connected Transactions
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XIII. Particulars about the Non-operating Occupation of Funds by the Controlling
Shareholder and Other Connected Parties of the Company
□ Applicable √ Not applicable
The Company was not involved in the non-operating occupation of funds by the controlling shareholder and other connected parties
during the Reporting Period.
XIV. Significant Contracts and Execution
1. Entrustment, Contracting and Leasing
(1) Entrustment
□ Applicable √ Not applicable
No such cases in the Reporting Period.
(2) Contracting
□ Applicable √ Not applicable
No such cases in the Reporting Period.
(3) Leasing
□ Applicable √ Not applicable
No such cases in the Reporting Period.
2. Significant Guarantees
√ Applicable □ Not applicable
(1) Guarantees
Unit: RMB'0,000
Guarantees provided by the Company for external parties (excluding those for subsidiaries)
25
Lu Thai Textile Co., Ltd. Interim Report 2018
Disclosure
Actual Guarante
date of the
occurrence date Actual e for a
guarantee Line of Type of Term of Due or
Guaranteed party (date of guarantee connected
line guarantee guarantee guarantee not
agreement amount party or
announcem
signing) not
ent
Guarantees provided by the Company for subsidiaries
Guarant
ee for a
Disclosure date of Actual occurrence Actual
Guaranteed Line of Type of Due or connect
the guarantee line date (date of guarantee Term of guarantee
party guarantee guarantee not ed
announcement agreement signing) amount
party or
not
Two years since
Lu Thai Guarantee of
the approval of the
(Vietnam) 25 January 2017 6,534.2 20 January 2017 532.94 joint and several No Yes
board of the
Textile Co., Ltd. liability
Company
Two years since
Lu Thai Guarantee of
the approval of the
(Vietnam) 25 January 2017 5,227.36 20 January 2017 joint and several No Yes
board of the
Textile Co., Ltd. liability
Company
Two years since
Guarantee of
Lu An Garments the approval of the
25 January 2017 3,920.52 20 January 2017 joint and several No Yes
Co., Ltd. board of the
liability
Company
Five years since
Lu Thai Guarantee of
the approval of the
(Vietnam) 25 January 2017 26,790.22 20 January 2017 7,389.65 joint and several No Yes
board of the
Textile Co., Ltd. liability
Company
Two years since
Lu Thai Guarantee of
the approval of the
(Vietnam) 25 January 2017 19,602.6 20 January 2017 joint and several No Yes
board of the
Textile Co., Ltd. liability
Company
Lu Thai
(Vietnam) Two years since
Guarantee of
Textile Co., Ltd. the approval of the
25 January 2017 6,534.2 20 January 2017 3,701.28 joint and several No Yes
/ Lu An board of the
liability
Garments Co., Company
Ltd.
Lu Thai Guarantee of Five years since
25 January 2017 17,969.05 20 January 2017 7,259.53 No Yes
(Vietnam) joint and several the approval of the
26
Lu Thai Textile Co., Ltd. Interim Report 2018
Textile Co., Ltd. liability board of the
Company
Three years since
Xinjiang Lu Guarantee of
the approval of the
Thai Harvest 14 October 2017 15,000 12 October 2017 10,000 joint and several No Yes
board of the
Cotton Co., Ltd. liability
Company
Five years since
Lu Thai Guarantee of
the approval of the
(Vietnam) 27 October 2017 67,955.68 25 October 2017 14,756.08 joint and several No Yes
board of the
Textile Co., Ltd. liability
Company
Total amount of actual
Total amount of approved guarantee
guarantee for subsidiaries
for subsidiaries during the Reporting 0 43,488.64
during the Reporting Period
Period (B1)
(B2)
Total amount of actual
Total amount of approved guarantee
guarantee for subsidiaries at
for subsidiaries at the end of the 169,533.83 43,639.48
the end of the Reporting
Reporting Period (B3)
Period (B4)
Guarantees provided by subsidiaries for subsidiaries
Guarant
ee for a
Disclosure date of Actual occurrence Actual
Guaranteed Line of Type of Term of Due or connect
the guarantee line date (date of guarantee
party guarantee guarantee guarantee not ed
announcement agreement signing) amount
party or
not
Xinjiang Lu Guarantee of
Thai Textile Co., 14 October 2017 30,000 12 October 2017 20,000 joint and 12 months No Yes
Ltd. several liability
Total actual occurred amount
Total guarantee line approved for the
of guarantee for the
subsidiaries during the Reporting 0 20,000
subsidiaries during the
Period (C1)
Reporting Period (C2)
Total guarantee line that has been Total actual guarantee balance
approved for the subsidiaries at the 30,000 for the subsidiaries at the end 20,000
end of the Reporting Period (C3) of the Reporting Period (C4)
Total guarantee amount provided by the Company (total of the above-mentioned three kinds of guarantees)
Total actual occurred amount
Total guarantee line approved during
0 of guarantee during the 63,488.64
the Reporting Period (A1+B1+C1)
Reporting Period (A2+B2+C2)
Total guarantee line that has been Total actual guarantee balance
199,533.83 63,639.48
approved at the end of the Reporting at the end of the Reporting
27
Lu Thai Textile Co., Ltd. Interim Report 2018
Period (A3+B3+C3) Period (A4+B4+C4)
Proportion of total guarantee amount (A4+B4+C4) to the net
9.01%
assets of the Company
Of which:
Amount of guarantee provide for shareholders, actual controller
0
and related parties (D)
Amount of guarantee provided directly or indirectly for guarantee
0
objects with asset-liability ratio reaching over 70% (E)
Balance between 50% of net assets and total amount of guarantee
30,000
which exceeds 50% of net assets (F)
Sum total of the above three guaranteed amounts (D+E+F) 30,000
According to “Agreement on Counter Guarantee” signed on 12
October 2017 between Lu Thai Company and Xinjiang Lu Thai
Explanation on possible bearing joint responsibility of liquidation
Company, Xinjiang Lu Thai Company, the warrantee Xinjiang Lu
due to immature guarantee (if any)
Thai Company provided the corresponding amount of counter
guarantee for Lu Thai Company.
Explanation about external guarantee violating established The Company never provided guarantees for companies except
procedure (if any) controlling subsidiaries.
Notes for details about guarantee by complex method
(2) Illegal Provision of Guarantees for External Parties
□ Applicable √ Not applicable
No such cases in the Reporting Period.
3. Other Significant Contracts
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XV. Social Responsibilities
1. Significant Environment Protection
Indicate by tick mark whether the Company or any of its subsidiaries is a heavily polluting business identified by the environmental
protection authorities of China
Name of the Name of Number Distributio Carried emission Verified Excessi
Emission Emission
Company or main of n of standard of Total emission total ve
method concentration
its pollutants discharg discharge pollutants emission emissio
28
Lu Thai Textile Co., Ltd. Interim Report 2018
subsidiaries and e outlet outlet n
characteristi
cs
Huangjiap
u Emission standard COD is
COD is
Industrial COD≤165mg/ of water 1495.08t,
Lu Thai COD and 330.82t, and
Continuous Park; L; ammonia pollutants in and
Textile Co., ammonia 2 ammonia Naught
discharge East nitrogen≤10m textile dyeing and ammonia
Ltd nitrogen nitrogen is
Zone g/L finishing industry: nitrogen is
19.89t
Industrial GB 4287-2012 149.51t
Park
Emission standard COD is
Lufeng Lufeng COD≤135mg/ of water COD is 162t, 575.985t,
COD and
Weaving & Continuous chief L; ammonia pollutants in and ammonia and
ammonia 1 Naught
Dyeing Co., discharge discharge nitrogen≤3mg/ textile dyeing and nitrogen is ammonia
nitrogen
Ltd. outlet L finishing industry: 3.03t nitrogen is
GB 4287-2012 57.6t
Ultra-low
emission No. 2
modification list
SO2：
LZJBF (2016) The first half SO2 is
Zibo Production ≤35mg/m3、
No. 46 of year of 2018: 286.01t/a,
Xinsheng plant of NQx：
SO2, NQx, Continuous Emission SO2 is 27.65t, NQx is
Thermal 4 Xinsheng ≤100(50) Naught
and smoke discharge standard of air NQx is 817.18t/a,
Power Co., Thermal mg/m3, and
pollutants of 145.37t, and and smoke
Ltd. Power smoke≤10
Thermal Power smoke is 4.97t is 81.72t/a.
(5)mg/m3
Plant in
Shandong
Province
Discharge
Lu Thai into sewage
Beside
(Vietnam) plant in the QCVN40： Sewage:
Sewage 1 sewage / / Naught
Textile Co., park district 2011/BTNMT 309,200t
plant
Ltd. after
treatment
Lu Thai Direct
Beside
(Vietnam) discharge QCVN19： Exhaust gas:
Exhaust gas 2 boiler / / Naught
Textile Co., after 2009/BTNMT 95 million m3
room
Ltd. treatment
Construction of pollution prevention equipment and operation condition
Lu Thai Textile Co., Ltd. and its majority-owned subsidiary Lufeng Weaving & Dyeing Co., Ltd. strictly implement the "Three
Simultaneous" management system for environmental protection in project constructions. The companies are equipped with complete
facilities for waste gas and waste water treatment. In 2018, Lu Thai Textile Co., Ltd. and its majority-owned subsidiary Lufeng
29
Lu Thai Textile Co., Ltd. Interim Report 2018
Weaving & Dyeing Co., Ltd. carried out the waste water treatment system transformation project to improve the treated water quality
by systematic and comprehensive reform, further improving the river water quality and local ecological environment. The newly
added online monitoring devices for total phosphorus and total nitrogen in 2018 monitor and detect the pollutants discharge index
comprehensively. Support teams were set up to be responsible for daily operation maintenance and inspection to guarantee the
normal operation of facilities. Both the exhaust emission and waste water discharge meet the emission standards.
The wholly-owned subsidiary Zibo Xinsheng Thermal Power Co., Ltd. enforces the "Three Simultaneous" management system for
environmental protection in extension project construction in accordance with the government requirements, and adopts the
"limestone-gypsum method" to reduce emission concentration of sulfur dioxide, the "SNCR+SCR method" to reduce emission
concentration of nitrogen oxides, and the "five-field electrostatic precipitator + wet electrostatic precipitator" to reduce soot emission
concentration. The overall system works well.
The waste water treatment project of the wholly-owned subsidiary Lu Thai (Vietnam) Textile Co., Ltd. is designed to treat 3,000 tons
of sewage water daily. The Company adopts a comprehensive treatment process of "pre-materialization + A2O biochemistry +
post-materialization + ozone oxidation" for waste water treatment, and the treated water quality is better than the QCVN
40:2011/BTNMT A-level emission standards stipulated by the Vietnam government. The treated waste water is all discharged to the
waste water treatment station in the park. Treated water quality analysis for January to June 2018: The COD (mean value) was 47.73
mg/L, the chrominance (mean value) was 44.4, the ammonia nitrogen (mean value) was 1.4 mg/L, and the total phosphorus (mean
value) was 0.13 mg/L. All the parameters met the A-level emission standards set in the "Regulations on Parameters of Industrial
Drainage in Vietnam" (QCVN40:2011/BTNMT). Waste water discharge in the whole year met the standards without violation. The
total amount of waste water discharged in January to June 2018 was 309,200 tons, among which, the chemical oxygen demand (COD)
was 14.758 tons, ammonia nitrogen (NH3-N) was 432.88 kg and total phosphorus (TP) was 40.196 kg. The Company is equipped
with multi-pipe and water film dust-separation devices to process the exhaust gas discharged from boilers of the Company. From
January to June 2018, all the equipment was in normal operation, and the exhaust gas inspection parameters were lower than the
QCVN19:2009/BTNMT emission standards set by Vietnam government. From January to June 2018, the total amount of sulfur
dioxide emissions was 34.2 tons, and the total amount of nitrogen oxides emissions was 58.14 tons.
Project Environmental Impact Assessment and Other Administrative Permission for Environmental Protection
In 2018, the environmental assessment project for technical upgrading of high-grade printed fabric production line of the
majority-owned subsidiary Lufeng Weaving & Dyeing Co., Ltd. has been approved and entered the trial operation stage while the
trial operation stage of the environmental assessment project for high-grade grey fabric production line has been completed and is
ready to enter the acceptance stage; the liquid membrane separation of dyeing waste water and treatment station comprehensive
upgrading projects have entered the commissioning stage. The wholly-owned subsidiary Zibo Xinsheng Thermal Power Co., Ltd. got
the "Approval of Environmental Impact Assessment Report of the Environmental Protection Department of Shandong Province on
the Extension Project of Zibo Xinsheng Thermal Power Co., Ltd." (LHS [2015] No. 241) in accordance with the regulations, and the
first phase of the project was put into trial operation at the end of 2017. The completion acceptance of the environmental protection
project for the spinning and dyeing zone of the wholly-owned subsidiary Lu Thai (Vietnam) Co., Ltd. has been recognized, and the
EIA report for the spinning and dyeing industrial park Phase II is under application.
Emergency plan for environmental incidents
The head office and factories in eastern district of Lu Thai Textile Co., Ltd., and its majority-owned subsidiary Lufeng Weaving &
Dyeing Co., Ltd. prepared the Emergency Plan for Environmental Incidents, which was filed with Zibo Environmental Protection
Bureau Xichuan Branch. The wholly-owned subsidiary Zibo Xinsheng Thermal Power Co., Ltd. has formulated the "Emergency Plan
for Environmental Incidents" and filed it with the environmental protection management department. The identification and risk
assessment of environmental risk sources, prevention and early warning mechanisms, emergency protection and supervision and
management were included in the plan. The wholly-owned subsidiary Lu Thai (Vietnam) Co., Ltd. has prepared emergency plans for
different environmental incidents to reduce their impacts.
Environmental self-monitoring program
30
Lu Thai Textile Co., Ltd. Interim Report 2018
In accordance with the requirements of environmental protection authorities, Lu Thai Textile Co., Ltd. formulates environmental
self-testing plan for the following year in December of each year, and implements the self-monitoring plan to submit data to Zibo
Automatic Environmental Monitoring System. The wholly-owned subsidiary Zibo Xinsheng Thermal Power Co., Ltd. complies with
the requirements of superior environmental protection authorities to meet discharge standards by online real-time monitoring of
environmental protection data. The wholly-owned subsidiary Lu Thai (Vietnam) Co., Ltd. installed an on-line monitoring device for
real-time treated water quality monitoring. In addition, the Company invites external qualified testing organizations to carry out
inspections on waste water, sludge and exhaust gas every quarter, and provides reports to environmental inspection departments.
Other environment information that should be disclosed
No
Other related environment protection information
No
2. Targeted Measures Taken to Help People Lift themselves out of Poverty
The Company didn’t conduct any targeted anti-poverty projects temporarily in the Reporting Period, no subsequent plan for targeted
anti-poverty also.
XIX Other Significant Events
√ Applicable □ Not applicable
The Company implemented the project of repurchasing part of B shares in the Reporting Period. As of 30 June 2018, the Company
had accumulatively repurchased 17,674,849 shares, accounting for 1.9158% of total share capital. For details, see relevant
announcement about the repurchase of B shares.
XVII. Significant Events of Subsidiaries
□ Applicable √ Not applicable
31
Lu Thai Textile Co., Ltd. Interim Report 2018
Part VI Share Changes and Shareholder Information
I. Share Changes
1. Share Changes
Unit: share
Before Increase/decrease (+/-) After
Bonus
Percentage New Bonus issue Percenta
Number Other Subtotal Number
(%) issues shares from ge (%)
profit
I. Shares subject to trading
119,079,944 12.91% 264,499 264,499 119,344,443 12.94%
moratorium
3. Other domestic shares 847,544 0.09% 264,499 264,499 1,112,043 0.12%
Shares held by domestic
847,544 0.09% 264,499 264,499 1,112,043 0.12%
individuals
4. Shares held by overseas
118,232,400 12.82% 118,232,400 12.82%
shareholders
Including: Shares held by
118,232,400 12.82% 118,232,400 12.82%
overseas legal persons
II. Shares not subject to
803,522,367 87.09% -264,499 -264,499 803,257,868 87.06%
trading moratorium
1. RMB ordinary shares 561,150,431 60.82% -186,725 -186,725 560,963,706 60.80%
2. Domestically listed
242,371,936 26.27% -77,774 -77,774 242,294,162 26.26%
foreign shares
III. Total of shares 922,602,311 100.00% 0 0 922,602,311 100.00%
Reasons for the share changes
√ Applicable □ Not applicable
Due to the changes of locked shares from the resignation of some supervisors and senior executives, the “limited sales condition
shares-domestic natural person holding” of the Company increased 264,499 shares.
Approval of share changes
□ Applicable √ Not applicable
Transfer of share ownership
□ Applicable √ Not applicable
Effects of share changes on the basic EPS, diluted EPS, net assets per share attributable to common shareholders of the Company and
32
Lu Thai Textile Co., Ltd. Interim Report 2018
other financial indexes over the prior year and the prior period
□ Applicable √ Not applicable
Other contents that the Company considers necessary or is required by the securities regulatory authorities to disclose
□ Applicable √ Not applicable
2. Changes in Restricted Shares
□ Applicable √ Not applicable
II. Issuance and Listing of Securities
□ Applicable √ Not applicable
III. Total Number of Shareholders and Their Shareholdings
Unit: share
Total number of ordinary Total number of preference shareholders with resumed voting rights
57,783 0
shareholders at the period-end at the period-end (if any) (see Note 8)
5% or greater ordinary shareholders or the top 10 ordinary shareholders
Increase/dec Pledged or frozen
Sharehol
Total shares rease during Number of Number of shares
Nature of ding
Name of shareholder held at the the restricted non-restricted
shareholder percenta Numbe
period-end Reporting shares held shares held Status
ge (%) r
Period
Domestic
Zibo Lucheng Textile non-state-own
15.21% 140,353,583 0 0 140,353,583
Investment Co., Ltd. ed legal
person
Tailun (Thailand) Textile Foreign legal
12.82% 118,232,400 0 118,232,400 0
Co., Ltd. person
Hong Kong Securities Foreign legal
3.32% 30,593,555 12,767,400 0 30,593,555
Clearing Co. Ltd person
Central Huijin Assets State-owned
2.20% 20,315,300 0 0 20,315,300
Management Co., Ltd. legal person
T.Rowe Price Intl Foreign legal
2.16% 19,948,219 0 0 19,948,219
Discovery Fund person
Domestic
China Securities Finance
non-state-own 1.70% 15,679,091 0 0 15,679,091
Corporation Limited
ed legal
33
Lu Thai Textile Co., Ltd. Interim Report 2018
person
Hong Kong Monetary
Foreign legal
Authority-self-owned 1.25% 11,540,893 3,126,256 0 11,540,893
person
funds
National Social Security
Other 0.87% 7,999,947 7,999,947 0 7,999,947
Fund Portfolio 103
Hua’an New Silk Road
Theme Equity Securities Other 0.83% 7,650,000 -3,340,000 0 7,650,000
Investment Fund
Bosera Selected Mixed
Securities Investment Other 0.81% 7,500,000 7,500,000 0 7,500,000
Fund
Strategic investors or general corporations
becoming top-ten shareholders due to
Naught
placing of new shares (if any) (see Note
3)
Zibo Lucheng Textile Investment Co., Ltd. is the largest shareholder and the actual
controller of the Company. Tailun (Thailand) Textile Co., Ltd. is the second largest
Connected or acting-in-concert parties
shareholder and the foreign sponsor of the Company. All the other shareholders are
among the shareholders above
holding tradable A-shares or B-shares. And it is unknown whether there is any related
party or acting-in-concert party among them.
Shareholdings of the top ten non-restricted ordinary shareholders
Number of Type of shares
Name of shareholder non-restricted shares
Type Number
held at the period-end
RMB ordinary
Zibo Lucheng Textile Investment Co., Ltd. 140,353,583 140,353,583
share
RMB ordinary
Hong Kong Securities Clearing Co. Ltd 30,593,555 30,593,555
share
RMB ordinary
Central Huijin Assets Management Co., Ltd. 20,315,300 20,315,300
share
Domestically
T.Rowe Price Intl Discovery Fund 19,948,219 listed foreign 19,948,219
share
RMB ordinary
China Securities Finance Corporation Limited 15,679,091 15,679,091
share
RMB ordinary
Hong Kong Monetary Authority-self-owned funds 11,540,893 11,540,893
share
RMB ordinary
National Social Security Fund Portfolio 103 7,999,947 7,999,947
share
34
Lu Thai Textile Co., Ltd. Interim Report 2018
RMB ordinary
Hua’an New Silk Road Theme Equity Securities Investment Fund 7,650,000 7,650,000
share
RMB ordinary
Bosera Selected Mixed Securities Investment Fund 7,500,000 7,500,000
share
Domestically
Foreningen AP Invest F.M.B.A. 6,879,562 listed foreign 6,879,562
share
Zibo Lucheng Textile Investment Co., Ltd. is the largest
shareholder and the actual controller of the Company.
Explanation on connected relationship among the top ten shareholders of
Tailun (Thailand) Textile Co., Ltd. is the second largest
tradable share not subject to trading moratorium, as well as among the
shareholder and the foreign sponsor of the Company. All
top ten shareholders of tradable share not subject to trading moratorium
the other shareholders are holding tradable A-shares or
and top ten shareholders, or explanation on acting-in-concert
B-shares. And it is unknown whether there is any related
party or acting-in-concert party among them.
Particular about shareholder participate in the securities lending and
Naught
borrowing business (if any) (note 4)
Indicate by tick mark whether any of the top ten common shareholders or the top ten non-restricted common shareholders of the
Company conducted any promissory repo during the Reporting Period.
□ Yea √ No
No such cases in the Reporting Period.
IV. Change of the Controlling Shareholder or the Actual Controller
Change of the controlling shareholder in the Reporting Period
□ Applicable √ Not applicable
There was no any change of the controlling shareholder of the Company in the Reporting Period.
Change of the actual controller in the Reporting Period
□ Applicable √ Not applicable
There was no any change of the actual controller of the Company in the Reporting Period.
35
Lu Thai Textile Co., Ltd. Interim Report 2018
Part VII Preferred Shares
□ Applicable √ Not applicable
No preferred shares in the Reporting Period.
Part VIII Directors, Supervisors and Senior Management
I Changes in Shareholdings of Directors, Supervisors and Senior Management
√ Applicable □ Not applicable
Number of
Number of
Decrease restricted Number of
Incu Increase in granted
Beginning in the Ending shares granted restricted
mben the Current restricted
Name Office title shareholdi Current shareholdi granted in the shares at the
t/for Period shares at the
ng (share) Period ng (share) Current period-end
mer (share) period-begin
(share) Period (share)
(share)
(share)
Curre
Liu Zibin Chairman and GM 148,290 148,290
nt
Curre
Xu Zhinan Vice President
nt
Fujiwara Curre
Director
Hidetoshi nt
Chen Curre
Director
Ruimou nt
Zeng Curre
Director
Facheng nt
Director, Vice
Wang Curre
GM, and Chief 146,753 146,753
Fangshui nt
Engineer
Liu Curre
Director
Deming nt
Director and
Qin Curre
Secretary of the 126,542 126,542
Guiling nt
Board
Zhang Director and Chief Curre
92,500 92,500
Hongmei Accountant nt
36
Lu Thai Textile Co., Ltd. Interim Report 2018
Independent Curre
Xu Jianjun
Director nt
Independent Curre
Zhao Yao
Director nt
Independent Curre
Bi Xiuli
Director nt
Independent Curre
Pan Ailing
Director nt
Wang Independent Curre
Xinyu Director nt
Supervisory
Zhang Curre
Committee 73,100 73,100
Shougang nt
Chairman
Curre
Liu Zilong Supervisor 10,000 10,000
nt
Dong Curre
Supervisor 5,000 5,000
Shibing nt
Zhang Curre
Vice GM 52,150 52,150
Jianxiang nt
Wang Vice GM, Product Curre
83,700 83,700
Jiabin Manager nt
Zhang Vice GM, GM of Curre
80,300 80,300
Zhanqi Lufeng Company nt
Fujiwara Manager of Japan Curre
Matsuzaka Office nt
Zhang Curre
Financial Manager 77,700 77,700
Keming nt
Curre
Li Wenji CIO 10,000 10,000
nt
Form
Pan Pingli Customs Manager 134,296 134,296
er
Lv Vice GM of Curre
33,750 33,750
Yongchen Lufeng Company nt
Yu
Energy Business Curre
Shouzhen 83,100 83,100
Manager nt
g
Wang GM assistant,
Curre
Changzha Fabric Marketing 22,500 22,500
nt
o Manager
37
Lu Thai Textile Co., Ltd. Interim Report 2018
Brand Marketing Curre
Quan Peng 27,750 27,750
manager nt
Manager of
Shang
Garments Curre
Chenggan 30,000 30,000
Production nt
g
Department
GM of Lu Thai Curre
Du Lixin
(Vietnam) nt
Manager of
Curre
Guo Heng Business
nt
Management
GM assistant and
Manager of
Curre
Zhang Wei Strategy
nt
Planning
Department
Supervisory
Li Form
Committee 176,164 176,164
Tongmin er
Chairman
Total -- -- 1,413,595 0 0 1,413,595 0 0 0
II Changes in Directors, Supervisors and Executive Officers
√ Applicable □ Not applicable
Name Position Type Date Reason
Li Tongmin Supervisory Committee Chairman Left 18 January 2018 Retired
Qin Guiling Vice GM Dismissed 18 January 2018 Job turnover
Zhang Shougang Vice GM Dismissed 18 January 2018 Job turnover
Zhang Shougang Supervisory Committee Chairman Elected 8 February 2018
Pan Pingli Customs Manager Dismissed 18 January 2018 Job turnover
Du Lixin GM of Lu Thai (Vietnam) Employed 18 January 2018
Guo Heng Manager of Business Management Employed 18 January 2018
GM assistant and Manager of
Zhang Wei Employed 18 January 2018
Strategy Planning Department
38
Lu Thai Textile Co., Ltd. Interim Report 2018
Part IX Corporate Bonds
Are there any corporate bonds publicly offered and listed on the stock exchange, which were undue before the approval date of this
Report or were due but could not be redeemed in full?
No
39
Lu Thai Textile Co., Ltd. Interim Report 2018
Part X Financial Report
I. Auditor’s Report
Whether the interim report has been audited?
□Yes √ No
The interim report of the Company has not been audited.
II. Financial Statements
The unit of the financial statements attached: RMB
1. Consolidated Balance Sheet
Prepared by Lu Thai Textile Co., Ltd.
30 June 2018
Unit: RMB
Item 30 June 2018 31 December 2017
Current assets:
Monetary assets 671,721,970.36 693,989,293.38
Derivative financial assets
Notes receivable 115,709,268.88 139,276,742.34
Accounts receivable 356,818,963.69 334,080,524.05
Prepayments 134,524,113.79 146,463,066.38
Interest receivable 874,571.14 590,003.07
Dividends receivable
Other receivables 76,480,721.09 56,182,782.04
Financial assets purchased under resale agreements
Inventories 2,017,424,627.73 2,100,661,221.93
Assets classified as held for sale
Current portion of non-current assets
Other current assets 150,806,143.77 118,588,703.34
Total current assets 3,524,360,380.45 3,589,832,336.53
Non-current assets:
40
Lu Thai Textile Co., Ltd. Interim Report 2018
Available-for-sale financial assets 85,733,000.00 84,533,000.00
Held-to-maturity investments
Long-term receivables 650,000.00
Long-term equity investments 95,806,134.43 97,536,732.02
Investment property 23,856,705.69 24,563,544.58
Fixed assets 5,359,308,862.06 5,421,295,850.03
Construction in progress 212,917,526.85 157,421,820.68
Engineering materials 152,136,560.03 56,913,806.06
Proceeds from disposal of fixed assets
Productive living assets
Intangible assets 491,291,914.65 498,948,301.48
R&D expense
Goodwill 20,613,803.29 20,613,803.29
Long-term prepaid expense 110,885,589.66 107,877,194.52
Deferred income tax assets 75,315,743.25 74,697,159.71
Other non-current assets 80,514,271.73 36,390,478.85
Total non-current assets 6,709,030,111.64 6,580,791,691.22
Total assets 10,233,390,492.09 10,170,624,027.75
Current liabilities:
Short-term borrowings 1,458,058,962.33 1,135,124,996.40
Financial liabilities at fair value through profit or loss 28,481,010.00
Derivative financial liabilities
Notes payable 3,118,556.78 7,301,771.85
Accounts payable 283,653,868.64 366,265,132.65
Advances from customers 99,307,372.64 119,785,945.48
Financial assets sold under repurchase agreements
Handling charges and commissions payable
Payroll payable 246,282,564.04 316,836,488.95
Taxes payable 42,752,421.70 33,055,090.58
Interest payable 2,079,744.07 1,572,231.86
Dividends payable 441,113.64 441,113.64
Other payables 157,412,933.90 127,090,009.25
Liabilities directly associated with assets classified as held for sale
Current portion of non-current liabilities 62,750,292.49
41
Lu Thai Textile Co., Ltd. Interim Report 2018
Other current liabilities
Total current liabilities 2,321,588,547.74 2,170,223,073.15
Non-current liabilities:
Long-term borrowings 69,431,359.47
Long-term payables
Long-term payroll payable 92,458,178.53 93,843,473.02
Specific payables
Provisions
Deferred income 126,957,174.18 126,737,092.32
Deferred income tax liabilities 3,112,735.33 2,904,899.46
Other non-current liabilities 1,840,000.00 1,840,000.00
Total non-current liabilities 293,799,447.51 225,325,464.80
Total liabilities 2,615,387,995.25 2,395,548,537.95
Owners’ equity:
Share capital 922,602,311.00 922,602,311.00
Capital reserves 699,493,647.48 699,493,593.82
Less: Treasury shares 121,952,709.49
Other comprehensive income 44,370,228.14 16,810,574.22
Specific reserve
Surplus reserves 962,933,579.06 962,933,579.06
General reserve
Retained profits 4,553,114,343.08 4,629,102,712.06
Total equity attributable to owners of the Company as the parent 7,060,561,399.27 7,230,942,770.16
Non-controlling interests 557,441,097.57 544,132,719.64
Total owners’ equity 7,618,002,496.84 7,775,075,489.80
Total liabilities and owners’ equity 10,233,390,492.09 10,170,624,027.75
Legal representative: Liu Zibin Chief Accountant: Zhang Hongmei
Financial Manager: Zhang Keming
2. Balance Sheet of the Company as the Parent
Unit: RMB
Item 30 June 2018 31 December 2017
Current assets:
Monetary assets 155,738,414.91 267,809,829.78
42
Lu Thai Textile Co., Ltd. Interim Report 2018
Financial assets at fair value through profit or loss
Derivative financial assets
Notes receivable 73,448,876.87 93,244,480.81
Accounts receivable 283,715,100.32 305,903,590.98
Prepayments 48,847,481.49 81,471,605.69
Interest receivable 220,590.38
Dividends receivable
Other receivables 442,255,215.86 519,788,239.57
Inventories 1,167,143,139.52 1,164,055,145.96
Assets classified as held for sale
Current portion of non-current assets
Other current assets 104,977,154.77 53,657,308.33
Total current assets 2,276,125,383.74 2,486,150,791.50
Non-current assets:
Available-for-sale financial assets 73,733,000.00 72,533,000.00
Held-to-maturity investments
Long-term receivables
Long-term equity investments 2,165,499,250.47 1,816,493,348.06
Investment property 15,170,780.40 15,536,968.08
Fixed assets 2,665,189,699.04 2,811,046,847.91
Construction in progress 71,255,813.53 25,703,496.87
Engineering materials 21,630,265.23 1,609,204.75
Proceeds from disposal of fixed assets
Productive living assets
Intangible assets 245,840,436.86 249,994,817.83
R&D expense
Goodwill
Long-term prepaid expense
Deferred income tax assets 45,569,866.60 51,474,007.76
Other non-current assets 14,937,345.52 27,077,391.31
Total non-current assets 5,318,826,457.65 5,071,469,082.57
Total assets 7,594,951,841.39 7,557,619,874.07
Current liabilities:
Short-term borrowings 705,343,347.97 622,438,413.87
43
Lu Thai Textile Co., Ltd. Interim Report 2018
Financial liabilities at fair value through profit or loss 18,847,500.00
Derivative financial liabilities
Notes payable 1,401,325.50 6,124,239.92
Accounts payable 233,442,898.51 147,883,359.29
Advances from customers 56,386,065.62 52,314,250.61
Payroll payable 183,941,763.51 240,391,459.47
Taxes payable 33,744,215.20 17,297,415.92
Interest payable 2,013,677.88 973,134.21
Dividends payable 441,113.64 441,113.64
Other payables 201,727,467.65 22,933,385.28
Liabilities directly associated with assets classified as held for sale
Current portion of non-current liabilities
Other current liabilities
Total current liabilities 1,437,289,375.48 1,110,796,772.21
Non-current liabilities:
Long-term borrowings
Long-term payables
Long-term payroll payable 92,458,178.53 93,843,473.02
Specific payables
Provisions
Deferred income 81,699,952.30 80,580,249.14
Deferred income tax liabilities 184,950.00 4,950.00
Other non-current liabilities
Total non-current liabilities 174,343,080.83 174,428,672.16
Total liabilities 1,611,632,456.31 1,285,225,444.37
Owners’ equity:
Share capital 922,602,311.00 922,602,311.00
Capital reserves 759,836,756.57 759,836,702.91
Less: Treasury shares 121,952,709.49
Other comprehensive income 1,048,050.00 28,050.00
Specific reserve
Surplus reserves 959,824,839.42 959,824,839.42
Retained profits 3,461,960,137.58 3,630,102,526.37
Total owners’ equity 5,983,319,385.08 6,272,394,429.70
44
Lu Thai Textile Co., Ltd. Interim Report 2018
Total liabilities and owners’ equity 7,594,951,841.39 7,557,619,874.07
3. Consolidated Income Statement
Unit: RMB
Item H1 2018 H1 2017
1. Revenue 3,281,014,155.43 2,997,093,395.84
Including: Operating revenue 3,281,014,155.43 2,997,093,395.84
2. Operating costs and expenses 2,840,765,404.50 2,517,282,163.05
Including: Cost of sales 2,360,836,431.41 2,051,483,003.79
Taxes and surtaxes 54,470,407.88 51,503,327.13
Selling expense 66,941,088.56 68,365,512.22
Administrative expense 325,870,756.50 314,037,319.49
Finance costs 30,525,225.31 30,930,178.28
Asset impairment loss 2,121,494.84 962,822.14
Add: Gain on changes in fair value (“-” for loss) -28,481,010.00 1,110,700.00
Investment income (“-” for loss) 4,646,023.78 1,385,535.34
Including: Share of profit or loss of joint ventures and associates -1,730,597.59
Foreign exchange gain (“-” for loss)
Asset disposal income (“-” for loss) -522,286.65 -1,191,082.48
Other income 36,532,224.59 10,580,637.29
3. Operating profit (“-” for loss) 452,423,702.65 491,697,022.94
Add: Non-operating income 3,011,072.58 4,365,273.28
Less: Non-operating expense 1,994,923.71 4,648,925.39
4. Profit before taxation (“-” for loss) 453,439,851.52 491,413,370.83
Less: Income tax expense 63,275,514.57 79,455,627.02
5. Net profit (“-” for net loss) 390,164,336.95 411,957,743.81
5.1 Net profit from continuing operations (“-” for net loss) 390,164,336.95 411,957,743.81
5.2 Net profit from discontinued operations (“-” for net loss)
Net profit attributable to owners of the Company as the parent 377,355,959.02 395,130,296.26
Net profit attributable to non-controlling interests 12,808,377.93 16,827,447.55
6. Other comprehensive income, net of tax 27,559,653.92 -14,785,091.90
Attributable to owners of the Company as the parent 27,559,653.92 -14,785,091.90
6.1 Items that will not be reclassified to profit or loss
6.1.1 Changes in net liabilities or assets caused by
45
Lu Thai Textile Co., Ltd. Interim Report 2018
remeasurements on defined benefit pension schemes
6.1.2 Share of other comprehensive income of investees that
will not be reclassified to profit or loss under equity method
6.2 Items that may subsequently be reclassified to profit or loss 27,559,653.92 -14,785,091.90
6.2.1 Share of other comprehensive income of investees that
will be reclassified to profit or loss under equity method
6.2.2 Gain/Loss on changes in fair value of available-for-sale
1,020,000.00
financial assets
6.2.3 Gain/Loss arising from reclassification of held-to-maturity
investments to available-for-sale financial assets
6.2.4 Effective gain/loss on cash flow hedges
6.2.5 Differences arising from translation of foreign
26,539,653.92 -14,785,091.90
currency-denominated financial statements
6.2.6 Other
Attributable to non-controlling interests
7. Total comprehensive income 417,723,990.87 397,172,651.91
Attributable to owners of the Company as the parent 404,915,612.94 380,345,204.36
Attributable to non-controlling interests 12,808,377.93 16,827,447.55
8. Earnings per share
8.1 Basic earnings per share 0.41 0.43
8.2 Diluted earnings per share 0.41 0.43
Where business mergers under the same control occurred in the current period, the net income achieved by the merged parties before
the business mergers was RMB0.00, with the amount for last year being RMB0.00.
Legal representative: Liu Zibin Chief Accountant: Zhang Hongmei
Financial Manager: Zhang Keming
4. Income Statement of the Company as the Parent
Unit: RMB
Item H1 2018 H1 2017
1. Operating revenue 2,504,395,230.25 2,482,323,588.80
Less: Cost of sales 1,861,404,465.69 1,766,681,024.07
Taxes and surtaxes 40,307,584.75 37,477,779.18
Selling expense 38,315,465.09 43,320,775.03
Administrative expense 214,766,851.49 210,435,426.62
Finance costs 11,391,279.87 8,369,769.83
Asset impairment loss -1,182,154.91 262,131.70
46
Lu Thai Textile Co., Ltd. Interim Report 2018
Add: Gain on changes in fair value (“-” for loss) -18,847,500.00 1,110,700.00
Investment income (“-” for loss) 1,917,402.93 19,258,397.61
Including: Share of profit or loss of joint ventures and
-1,730,597.59
associates
Asset disposal income (“-” for loss) -9,032,750.08 -243,716.20
Other income 27,986,366.59 5,169,055.33
2. Operating profit (“-” for loss) 341,415,257.71 441,071,119.11
Add: Non-operating income 1,865,030.22 2,207,064.75
Less: Non-operating expense 1,119,027.21 3,935,434.10
3. Profit before taxation (“-” for loss) 342,161,260.72 439,342,749.76
Less: Income tax expense 56,959,321.51 65,645,694.09
4. Net profit (“-” for net loss) 285,201,939.21 373,697,055.67
4.1 Net profit from continuing operations (“-” for net loss) 285,201,939.21 373,697,055.67
4.2 Net profit from discontinued operations (“-” for net loss)
5. Other comprehensive income, net of tax 1,020,000.00
5.1 Items that will not be reclassified to profit or loss
5.1.1 Changes in net liabilities or assets caused by
remeasurements on defined benefit pension schemes
5.1.2 Share of other comprehensive income of investees that will
not be reclassified into profit or loss under equity method
5.2 Items that may subsequently be reclassified to profit or loss 1,020,000.00
5.2.1 Share of other comprehensive income of investees that will
be reclassified into profit or loss under equity method
5.2.2 Gain/Loss on changes in fair value of available-for-sale
1,020,000.00
financial assets
5.2.3 Gain/Loss arising from reclassification of held-to-maturity
investments to available-for-sale financial assets
5.2.4 Effective gain/loss on cash flow hedges
5.2.5 Differences arising from translation of foreign
currency-denominated financial statements
5.2.6 Other
6. Total comprehensive income 286,221,939.21 373,697,055.67
7. Earnings per share
7.1 Basic earnings per share 0.31 0.41
7.2 Diluted earnings per share 0.31 0.41
47
Lu Thai Textile Co., Ltd. Interim Report 2018
5. Consolidated Cash Flow Statement
Unit: RMB
Item H1 2018 H1 2017
1. Cash flows from operating activities:
Proceeds from sale of commodities and rendering of services 3,222,986,999.01 2,965,847,838.31
Tax rebates 114,081,775.79 103,287,108.06
Cash generated from other operating activities 58,830,516.70 50,784,884.88
Subtotal of cash generated from operating activities 3,395,899,291.50 3,119,919,831.25
Payments for commodities and services 1,580,866,513.00 1,633,500,466.75
Cash paid to and for employees 866,022,073.85 819,888,473.79
Taxes paid 138,363,376.99 179,630,100.30
Cash used in other operating activities 112,862,616.89 143,654,039.84
Subtotal of cash used in operating activities 2,698,114,580.73 2,776,673,080.68
Net cash generated from/used in operating activities 697,784,710.77 343,246,750.57
2. Cash flows from investing activities:
Proceeds from disinvestments
Investment income 439,800.00
Net proceeds from disposal of fixed assets, intangible assets and other
936,526.59 1,257,813.92
long-lived assets
Net proceeds from disposal of subsidiaries or other business units
Cash generated from other investing activities 13,528,136.07 70,035,606.25
Subtotal of cash generated from investing activities 14,464,662.66 71,733,220.17
Payments for acquisition of fixed assets, intangible assets and other
438,092,015.33 294,548,197.25
long-lived assets
Payments for investments
Net increase in pledged loans granted
Net payments for acquisition of subsidiaries and other business units
Cash used in other investing activities
Subtotal of cash used in investing activities 438,092,015.33 294,548,197.25
Net cash generated from/used in investing activities -423,627,352.67 -222,814,977.08
3. Cash flows from financing activities:
Capital contributions received 500,000.00 500,000.00
Including: Capital contributions by non-controlling interests to
500,000.00 500,000.00
subsidiaries
Increase in borrowings obtained 1,554,914,896.37 1,143,078,297.25
48
Lu Thai Textile Co., Ltd. Interim Report 2018
Net proceeds from issuance of bonds
Cash generated from other financing activities 39,317,500.00 10,300,000.00
Subtotal of cash generated from financing activities 1,594,732,396.37 1,153,878,297.25
Repayment of borrowings 1,235,496,710.59 833,454,881.16
Payments for interest and dividends 469,601,858.04 484,246,981.18
Including: Dividends paid by subsidiaries to non-controlling interests
Cash used in other financing activities 175,517,237.20 0.00
Subtotal of cash used in financing activities 1,880,615,805.83 1,317,701,862.34
Net cash generated from/used in financing activities -285,883,409.46 -163,823,565.09
4. Effect of foreign exchange rate changes on cash and cash equivalents 6,658,728.34 -14,067,019.42
5. Net increase in cash and cash equivalents -5,067,323.02 -57,458,811.02
Add: Cash and cash equivalents, beginning of the period 676,639,212.86 659,116,137.67
6. Cash and cash equivalents, end of the period 671,571,889.84 601,657,326.65
6. Cash Flow Statement of the Company as the Parent
Unit: RMB
Item H1 2018 H1 2017
1. Cash flows from operating activities:
Proceeds from sale of commodities and rendering of services 2,547,140,430.96 2,436,886,166.08
Tax rebates 70,272,032.57 75,165,906.24
Cash generated from other operating activities 36,415,607.59 15,897,897.32
Subtotal of cash generated from operating activities 2,653,828,071.12 2,527,949,969.64
Payments for commodities and services 1,356,047,613.94 1,526,580,047.50
Cash paid to and for employees 605,320,730.04 587,514,691.21
Taxes paid 87,174,263.36 97,827,376.39
Cash used in other operating activities 65,254,416.78 75,176,222.57
Subtotal of cash used in operating activities 2,113,797,024.12 2,287,098,337.67
Net cash generated from/used in operating activities 540,031,047.00 240,851,631.97
2. Cash flows from investing activities:
Proceeds from disinvestments
Investment income 17,976,433.62
Net proceeds from disposal of fixed assets, intangible assets and other
71,378,849.40 1,272,813.92
long-lived assets
Net proceeds from disposal of subsidiaries or other business units
49
Lu Thai Textile Co., Ltd. Interim Report 2018
Cash generated from other investing activities 408,047,687.20 143,584,458.87
Subtotal of cash generated from investing activities 479,426,536.60 162,833,706.41
Payments for acquisition of fixed assets, intangible assets and other
75,495,986.86 35,162,185.30
long-lived assets
Payments for investments 350,352,500.00 7,934,750.00
Net payments for acquisition of subsidiaries and other business units
Cash used in other investing activities 329,863,300.00 162,588,600.00
Subtotal of cash used in investing activities 755,711,786.86 205,685,535.30
Net cash generated from/used in investing activities -276,285,250.26 -42,851,828.89
3. Cash flows from financing activities:
Capital contributions received
Increase in borrowings obtained 905,214,428.57 921,800,512.27
Net proceeds from issuance of bonds
Cash generated from other financing activities 173,828,100.00
Subtotal of cash generated from financing activities 1,079,042,528.57 921,800,512.27
Repayment of borrowings 821,108,369.41 597,328,780.40
Payments for interest and dividends 455,588,046.43 464,854,599.26
Cash used in other financing activities 175,517,237.20
Sub-total of cash used in financing activities 1,452,213,653.04 1,062,183,379.66
Net cash generated from/used in financing activities -373,171,124.47 -140,382,867.39
4. Effect of foreign exchange rate changes on cash and cash equivalents -2,646,087.14 -8,267,806.48
5. Net increase in cash and cash equivalents -112,071,414.87 49,349,129.21
Add: Cash and cash equivalents, beginning of the period 267,809,829.78 177,016,859.63
6. Cash and cash equivalents, end of the period 155,738,414.91 226,365,988.84
7. Consolidated Statements of Changes in Owners’ Equity
50
Lu Thai Textile Co., Ltd. Interim Report 2018
H1 2018
Unit: RMB
H1 2018
Equity attributable to owners of the Company as the parent
Item Other equity Specifi
Other Non-controlling Total owners’
instruments Less: Treasury c General
Share capital Capital reserves comprehensiv Surplus reserves Retained profits interests equity
Preferre Perpetua Othe shares reserv reserve
e income
d shares l bonds r e
1. Balances as of
922,602,311.00 699,493,593.82 16,810,574.22 962,933,579.06 4,629,102,712.06 544,132,719.64 7,775,075,489.80
end of prior year
Add: Adjustments
for changed
accounting
policies
Adjustments for
corrections of
previous errors
Adjustments for
business
combinations
involving
enterprises under
common control
Other
adjustments
2. Balances as of
beginning of the 922,602,311.00 699,493,593.82 16,810,574.22 962,933,579.06 4,629,102,712.06 544,132,719.64 7,775,075,489.80
year
3. Increase/ 53.66 121,952,709.49 27,559,653.92 -75,988,368.98 13,308,377.93 -157,072,992.96
51
Lu Thai Textile Co., Ltd. Interim Report 2018
decrease in the
period (“-” for
decrease)
3.1 Total
comprehensive 27,559,653.92 377,355,959.02 12,808,377.93 417,723,990.87
income
3.2 Capital
increased and 53.66 121,952,709.49 500,000.00 -121,452,655.83
reduced by owners
3.2.1
Ordinary shares
121,952,709.49 500,000.00 -121,452,709.49
increased by
shareholders
3.2.2 Capital
increased by
holders of other
equity instruments
3.2.3
Share-based
payments included
in owners’ equity
3.2.4 Other 53.66 53.66
3.3 Profit
-453,344,328.00 -453,344,328.00
distribution
3.3.1
Appropriation to
surplus reserves
3.3.2
Appropriation to
general reserve
52
Lu Thai Textile Co., Ltd. Interim Report 2018
3.3.3
Appropriation to
-453,344,328.00 -453,344,328.00
owners (or
shareholders)
3.3.4 Other
3.4
Carryforwards
within owners’
equity
3.4.1 Increase
in capital (or share
capital) from
capital reserves
3.4.2 Increase
in capital (or share
capital) from
surplus reserves
3.4.3 Surplus
reserves used to
make up losses
3.4.4 Other
3.5 Specific
reserve
3.5.1
Withdrawn for the
period
3.5.2 Used
during the period
3.6 Other
53
Lu Thai Textile Co., Ltd. Interim Report 2018
4. Balances as of
922,602,311.00 699,493,647.48 121,952,709.49 44,370,228.14 962,933,579.06 4,553,114,343.08 557,441,097.57 7,618,002,496.84
end of the period
H1 2017
Unit: RMB
H1 2017
Equity attributable to owners of the Company as the parent
Item Other equity Specifi
Other Non-controlling Total owners’
instruments Less: Treasury c General
Share capital Capital reserves comprehensiv Surplus reserves Retained profits interests equity
Preferre Perpetua Othe shares reserv reserve
e income
d shares l bonds r e
1. Balances as of
922,602,311.00 761,280,557.83 53,293,544.89 891,870,522.68 4,341,866,189.19 475,088,111.17 7,446,001,236.76
end of prior year
Add: Adjustments
for changed
accounting
policies
Adjustments for
corrections of
previous errors
Adjustments for
business
combinations
involving
enterprises under
common control
Other
adjustments
2. Balances as of
922,602,311.00 761,280,557.83 53,293,544.89 891,870,522.68 4,341,866,189.19 475,088,111.17 7,446,001,236.76
beginning of the
54
Lu Thai Textile Co., Ltd. Interim Report 2018
year
3. Increase/
decrease in the -36,482,970.6
-61,786,964.01 71,063,056.38 287,236,522.87 69,044,608.47 329,074,253.04
period (“-” for 7
decrease)
3.1 Total
-36,482,970.6
comprehensive 841,150,934.75 42,168,174.85 846,836,138.93
7
income
3.2 Capital
increased and -61,786,964.01 38,900,000.00 -22,886,964.01
reduced by owners
3.2.1
Ordinary shares
500,000.00 500,000.00
increased by
shareholders
3.2.2 Capital
increased by
holders of other
equity instruments
3.2.3
Share-based
payments included
in owners’ equity
3.2.4 Other -61,786,964.01 38,400,000.00 -23,386,964.01
3.3 Profit
71,063,056.38 -553,914,411.88 -12,023,566.38 -494,874,921.88
distribution
3.3.1
Appropriation to 71,063,056.38 -71,063,056.38
surplus reserves
55
Lu Thai Textile Co., Ltd. Interim Report 2018
3.3.2
Appropriation to
general reserve
3.3.3
Appropriation to
-482,851,355.50 -12,023,566.38 -494,874,921.88
owners (or
shareholders)
3.3.4 Other
3.4
Carryforwards
within owners’
equity
3.4.1 Increase
in capital (or share
capital) from
capital reserves
3.4.2 Increase
in capital (or share
capital) from
surplus reserves
3.4.3 Surplus
reserves used to
make up losses
3.4.4 Other
3.5 Specific
reserve
3.5.1
Withdrawn for the
period
56
Lu Thai Textile Co., Ltd. Interim Report 2018
3.5.2 Used
during the period
3.6 Other
4. Balances as of
922,602,311.00 699,493,593.82 16,810,574.22 962,933,579.06 4,629,102,712.06 544,132,719.64 7,775,075,489.80
end of the period
8. Statements of Changes in Owners’ Equity of the Company as the Parent
H1 2018
Unit: RMB
H1 2018
Other equity instruments Other
Item Less: Treasury Specific Total owners’
Share capital Preferre Perpetua Capital reserves comprehensive Surplus reserves Retained profits
Other shares reserve equity
d shares l bonds income
1. Balances as of end of prior year 922,602,311.00 759,836,702.91 28,050.00 959,824,839.42 3,630,102,526.37 6,272,394,429.70
Add: Adjustments for changed
accounting policies
Adjustments for corrections of
previous errors
Other adjustments
2. Balances as of beginning of the
922,602,311.00 759,836,702.91 28,050.00 959,824,839.42 3,630,102,526.37 6,272,394,429.70
year
3. Increase/ decrease in the period
53.66 121,952,709.49 1,020,000.00 -168,142,388.79 -289,075,044.62
(“-” for decrease)
3.1 Total comprehensive
1,020,000.00 285,201,939.21 286,221,939.21
income
3.2 Capital increased and
53.66 121,952,709.49 -121,952,655.83
reduced by owners
57
Lu Thai Textile Co., Ltd. Interim Report 2018
3.2.1 Ordinary shares
121,952,709.49 -121,952,709.49
increased by shareholders
3.2.2 Capital increased by
holders of other equity
instruments
3.2.3 Share-based payments
included in owners’ equity
3.2.4 Other 53.66 53.66
3.3 Profit distribution -453,344,328.00 -453,344,328.00
3.3.1 Appropriation to
surplus reserves
3.3.2 Appropriation to
-453,344,328.00 -453,344,328.00
owners (or shareholders)
3.3.3 Other
3.4 Carryforwards within
owners’ equity
3.4.1 Increase in capital (or
share capital) from capital
reserves
3.4.2 Increase in capital (or
share capital) from surplus
reserves
3.4.3 Surplus reserves used
to make up losses
3.4.4 Other
3.5 Specific reserve
3.5.1 Withdrawn for the
period
58
Lu Thai Textile Co., Ltd. Interim Report 2018
3.5.2 Used during the period
3.6 Other
4. Balances as of end of the period 922,602,311.00 759,836,756.57 121,952,709.49 1,048,050.00 959,824,839.42 3,461,960,137.58 5,983,319,385.08
H1 2017
Unit: RMB
H1 2017
Other equity instruments Other
Item Less: Treasury Specific Total owners’
Share capital Preferre Perpetua Capital reserves comprehensive Surplus reserves Retained profits
Other shares reserve equity
d shares l bonds income
1. Balances as of end of prior year 922,602,311.00 759,793,238.92 888,761,783.04 3,451,836,174.44 6,022,993,507.40
Add: Adjustments for changed
accounting policies
Adjustments for corrections of
previous errors
Other adjustments
2. Balances as of beginning of the
922,602,311.00 759,793,238.92 888,761,783.04 3,451,836,174.44 6,022,993,507.40
year
3. Increase/ decrease in the period
43,463.99 28,050.00 71,063,056.38 178,266,351.93 249,400,922.30
(“-” for decrease)
3.1 Total comprehensive
28,050.00 710,630,563.81 710,658,613.81
income
3.2 Capital increased and
43,463.99 43,463.99
reduced by owners
3.2.1 Ordinary shares
increased by shareholders
3.2.2 Capital increased by
holders of other equity
59
Lu Thai Textile Co., Ltd. Interim Report 2018
instruments
3.2.3 Share-based payments
included in owners’ equity
3.2.4 Other 43,463.99 43,463.99
3.3 Profit distribution 71,063,056.38 -532,364,211.88 -461,301,155.50
3.3.1 Appropriation to
71,063,056.38 -71,063,056.38
surplus reserves
3.3.2 Appropriation to
-461,301,155.50 -461,301,155.50
owners (or shareholders)
3.3.3 Other
3.4 Carryforwards within
owners’ equity
3.4.1 Increase in capital (or
share capital) from capital
reserves
3.4.2 Increase in capital (or
share capital) from surplus
reserves
3.4.3 Surplus reserves used
to make up losses
3.4.4 Other
3.5 Specific reserve
3.5.1 Withdrawn for the
period
3.5.2 Used during the period
3.6 Other
4. Balances as of end of the period 922,602,311.00 759,836,702.91 28,050.00 959,824,839.42 3,630,102,526.37 6,272,394,429.70
60
III. Company Profile
Lu Thai Textile Co., Ltd. (hereinafter referred to as the “Company”) is a joint venture invested by
Zibo Lucheng Textile Investment Co., Ltd (originally named Zibo Lucheng Textile Co., Ltd,
hereinafter referred to as Lucheng Textile) and Thailand Tailun Textile Co., Ltd. On 3 February
1993, the Company is approved by the former Ministry of Foreign Trade and Economy of the State
(1993) in WJMZEHZ No. 59 to convert into a joint-stock enterprise. Zibo Administration for
Industry and Commerce issued the Company corporate business license with the registration No. of
QGLZZZ No. 000066. In July 1997, the Company is approved by the Securities Committee of the
Department of the State in the ZWF (1997) No. 47 to issue 80 million shares of domestically listed
foreign share( B-shares) at the price of RMB 1.00 per share. Upon approved by Shenzhen Stock
Exchange with No. (1997) 296 Listing Notice, the Company is listed on the Shenzhen Stock
Exchange on 19 August 1997 with B-shares stock code of 200726. On 24 November 2000,
approved by ZJGSZ [2000] No.199 by CSRC, the Company increased publication of 50 million
shares of general share (A-shares) at the book value of RMB 1.00, which are listed on the Shenzhen
Stock Exchange on 25 December 2000 with A-shares stock code of 000726 through approval by
Shenzhen Stock Exchange with No. (2000) 162 Listing Notice. As approved by 2000 Annual
General Meeting in May 2001, the Company carried out the distribution plan that 10 shares of
capital public reserve are converted to 3 more shares for each 10 shares. As approved by
Resolutions of 2001 Annual General Meeting in June 2002, the Company implemented the
distribution plan that 10 shares of capital public reserve are converted 3 more shares for each 10
shares again. As approved by 2002 Annual General Meeting in May 2003, the Company
implemented the distribution plan that 10 shares of capital public reserve are 2 more shares for each
10 shares, and inner employees’ shared increased to 40.56 million shares. As examined and
approved by ZJGSZ No. [2000] 199 of CSRC, the inner employees’ shares will start circulation 3
years later since listing on the A-share market. On 25 December 2003, the inner employees’ shares
reach 3 years since listing on the A-share stock market, and they set out circulation on 26 December
2003. As approved by the Annual General Meeting 2006 held in June 2007, the Company
implemented the plan on converting 10 shares to all its shareholders with capital reserves for every
10 shares. After capitalization, the registered capital of the Company was RMB 844.8648 million.
The Company, in accordance with the official reply on approving Lu Thai Textile Co., Ltd. to issue
additional shares (ZJXK [2008] No. 890 document) from CSRC, issued the Renminbi common
shares (A shares) amounting to 150 million shares on 8 December 2008. According to the relevant
resolution of the 2nd Special Extraordinary General Meeting of 2011, the relevant resolution of the
15th Meeting of the 6th Board of Directors, the Opinion of China Securities Regulatory Commission
on the Restricted Share Incentive Plan of Lu Thai Textile Co., Ltd. (Shang-Shi-Bu-Han [2011] No.
206), the Company applied for a registered capital increment of RMB 14.09 million, which was
contributed by restricted share incentive receivers with monetary funds. In accordance with the
resolution of Proposal on Repurchasing and Canceling Partial Restricted Shares already Granted for
the Original Incentive Targets not Reaching the Incentive Conditions made at the 23rd Session of the
6th Board of Directors on 13 August 2012, the Company canceling a total of 60,000.00 shares
already granted for the original incentive targets not reaching the incentive conditions. According to
the second temporary resolution of Proposal on counter purchase of part of the domestic listed
foreign share (B share) on 25 June 2012, the Company counter purchase domestic listed foreign
61
share (B share) 48,837,300 shares. According to the Proposal on Repurchase and Cancel Part of
Unlocked Restricted Share of the Original Incentive Personnel not Conforming to the Incentive
Condition, Proposal on Repurchase and Cancel unlocked Restricted Share in Second Unlocked
Period of all the Incentive Personnel reviewed and approved by the 26th Meeting of the 6th Board of
Directors on 27 March 2013, the Company repurchase and cancel 4,257,000 shares owned by
original people whom to motivate. According to the Proposal on Repurchase and Write-off of Partly
of the Original Incentive Targets Not Met with the Incentive Conditions but Granted Restricted
Shares approved on the 11th Meeting of the 7th Board of Directors on 11 June 2014, to execute
repurchase and write-off of the whole granted shares of 42,000 shares of the original incentive
targets not met with the incentive targets of the Company. As per the Proposal on Buy-back of
Some A- and B-shares considered and approved as a resolution at the 1st special meeting of
shareholders on 5 August 2015, the Company repurchased 33,156,200 domestically listed foreign
shares (B-shares). According to the Agreement about Repurchase of Part of the Company’s B
Shares by the Resolutions on the 2nd Extraordinary General Meeting of 2018 on 23 March 2018, the
Company repurchased 17.6748 million domestically listed foreign shares (B shares). As of 30 June
2018, the registered capital of the Company was RMB922.6023 million.
The Company’s registered address: No. 11, Mingbo Road, Hi-tech Development Zone, Zibo,
Shandong
The Company’s legal representative: Liu Zibin
The Company’s business scope includes the production, processing and sales business of cotton
yarn, yarn dyed fabrics, shirts, fashion accessories, health underwear and other textile products and
their mating products; design, R&D and technology services of the textile and garment products;
acquisition and export of products not under exclusive rights or quota licenses; and hotel,
guesthouses, catering, conferences, and training services; rental business of the self-owned houses
and land; the production and sales of the purified water projects.
The Company’s financial statements have been approved for issue by the Board of Directors of the
Company on 20 August 2018.
There were 16 subsidiaries included into the consolidation scope of the Company from January to
June 2018, and for the details, please refer to Notes VIII. “Equities among Other Entities”.
IV Basis for Preparation of Financial Statements
1. Preparation Basis
With the going-concern assumption as the basis and based on transactions and other events that
actually occurred, the Group prepared financial statements in accordance with The Accounting
Standards for Business Enterprises—Basic Standard issued by the Ministry of Finance with Decree
No. 33 and revised with Decree No. 76, the 42 specific accounting standards, the Application
Guidance of Accounting Standards for Business Enterprises, the Interpretation of Accounting
Standards for Business Enterprises and other regulations issued and revised from 15 February 2006
onwards (hereinafter jointly referred to as “the Accounting Standards for Business Enterprises”,
“China Accounting Standards” or “CAS”), as well as the Rules for Preparation Convention of
Disclosure of Public Offering Companies No.15 – General Regulations for Financial Reporting
(revised in 2014) by China Securities Regulatory Commission.
62
In accordance with relevant provisions of the Accounting Standards for Business Enterprises, the
Group adopted the accrual basis in accounting. Except for some financial instruments, the financial
statements were based on historical costs for measurement. Non-current asset held for sale was
priced according to the lower one between the amount of fair value minus estimated costs and the
original book value which complies with the conditions of holding for sale. If impairment occurred
on an asset, an impairment reserve was withdrawn accordingly pursuant to relevant requirements.
V. Significant Accounting Policies and Estimates
Specific accounting policies and accounting estimates indicators:
The Company and each subsidiary mainly engage in the production and operation of textile
products. The Company and each subsidiary according to the actual production and operation
characteristics and the regulations of the relevant ASBE, formulated certain specific accounting
policies and accounting estimates of the transactions and events such as recognizing the revenues,
and for details, please refer to each description of Notes V. As for the notes to the important
accounting judgment and estimations made by the management level, please refer to Notes V. 28
“Other important accounting policies and estimations”.
1. Statement of Compliance with the Accounting Standards for Business Enterprises
The financial statements prepared by the Company are in compliance with in compliance with the
Accounting Standards for Business Enterprises, which factually and completely present the
Company’s, and the Company’s financial positions as at 30 June 2018, business results and cash
flows for the January to June of 2018, and other relevant information. In addition, the Company’s
and the Company’s financial statements meet the requirements of disclosing financial statements
and notes thereto stated in the Rules for Preparation Convention of Disclosure of Public Offering
Companies No.15 – General Regulations for Financial Reporting (revised in 2014) by China
Securities Regulatory Commission.
2. Fiscal Period
The Company’s fiscal periods include fiscal years and fiscal periods shorter than a complete fiscal
year. The Company’s fiscal year starts on January 1st and ends on December 31st of every year
according to the Gregorian calendar.
3. Operating Cycle
Normal operating cycle refers to the period from the Group purchases the assets for processing to
realize the cash or cash equivalents. The Group regards 12 months as an operating cycle and regards
which as the partition criterion of the mobility of the assets and liabilities.
4. Recording Currency
Renminbi (RMB) is regarded as the prevailing currency used in the main economic circumstances
of the Company and its domestic subsidiaries. The Company and its domestic subsidiaries adopt
63
RMB as the recording currency. The Company and its overseas subsidiaries confirm to adopt HK
Dollar, US Dollar and Vietnamese Dong as the recording currency according their major economic
environment of the operating. When preparing the financial statements for the Reporting Period, the
Company adopted RMB as the recording currency.
5. Accounting Treatment for Business Combinations under the Common Control and Not under the
Common Control
Business combinations, it is refer to two or more separate enterprises merge to form a reporting
entity transactions or events. Business combination is divided into under the same control and those
non under the same control.
(1) Business combinations under the same control
A business combination under the same control is a business combination in which all of the
combining enterprises are ultimately controlled by the same party or the same parties both before
and after the business combination and on which the control is not temporary. In a business
combination under the same control, the party which obtains control of other combining enterprise(s)
on the combining date is the combining party, the other combining enterprise(s) is (are) the
combined party. The “combining date” refers to the date on which the combining party actually
obtains control on the combined party.
The assets and liabilities that the combining party obtains in a business combination shall be
measured on the basis of their carrying amount in the combined party on the combining date. As for
the balance between the carrying amount of the net assets obtained by the combining party and the
carrying amount of the consideration paid by it (or the total par value of the shares issued), the
additional paid-in capital (share premium) shall be adjusted. If the additional paid-in capital (share
premium) is not sufficient to be offset, the retained earnings shall be adjusted.
The direct cost for the business combination of the combining party shall be recorded into the
profits and losses at the current period.
(2) Business combinations not under the same control
A business combination not under the same control is a business combination in which the
combining enterprises are not ultimately controlled by the same party or the same parties both
before and after the business combination. In a business combination not under the same control,
the party which obtains the control on other combining enterprise(s) on the purchase date is the
acquirer, and other combining enterprise(s) is (are) the acquiree.
For a business combination not under the same control, the combination costs shall include the fair
values, on the acquisition date, of the assets paid, the liabilities incurred or assumed and the equity
securities issued by the acquirer in exchange for the control on the acquiree, the expenses for audit,
legal services and assessment, and other administrative expenses, which are recorded into the
profits and losses in the current period. The trading expenses for the equity securities or debt
securities issued by the acquirer as the combination consideration shall be recorded into the amount
of initial measurement of the equity securities or debt securities. The involved contingent
consideration shall be recorded into the combination costs at its fair value on the acquiring date.
Where new or further evidences emerge, within 12 months since the acquiring date, against the
existing circumstances on the acquiring date and the contingent consideration thus needs to be
64
adjusted, the combined goodwill shall be adjusted accordingly. The combination costs of the
acquirer and the identifiable net assets obtained by it in the combination shall be measured
according to their fair values at the acquiring date. The acquirer shall recognize the positive balance
between the combination costs and the fair value of the identifiable net assets it obtains from the
acquiree as business reputation. Where the combination costs are less than the fair value of the
identifiable net assets it obtains from the acquiree, the acquirer shall re-examine the measurement of
the fair values of the identifiable assets, liabilities and contingent liabilities it obtains from the
acquiree as well as the combination costs. If, after the reexamination, the combination costs are still
less than the fair value of the identifiable net assets it obtains from the acquiree, the acquirer shall
record the balance into the profits and losses of the current period.
As for the deductible temporary differences the acquirer obtains from the acquiree which are not
recognized into deferred income tax liabilities due to their not meeting the recognition standards, if
new or further information shows that the relevant situation has existed on the acquiring date and
the economic benefits brought by the deductible temporary differences the acquirer obtains from the
acquiree on the acquiring date can be realized, they shall be recognized into deferred income tax
assets and the relevant goodwill shall be reduced. Where the goodwill is not sufficient to be offset,
the difference shall be recognized into the profits and losses in the current period. In other
circumstances than the above, where the deductible temporary differences are recognized into
deferred income tax assets on the acquiring date, they shall be recorded into the profits and losses in
the current period.
In a business combination not under same control realized by two or more transactions of exchange,
according to about the 5th Notice about the Treasury Issuing the Accounting Standards for
Enterprises (Finance accounting) [2012] No. 19 Criterion about the “package deal” (see Notes V. 6
(2)), Whether the deals are “package deal” or not, belong to the “package deal”, see the previous
paragraphs described in this section and Notes V. 13 “Long term equity investment transaction” and
conduct accounting treatment, those not belong to the "package deal" distinguish between the
individual financial statements and the consolidated financial statements and conduct relevant
accounting treatment.
In the individual financial statements, the sum of the book value and new investment cost of the
Company holds in the acquiree before the acquiring date shall be considered as initial cost of the
investment. Other related comprehensive gains in relation to the equity interests that the Company
holds in the acquiree before the acquiring date shall be treated on the same basis as the acquiree
directly disposes the related assets or liabilities when disposing the investment (that is, except for
the corresponding share in the changes in the net liabilities or assets with a defined benefit plan
measured at the equity method arising from the acquiree’s re-measurement, the others shall be
transferred into current investment gains).
In the Company’s consolidated financial statements, as for the equity interests that the Company
holds in the acquiree before the acquiring date, they shall be re-measured according to their fair
values at the acquiring date; the positive difference between their fair values and carrying amounts
shall be recorded into the investment gains for the period including the acquiring date. Other related
comprehensive gains in relation to the equity interests that the Company holds in the acquiree
before the acquiring date shall be treated on the same basis as the acquiree directly disposes the
related assets or liabilities when disposing the investment (that is, except for the corresponding
share in the changes in the net liabilities or assets with a defined benefit plan measured at the equity
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method arising from the acquiree’s re-measurement, the others shall be transferred into current
investment gains on the acquiring date).
6. Preparation of the Consolidated Financial Statements
(1) Principle for determining the consolidation scope
The consolidation scope for financial statements is determined on the basis of control. The term
“control” is the power of the Company upon an investee, with which it can take part in relevant
activities of the investee to obtain variable returns and is able to influence the amount of returns.
The consolidated financial statements comprise the financial statements of the Company and its
subsidiaries. A subsidiary is an enterprise or entity controlled by the Company.
If any changes in the relevant facts or situations result in any changes in the elements involved in
the aforesaid definition of “control”, the Company shall carry out a reassessment.
(2) Methods for preparing the consolidated financial statements
Subsidiaries are fully consolidated from the date on which the Company obtains control on their net
assets and operation decision-making and are de-consolidated from the date when such control
ceases. As for a disposed subsidiary, its operating results and cash flows before the disposal date has
been appropriately included in the consolidated income statement and cash flow statement; and as
for subsidiaries disposed in the current period, the opening items in the consolidated balance sheet
are not adjusted. For a subsidiary acquired in a business combination not under the same control, its
operating results and cash flows after the acquiring date have been appropriately included in the
consolidated income statement and cash flow statement, and the opening items and comparative
items in the consolidated financial statements are not adjusted. For a subsidiary acquired in a
business combination under the same control or a combined party obtained in a takeover, its
operating results and cash flows from the beginning of the Reporting Period of the combination to
the combination date have been appropriately included in the consolidated income statement and
cash flow statement, and the comparative items in the consolidated financial statements are adjusted
at the same time.
The financial statements of subsidiaries are adjusted in accordance with the accounting policies and
accounting period of the Company during the preparation of the consolidated financial statements,
where the accounting policies and the accounting periods are inconsistent between the Company
and subsidiaries. For a subsidiary acquired from a business combination not under the same control,
the individual financial statements of the subsidiary are adjusted based on the fair value of the
identifiable net assets at the acquisition date.
All significant inter-group balances, transactions and unrealized profits are offset in the
consolidated financial statements.
The portion of a subsidiary’s shareholders’ equity and the portion of a subsidiary’s net profits and
losses for the period not held by the Company are recognized as minority interests and minority
shareholder profits and losses respectively and presented separately under shareholders’ equity and
net profits in the consolidation financial statements. The portion of a subsidiary’s net profits and
losses for the period that belong to minority interests is presented as the item of “minority
shareholder profits and losses” under the bigger item of net profits in the consolidated financial
statements. Where the loss of a subsidiary shared by minority shareholders exceeds the portion
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enjoyed by minority shareholders in the subsidiary’s opening owners’ equity, minority interests are
offset.
Where the Company losses control on its original subsidiaries due to disposal of some equity
investments or other reasons, the residual equity interests are re-measured according to the fair
value on the date when such control ceases. The summation of the consideration obtained from the
disposal of equity interests and the fair value of the residual equity interests, minus the portion in
the original subsidiary’s net assets measured on a continuous basis from the acquisition date that is
enjoyable by the Company according to the original shareholding percentage in the subsidiary, is
recorded in investment gains for the period when the Company’s control on the subsidiary ceases.
Other comprehensive incomes in relation to the equity investment in the original subsidiary are
treated on the same accounting basis as the acquiree directly disposes the relevant assets or
liabilities (that is, except for the changes in the net liabilities or assets with a defined benefit plan
resulted from re-measurement of the original subsidiary, the rest shall all be transferred into current
investment gains) when such control ceases. And subsequent measurement is conducted on the
residual equity interests according to the No. 2 Accounting Standard for Business Enterprises
—Long-term Equity Investments or the No. 22 Accounting Standard for Business
Enterprises—Recognition and Measurement of Financial Instruments. For details, see Notes V. 13
“Long Term Equity Investment” or Notes V. 9 “Financial Instruments”.
Where the Company losses control on its original subsidiaries due to step by step disposal of equity
investments through multiple transactions, it need to distinguish the Group losses control on its
subsidiaries due to disposal of equity investments whether belongs to a package deal. All the
transaction terms, conditions and economic impact of the disposal of subsidiaries’ equity investment
are in accordance with one or more of the following conditions, which usually indicate the multiple
transactions, should be considered as a package deal for accounting treatment. ① These deals are
at the same time or under the condition of considering the influence of each other to concluded; ②
These transactions only be as a whole can achieve a complete business result; ③ The occurrence
of a deal depends on at least one other transactions；④ A deal alone is not economical, it is
economical with other trading together. Those not belong to a package deal, each of them a deal
depends on circumstances respectively conduct accounting treatment in accordance with the
applicable principles of “part disposal of subsidiaries of a long-term equity investment under the
condition of not losing control on its subsidiaries” (see Notes V. 13. (2) ④ in this section) and
“Where the Company losses control on its original subsidiaries due to disposal of some equity
investments or other reasons” (see the front paragraph) relevant transactions of the Company losses
control on its subsidiaries due to disposal of equity investments belonging to a package deal,
considered as a transaction and conduct accounting treatment. However, Before losing control,
every disposal cost and corresponding net assets balance of subsidiary of disposal investment are
confirmed as other comprehensive income in consolidated financial statements, which together
transferred into the current profits and losses in the loss of control, when the Company losing
control on its subsidiary.
7. Confirmation Standard for Cash and Cash Equivalent
The term “cash” refers to cash on hand and deposits that are available for payment at any time. The
term “cash equivalents” refers to short-term (within 3 months from the purchase date) and highly
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liquid investments that are readily convertible to known amounts of cash and which are subject to
an insignificant risk of change in value.
8. Foreign Currency Businesses and Translation of Foreign Currency Financial Statements
(1) Accounting treatments for translation of foreign currency transactions
As for a foreign currency transaction, the Company shall convert the amount in a foreign currency
into amount in its bookkeeping base at the spot exchange rate (usually referring to the central parity
rate announced by the People’s Bank of China, the same below) of the transaction date, while as for
such transactions as foreign exchange or involving in foreign exchange, the Company shall
converted into amount in the bookkeeping base currency at actual exchange rate the transaction is
occurred.
(2) Accounting treatments for translation of foreign currency monetary items and non-monetary
items
On the balance sheet date, the foreign currency monetary items shall be translated at the spot
exchange rate on the balance sheet date. The exchange difference arising from the difference
between the spot exchange rate on the balance sheet date and the spot exchange rate at the time of
initial recognition or prior to the balance sheet date shall be recorded in the profits and losses in the
current period, excluding the following situations: ① the exchange difference arising from foreign
currency loans related to acquisition of fixed assets shall be treated at the principle of capitalization
of borrowing costs; ② the exchange difference arising from the hedging instruments used for
effective hedging of net overseas operation investments shall be recorded into other comprehensive
incomes, and shall be recognized into current gains and losses when the net investments are
disposed; and ③ the exchange difference arising from change in the book balance of foreign
currency monetary items available for sale except the amortized costs shall be recorded into other
comprehensive gains and losses.
For the preparation for consolidated financial statement involved in foreign operations, if there are
items of foreign currency monetary of net investment in foreign operations in essence, then the
balance of exchange generated by changes in exchange rate shall included into other comprehensive
income; when disposing foreign operations, it shall be converted into the disposal of the current
profits and losses.
A foreign currency non-monetary item measured at the historical costs shall still be translated at the
spot exchange rate on the transaction date. Where the foreign non-monetary items measured at the
fair value shall be converted into amount in its bookkeeping base currency at spot exchange rate,
the exchange gains and losses arising thereof shall be treated as change in fair value, and recorded
into the current period gains and losses or as other comprehensive incomes.
(3) Translation of foreign currency financial statements
When it involves overseas business in preparing the consolidated financial statement, for the
translation difference of foreign currency monetary items of net investment in overseas business
arising from the change in exchange rate, it shall be recorded into the item of “difference of foreign
currency financial statement translation” under the owners’ equity; and be recorded into disposal
gains and losses at current period when disposing overseas business.
The foreign currency financial statement of overseas business should be translated in to RMB
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financial statement by the following methods: The asset and liability items in the balance sheets
shall be translated at a spot exchange rate on the balance sheet date. Among the owner’s equity
items, except for the items as “undistributed profits”, other items shall be translated at the spot
exchange rate at the time when they are incurred. The income and expense items in the profit
statements shall be translated at the spot exchange rate of the transaction date. The undistributed
profits at year-begin is the undistributed profits at the end of last year after the translation;
undistributed profits at year-end shall be listed as various distribution items after the translation;
after the translation, the balance between assets and the sum of liabilities and owners’ equities shall
be recorded into other comprehensive gains and losses as difference of foreign currency translation.
Where an enterprise disposes of an overseas business without the control right, it shall shift the
differences, which is presented under the items of the owner’s equities in the balance sheet and
which arises from the translation of foreign currency financial statements relating to this overseas
business, into the disposal profits and losses of the current period by all or proportion of the
disposed overseas business.
Foreign cash flow shall be translated at the spot exchange rate of the date of cash flow incurred. The
influence of exchange rate on the cash flow shall be adjustment item and individually listed in the
cash flow statement.
And the opening balance and the actual balance of last year shall be listed at the amounts after
translation of foreign currency financial statement in last year.
Where the control of the Company over an overseas operation ceases due to disposal of all or some
of the Company’s owner’s equity in the overseas operation or other reasons, the foreign-currency
statement translation difference belonging to the parent company’s owner’s equity in relation to the
overseas operation which is stated under the shareholders’ equity in the balance sheet shall be all
restated as gains and losses of the disposal period.
Where the Company’s equity in an overseas operation decreases due to disposal of some equity
investment or other reasons but the Company still has control over the overseas operation, the
foreign-currency statement translation difference in relation to the disposed part of the overseas
operation shall be recorded into minority interests instead of current gains and losses. If what’s
disposed is some equity in an overseas associated enterprise or joint venture, the foreign-currency
statement translation difference related to the overseas operation shall be recorded into the gains
and losses of the current period of the disposal according to the disposal ratio.
9. Financial Instruments
The Company recognizes a financial asset or liability when it becomes a party of the relevant
financial instrument contract. Financial assets and liabilities are measured at fair value in initial
recognition. As for the financial assets and liabilities measured at fair value of which changes are
recorded into current gains and losses, the relevant dealing expenses are directly recorded into gains
and losses; and the dealing expenses on other kinds of financial assets and liabilities are included in
the amounts initially recognized.
(1) Determination of the fair value of main financial assets and financial liabilities
Fair value refers to the price that a market participant shall receive for selling an asset or shall pay
for transferring a liability in an orderly transaction on the measurement date. As for the financial
assets or financial liabilities for which there is an active market, the quoted prices in the active
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market shall be used to determine the fair values thereof. The quoted prices in the active market
refers to the prices available from stock exchange, broker’s agencies, guilds, pricing organization
and etc., which represent the actual trading price under equal transaction. Where there is no active
market for a financial instrument, the enterprise concerned shall adopt value appraisal techniques,
including the prices adopted by the parties, who are familiar with the condition, in the latest market
transaction upon their own free will, the current fair value obtained by referring to other financial
instruments of the same essential nature, the cash flow capitalization method and the option pricing
model, etc., to determine its fair value.
(2) Classification, recognition and measurement of financial assets
The purchase and sale of financial assets under the normal ways shall be recognized and stopped to
be recognized respectively at the price of transaction date. Financial assets shall be classified into
the following four categories when they are initially recognized: (a) the financial assets which are
measured at their fair values and the variation of which is recorded into the profits and losses of the
current period, (b) the investments which will be held to their maturity; (c) loans and the account
receivables; and (d) financial assets available for sale.
① The financial assets which are measured at their fair values and the variation of which is
recorded into the profits and losses of the current period
Including transactional financial assets and the financial assets which are designated to be measured
at their fair value when they are initially recognized and of which the variation is recorded into the
profits and losses of the current period;
The financial assets meeting any of the following requirements shall be classified as transactional
financial assets：A. The purpose to acquire the said financial assets is mainly for selling them in the
near future; B. Forming a part of the identifiable combination of financial instruments which are
managed in a centralized way and for which there are objective evidences proving that the
enterprise may manage the combination by way of short-term profit making in the near future; C.
Being a derivative instrument, excluding the designated derivative instruments which are effective
hedging instruments, or derivative instruments to financial guarantee contracts, and the derivative
instruments which are connected with the equity instrument investments for which there is no
quoted price in the active market, whose fair value cannot be reliably measured, and which shall be
settled by delivering the said equity instruments.
A transactional financial asset is subsequently measured at the fair value. The gains and losses
arising from the fair value changes, as well as the dividend and interest incomes from the financial
asset, are recorded in the gains and losses for the current period.
② Held-to-maturity investment
The term "held-to-maturity investment" refers to a non-derivative financial asset with a fixed date
of maturity, a fixed or determinable amount of repo price and which the enterprise holds for a
definite purpose or the enterprise is able to hold until its maturity.
For the held-to-maturity investment adopting actual interest rate method, which is measured at the
post-amortization costs, the profits and losses that arise when such financial assets or financial
liabilities are terminated from recognition, or are impaired or amortized, shall be recorded into the
profits and losses of the current period.
The actual interest rate method refers to the method by which the post-amortization costs and the
interest incomes of different installments or interest expenses are calculated in light of the actual
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interest rates of the financial assets or financial liabilities (including a set of financial assets or
financial liabilities). The actual interest rate refers to the interest rate adopted to cash the future cash
flow of a financial asset or financial liability within the predicted term of existence or within a
shorter applicable term into the current carrying amount of the financial asset or financial liability.
When the actual interest rate is determined, the future cash flow shall be predicted on the basis of
taking into account all the contractual provisions concerning the financial asset or financial liability
(the future credit losses shall not be taken into account).and also the various fee charges, trading
expenses, premiums or reduced values, etc., which are paid or collected by the parties to a financial
asset or financial liability contract and which form a part of the actual interest rate.
③ Loans and the accounts receivables
Loans and the accounts receivables refer to non-derivative financial assets, which there is no
quotation in the active market, with fixed recovery cost or recognizable. Financial assets that are
defined as loans and the accounts receivables by the Company including notes receivables, accounts
receivables, interest receivable, dividends receivable and other receivables etc..
Loans and the accounts receivables are made follow-up measurement on the basis of
post-amortization costs employing the effective interest method. Gains or loss arising from the
termination recognition, impairment occurs or amortization shall be recorded into the profits and
losses of the current period.
④ Assets available for sales
Assets available for sales including non-derivative financial asset that has been assigned as assets
available for sales on the initial recognition and financial assets excluded those measured at fair
value and of which the variation into profits and losses of the current period, they are some financial
assets, loans and accounts receivables, held-to-maturity investment.
The cost at the period-end of the available-for-sale liabilities instruments should be confirmed
according to its amortized cost method, that is the initially recognized amount which deduct the
principal that had been repaid, to plus or minus the accumulative amortization amount formed by
the amortization between the difference of the initially recognized amount and the amount on the
due date that adopted the actual interest rate method, and at the same time deduct the amount after
the impairment loss happened. The cost at the period-end of the available-for-sale liabilities
instruments is its initial cost.
Financial assets available-for-trade are subsequently measured at fair value, and gains or losses
arising from changes in the fair value are recognized as other comprehensive income，and be carried
forward when the said financial assets stopped recognition, then it shall be recorded into the profits
and losses of the current period. But, the equity instrument investment which neither have quotation
in the active market nor its fair value could not be reliable measured, as well as the derivative
financial assets that concern with the equity instruments and should be settled through handing over
to its equity instruments, should take the follow-up measurement according to the cost.
Interest receive during the holding of assets available for sales and cash dividends with distribution
announcement by invested companies, it shall be recorded into the profits and losses of the current
period.
(3) Impairment of financial assets
The Company assesses at the balance sheet date the carrying amount of every financial asset except
for the financial assets that measured by the fair value. If there is objective evidence indicating a
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financial asset may be impaired, a provision is provided for the impairment.
The Company carries out a separate impairment test for every financial asset which is individually
significant. As for a financial asset which is individually insignificant, an impairment test is carried
out separately or in the financial asset group with similar credit risk. Where the financial asset
(individually significant or insignificant) is found not impaired after the separate impairment test, it
is included in the financial asset group with similar credit risk and tested again on the group basis.
Where the impairment loss is recognized for an individual financial asset, it is not included in the
financial asset group with similar credit risk for an impairment test.
① Impairment on held-to maturity investment, loans and receivables
The financial assets measured by cost or amortized cost write down their carrying value by the
estimated present value of future cash flow. The difference is recorded as impairment loss. If there
is objective evidence to indicate the recovery of value of financial assets after impairment, and it is
related with subsequent event after recognition of loss, the impairment loss recorded originally can
be reversed. The carrying value of financial assets after impairment loss reversed shall not exceed
the amortized cost of the financial assets without provisions of impairment loss on the reserving
date.
② Impairment of available-for-sale financial assets
When it judged that the decrease of fair value of the available-for-sale equity instrument investment
is serious and not temporarily after comprehensive considering relevant factors, it reflected that the
available-for-sale equity instrument investment occurred impairment. Of which, the “serious
decline” refers to the accumulative decline range of the fair value over 20%; while the
“non-temporary decline” refers to the consecutive decline time of the fair value over 12 months.
Where an available-for-sale financial asset is impaired, the accumulative losses arising from the
decrease of the fair value of the capital reserve which is directly included are transferred out and
recorded in the profits and losses for the current period. The accumulative losses transferred out are
the balance obtained from the initially obtained cost of the said financial asset after deducting the
principals as taken back, the amortized amount, the current fair value and the impairment loss
originally recorded in the profits and losses.
Where the impairment loss has been recognized for an available-for-sale financial asset, if, within
the accounting periods thereafter, there is any objective evidence proving that the value of the said
financial asset has been restored and the restoration is objectively related to the events that occur
after the impairment loss was recognized, the originally recognized impairment loss is reversed.
The impairment losses on the available-for-sale equity instrument investments are reversed and
recognized as other comprehensive incomes, and the impairment losses on the available-for-sale
liability instruments are reversed and recorded in the profits and losses for the current period.
The impairment loss incurred to an equity instrument investment for which there is no quoted price
in the active market and whose fair value cannot be reliably measured, or incurred to a derivative
financial asset which is connected with the said equity instrument investment and which must be
settled by delivering the said equity investment, is not reversed.
(4) Recognition and measurement of financial asset transfers
Where a financial asset satisfies any of the following requirements, the recognition of it is
terminated: ① The contractual rights for collecting the cash flow of the said financial asset are
terminated; ② The said financial asset has been transferred and nearly all of the risks and rewards
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related to the ownership of the financial asset to the transferee; or ③ The said financial asset has
been transferred. And the Company has ceased its control on the said financial asset though it
neither transfers nor retains nearly all of the risks and rewards related to the ownership of the
financial asset.
Where the Company neither transfers nor retains nearly all of the risks and rewards related to the
ownership of a financial asset, and it does not cease its control on the said financial asset, it
recognizes the relevant financial asset and liability accordingly according to the extent of its
continuous involvement in the transferred financial asset. The term "continuous involvement in the
transferred financial asset" refers to the risk level that the enterprise faces resulting from the change
of the value of the financial asset.
If the transfer of an entire financial asset satisfies the conditions for stopping recognition, the
difference between the amounts of the following 2 items is recorded in the profits and losses of the
current period: (1) The book value of the transferred financial asset; and (2) The sum of
consideration received from the transfer, and the accumulative amount of the changes of the fair
value originally recorded in other comprehensive incomes.
If the transfer of partial financial asset satisfies the conditions to stop the recognition, the book
value of the transferred financial asset is apportioned between the portion whose recognition has
been stopped and the portion whose recognition has not been stopped according to their respective
relative fair value, and the difference between the amounts of the following 2 items is included into
the profits and losses of the current period: (1) The summation of the consideration received from
the transfer and the portion of the accumulative amount of changes in the fair value originally
recorded in other comprehensive incomes which corresponds to the portion whose recognition has
been stopped; and (2) The amortized carrying amounts of the aforesaid amounts.
In respect of the assets using recourse to sell or using endorsement to transfer, the Company needs
to determine whether almost all of the risks and rewards of the financial asset ownership are
transferred. If almost all of the risks and rewards of the financial asset ownership had been
transferred to the transferee, derecognize the financial assets. For almost all of the risks and rewards
of the financial asset ownership retained, do not end to recognize the financial assets. For which
neither transfer or retain almost all of the risks and rewards of the financial asset ownership,
continuously judge whether the Company retain the control of the assets, and conduct accounting
treatment according to the principle of mentioned in the previous paragraphs.
(5) Classification and measurement of financial liabilities
In the initial recognition, financial liabilities are divided into the financial liabilities measured at fair
values and whose changes are recorded in current gains and losses and other financial liabilities.
Financial liabilities are initially recognized at their fair values. As for a financial liability measured
at fair value and whose changes are recorded in current gains and losses, the relevant trading
expense is directly recorded in the profits and losses for the current period. As for other financial
liabilities, the relevant trading expenses are recorded in the initially recognized amounts.
① Financial liabilities measured at fair values and whose changes are recorded in current gains and
losses
Such financial liabilities are divided into transactional financial liabilities and financial liabilities
designated to be measured at fair values and whose changes are recorded in current gains and losses
in the initial recognition under the same conditions where such financial assets are divided into
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transactional financial assets and financial assets designated to be measured at fair values and
whose changes are recorded in current gains and losses in the initial recognition.
Financial liabilities measured at fair values and whose changes are recorded in current gains and
losses are subsequently measured at their fair values. Gains or losses arising from the fair value
changes, as well as the dividend and interest expenses in relation to the said financial liabilities, are
recorded in the profits and losses for the current period.
② Other financial liabilities
As for a derivative financial liability connected to an equity instrument for which there is not quoted
price in an active market and whose fair value cannot be reliably measured and which must be
settled by delivering the equity instrument, it is subsequently measured on the basis of costs. Other
financial liabilities are subsequently measured according to the amortized cost using the actual
interest rate method. Gains or losses arising from de-recognition or amortization of the said
financial liabilities is recorded in the profits and losses for the current period.
(6) De-recognition of financial liabilities
Only when the prevailing obligations of a financial liability are relieved in all or in part may the
recognition of the financial liability be terminated in all or partly. Where the Company (debtor)
enters into an agreement with a creditor so as to substitute the existing financial liabilities by way of
any new financial liability, and if the contractual stipulations regarding the new financial liability is
substantially different from that regarding the existing financial liability, it terminates the
recognition of the existing financial liability, and at the same time recognizes the new financial
liability.
Where the recognition of a financial liability is totally or partially terminated, the enterprise
concerned shall include into the profits and losses of the current period for the gap between the
book value which has been terminated from recognition and the considerations it has paid
(including the non-cash assets it has transferred out and the new financial liabilities it has assumed)
(7) Derivatives and embedded derivatives
Derivative financial instruments include derivatives are initially measured at fair value at the date
when the derivative contracts are entered into and are substantially re-measured at fair value. The
resulting gain and loss is recognized in profit or loss.
An embedded derivative is separated from the hybrid instrument, where the hybrid instrument is not
designated as a financial asset or financial liability at fair value though profit or loss, and the treated
as a standalone derivative if (a) the economic characteristics and risks of the embedded derivative
are not closely related to the economic characteristics and risks of the host contract; and (b) a
separate instrument with the same terms as the embedded derivative would meet the definition of a
derivative. If the Company is unable to measure the embedded derivative separately either at
acquisition or at a subsequent balance sheet date, it designates the entire hybrid instrument as a
financial asset or financial liability at fair value through profit or loss.
(8) Offsetting financial assets and financial liabilities
When the Company has a legal right that is currently enforceable to set off the recognized financial
assets and financial liabilities, and intends either to settle on a net basis, or to realize the financial
asset and settle the financial liability simultaneously, a financial asset and a financial liability shall
be offset and the net amount is presented in the balance sheet. Except for the above circumstances,
financial assets and financial liabilities shall be presented separately in the balance sheet and shall
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not be offset.
(9) Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company
after deducting all of its liabilities. The Company issues (including refinancing), re-purchases, sells
or written-offs the equity instrument as the disposing of the changes of the equity. The Group not
recognized the changes of the fair value of the equity instrument. The transaction expenses related
to the equity transaction would be deducted from the equity.
All types of distribution (excluding stock dividends) made by the Company to holders of equity
instruments are deducted from shareholders’ equity. The Company does not recognize any changes
in the fair value of equity instruments.
10. Receivables
(1) Accounts Receivable with Significant Single Amount for Which the Bad Debt Provision is Made
Individually
Receivables with the amount of RMB5 million or more than
Judgement basis or monetary standards of provision for bad
RMB5 million should recognize as the receivables with
debts of the individually significant accounts receivable
significant single amount.
The Company made an independent impairment test on
receivables with significant single amounts; the financial assets
without impairment by independent impairment test should be
Method of individual provision for bad debts of the individually
included in financial assets portfolio with similar credit risk to
significant accounts receivable
take the impairment test. Receivables was recognized with
impairment should no longer be included in receivables portfolio
with similar credit risk to take the impairment test.
(2) Accounts Receivable Which the Bad Debt Provision is Withdrawn by Credit Risk Characteristics
Name of portfolios Bad debt provision method
Aging group Aging analysis method
In the groups, adopting aging analysis method to withdraw bad debt provision:
√ Applicable □ Not applicable
Withdrawal proportion for accounts Withdrawal proportion for other accounts
Age
receivable (%) receivable (%)
Within 1 year (including 1 year) 5.00% 5.00%
1-2 years 10.00% 10.00%
2-3 years 20.00% 20.00%
Over 3 years 30.00% 30.00%
In the groups, adopting balance percentage method to withdraw bad debt provision:
□ Applicable √ Not applicable
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In the groups, adopting other methods to withdraw bad debt provision:
□ Applicable √ Not applicable
(3) Accounts Receivable with an Insignificant Single Amount but for Which the Bad Debt Provision is
Made Individually
Receivables have dispute with the other parties or involving lawsuit and arbitration; receivables
Reason of individually
have obvious indication showing that the debtors are likely to fail to perform the duty of
withdrawing bad debt provision
repayment, etc.
The Company made independent impairment test on receivables with insignificant amount but
with the following characteristics, if any objective evidence shows that the accounts receivable
Withdrawal method for bad debt has been impaired, impairment loss shall be recognized on the basis of the gap between the
provision current values of the future cash flow lower than its book value so as to withdraw provision for
bad debts: receivables involved in disputes, lawsuits or arbitrations; receivables with clear signs
that the debtor is not likely to repay; and the like.
11. Inventory
Is the Company subject to any disclosure requirements for special industries?
No.
(1) Classification
Inventories mainly include raw materials, work-in-progress, product processed on entrustment,
consumptive biological assets and stock products etc.
(2) Valuation method of inventories acquiring and issuing
Inventories shall be measured at actual cost when acquired, and the cost of the inventories including
the procurement cost, processing cost and other costs. Grey yarn, dyed yarn, and plus material shall
be measured at first-in first-out method when acquired and delivered; other inventories shall be
measured as per the weighted average method
(3) Basis for determining net realizable value of inventories and provision methods for decline in
value of inventories
Net realizable value is the estimated selling price in the ordinary course of business less the
estimated costs of completion, the estimated costs necessary to make the sale and relevant taxes.
Net realizable value is determined on the basis of clear evidence obtained, and takes into
consideration the purpose of holding inventories and effect of post balance sheet events.
At the balance sheet date, inventories are measured at the lower of the cost and net realizable value.
If the net realizable value is below the cost of inventories, a provision for decline in value of
inventories is made. The provision for inventories decline in value is determined by the difference
of the cost of individual item less its realizable value.
After the provision for decline in value of inventories is made, if the circumstances that previously
caused inventories to be written down below cost no longer exist so that the net realizable value of
inventories is higher than their cost, the original provision for decline in value is reversed and the
reversal is included in profit or loss for the period.
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(4) The perpetual inventory system is maintained for stock system.
(5) Amortization method of the low-value consumption goods and packing articles
For the low-value consumption goods, should be amortized by one-off amortization method when
consuming; and for the packing articles, should be amortized by one-off amortization method when
consuming.
12. Assets Held for Sale
The Company classifies an asset into held-for-sale when its book value is mainly recovered by
selling (including the exchanges of non-monetary assets with commercial substance) instead of a
non-current asset or disposal group. Specific standards are simultaneously satisfying the following
conditions: A asset or disposal group can be sold immediately under current conditions based on the
practice of selling such assets or disposal groups in similar transactions; the Company has already
made a resolution on sale plan and obtained a confirmed purchase commitment; and the sale is
expected to will be completed within one year. A disposal group refers to a group of assets that are
disposed of together as a whole by sale or other means in a transaction and the liabilities directly
related to these assets transferred in the transaction. Where the asset group or combination of asset
groups to which a disposal group belongs apportions the goodwill acquired in the business
combination in accordance with the "Accounting Standards for Enterprises No. 8 - Asset
Impairment", the disposal group shall include the goodwill allocated to it.
When the Company initially measures or re-measures on the balance sheet date the non-current
assets and disposal groups classified as held-for-sale, If the book value is higher than the fair value
minus the net amount of the sale costs, the book value will be written down to the net amount of fair
value minus the sale costs, and the amount written down will be recognized as impairment loss of
assets and included in the current profit and loss, and provision for impairment of held-for-sale
assets will be made at the same time. For the confirmed amount of impairment loss of assets of the
disposal groups held for sale, the book value of goodwill of the disposal groups will be offset first,
and then the book value of various non-current assets applicable to the measurement of Accounting
Standards for Business Enterprises No. 42 - Non-current Assets and Disposal Groups Held for Sale
and Termination of Operations (hereinafter referred to as “Held for sale standards”) in the disposal
groups will be offset according to the proportions. If the net amount that the fair value of the
disposal groups held for sale on the follow-up balance sheet date minus the sale costs increases, the
previous written-down amount will be restored, and reversed to the asset impairment loss confirmed
after the assets being classified as held-for-sale. The reversed amount will be included in the current
profit or loss. And its book value shall be increased proportionately to the proportion of the book
value of various non-current assets measured by the disposal group in addition to goodwill
applicable to the measurement of held-for-sale norms; The book value of deducted goodwill and the
non-current assets applicable to the measurement of held-for-sale norms will not be reversed if the
asset impairment loss is recognized before it is classified as held for sale.
Non-current assets held for sale or non-current assets in the disposal group are not subject to
depreciation or amortization. Interest and other expenses of liabilities in the disposal group held for
sale will be confirmed as before.
When a non-current asset or disposal group ceases be classified as held-for-sale or a non-current
asset is removed out from the held-for-sale disposal group due to failure in meeting the
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classification conditions for the category of held-for-sale, it will be measured by one of the
followings whichever is lower: (1) The book value before being classified as held for sale will be
adjusted according to the depreciation, amortization or impairment that would have been recognized
under the assumption that it was not classified as held for sale; (2) The recoverable amount.
13. Long-term Equity Investments
The long-term equity investments of this part refer to the long-term equity investments that the
Company has control, joint control or significant influence over the investees. The long-term equity
investment that the Company does not have control, joint control or significant influence over the
investees, should be recognized as available-for-sale financial assets or be measured by fair value
with the changes should be included in the financial assets accounting of the current gains and
losses, and please refer the details of the accounting policies to Notes V. 9 “Financial instrument”
Joint control, refers to the control jointly owned according to the relevant agreement on an
arrangement by the Company and the relevant activities of the arrangement should be decided only
after the participants which share the control right make consensus. Significant influence refers to
the power of the Company which could anticipate in the finance and the operation polices of the
investees, but could not control or jointly control the formulation of the policies with the other
parties.
(1) Recognition of investment costs
As for long-term equity investments acquired by enterprise merger, if the merger is under the same
control, the share of the book value of the owner’s equity of the merged enterprise, on the date of
merger, is regarded as the initial cost of the long-term equity investment. The difference between
the initial cost of the long-term equity investment and the payment in cash, non-cash assets
transferred as well as the book value of the debts borne by the merging party shall offset against the
capital reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted.
If the consideration of the merging enterprise is that it issues equity securities, it shall, on the date of
merger, regard the share of the book value of the shareholder's equity of the merged enterprise on
the consolidated financial statement of the ultimate control party as the initial cost of the long-term
equity investment. The total face value of the stocks issued shall be regarded as the capital stock,
while the difference between the initial cost of the long-term equity investment and total face value
of the shares issued shall offset against the capital reserve. If the capital reserve is insufficient to
dilute, the retained earnings shall be adjusted.
For the long-term investment required from the business combination under different control, the
initial investment cost regarded as long-term equity investment on the purchasing date according to
the combination cost, the combination costs shall be the sum of the fair values of the assets paid, the
liabilities incurred or assumed and the equity securities issued by the Company.
The commission fees for audit, law services, assessment and consultancy services and other
relevant expenses occurred in the business combination by the combining party or the purchase
party, shall be recorded into current profits and losses upon their occurrence.
Besides the long-term equity investments formed by business combination, the other long-term
equity investments shall be initially measured by cost, the cost is fixed in accordance with the ways
of gaining, such as actual cash payment paid by the Company, the fair value of equity securities
issued by the Company, the agreed value of the investment contract or agreement, the fair value or
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original carrying amount of exchanged assets from non-monetary assets exchange transaction, the
fair value of the long-term equity investments, etc. The expenses, taxes and other necessary
expenditures directly related with gaining the long-term equity investments shall also be recorded
into investment cost.
(2) Subsequent measurement and recognition of gains or losses
A long-term equity investment where the investing enterprise has joint control (except for which
forms into common operators) or significant influence over the investors should be measured by
equity method. Moreover, long-term equity investment adopting the cost method in the financial
statements, and which the Company has control on invested entity.
① Long-term equity investment measured by adopting cost method
The price of a long-term equity investment measured by adopting the cost method shall be included
at its initial investment cost and append as well as withdraw the cost of investing and adjusting the
long-term equity investment. The return on investment at current period shall be recognized in
accordance with the cash dividend or profit announced to distribute by the invested entity, except
the announced but not distributed cash dividend or profit included in the actual payment or
consideration upon gaining the investment.
② Long-term equity investment measured by adopting equity method
If the initial cost of a long-term equity investment is more than the Company's attributable share of
the fair value of the invested entity's identifiable net assets for investment, the initial cost of the
long-term equity investment may not be adjusted. If the initial cost of a long-term equity investment
is less than the Company's attributable share of the fair value of the invested entity's identifiable net
assets for the investment, the difference shall be included in the current profits and losses and the
cost of the long-term equity investment shall be adjusted simultaneously.
When measured by adopting equity method, respectively recognize investment income and other
comprehensive income according to the net gains and losses as well as the portion of other
comprehensive income which should be enjoyed or be shared, and at the same time adjust the book
value of the long-term equity investment; corresponding reduce the book value of the long-term
equity investment according to profits which be declared to distribute by the investees or the portion
of the calculation of cash dividends which should be enjoyed; for the other changes except for the
net gains and losses, other comprehensive income and the owners’ equity except for the profits
distribution of the investees, should adjust the book value of the long-term equity investment as
well as include in the capital reserve. The investing enterprise shall, on the ground of the fair value
of all identifiable assets of the invested entity when it obtains the investment, recognize the
attributable share of the net profits and losses of the invested entity after it adjusts the net profits of
the invested entity. If the accounting policies adopted by the investees is not accord with that of the
Company, should be adjusted according to the accounting policies of the Company and the financial
statement of the investees during the accounting period and according which to recognize the
investment income as well as other comprehensive income. For the transaction happened between
the Company and associated enterprises as well as joint ventures, if the assets launched or sold not
form into business, the portion of the unrealized gains and losses of the internal transaction, which
belongs to the Company according to the calculation of the enjoyed proportion, should recognize
the investment gains and losses on the basis. But the losses of the unrealized internal transaction
happened between the Company and the investees which belongs to the impairment losses of the
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transferred assets, should not be neutralized.
The Company shall recognize the net losses of the invested enterprise until the book value of the
long-term equity investment and other long-term rights and interests which substantially form the
net investment made to the invested entity are reduced to zero. However, if the Company has the
obligation to undertake extra losses, it shall be recognized as the estimated liabilities in accordance
with the estimated duties and then recorded into investment losses at current period. If the invested
entity realizes any net profits later, the Company shall, after the amount of its attributable share of
profits offsets against its attributable share of the un-recognized losses, resume recognizing its
attributable share of profits.
For the long-term equity investment held by the Company before the first execution of the new
accounting criterion on January 1, 2007 of the associated enterprises and joint ventures, if there is
debit difference of the equity investment related to the investment, should be included in the current
gains and losses according to the amount of the straight-line amortization during the original
remained period.
③ Acquiring shares of minority interest
In the preparation for the financial statements, the balance existed between the long-term equity
investment increased by acquiring shares of minority interest and the attributable net assets on the
subsidiary calculated by the increased shares held since the purchase date (or combination date), the
capital reserves shall be adjusted, if the capital reserves are not sufficient to offset, the retained
profits shall be adjusted.
④ Disposal of long-term equity investment
In the preparation of financial statements, the Company disposed part of the long-term equity
investment on subsidiaries without losing its controlling right on them, the balance between the
disposed price and attributable net assets of subsidiaries by disposing the long-term equity
investment shall be recorded into owners’ equity; where the Company losses the controlling right by
disposing part of long-term equity investment on such subsidiaries, it shall treated in accordance
with the relevant accounting policies in Notes V. 6. (2) “Method on preparation of combined
financial statements”.
For other ways on disposal of long-term equity investment, the balance between the book value of
the disposed equity and its actual payment gained shall be recorded into current profits and losses.
For the long-term equity investment measured by adopting equity method, if the remained equity
after disposal still adopts the equity method for measurement, the other comprehensive income
originally recorded into owners’ equity should adopt the same basis of the accounting disposal of
the relevant assets or liabilities directly disposed by the investees according to the corresponding
proportion. The owners’ equity recognized owning to the changes of the other owners’ equity except
for the net gains and losses, other comprehensive income and the profits distribution of the
investees, should be transferred into the current gains and losses according to the proportion.
For the long-term equity investment which adopts the cost method of measurement, if the remained
equity still adopt the cost method, the other comprehensive income recognized owning to adopting
the equity method for measurement or the recognition and measurement standards of financial
instrument before acquiring the control of the investees, should adopt the same basis of the
accounting disposal of the relevant assets or liabilities directly disposed by the investees and should
be carried forward into the current gains and losses according to the proportion; the changes of the
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other owners’ equity except for the net gains and losses, other comprehensive income and the
profits distribution among the net assets of the investees which recognized by adopting the equity
method for measurement, should be carried forward into the current gains and losses according to
the proportion.
14. Investment Real Estate
Measurement model of investment real estate
Costing method measurement
Depreciation or amortization method
The investment real estate refers to the real estate gaining the rent or capital appreciation or both. It
includes rented land use right, holding land use right to be transferred after the appreciation and
rented building, etc.
The investment real estate is measured initially according to the cost. The subsequent expenses
related with the investment real estate shall be calculated into the cost of investment real estate if
the economic benefit related with the asset may flow in and the cost may be measured reliably.
Other subsequent expenses shall be calculated in the current profits and losses at the occurrence.
The Company adopts the cost mode to conduct the subsequent measurement on the investment real
estate, depreciates or amortizes according to the policy consistent with the house building or land
use right.
The devaluation test method and devaluation provision method for the investment real estate can be
seen in Notes V. 20 “Long-term Asset Devaluation”.
When the self-use real estate or stock is converted to the investment real estate or the investment
real estate is converted to the self-use real estate, the book value before the conversion shall be the
entry value after the conversion.
When the investment real estate is disposed, or out of usage permanently, and it is expected not to
get the economic benefit from the disposal, the confirmation on the investment real estate shall be
terminated. The disposal income for the sales, transferring, scrap or damage of the investment real
estate deducing the book value and related tax shall be calculated in the current profits and losses.
15. Fixed Assets
(1) Conditions for Recognition
The term “fixed assets” refers to the tangible assets that simultaneously possess the features as
follows: (a) they are held for the sake of producing commodities, rendering labor service, renting or
business management; and (b) their useful life is in excess of one fiscal year. The fixed assets are
only recognized when the relevant economic benefits probably flow in the Company and its cost
could be reliable measured. The fixed assets should take the initial measurement according to the
cost and at the same time consider the influences of the factors of the estimated discard expenses.
(2) Depreciation Methods
Category of fixed assets Method Useful life Salvage value Annual deprecation
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Average method of
Housing and building 5-30 0-10% 3.00-20.00
useful life
Average method of
Machinery equipments 10-18 0-10% 5.00-10.00
useful life
Average method of
Transportation vehicle 5 0-10% 18.00-20.00
useful life
Electronic equipments Average method of
5 0-10% 18.00-20.00
and others useful life
(3) Recognition Basis, pricing and depreciation method of fixed assets by finance lease
The “finance lease” shall refer to a lease that has transferred in substance all the risks and rewards
related to the ownership of an asset. Its ownership may or may not eventually be transferred. The
fixed assets by finance lease shall adopt the same depreciation policy for self-owned fixed assets. If
it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when the
lease term expires, the leased asset shall be fully depreciated over its useful life. If it is not
reasonable to be certain that the lessee will obtain the ownership of the leased asset at the expiry of
the lease term, the leased asset shall be fully depreciated over the shorter one of the lease term or its
useful life.
16. Construction in Progress
Construction in process is measured at actual cost. Actual cost comprises construction costs,
borrowing costs that are eligible for capitalization before the fixed assets being ready for their
intended us and other relevant costs. Construction in process is transferred to fixed assets when the
assets are ready for their intended use. See the details of the impairment test method of the
impairment provision withdrawal method of the construction in progress to Notes V. 20 “Long-term
assets impairment”.
17. Borrowing Costs
Borrowing costs include interest on borrowings, amortization of discounts or premiums, ancillary
expenses and exchange differences arising from foreign currency borrowings. The capitalization of
borrowing costs, which can be directly attributable to asset acquisition or construction, starts when
asset expenditure or borrowing cost are generated, or the asset acquisition or construction is
launched to enable the asset to meet the predefined conditions for use or sale, and ends when the
acquired or constructed asset conforming to capitalization conditions meet the predefined
conditions for use or sale. The other borrowing costs are recognized as expenses in the current
period.
The actual interest expenses incurred in the current period of specific borrowings shall be
capitalized by subtracting the interest income earned by the bank from unused borrowing funds or
investment income gained from temporary investment. For general borrowings, the amount to be
capitalized shall be determined based on the weighted average of total asset expenditure exceeding
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the specific borrowing multiplied by the capitalization rate of general borrowings. The
capitalization rate is determined based on the weighted average interest rate of general borrowings.
During the capitalization period, the foreign exchange differences on foreign currency specific
borrowings shall be capitalized. The exchange differences on foreign currency general borrowings
shall be included in the current profits and losses.
Assets eligible for capitalization refer to assets such as fixed assets, investment real estate and
inventory that require a considerable amount of time for acquisition or construction to be ready for
use or sale.
If the acquisition or construction process of the assets eligible for capitalization is stopped
unexpectedly for more than 3 months, the capitalization of borrowing costs shall be suspended until
the asset acquisition or construction resumes.
18. Biological Assets
(1) Consumptive biological assets
Consumptive biological assets refer to the biological assets held for sale or to be harvested as
agricultural products in future, including crops, vegetables under growing, timber production forest
and domestic animals for sale. The consumptive biological assets shall be measured based on cost.
All costs for planting, creating, cultivating or raising of consumptive biological assets shall be the
necessary expenses directly added to such assets that accrued before harvest, including any loan that
satisfies capitalization conditions. Subsequent expenses for keeping and feeding the consumptive
biological assets after the harvest should be recognized as the losses and gains of the current period.
Upon harvest or sale, the cost of consumptive biological assets shall be based on its book value
through weighted average.
On the date of Balance Sheet, the consumptive biological assets shall be measured with lower of
cost and net realizable value, and the method for confirming the reserve for inventory price drop
shall be adopted to confirm the reserve for price drop of consumptive biological assets. If the
impacts of depreciation disappear, the depreciation amount shall be recovered, and the reserve for
price drop originally accrued shall be reversed. Such amount reversed shall be recognized as loss
and gain for the current period.
If consumptive biological assets change its usage to be as productive biological assets, the cost after
such change shall be confirmed based on the book value when the usage is changed. If consumptive
biological assets are changed as public biological assets, depreciation shall be taken into
consideration pursuant to Corporate Accounting Rules No. 8 – Assets Depreciation. When
depreciation occur, accrued the depreciation reserve first and then confirm based on the book value
after such accrual.
(2) Productive biological assets
Productive biological assets refer to agricultural products produced, and biological assets held for
labor provision or lease, including economic forest, firewood forest, productive animals and labor
animals. The productive biological assets shall be measured based on cost. All costs for creating or
fostering productive biological assets shall be the necessary expenses directly added to such assets
that accrued before it reaches expected production purpose, including any loan that satisfies
capitalization conditions.
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The Company shall withdraw the depreciation of the productive biological assets by adopting the
straight-line method since the second month of its useful life. Useful life, expected net salvage
value and annual depreciation rate of each productive biological assets are as below:
Category Useful life (Year) Expected net salvage value Annual deprecation (%)
(%)
Livestock 5 5% 19
The Company shall review the service life, expected net residuals and depreciation method of the
productive biological assets at least by the end of the year. In case of any change, it shall be deemed
as accounting estimate change.
The difference between proceedings from disposal (sale, loss, death or damage) of the productive
biological assets deducted by book value and related tax shall be recognized as loss and gain for the
current period.
The Company shall check on the date of Balance Sheet whether there is a depreciation sign for the
productive biological assets. If yes, estimate the recoverable amount. Such recoverable amount shall
be estimated based on single asset item. If it is difficult, the recoverable amount of the portfolio
shall be confirmed based on the portfolio such assets belong to. If the recoverable amount of the
assets is lower than book value, reserve for asset depreciation shall be accrued based on such
difference, and recognized as loss and gain for the current period.
The above assets impairment losses once be recognized should not be reversed during the
accounting periods afterwards.
If the productive biological assets changed the usage as the consumptive biological assets, the cost
after the change should be recognized as the book value when changing the usage; of the productive
biological assets changed the usage as non-profit living assets, should be recognized according to
the book value after the withdrawal of the impairment provision in accord with the regulation of No.
8 of ASBE - Assets Impairment for considering whether there was impairment and should withdraw
the impairment provision in ahead of it.
19. Intangible Assets
(1) Pricing Method, Useful Life and Impairment Test
The term “intangible asset” refers to the identifiable non-monetary assets possessed or controlled by
enterprises which have no physical shape.
The intangible assets shall be initially measured according to its cost. The costs related with the
intangible assets, if the economic benefits related to intangible assets are likely to flow into the
enterprise and the cost of intangible assets can be measured reliably, shall be recorded into the costs
of intangible assets; otherwise, it shall be recorded into current profits and losses upon the
occurrence.
The use right of land gained is usually measured as intangible assets. For the self-developed and
constructed factories and other constructions, the related expenditures on use right of land and
construction costs shall be respectively measured as intangible assets and fixed assets. For the
purchased houses and buildings, the related payment shall be distributed into the payment for use
right of land and the payment for buildings, if it is difficult to be distributed, the whole payment
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shall be treated as fixed assets.
For intangible assets with a finite service life, from the time when it is available for use, the cost
after deducting the sum of the expected salvage value and the accumulated impairment provision
shall be amortized by straight line method during the service life. While the intangible assets
without certain service life shall not be amortized.
At the end of period, the Company shall check the service life and amortization method of
intangible assets with finite service life, if there is any change, it shall be regarded as a change of
the accounting estimates. Besides, the Company shall check the service life of intangible assets
without certain service life, if there is any evidence showing that the period of intangible assets to
bring the economic benefits to the enterprise can be prospected, it shall be estimated the service life
and amortized in accordance with the amortization policies for intangible assets with finite service
life.
For details of impairment testing method and provision-making method for intangible assets, see
Notes V. 20 “Long-term assets impairment”.
(2) Accounting Policy for Internal Research and Development Expenditures
The expenditures for internal research and development projects of an enterprise shall be classified
into research expenditures and development expenditures.
The research expenditures shall be recorded into the profit or loss for the current period.
The development expenditures shall be confirmed as intangible assets when they satisfy the
following conditions simultaneously, and shall be recorded into profit or loss for the current period
when they don’t satisfy the following conditions.
① It is feasible technically to finish intangible assets for use or sale;
② It is intended to finish and use or sell the intangible assets;
③ 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
applying the intangible assets or there is a potential market for the intangible assets itself or the
intangible assets will be used internally;
④ It is able to finish the development of the intangible assets, and able to use or sell the intangible
assets, with the support of sufficient technologies, financial resources and other resources;
⑤ The development expenditures of the intangible assets can be reliably measured.
As for expenses that can’t be identified as research expenditures or development expenditures, the
occurred R & D expenses shall be all included in current profits and losses.
20. Impairment of Long-term Assets
For non-current financial Assets of fixed Assets, projects under construction, intangible Assets with
limited service life, investing real estate with cost model, long-term equity investment of
subsidiaries, cooperative enterprises and joint ventures, the Company should judge whether
decrease in value exists on the date of balance sheet. Recoverable amounts should be tested for
decrease in value if it exists. Other intangible Assets of reputation and uncertain service life and
other non-accessible intangible assets should be tested for decrease in value no matter whether it
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exists.
If the recoverable amount is less than book value in impairment test results, the provision for
impairment of differences should include in impairment loss. Recoverable amounts would be the
higher of net value of asset fair value deducting disposal charges or present value of predicted cash
flow. Asset fair value should be determined according to negotiated sales price of fair trade. If no
sales agreement exists but with asset active market, fair value should be determined according to the
Buyer’s price of the asset. If no sales agreement or asset active market exists, asset fair value could
be acquired on the basis of best information available. Disposal expenses include legal fees, taxes,
cartage or other direct expenses of merchantable Assets related to asset disposal. Present value of
predicted asset cash flow should be determined by the proper discount rate according to Assets in
service and predicted cash flow of final disposal. Asset depreciation reserves should be calculated
on the basis of single Assets. If it is difficult to predict the recoverable amounts for single Assets,
recoverable amounts should be determined according to the belonging asset group. Asset group is
the minimum asset combination producing cash flow independently.
In impairment test, book value of the business reputation in financial report should be shared to
beneficial asset group and asset group combination in collaboration of business merger. It is shown
in the test that if recoverable amounts of shared business reputation asset group or asset group
combination are lower than book value, it should determine the impairment loss. Impairment loss
amount should firstly be deducted and shared to the book value of business reputation of asset
group or asset group combination, then deduct book value of all assets according to proportions of
other book value of above assets in asset group or asset group combination except business
reputation.
After the asset impairment loss is determined, recoverable value amounts would not be returned in
future.
21. Long-term Deferred Expenses
Long-term deferred expenses refer to general expenses with the apportioned period over one year
(one year excluded) that have occurred but attributable to the current and future periods. The
long-term deferred expenses mainly including land contract fees, land rental fees and house rental
fees, and etc. And the long-term deferred expense shall be amortized by the straight-line method
averagely within the benefit period.
22. Payroll
(1) Accounting Treatment of Short-term Compensation
The payroll of the Company mainly includes: short-term employees compensation, welfare after
departure, demission welfare, and the welfare of other long-term staffs, of which:
Short-term compensation mainly including salary, bonus, allowances and subsidies, employee
services and benefits, medical insurance premiums, birth insurance premium, industrial injury
insurance premium, housing fund, labor union expenditure and personnel education fund,
non-monetary benefits etc. The short-term compensation actually happened during the accounting
period when the active staff offering the service for the Company should be recognized as liabilities
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and is included in the current gains and losses or relevant assets cost. Of which the non-monetary
benefits should be measured according to the fair value.
(2) Accounting Treatment of the Welfare after Departure
Welfare after demission mainly includes basic endowment insurance and unemployment insurance
and welfare plans after demission include setting drawing plan. Where the setting drawing plan is
adopted, the corresponding payable and deposit amount should be included into the relevant assets
cost or the current gains and losses when happen.
(3) Accounting Treatment of the Demission Welfare
The Company relieves the labor relation with the employees before the due date of the labor
contacts or puts forward the advice of providing the compensation for urging the employees
volunteered to receive the downsizing and when the Company could not unilaterally withdraw the
demission welfare owning to the relieving plan of the labor relation or the downsizing advice,
should confirm the liabilities of the employees’ salary from the demission welfare on the earlier day
between the cost confirmed by the Company and the cost related to the reorganization of the
payment of the demission welfare and includes which in the current gains and losses. But as for the
demission welfare be estimated that could not be completed paid within 12 months after the end of
the annual Reporting Period, should be handled according to the other long-term employee’s salary.
(4) Accounting Treatment of the Welfare of Other Long-term Staffs
The internal retire plan of the employees should be handled by adopting the same principles of the
above demission welfare. The Company includes the salary and the paid social insurance charges
planed to pay by the personnel retreated inside during the period from the date when ceased the
services to the normal retire date in the current gains and losses (demission welfare) when met with
the recognition conditions of the estimated liabilities.
The other long-term welfare that the Company offers to the staffs, if met with the setting drawing
plan, should be accounting disposed according to the setting drawing plan, while the rest should be
disposed according to the setting revenue plan.
23. Revenue
Is the Company subject to any disclosure requirements for special industries?
No.
(1) Selling products
No revenue from selling goods may be recognized unless the following conditions are met
simultaneously: the significant risks and rewards of ownership of the goods have been transferred to
the buyer by the enterprise; the enterprise retains neither continuous management right that usually
keeps relation with the ownership nor effective control over the sold goods; the relevant amount of
revenue can be measured in a reliable way; the relevant economic benefits may flow into the
enterprise; and the relevant costs incurred or to be incurred can be measured in a reliable way.
87
As for the revenues from the domestic sales products, the Company deliveries the products to the
buyers according to the contracts agreement, and the revenues amount of the products sales had
been confirmed with the goods payment had been withdrawn or had received the receipt voucher of
which the relevant economic benefits probably flow into the enterprise as well as the relevant costs
of the products could be reliable measured when being confirming as the revenues.
As for the revenues from the export sales products, the Company executes the customs declaration
and the products departure according to the contracts agreement, and the Company had acquired the
bill of lading with the revenues amount of the products sale had been confirmed and the goods
payment had been withdrawn or had had received the receipt voucher of which the relevant
economic benefits probably flow into the enterprise as well as the relevant costs of the products
could be reliable measured when being confirming as the revenues.
(2) Providing labor services
If the Company can reliably estimate the outcome of a transaction concerning the labor services it
provides, it shall recognize the revenue from providing services employing the
percentage-of-completion method on the date of the balance sheet. The completed proportion of a
transaction concerning the providing of labor services shall be decided by the proportion of the
labor service already provided to the total labor service to provide.
The outcome of a transaction concerning the providing of labor services can be measured in a
reliable way, means that the following conditions shall be met simultaneously: ① The amount of
revenue can be measured in a reliable way; ② The relevant economic benefits are likely to flow
into the enterprise; ③ The schedule of completion under the transaction can be confirmed in a
reliable way; and ④ The costs incurred or to be incurred in the transaction can be measured in a
reliable way.
If the outcome of a transaction concerning the providing of labor services can’t be measured in a
reliable way, the revenue from the providing of labor services shall be recognized in accordance
with the amount of the cost of labor services incurred and expected to be compensated, and make
the cost of labor services incurred as the current expenses. If it is predicted that the cost of labor
services incurred couldn’t be compensated, thus no revenue shall be recognized.
Where a contract or agreement signed between Company and other enterprises concerns selling
goods and providing of labor services, if the part of sale of goods and the part of providing labor
services can be distinguished from each other and can be measured respectively, the part of sale of
goods and the part of providing labor services shall be treated respectively. If the part of selling
goods and the part of providing labor services can’t be distinguished from each other, or if the part
of sale of goods and the part of providing labor services can be distinguished from each other but
can’t be measured respectively, both parts shall be conducted as selling goods.
(3) Royalty revenue
In accordance with relevant contract or agreement, the amount of royalty revenue should be
recognized as revenue on accrual basis.
(4) Interest revenue
The amount of interest revenue should be measured and confirmed in accordance with the length of
time for which the Company’s monetary fund is used by others and the agreed interest rate.
88
24. Government Subsidies
(1) Judgment Basis and Accounting Treatment of Government Subsidies Related to Assets
The government subsidy refers to the Company gets the monetary and non-monetary assets for free
from the government, excluding the capital that the government invests as the investor who enjoys
the corresponding owner’s equity. It can be divided into the asset-related government subsidy and
income-related government subsidy. The Company defines the obtained government subsidy for the
acquisition and construction or forming the long-term asset in other ways as the asset-related
government subsidy; other government subsidies are defined as the income-related government
subsidy. If the government document does not clearly prescribe the subsidy object, the following
ways shall be adopted to divide the subsidy into the income-related government subsidy and
asset-related government subsidy: (1) The government document clears the specific project for the
subsidy, it shall divide according to the relative ratio of asset expenditure amount and entry cost
expenditure amount to be formed in the budget of specific project, review according to the division
ratio at each balance sheet date, and change when necessary; (2) The government document only
makes the general expression on the usage without indicated specific project, it shall be the
income-related government subsidy. If the government subsidy is monetary asset, it shall be
measured according to the received or receivable amount. If the government subsidy is
non-monetary asset, it shall be measured according to the fair value; it the fair value can’t be got
reliably, it shall be measured according to the nominal amount. The government subsidy measured
according to the nominal amount shall be calculated in the current profits and losses directly.
The asset-related government subsidy shall be confirmed as the deferred income, and it shall be
calculated into the current profits and losses by stages in reasonable and systematic way within the
service life of related asset.
Government subsidies related to routine activities of the Company shall be calculated into other
income or offset related costs according to the essence of economic business; government subsidies
that have nothing to do with routine activities shall calculated into non-operating income.
When the confirmed government subsidy needs to be returned and there is the related deferred
income balance, the related deferred income book balance shall be deducted, and the surpassing part
shall be calculated into the current profits and losses; If in other situations, it shall be calculated in
the current profits and losses directly.
(2) Judgment Basis and Accounting Treatment of Government Subsidies Pertinent to Incomes
The Company usually confirms and measures the government subsidy according to the received
amount when receiving actually. However, the financial support fund which can be received
complying with the related conditions prescribed in the financial support policy indicated by the
conclusive evidence shall be measured according to the receivable amount. The following
conditions shall be met for the government subsidy measured by the receivable amount: (1) The
receivable subsidy amount has been confirmed by the authorized government department, or it can
be measured reasonably according to the officially released provisions related with the financial
fund management method, and it is expected there is no major uncertainty for the amount; (2) It is
based on the financial support project and financial fund management method actively opened
89
released officially by the local financial department and according to the provision in Government
Information Disclosure Provisions, the management method shall be universal (any enterprise
complying with the prescribed condition can apply) rather than for the specific enterprise; (3) The
related subsidy approval document has clearly promised the appropriate term, and the appropriation
of the amount shall have the corresponding financial budget for the guarantee, therefore, it can
ensure to receive within the prescribed term reasonably.
The income-related government subsidy to compensate the related expense and loss later shall be
confirmed as the deferred income, and it shall be calculated in the current profits and losses during
the period to confirm the related costs or losses; the occurred related costs or losses for
compensation shall be calculated in the current profits and losses directly.
For government subsidy including the asset-related government subsidy and the income-related
government subsidy at one time, accounting treatment shall be conducted respectively to distinguish
the different parts; if it is difficult to distinguish, then it shall be classified into the income-related
government subsidy
25. Deferred Income Tax Assets/Deferred Income Tax Liabilities
(1) Income tax of the current period
On the balance sheet date, for the current income tax liabilities (or assets) of the current period as
well as the part formed during the previous period, should be measured by the income tax of the
estimated payable (returnable) amount which be calculated according to the regulations of the tax
law. The amount of the income tax payable which is based by the calculation of the current income
tax expenses, are according to the result measured from the corresponding adjustment of the pre-tax
accounting profit of this Reporting Period which in accord to the relevant regulations of the tax law.
(2) Deferred income tax assets and deferred income tax liabilities
The difference between the book value of certain assets and liabilities and their tax assessment basis,
as well as the temporary difference occurs from the difference between the book value of the items
which not be recognized as assets and liabilities but could confirm their tax assessment basis
according to the regulations of the tax law, the deferred income tax assets and the deferred income
tax liabilities should be recognized by adopting liabilities law of the balance sheet.
No deferred tax liability is recognized for a temporary difference arising from the initial recognition
of goodwill, the initial recognition of assets or liabilities due to a transaction other than a business
combination, which affects neither accounting profit nor taxable profit (or deductible loss). Besides,
no deferred tax assets is recognized for the taxable temporary differences related to the investments
of subsidiary companies, associated enterprises and joint enterprises, and the investing enterprise
can control the time of the reverse of temporary differences as well as the temporary differences are
unlikely to be reversed in the excepted future. Otherwise, the Group should recognize the deferred
income tax liabilities arising form other taxable temporary difference.
No deferred taxable assets should be recognized for the deductible temporary difference of initial
recognition of assets and liabilities arising from the transaction which is not business combination,
the accounting profits will not be affected, nor will the taxable amount or deductible loss be affected
at the time of transaction. Besides, no deferred taxable assets should be recognized for the
deductible temporary difference related to the investments of the subsidiary companies, associated
enterprises and joint enterprises, which are not likely to be reversed in the expected future or is not
90
likely to acquire any amount of taxable income tax that may be used for making up such deductible
temporary differences. Otherwise, the Company shall recognize the deferred income tax assets
arising from a deductible temporary difference basing on the extent of the amount of the taxable
income that is likely to be acquired to make up such deductible temporary differences
For any deductible loss or tax deduction that can be carried forward to the next year, the
corresponding deferred income tax asset shall be determined to the extent that the amount of future
taxable income to be offset by the deductible loss or tax deduction to be likely obtained.
On the balance sheet date, the deferred income tax assets and the deferred income tax liabilities
shall be measured at the tax rate applicable to the period during which the assets are expected to be
recovered or the liabilities are expected to be settled.
The book value of deferred income tax assets shall be reviewed at each balance sheet date. If it is
unlikely to obtain sufficient taxable income to offset against the benefit of the deferred income tax
asset, the book value of the deferred income tax assets shall be written down. Any such write-down
should be subsequently reversed where it becomes probable that sufficient taxable income will be
available.
(3) Income tax expenses
Income tax expenses include current income tax and deferred income tax.
The rest current income tax and the deferred income tax expenses or revenue should be included
into current gains and losses except for the current income tax and the deferred income tax related
to the transaction and events that be confirmed as other comprehensive income or be directly
included in the shareholders’ equity which should be included in other comprehensive income or
shareholders’ equity as well as the book value for adjusting the goodwill of the deferred income tax
occurs from the business combination.
(4) Offset of income tax
The current income tax assets and liabilities of the Company should be listed by the written-off net
amount which intend to executes the net amount settlement as well as the assets acquiring and
liabilities liquidation at the same time while owns the legal rights of settling the net amount.
The deferred income tax assets and liabilities of the Company should be listed as written-off net
amount when having the legal rights of settling the current income tax assets and liabilities by net
amount and the deferred income tax and liabilities is relevant to the income tax which be collected
from the same taxpaying bodies by the same tax collection and administration department or is
relevant to the different taxpaying bodies but during each period which there is significant reverse
of the deferred income assets and liabilities in the future and among which the involved taxpaying
bodies intend to settle the current income tax and liabilities by net amount or are at the same time
acquire the asset as well as liquidate the liabilities.
26. Lease
(1) Accounting Treatment of Operating Lease
(1) Business of operating leases recorded by the Group as the lessee
The rent expenses from operating leases shall be recorded by the lessee in the relevant asset costs or
the profits and losses of the current period by using the straight-line method over each period of the
91
lease term. The initial direct costs shall be recognized as the profits and losses of the current period.
The contingent rents shall be recorded into the profits and losses of the current period in which they
actually arise.
(2) Business of operating leases recorded by the Group as the lessor
The rent incomes from operating leases shall be recognized as the profits and losses of the current
period by using the straight-line method over each period of the lease term. The initial direct costs
of great amount shall be capitalized when incurred, and be recorded into current profits and losses
in accordance with the same basis for recognition of rent incomes over the whole lease term. The
initial direct costs of small amount shall be recorded into current profits and losses when incurred.
The contingent rents shall be recorded into the profits and losses of the current period in which they
actually arise.
(2) Accounting Treatments of Financial Lease
(1) Business of finance leases recorded by the Company as the lessee
On the lease beginning date, the Company shall record the lower one of the fair value of the leased
asset and the present value of the minimum lease payments on the lease beginning date as the
entering value in an account, recognize the amount of the minimum lease payments as the entering
value in an account of long-term account payable, and treat the balance between the recorded
amount of the leased asset and the long-term account payable as unrecognized financing charges.
Besides, the initial direct costs directly attributable to the leased item incurred during the process of
lease negotiating and signing the leasing agreement shall be recorded in the asset value of the
current period. The balance through deducting unrecognized financing charges from the minimum
lease payments shall be respectively stated in long-term liabilities and long-term liabilities due
within 1 year.
Unrecognized financing charges shall be adopted by the effective interest rate method in the lease
term, so as to calculate and recognize current financing charges. The contingent rents shall be
recorded into the profits and losses of the current period in which they actually arise.
(2) Business of finance leases recorded by the Company as the lessor
On the beginning date of the lease term, the Company shall recognize the sum of the minimum
lease receipts on the lease beginning date and the initial direct costs as the entering value in an
account of the financing lease values receivable, and record the unguaranteed residual value at the
same time. The balance between the sum of the minimum lease receipts, the initial direct costs and
the unguaranteed residual value and the sum of their present values shall be recognized as
unrealized financing income. The balance through deducting unrealized financing incomes from the
finance lease accounts receivable shall be respectively stated in long-term claims and long-term
claims due within 1 year.
Unrecognized financing incomes shall be adopted by the effective interest rate method in the lease
term, so as to calculate and recognize current financing revenues. The contingent rents shall be
recorded into the profits and losses of the current period in which they actually arise.
27. Repurchase of Shares
No gains or losses shall be recognized when the consideration and transaction fees paid in share
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repurchases reduce the shareholders’ equity and the Company’s shares are repurchased, transferred
or cancelled.
Transfer of treasury stocks shall be included into the capital reserves according to the difference
between the actually received amount and the book value of the treasury stocks. If the capital
reserves are insufficient for adjustment, the surplus reserves and retained profits shall be adjusted
accordingly. For cancellation of treasury stocks, the share capital shall be reduced according to the
par value and number of shares cancelled and the capital reserves shall be adjusted according to the
difference between the book value of the treasury stocks and the par value. If the capital reserves
are insufficient for adjustment, the surplus reserves and retained profits shall be adjusted
accordingly.
28. Other Significant Accounting Policies and Estimates
Due to the internal uncertainty of operating activities, the Company needs to make judgments,
estimates and assumptions for carrying amounts of statement items that can’t be measured
accurately during the process of applying accounting policies. Such judgments, estimates and
assumptions are made on the basis of the past experience of Company’s management staffs and on
the consideration of other relevant factors. Such judgments, estimates and assumptions have effect
on reporting amount of incomes, expense, assets and liabilities, as well as disclosure of contingent
liabilities on the balance sheet date. However, the uncertainty of such estimates may results in major
adjustments of carrying amounts of assets or liabilities that will be influenced in future.
The Company shall have a check on the aforesaid judgments, estimates and assumptions at fixed
intervals on the basis of sustainable operation. As for the change in accounting estimates that only
effects on the current period of the change, the affected amount thereof shall be recognized at
current period of the change. As for accounting estimates that effects on both the current period of
the change and future periods, the affected amount thereof shall be recognized at current period of
the change and future periods.
On balance sheet date, major fields requiring judgments, estimates and assumptions on amounts of
financial statement items by the Company are as follows:
(1) Classification of leases
In line with rules in Accounting Standards for Enterprises No. 21 – Leases, the Company classifies
leases into operating leases and finance leases. Upon the classification, the management staffs need
to make analysis and judgments on whether to essentially transfer all risks and remuneration
relating to the ownership of leased-out assets to the lessee, or whether the Company has essentially
undertaken all risks and remuneration relating to the ownership of leased-in assets.
(2) Withdrawal of bad debt provisions
The Company shall, in accordance with accounting policies of receivables, calculate bad debt
provisions by adopting allowance method. Impairment of accounts receivable is based on the
assessment of the recovery of accounts receivable. Identification of impairment of accounts
receivable requires judgments and estimates by management staffs. The difference between actual
outcomes and originally estimated outcomes, which will influence the carrying amount of accounts
receivable and bad debt provisions thereof in the estimated period of the change, shall be withdrawn
or reversed.
93
(3) Inventory depreciation reserves
The Company shall calculate whichever is lower between the cost and realizable net value in light
of inventory accounting policies. As for inventories of which the cost is higher than the realizable
net value and inventories which are obsolete and unsalable inventory depreciation reserves shall be
withdrawn. Impairment of inventories to realizable net value is based on the assessment of the
marketing of inventories and realizable net value thereof. Identification of inventory impairment
requires well-established evidences by management staffs, as well as judgments and estimates
based on consideration of the purpose of holding inventories and other factors such as events
occurring after the date of balance sheet. The difference between actual outcomes and originally
estimated outcomes, which will influence the carrying amount of inventories and inventory
depreciation reserves in the estimated period of the change, shall be withdrawn or reversed.
(4) Fair values of financial instruments
As for financial instruments not existing in active trading market, the Company shall determine
their fair values by all kinds of assessment methods, which include model analysis of discounted
cash flow and etc. During the assessment, the Company needs to assess for respects such as future
cash flows, credit risks, market volatility, correlation, and choose appropriate discount rate. Such
related assumptions have uncertainty, of which the change will effect on fair values of financial
instruments.
(5) Impairment of financial assets available for sale
To a large extent, whether the impairment of financial assets available for sale is recognized or not
relies on the judgments and assumptions of the management staffs. In that way, the Company shall
be certain about whether to recognize impairment losses of financial assets available for sale in the
profit statement. During the process of making judgments and assumptions, the Company needs to
evaluate how much the fair value of such investment is less than its cost, how long such investment
will last, and the financial condition and short-term business outlook of the invested parties, which
include industry status, technology transform, credit rating, default rate and risks from the opposite
parties.
(6) Impairment provisions of non-financial non-current assets
The Company shall judge whether there is sign of impairment of non-current assets other than
financial assets on balance sheet date. Intangible assets with uncertain service lives, besides being
conducted with annual impairment test every year, have to accept impairment tests when there is
sign of impairment. Other non-current assets except for financial assets have to accept impairment
tests when there is sign indicating the carrying amount thereof is unrecoverable.
When the carrying amounts of the asset or group assets are higher than the recoverable amounts,
namely whichever is higher between the net amount through deducting disposal charges from the
fair value and the present value of the estimated future cash flow, impairment occurs.
The net amount of the fair value of an asset minus the disposal expenses shall be determined in light
of the amount of the basis of the price as stipulated in the sales agreement or the observable market
price in the fair transaction minus the incremental cost directly subject to the disposal of the asset.
When estimating present value of future cash flows, it is necessary to make significant judgments
on characters of the asset or asset group, such as output, sales price, related operating costs, and
discount used to calculate the present value. When estimating recoverable amount, the Company
shall adopt all relevant materials that can be required, including estimates relating to output, sales
94
price and relevant operating costs judged by rational and supportable assumptions.
The Company tests whether there is impairment of good will at least for every year, which requires
itself to estimate the present value of the future cash flow of group assets or combination of group
assets. When estimating the present value of the future cash flow, the Company needs to estimate
the cash flow arising from future group assets or combination of group assets, and at the same time
choose appropriate discount rate to determine the present value of the future cash flow.
(7) Depreciation and amortization
Upon consideration on the salvage value of investment real estates, fixed assets and intangible
assets, the Company shall withdraw depreciation and amortization by straight-line method over
their service lives. The Company checks on service lives at fixed intervals, so as to determine the
amounts of depreciation expenses and amortization expenses at each period. Service lives are
confirmed in accordance with the past experience on similar assets of the Company, along with
renewed technology of expectation. If any significant change occurred to previous estimated,
depreciation expenses and amortization expenses will be adjusted in future period.
(8) Deferred income tax assets
In a limit providing large possibility of offset losses from sufficient taxable profits, the Group shall
recognize deferred income tax assets in line with all unused tax losses, which requires management
staffs of the Group to estimate the time when future taxable profits occurs and the amount thereof
by applying plenty of judgments and combining tax planning strategies, so as to determine the
amount of the recognizable deferred income tax assets.
(9) Income taxes
There’s certain uncertainty of disposal and calculation of taxes of partial transactions in normal
operating activities. It is uncertain whether some pre-taxed items can set aside the approvals by tax
authorities or not. If there are differences between the ultimate recognition outcomes and the
originally estimated amounts of such tax issues, then such differences shall effect on the current
income tax and deferred income tax during the ultimate recognition period.
(10) Measurement of fair value
Some of assets and liabilities in financial statement of the Company are measured by fair value.
When estimating the fair value of a asset or liability, the Company adopts the available and
observable market data. During the process of confirming the fair value of various assets and
liabilities, relevant information of the adopted valuation technique and input value was disclosure in
Note X.
29. Changes in Main Accounting Policies and Estimates
(1) Change of Accounting Policies
□ Applicable √ Not applicable
(2) Significant Changes in Accounting Estimates
□ Applicable √ Not applicable
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VI Taxes
1. Main Taxes and Tax Rates
Category of tax Taxable basis Tax rate
Calculated the output tax at 17%, 16%, 11%, 10%, 6%, 5%,
3%, and 0% of taxable income and paid the VAT by the amount
VAT 17%, 6%, 11%, 10%, 6%, 5%, 3%, 0%
after deducting the deductible withholding VAT at current
period.
Urban maintenance
Paid at 7%, 5%, 1% of the circulating tax actually paid 7%, 5%, 1%
and construction tax
Paid at 0%, 15%, 16.5% and 25% of taxable income
Enterprise income tax 0%, 15%, 16.5%, 25%
respectively
Notes of the disclosure situation of the taxpaying bodies with different enterprises income tax rate
Taxpayer Income tax rate
The Company 15%
Lufeng Weaving & Dyeing Co., Ltd. (hereinafter refer to as
15%
“Lufeng Weaving & Dyeing”)
Lu Thai (Hong Kong) Textile Co., Ltd. (hereinafter refer to as
16.50%
“Lu Thai Hong Kong”)
Xinjiang Lu Thai Harvest Cotton Co., Ltd. (“Xinjiang Lu Thai”) 25%
Zibo Luqun Textile Co., Ltd. (hereinafter refer to as “Luqun
25%
Textile”)
Zibo Xinsheng Power Co., Ltd. hereinafter refer to as “Xinsheng
25%
Power”)
Beijing Innovative Garment Co., Ltd. (hereinafter referred to as
25%
“Beijing Innovative”
Shanghai Lu Thai Textile & Garments Co., Ltd. (hereinafter
25%
referred to as “Shanghai Lu Thai”)
Beijing Lu Thai Youxian Electronic Commerce Co., Ltd.
25%
(hereinafter referred to as “Beijing Youxian”)
Zibo Chengshun Heating Co., Ltd. (hereinafter referred to as
25%
“Chengshun Heating”)
Zibo Helijie Energy-saving Technology Service Co., Ltd.
25%
(hereinafter referred to as “Helijie”)
Xinjiang Lu Thai Textile Co., Ltd. (hereinafter referred to as
15%
“Xinjiang Textile”)
Lu Thai (Cambodia) Textile Co., Ltd. (hereinafter referred to as
0%
“Lu Thai Cambodia”)
96
Lu Thai (Burma) Textile Co., Ltd. (hereinafter referred to as “Lu
0%
Thai Burma”)
Lu Thai (Vietnam) Textile Co., Ltd. (hereinafter referred to as
0%
“Lu Thai Vietnam”)
Lu An Garments Co., Ltd. (hereinafter referred to as “Lu An
0%
Garments”
Lu Thai (America) Textile Co., Ltd. (hereinafter referred to as
Refer to 2. Tax Preference presented as follows for details
“Lu Thai America”
2. Tax Preference
According to the "On the Recognition of 2078 Enterprises as High-tech Enterprises for 2017 such
as WeihaiTuozhan Fiber Co., Ltd." (LK Zi[2018 ] No. 37) issued Department of Science and
Technology of Shandong Province, Shandong Provincial Finance Department, State Administration
of Taxation of Shandong Province and Local Taxation Bureau of Shandong Province, the Company
and the holding subsidiary Lufeng Weaving and Dyeing Co., Ltd. were identified as high-tech
enterprises. Pursuant to Article 28 of the "Law of the PRC on Enterprise Income Tax” and the No.
76 Announcement published by the State Administration of Taxation in 2015, namely
“Management of Preferential Policy on Corporate Income Tax” and the “Measures for the
Administration of the Recognition of Hi-tech Enterprises” GKFH [2016] No. 195 revised and
published by the Ministry of Science and Technology, Ministry of Finance and State
Administration of Taxation, the Company and the holding subsidiary Lufeng Weaving and Dyeing
Co., Ltd. enjoy a corporate income tax rate of 15%.
According to the "Notice of the Ministry of Finance, the General Administration of Customs and
the State Administration of Taxation on Tax Policy Issues concerning Further Implementing the
Western China Development Strategy " (CS[2011] No. 58), Xinjiang Textile Co., Ltd., the
subsidiary of Lu Thai in Xinjiang, enjoys a preferential corporate income tax rate of 15%.
Lu Thai (Hong Kong) Textile Co., Ltd. (hereinafter refers as Lu Thai (Hong Kong) Textile), the
wholly-owned subsidiary company of the Company, was incorporated in Hong Kong SAR, whose
profit tax shall be paid at tax rate of 16.5%.
The wholly own subsidiary Lu Thai Cambodia, according to the Lu Thai Cambodia Profits tax free
approval issued by Investment Committee of Cambodia, Lu Thai Cambodia enjoys tax preference
of tax free on corporate income tax of 3 (3 years start-up period) + 3 (3 years tax holiday)+1 (1 year
grace period). If profit during the 3 year start-up period then turn into 3 years tax holiday, after
grace period, enterprise income tax rate was of 20%.
The wholly own subsidiary Lu Thai Burma, according to the Burma’s Special Economic Zone Law
issued by Pyidaungsu Hluttaw, Lu Thai Burma enjoys tax preference on corporate income tax of 7
(7 years tax holiday) + 5 (5 years tax revenues drop by half) + 5 (re-invest the profits within 1 year
and continues to enjoy the half tax revenues 5 years afterwards). After grace period, enterprise
income tax rate was of 25%.
The wholly-owned subsidiary Lu Thai (Vietnam) Textile Co., Ltd. shall enjoy the preference of
enterprise income tax at 3 years’ starting term + 4 years’ duty-free term + 9 years’ half-tax term
according to the investment license issued by Vietnamese Fudong Industrial Zone Management
97
Committee, and it will enter into 2 years’ duty-free term if it is profitable within 3 years’ starting
term. The enterprise income tax rate shall be 20% after the preference term ends. The Company
shall enjoy 10% of the preference tax rate within 15 years since the tax year to get the first
production and operation income, and the enterprise income tax rate shall be 20% after the
preference term ends.
The wholly-owned subsidiary Lu An Garments Co., Ltd. shall enjoy the preference of enterprise
income tax at 3 years’ starting term + 2 years’ duty-free term + 4 years’ half-tax term according to
the investment license issued by Vietnamese Anjiang Province Economic Zone Management
Committee, and it will enter into duty-free term if the profitability is realized at any year within 3
years’ starting term. The Company shall enjoy 17% of the preference tax rate within 10 years since
the tax year to get the first production and operation income, and the enterprise income tax rate shall
be 20% after the preference term ends.
Lu Thai America, the wholly-owned subsidiary of the Company registered in New York, America,
was imposed the federal enterprise income tax at progressive tax rate in excess of specific amount
of 15%-39%, and imposed the New York Enterprise income tax at the rate of 6.5%. The income tax
rate shall be 6.5% when the sales income in New York was below US$1 million, while 8.85% when
above US$1 million.
VII. Notes to Main Items of Consolidated Financial Statements
1. Monetary Funds
Unit: RMB
Item Ending balance Beginning balance
Cash on hand 3,982,351.33 8,040,420.28
Bank deposits 667,589,538.44 668,598,792.58
Other monetary funds 150,080.59 17,350,080.52
Total 671,721,970.36 693,989,293.38
Of which: total amount deposited
310,358,555.04 54,911,636.96
oversees
Other notes:
On 30 June 2018, the monetary fund with restricted ownership of the Company was of RMB
150,080.52 (31 December 2017: RMB17,350,080.52), which was guarantee deposit of
RMB150,080.52 by the Company’s subsidiary Lufeng Weaving & Dyeing
2. Notes Receivable
(1) Notes Receivable Listed by Category
Unit: RMB
Item Ending balance Beginning balance
Bank acceptance bill 24,304,548.05 28,926,913.53
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L/C 91,404,720.83 110,349,828.81
Total 115,709,268.88 139,276,742.34
(2) Notes Receivable which Had Endorsed by the Company or Had Discounted and Had not Due on the
Balance Sheet Date at the Period-end
Unit: RMB
Amount of recognition termination at the Amount of not terminated recognition at
Item
period-end the period-end
Bank acceptance bill 178,434,467.09
Total 178,434,467.09
3. Accounts Receivable
(1) Accounts Receivable Disclosed by Category
Unit: RMB
Ending balance Beginning balance
Carrying amount Bad debt provision Carrying amount Bad debt provision
With With
Category draw draw
Propor al Carrying value Propor al Carrying value
Amount Amount Amount Amount
tion prop tion prop
ortio ortio
n n
Accounts
receivable
withdrawal of
100.00 5.06 100.00 5.09
bad debt 375,832,028.96 19,013,065.27 356,818,963.69 351,991,919.14 17,911,395.09 334,080,524.05
% % % %
provision of
by credit risks
characteristics
100.00 5.06 100.00 5.09
Total 375,832,028.96 19,013,065.27 356,818,963.69 351,991,919.14 17,911,395.09 334,080,524.05
% % % %
Accounts receivable with significant single amount for which bad debt provision separately accrued at the period-end:
□ Applicable √ Not applicable
In the groups, accounts receivable adopted aging analysis method to withdraw bad debt provision:
√ Applicable □ Not applicable
Unit: RMB
Aging Ending balance
99
Accounts receivable Bad debt provision Withdrawal proportion
Subitem within 1 year
Subtotal within 1 year 373,199,150.22 18,659,957.51 5.00%
1 to 2 years 2,028,679.82 202,867.98 10.00%
2 to 3 years 310,198.92 62,039.78 20.00%
Over 3 years 294,000.00 88,200.00 30.00%
Total 375,832,028.96 19,013,065.27 5.06%
In the groups, accounts receivable adopted balance percentage method to withdraw bad debt provision:
□ Applicable √ Not applicable
(2) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB1,101,670.18; the amount of the reversed
or collected part during the Reporting Period was of RMB0.00.
(3) Top 5 Accounts Receivable in Ending Balance Collected according to the Arrears Party
The total top 5 accounts receivable in ending balance collected according to the arrears party for the
Company was RMB105,332,965.56, accounting for 28.03% of the total ending balance of accounts
receivable, and the total ending balance of bad debt provision correspondingly withdrawn was
RMB5,266,648.28.
4. Prepayment
(1) Prepayment Listed by Aging Analysis
Unit: RMB
Ending balance Beginning balance
Aging
Amount Proportion Amount Proportion
Within 1 year 133,166,462.98 98.99% 145,673,771.77 99.46%
1 to 2 years 1,347,850.81 1.00% 625,210.35 0.43%
2 to 3 years 0.00 0.00% 162,029.49 0.11%
Over 3 years 9,800.00 0.01% 2,054.77 0.00%
Total 134,524,113.79 -- 146,463,066.38 --
(2) Top 5 Prepayment in Ending Balance Collected according to the Prepayment Target
The total top 5 prepayment in ending balance collected according to the prepayment target for the
Company was RMB54,276,853.14, accounting for 40.35% of total ending balance of prepayment.
100
5. Interest Receivable
(1) Category of Interest Receivable
Unit: RMB
Item Ending balance Beginning balance
Fixed term deposits 874,571.14 590,003.07
Total 874,571.14 590,003.07
6. Other Accounts Receivable
(1) Other Accounts Receivable Disclosed by Category
Unit: RMB
Ending balance Beginning balance
Carrying amount Bad debt provision Carrying amount Bad debt provision
Category Withdra
Carrying Carrying
Proportio wal Proportio Withdrawal
Amount Amount value Amount Amount value
n proportio n proportion
n
Other accounts
receivable withdrawn
83,485,3 7,004,65 76,480,72 62,067, 5,885,026 56,182,782.
bad debt provision 100.00% 8.39% 100.00% 9.48%
77.63 6.54 1.09 808.10 .06 04
according to credit
risks characteristics
83,485,3 7,004,65 76,480,72 62,067, 5,885,026 56,182,782.
Total 100.00% 8.39% 100.00% 9.48%
77.63 6.54 1.09 808.10 .06 04
Other accounts receivable with significant single amount for which bad debt provision separately accrued at the period-end:
□ Applicable √ Not applicable
In the groups, other accounts receivable adopted aging analysis method to withdraw bad debt provision:
√ Applicable □ Not applicable
Unit: RMB
Ending balance
Aging
Other accounts receivable Bad debt provision Withdrawal proportion
Subentry within 1 year
Subtotal of within 1 year 70,295,023.36 3,514,751.15 5.00%
1 to 2 years 2,313,867.15 231,386.72 10.00%
2 to 3 years 44,274.42 8,854.87 20.00%
Over 3 years 10,832,212.70 3,249,663.80 30.00%
101
Total 83,485,377.63 7,004,656.54 8.39%
In the groups, other accounts receivable adopted balance percentage method to withdraw bad debt provision
□ Applicable √ Not applicable
In the groups, other accounts receivable adopted other methods to withdraw bad debt provision:
□ Applicable √ Not applicable
(2) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB1,119,630.48; the amount of the reversed
or collected part during the Reporting Period was of RMB0.00.
(3) Other Account Receivable Classified by Account Nature
Unit: RMB
Nature Ending carrying amount Beginning carrying amount
Export taxes refund 18,877,922.77 26,928,248.68
Advance payment 45,328,177.05 19,470,920.20
Cash Pledge & Margin 5,523,371.84 5,915,873.52
Borrowings and petty cash 3,587,192.13 1,533,438.12
Other 10,168,713.84 8,219,327.58
Total 83,485,377.63 62,067,808.10
(4) Top 5 Other Accounts Receivable in Ending Balance Collected according to the Arrears Party
Unit: RMB
Proportion to total
Ending balance
ending balance of
Name of the entity Nature Ending balance Aging of bad debt
other accounts
provision
receivable
Advances for agricultural machinery Advance 20,144,428.21 Within 1 year 24.13% 1,007,221.41
Export taxes
Export taxes refund receivable 16,212,237.17 Within 1 year 19.41% 810,611.86
refund
Advance money receivable of the
Advance 7,393,934.63 Within 1 year 8.86% 369,696.73
fundraising houses
Farmland premium Premium 5,607,294.08 Within 1 year 6.72% 280,364.70
Advances for farm land leveling and
Advance 4,811,384.69 Within 1 year 5.76% 240,569.23
canal projects in Xinjiang
Total -- 54,169,278.78 -- 64.88% 2,708,463.93
102
7. Inventory
(1) Category of Inventory
Unit: RMB
Ending balance Beginning balance
Item Depreciation Depreciation
Carrying amount Carrying value Carrying amount Carrying value
reserves reserves
Raw materials 894,061,853.37 894,061,853.37 859,429,529.00 1,172,453.02 858,257,075.98
Goods in process 458,253,436.36 458,253,436.36 508,535,945.66 508,535,945.66
Inventory goods 668,773,766.10 32,279,398.47 636,494,367.63 754,961,464.17 51,653,377.28 703,308,086.89
Consumptive
1,477,285.41 355,425.24 1,121,860.17 1,531,621.67 404,221.67 1,127,400.00
living assets
Assigned
processing 27,493,110.20 27,493,110.20 29,432,713.40 29,432,713.40
products
Total 2,050,059,451.44 32,634,823.71 2,017,424,627.73 2,153,891,273.90 53,230,051.97 2,100,661,221.93
Whether the Company needs to comply with the disclosure requirements of Shenzhen Stock Exchange Industry Information
Disclosure Guidelines No. 4 - Listed Companies Engaged in Seed Industry and Planting Business
No
(2) Falling Price Reserves of Inventory
Unit: RMB
Increased amount Decreased amount
Beginning
Item Reverse or Ending balance
balance Withdrawal Other Other
write-off
Raw materials 1,172,453.02 1,172,453.02
Inventory goods 51,653,377.28 -99,805.82 19,274,172.99 32,279,398.47
Consumptive
404,221.67 48,796.43 355,425.24
living assets
Total 53,230,051.97 -99,805.82 20,495,422.44 32,634,823.71
(3) Notes to the Inventory with the Ending Balance Including Capitalized Borrowing Expenses
Not applicable
103
(4) The Withdrawal Basis for Inventory Falling Price Reserves and Reasons for Write-back or Write-off
during the Reporting Period
Item Specific basis of Reasons for write-back Reasons for write-off
withdrawal of inventory
falling price reserves
The lower one between Disposed in the Reportin
cost of each item of g Period
Raw materials
inventory and its realizable
net value
The lower one between Sold in the Reporting
cost of each item of Period
Inventory goods
inventory and its realizable
net value
The lower one between Sold in the Reporting
Consumptive living cost of each item of Period
assets inventory and its realizable
net value
Notes: ①The inventory falling price reserves shall be made based on the balance of inventory cost
and the realizable net value regarding the former is higher than the latter, which is caused by the
quality problem of some raw materials, the gray yarn and dyed yarn in finished products, by the
long stock age of some shirts and fabric and by the decrease of market price of the consumptive
living asset Hu sheep at the end of the Reporting Period.
②The subsidiary of the Company-Xinjiang Lu Thai Textile-obtained the short-term borrowing of
RMB100,000,000.00 from the bank taking the inventories with the carrying value of
RMB67,984,874.74 as a pledge.
8. Other Current Assets
Unit: RMB
Item Ending balance Beginning balance
VAT input tax to be deducted 44,426,042.78 68,286,428.20
Prepaid income tax to be deducted 2,629,302.17 302,275.14
Financial products 50,000,000.00 50,000,000.00
B-share repurchase account 53,750,798.82
Total 150,806,143.77 118,588,703.34
9. Available-for-sale Financial Assets
(1) List of Available-for-sale Financial Assets
Unit: RMB
104
Ending balance Beginning balance
Item Carrying Depreciation Carrying Depreciation
Carrying value Carrying value
amount reserves amount reserves
Available-for-dale debt
61,233,000.00 61,233,000.00 60,033,000.00 60,033,000.00
instruments:
Available-for-sale equity
67,282,600.00 42,782,600.00 24,500,000.00 67,282,600.00 42,782,600.00 24,500,000.00
instruments:
Measured at fair value 61,233,000.00 61,233,000.00 60,033,000.00 60,033,000.00
Measured at cost 67,282,600.00 42,782,600.00 24,500,000.00 67,282,600.00 42,782,600.00 24,500,000.00
Total 128,515,600.00 42,782,600.00 85,733,000.00 127,315,600.00 42,782,600.00 84,533,000.00
(2) Available-for-sale Financial Assets Measured by Fair Value at the Period-end
Unit: RMB
Available-for-sale Available-for-sale debt
Category of available-for-sale financial assets Total
equity instruments instruments
Equity instrument costs/debt instrument amortization
60,000,000.00 60,000,000.00
costs
Fair value 61,233,000.00 61,233,000.00
Accumulative amount of changes in fair value included
1,233,000.00 1,233,000.00
in other comprehensive income
(3) Available-for-sale Financial Assets Measured by Cost at the Period-end
Unit: RMB
Carrying amount Depreciation reserves Cash
bonus
Shareholdi
durin
ng
g the
Investee Period-beginni Increa Decrea Period-beginni Increa Decrea proportion
Period-end Period-end Repo
ng se se ng se se in the
rting
investee
Perio
d
Yantai Rongchang
Pharmacy Co.,
Ltd. (hereinafter
55,282,600.00 55,282,600.00 42,782,600.00 42,782,600.00 3.13%
refer to as
“Rongchang
Pharmacy”)
Shandong
Hongqiao Power
12,000,000.00 12,000,000.00 19.38%
Co., Ltd.
(Hongqiao Power)
105
Total 67,282,600.00 67,282,600.00 42,782,600.00 42,782,600.00 --
(4) Changes in the Depreciation of Available-for-sale Financial Assets during the Reporting Period
Unit: RMB
Category of the
Available-for-sale equity Available-for-sale debt
available-for-sale Total
instruments instruments
financial assets
Beginning balance of
42,782,600.00 42,782,600.00
impairment withdrawn
Ending balance of
42,782,600.00 42,782,600.00
impairment withdrawn
10. Long-term Accounts Receivable
(1) List of Long-term Accounts receivable
Unit: RMB
Ending balance Beginning balance Interval
of
Item Carrying Bad debt Carrying Carrying Bad debt Carrying
discoun
amount provision value amount provision value
t rate
Financing lease accounts 650,000.00 650,000.00 29.40%
Of which: unrealized financing income 145,204.18 145,204.18
Total 650,000.00 650,000.00 --
11. Long-term Equity Investment
Unit: RMB
Increase/decrease Endin
g
Addi Adjustm balan
Gains and Cash Withdra
tiona Redu ent of ce of
losses Changes bonus or wal of Ending
Investees Beginning balance l ced other Othe depre
recognized of other profits deprecia balance
inve invest compreh r ciatio
under the equity announced tion
stme ment ensive n
equity method to issue reserves
nt income reserv
es
I. Joint ventures
II. Associated enterprises
Ningbo Mei 97,536,732.02 -1,730,597.59 95,806,134.43
106
shan Bonded
Poer Area
Haohong
Equity
Investment
Partnership
(L.P)
(hereinafter
referred to as
“Haohong
Investment”)
Subtotal 97,536,732.02 -1,730,597.59 95,806,134.43
Total 97,536,732.02 -1,730,597.59 95,806,134.43
12. Investment Property
(1) Investment Property Adopted the Cost Measurement Mode
√ Applicable □ Not applicable
Unit: RMB
Houses and Construction in
Item Land use right Total
buildings progress
I. Original carrying value
1. Beginning balance 35,982,382.40 35,982,382.40
2. Increased amount of the period
(1) Outsourcing
(2) Transfer from inventory\fixed
assets\construction in progress
(3) Enterprise combination increase
3. Decreased amount of the period
(1) Disposal
(2) Other transfer
4. Ending balance 35,982,382.40 35,982,382.40
II. Accumulative depreciation and accumulative
amortization
1. Beginning balance 11,418,837.82 11,418,837.82
2. Increased amount of the period 706,838.89 706,838.89
(1) Withdrawal or amortization 706,838.89 706,838.89
3. Decreased amount of the period
107
(1) Disposal
(2) Other transfer
4. Ending balance 12,125,676.71 12,125,676.71
III. Depreciation reserves
1. Beginning balance
2. Increased amount of the period
(1) Withdrawal
3. Decreased amount of the period
(1) Disposal
(2) Other transfer
4. Ending balance
IV. Carrying value
1. Ending carrying value 23,856,705.69 23,856,705.69
2. Beginning carrying value 24,563,544.58 24,563,544.58
(2) Investment Property Adopted the Fair Value Measurement Mode
□ Applicable √ Not applicable
13. Fixed Assets
(1) List of Fixed Assets
Unit: RMB
Electronic
Houses and Machinery Transportation
Item equipment and Total
buildings equipment equipment
others
I. Original carrying value
1. Beginning balance 3,136,008,729.48 6,013,226,456.60 75,605,860.26 118,680,314.89 9,343,521,361.23
2. Increased amount of the
625,984.09 220,691,369.26 3,002,436.32 4,940,100.33 229,259,890.00
period
(1) Purchase 8,387.68 103,632,024.02 3,002,436.32 3,872,410.24 110,515,258.26
(2) Transfer from construction
617,596.41 117,059,345.24 1,067,690.09 118,744,631.74
in progress
(3) Enterprise combination
increase
3. Decreased amount of the
61,665,913.62 109,299,112.67 2,623,436.05 692,964.26 174,281,426.60
period
108
(1) Disposal or Scrap 2,273,039.58 9,678,561.86 2,676,654.36 730,095.66 15,358,351.46
(2) Transferred into investment
property
(3) Transferred into construction
63,326,344.11 104,747,451.53 11,980.00 168,085,775.64
in progress
(4) Other decrease -3,933,470.07 -5,126,900.72 -53,218.31 -49,111.40 -9,162,700.50
4. Ending balance 3,074,968,799.95 6,124,618,713.19 75,984,860.53 122,927,450.96 9,398,499,824.63
II. Accumulative depreciation
1. Beginning balance 888,764,731.56 2,869,058,997.31 53,792,239.67 78,471,588.54 3,890,087,557.08
2. Increased amount of the
48,755,271.49 147,932,075.47 2,467,451.93 4,944,608.19 204,099,407.08
period
(1) Withdrawal 48,755,271.49 147,932,075.47 2,467,451.93 4,944,608.19 204,099,407.08
3. Decreased amount of the
22,399,548.45 60,416,202.84 2,326,468.59 689,045.79 85,831,265.67
period
(1) Disposal or Scrap 335,639.84 7,970,480.70 2,344,130.34 696,971.60 11,347,222.48
(2) Transferred into construction
22,311,100.92 52,974,322.84 10,782.00 75,296,205.76
in progress
(3) Other decrease -247,192.31 -528,600.70 -17,661.75 -18,707.81 -812,162.57
4. Ending balance 915,120,454.60 2,956,574,869.94 53,933,223.01 82,727,150.94 4,008,355,698.49
III. Depreciation reserves
1. Beginning balance 2,893,416.89 29,123,503.34 27,269.67 93,764.22 32,137,954.12
2. Increased amount of the
period
(1) Withdrawal
3. Decreased amount of the
1,302,690.04 1,302,690.04
period
(1) Disposal or Scrap 1,302,690.04 1,302,690.04
4. Ending balance 2,893,416.89 27,820,813.30 27,269.67 93,764.22 30,835,264.08
IV. Carrying value
1. Ending carrying value 2,156,954,928.46 3,140,223,029.95 22,024,367.85 40,106,535.80 5,359,308,862.06
2. Beginning carrying value 2,244,350,581.03 3,115,043,955.95 21,786,350.92 40,114,962.13 5,421,295,850.03
(2) Fixed Assets Leased out by Operation Lease
Unit: RMB
Item Ending carrying value
Houses and buildings 19,075,215.72
109
(3) Fixed Assets Failed to Accomplish Certification of Property
Unit: RMB
Item Carrying value Reason
Ongoing inspection, surveying, verification to application procedures
Weaving and yarn dying workshop 103,467,194.39
by Housing authorities
Employee’s dormitory building of eastern
42,283,610.59 Same with above
area of industrial park
Spinning Fourth factory workshop 92,197,016.21 Same with above
Employee’s dormitory building of western
123,773,968.11 Same with above
area of industrial park
Eastern sample plant 30,318,302.04 Same with above
Lufeng weaving dye workshop 128,263,529.32 Same with above
Xinjiang construction project of
64,027,681.05 Same with above
100,000-spindle spinning production line
Note: The original carrying value and other decrease in accumulative depreciation of fixed assets in
the Reporting Period were exchange rate difference generated from the conversion of overseas
subsidiaries’ recording currency into RMB due to the fluctuation of the exchange rates.
14. Construction in Progress
(1) List of Construction in Progress
Unit: RMB
Ending balance Beginning balance
Depreciati Depreciati
Item Carrying Carrying
on Carrying value on Carrying value
amount amount
reserves reserves
Roof transformation engineering of for
the whole eastern weaving complex 33,997,010.54 33,997,010.54
workshop (Phase II)
Reform project of Xinsheng Thermal
9,719,978.74 9,719,978.74 6,192,038.65 6,192,038.65
Power
Expansion project of Xinsheng Thermal
5,697,893.74 5,697,893.74 744,000.00 744,000.00
Power
Expansion project of Xinsheng Thermal
9,864,619.23 9,864,619.23
Power (Phase II)
Heat supply engineering of Chengshun
5,028,045.18 5,028,045.18 1,805,751.30 1,805,751.30
Heating
110
Reform engineering of 100,000-spindle
77,875,603.13 77,875,603.13
spinning
Lu Thai (Vietnam) project 34,325,323.53 34,325,323.53 34,325,323.53 34,325,323.53
Spinning Phase II of Lu Thai (Vietnam)
40,564,949.43 40,564,949.43 4,922,411.28 4,922,411.28
project
Yarn Dye Phase II of Lu Thai (Vietnam)
17,584,838.00 17,584,838.00
project
Project of Lu An Garments 16,468,087.74 16,468,087.74 3,371,413.19 3,371,413.19
Other retails projects 39,666,780.72 39,666,780.72 28,185,279.60 28,185,279.60
157,421,820.6
Total 212,917,526.85 212,917,526.85 157,421,820.68
8
(2) Changes in Significant Construction in Progress during the Reporting Period
Unit: RMB
Capi
taliz
Propor
Of ation
tion of Accu
which: rate
accum mulate
amount of
ulated d Capi
of inter
Other invest Job amoun tal
Beginning Increased Transferred in capitaliz ests
Item Budget decreased Ending balance ment schedu t of reso
balance amount fixed assets ed for
amount in le interes urce
interests the
constr t s
for the Rep
uction capital
Reportin ortin
s to ization
g Period g
budget
Peri
od
Roof
transfor
mation
engineer
ing of
for the
94.00 94.00 Othe
whole 36,000,000.00 33,997,010.54 33,997,010.54
%% r
eastern
weaving
complex
worksho
p (Phase
II)
111
Reform
project
of
49.00 49.00 Othe
Xinshen 20,000,000.00 6,192,038.65 3,527,940.09 9,719,978.74
%% r
g
Thermal
Power
Expansi
on
project
of 240,000,000.0 86.00 86.00 Othe
744,000.00 4,953,893.74 5,697,893.74
Xinshen 0 %% r
g
Thermal
Power
Expansi
on
project
of
Xinshen 10.00 10.00 Othe
97,950,000.00 9,864,619.23 9,864,619.23
g %% r
Thermal
Power
(Phase
II)
Heat
supply
engineer
99.00 99.00 Othe
ing of 38,000,000.00 1,805,751.30 3,222,293.88 5,028,045.18
%% r
Chengsh
un
Heating
Reform
engineer
ing of 156,000,000.0 100.00 100.00 Othe
77,875,603.13 38,710,587.12 116,586,190.25
100,000- 0 %% r
spindle
spinning
Lu Thai
(Vietna 242,282,300.0 99.00 99.00 Othe
34,325,323.53 34,325,323.53
m) 0 %% r
project
112
Spinning
Phase II
of Lu
76.00 76.00 Othe
Thai 52,750,000.00 4,922,411.28 35,233,707.58 -408,830.57 40,564,949.43
%% r
(Vietna
m)
project
Yarn
Dye
Phase II
of Lu 110,300,000.0 16.00 16.00 Othe
17,584,838.00 17,584,838.00
Thai 0 %% r
(Vietna
m)
project
Project
of Lu An 91.00 91.00 Othe
93,035,700.00 3,371,413.19 13,573,989.65 512,433.99 -35,118.89 16,468,087.74
Garment %% r
s
Other
Othe
retails 28,185,279.60 13,127,508.62 1,646,007.50 39,666,780.72
r
projects
1,086,318,000
Total 157,421,820.68 173,796,388.45 118,744,631.74 -443,949.46 212,917,526.85 -- -- --
.00
15. Engineering Materials
Unit: RMB
Item Ending balance Beginning balance
Specific materials
Specific equipment 152,136,560.03 56,913,806.06
Total 152,136,560.03 56,913,806.06
16. Intangible Assets
(1) List of Intangible Assets
Unit: RMB
Non-patent Software use Brand use
Item Land use right Patent right Total
right rights rights
I. Original carrying value
113
1. Beginning balance 604,760,289.56 1,985,176.47 6,710,503.67 300,000.00 613,755,969.70
2. Increased amount of the
1,106,048.24 1,106,048.24
period
(1) Purchase 1,106,048.24 1,106,048.24
(2) Internal R&D
(3) Business combination
increase
3. Decreased amount of the
period
(1) Disposal
4. Ending balance 604,760,289.56 1,985,176.47 7,816,551.91 300,000.00 614,862,017.94
II. Accumulated amortization
1. Beginning balance 111,042,573.91 1,422,710.04 2,252,384.27 90,000.00 114,807,668.22
2. Increased amount of the
6,873,241.70 99,258.84 1,774,934.53 15,000.00 8,762,435.07
period
(1) Withdrawal 6,873,241.70 99,258.84 1,774,934.53 15,000.00 8,762,435.07
3. Decreased amount of the
period
(1) Disposal
4. Ending balance 117,915,815.61 1,521,968.88 4,027,318.80 105,000.00 123,570,103.29
III. Depreciation reserves
1. Beginning balance
2. Increased amount of the
period
(1) Withdrawal
3. Decreased amount of the
period
(1) Disposal
4. Ending balance
IV. Carrying value
1. Ending carrying value 486,844,473.95 463,207.59 3,789,233.11 195,000.00 491,291,914.65
2. Beginning carrying value 493,717,715.65 562,466.43 4,458,119.40 210,000.00 498,948,301.48
The proportion of intangible assets formed from the internal R&D of the Company at the Period-end to the ending balance of
intangible assets was 0.00%.
114
17. R&D Expense
Unit: RMB
Ending
Increase Decrease
balance
Beginnin
Item Transferred into
g balance Internal R&D Recognized as
Other the current profit
expense intangible assets
or loss
R&D of
162,596,245.80 162,596,245.80
products
Total 162,596,245.80 162,596,245.80
18. Goodwill
(1) Original Carrying Value of Goodwill
Unit: RMB
Name of the invested
units or events Beginning balance Increase Decrease Ending balance
generating goodwill
Xinsheng Power 20,563,803.29 20,563,803.29
Helijie 50,000.00 50,000.00
Total 20,613,803.29 20,613,803.29
(2) Impairment Provision for Goodwill
Unit: RMB
Name of the
invested units or Beginning
Increase Decrease Ending balance
events generating balance
goodwill
Xinsheng Power
Helijie
Notes of the testing process of goodwill impairment, parameters and the recognition method of goodwill impairment losses:
Refer to Note V-20 for details of the testing process of goodwill impairment.
19. Long-term Prepaid Expense
Unit: RMB
Item Beginning balance Increased Amortization Other decreased Ending balance
115
amount amount of the amount
period
Land contracting fee of
26,693,642.92 543,109.50 26,150,533.42
Xinjiang Luthai
Decoration fee of
865,660.06 96,940.31 768,719.75
Xinjiang Lu Thai
Land rent of overseas
80,148,619.17 3,713,555.49 761,994.05 -866,155.88 83,966,336.49
subsidiaries
Housing rent of overseas
169,272.37 171,406.99 -2,134.62
subsidiaries
Total 107,877,194.52 3,713,555.49 1,573,450.85 -868,290.50 110,885,589.66
Other notes
Note: Other decrease was the exchange rate difference generated from the conversion of overseas
subsidiaries’ recording currency into RMB due to the fluctuation of exchange rates.
20. Deferred Income Tax Assets/Deferred Income Tax Liabilities
(1) Deferred Income Tax Assets Had Not Been Off-set
Unit: RMB
Ending balance Beginning balance
Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax
difference assets difference assets
Provision for impairment
123,762,792.64 19,984,983.02 140,256,135.72 22,531,008.74
of assets
Internal unrealized profit 109,048,430.64 14,813,500.08 100,706,925.35 11,627,841.87
One-time listed
5,405,702.23 1,351,425.56 5,405,702.23 1,351,425.56
decoration expenses
Payroll payable 124,021,657.72 18,701,206.18 124,021,657.72 18,701,206.18
Deferred income 126,957,174.18 20,464,628.41 126,737,092.32 20,485,677.36
Total 489,195,757.41 75,315,743.25 497,127,513.34 74,697,159.71
(2) Deferred Income Tax Liabilities Had not Been Off-set
Unit: RMB
Ending balance Beginning balance
Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax
difference liabilities difference liabilities
Depreciation of fixed 16,979,223.43 2,927,785.33 16,820,058.15 2,899,949.46
116
assets
Available-for-sale
1,233,000.00 184,950.00 33,000.00 4,950.00
financial assets
Total 18,212,223.43 3,112,735.33 16,853,058.15 2,904,899.46
(3) List of Unrecognized Deferred Income Tax Assets
Unit: RMB
Item Ending balance Beginning balance
Deductible temporary difference 8,507,616.96 11,690,891.52
Deductible losses 28,067,909.91 27,993,886.84
Total 36,575,526.87 39,684,778.36
(4) Deductible Losses of Unrecognized Deferred Income Tax Assets will Due in the Following Years
Unit: RMB
Years Ending amount Beginning amount Notes
Y2018 97,981.65 97,981.65
Y2019 1,456,659.23 1,456,659.23
Y2020 18,458,244.61 18,458,244.61
Y2021 4,250,703.45 4,250,703.45
Y2022 3,730,297.90 3,730,297.90
Y2023 74,023.07
Total 28,067,909.91 27,993,886.84 --
21. Other Non-current Assets
Unit: RMB
Item Ending balance Beginning balance
Prepayment for equipment 78,517,334.73 28,984,077.85
Prepayment for land 1,996,937.00 7,406,401.00
Total 80,514,271.73 36,390,478.85
22. Short-term Borrowings
(1) Category of Short-term Borrowings
Unit: RMB
117
Item Ending balance Beginning balance
Mortgage loan 150,000,000.00 440,000,000.00
Guaranteed loan 527,722,734.36 28,254,022.53
Credit loan 780,336,227.97 666,870,973.87
Total 1,458,058,962.33 1,135,124,996.40
Notes of the category for short-term loans:
Note: for the type and amount of the pledged assets for mortgage loan, please refer to Note VII-7,16
and 58.
23. Financial Liabilities at Fair Value through Profit or Loss
Unit: RMB
Item Ending balance Beginning balance
Trading financial liabilities 28,481,010.00
Of which: issued trading bonds
Derivative financial liabilities 28,481,010.00
Other
Financial liabilities designated to be
measured at fair value through profit or
loss
Total 28,481,010.00
24. Notes Payable
Unit: RMB
Category Ending balance Beginning balance
Trade acceptance 2,039,106.28 2,441,810.45
Bank’s acceptance bill 1,079,450.50 4,859,961.40
Total 3,118,556.78 7,301,771.85
The total overdue but unpaid notes payable at the period-end were RMB0.00.
25. Accounts Payable
(1) List of Accounts Payable
Unit: RMB
Item Ending balance Beginning balance
118
Purchase of goods 188,533,806.46 219,463,023.43
Engineering equipment 83,642,879.87 134,864,245.66
Other 11,477,182.31 11,937,863.56
Total 283,653,868.64 366,265,132.65
26. Advances from Customers
(1) List of Advances from Customers
Unit: RMB
Item Ending balance Beginning balance
Advance from goods 99,307,372.64 119,785,945.48
Total 99,307,372.64 119,785,945.48
27. Payroll Payable
(1) List of Payroll Payable
Unit: RMB
Item Beginning balance Increase Decrease Ending balance
I. Short-term salary 316,812,093.17 841,207,933.99 911,760,588.44 246,259,438.72
II. Post-employment benefit-defined
24,395.78 75,787,694.44 75,788,964.90 23,125.32
contribution plans
III. Termination benefits 180,688.20 180,688.20
Total 316,836,488.95 917,176,316.63 987,730,241.54 246,282,564.04
(2) List of Short-term Salary
Unit: RMB
Item Beginning balance Increase Decrease Ending balance
1. Salary, bonus, allowance,
267,328,134.33 757,339,575.32 831,946,327.90 192,721,381.75
subsidy
2. Employee welfare 27,175,649.69 27,175,649.69
3. Social insurance 35,231.00 34,876,878.81 34,874,630.67 37,479.14
Of which: 1. Medical
28,800.70 27,627,857.60 27,627,430.47 29,227.83
insurance premiums
Work-related injury insurance 5,065.07 3,570,163.13 3,568,361.67 6,866.53
Maternity insurance 1,365.23 3,678,858.08 3,678,838.53 1,384.78
119
4. Housing fund 1,293.00 8,133,982.10 8,135,275.10
5. Labor union budget and
49,447,434.84 13,681,848.07 9,628,705.08 53,500,577.83
employee education budget
Total 316,812,093.17 841,207,933.99 911,760,588.44 246,259,438.72
(3) List of Defined Contribution Plans
Unit: RMB
Item Beginning balance Increase Decrease Ending balance
1. Basic pension benefits 22,636.70 72,984,343.09 72,984,781.91 22,197.88
2. Unemployment
1,759.08 2,803,351.35 2,804,182.99 927.44
insurance
Total 24,395.78 75,787,694.44 75,788,964.90 23,125.32
Other notes:
The Company, in line with the requirement, participate the endowment insurance, unemployment
insurance scheme and so on, according to the scheme, the Company monthly pay to the scheme in
line with 18% and 0.7% of the endowment insurance base, except the monthly payment, the
Company no longer shoulder the further payment obligation, the relevant expense occurred was
recorded into current profits and losses or related assets costs.
28. Taxes Payable
Unit: RMB
Item Ending balance Beginning balance
VAT 2,760,614.68 2,639,133.26
Corporate income tax 21,524,297.71 13,934,074.08
Personal income tax 3,214,555.49 1,453,967.09
Urban maintenance and construction tax 2,967,638.49 3,036,340.88
Stamp tax 347,321.70 400,579.00
Property tax 4,667,520.13 4,618,710.82
Land use tax 4,486,008.66 4,537,230.07
Education surcharge 1,293,949.35 1,314,401.95
Local education surcharge 862,632.88 876,267.97
Local water conservancy facility
214,710.11 217,869.46
construction fund
Resource tax 139,102.00 26,516.00
Environmental protection tax 274,070.50
Total 42,752,421.70 33,055,090.58
120
29. Interest Payable
Unit: RMB
Item Ending balance Beginning balance
Interest payable on short-term borrowings 2,079,744.07 1,572,231.86
Total 2,079,744.07 1,572,231.86
30. Dividends Payable
Unit: RMB
Item Ending balance Beginning balance
Dividends payable to individual
441,113.64 441,113.64
shareholders by the Company
Total 441,113.64 441,113.64
Other notes, including significant dividends payable unpaid for over one year, the unpaid reason shall be disclosed:
Notes: the dividends payable unpaid for over one year were the cash dividend of previous year not
received by individual shareholders.
31. Other Accounts Payable
(1) Other Accounts Payable Listed by Nature of Account
Unit: RMB
Item Ending balance Beginning balance
Deposits and cash deposits etc. 18,572,061.86 19,600,682.80
Collecting payment on behalf of others 19,770,608.87 17,030,878.91
Intercourse funds 95,570,959.03 66,354,397.71
Other 23,499,304.14 24,104,049.83
Total 157,412,933.90 127,090,009.25
(2) Significant Other Accounts Payable Aging over One Year
Unit: RMB
Item Ending balance Unpaid/Un-carry-over reason
Cotton and Linen Company 11,925,000.00 Received deposit of sale contract
Total 11,925,000.00 --
32. Non-current Liabilities Due within One Year
Unit: RMB
121
Item Ending balance Beginning balance
Long-term borrowings due within one year 62,750,292.49
Total 62,750,292.49
33. Long-term Borrowings
(1) Category of Long-term Borrowings
Unit: RMB
Item Ending balance Beginning balance
Guarantee loan 69,431,359.47 62,750,292.49
Less: long-term borrowings due within one year -62,750,292.49
Total 69,431,359.47
34. Long-term Payroll Payable
(1) List of Long-term Payroll Payable
Unit: RMB
Item Ending balance Beginning balance
III. Other long-term welfare 92,458,178.53 93,843,473.02
Total 92,458,178.53 93,843,473.02
35. Deferred Income
Unit: RMB
Reason for
Item Beginning balance Increase Decrease Ending balance
formation
Government Government
126,737,092.32 2,417,500.00 2,342,622.32 126,811,970.00
subsidies subsidies
Unrealized financing
237,606.84 92,402.66 145,204.18 Finance lease
incomes
Total 126,737,092.32 2,655,106.84 2,435,024.98 126,957,174.18 --
Item involving government subsidies:
Unit: RMB
Amount Amount Amount
Other Related to
Beginning Amount of recorded recorded into offset cost in
Item change Ending balance assets/related
balance newly subsidy into other income the
s income
non-operat in the Reporting
122
ing Reporting Period
income in Period
the
Reporting
Period
Related to the
Land 59,265,769.33 696,578.94 58,569,190.39
assets
Related to the
Equipment 64,626,322.95 417,500.00 1,579,543.40 63,464,279.55
assets
Production Related to the
691,000.04 66,499.98 624,500.06
living assets assets
Overseas Related to the
100,000.00 400,000.00 500,000.00
investment assets
Related to the
R&D 2,054,000.00 1,600,000.00 3,654,000.00
income
Total 126,737,092.32 2,417,500.00 0.00 2,342,622.32 0.00 0.00 126,811,970.00 --
Other notes:
36. Other Non-current Liabilities
Unit: RMB
Item Ending balance Beginning balance
Other 1,840,000.00 1,840,000.00
Total 1,840,000.00 1,840,000.00
37. Share Capital
Unit: RMB
Increase/decrease (+/-)
Beginning
New shares Bonus issue Ending balance
balance Bonus shares Other Subtotal
issued from profit
The sum of
922,602,311.00 922,602,311.00
shares
38. Capital Reserves
Unit: RMB
Item Beginning balance Increase Decrease Ending balance
Capital premium
640,470,910.34 640,470,910.34
(premium on stock)
123
Other capital reserves 59,022,683.48 53.66 59,022,737.14
Total 699,493,593.82 53.66 0.00 699,493,647.48
39. Treasury Shares
Unit: RMB
Item Beginning balance Increase Decrease Ending balance
Shares of the Company acquired for
0.00 121,952,709.49 0.00 121,952,709.49
decrease in registered capital
Total 121,952,709.49 121,952,709.49
40. Other Comprehensive Income
Unit: RMB
Reporting Period
Less: recorded in
other
comprehensive Attributable to Attributable
Beginning Income before income in prior Less: owners of the to
Item Ending balance
balance taxation in the period and Income tax Company as non-controll
Current Period transferred in expense the parent ing interests
profit or loss in after tax after tax
the Current
Period
II. Other
comprehensive
income that may
16,810,574.22 27,739,653.92 180,000.00 27,559,653.92 44,370,228.14
subsequently be
reclassified to
profit or loss
Profit or loss
generated from
changes in fair
28,050.00 1,200,000.00 180,000.00 1,020,000.00 1,048,050.00
value of
available-for-sale
financial assets
Differences
arising from
translation of 16,782,524.22 26,539,653.92 26,539,653.92 43,322,178.14
foreign
currency-denomin
124
ated financial
statements
Total of other
comprehensive 16,810,574.22 27,739,653.92 180,000.00 27,559,653.92 44,370,228.14
income
41. Surplus Reserves
Unit: RMB
Item Beginning balance Increase Decrease Ending balance
Statutory surplus
959,592,006.48 959,592,006.48
reserves
Discretional surplus
3,341,572.58 3,341,572.58
reserves
Total 962,933,579.06 962,933,579.06
42. Retained Profits
Unit: RMB
Item Reporting Period Same period of last year
Beginning balance of retained profits before
4,629,102,712.06 4,341,866,189.19
adjustments
Beginning balance of retained profits after
4,629,102,712.06 4,341,866,189.19
adjustments
Add: Net profit attributable to owners of the
377,355,959.02 841,150,934.75
Company as the parent
Less: Withdrawal of statutory surplus reserves 71,063,056.38
Dividend of ordinary shares payable 453,344,328.00 482,851,355.50
Ending retained profits 4,553,114,343.08 4,629,102,712.06
List of adjustment of beginning retained profits:
(1) RMB0.00 beginning retained profits was affected by retrospective adjustment conducted according to the Accounting Standards
for Business Enterprises and relevant new regulations.
(2) RMB0.00 beginning retained profits was affected by changes in accounting policies.
(3) RMB0.00 beginning retained profits was affected by correction of significant accounting errors.
(4) RMB0.00 beginning retained profits was affected by changes in combination scope arising from same control.
(5) RMB0.00 beginning retained profits was affected totally by other adjustments.
125
43. Operating Revenue and Cost of Sales
Unit: RMB
Reporting Period Same Period of last year
Item
Operating revenue Cost of sales Operating revenue Cost of sales
Main operations 3,161,001,569.72 2,286,826,556.57 2,879,100,712.82 1,969,571,645.66
Other operations 120,012,585.71 74,009,874.84 117,992,683.02 81,911,358.13
Total 3,281,014,155.43 2,360,836,431.41 2,997,093,395.84 2,051,483,003.79
44. Taxes and Surtaxes
Unit: RMB
Item Reporting Period Same Period of last year
Urban maintenance and construction tax 17,451,386.91 16,393,442.71
Education Surcharge 7,605,633.12 7,180,677.97
Property tax 10,374,539.75 9,865,797.76
Land use tax 9,379,056.90 9,262,257.89
Vehicle and vessel usage tax 75,652.02 71,177.18
Stamp duty 1,989,710.41 1,973,396.29
Local education surcharge 5,070,422.01 4,787,118.66
Local water conservancy facility
1,262,384.77 1,969,458.67
construction fund
Resource tax 220,654.00
Environmental protection tax 1,040,967.99
Total 54,470,407.88 51,503,327.13
45. Selling Expense
Unit: RMB
Item Reporting Period Same Period of last year
Salary 19,297,126.63 18,231,453.63
Transport fees 20,928,650.85 19,456,296.25
Advertising expense 5,420,732.63 8,178,116.43
Mall costs 875,238.41 0.00
Port surcharge 6,170,035.18 5,798,672.52
Depreciation charge 2,532,810.28 2,631,285.73
Business travel charges 1,629,252.55 2,401,690.68
126
Rental charges 556,033.51 687,727.39
Other 9,531,208.52 10,980,269.59
Total 66,941,088.56 68,365,512.22
46. Administrative Expense
Unit: RMB
Item Reporting Period Same Period of last year
R&D expenses 162,596,245.80 158,802,502.01
Salary 49,380,053.99 50,247,742.67
Depreciation charge 13,579,871.22 12,850,463.13
Warehouse funding 14,923,489.16 14,931,054.00
Travel expense 8,855,345.37 12,066,196.48
Rental charges 8,383,823.95 6,524,734.12
Labor-union expenditure 8,029,634.53 7,312,516.87
Employee education budget 5,642,213.54 5,469,769.99
Amortization of intangible assets 5,669,585.44 5,452,967.89
Transport fees 3,049,340.29 3,489,273.36
Other 45,761,153.21 36,890,098.97
Total 325,870,756.50 314,037,319.49
47. Finance Costs
Unit: RMB
Item Reporting Period Same Period of last year
Interest expense 22,535,312.05 14,653,232.24
Less: Interest income 7,403,493.02 2,645,051.42
Less: Amount of capitalized interest
Foreign exchange gains or losses 11,511,469.36 15,375,073.21
Other 3,881,936.92 3,546,924.25
Total 30,525,225.31 30,930,178.28
48. Asset Impairment Loss
Unit: RMB
Item Reporting Period Same Period of last year
I. Bad debt loss 2,221,300.66 -1,283,546.44
127
II. Inventory falling price loss -99,805.82 2,246,368.58
Total 2,121,494.84 962,822.14
49. Gain on Changes in Fair Value
Unit: RMB
Sources Reporting Period Same period of last year
Financial assets at fair value through profit or loss 1,110,700.00
Financial liabilities at fair value through profit or loss -28,481,010.00
Total -28,481,010.00 1,110,700.00
50. Investment Income
Unit: RMB
Same Period of last
Item Reporting Period
year
Long-term equity investment income accounted by equity method -1,730,597.59
Investment income from disposal of financial assets at fair value through profit or
6,376,621.37 1,385,535.34
loss
Total 4,646,023.78 1,385,535.34
51. Asset Disposal Income
Unit: RMB
Sources Reporting Period Same period of last year
Income from disposal of fixed assets -522,286.65 -1,191,082.48
52. Other Income
Unit: RMB
Same period of
Sources Reporting Period
last year
2016 Incentive Fund for international and provincial R&D platforms (CCQZ [2018] No.13 and
2,517,200.00
No.2)
2017 Provincial Specific Fund for service industry development (ZCQZ [2017] No.169) 133,000.00
2017 Central Specific Fund for foreign trade and economic development (ZCQZ [2017]
48,200.00
No.179)
2017 Municipal Specific fund for foreign trade and economic development (ZCQZ [2017]
131,200.00
No.168)
128
Municipal Specific Fund for R&D of application technology (ZKF [2017] No.100) 400,000.00
2017 Municipal Specific Fund for patent development (ZCJZ [2018] No.23) 32,000.00
2017 Award for Shandong science and technology (LZF [2018] No.10) 200,000.00
Subsidy for leading talents in Mount Tai (ZZF [2018] No.14) 1,000,000.00
Subsidy for Zibo Gifted Person Plan (ZZF [2018] No.14) 700,000.00
Specific Raised Fund for integration of IT application with industrialization (ZCQZ [2017]
4,735,700.00
No.189)
Government subsidy in premium of ECI (CCQZ [2018] No.9) 373,200.00
Government subsidy for new industry format of Foreign trade (CCQZ [2018] No.9) 10,600.00
Government subsidy for international market development project (CCQZ [2018] No.8) 23,200.00
Government subsidy for leading enterprises in export (CCQZ [2018] No.8) 100,000.00
2017 Government subsidy for 17th Asia International Textile Machine and Fittings Exhibition
5,400.00
(CCQZ [2018] No.11)
Government subsidy for TEXWORLD held in Feb. 2017 (CCQZ [2018] No.11) 40,000.00
Government subsidy for 30th Vietnam HCM Exhibition of Textile & Clothing Industry held in
21,300.00
April 2017 (CCQZ [2018] No.11)
Government subsidy for LT. GRFF (CCQZ [2018] No.11) 1,700,000.00
Government subsidy for international qualification certification (CCQZ [2018] No.11) 10,000.00
Specific government subsidy for corporate management improvement (ZGXWF [2018] No.1) 304,450.00
2016 Government subsidy for freight of cotton out of Xinjiang (XCJ [2017] No.206) 464,400.00
Government subsidy for capital of supporting infrastructure construction of Lu Thai Group
16,527,500.00
(CCFSZ [2018] No.34)
Zibo Qilu Cup Industrial Design Rewards 30,000.00
Government subsidy for social insurance and post subsidy of people with job hunting
1,042,819.75
difficulties hired during Jan. to May of 2018 (LCS [2011] No.55)
2016 subsidy for outstanding energy-saving enterprises in Zibo (ZZZ [2017] No.118) 300,000.00
Fund for green cotton project with high yield and high efficiency 500,000.00
Specific fund for agricultural industrialized development 600,000.00
Compensatory resettlement fund from land acquisition for highway 500,390.33
2017 4th subsidy for freight of cotton yarn 908,274.23
2017 4th electricity price subsidy 305,711.64
2017 4th quarter social insurance subsidy 246,565.76
2017 Pre-employment training subsidy for textile enterprises 278,490.56
Deferred income amortization 2,342,622.32
2016 power industrial city 30 policies support fund (special fund for business management
3,036,000.00
Zicaiqizhi [2016] No. 205)
129
Special fund for development of service sector (Chuancaiqizhi[2017] No. 16, No. 17) 70,500.00
Subsidy for Elite Program of Zibo (Zizhengbanzi[2016] No. 159) 500,000.00
Receiving subsidy from the academician workstation (Cheque No: 14916508) 200,000.00
Progress of Science and Technology Award 50,000.00
Reward fund for enterprises with an advantage in patent creation in 2016 (Zizhizi[2017] No.
30,000.00
22)
Fund for energy-saving 30,000.00
Fund for supporting talents 300,000.00
Funding for Municipal Key Talents Introduce Project 50,000.00
Export credit insurance premiums 135,200.00
Subsidy for Las Vegas Show 56,000.00
Government subsidy for brand construction 740,200.00
Government subsidy for service trade 20,000.00
Progress of Science and Technology Award in of Zibo in 2016 50,000.00
Counterpart funding for post doctorates 50,000.00
Special subsidy liquidation fund for textile and garment in 2016 3,871,234.20
Deferred income amortization 1,391,503.09
Total 36,532,224.59 10,580,637.29
53. Non-operating Income
Unit: RMB
Same Period of Amount recorded in the current
Item Reporting Period
last year non-recurring profit or loss
Gains from damage and scrap of non-current assets 12,598.97 12,598.97
Government subsidies unrelated to normal
130,000.00
operations of the Company
Other 2,998,473.61 4,235,273.28 2,998,473.61
Total 3,011,072.58 4,365,273.28 3,011,072.58
54. Non-operating Expense
Unit: RMB
Amount recorded in the current
Item Reporting Period Same Period of last year
non-recurring profit or loss
Donations 7,246.70 3,010,000.00 7,246.70
Losses from damage and scrap 1,094,026.64 781,154.66 1,094,026.64
130
of non-current assets
Other 893,650.37 857,770.73 893,650.37
Total 1,994,923.71 4,648,925.39 1,994,923.71
55. Income Tax Expense
(1) List of Income Tax Expense
Unit: RMB
Item Reporting Period Same Period of last year
Current income tax expense 63,894,098.11 82,330,397.98
Deferred income tax expense -618,583.54 -2,874,770.96
Total 63,275,514.57 79,455,627.02
(2) Adjustment Process of Accounting Profit and Income Tax Expense
Unit: RMB
Item Reporting Period
Profit before taxation 453,439,851.52
Current income tax expense accounted at statutory/applicable tax rate 68,015,977.73
Influence of applying different tax rates by subsidiaries -917,425.56
Influence of income tax before adjustment 629,616.91
Influence of non-taxable income -9,000,551.96
Influence of not deductable costs, expenses and losses 3,795,257.08
Influence of deductable temporary difference or deductable losses of unrecognized
752,640.37
deferred income tax in the Reporting Period
Income tax expense 63,275,514.57
56. Cash Flow Statement
(1) Cash Generated from Other Operating Activities
Unit: RMB
Item Reporting Period Same Period of last year
Government subsidies 38,328,491.16 32,282,179.48
Claim income 1,639,520.19 1,325,325.55
Recovery of employee borrowings, petty
7,332,632.94 293,762.05
cash and deposit
131
Collection for employees 2,811,301.35 278,441.53
Other 8,718,571.06 16,605,176.27
Total 58,830,516.70 50,784,884.88
(2) Cash Used in Other Operating Activities
Unit: RMB
Item Reporting Period Same Period of last year
Freight and miscellaneous charges 30,263,702.56 29,710,088.63
Rental charges 5,121,075.62 12,119,156.17
Advertising expense 361,478.56 2,594,594.92
Business travel charges 17,701,778.95 16,603,736.64
Insurance 9,043,863.69 3,345,635.81
Audit advisory announcement fee 4,654,078.64 2,901,671.62
Decoration & repair expenses 1,092,271.20 4,151,211.04
Donation 207,152.51 4,226,982.21
Pre-payment 967,632.15 24,679,803.50
Payment of employee borrowings, petty
9,938,512.86 5,521,282.60
cash and deposit
Other 33,511,070.15 37,799,876.70
Total 112,862,616.89 143,654,039.84
(3) Cash Generated from Other Investing Activities
Unit: RMB
Item Reporting Period Same Period of last year
Interest income 7,141,264.70 2,642,590.05
Income from forward foreign exchange 6,274,421.37 1,385,535.34
Sale of securities 66,007,480.86
Option cost 112,450.00
Total 13,528,136.07 70,035,606.25
(4) Cash Used in Other Investing Activities
Unit: RMB
Item Reporting Period Same Period of last year
forward settlement exchange loss 0.00 0.00
132
Payment of deposit for the L/C of
0.00 0.00
equipment purchase
(5) Cash Generated from Other Financing Activities
Unit: RMB
Item Reporting Period Same Period of last year
Return of loan guarantees 17,200,000.00 8,000,000.00
Recovery of intercourse accounts 21,300,000.00 2,300,000.00
Government subsidies related to assets 817,500.00 0.00
Total 39,317,500.00 10,300,000.00
(6) Cash Used in Other Financing Activities
Unit: RMB
Item Reporting Period Same Period of last year
Return of the B-share buy-back amount 175,517,237.20 0.00
Total 175,517,237.20 0.00
57. Supplemental Information for Cash Flow Statement
(1) Supplemental Information for Cash Flow Statement
Unit: RMB
Supplemental information Reporting Period Same period of last year
1. Reconciliation of net profit to net cash flows generated from operating
-- --
activities
Net profit 390,164,336.95 411,957,743.81
Add: Provision for impairment of assets 2,121,494.84 962,822.14
Depreciation of fixed assets, oil-gas assets, and productive living assets 204,806,245.97 206,209,335.09
Amortization of intangible assets 8,762,435.07 7,901,439.13
Amortization of long-term prepaid expenses 1,573,450.85 2,182,955.03
Losses from disposal of fixed assets, intangible assets and other
522,286.65 1,972,237.14
long-lived assets (gains: negative)
Losses from scrap of fixed assets (gains: negative) 1,081,427.67
Losses from changes in fair value (gains: negative) 28,481,010.00 -1,110,700.00
Finance costs (gains: negative) 29,182,177.28 27,385,715.40
Investment loss (gains: negative) -4,646,023.78 -1,385,535.34
133
Decrease in deferred income tax assets (gains: negative) -618,583.54 -2,805,205.65
Increase in deferred income tax liabilities
207,835.87 -69,565.31
(“-” means decrease)
Decrease in inventory (gains: negative) 103,831,822.46 -222,720,851.30
Decrease in accounts receivable generated from operating activities
-10,014,110.37 35,400,564.44
(gains: negative)
Increase in accounts payable used in operating activities (decrease:
-56,853,595.15 -122,634,204.01
negative)
Other -817,500.00
Net cash generated from/used in operating activities 697,784,710.77 343,246,750.57
2. Significant investing and financing activities without involvement of
-- --
cash receipts and payments
3. Net increase/decrease of cash and cash equivalent: -- --
Ending balance of cash 671,571,889.84 601,657,326.65
Less: beginning balance of cash 676,639,212.86 659,116,137.67
Net increase in cash and cash equivalents -5,067,323.02 -57,458,811.02
(2) Cash and Cash Equivalent
Unit: RMB
Item Ending balance Beginning balance
I. Cash 671,571,889.84 676,639,212.86
Including: Cash on hand 3,982,351.33 8,040,420.28
Bank deposit on demand 667,589,538.44 668,598,792.58
Other monetary fund on demand 0.07
III. Ending balance of cash and cash
671,571,889.84 676,639,212.86
equivalents
58. Assets with Restricted Ownership or Right to Use
Unit: RMB
Item Ending carrying value Reason for restriction
Monetary capital 150,080.52 cash deposit of L/G
Inventory 67,984,874.74 Mortgaged for short-term borrowings
Fixed assets 101,474,035.19 Mortgaged for short-term borrowings
Total 169,608,990.45 --
134
59. Foreign Currency Monetary Items
(1) Foreign Currency Monetary Items
Unit: RMB
Ending foreign currency Ending balance converted to
Item Exchange rate
balance RMB
Monetary capital -- --
Including: USD 35,333,824.63 6.6166 233,789,784.06
EUR 589,293.86 7.6515 4,508,981.98
HKD 11,259,904.56 0.8431 9,493,225.55
JPY 1,814,848.00 0.0599 108,709.39
THB 190.19 0.1998 38.00
SGD 1.90 4.8386 9.19
GBP 2,850.86 8.6551 24,674.47
AUD 131.03 4.8633 637.24
CHF 23,407.90 6.6350 155,311.42
SEK 920.00 0.7328 674.18
MMK 381,590,866.86 0.004887 1,864,834.59
Dong 832,968,600,275.00 0.000291 242,393,862.68
Accounts receivable -- --
Including: USD 35,861,603.26 6.6166 237,281,884.13
EUR
HKD 3,017,862.52 0.8431 2,544,359.89
Dong 19,943,156,276.00 0.000291 5,803,458.48
Long-term borrowings -- --
Including: USD 10,493,510.18 6.6166 69,431,359.47
EUR
HKD
Notes receivable:
Including: USD 13,814,454.68 6.6166 91,404,720.83
Other accounts receivable
Including: USD 198,313.13 6.6166 1,312,158.66
HKD 6,500.00 0.8431 5,480.15
JPY 1,813,040.00 0.0599 108,601.10
135
EUR 10,000.00 7.6515 76,515.00
MMK 1,090,000.00 0.004887 5,326.83
Dong 4,714,754,917.00 0.000291 1,371,993.68
Accounts payable:
Including: USD 1,459,263.63 6.6166 9,655,363.74
JPY 998.37 0.0599 59.80
EUR 498,001.11 7.6515 3,810,455.50
MMK 54,124,376.26 0.004887 264,505.83
Dong 8,063,790,891.00 0.000291 2,346,563.15
Other accounts payable:
Including: USD 5,455.33 6.6166 36,095.74
HKD 5,813,035.34 0.8431 4,900,970.10
Dong 389,536,742.00 0.000291 113,355.19
Short-term borrowings:
Including: USD 91,703,604.26 6.6166 606,766,067.97
Dong 588,635,375,814.00 0.000291 171,292,894.36
(2) Notes to Overseas Entities Including: for Significant Oversea Entities, Main Operating Place, Recording
Currency and Selection Basis Shall Be Disclosed; if there Are Changes in Recording Currency, Relevant
Reasons Shall Be Disclosed.
√ Applicable □ Not applicable
The operating places of Company’s subsidiaries Lu Thai( Hong Kong), Lu Thai(Cambodia), Lu
Thai(Burma), Lu Thai(America), and Lu Thai(Vietnam), and Lu An Garment Co., Ltd. were Hong
Kong, Cambodia, Burma, America, Vietnam and Vietnam, and the recording currency respectively
was HKD, USD, USD, USD, Dong and Dong.
VIII. Equity in Other Entities
1. Equity in Subsidiary
(1) Subsidiaries
Main Holding percentage (%)
Registration Nature of
Name operating Way of gaining
place business Directly Indirectly
place
Wholesale and
Beijing Innovative Beijing Beijing 60.00% Set-up
retail industry
Luthai (Hong Kong) Hong Hong Kong Wholesale and 100.00% Set-up
136
Kong retail industry
Wholesale and
Shanghai Luthai Shanghai Shanghai 100.00% Set-up
retail industry
Manufacturing Business combination not under the
Xinjiang Luthai Xinjiang Xinjiang 59.92%
industry same control
Lufeng Weaving & Manufacturing
Zibo Zibo 75.00% Set-up
Dyeing industry
Manufacturing
Luqun Textile Zibo Zibo 100.00% Set-up
industry
Manufacturing Business combination not under the
Xinsheng Power Zibo Zibo 100.00%
industry same control
Xinjiang Textile Manufacturing
Xinjiang Xinjiang 59.92% Set-up
(sub-subsidiary) industry
Helijie Business combination not under the
Zibo Zibo Service 100.00%
(sub-subsidiary) same control
Chengshun Heating Manufacturing Business combination under the
Zibo Zibo 100.00%
(sub-subsidiary) industry same control
Wholesale and
Beijing Youxian Beijing Beijing 90.00% Set-up
retail industry
Manufacturing
Lu Thai (Cambodia) Cambodia Cambodia 100.00% Set-up
industry
Manufacturing
Lu Thai (Burma) Burma Burma 100.00% Set-up
industry
Wholesale and
Lu Thai (America) America America 100.00% Set-up
retail industry
Manufacturing
Lu Thai (Vietnam) Vietnam Vietnam 100.00% Set-up
industry
Manufacturing
Lu An Garments Vietnam Vietnam 100.00% Set-up
industry
(2) Significant Non-wholly-owned Subsidiary
Unit: RMB
Shareholding Balance of
The profit or loss attributable
proportion of Declaring dividends distributed to non-controlling
Name to the non-controlling
non-controlling non-controlling shareholders shareholders at the
shareholders
shareholders period-end
Xinjiang
40.08% 4,822,646.19 201,265,723.17
Luthai
137
Lufeng
Weaving & 25.00% 7,920,513.21 355,592,421.35
Dyeing
(3) The Main Financial Information of Significant Not Wholly-owned Subsidiary
Unit: RMB
Ending balance Beginning balance
Non-curr Non-curr Non-curr Non-curr
Name Current Total Current Total Current Total Current Total
ent ent ent ent
assets assets liabilities liabilities assets assets liabilities liabilities
assets liability assets liability
Xinjiang 488,075, 578,451, 1,066,52 555,782, 4,974,92 560,757, 533,910, 552,920, 1,086,83 593,505, 4,950,67 598,456,
Luthai 178.89 477.03 6,655.92 242.59 7.16 169.75 300.91 939.85 1,240.76 546.28 5.96 222.24
Lufeng
817,800, 833,800, 1,651,60 193,995, 29,276,4 223,271, 756,065, 841,883, 1,597,94 168,738, 29,616,0 198,354,
Weaving &
218.73 294.71 0,513.44 287.89 76.20 764.09 670.02 193.85 8,863.87 484.34 32.10 516.44
Dyeing
Unit: RMB
Reporting Period Same period of last year
Total Cash flows Total Cash flows from
Name Operating Operating
Net profit comprehensiv from operating Net profit comprehensiv operating
revenue revenue
e income activities e income activities
Xinjiang
342,127,462.81 3,505,617.21 3,505,617.21 96,172,947.55 259,171,106.59 14,636,728.56 14,636,728.56 79,439,238.74
Luthai
Lufeng
Weaving 793,449,942.60 28,734,401.92 28,734,401.92 16,773,852.80 791,134,076.11 66,827,430.66 66,827,430.66 69,665,169.07
& Dyeing
2. Equity in Joint Ventures or Associated Enterprises
(1) Significant Joint Ventures or Associated Enterprises
Unit: RMB
Beginning balance/The same period of last
Ending balance/Reporting Period
year
Haohong Investment Haohong Investment
Current assets 70,056,089.94 128,880,401.95
Non-current assets 217,511,055.06 163,879,055.06
Total assets 287,567,145.00 292,759,457.01
Current liabilities 150,000.00 150,000.00
138
Total liabilities 150,000.00 150,000.00
Equity attributable to shareholders of the
287,417,145.00 292,609,457.01
Company as the parent
Net assets shares calculated at the
95,806,134.43 97,536,732.02
shareholding proportion
Carrying value of investment to associated
95,806,134.43 97,536,732.02
enterprises
Net profit -5,192,312.01
Total comprehensive income -5,192,312.01
IX. The Risk Related to Financial Instruments
Main financial instruments of the Company included: Loans, accounts receivable, accounts payable,
etc., all the details of the financial instruments, see related projects of “Section VI”. The risk
associated with these financial instruments, as well as the Company’s risk management policy to
reduce these risks which were described below. The Company's management managed and
supervised these risks to ensure that the above risk was controlled in a limited scope.
The Company use sensitivity analysis technology to analyze the reasonable of risk variables,
influence of probable changes to the current profits and Stockholders' equity. Because rarely any
risk variables change in isolation, and the correlation between variables for the eventual impact of
the change of a risk variables will have a significant effect, thus, the aforesaid content was
processing under the assumption of the change of each variable was conducted independently.
(I) Risk management objectives and policies
The goals of Company engaged in the risk management is to achieve the proper balance between
the risks and benefits, reduced the negative impact to the Company operating performance risk to a
minimum, maximized the profits of shareholders and other equity investors. Based on the risk
management goal, the basic strategy of the Company's risk management is determine and analyze
the various risks faced by the Company, set up the bottom line of risk and conducted appropriate
risk management, and timely supervised various risks in a reliable way and controlled the risk
within the range of limit.
1. Market Risk
(1) Foreign exchange risk
Foreign exchange risk is referred to the risk incurred due to loss of changes in exchange rate.
Foreign exchange risk is referred to the risk incurred due to loss of changes in exchange rate. The
Company’s foreign exchange risk was mainly related to USD, HKD and EUR, excepting the
Company’s several subsidiaries purchase and sale, in USD, HKD and Dong, the other main
business settled by RMB. On 30 June 2018, in addition to the following assets or liabilities in
statement was USD, HKD and EUR, the Company’s assets or liabilities was RMB balance. The
foreign exchange risk incurred by assets and liabilities of foreign balance may have impact to the
operation results of the Company.
Item Period-end Period-beginning
139
Cash and cash equivalents 492,340,742.75 556,296,995.92
Notes receivable 91,404,720.83 110,349,828.81
Account receivable 245,629,702.50 252,210,660.04
Other accounts receivable 2,880,075.42 6,010,153.41
Accounts payable 16,076,948.02 44,343,006.71
Other accounts payable 5,050,421.03 4,566,032.47
Short-term borrowings 778,058,962.33 695,124,996.40
Long-term borrowings due with one year 62,750,292.49
Long-term borrowings 69,431,359.47
(2) Interest rate risk
The risk of cash flow changes of financial instruments due to change of interest rate mainly was
related bank loan (for details, refer to Note VII-22 and 33).
Sensitive analysis of interest rate risk:
Influence of interest increasing 100 BP to current profits and losses and equity of shareholders
before tax was followed:
Change Reporting Period Same period of last year
Influence to the Influence to equity of Influence to the Influence to equity of
profits shareholders profits shareholders
Increase 100 BP -3,208,984.32 -1,891,755.11 -8,376,485.24 -7,702,361.91
Decrease 100 BP 3,208,984.32 1,891,755.11 8,376,485.24 7,702,361.91
2. Credit Risk
On 30 June 2018, credit risk what may lead to the financial losses was the other party of the
contract failed to fulfill the obligations and causes loss of the Company’s financial assets, which
including: book value of financial assets recognized in consolidated balance sheet.
In order to reduce the credit risk, the Company established a special team be responsible for the
determination of credit limit to conduct credit approval, and perform other supervising procedures
to ensure that taking necessary measures to recycle expired claims. In addition, the Company at
each balance sheet date, review every single receivables recycling situation, to ensure that the
money unable to recycle withdrawn provision for bad debt fully. Thus, the Company management
believed that have assume the credit risk the Company shouldered had been greatly reduced.
The Company's working capital was in bank with higher credit rating, so credit risk of working
capital was low.
3. Liquidity Risk
When manage liquidity risk, the Company keep administrators deemed sufficient cash and cash
equivalents and supervised it to meet the need of the operation of the Company and reduce the
influence of cash flow volatility. The Company management supervised the usage of bank loan and
ensured to comply with the loan agreement.
In the end of Reporting Period, the Company held cash and bank deposit of RMB672 million. In
140
recent two years, the average of net cash flow of operation activities was RMB1.176 billion. The
Company believed that the liquidity risk was insignificant.
X. The Disclosure of Fair Value
1. Ending Fair Value of Assets and Liabilities at Fair Value
Unit: RMB
Ending fair value
Item Fair value measurement Fair value measurement Fair value measurement
Total
items at level 1 items at level 2 items at level 3
I. Consistent fair value
-- -- -- --
measurement
(II)Available-for-sale financial
61,233,000.00 61,233,000.00
assets
(1) Debt instrument investment 61,233,000.00 61,233,000.00
(2) Equity instrument investment
(3) Other
The total amount of assets
61,233,000.00 61,233,000.00
consistently measured at fair value
(5) Trading financial liabilities 28,481,010.00 28,481,010.00
Of which: issued trading bonds
Derivative financial liabilities 28,481,010.00 28,481,010.00
Other
The total amount of liabilities
28,481,010.00 28,481,010.00
consistently measured at fair value
2. Market Price Recognition Basis for Consistent and Inconsistent Fair Value Measurement Items at Level
1
The fair value of financial liabilities at level 1 was determined in accordance with the quotation of future foreign exchange of the
bank on 30 June 2018.
3. Valuation Technique Adopted and Nature and Amount Determination of Important Parameters for
Consistent and Inconsistent Fair Value Measurement Items at Level 2
For the fund investment without active markets in available-for-sale financial assets, the fair value was determined in accordance
with the evaluation on the balance sheet date provided by the asset manager.
141
XI. Connected Party and Connected Transaction
1. Information Related to the Company as the Parent of the Company
Proportion of share Proportion of voting
held by the rights owned by the
Name Registration place Nature of business Registered capital Company as the Company as the
parent against the parent against the
Company (%) Company (%)
Zibo Lucheng
Textile, chemistry
Textile Investment Zibo RMB63,260,000 15.21% 15.21%
and investment
Co., Ltd.
Notes to information on the Company as the parent of the Company:
The final controllers of the Company are Mr. Liu Zibin and Mr. Liu Deming.
2. Subsidiaries of the Company
Refer to Note VIII-1. Equity in Subsidiaries.
3. Information on the Joint Ventures and Associated Enterprises of the Company
Refer to Note VIII-2. Equity in Joint Ventures or Associated Enterprises.
4. Information on Other Connected Parties
Name Relationship with the Company
Zibo Stanluian Cosmetics Co., Ltd. (hereinafter called
Joint-stock company of the Company as the parent
“Stanluian”)
Zibo Taimei Ties Co., Ltd. (hereinafter called Taimei Ties) Majority-owned subsidiary of the Company as the parent
Zibo Limin Purified Water Co., Ltd. (hereinafter called Limin
Wholly-owned subsidiary of the Company as the parent
Purified Water)
Zibo Luqun Land Co., Ltd (hereinafter called Luqun Land) Wholly-owned subsidiary of the Company as the parent
Zibo Lurui Fine Chemical Co., Ltd. (hereinafter referred to as
Majority-owned subsidiary of the Company as the parent
Lurui Chemical)
Zibo Lujia Property Management Co. , Ltd. (hereinafter referred
Wholly-owned subsidiary of the Company as the parent
to as Lujia Property)
Shandong Chengshun Petrochemical Co., Ltd. (hereinafter
Wholly-owned subsidiary of the Company as the parent
referred to as Chengshun Petrochemical)
Hongkong Donghai International Co., Ltd. (hereinafter referred
Wholly-owned subsidiary of the Company as the parent
to as “Donghai International”)
142
5. List of Connected Transactions
(1) Information on Acquisition of Goods and Reception of Labor Service (Unit:RMB’0,000)
Information on acquisition of goods and reception of labor service
Unit: RMB
The approval trade Whether exceed Same period of
Connected party Content Reporting Period
credit trade credit or not last year
Zibo Lucheng
Processing of towel, sock, oil
Textile
product, supermarket retail, 6,462,966.30 7,750,000.00 No 6,638,544.04
Investment Co.,
household chemicals and boot etc.
Ltd.
Taimei Ties Goods processing fee No 641,693.32
Limin Purified
Recycled water, sewage treatment 12,624,335.83 14,310,000.00 No 11,460,424.24
Water
Chengshun
Gas 15,016,102.73 18,000,000.00 No 8,940,846.94
Petrochemical
Lurui Fine
Auxiliaries 53,067,182.08 63,600,000.00 No 44,827,622.22
Chemical
Information of sales of goods and provision of labor service
Unit: RMB
Connected party Content Reporting Period Same period of last year
Sales of materials, electricity, running
Lucheng Textile 268,002.48 534,393.58
water, draught water etc.
Taimei Ties Sales of electricity, heating charges 12,289.62
Sales of materials, electricity, and
Stanluian Company 6,926.79 29,595.68
running water
Sales of materials, electricity and lunch
Limin Purified Water 72,279.13 1,365.29
components etc.
Sales of drinking water, water &
Lurui Fine Chemical 88,729.05 105,936.42
electricity and lunch components
Lujia Property Sales of materials and recycled water 35,871.66 44,777.40
(2) Information on Connected Lease
The Company was lessor:
Unit: RMB
The lease income confirmed in The lease income confirmed in
Name of lessee Category of leased assets
the Reporting Period the same period of last year
143
Zibo Lucheng Textile
Houses and buildings 48,965.14 15,428.58
Investment Co., Ltd.
Lurui Fine Chemical Houses and buildings 4,091.82 4,091.82
The Company was lessee:
Unit: RMB
The lease fee confirmed in the The lease fee confirmed in the
Name of lessor Category of leased assets
Reporting Period same period of last year
Zibo Lucheng Textile
Rent of land 1,807,428.60 1,807,428.60
Investment Co., Ltd.
Zibo Lucheng Textile
Rent of gas station 250,857.12 250,857.12
Investment Co., Ltd.
Zibo Lucheng Textile
Rent of land and buildings 5,748,600.80 5,634,857.16
Investment Co., Ltd.
Luqun Property Rent of land and buildings 697,142.82 697,142.82
(3) Information on Inter-bank Lending of Capital of Related Parties
Unit: RMB
Connected party Amount Start date End date Note
Borrowing
Zibo Lucheng Textile Borrowed by the Company’s subsidiaries
80,520,000.00 2 Aug. 2017 31 Dec. 2018
Investment Co., Ltd. Xinsheng Power and Chengshun Heating
Borrowed by the Company’s subsidiary
Lujia Property 600,000.00 30 Mar. 2017 31 Dec. 2018
Chengshun Heating
Borrowed by the Company’s subsidiary
Stanluian Company 1,450,000.00 17 Aug. 2017 31 Dec. 2018
Chengshun Heating
Borrowed by the Company’s subsidiary
Taimei Ties 1,300,000.00 31 Mar. 2017 31 Dec. 2018
Chengshun Heating
Lending
6. Accounts Receivable and Payable of Connected Party
(1) Accounts Receivable
Unit: RMB
Item Connected party Ending carrying amount Beginning carrying amount
Accounts payable: Lurui Fine Chemical 3,774,559.50
Zibo Lucheng Textile
Other accounts payable: 83,474,436.64 60,456,317.14
Investment Co., Ltd.
144
Other accounts payable: Lujia Property 633,132.50 620,010.00
Other accounts payable: Stanluian Company 1,505,541.04 1,473,828.33
Other accounts payable: Taimei Ties 1,391,374.16 1,362,942.08
XII. Commitments and Contingency
1. Significant Commitments
Significant commitments on the balance sheet date
Capital commitments
Item Ending balance Beginning balance
(RMB’0,000) (RMB’0,000)
Commitments signed but hasn’t been recognized
in financial statements
-- Commitment for constructing and purchasing 16,665.29 6,364.72
long-lived assets
Total 16,665.29 6,364.72
2. Contingency
(1) In Despite of no Significant Contingency to Disclose, the Company Shall Also Make Relevant
Statements.
There was no significant contingency for the Company to disclose.
XIII. Notes of Main Items in the Financial Statements of the Company as the Parent
1. Accounts Receivable
(1) Accounts Receivable Disclosed by Category
Unit: RMB
Ending balance Beginning balance
Carrying amount Bad debt provision Carrying amount Bad debt provision
With With
Category draw draw
Propor al Carrying value Propor al Carrying value
Amount Amount Amount Amount
tion prop tion prop
ortio ortio
n n
Accounts 298,726,378.20 100.00 15,011,277.88 5.03 283,715,100.32 322,076,206.04 100.00 16,172,615.06 5.02 305,903,590.98
145
receivable % % % %
withdrawal of
bad debt
provision of
by credit risks
characteristics
100.00 5.03 100.00 5.02
Total 298,726,378.20 15,011,277.88 283,715,100.32 322,076,206.04 16,172,615.06 305,903,590.98
% % % %
Accounts receivable with significant single amount for which bad debt provision separately accrued at the period-end:
□ Applicable √ Not applicable
In the groups, accounts receivable adopted aging analysis method to withdraw bad debt provision:
√ Applicable □ Not applicable
Unit: RMB
Ending balance
Aging
Accounts receivable Bad debt provision Withdrawal proportion
Subitem within 1 year
Subtotal within 1 year 297,847,596.66 14,892,379.84 5.00%
1 to 2 years 568,582.62 56,858.26 10.00%
2 to 3 years 310,198.92 62,039.78 20.00%
Total 298,726,378.20 15,011,277.88 5.03%
In the groups, accounts receivable adopted balance percentage method to withdraw bad debt provision:
□ Applicable √ Not applicable
(2) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB-1,161,337.18; the amount of the reversed
or collected part during the Reporting Period was of RMB0.00.
(3) Top 5 Accounts Receivable in Ending Balance Collected according to the Arrears Party
The total top5 accounts receivable in ending balance collected according to the arrears party for the
Company was RMB101,861,233.11, accounting for 34.10% of total ending balance of accounts
receivable, and the total accounts receivable correspondingly withdrawn was RMB5,093,061.66.
2. Other Accounts Receivable
(1) Other Accounts Receivable Disclosed by Category
Unit: RMB
Category Ending balance Beginning balance
146
Carrying amount Bad debt provision Carrying amount Bad debt provision
With With
draw draw
Propor al Carrying value Proporti al Carrying value
Amount Amount Amount Amount
tion prop on prop
ortio ortio
n n
Other accounts
receivable with
significant single 92.21
410,476,728.06 410,476,728.06 486,974,195.33 93.16% 486,974,195.33
amount for which %
bad debt provision
separately accrued
Other accounts
receivable
withdrawn bad
8.35 8.16
debt provision 34,673,033.83 7.79% 2,894,546.03 31,778,487.80 35,729,408.00 6.84% 2,915,363.76 32,814,044.24
% %
according to credit
risks
characteristics
100.00 0.65 0.56
Total 445,149,761.89 2,894,546.03 442,255,215.86 522,703,603.33 100.00% 2,915,363.76 519,788,239.57
% % %
Other accounts receivable with significant single amount for which bad debt provision separately accrued at the period-end:
√ Applicable □ Not applicable
Unit: RMB
Ending balance
Other accounts receivable
Other accounts
(unit) Bad debt provision Withdrawal proportion Withdrawal reason
receivable
no impairment for the
Lu Thai (Vietnam) 353,963,796.16
individual test
no impairment for the
Lu An Garments 56,512,931.90
individual test
Total 410,476,728.06 -- --
In the groups, other accounts receivable adopted aging analysis method to withdraw bad debt provision:
√ Applicable □ Not applicable
Unit: RMB
Ending balance
Aging
Other accounts receivable Bad debt provision Withdrawal proportion
Subentry within 1 year
147
Subtotal of within 1 year 28,291,279.16 1,414,563.96 5.00%
1 to 2 years 2,172,721.63 217,272.16 10.00%
2 to 3 years 20.00%
Over 3 years 4,209,033.04 1,262,709.91 30.00%
Total 34,673,033.83 2,894,546.03 8.35%
Notes to the determination basis for the Group:
In the groups, other accounts receivable adopted balance percentage method to withdraw bad debt provision
□ Applicable √ Not applicable
In the groups, other accounts receivable adopted other methods to withdraw bad debt provision:
□ Applicable √ Not applicable
(2) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB-20,817.73; the amount of the reversed or
collected part during the Reporting Period was of RMB0.00.
(3) Other Account Receivable Classified by Account Nature
Unit: RMB
Nature Ending carrying amount Beginning carrying amount
Intercourse funds 410,476,728.06 486,974,195.33
Export rebates 11,876,418.09 16,370,989.66
Payment on behalf 12,069,966.78 14,593,482.76
Guarantee deposit and cash deposit 2,434,068.07 2,532,658.50
Borrowings and petty cash 1,489,937.80 1,044,226.03
Other 6,802,643.09 1,188,051.05
Total 445,149,761.89 522,703,603.33
(4) Top 5 Other Accounts Receivable in Ending Balance Collected according to the Arrears Party
Unit: RMB
Proportion to total Ending
ending balance of balance of
Name of the entity Nature Ending balance Aging
other accounts bad debt
receivable provision
Lu Thai (Vietnam) Intercourse funds 353,963,796.16 Within 1 year 79.51%
Lu An Garments Intercourse funds 56,512,931.90 Within 1 year 12.70%
Refund of tax for export
Export rebates 11,876,418.09 Within 1 year 2.67% 593,820.90
receivable
148
Accounts receivable of
Advance money for the
advance money for the
social security undertake by
social security undertake 7,263,748.25 Within 1 year 1.63% 363,187.41
the individual of the
by the individual of the
employee
employee
B-share dividend refunds B-share dividend refunds
receivable from securities receivable from securities
4,791,546.35 Within 1 year 1.08% 239,577.32
registration and settlement registration and settlement
companies companies
Total -- 434,408,440.75 -- 97.59% 1,196,585.63
3. Long-term Equity Investment
Unit: RMB
Ending balance Beginning balance
Item Depreciation Depreciation
Carrying amount Carrying value Carrying amount Carrying value
reserve reserve
Investment to
2,069,693,116.04 0.00 2,069,693,116.04 1,744,156,616.04 25,200,000.00 1,718,956,616.04
subsidiaries
Investment to joint
ventures and associated 95,806,134.43 95,806,134.43 97,536,732.02 97,536,732.02
enterprises
Total 2,165,499,250.47 2,165,499,250.47 1,841,693,348.06 25,200,000.00 1,816,493,348.06
(1) Investment to the Subsidiary
Unit: RMB
Beginning Depreciation reserve Ending balance of
Investee Increase Decrease Ending balance
balance withdrawn depreciation reserve
Beijing Innovative 25,200,000.00 25,200,000.00 0.00
Xinjiang Luthai 147,303,034.16 147,303,034.16
Xinsheng Power 176,340,737.93 176,340,737.93
Lufeng Weaving &
529,620,000.00 529,620,000.00
Dyeing
Luqun Textile 171,784,550.00 171,784,550.00
Luthai (Hong
128,771,800.00 128,771,800.00
Kong)
Shanghai Luthai 20,000,000.00 20,000,000.00
Lu Thai 108,242,335.38 108,242,335.38
149
(Cambodia)
Lu Thai (America) 10,209,050.00 10,209,050.00
Lu Thai(Burma) 62,337,238.57 62,337,238.57
Beijing Youxian 13,500,000.00 4,500,000.00 18,000,000.00
Lu Thai (Vietnam) 318,034,810.00 314,820,500.00 632,855,310.00
Lu An Garments 32,813,060.00 31,416,000.00 64,229,060.00
Total 1,744,156,616.04 350,736,500.00 25,200,000.00 2,069,693,116.04 0.00
(2) Investment to Joint Ventures and Associated Enterprises
Unit: RMB
Increase/decrease
Ending
Adjustm Withdra
Gains and balance
Additi Reduc ent of Change Cash bonus wal of
Beginning losses Ending of
Investee onal ed other s of or profits impair
balance recognized Other balance depreci
invest invest compreh other announced ment
under the ation
ment ment ensive equity to issue provisio
equity method reserve
income n
I. Joint ventures
II. Associated enterprises
Haohong
Investme 97,536,732.02 -1,730,597.59 95,806,134.43
nt
Subtotal 97,536,732.02 -1,730,597.59 95,806,134.43
Total 97,536,732.02 -1,730,597.59 95,806,134.43
4. Operating Revenue and Cost of Sales
Unit: RMB
Reporting Period Same period of last year
Item
Operating revenue Cost of sales Operating revenue Cost of sales
Main operations 2,360,871,867.81 1,740,109,055.52 2,368,342,984.34 1,674,625,537.10
Other operations 143,523,362.44 121,295,410.17 113,980,604.46 92,055,486.97
Total 2,504,395,230.25 1,861,404,465.69 2,482,323,588.80 1,766,681,024.07
5. Investment Income
Unit: RMB
150
Item Reporting Period Same period of last year
Long-term equity investment income
17,976,433.62
accounted by cost method
Long-term equity investment income
-1,730,597.59
accounted by equity method
Investment income from disposal of
financial assets at fair value through profit or 3,648,000.52 1,281,963.99
loss
Total 1,917,402.93 19,258,397.61
6. Other
XIV. Supplementary Materials
1. Items and Amounts of Non-recurring Profit or Loss
√ Applicable □ Not applicable
Unit: RMB
Item Amount Note
Gains/losses from the disposal of non-current assets -1,603,714.32
Government grants recognized in the current period, except for those acquired in the
ordinary course of business or granted at certain quotas or amounts according to the 39,071,113.48
government’s unified standards
Gain/loss from change of fair value of trading financial assets and liabilities, and
investment gains from disposal of trading financial assets and liabilities and
-22,104,388.63
available-for-sale financial assets, other than valid hedging related to the Company’s
common businesses
Other non-operating income and expense other than the above 2,097,576.54
Less: Income tax effects 5,975,920.72
Non-controlling interests effects 1,077,047.21
Total 10,407,619.14 --
Explain the reasons if the Company classifies an item as an non-recurring gain/loss according to the definition in the Explanatory
Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Non-recurring Gains and
Losses, or classifies any extraordinary gain/loss item mentioned in the said explanatory announcement as a recurrent gain/loss item
□ Applicable √ Not applicable
2. Return on Equity and Earnings Per Share
Weighted average EPS (Yuan/share)
Profit as of Reporting Period
ROE (%) EPS-basic EPS-diluted
151
Net profit attributable to ordinary shareholders of the
5.13% 0.41 0.41
Company
Net profit attributable to ordinary shareholders of the
4.99% 0.40 0.40
Company after deduction of non-recurring profit and loss
3. Differences between Accounting Data under Domestic and Overseas Accounting Standards
(1) Differences of Net Profit and Net Assets Disclosed in Financial Reports Prepared under International
and Chinese Accounting Standards
√ Applicable □ Not applicable
Unit: RMB
Net profit Net assets
Same period of last
Reporting Period Ending balance Beginning balance
year
According to Chinese accounting
377,355,959.02 395,130,296.26 7,060,561,399.27 7,230,942,770.16
standards
Items and amounts adjusted according to international accounting standards:
Impact on domestic equipment tax
credit recognized as deferred income
164,500.00
under international accounting
standards
According to international
377,355,959.02 395,294,796.26 7,060,561,399.27 7,230,942,770.16
accounting standards
(2) Differences of Net profit and Net assets Disclosed in Financial Reports Prepared under Overseas and
Chinese Accounting Standards
□ Applicable √ Not applicable
152
Part XI Documents Available for Reference
1. The financial statements signed and stamped by the Company’s legal representative, Chief Accountant and
Financial Manager.
2. The originals of all the Company’s announcements and documents disclosed to the public during the Reporting
Period on Securities Times, Shanghai Securities News, China Securities Journal and Ta Kung Pao.
Chairman of the Board: Liu Zibin
Lu Thai Textile Co., Ltd.
22 August 2018
153
