Lu Thai Textile Co., Ltd. Annual Report 2018
LU THAI TEXTILE CO., LTD.
ANNUAL REPORT 2018
March 2019
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Lu Thai Textile Co., Ltd. Annual 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.
All the Company’s directors have attended the Board meeting for the review of this Report
and its summary.
The Company has described in detail in this Report the possible risks. Please refer to the
contents about the major risks and countermeasures in “Outlook of the Company’s future
development” 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
2019. 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 Board has approved a final dividend plan as follows: based on the 858,121,541 shares, a
cash dividend of RMB5.00 (tax inclusive) per 10 shares is to be distributed to the shareholders,
with no bonus issue from either profit or capital reserves.
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. Annual 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 ................................................................................................................ 30
Part VI Share Changes and Shareholder Information ................................................................. 46
Part VII Preferred Shares ............................................................................................................... 54
Part VIII Directors, Supervisors, Senior Management and Staff ............................................... 55
Part IX Corporate Governance ...................................................................................................... 66
Part X Corporate Bonds .................................................................................................................. 76
Part XI Financial Statements .......................................................................................................... 77
Part XII Documents Available for Reference .............................................................................. 193
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Lu Thai Textile Co., Ltd. Annual 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 31 December 2018
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Lu Thai Textile Co., Ltd. Annual 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 listing Shenzhen Stock Exchange
Company name in Chinese 鲁泰纺织股份有限公司
Abbr. 鲁泰纺织
Company name in English (if any) LU THAI TEXTILE CO.，LTD
Abbr. (if any) LTTC
Legal representative Liu Zibin
Registered address No. 11, Mingbo Road, High-tech Industry Development Zone, Zibo, Shandong, P.R.China
Zip code 255086
No. 81, Songling East Road, Zichuan District, Zibo, Shandong, P.R.China; No. 11, Mingbo
Office address
Road, High-tech Industry Development Zone, Zibo, Shandong, P.R.China
Zip code 255100; 255086
Company website www.lttc.com.cn
Email address lttc@lttc.com.cn
II Contact Information
Board Secretary Securities Representative
Name Qin Guiling Zheng Weiyin and Li Kun
No. 81, Songling East Road, Zichuan District, Zibo, No. 81, Songling East Road, Zichuan District, Zibo,
Address
Shandong, P.R.China 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 Media for Information Disclosure and Place where this Report Is Lodged
Newspapers designated by the Company for information Securities Times, Shanghai Securities News, China Securities Journal
disclosure and Ta Kung Pao (HK)
Website designated by CSRC for publication of this Report www.cninfo.com.cn
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Lu Thai Textile Co., Ltd. Annual Report 2018
Place where this Report is lodged The Securities Department of the Company
IV Change to Company Registered Information
Unified social credit code 91370300613281175K
Change to principal activity of the Company since going public (if any) No change
Every change of controlling shareholder since incorporation (if any) No change
V Other Information
The independent audit firm hired by the Company:
Name Ruihua Certified Public Accountants LLP
5-11F, West Tower, China Overseas Property Plaza, Block No. 7, Compound No. 8, Xibinhe
Office address
Road, Yongdingmen, Dongcheng District, Beijing, P.R.C.
Accountants writing signatures Wang Chuanshun and Cui Xiaoli
The independent sponsor hired by the Company to exercise constant supervision over the Company in the Reporting Period:
□ Applicable √ Not applicable
The independent financial advisor hired by the Company to exercise constant supervision over the Company in the Reporting Period:
□ Applicable √ Not applicable
VI Key Financial Information
Indicate by tick mark whether there is any retrospectively restated datum in the table below.
□ Yes √ No
2018-over-2017
2018 2017 2016
change (%)
Operating revenue (RMB) 6,879,058,813.93 6,409,224,044.97 7.33% 5,990,493,909.36
Net profit attributable to the listed company’s
811,526,477.83 841,150,934.75 -3.52% 808,760,025.91
shareholders (RMB)
Net profit attributable to the listed company’s
805,197,824.28 780,637,833.47 3.15% 762,785,364.02
shareholders before exceptional items (RMB)
Net cash generated from/used in operating
1,430,341,663.16 1,070,510,653.43 33.61% 1,314,732,284.45
activities (RMB)
Basic earnings per share (RMB/share) 0.90 0.91 -1.10% 0.85
Diluted earnings per share (RMB/share) 0.90 0.91 -1.10% 0.85
Weighted average return on equity (%) 11.24% 11.87% -0.63% 11.70%
Change of 31
31 December 31 December 2017 31 December
December 2018 over
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Lu Thai Textile Co., Ltd. Annual Report 2018
2018 31 December 2017 2016
(%)
Total assets (RMB) 10,537,759,811.84 10,170,624,027.75 3.61% 9,464,604,315.39
Equity attributable to the listed company’s
7,146,548,467.86 7,230,942,770.16 -1.17% 6,970,913,125.59
shareholders (RMB)
VII 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 under CAS and IFRS
□ Applicable √ Not applicable
No difference for the Reporting Period.
2. Net Profit and Equity under CAS and Foreign Accounting Standards
□ Applicable √ Not applicable
No difference for the Reporting Period.
VIII Key Financial Information by Quarter
Unit: RMB
Q1 Q2 Q3 Q4
Operating revenue 1,519,803,691.24 1,760,604,084.58 1,743,184,011.30 1,855,467,026.81
Net profit attributable to the listed company’s
159,278,371.57 218,077,587.45 209,540,056.51 224,630,462.30
shareholders
Net profit attributable to the listed company’s
138,044,830.06 228,388,087.15 224,130,296.96 214,634,610.11
shareholders before exceptional items
Net cash generated from/used in operating activities 84,118,827.13 613,665,883.64 425,367,905.98 307,189,046.41
Indicate by tick mark whether any of the quarterly financial data in the table above or their summations differs materially from what
have been disclosed in the Company’s quarterly or interim reports.
□ Yes √ No
IX Exceptional Gains and Losses
√ Applicable □ Not applicable
Unit: RMB
Item 2018 2017 2016 Note
Gain or loss on disposal of non-current assets (inclusive of impairment 20,670,427.42 -1,326,737.85 -8,321,693.49
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Lu Thai Textile Co., Ltd. Annual Report 2018
allowance write-offs)
Government subsidies charged to current profit or loss (exclusive of
government subsidies given in the Company’s ordinary course of
63,680,098.12 66,031,583.92 64,121,633.01
business at fixed quotas or amounts as per the government’s uniform
standards)
Current profit or loss on subsidiaries obtained in business combinations
involving enterprises under common control from the period-beginning to 4,145,908.17
combination dates, net
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 assets (exclusive of -63,632,606.67 4,794,598.32 3,212,471.16
effective portion of hedges that arise in the Company’s ordinary course of
business)
Non-operating income and expense other than the above 2,784,021.34 4,638,779.84 3,925,471.62
Less: Income tax effects 6,656,476.16 8,690,224.28 3,065,544.25
Non-controlling interests effects (net of tax) 10,516,810.50 9,080,806.84 13,897,676.16
Total 6,328,653.55 60,513,101.28 45,974,661.89 --
Explanation of why the Company reclassifies as recurrent an exceptional gain/loss item defined or listed in the Explanatory
Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Exceptional Gain/Loss
Items:
□ Applicable √ Not applicable
No such cases for the Reporting Period.
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Lu Thai Textile Co., Ltd. Annual Report 2018
Part III Business Summary
I Principal Activity of the Company in the Reporting Period
Is the Company subject to any industry-specific disclosure requirements?
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 Significant Changes in Major Assets
1. Significant Changes in Major Assets
Major assets Main reason for significant changes
The amount as at 31 December 2018 was RMB337,230,646.42, up 57.34% from the
Construction in progress beginning amount, primarily driven by a larger construction investment in and more
to-be-installed equipment of the second phase of the Lu Thai (Vietnam) project.
2. Major Assets Overseas
√ Applicable □ Not applicable
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Lu Thai Textile Co., Ltd. Annual Report 2018
Control Material
Return As % of the
Asset value Managemen measures to impairment
Asset Source Location generated Company’s
(RMB) t model protect asset risk
(RMB) equity
safety (yes/no)
Main
Lu Thai
management
(Hong Kong) Incorpora Hong
158,113,858.58 Marketing personnel sent 4,021,080.04 2.05% No
Textile Co., ted Kong
by the Company
Ltd.
as the parent
Main
Lu Thai
management
(America) Incorpora
11,650,032.05 New York Marketing personnel sent -433,472.32 0.15% No
Textile Co., ted
by the Company
Ltd.
as the parent
Main
Lu Thai
management
(Cambodia) Incorpora Svay Manufacturi
151,429,516.55 personnel sent 14,229,575.15 1.96% No
Textile Co., ted Rieng ng
by the Company
Ltd.
as the parent
Main
Lu Thai
management
(Burma) Incorpora Manufacturi
75,062,596.79 Rangoon personnel sent 617,677.23 0.97% No
Textile Co., ted ng
by the Company
Ltd.
as the parent
Main
Lu Thai
management
(Vietnam) Incorpora 1,604,398,322.1 Manufacturi
Tay Ninh personnel sent 77,297,740.72 20.77% No
Textile Co., ted 6 ng
by the Company
Ltd.
as the parent
Main
Lu An management
Incorpora Anjiang, Manufacturi
Garments 150,804,573.61 personnel sent -5,389,142.26 1.95% No
ted Vietnam ng
Co., Ltd. by the Company
as the parent
III Core Competitiveness Analysis
Is the Company subject to any industry-specific disclosure requirements?
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.
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Lu Thai Textile Co., Ltd. Annual Report 2018
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.
5. It attaches importance to customer-specific individualized product design service, following the philosophy of customer
satisfaction at the forefront of market demand.
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Lu Thai Textile Co., Ltd. Annual Report 2018
Part IV Operating Performance Discussion and Analysis
I Overview
In face of complicated and harsh market environments at home and abroad in 2018, the Company continued to push forward its
strategies of “Improve Quality and Efficiency” and “Overall Internationalization”. In light of the new positioning of the textile
industry—“Technology, Fashionable and Green”, as well as following the strategies of high-quality development and new driving
force creation, the Company carried out the “Year for Further Deepening Market Service” and other activities. As a result, it
maintained a healthy, stable development momentum. For 2018, the Company recorded operating revenue of RMB6,879 million, an
operating profit of RMB969 million, a net profit attributable to the listed company’s shareholders of RMB812 million, a net profit
attributable to the listed company’s shareholders before exceptional items of RMB805 million, up 7.33%, -3.19%, -3.52% and 3.15%
year-on-year, respectively. No changes have occurred to the principal activities, the main profit sources and structure of the Company
in the year.
I. Continue to "Improve Quality and Efficiency" and Pursue High-quality Development
During the reporting period, the Company took the initiative to adapt to the current economic and market changes at home and
abroad through organizational structure adjustment, high-quality project construction, technical transformation, scientific and
technological innovation, new business model exploration, and deep integration of informatization and industrialization. The
Company actively promoted budget management information construction and group subsidiary budget control; conducted effective
cost control from procurement, production, sales, quality and other links; strengthened human resources management, perfected
compensation, performance management and incentive mechanism; On the basis of system management, the Company
comprehensively promoted the excellent performance management, perfected and improved Lu Thai production style (LTPS) and
steadily advance the strategy of "Improve Quality and Efficiency". During the reporting period, "Lu Thai Intelligent Manufacturing
System Based on Cloud Architecture" won "The First Prize for Innovative Application" of Information Achievement Award in textile
industry. The Company was named "National Technological Innovation Demonstration Enterprise" by the Ministry of Industry and
Information Technology, and awarded the "Evaluation Certificate of Informatization and Industrialization Integration Management
system" issued by CICS-CERT.
II. Steadily Advance the Strategy of "All-round Internationalization" and Perfect the Global Strategic Layout
During the reporting period, the Company's overseas projects have progressed smoothly and the company's planning deployment has
been completed as a whole. The production, quality indicators, employee relationship management, system construction, cultural
construction and other aspects have been further improved. During the reporting period, the Company set up an office in Tokyo,
Japan. Together with the existing offices in New York and Milan, the Company has further improved its international service
structure and actively expanded in the effective communication with its customers, product promotion, market investigation and
other aspects to further grasp the market and understand the customer requirements.
In order to better grasp the trend of fashion and train the design team, the Company has successively hired famous Italian fabric
designers, French fashion consultants, British textile and garment designers, and other international designers as the design guides. At
the same time, the Company has strengthened cooperation with European professional trend organizations, achieved the industry
upgrade from manufacturing to creation to creativity through the international design layout to lay a foundation for the cultivation of
high-end design talents and the creation of fashionable and creative brands.
III. Implement the Year of Continuous Deepening of Market Service and Build a Community with a Shared Future with Customers
The Company promotes the establishment of a community with a shared future with customers in three business fields (yarn-dyed,
dyeing and clothing), improves the pre-control management, basic work advancement, process standardization through information
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Lu Thai Textile Co., Ltd. Annual Report 2018
systems such as yarn-dyed production system, printing and dyeing production system and garment production system, etc.,
strengthens the process management and control, meets the customers' requirements for quality, delivery period and services, and
shortens the production cycle of fabrics and shirts at home and abroad. The Company actively grasps the fashion trend, optimizes the
product structure, increases custom R & D and new product development efforts, provides customers with a wealth of product design
solutions around the Company's core technology products, unique products, environment-friendly products, original products,
functional and fashionable products five major directions. The Company has held more than 30 promotional meetings at home and
abroad.
The Company deepens the customer relationship through the product structure adjustment, supply chain fusion, design research and
development docking, brand cooperation, overseas expansion, e-commerce platform and other positive measures, unceasingly
improves the product design idea and innovative service model according to the market new characteristics and new demands to meet
customer needs and adapt to market trends. During the reporting period, the Company started to build Luthai1987 new retail
platform based on S2B2C model and opened the online and offline OMO model to provide high-quality services for the terminal
customers with the partners.
During the reporting period, the Company was rated "Top-20 Enterprise in China's Printing and Dyeing Industry in 2018" by CDPA
and won "National Textile Industry Quality Award" awarded by CNTAC. After the rating of China Brand Promotion Association, the
Company was shortlisted as a top-50 enterprise in the field of textile, clothing, shoes and hats. The Company was rated as "Top-10
Enterprise in Business income in Color Weaving Industry in 2017" and "Top-100 Enterprise in Main Business Income in Cotton
Textile Industry in 2017" by CCTA. In 2018 China International Fabrics Design Completion, Excellence Award for Spring/Summer
Chinese Fashion Fabric 2019, the company's works "Luxury and Unique Flow" won the Best Market Application Award and
"Crisscross Footpaths between Fields" and "Time Wheel" won the first prize of good fabrics in Chinese printing and dyeing industry.
IV. Adhere To Scientific and Technological Innovation, Attach Importance to R & D and Application
During the reporting period, the Company continued to promote scientific and technological innovation and focus on the research
and development of new topics, new technologies and new materials. In view of the key core technologies and weak links affecting
the Company's industrial chain, as well as the technical key and difficult issues such as quality, cost, efficiency, environmental
protection, and so on, which have a strong reaction in the production process, 18 technical improvement projects at the corporate
level and 154 technical topics at the departmental level have been promoted. The Company always adheres to the "intelligent,
energy-saving, low-carbon, environmental protection" concept of green, low-carbon and sustainable development, strives to create
"healthy, comfortable, environmentally friendly" ecological textiles that the process can be traced back and the quality can be trusted.
The project of "Key Technology and industrialization Application of Color Digitization of Yarn and Fabric in Textile and Garment
Industry" has won the first prize for scientific and technological progress in Shandong province in 2018;
In recent years, the Company has successfully developed more than 600 new technologies and new products, of which 48 products
have passed the scientific and technological achievements appraisal at provincial and ministerial level. Among them, 13 products
have reached the international leading level and 30 products have reached the international advanced level; The Company has won 53
rewards at the national and provincial level, including 1 first prize and 2 second prizes for scientific and technological progress; The
Company has undertaken 17 scientific and technical programs above the provincial level; The Company boasts the core technology
and equipment, such as "a complete set of technology and equipment for digital automatic dyeing of cylindrical yarn", "key
processing technology and industrialization of super high pure cotton fabric" and "high flux membrane treatment and reuse
technology and industrialization of printing and dyeing wastewater", etc. The Company has been authorized 335 patents and 3
software copyrights; The Company has presided over or participated in the formulation of 44 national and industrial standards.
V. Dig Deeply into the Connotation of Enterprise Culture and Assume Social Responsibility
The Company continues to build a regular, scientific, standardized learning management organization, organizes the management to
learn and understand from the traditional culture, modern management, professional technology and other aspects to improve the
management and production management ability. In addition, the Company guides the employees to attach importance to the
improvement of skills through technical competition activities. During the reporting period, the Company strengthened the
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Lu Thai Textile Co., Ltd. Annual Report 2018
construction and training of design talent teams and continued to deepen communication and cooperation with strategic customers in
the early design of fabric and shirt. The Company has received good market response. Lu Thai Textile was rated as the advanced unit
for the cultivation of designers in the fifth rating of "Golden Shuttle Award" for textile fabrics. During the reporting period, the
Company was rated as "Demonstration Enterprise of Fulfilling Social Responsibility in Shandong Province" and was shortlisted into
"Top-30 Private Listed Company with Social Responsibility in China in 2018". The Company also won the honorary title of "Forty
Exemplary Organizations of Chinese Enterprise Culture in the 40 Years of Reform and Opening-up" by China Research Institute of
Enterprise Culture.
During the reporting period, the Company continued to promote chemical control and strengthen supply chain environmental
management; to promote the preparation and revision of environmental emergency plans; to study on the improvement of sewage
Station Standard raising and the wastewater liquid membrane separation technology, and increase annual waste water treatment
amount and recycled water recycling amount. To carry out more than 110 energy-saving and water-saving projects and promote the
comprehensive utilization of energy sources.
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 Core Business Analysis
1. Overview
For the Reporting Period, the Company recorded operating revenue of RMB6.879 billion (a 7.33% year-on-year increase); cost of
sales of RMB4.861 billion (a 8.59% year-on-year increase), including selling expense of RMB158 million (a 9.75% year-on-year rise)
and administrative expense of RMB391 million (a 20.98% year-on-year increase); research and development expense of RMB289
million (a 11.88% year-on-year drop); and net cash generated from operating activities of RMB1.430 billion (a 33.61% year-on-year
growth).
2. Revenue and Cost Analysis
(1) Breakdown of Operating Revenue
Unit: RMB
2018 2017
As % of total As % of total
Change (%)
Operating revenue operating revenue Operating revenue operating revenue
(%) (%)
Total 6,879,058,813.93 100% 6,409,224,044.97 100% 7.33%
By operating division
Textile and apparel 6,208,566,844.56 90.25% 5,906,736,459.03 92.16% 5.11%
Cotton 101,088,256.72 1.47% 35,606,856.03 0.56% 183.90%
Electricity and steam 154,470,651.72 2.25% 103,870,652.93 1.62% 48.71%
Others 414,933,060.93 6.03% 363,010,076.98 5.66% 14.30%
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Lu Thai Textile Co., Ltd. Annual Report 2018
By product category
Fabric products 4,926,081,389.35 71.61% 4,624,849,307.12 72.16% 6.51%
Shirts 1,282,485,455.21 18.64% 1,281,887,151.91 20.00% 0.05%
Cotton 101,088,256.72 1.47% 35,606,856.03 0.56% 183.90%
Electricity and steam 154,470,651.72 2.25% 103,870,652.93 1.62% 48.71%
Others 414,933,060.93 6.03% 363,010,076.98 5.66% 14.30%
By operating segment
Hong Kong 263,460,345.34 3.83% 246,434,343.62 3.84% 6.91%
Japan And South
451,954,695.71 6.57% 413,874,632.85 6.46% 9.20%
Korea
Southeast Asia 2,010,251,958.96 29.22% 1,976,448,225.47 30.84% 1.71%
Europe and America 1,224,318,099.10 17.80% 1,044,242,539.46 16.29% 17.24%
Others 388,746,153.95 5.65% 376,849,171.78 5.88% 3.16%
Mainland China 2,540,327,560.87 36.93% 2,351,375,131.79 36.69% 8.04%
(2) Operating Division, Product Category or Operating Segment Contributing over 10% of Operating
Revenue or Operating Profit
√ Applicable □ Not applicable
Is the Company subject to any industry-specific disclosure requirements?
No.
Unit: RMB
YoY change in YoY change in
Gross profit YoY change in
Operating revenue Cost of sales operating gross profit
margin cost of sales (%)
revenue (%) margin (%)
By operating division
Textile and pparel 6,208,566,844.56 4,323,535,187.46 30.36% 5.11% 5.71% -0.40%
By product category
Fabric products 4,926,081,389.35 3,414,309,296.66 30.69% 6.51% 7.69% -0.76%
Shirts 1,282,485,455.21 909,225,890.80 29.10% 0.05% -1.13% 0.84%
By operating segment
Southeast Asia 2,010,251,958.96 1,393,864,915.85 30.66% 1.71% 2.82% -0.75%
Europe and America 1,224,318,099.10 858,719,258.08 29.86% 17.24% 16.35% 0.54%
Mainland China 2,540,327,560.87 1,838,033,059.66 27.65% 8.04% 10.67% -1.72%
Core business data of the prior year restated according to the changed statistical caliber for the Reporting Period:
□ Applicable √ Not applicable
15
Lu Thai Textile Co., Ltd. Annual Report 2018
(3) Whether Revenue from Physical Sales Is Higher than Service Revenue
√ Yes □ No
Operating division Item Unit 2018 2017 Change (%)
Unit sales 0,000 meters 25,494.21 23,921.03 6.58%
Textile and fabric Output 0,000 meters 28,752.73 26,614.99 8.03%
Inventory 0,000 meters 3,640.18 2,790 30.47%
Unit sales 0,000 pieces 1,889.35 1,962.29 -3.72%
Textile and apparel Output 0,000 pieces 1,868.74 1,914.08 -2.37%
Inventory 0,000 pieces 77.62 105.56 -26.47%
Unit sales ton 6,610.89 2,110.48 213.24%
Cotton Output ton 17,680.56 16,737.17 5.64%
Inventory ton 8,205.95 8,092.61 1.40%
Unit sales 000 KWH 104,570.59 65,661.68 59.26%
Electricity Output 000 KWH 445,490.43 401,967.71 10.83%
Inventory 000 KWH
Unit sales ton 478,012.13 307,504.69 55.45%
Steam Output ton 1,434,662.48 1,235,609.78 16.11%
Inventory ton
Any over 30% YoY movements in the data above and why:
√ Applicable □ Not applicable
1. Inventory of textile and facric in 2018 increased by 30.47% as compared with last year, mainly due to the increase of reserves of
fabric production of Lu Thai.
2. Unit sales of cotton in 2018 increased by 213.24% from last year, mainly due to the increase of external cotton sales from related
companies of Xinjiang Lu Thai.
3. Unit sales of electricity in 2018 increased by 59.26% as compared with last year, mainly due to the increase of non-related sales of
electricity of Xinsheng Thermal Power.
4. Unit sales of steam in 2018 increased 55.45% as compared with last year, mainly due to the increase of non-related sales of steam
of Xinsheng Thermal Power.
(4) Execution Progress of Major Signed Sales Contracts in the Reporting Period
□ Applicable √ Not applicable
(5) Breakdown of Cost of Sales
By operating division and product category
Unit: RMB
16
Lu Thai Textile Co., Ltd. Annual Report 2018
2018 2017
Operating
Item As % of total cost As % of total cost Change (%)
division Cost of sales Cost of sales
of sales (%) of sales (%)
Textile and
Cost of sales 4,323,535,187.46 88.93% 4,090,113,368.00 91.36% 5.71%
apparel
Cotton Cost of sales 93,918,390.99 1.93% 32,882,009.84 0.73% 185.62%
Electricity and
Cost of sales 154,888,713.67 3.19% 110,812,770.78 2.48% 39.78%
steam
Other Cost of sales 289,100,950.83 5.95% 243,239,636.06 5.43% 18.85%
Unit: RMB
2018 2017
Product category Item As % of total cost As % of total cost Change (%)
Cost of sales Cost of sales
of sales (%) of sales (%)
Fabric products Cost of sales 3,414,309,296.66 70.23% 3,170,487,809.95 70.82% 7.69%
Shirts Cost of sales 909,225,890.80 18.70% 919,625,558.05 20.54% -1.13%
Cotton Cost of sales 93,918,390.99 1.93% 32,882,009.84 0.73% 185.62%
Electricity and
Cost of sales 154,888,713.67 3.19% 110,812,770.78 2.48% 39.78%
steam
Other Cost of sales 289,100,950.83 5.95% 243,239,636.06 5.43% 18.85%
Note
Product Period Raw material Labor cost Depreciation Energy Manufacture expenses Total
2018 56.77% 17.56% 5.50% 12.66% 7.51% 100.00%
Fabric
2017 55.02% 17.51% 5.41% 13.47% 8.59% 100.00%
2018 55.73% 37.48% 2.14% 0.92% 3.73% 100.00%
Shirts
2017 55.53% 37.50% 2.16% 0.92% 3.89% 100.00%
(6) Changes in the Scope of Consolidated Financial Statements for the Reporting Period
√ Yes □ No
During the Reporting Period, Beijing Sichaung Apparel Co., Ltd was cancelled, and Shanghai Zhinuo Textile New Material Co., Ltd
was newly established.
(7) Major Changes to the Business Scope or Product or Service Range in the Reporting Period
□ Applicable √ Not applicable
(8) Major Customers and Suppliers
Major customers:
17
Lu Thai Textile Co., Ltd. Annual Report 2018
Total sales to top five customers (RMB) 1,360,691,421.45
Total sales to top five customers as % of total sales of the
19.78%
Reporting Period (%)
Total sales to related parties among top five customers as % of
0.00%
total sales of the Reporting Period (%)
Information about top five customers:
Sales revenue contributed for
No. Customer As % of total sales revenue (%)
the Reporting Period (RMB)
1 A 373,427,618.03 5.43%
2 B 329,650,999.24 4.79%
3 C 265,493,804.74 3.86%
4 D 213,133,056.36 3.10%
5 E 178,985,943.08 2.60%
Total -- 1,360,691,421.45 19.78%
Other information about major customers:
□ Applicable √ Not applicable
Major suppliers:
Total purchases from top five suppliers (RMB) 654,234,880.87
Total purchases from top five suppliers as % of total purchases
13.95%
of the Reporting Period (%)
Total purchases from related parties among top five suppliers
2.48%
as % of total purchases of the Reporting Period (%)
Information about top five suppliers:
Purchase in the Reporting
No. Supplier As % of total purchases (%)
Period (RMB)
1 A 151,879,635.33 3.24%
2 B 147,033,663.37 3.13%
3 C 121,913,704.08 2.60%
4 D 117,094,668.39 2.50%
5 E 116,313,209.70 2.48%
Total -- 654,234,880.87 13.95%
Other information about major suppliers:
□ Applicable √ Not applicable
18
Lu Thai Textile Co., Ltd. Annual Report 2018
3. Expense
Unit: RMB
2018 2017 Change (%) Reason for any significant change
Selling expense 158,106,183.74 144,061,780.39 9.75%
Administrative expense 390,911,763.27 323,126,978.65 20.98%
Finance costs 48,779,680.31 63,342,671.31 -22.99%
R&D expense 289,395,092.58 328,403,990.29 -11.88%
4. R&D Expense
√ Applicable □ Not applicable
With leading the technology development in the industry as the goal, the research staff of the Company work hard in new product
development, new technology promotion and transformation of new technological results to productivity to explore ways for
transforming the business mode, adjusting the structure and extending the industrial chain. These efforts will promote the Company’s
development towards an energy-saving and environment-friendly enterprise and truly achieve the sustainable development.
Details about R&D expense:
2018 2017 Change (%)
Number of R&D personnel 1,867 1,673 11.60%
R&D personnel as % of total employees 11.79% 11.72% 0.07%
R&D expense (RMB) 289,395,092.58 328,403,990.29 -11.88%
R&D expense as % of operating revenue 4.21% 5.12% -0.91%
Capitalized R&D expense (RMB) 0.00 0.00 0.00%
Capitalized R&D expense as % of total R&D expense 0.00% 0.00% 0.00%
Reasons for any significant YoY change in the percentage of R&D expense in operating revenue:
□ Applicable √ Not applicable
Reason for any sharp variation in the percentage of capitalized R&D expense and rationale:
□ Applicable √ Not applicable
5. Cash Flows
Unit: RMB
Item 2018 2017 Change (%)
Subtotal of cash generated from operating activities 6,900,228,651.30 6,575,970,495.58 4.93%
Subtotal of cash used in operating activities 5,469,886,988.14 5,505,459,842.15 -0.65%
Net cash generated from/used in operating activities 1,430,341,663.16 1,070,510,653.43 33.61%
Subtotal of cash generated from investing activities 115,825,451.80 84,563,735.04 36.97%
19
Lu Thai Textile Co., Ltd. Annual Report 2018
Subtotal of cash used in investing activities 1,002,392,250.74 828,490,043.09 20.99%
Net cash generated from/used in investing activities -886,566,798.94 -743,926,308.05 -19.17%
Subtotal of cash generated from financing activities 3,282,459,288.75 2,356,781,279.43 39.28%
Subtotal of cash used in financing activities 3,969,383,669.10 2,626,785,842.65 51.11%
Net cash generated from/used in financing activities -686,924,380.35 -270,004,563.22 -154.41%
Net increase in cash and cash equivalents -141,504,439.96 17,523,075.19 -907.53%
Explanation of why any of the data above varies significantly:
√ Applicable □ Not applicable
During the reporting period, the amount of net cash flows from operating activities was RMB 1,430,341,663.16 with 33.61%
year-on-year increase due to the year-on-year increase in cash received from the sale of commodities. The amount of cash inflows
from investment activities was RMB 115,825,451.80 with 36.97% year-on-year increase due to the recovery of trust funds. The
amount of net cash flows from financing activities was RMB -686,924,380.35 with 154.41% year-on-year decrease. First, the amount
of cash outflows from financing activities was increased by RMB 1,342,597,826.45 year on year (increase: 51.11%) due to the
increase in cash paid for the repayment of debts and the payment of B-share buy-back funds; Second, the amount of cash inflows
from financing activities was increased by RMB 925,678,009.32 year on year (increase: 39.28%) due to the year-on-year increase of
cash received from the borrowings. The net increase amount of cash and cash equivalents was RMB-141,504,439.96 with 907.53%
year-on-year decrease because the amount of net cash flows from operating activities was decreased by RMB 416,919,817.13, the net
amount of cash inflows from investment activities was decreased by RMB 142,640,490.89 and the amount of net cash flows from
operating activities was increased by RMB 359,831,009.73.
Reason for any big difference between the net operating cash flow and the net profit for this Reporting Period
□ Applicable √ Not applicable
III Analysis of Non-Core Businesses
√ Applicable □ Not applicable
Unit: RMB
As % of Exceptional
Amount Source/Reason
total profit or recurrent
Losses on delivery and losses on equity
Investment income -60,273,275.04 -6.22% investment of financial assets (financial No
liabilities) such as forward exchange settlement
Changes in fair value of financial liabilities at the
Gain/loss on changes in fair value -4,877,600.00 -0.50% period-end, such as undelivered forward exchange No
settlement
Inventory falling price provision, fixed assets
Asset impairments 57,528,337.04 5.93% No
impairment provision, and bad debt provision
Non-operating income 10,652,238.56 1.10% Income of non-operating compensation, etc No
Non-operating compensation, losses on damage
Non-operating expense 10,598,854.65 1.09% No
of non-current assets
20
Lu Thai Textile Co., Ltd. Annual Report 2018
IV Analysis of Assets and Liabilities
1. Significant Changes in Asset Composition
Unit: RMB
31 December 2018 31 December 2017 Change in Reason for any
As % of total As % of total percentage significant
Amount Amount
assets assets (%) change
Monetary capital 545,502,709.36 5.18% 693,989,293.38 6.82% -1.64%
Accounts
374,607,116.55 3.55% 334,080,524.05 3.28% 0.27%
receivable
Inventories 2,093,366,992.30 19.87% 2,100,661,221.93 20.65% -0.78%
Investment
22,880,242.95 0.22% 24,563,544.58 0.24% -0.02%
property
Long-term equity
96,018,463.65 0.91% 97,536,732.02 0.96% -0.05%
investments
Fixed assets 5,748,562,385.35 54.55% 5,421,295,850.03 53.30% 1.25%
Construction in
337,230,646.42 3.20% 214,335,626.74 2.11% 1.09%
progress
Short-term
1,325,273,780.05 12.58% 1,135,124,996.40 11.16% 1.42%
borrowings
Long-term
170,019,083.89 1.61% 0.00% 1.61%
borrowings
2. Assets and Liabilities at Fair Value
√ Applicable □ Not applicable
Unit: RMB
Gain/loss on Impairment Purchased in
Cumulative Sold in the
Beginning fair-value changes allowance for the
Item fair-value changes Reporting Ending amount
amount in the Reporting the Reporting Reporting
charged to equity Period
Period Period Period
Financial assets
3.
Available-for-sa
60,033,000.00 579,000.00 60,612,000.00
le financial
assets
Subtotal of
60,033,000.00 579,000.00 60,612,000.00
financial assets
21
Lu Thai Textile Co., Ltd. Annual Report 2018
Total of the
60,033,000.00 579,000.00 60,612,000.00
above
Financial
0.00 -4,877,600.00 4,877,600.00
liabilities
Significant changes to the measurement attributes of the major assets in the Reporting Period:
□ Yes √ No
3. Restricted Asset Rights as at the Period-End
For details, see Part XI. VII. 54. Assets with restricted ownership and using right in this Report.
V Investments Made
1. Total Investment Amount
□ Applicable √ Not applicable
2. Major Equity Investments Made in the Reporting Period
□ Applicable √ Not applicable
3. Major 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
22
Lu Thai Textile Co., Ltd. Annual Report 2018
Propor
tion of
closin
Imp g
Begin
Relation airm invest Actual
Relate Type ning Purchased in
ship Initial Sold in the ent Ending ment gain/loss
d-party of Startin Endin invest the
Operator with the investment Reporting prov investment amoun in the
transac derivat g date g date ment Reporting
Compan amount Period ision amount t in the Reporting
tion ive amoun Period
y (if Comp Period
t
any) any’s
ending
net
assets
Forwa
rd 22
Commer 25
Non-rel exchan Februa
cial No 67,367.6 Januar 0 67,367.6 60,855.55 6,512.05 0.84% -1,590.01
ated ge ry
bank y 2019
settle 2018
ment
Foreig
30
Commer n 25
Non-rel Nove 223,541.9
cial No exchan 225,451.86 Januar 19,800 205,651.86 1,909.89 0.25% -4,656.64
ated meber 7
bank ge y 2019
2017
option
Forwa
rd 8
Commer 14
Non-rel exchan Februa
cial No 27,803.58 March 0 27,803.58 26,193.47 1,610.11 0.21% -239.74
ated ge ry
bank 2018
transac 2019
tions
Foreig
Commer n 21 11
Non-rel
cial No exchan 5,925.81 March April 0 5,925.81 5,925.81 0 3.95
ated
bank ge 2018 2018
swap
Total 326,548.85 -- -- 19,800 306,748.85 316,516.8 10,032.05 1.30% -6,482.44
Capital source for derivative
The Company’s own money
investment
Lawsuit (if applicable) Naught
Disclosure date of board of 28 April 2017
directors announcement on
27 April 2018
approval of derivative investment
23
Lu Thai Textile Co., Ltd. Annual Report 2018
(if any)
Disclosure date of general
meeting of shareholders
announcement on approval of
derivative investment (if any)
The Company conducted derivatives products transaction in order for hedging. And the forward
settlement hedging was operated by installments, with the relevant amount not more than the
planned derivatives products transactions. And all derivatives products transaction was
zero-deposit. Meanwhile, the Company had a complete risk control system for sufficient analysis
and prevention of possible risks such as market risk, liquidity risk and credit risk, operation risk
and risk of laws and regulation.
1. Market risk: when the international and domestic economic situations change, the corresponding
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
Analysis on risks and control income, and conducts operations by stage according to the budget of future collections and
measures of derivative products disbursement. The derivative trades are free of guarantee deposit and can still be guaranteed in
held in the Reporting Period performance after the contract expires by means of extension and balance settlement etc. to prevent
(including but not limited to the Company from credit damages due to lack of liquidity. The Company selects financial
market risk, liquidity risk, credit institutions with strong capability and good reputation as a counterparty and signs standard
risk, operation risk, law risk, etc.) 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,
24
Lu Thai Textile Co., Ltd. Annual Report 2018
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 the Proposal on the Plan of
Lu Thai Textile Co., Ltd. for Derivative Transactions approved at the 17th Meeting of the 8th Board
of Directors on 25 April 2018, and performed relevant information disclosure responsibilities.
1. As of 31 December 2018, the Company held four undue financial derivatives contracts,
totaling USD 15.346 million, including 2 settlements of exchange in middle and long term (USD
10 million); 1 foreign exchange option portfolio (USD 3 million); 1 forward exchange transaction
(USD 2.346 million); The contract expires by February 2019 at the latest. Financial derivatives
Changes of market prices or fair
accounted for 1.30 % of net assets at the end of the period. 2. In January - December 2018, the
values in the Reporting Period of
amount of maturing financial derivatives of the Company amounted to USD 497,564,400 and to
the invested derivatives. And the
USD 3 million in extension period. USD 494,564,400 was executed as per the contract,which
analysis on the fair value of the
generated a loss of RMB 64,824,400. The amount of maturing settlements of exchange in the long
derivatives should include the
term amounted to USD 94 million and has been closed in full, which generated a loss of RMB
specific use methods and the
15,900,100; the amount of maturing foreign exchange options was USD 356 million and USD 3
relevant assumptions and
million in extension period. USD 353 million was executed as per the contract, which generated a
parameters.
loss of RMB 46,566,400. The amount of maturing exchange transaction amounted to USD
38,165,100 and has been closed in full, which generated a loss of RMB 2,397,400; the amount of
Maturing foreign exchange swap amounted to USD 9,399,300 and has been closed in full, which
generated an income of RMB 39,500.
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 Zhou Zhiji, Zhao Yao, Bi Xiuli, Pan Ailing and Wang
Xinyu, concerning conducting derivatives business, have issued the following professional advice:
We are of the opinion that it will strengthen the Company’s competitiveness to use derivative
Specific opinion from
transactions with focus on forward settlement and purchase as an effective tool to avoid foreign
independent directors on the
exchange risks, to strengthen the relevant internal control and to carry out the loss and risk
Company’s derivatives investment
prevention measures so as to improve the operation and management. In conducting derivative
and risk control
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.
5. Use of Funds Raised
□ Applicable √ Not applicable
25
Lu Thai Textile Co., Ltd. Annual Report 2018
No such cases in the Reporting Period
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 Major Subsidiaries
√ Applicable □ Not applicable
Major fully/majority-owned subsidiaries and those minority-owned subsidiaries with an over 10% effect on the Company’s net profit:
Unit: RMB
Relationship Principal Registered Operating Operating
Name with the activity Total assets Net assets Net profit
capital revenue profit
Company
Lufeng Weaving
706,160,000. 1,728,414,89 1,518,451,55 1,780,246,45 133,637,946. 118,857,204.
& Dyeing Co., Subsidiary Fabric
00 5.13 1.77 9.14 98 34
Ltd.
Subsidiaries obtained or disposed in the Reporting Period:
□ Applicable √ Not applicable
Information about major majority- and minority-owned subsidiaries:
Lufeng Weaving & Dyeing Co., Ltd. (hereinafter called “Lufeng Weaving & Dyeing”) is the holding subsidiary corporation of the
Company. Registration place: Zibo, Shandong; registered capital: RMB706.160 million. It was authenticated to be high-tech
enterprise in October 2014, and authenticated to be high-tech enterprise again for re-evaluation in 2017, mainly manufacturing and
selling textile printing and dyeing products and the products of clothing and garments. Its export income accounted for more than
75%. During the Reporting Period, market required more and more on the production and environmental protection of printing and
dyeing products. Lufeng Weaving & Dyeing had been further acknowledged in market as an enterprise with normative operation and
the focus on environmental protection and sustainable development. At the same time, the R & D and innovation of Lufeng Weaving
& Dyeing constantly progressed. With the rise of the transfer ratio of scientific and technological achievements, proportion of the
sale of new products with high additional value rose largely. In 2018, operation revenue of Lufeng Weaving & Dyeing was RMB1.78
billion, increasing for 6.93% comparing with that of the last year. In another aspect, thanks to comprehensive budget management,
costs control and investment in new products R & D, net profit RMB119 million was achieved in 2018, decreasing for 14.19%
comparing with that of the last year.
26
Lu Thai Textile Co., Ltd. Annual Report 2018
VIII Structured Bodies Controlled by the Company
□ Applicable √ Not applicable
IX Prospects
1. Industry competition and development trend
China's textile industry possesses outstanding advantages in the global textile industry, mainly in terms of industrial chain,
technology and labor efficiency, etc. Although the cost of production factors is increasing, China's textile industry still has an
outstanding advantage in the global competition. At present, the main current fabric for high-end shirts in the world is pure
cotton-dyed fabric. In recent years, with the increase of domestic environmental protection requirements and production costs, and
the trend of state transformation and upgrading, some low-end and small yarn-dyed production capacities gradually quit the market,
and production capacities have been concentrated on large companies, while the demand for yarn-dyed fabrics for shirts is changing
to small quantity, variety, diversity, functionality and leisure.
2. Development strategy of the Company
The Company is a large-scale textile enterprise with a complete industrial chain integrating cotton cultivation, spinning, dyeing,
weaving, post-treatment and garment manufacturing. It is the world's largest production base for yarn-dyed fabrics for shirts,
providing blending of three major series of shirt fabrics of pure cotton and natural fiber, cotton and natural fiber as well as cotton and
functional fiber. In order to maintain the outstanding advantages of the Company in global shirt-dyed fabrics, the Company is
pushing intelligent manufacturing upgrades and integrating domestic and foreign advantageous resources to deepen
internationalization of the Company with regional advantages. The Company combines quality innovation and customer needs, and
innovates the marketing model with advantages of resources in each channel. High-end shirt customization services are provided to
meet various needs of customers. Furthermore, the Company increases investment in innovation to improve R&D and design and
develop new fabrics. The Company holds the concept of low-carbon environmental protection for sustainable economic
development.
3. Business plan (the following description does not constitute any commitment of the Company)
(1) In terms of corporate governance, in order to ensure the healthy, stable and sustainable development of the Company at the
institutional level, the Company will establish an internal control system to improve organizational structure, corporate governance
structure and risk prevention mechanism.
(2) In terms of market development, the Company will follow the business philosophy of "combining end-customer demand with
R&D, design and sales services". Based on the stability of existing markets, the Company will adjust operation models, establish
diversified sales platforms and explore new markets to increase domestic market share and balance the development of domestic and
foreign markets.
(3) In terms of corporate management, with the goal of "improving quality and increasing efficiency", the Company will fully
develop the group system and deeply practice the model of excellence performance. Relying on the Lu Thai Production System
(LTPS) and supply chain management, the Company creates a global procurement network to improve the enterprise management
system and company upgrade.
(4) In terms of brand building, the Company focuses on quality to integrate corporate philosophy and culture into brand building with
innovation. Based on customer demand, the Company innovated the marketing model and integrated online and offline channel
resources to push forward the process of brand internationalization.
(5) In terms of industrial overall arrangement, in order to maintain the leading position of the Company in the global yarn-dyed
industry, the Company rationally allocates domestic and foreign resources and improves production efficiency while keeping product
quality relying on the advantages of U.S. companies, Milan and Japan Office in market development, design and R&D, customer
service and talent development, and the cost advantages of Southeast Asian production bases.
27
Lu Thai Textile Co., Ltd. Annual Report 2018
4. Capital needs, sources and planning
During the reporting period, the new spinning production line with a capacity of 76,000 spindles of the yarn manufacture project
Phase II of Lu Thai (Vietnam) Textile Co., Ltd. has been set up; The main plant of 40 million meters of production expansion project
of yarn-dyed fabrics was completed and the first batch equipment will be installed in the first quarter of 2019. The expansion project
of 3 million high-grade shirts in Vietnamese garment factory Phase II has been put into production in August 2018. Preparatory work
is under way for infrastructure construction of the investment project of Lu Thai (Tan Chau) Co., Ltd., the wholly owned subsidiary
of Lu Thai (Vietnam) Textile Co., Ltd. The above-mentioned project funds all come from the owned and self-financing funds of the
wholly owned subsidiary.
5. Risks that bring adverse impact to company development strategy and business objectives and countermeasures of the Company
(1) Economic environment: at present, the rise of the international trade protectionism and the increasing uncertain risks of economic
policies of advanced economies, especially monetary policy, produce 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 going stable. 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.
(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 improve environmental
protection standards.
(3) Exchange rate changes: along with the operation of overseas production base of the Company 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 willaccount 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. 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
appropriately 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.
X Communications with the Investment Community such as Researches, Inquiries and
Interviews
1. During the Reporting Period
√ Applicable □ Not applicable
Type of communication Index to main information
Date Way of communication
party communicated
17 April 2018 By phone Institution About basic information of the Company
27 April 2018 By phone Institution About basic information of the Company
28
Lu Thai Textile Co., Ltd. Annual Report 2018
22 August 2018 By phone Institution About basic information of the Company
31 October 2018 By phone Institution About basic information of the Company
31 October 2018 By phone Institution About basic information of the Company
8 November 2018 One-on-one meeting Institution About basic information of the Company
Times of communications 6
Number of institutions communicated with 86
Number of individuals communicated with 0
Number of other communication parties 0
Tip-offs or leakages of substantial supposedly-confidential
None
information during communications
29
Lu Thai Textile Co., Ltd. Annual Report 2018
Part V Significant Events
I Profit Distributions to Ordinary Shareholders (in the Form of Cash and/or Stock)
How the profit distribution policy, especially the cash dividend policy, for ordinary shareholders was formulated, executed or revised
in the Reporting Period:
√ Applicable □ Not applicable
The 1st Extraordinary General Meeting of 2018 convened by the Company on 8 February 2018 reviewed and approved the Proposal
on Revision of Part of Clauses of Articles of Lu Thai Textile Co., Ltd., among which revised the contents of the profit distribution
policy and decision-making mechanism of the Company in Article 154, adequately protecting the legitimate interest of medium and
small investors. For details, see related announcement disclosed on www.cninfo.com.cn on 9 February 2018.
Special statement about the cash dividend policy
In compliance with the Company’s Articles of Association and resolution of general meeting Yes
Specific and clear dividend standard and ratio Yes
Complete decision-making procedure and mechanism Yes
Independent directors faithfully performed their duties and played their due role Yes
Non-controlling interests are able to fully express their opinion and desire and their legal
Yes
rights and interests are fully protected
In case of adjusting or changing the cash dividend policy, the conditions and procedures
Yes
involved are in compliance with applicable regulations and transparent
The profit distributions to ordinary shareholders, either in the form of cash or stock, in the past three years (including the Reporting
Period) are summarized as follows:
1. The 24th Meeting of the 8th Board of Directors of the Company reviewed and approved 2018 Profit Distribution Plan
As of 31 December 2018, the total share capital of the Company was 922,602,311 shares. Since 28 May 2018, the Company has
implemented B-share repurchase. As of 22 March 2019, the Company has repurchased 64,480,770 shares which have not been
cancelled. The repurchase shares were inventory shares and were not entitled the rights of all shareholders, such as profit distribution.
Therefore, the Company's profit distribution plan for 2018: Based on 858,121,541 shares (the total share capital of 922,602,311
shares deducted 64,480,770 shares which have been repurchased but not cancelled on 31 December 2018), the cash allocated per 10
shares is RMB 5.00 (including tax). The individual income tax for A Share shall be subject to related regulations under CS [2012] No.
85 Notice on Certain Question about the Differentiated Individual Income Tax Policy for Cash Dividend of Listed Companies jointly
issued by Ministry of Finance, SAT, and CSRC; and that for B Share shall be conversed to HKD based on the central parity rate on
interbank exchange market released by the People’s Bank of China on the following day after shareholder’s meeting (for foreign
shareholders, tax is free pursuant to CSZ (1994) No. 020 regulations; and non-residential corporate shareholders is entitled to a 10%
reduction of enterprise income tax according to related regulations under Enterprise Income Tax Law of the People’s Republic of
China).
RMB429,060,770.50 should be allocated based on 922,602,311 shares deducting 64,480,770 B shares which have been repurchased
but not cancelled. The above-mentioned allocation scheme shall be submitted to the shareholders' meeting in 2018 for consideration
30
Lu Thai Textile Co., Ltd. Annual Report 2018
and approval.
2. The 16th Meeting of the 8th Board of Directors of the Company reviewed and approved 2017 Profit Distribution Plan
Based on the total 922,602,311 shares on 31 December 2017, the Company is to distribute a cash dividend of RMB5.0 for every 10
shares (including tax). The individual income tax for A Share shall be subject to related regulations under CS [2015] No. 101 Notice
on Certain Question about the Differentiated Individual Income Tax Policy for Share Dividend of Listed Companies jointly issued by
Ministry of Finance, SAT, and CSRC; and that for B Share shall be conversed to HKD based on the central parity rate on interbank
exchange market released by the People’s Bank of China on the following day after shareholder’s meeting (for foreign shareholders,
tax is free pursuant to CSZ (1994) No. 020 regulations; and non-residential corporate shareholders is entitled to a 10% reduction of
enterprise income tax according to related regulations under Enterprise Income Tax Law of the People’s Republic of China).
The Company has implemented B-share buyback scheme from 28 May 2018. As of the date of equity distribution, the total number
of B shares repurchased by the Company was 15,913,655 shares. According to the provisions of the Company Law, listed companies
do not have the right to participate in the distribution of profits by buying back the shares of the Company. Therefore, the allocation
base of the Company's profit distribution scheme in 2017 shall be the total share capital less the number of shares repurchased, that is
RMB 453,344,328.00 shall be allocated based on 906,688,656 shares as the profit distribution base in 2017. The above distribution
scheme has been implemented in June 2018.
3. The 5th Meeting of the 8th Board of Directors of the Company reviewed and approved 2016 Profit Distribution Plan
Based on the total 922,602,311 shares on 31 December 2016, the Company is to distribute a cash dividend of RMB5.0 for every 10
shares (including tax). The individual income tax for A Share shall be subject to related regulations under CS [2012] No. 85 Notice
on Certain Question about the Differentiated Individual Income Tax Policy for Share Dividend of Listed Companies jointly issued by
Ministry of Finance, SAT, and CSRC; and that for B Share shall be conversed to HKD based on the central parity rate on interbank
exchange market released by the People’s Bank of China on the following day after shareholder’s meeting (for foreign shareholders,
tax is free pursuant to CSZ (1994) No. 020 regulations; and non-residential corporate shareholders is entitled to a 10% reduction of
enterprise income tax according to related regulations under Enterprise Income Tax Law of the People’s Republic of China).
The actual distributed dividend for above-mentioned distribution plan was of RMB461,301,155.50. The above-mentioned
distribution plan was implemented on June 2017 after being reviewed and approved by the 2016 Annual General Meeting convened
on 12 May 2017.
Cash dividend for ordinary shareholders in the past three years (including the Reporting Period):
Unit: RMB
Net profit
attributable to
ordinary Total cash
Cash shareholders Cash dividends dividends
A as % of B in other forms C as % of B D as % of B
Year dividends (tax of the listed (including
(%) (such as share (%) (%)
inclusive) (A) company in repurchase) (C) those in other
consolidated forms) (D)
statements for
the year (B)
2018 429,060,770.50 811,526,477.83 52.87% 486,922,944.94 59.99% 915,983,715.44 112.87%
2017 453,344,328.00 841,150,934.75 53.90% 0.00 0.00% 453,344,328.00 53.90%
2016 461,301,155.50 808,760,025.91 57.04% 0.00 0.00% 461,301,155.50 57.04%
Indicate by tick mark whether the Company fails to put forward a cash dividend proposal for the ordinary shareholders despite the
31
Lu Thai Textile Co., Ltd. Annual Report 2018
facts that the Company has made profits in the Reporting Period and the profits of the Company as the parent distributable to the
ordinary shareholders are positive.
□ Applicable √ Not applicable
II Final Dividend Plan for the Reporting Period
√ Applicable □ Not applicable
Bonus shares for every 10 shares (share) 0
Dividend for every 10 shares (RMB) (tax inclusive) 5.00
Additional shares to be converted from capital reserve for every 10 shares (share) 0
Total shares as the basis for the profit distribution proposal (share) 858,121,541
Cash dividends (RMB) (tax inclusive) 429,060,770.50
Cash dividends in other forms (such as share repurchase) (RMB) 486,922,944.94
Total cash dividends (including those in other forms) (RMB) 915,983,715.44
Distributable profit (RMB) 3,714,813,049.43
Total cash dividends (including those in other forms) as % of total profit distribution 112.87%
Cash dividend policy
Where the Company is at a mature stage of development and has plans for considerable spending, in profit distribution, cash
dividends shall reach at least 40% in the total profit to be distributed.
Details about the proposal for profit distribution and converting capital reserve into share capital
As of 31 December 2018, the total share capital of the Company was 922,602,311 shares. Since 28 May 2018, the Company has
implemented B-share repurchase. As of 22 March 2019, the Company has repurchased 64,480,770 shares which have not been
cancelled. The repurchase shares were inventory shares and were not entitled the rights of all shareholders, such as profit
distribution. Therefore, the Company's profit distribution plan for 2018: Based on 858,121,541 shares (the total share capital of
922,602,311 shares deducted 64,480,770 shares which have been repurchased but not cancelled on 31 December 2018), the cash
allocated per 10 shares is RMB 0.00 (including tax). The individual income tax for A Share shall be subject to related regulations
under CS [2012] No. 85 Notice on Certain Question about the Differentiated Individual Income Tax Policy for Cash Dividend of
Listed Companies jointly issued by Ministry of Finance, SAT, and CSRC; and that for B Share shall be conversed to HKD based
on the central parity rate on interbank exchange market released by the People’s Bank of China on the following day after
shareholder’s meeting (for foreign shareholders, tax is free pursuant to CSZ (1994) No. 020 regulations; and non-residential
corporate shareholders is entitled to a 10% reduction of enterprise income tax according to related regulations under Enterprise
Income Tax Law of the People’s Republic of China). 2. The distributed dividend in the aboved distribution plan was of
RMB429,060,770.50, the rest of the profit available for distribution RMB3,285,752,278.93 will be carried forward into the next
year.
32
Lu Thai Textile Co., Ltd. Annual Report 2018
III Fulfillment of Commitments
1. Commitments of the Company’s Actual Controller, Shareholders, Related Parties and Acquirers, as well
as the Company Itself and other Entities Fulfilled in the Reporting Period or Ongoing at the Period-end
□ Applicable √ Not applicable
No such cases in the Reporting Period.
2. Where there had been an earnings forecast for an asset or project and the Reporting Period was still
within the forecast period, explain why the forecast has been reached for the Reporting Period.
□Applicable √ Not applicable
IV Occupation of the Company’s Capital by the Controlling Shareholder or Its Related
Parties for Non-Operating Purposes
□ Applicable √ Not applicable
No such cases in the Reporting Period.
V Explanations Given by the Board of Directors, the Supervisory Board and the Independent
Directors (if any) Regarding the Independent Auditor's “Modified Opinion” on the Financial
Statements of the Reporting Period
□ Applicable √ Not applicable
VI YoY Changes to Accounting Policies, Estimates and Methods
□ Applicable √ Not applicable
No such cases in the Reporting Period.
VII Retrospective Restatements due to Correction of Material Accounting Errors in the
Reporting Period
□ Applicable √ Not applicable
No such cases in the Reporting Period.
VIII YoY Changes to the Scope of the Consolidated Financial Statements
√Applicable □ Not applicable
During the Reporting Period, Beijing Sichaung Apparel Co., Ltd was cancelled, and Shanghai Zhinuo Textile New
Material Co., Ltd was newly established.
33
Lu Thai Textile Co., Ltd. Annual Report 2018
IX Engagement and Disengagement of Independent Auditor
Current independent auditor:
Name of the domestic independent auditor Ruihua Certified Public Accountants (LLP)
The Company’s payment to the domestic independent auditor
173.5
(RMB’0,000)
How many consecutive years the domestic independent auditor has
6
provided audit service for the Company
Names of the certified public accountants from the domestic independent
Wang Chuanshun and Cui Xiaoli
auditor writing signatures on the auditor’s report
How many consecutive years the certified public accountants have
1, 4
provided audit service for the Company
Indicate by tick mark whether the independent auditor was changed for the Reporting Period.
□ Yes √ No
Independent auditor, financial advisor or sponsor engaged for the audit of internal controls:
√ Applicable □ Not applicable
On 16 May 2018, the Company held the 2017 Annual General Meeting, which reviewed and approved the Proposal on Engagement
of the 2018 Financial Audit and Internal Control Auditor. The Company paid RMB1.735 million in total for 2017 financial report
audit and the internal control audit.
X Possibility of Listing Suspension or Termination after Disclosure of this Report
□ Applicable √ Not applicable
XI Insolvency and Reorganization
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XII Major Legal Matters
□ Applicable √ Not applicable
No such cases in the Reporting Period.
Quality of the Company as well as Its Controlling Shareholder and Actual Controller
□ Applicable √ Not applicable
34
Lu Thai Textile Co., Ltd. Annual Report 2018
XV Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures
for Employees
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XVI Major Related-Party Transactions
1. Continuing Related-Party Transactions
□ Applicable √ Not applicable
No such cases in the Reporting Period.
2. Related-Party Transactions Regarding Purchase or Sales of Assets or Equity Interests
□ Applicable √ Not applicable
No such cases in the Reporting Period.
3. Related Transactions Regarding Joint Investments in Third Parties
□ Applicable √ Not applicable
No such cases in the Reporting Period.
4. Credits and Liabilities with Related Parties
√Applicable □ Not applicable
Indicate by tick mark whether there were any credits and liabilities with related parties for non-operating purposes.
√ Yes □ No
Liabilities of related parties to account payable
Amount Amount
Beginning newly added returned in Current
Relation with the Formation balance in current current Interes interest Ending
Related party
Company reason (RMB’0,0 period period t rate (RMB’0,0 balance(
00) (RMB’0,000 (RMB’0,000 00) RMB’0,0
) ) 00)
Zibo Lucheng Textile The Company as Currencies
5,900 7,852 1,600 4.35% 413.55 12,152
Investmentt Co., Ltd the parent deposit
Wholly-owned
Zibo Lujia Property Currencies
subsidiary of 60 4.35% 2.57 60
Management Co., Ltd deposit
Lucheng Textile
Zibo Shidanlu Cosmetics Co., Joint-stock Currencies
145 4.35% 6.03 145
Ltd Company of deposit
35
Lu Thai Textile Co., Ltd. Annual Report 2018
Lucheng Textile
Controlling
Currencies
Zibo Taimei Ties Co., Ltd subsidiary of 130 4.35% 5.41 130
deposit
Lucheng Textile
Influences from liabilities of parties related on
operating results and financial situations of the No
Company
5. Other Major Related-Party Transactions
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XVII Major Contracts and Execution thereof
1. Entrustment, Contracting and Leases
(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) Leases
□ Applicable √ Not applicable
No such cases in the Reporting Period.
2. Major guarantees
√ Applicable □ Not applicable
(1) Guarantees
Unit: RMB'0,000
36
Lu Thai Textile Co., Ltd. Annual Report 2018
Guarantees provided by the Company as the parent for its subsidiaries
Guarante
Disclosure date
Actual Having e for a
of the guarantee Line of Actual Type of Term of
Obligor guarantee expired or related
line guarantee occurrence date guarantee guarantee
amount not party or
announcement
not
Two years
since the
Lu Thai (Vietnam)
25 January 2017 6,534.2 20 January 2017 0 Joint-liability approval of No Yes
Textile Co., Ltd.
the board of
the Company
Two years
since the
Lu Thai (Vietnam)
25 January 2017 5,227.36 20 January 2017 1,390.90 Joint-liability approval of No Yes
Textile Co., Ltd.
the board of
the Company
Two years
since the
Lu An Garments
25 January 2017 3,920.52 20 January 2017 0 Joint-liability approval of No Yes
Co., Ltd.
the board of
the Company
Five years
since the
Lu Thai (Vietnam)
25 January 2017 25,483.38 20 January 2017 0 Joint-liability approval of No Yes
Textile Co., Ltd.
the board of
the Company
Two years
since the
Lu Thai (Vietnam)
25 January 2017 19,602.6 20 January 2017 18,530.64 Joint-liability approval of No Yes
Textile Co., Ltd.
the board of
the Company
Two years
Lu Thai (Vietnam)
since the
Textile Co., Ltd. /
25 January 2017 6,534.2 20 January 2017 0 Joint-liability approval of No Yes
Lu An Garments
the board of
Co., Ltd.
the Company
Five years
since the
Lu Thai (Vietnam)
25 January 2017 17,969.05 20 January 2017 5,089.27 Joint-liability approval of No Yes
Textile Co., Ltd.
the board of
the Company
37
Lu Thai Textile Co., Ltd. Annual Report 2018
Three years
Xinjiang Lu Thai since the
Good Yield Cotton 14 October 2017 15,000 12 October 2017 0 Joint-liability approval of No Yes
Co., Ltd. the board of
the Company
Five years
since the
Lu Thai (Vietnam)
27 October 2017 33,977.84 25 October 2017 17,001.91 Joint-liability approval of No Yes
Textile Co., Ltd.
the board of
the Company
Three years
since the
Lu Thai (Vietnam)
22 August 2018 7,549.52 20 August 2018 0 Joint-liability approval of No Yes
Textile Co., Ltd.
the board of
the Company
Two years
since the
Lu Thai (Vietnam)
22 August 2018 2,745.28 20 August 2018 0 Joint-liability approval of No Yes
Textile Co., Ltd.
the board of
the Company
Total approved line for such Total actual amount of
guarantees in the Reporting Period 10,294.8 such guarantees in the 42,012.72
(B1) Reporting Period (B2)
Total actual balance of
Total approved line for such
such guarantees at the end
guarantees at the end of the Reporting 144,543.95 42,012.72
of the Reporting Period
Period (B3)
(B4)
Guarantees provided between subsidiaries
Disclosure
Guarante
date of the
Actual Having e for a
guarantee Line of Actual occurrence Type of Term of
Obligor guarantee expired related
line guarantee date guarantee guarantee
amount or not party or
announceme
not
nt
Xinjiang Lu Thai
20,000 5 November 2018 20,000 Joint-liability 12 months No Yes
Textile Co., Ltd.
Total approved line for such Total actual amount of
guarantees in the Reporting Period 20,000 such guarantees in the 20,000
(C1) Reporting Period (C2)
Total approved line for such Total actual balance of
20,000 20,000
guarantees at the end of the such guarantees at the
38
Lu Thai Textile Co., Ltd. Annual Report 2018
Reporting Period (C3) end of the Reporting
Period (C4)
Total guarantee amount (total of the three kinds of guarantees above)
Total actual guarantee
Total guarantee line approved in the
30,294.8 amount in the Reporting 62,012.72
Reporting Period (A1+B1+C1)
Period (A2+B2+C2)
Total actual guarantee
Total approved guarantee line at the
balance at the end of the
end of the Reporting Period 164,543.95 62,012.72
Reporting Period
(A3+B3+C3)
(A4+B4+C4)
Total actual guarantee amount (A4+B4+C4) as % of the Company’s
8.68%
net assets
Of which:
Balance of guarantees provided for shareholders, actual controller
0
and their related parties (D)
Balance of debt guarantees provided directly or indirectly for obligors
0
with an over 70% debt/asset ratio (E)
Amount by which the total guarantee amount exceeds 50% of the
0
Company’s net assets (F)
Total of the three amounts above (D+E+F) 0
According to “Agreement on Counter Guarantee” signed on
12 October 2017 between Lu Thai Company and Xinjiang
Explanations about joint and several liability for repayment in respect Lu Thai Company, Xinjiang Lu Thai Company, the
of undue guarantee (if any) warrantee Xinjiang Lu Thai Company provided the
corresponding amount of counter guarantee for Lu Thai
Company.
Explanation about external guarantee violating established procedure The Company never provided guarantees for companies
(if any) except controlling subsidiaries.
Compound guarantees:
None.
(2) Irregularities in Provision of Guarantees
□ Applicable √ Not applicable
No such cases in the Reporting Period.
39
Lu Thai Textile Co., Ltd. Annual Report 2018
3. Cash Entrusted to Other Entities for Management
(1) Cash Entrusted for Wealth Management
√ Applicable □ Not applicable
Overviews of entrusted cash management during the Reporting Period
RMB’0,000
Specific type Capital resources Amount incurred Undue Balance Overdue amount
Trusted financial
Self-owned funds 0 0 0
products
Others Self-owned funds 0 6,000 0
Total 0 6,000 0
Particulars of entrusted cash management with single significant amount or low security, bad liquidity, and no capital preservation
√ Applicable □ Not applicable
RMB’0,000
Wheth Overv
er iew of
Amou Actual
Amou there the
nt of recove
nt Wheth is item
Metho actual ry of
Annua Estima withdr er go wealth and
d of profits profits
Name Type Type Resou l yield te awn throug manag the
Amou Initial Ended Use of payme or or
of the of the of the rce of for profit impair h ement relate
nt date Date fund nt losses losses
trustee trustee product funds refere (if ment stator entrust d
determ in in
nce any) provis proced ment index
ination Report Report
ion (if ures plan for
ing ing
any) in inquiri
Period Period
future ng (if
or not any)
Repay
capital
AVIC 14 14 with
Trust Consta Self-o Miya
Trust Septe Septe interes Not
compa nt 5,000 wned Baobe 7.20% 360 356.62 No Yes
Co., mber mber ts yet
ny return funds i
Ltd 2017 2018 when
expire
d
Shang Accou Repay
18
hai Fund Consta Self-o 18 nt capital
Dece Not
Gophe compa nt 3,000 wned Januar receiv with 7.60% 228 No Yes
mber yet
r Asset ny return funds y 2019 ables interes
2017
Manag bonds ts
40
Lu Thai Textile Co., Ltd. Annual Report 2018
ement of when
Co., Guang expire
Ltd dong d
Cheng
xing
and
Jingdo
ng
Repay
Shang Granti capital
hai ng when
Gophe 22 22 trust expire
Fund Consta Self-o
r Asset Dece Dece loans d with Not
compa nt 3,000 wned 8.50% 255 250.32 No Yes
Manag mber mber to annual yet
ny return funds
ement 2017 2019 Jiexin interes
Co., Financ ts
Ltd e payme
nt
Total 11,000 -- -- -- -- -- -- 843 606.94 -- -- -- --
Whether there is the case where the principal cannot be recovered at maturity or other case which may cause impairment for
entrusted asset management
□ Applicable √ Not applicable
(2) Entrusted Loans
□ Applicable √ Not applicable
No such cases in the Reporting Period.
4. Other Major Contracts
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XVIII Corporate Social Responsibility (CSR)
1. Measures Taken to Fulfill CSR Commitment
The Company has prepared social responsibilities report for 2018, for details, see Social Responsibilities Report disclosed
simultaneously with Annual Report 2018 of the Company.
2. Measures Taken for Targeted Poverty Alleviation
The Companydid not carry out any targeted poverty allviaton work in the Reporting Period, nor did it have subsequent targeted
41
Lu Thai Textile Co., Ltd. Annual Report 2018
poverty allviaton plan.
3. Issues Related to Environmental Protection
Indicate by tick mark whether the Company or any of its subsidiaries is identified as a major polluter by the environmental protection
authorities.
Yes
Discharge
Name of Number of Distribution Discharge Approved
Name of Way of standards Total Excessive
major discharge of discharge concentratio total
polluter discharge implemente discharge discharge
pollutants outlets outlets n discharge
d
Emission
standard of
Huangjiapu water COD is
COD≤150m COD is
Industrial pollutants in 1495.08t,
Lu Thai COD and g/L; 622.28t, and
Continuous Park; East textile and
Textile Co., ammonia 2 ammonia ammonia No
discharge Zone dyeing and ammonia
Ltd nitrogen nitrogen≤10 nitrogen is
Industrial finishing nitrogen is
mg/L 33.98t
Park industry: 149.51t
GB
4287-2012
Emission
standard of
water COD is COD is
COD≤130m
Lufeng Lufeng pollutants in 306.49 t, 575.985t,
COD and g/L;
Weaving & Continuous chief textile and and
ammonia 1 ammonia No
Dyeing Co., discharge discharge dyeing and ammonia ammonia
nitrogen nitrogen≤3
Ltd. outlet finishing nitrogen is nitrogen is
mg/L
industry: 5.93t 57.6t
GB
4287-2012
Ultra-low
emission
No. 2
SO2：
modificatio Y2018: SO2 is
Zibo Production ≤35mg/m3,
n list SO2 is 286.01t/a,
Xinsheng plant of NQx：
SO2, NQx, Continuous LZJBF 54.41t, NQx NQx is
Thermal 4 Xinsheng ≤100(50) No
and smoke discharge (2016) No is 276.5t, 817.18t/a,
Power Co., Thermal mg/m3 and
46 of and smoke and smoke
Ltd. Power smoke:≤10
Emission is 9.914t. is 81.72t/a.
(5)mg/m3
standard of
air
pollutants
42
Lu Thai Textile Co., Ltd. Annual Report 2018
of Thermal
Power Plant
in
Shangdong
Province
Discharge
Lu Thai into sewage
Beside QCVN40： Sewage
(Vietnam) plant in the
Sewage 1 sewage / 2011/BTN discharge is / No
Textile Co., park district
plant MT 763,200t
Ltd. after
treatment
Lu Thai Direct Gas
QCVN19：
(Vietnam) discharge Beside emission is
Exhaust gas 2 / 2009/BTN / No
Textile Co., after boiler room 190 million
MT
Ltd. teratment m3
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
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 with automatic sampling apparatus. 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 “Low-nitroen combustion+SNCR” and
"SNCR+SCR method" to reduce emission concentration of nitrogen oxides, and the "electric-bag 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 2018: The COD (mean value) was 47.8 mg/L, the
chrominance (mean value) was 36, the ammonia nitrogen (mean value) was 1.5 mg/L, and the total phosphorus (mean value) was 0.3
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 2018 was 763,200 tons, among which, the chemical oxygen demand (COD) was 38.48 tons, ammonia
nitrogen (NH3-N) was 1119.39kg and total phosphorus (TP) was 235.33kg. The Company is equipped with multi-pipe and water
film dust-separation devices to process the exhaust gas discharged from boilers of the Company. In 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. In 2018, the total amount of sulfur dioxide emissions was 67.45 tons, and the total amount of nitrogen oxides
43
Lu Thai Textile Co., Ltd. Annual Report 2018
emissions was 73.3 tons.
Project Environmental Impact Assessment and Other Administrative Permission for Environmental Protection
In treatment and comprehensive improvement project of PVA waste water at high concentration of Lu Thai Textile in 2018 (I), the
approval has been obtained, and the main works have been completed and entered the commissioning phase; The treatment and
comprehensive improvement project of PVA waste water at high concentration of Lu Thai Textile (II) has completed the acceptance;
The technical transformation of production line of high-grade greige cloth of Lu Thai Textile has been approved. The project is under
construction. The technical transformation project of automatic equipment of Lu Thai Garment has been completed. In its holding
subsidiary Lufeng Weaving & Dyeing Co., Ltd., EIA project of technical transformation of high-grade printed fabric production line
has been approved and entered the trial run phase. The production line of high-grade greige cloth has been accepted; The separation
of dyeing wastewater liquid membrane and comprehensive improvement project of sewage station in Lufeng Weaving & Dyeing has
been approved and entered the commissioning phase. Its wholly-owned subsidiary Zibo Xinsheng Thermal Power Co., Ltd. has
obtained Reply of Environmental Protection Department of Shandong Province on Environmental Impact Report of Expansion
Project of Zibo Xinsheng Thermal Power Co., Ltd. (LHS [2015] No. 241) as specified. The expansion project (phase II) is under
construction. The completion acceptance of environmental protection project for spinning and yarn-dyed park phase I in its
wholly-owned subsidiary Lu Thai (Vietnam) Co., Ltd. has been confirmed. EIA report of spinning phase II and yarn-dyed park phase
II has been approved.
Emergency plan for environmental incidents
The head office, factories in eastern district, and factories in western 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
In accordance with the requirements of environmental protection authorities, Lu Thai Textile Co., Ltd and and its majority-owned
subsidiary Lufeng Weaving & Dyeing Co., Ltd. formulates environmental self-testing plan for the following year in December of
each year accordint to the requirements of superior environmental protection administration, and implements the self-monitoring plan
to submit data to Zibo Automatic Environmental Monitoring System. The Company invited external qualified angency to detect the
sewage, sludge, and exhaust gas every quarter, and report the examing report to environment inspection department. 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
XIX Other Significant Events
√ Applicable □ Not applicable
The Company held its 2nd Extraordinary General Meeting of 2018 on 23 March 2018 and passed Bill to Buy Back Some of the
44
Lu Thai Textile Co., Ltd. Annual Report 2018
B-shares of the Company. For details, please refer to the relevant announcements on www.cninfo.com.cn published on 24 March
2018 (No.: 2018-013); The Company disclosed Report on the Buyback of Some B-shares of the Company on 16 May 2018 and issued
Announcement of Lu Thai Textile Co., Ltd. about the Implementation of Buy-back of Shares on 29 May 2018 that the first buyback
shares were disclosed for the first time. The above contents refer to relevant announcements on www.cninfo.com.cn.
As of 31 December 2018, the Company had repurchased 62,751,332 B shares. As of 22 March 2019 when the repurchase period
expired the Company repurchased 64,480,770 B shares. For details, please refer to the relevant announcements on
www.cninfo.com.cn published on 3 January 2019 and 23 March 2019 (No.: 2019-001; 2019-013).
XX Significant Events of Subsidiaries
□ Applicable √ Not applicable
45
Lu Thai Textile Co., Ltd. Annual Report 2018
Part VI Share Changes and Shareholder Information
I. Share Changes
1. Share Changes
Unit: share
Before Increase/decrease in the Reporting Period (+/-) After
Shares
Shares
as
as
dividend
Percentage New dividend Percentag
Shares converte Other Subtotal Shares
(%) issues converte e (%)
d from
d from
capital
profit
reserves
I. Restricted shares 119,079,944 12.91% 215,875 215,875 119,295,819 12.93%
3. Shares held by other
847,544 0.09% 215,875 215,875 1,063,419 0.12%
domestic corporations
Shares held by domestic
847,544 0.09% 215,875 215,875 1,063,419 0.12%
natural persons
4. Shares held by foreign
118,232,400 12.82% 118,232,400 12.82%
investors
Among which: Shares
held by foreign 118,232,400 12.82% 118,232,400 12.82%
corporations
II. Unrestricted shares 803,522,367 87.06% -215,875 -215,875 803,306,492 87.07%
1. RMB ordinary shares 561,150,431 60.79% -45,000 -45,000 561,105,431 60.82%
2. Domestically listed
242,371,936 26.27% -170,875 -170,875 242,201,061 26.25%
foreign shares
III. Total shares 922,602,311 100.00% 0 0 922,602,311 100.00%
Reasons for share changes:
√ Applicable □ Not applicable
Shenzhen Branch of China Securities Depository and Clearin g Corporation Limited locked and adjusted the
shareholding of the Senior Executives
Approval of share changes:
□ Applicable √ Not applicable
Transfer of share ownership:
46
Lu Thai Textile Co., Ltd. Annual Report 2018
□ Applicable √ Not applicable
Progress on any share repurchases:
√ Applicable □ Not applicable
The Company held its 2nd Extraordinary General Meeting of 2018 on 23 March 2018 and passed Bill to Buy Back Some of the
B-shares of the Company. For details, please refer to the relevant announcements on www.cninfo.com.cn published on 24 March
2018 (No.: 2018-013); The Company disclosed Report on the Buyback of Some B-shares of the Company on 16 May 2018 and issued
Announcement of Lu Thai Textile Co., Ltd. about the Implementation of Buy-back of Shares on 29 May 2018 that the first buyback
shares were disclosed for the first time. The above contents refer to relevant announcements on www.cninfo.com.cn.
As of 31 December 2018, the Company had repurchased 62,751,332 B shares. As of 22 March 2019 when the repurchase period
expired the Company repurchased 64,480,770 B shares. For details, please refer to the relevant announcements on
www.cninfo.com.cn published on 3 January 2019 and 23 March 2019 (No.: 2019-001; 2019-013).
Progress on reducing the repurchased shares by means of centralized bidding:
√ Applicable □ Not applicable
Mr. Quan Peng, the senior executive of the Company, reduced 6,900 shares by means of centralized bidding on 14 February 2019 due
to his personal capital needs, and the average price of this trade was RMB10.15/share, accounting for 0.00075% of the total shares of
the Company. For details, see related announcements (No. 2019-001, and 2019-006) disclosed on www.cninfo.com.cn on 3 January
2019, and 15 February 2019.
Effects of share changes on the basic and diluted earnings per share, equity per share attributable to the Company’s ordinary
shareholders and other financial indicators of the prior year and the prior accounting period, respectively:
□ Applicable √ Not applicable
Other information that the Company considers necessary or is required by the securities regulator to be disclosed:
□ Applicable √ Not applicable
2. Changes in Restricted Shares
√ Applicable □ Not applicable
Unit: share
Opening
Name of Unlocked in Increased in Closing Reason for
restricted Date of unlocking
shareholder Reporting Period Reporting Period restricted shares lock-up/unlocking
shares
6 months after the
Liu Locked the shareholding
96,067 15,150 111,217 departure of
Zibin of the Senior Executives
director
6 months after the
Wang Locked the shareholding
71,740 38,325 110,065 departure of
Fangshui of the Senior Executives
director
6 months after the
Qin Locked the shareholding
53,431 41,475 94,906 departure of
Guiling of the Senior Executives
director
47
Lu Thai Textile Co., Ltd. Annual Report 2018
6 months after the
Zhang Locked the shareholding
48,300 21,075 69,375 departure of
Hongmei of the Senior Executives
director
6 months after the
Zhang Locked the shareholding
45,000 9,825 54,825 departure of
Shougang of the Senior Executives
supervisor
6 months after the
Liu Locked the shareholding
0 7,500 7,500 departure of
Zilong of the Senior Executives
supervisor
6 months after the
Zhang Locked the shareholding
34,687 4,425 39,112 departure of senior
Jianxiang of the Senior Executives
executive
6 months after the
Zhang Locked the shareholding
52,725 7,500 60,225 departure of senior
Zhanqi of the Senior Executives
executive
6 months after the
Zhang Locked the shareholding
46,875 11,400 58,275 departure of senior
Keming of the Senior Executives
executive
6 months after the
Wang Locked the shareholding
55,275 7,500 62,775 departure of senior
Jiabin of the Senior Executives
executive
6 months after the
Pan Locked the shareholding
69,572 34,375 103,947 departure of senior
Pingli of the Senior Executives
executive
6 months after the
Yu Locked the shareholding
45,000 17,325 62,325 departure of senior
Shouzheng of the Senior Executives
executive
Total 618,672 0 215,875 834,547 -- --
II. Issuance and Listing of Securities
1. Securities (Exclusive of Preferred Shares) Issued in the Reporting Period
□ Applicable √ Not applicable
2. Changes to Total Shares, Shareholder Structure and Asset and Liability Structures
□ Applicable √ Not applicable
48
Lu Thai Textile Co., Ltd. Annual Report 2018
3. Existing Staff-Held Shares
□ Applicable √ Not applicable
III Shareholders and Actual Controller
1. Shareholders and Their Shareholdings at the Period-End
Unit: share
Number of
Number of preferred
Number of
ordinary shareholders with
preferred
Number of shareholders at resumed voting
shareholders with
ordinary 54,163 the month-end 54,494 0 rights at the 0
resumed voting
shareholders prior to the month-end prior
rights (if any) (see
disclosure of this to the disclosure
note 8)
Report of this Report (if
any) (see note 8)
5% or greater shareholders or top 10 shareholders
Sharehol Increase/dec Shares in pledge
Total shares
Nature of ding rease in the Restricted Unstricted or frozen
Name of shareholder held at the
shareholder percenta Reporting shares held shares held
period-end Status Shares
ge Period
Domestic
Zibo Lucheng Textile Investment non-state-o
15.21% 140,353,583 - 0 140,353,583
Co., Ltd. wned legal
person
Foreign
Tailun (Thailand) Textile Co., Ltd. 12.82% 118,232,400 - 118,232,400 0
legal person
Hong Kong Securities Clearing Foreign
3.69% 34,015,548 16,189,393 0 34,015,548
Co. Ltd legal person
Central Huijin Assets State-owned
2.20% 20,315,300 - 0 20,315,300
Management Co., Ltd. legal person
Foreign
T.Rowe Price Intl Discovery Fund 2.16% 19,948,219 - 0 19,948,219
legal person
China Securities Finance
Other 1.98% 18,313,391 2,634,300 0 18,313,391
Corporation Limited
National Social Security Fund
Other 1.30% 11,999,947 11,999,947 0 11,999,947
Portfolio 103
Hong Kong Monetary Other 1.26% 11,635,393 3,220,756 0 11,635,393
49
Lu Thai Textile Co., Ltd. Annual Report 2018
Authority-self-owned funds
Bosera Selected Mixed
Other 1.08% 9,991,034 9,991,034 0 9,991,034
Securities Investment Fund
Invesco Great Wall Energy
Capital Construction Mixed Other 1.08% 9,939,476 9,939,476 0 9,939,476
Securities Investment Fund
Strategic investor or general legal person
becoming a top-10 ordinary shareholder due to Naught
rights issue (if any) (see note 3)
Zibo Lucheng Textile Investment Co., Ltd. is the largest shareholder of the
Company and the actual controller. Tailun (Thailand) Textile Co., Ltd. is the
Related or acting-in-concert parties among the second largest shareholder as well as sponsor of foreign capital of the Company.
shareholders above All of other shareholders are people holding public A share or public B share and
the Company is not able to confirm whether there is associated relationship or
concerted action among other shareholders.
Top 10 unrestricted shareholders
Shares by type
Name of shareholder Unrestricted shares held at the period-end
Type Shares
Zibo Lucheng Textile Investment Co., Ltd. 140,353,583 RMB ordinary share 140,353,583
Hong Kong Securities Clearing Co. Ltd 34,015,548 RMB ordinary share 34,015,548
Central Huijin Assets Management Co., Ltd. 20,315,300 RMB ordinary share 20,315,300
Domestically listed
T.Rowe Price Intl Discovery Fund 19,948,219 19,948,219
foreign share
China Securities Finance Corporation Limited 18,313,391 RMB ordinary share 18,313,391
National Social Security Fund Portfolio 103 11,999,947 RMB ordinary share 11,999,947
Hong Kong Monetary Authority-self-owned
11,635,393 RMB ordinary share 11,635,393
funds
Bosera Selected Mixed Securities Investment
9,991,034 RMB ordinary share 9,991,034
Fund
Invesco Great Wall Energy Capital Construction
9,939,476 RMB ordinary share 9,939,476
Mixed Securities Investment Fund
Invesco Great Wall Hugangshen Selected Stock
6,769,285 RMB ordinary share 6,769,285
Securities Investment Fund
Zibo Lucheng Textile Investment Co., Ltd. is the largest shareholder of the
Related or acting-in-concert parties among top Company and the actual controller. Tailun (Thailand) Textile Co., Ltd. is the
10 unrestricted public shareholders, as well as second largest shareholder as well as sponsor of foreign capital of the Company.
between top 10 unrestricted public shareholders All of other shareholders are people holding public A share or public B share and
and top 10 shareholders the Company is not able to confirm whether there is associated relationship or
concerted action among other shareholders.
50
Lu Thai Textile Co., Ltd. Annual Report 2018
Top 10 ordinary shareholders involved in
N/A
securities margin trading (if any) (see note 4)
Indicate by tick mark whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary shareholders of the
Company conducted any promissory repo during the Reporting Period.
□ Yea √ No
No such cases in the Reporting Period.
2. Controlling Shareholder
Nature of the controlling shareholder: Controlled by a natural person
Type of the controlling shareholder: legal person
Legal
Name of controlling Unified social credit
representative/person in Date of establishment Principal activity
shareholder code
charge
Investment on textile,
electricity and chemical;
Zibo Lucheng Textile
Liu Deming 25 September 1998 91370303164200391J purchase, process and
Investment Co., Ltd.
sale of cotton; retail
service etc.
Particulars about shareholding
of controlling shareholders
controlling and holding shares N/A
of other listed companies
during the Reporting Period
Change of the controlling shareholder in the Reporting Period:
□ Applicable √ Not applicable
No such cases in the Reporting Period.
3. Actual Controller and Its Acting-in-Concert Parties
Nature of the actual controller: Domestic natural person
Type of the actual controller: natural person
National Whether gain the right of residence
Name of the actual controller Relations with the actual controller
ity in other countries or regions or not
Liu Zibin In person China No
Concerted action (including agreement,
Liu Deming China No
relatives, and same control)
51
Lu Thai Textile Co., Ltd. Annual Report 2018
Liu Zibin is the Chairman of the Board and GM of Lu Thai Textile Co., Ltd. , Liu
Professions and titles Deming is the Chairman of the Board and GM of Zibo Lucheng Textile Investment
Co., Ltd.
Particulars about listed companies with
shares ever held by the actual controller N/A
over the past 10 years
Change of the actual controller during the Reporting Period:
□ Applicable √ Not applicable
No such cases in the Reporting Period.
Ownership and control relations between the actual controller and the Company:
Liu Zibin Liu Deming
4% 21%
Zibo Lucheng Textile Investment Co., Ltd.
0.02%
15.21%
Lu Thai Textile Co., Ltd.
Indicate by tick mark whether the actual controller controls the Company via trust or other ways of asset management.
□ Applicable √ Not applicable
4. Other 10% or Greater Corporate Shareholders
√ Applicable □ Not applicable
Name of corporate Legal representative / Date of
Registered capital Business scope
shareholder company principal establishment
Tailun (Thailand) Textile 600 million baht 600 million baht (Thai)
Xu Zhinan 29 January 1985
Co., Ltd. (Thai)
5. Limitations on Shareholding Decrease by the Company’s Controlling Shareholder, Actual Controller,
Reorganizer and Other Commitment Makers
□ Applicable √ Not applicable
52
Lu Thai Textile Co., Ltd. Annual Report 2018
Part VII Preferred Shares
□ Applicable √ Not applicable
No preferred shares in the Reporting Period.
53
Lu Thai Textile Co., Ltd. Annual Report 2018
Part VIII Directors, Supervisors, Senior Management and Staff
I Change in Shareholdings of Directors, Supervisors and Senior Management
Beginnin Increase Decrease
Other Ending
g in the in the
Office Incumben Gende increase/d sharehold
Name Age Start of tenure End of tenure sharehold Reporting Reporting
title t/Former r ecrease ing
ing Period Period
(share) (share)
(share) (share) (share)
Chairman Incumben
Liu Zibin Male 54 6 June 2007 5 June 2019 148,290 148,290
and GM t
Xu Vice Incumben
Male 89 6 May 2004 5 June 2019
Zhinan President t
Fujiwara Incumben
Director Male 79 7 May 1998 5 June 2019
Hidetoshi t
Chen Incumben
Director Male 75 16 April 2000 5 June 2019
Ruimou t
Zeng Incumben
Director Male 68 6 June 2007 5 June 2019
Facheng t
Director,
Wang Vice GM, Incumben
Male 58 7 May 1998 5 June 2019 146,753 146,753
Fangshui and Chief t
Engineer
Liu Incumben
Director Male 28 12 May 2017 9 June 2019
Deming t
Director
and
Qin Incumben Femal
Secretary 53 7 May 1998 5 June 2019 126,542 126,542
Guiling t e
of the
Board
Director
Zhang and Chief Incumben Femal
49 6 June 2016 5 June 2019 92,500 92,500
Hongmei Accounta t e
nt
Independ
Xu Incumben
ent Male 45 6 June 2013 5 June 2019
Jianjun t
Director
Independ Incumben 19 September
Zhao Yao Male 49 5 June 2019
ent t 2014
54
Lu Thai Textile Co., Ltd. Annual Report 2018
Director
Independ
Incumben Femal
Bi Xiuli ent 52 6 June 2016 5 June 2019
t e
Director
Independ
Pan Incumben Femal
ent 54 6 June 2016 5 June 2019
Ailing t e
Director
Independ
Wang Incumben
ent Male 52 6 June 2016 5 June 2019
Xinyu t
Director
Superviso
ry
Zhang Incumben 8 February
Committe Male 49 5 June 2019 73,100 73,100
Shougang t 2018
e
Chairman
Liu Superviso Incumben 6 June 2007
Male 51 5 June 2019 10,000 10,000
Zilong r t
Dong Superviso Incumben 6 June 2007
Male 50 5 June 2019 5,000 5,000
Shibing r t
Zhang Incumben
Vice GM Male 51 6 June 2007 5 June 2019 52,150 52,150
Jianxiang t
Vice GM,
Wang Incumben 6 June 2007
Product Male 56 5 June 2019 83,700 83,700
Jiabin t
Manager
Vice GM,
Zhang GM of Incumben
Male 47 6 June 2007 5 June 2019 80,300 80,300
Zhanqi Lufeng t
Company
Fujiwara Manager
Incumben 9 December
Matsuzak of Japan Male 46 5 June 2019
t 2014
a Office
Zhang Financial Incumben
Male 51 6 June 2007 5 June 2019 77,700 77,700
Keming Manager t
Incumben
Li Wenji CIO Male 52 8 June 2016 5 June 2019 10,000 10,000
t
Vice GM
Lv Incumben 6 June 2007
of Lufeng Male 51 5 June 2019 33,750 33,750
Yongchen t
Company
Yu Energy Incumben
Male 51 6 June 2007 5 June 2019 83,100 83,100
Shouzhen Business t
55
Lu Thai Textile Co., Ltd. Annual Report 2018
g Manager
GM
assistant,
Wang
Fabric Incumben
Changzha Male 45 6 June 2013 5 June 2019 22,500 22,500
Marketin t
o
g
Manager
Brand
Quan Marketin Incumben
Male 52 6 June 2013 5 June 2019 27,750 27,750
Peng g t
manager
Manager
of
Shang Garments
Incumben
Chenggan Productio Male 46 6 June 2013 5 June 2019 30,000 30,000
t
g n
Departme
nt
Deputy
chief
engineer, Incumben 18 January
Du Lixin Male 43 5 June 2019
GM of Lu t 2018
Thai
(Vietnam)
Manager
of
Guo Incumben 18 January
Business Male 46 5 June 2019
Heng t 2018
Managem
ent
GM
assistant
and
Manager
Zhang Incumben 18 January
of Male 33 5 June 2019
Wei t 2018
Strategy
Planning
Departme
nt
Superviso
Li ry 18 January
Former Male 63 5 June 2019 176,164 176,164
Tongmin Committe 2018
e
56
Lu Thai Textile Co., Ltd. Annual Report 2018
Chairman
Pan Customs 18 January
Former Male 51 6 June 2007 134,296 4,300 138,596
Pingli Manager 2018
Total -- -- -- -- -- -- 1,413,595 4,300 0 0 1,417,895
II Change of Directors, Supervisors and Senior Management
√Applicable □ Not applicable
Name Office title Type of change Date of change Reason for change
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 Appointed 8 February 2018
Pan Pingli Customs Manager Dismissed 18 January 2018 Job turnover
Du Lixin GM of Lu Thai (Vietnam) Appointed 18 January 2018
Guo Heng Manager of Business Management Appointed 18 January 2018
GM assistant and Manager of Strategy
Zhang Wei Appointed 18 January 2018
Planning Department
III Biographical Information
Professional backgrounds, major work experience and current duties in the Company of the incumbent directors, supervisors and
senior management:
1. Mr. Liu Zibin: Director and concurrently General Manager of the Company. He was born in 1965, and achieved Master Degree.
From Oct. 2004 to Jun. 2007, he acted as Chairman of the Board of Zibo Lucheng Textile Investment Co., Ltd, now concurrently was
Chairman of the Board of Xinjiang Lu Thai Good Yield Cotton Co., Ltd., Xinjiang Lu Thai Textile, Lufeng Weaving & Dyeing,
Luqun Textile, Xinsheng Thermal Power, Chengshun Thermal Power, Shanghai Li Thai, and Beijing Lu Thai Youxian, and the
President of Lu Thai (America), Director of Lu Thai (Hong Kong) and Shanghai Zhinuo Textile New Material Co., Ltd.
2. Mr. Xu Zhinan: Vice Chairman of the Board of the Company. He was born in 1930, Thailand Nationality. Since 2004, he has been
acting as Director and Vice Chairman of the Board of the Company, and General Manager of Tailun (Thailand) Textile Co., Ltd.
3. Mr. Fujiwara Hidetoshi: Director of the Company. He was born in 1940, Japanese Nationality. Since 1998, he has been holding
post of Director of Lu Thai Company, and Director of Lufeng Weaving & Dyeing Co., Ltd.
4. Mr. Chen Ruimou: Director of the Company. He was born in 1944, and holder of bachelor degree. From 1998 to now, he has been
Director of the Company.
5. Mr. Zeng Facheng, Director of the Company, was born in 1951, Thailand nationality. He acts as Chairman of the Board of GOLD
MINE GARMENT CO., LTD. and BLOSSOM GARMENT MANUFACTURING (THAILAND) CO., LTD.
6. Mr. Wang Fangshui: Director, Vice General Manager and Chief Engineer of the Company. He was born in 1961, holder of MBA
degree. Since 1998, he has been Director and Chief Engineer of the Company, and concurrently is Director of Xinjiang Lu Thai Good
Yield Cotton Co., Ltd., Lufeng Weaving & Dyeing, Xinjiang Lu Thai, Luqun Textile, and Shanghai Zhinuo Textile New Material Co.,
Ltd, and the Executive Director of Lu Thai (Burma).
7. Mr. Liu Deming: Director, Assistant of GM of the Company. He was born in 1990, and achieved Master Degree. He is the
Chairman and GM of Zibo Lucheng Textile Investment Co., Ltd, the supervisor of Beijing Lu Thai Youxian, and the director of
57
Lu Thai Textile Co., Ltd. Annual Report 2018
Shanghai Zhinuo Textile New Material Co., Ltd.
8. Ms. Qin Guiling: Director, and Secretary to the Board of the Company. She was born in 1966, holder of MBA degree. Since 1998,
she has been Director and Secretary to the Board of the Company, and Supervisor of Xinjiang Lu Thai Good Yield Cotton Co., Ltd.,
Xinjiang Lu Thai Textile Co., Ltd.
9. Ms. Zhang Hongmei: Chief Accountant. She was born in 1970; holder of MBA degree and senior accountant. She had served
successively as Chief of cost section of financial department of Lu Thai Textile Co., Ltd., director of the accounting department and
deputy chief accountant. Now she serves as Chief Accountant of the Company. At the same time, she is the director of Luqun Textile,
and supervisor of Beijing Lu Thai Youxian and Shanghai Zhinuo Textile New Material Co., Ltd
10. Mr. Xu Jianjun: Independent Director of the Company, born in 1974, master degree holder. Once took the post of Senior Staff
Member of Head Office of Bank of China, Legal Counsel, lawyer at Beijing Jingtian Gongsheng Law Firm. From August of 2004 up
to now, serves as a partner of Beijing Deheng Law Firm. Now he is taking a post of partner and Deputy Director of Beijing Deheng
Law Firm.
11. Mr. Zhao Yao: Independent Director of the Company, born in 1970, master degree holder, associate professor of accounting,
master tutor and successively acted as member of a council of Accounting Association in Shandong Province, executive member of
the council of Shandong Province Institute of CPAs, member of Shandong Province internal control consultant experts, member of
Shandong Province accounting criterion consultant experts and currently act as Director of Department of Accounting of Shandong
University of Technology.
12. Ms. Bi Xiuli: female, independent director of the Company, born in 1967, master. She worked as a judge of Zibo Intermediate
People's Court from 1990 to 1996, worked as a lawyer of Beijing Jingwei Law Firm from 2002 to 2003, worked as a lawyer of
Beijing King & Capital Law Firm from 2003 to 2004, worked as a partner of Beijing JunZeJun Law Offices from 2004 to 2011 and
works as a partner of Beijing DeHeng Law Offices now.
13. Ms. Pan Ailing: female, independent director of the Company, born in 1965, doctor of economics, postdoctor of financial
management. Now, she works as a professor, doctoral supervisor and academic leader of accounting in School of Management of
Shandong University, the director of investment and financing research center of Shandong University, a member of Shandong
Accounting Society, an executive member of Shandong Research Society of Comparative Management and a visiting professor of
Taiwan Soochow University.
14. Mr. Wang Xinyu: male, independent director of the Company, born in 1967, master, certified public accountant, certified tax
agent and certified public assets estimator. From December 2007 to August 2013, he worked in Zhonglei Accounting Firm as the
vice general manager of Shandong branch. Now he works as the senior partner and director of Shandong branch of Reanda Certified
Public Accountants (special general partnership).
15. Mr. Zhang Shougang: male, chairman of supervisory committee, born in 1970, MBA, senior engineer. He once worked as the
factory manager of weaving factory of the Company, manager of weaving business division, quality management department,
Garments Production Department, and business management dividion.
16. Mr. Liu Zilong: Supervisor of the Company. He was born in 1968, holder of MBA degree. From 2002 to present, he was General
Manager of Lu Thai (Hong Kong).
17. Mr. Dong Shibing: Supervisor of the Company. He was born in 1969, graduated from technical secondary school. He ever took
the post of Deputy Director of the General Manager Office of the Company, and now holds post of Manager of Property
Management Company.
18. Mr. Zhang Jianxiang: male, vice general manager of the Company & the executive director of Lu Thai Textile Garment
Engineering Research Institute, born in 1968, Master of Business Administration. He once worked as the manager of quality
management department of the Company and the director of textile finishing factory.
19. Mr. Wang Jiabin: General Manager Assistant and Manager of Production Department of the Company, head of security
checkpoint of production department. He was born in 1963, MBA and once acted as Manager of Dyeing Business Department.
58
Lu Thai Textile Co., Ltd. Annual Report 2018
20. Mr. Zhang Zhanqi: General Manager Assistant and deputy General Manager in Lufeng Weaving & Dyeing of the Company. He
was born in 1972, MBA, once worked as Director of Fabric Finishing Plant and Manager of Quality Control Department.
21. Mr. Fujiwara Matsuzaka: Manager in Japan office. He was born in 1973 and had acted as Manager of International Business
Department I and clothes marketing department of the Company.
22. Mr. Li Wenji: male, CIO & manager of information department of the Company, born in 1967. He once worked as a teacher in
Shandong University of Finance and Economics. From July 2005 to now, he works as the manager of information department of the
Company. In 2016, he was employed as chief information officer of the Company.
23. Mr. Zhang Keming: Manager of Financial Department of the Company. He was born in 1968, MBA and senior accountant. From
2002 to 2006, he held the post of Deputy Manager of Financial Department; from Apr. 2006 to present, he has acted as Manager of
Financial Department.
24. Mr. Lv Yongchen: Deputy General Manager of Lufeng Weaving and Dyeing Co., Ltd. He was born in 1968 and MBA degree
holder. From 2002 to 2010, he acted as Deputy Manager of International Business Department in the Company.
25. Mr. Yu Shouzheng: Energy Business Manager of the Company. He was born in 1968, MBA degree holder and engineer. He once
worked as Director of Dynamic Department in the Company. From 2007 to present, he has acted as Manager of Energy Business
Department in the Company.
26. Mr. Wang Changzhao: GM assistant, manager of fabric marketing department of the Company. He was born in 1974 and had
acted as General Manger Assistant of International Business Department.
27. Mr. Quan Peng: Manager of brand expanding department of the Company. He was born in 1967, MBA degree holder. From 2004
to present, he has acted as Marketing Manager.
28. Mr. Shang Chenggang: manager of garments production department of the Company, born in 1973. He once worked as the vice
director and director of general manager office, the manager of enterprise manager department and the representative of managers.
29. Mr. Du Lixin: dedputy chief engineer, GM of Lu Thai (Vietnam) Textile Co., Ltd, born in 1975. He once held the posts of
spinning operator, planner of weaving factory, deputy director of production dept. control center, director of weaving factory,
manager of weaving business division, and vice manager of production dept. of the Company.
30. Mr. Guo Heng: manager of business management dept. of the Company, born in 1972. He once worked as deputy director of
spinnery, vice manager of yarn business division, and manager of yarn business division of the Company.
31. Mr. Zhang Wei, GM assistant and manager of strategy planning dept. of the Company, born in 1985, doctor. He once worked as
the reasearcher of Guotai Junan Securities Co., Ltd and China Asset management Co., Ltd. Now he acts as the director of Beijing Lu
Thai Youxian E-commerce Co., Ltd., and Shanghai Zhinuo Textile New Material Co., Ltd
32. Mr. Li Tongmin: male, born in 1956, technical secondary school education. Now he works as chairman of the labor union of the
Company. From October 1993 to 2010, he worked as supervisor, chairman of supervisory committee, manager of production
department and vice general manager of the Company.
33. Mr. Pan Pingli: Customs Manager of the Company. He was born in 1968 and MBA degree holder. He ever acted as General
Manager of International Business Department of the Company.
Offices held concurrently in shareholding entities:
√Applicable □Not applicable
Remuneration or
Office held in the End of
Name Shareholding entity Start of tenure allowance from the
shareholding entity tenure
shareholding entity
Liu Zibin Zibo Lucheng Textile Investment Co., Ltd. Director 26 February 1999 No
Xu Zhinan Tailun (Thailand) Textile Co., Ltd. Chairman 29 January 1985 No
Liu Deming Zibo Lucheng Textile Investment Co., Ltd. Chairman and GM 1 February 2017 No
59
Lu Thai Textile Co., Ltd. Annual Report 2018
Mr. Liu Zibin is the Director of Zibo Lucheng Textile Investment Co., Ltd., holding 4% equities of Zibo Lucheng
Explanation
Textile Investment Co., Ltd. Basic information of Mr. Liu Zibin: Chinese, no right of residence in other countries or
s about
regions. Mr. Liu Deming holds the post of Chairman and GM of Zibo Lucheng Textile Investment Co., Ltd., holding
holding
21% equities of Zibo Lucheng Textile Investment Co., Ltd. Basic information of Mr. Liu Deming: Chinese, no right
posts in
of residence in other countries or regions. Mr. Xu Zhinan is the sponsor of foreign capital of the Company,
shareholders
shareholder of Tailun (Thailand) Textile Co., Ltd. and Tailun (Thailand) Textile Co., Ltd. is the second largest
’ companies
shareholder of the Company. Basic information about Mr. Xu Zhinan: Thai.
Offices held concurrently in other entities:
√Applicable □Not applicable
Remuneration or
Start of End of
Name Other entity Office held in the entity allowance from
tenure tenure
the entity
Xinjiang Lu Thai Good Yield Cotton Co., Ltd.,
Xinjiang Lu Thai Textile Co., Ltd., Lufeng
Weaving & Dyeing Co., Ltd. Zibo Luqun Textile
Co., Ltd., Zibo Xinsheng Thermal Power Co.,
7
Ltd., Zibo Chengshun Thermal Power Co., Ltd., Chairman, Director,
Liu Zibin December No
Shanghai Lu Thai Textile Garment Co., Ltd., Chairman of and GM
2015
Beijing Lu Thai Youxian E-commerce Co., Ltd.,
Lu Thai (America) Textile Co., Ltd. Lu Thai
(HK) Textile Co., Ltd, Shanghai Zhinuo Textile
New Material Co., Ltd
Xinjiang Lu Thai Good Yield Cotton Co., Ltd.,
Xinjiang Lu Thai Textile Co., Ltd., Lufeng
Weaving & Dyeing Co., Ltd. Zibo Luqun Textile 17 June
Wang Fangshui Director and Supervisor No
Co., Ltd., Lu Thai (Burma) Textile Co., Ltd., 2003
Lu Thai (Vietnam) Textile Co., Ltd., and
Shanghai Zhinuo Textile New Material Co., Ltd
Shanghai Zhinuo Textile New Material Co., Ltd
21 August
Liu Deming and Beijing Lu Thai Youxian E-commerce Co., Director and Supervisor No
2017
Ltd.
Xinjiang Lu Thai Good Yield Cotton Co., Ltd., Supervisory Board 17 June
Qin Guiling No
and Xinjiang Lu Thai Textile Co., Ltd Chairman 2003
Zibo Luqun Textile Co., Ltd., Beijing Lu Thai
17 June
Zhang Hongmei Youxian E-commerce Co., Ltd., and Shanghai Director and Supervisor No
2003
Zhinuo Textile New Material Co., Ltd
1 August
Xu Jianjun Beijing Deheng Law Offices Partner Yes
2004
1 March
Zhao Yao Shandong University of Technology Associate Professor Yes
2001
1 January
Bi Xiuli Beijing Deheng Law Offices Partner Yes
2011
60
Lu Thai Textile Co., Ltd. Annual Report 2018
1 July
Pan Ailing Shandong University School of Management Professor Yes
1986
Reanda Certified Public Accountants Shandong 1 August
Wang Xinyu Director Yes
Branch 2013
30
Zhang Beijing Lu Thai Youxian E-commerce Co., Ltd.,
Director and Supervisor December No
Jianxiang Shanghai Lu Thai Textile Garment Co., Ltd.,
2010
29
Du Lixin Lu Thai (Vietnam) Textile Co., Ltd. GM December No
2015
Beijing Lu Thai Youxian E-commerce Co., Ltd.,
23 May
Zhang Wei and Shanghai Zhinuo Textile New Material Co., Director Yes
2014
Ltd
Punishments imposed in the recent three years by the securities regulator on the incumbent directors, supervisors and senior
management as well as those who left in the Reporting Period:
□ Applicable √ Not applicable
IV Remuneration of Directors, Supervisors and Senior Management
Decision-making procedure, determination basis and actual payments of remuneration for directors, supervisors and senior
management:
Remuneration committee under the board of directors is responsible for formulating assessment standards of directors and senior
executives and conducting assessment; for formulating and reviewing remuneration policy and program of directors and senior
executives; it is responsible for the board of directors. The remuneration committee, according to appraisal results of position
performance and motivation and restriction plan for senior executives, proposes amount of payment and methods of reward for
directors and senior executives and submits the above resolutions to the board of directors for ratification after the approval by
voting.
The Chief Accountant Office, the Corporate Management Department and the HR Department of the Company was responsible for
preparations for the decision-making of the Remuneration and Appraisal Committee by providing relevant information of the
Company as follows: (I) accomplishment of main financial and business objectives; (II) accomplishment of relevant indicators of
other listed companies in the sector; (III) work scope and main responsibilities of senior management staff.
The remuneration committee appraised directors and senior management staff according to the completion situation of the
Company’s performance and the annual appraisal results of senior management staff were put forward according to the
performance appraisal results and the senior staff incentive and disciplinary plan. Upon approval by voting, the results were
reported to the Board of Directors for approval.
The number of incumbent directors, supervisors and senior executives is 31, among which there are 31 persons actually receiving
remuneration from the Company. Till 31 December 2018, the total amount of annual payment drawn from the Company by
directors, supervisors and senior executives is RMB23. 5271million (before tax).
Remuneration of directors, supervisors and senior management for the Reporting Period
Unit: RMB'0,000
61
Lu Thai Textile Co., Ltd. Annual Report 2018
Total before-tax Any
Incumbent/For
Name Office title Gender Age remuneration from remuneration
mer
the Company from related party
Liu Zibin Chairman and GM Male 54 Incumbent 147.59 No
Xu Zhinan Vice President Male 89 Incumbent 37.35 No
Fujiwara
Director Male 79 Incumbent 374.5 No
Hidetoshi
Chen Ruimou Director Male 75 Incumbent 37.35 No
Zeng Facheng Director Male 68 Incumbent 1.19 No
Wang
Director and Vice GM and Chief Engineer Male 58 Incumbent 156.5 No
Fangshui
Liu Deming Director Male 28 Incumbent 14.13 No
Qin Guiling Director and Chairman Secretary Female 53 Incumbent 162.97 No
Zhang
Director and Chief Accountant Female 49 Incumbent 106.61 No
Hongmei
Xu Jianjun Independent Director Male 45 Incumbent 4.8 No
Zhao Yao Independent Director Male 49 Incumbent 4.8 No
Bi Xiuli Independent Director Female 52 Incumbent 4.8 No
Pan Ailing Independent Director Female 54 Incumbent 4.8 No
Wang Xinyu Independent Director Male 52 Incumbent 4.8 No
Zhang
Supervisory Board Chairman Male 49 Incumbent 91.95 No
Shougang
Liu Zilong Supervisor Male 51 Incumbent 72.3 No
Dong Shibing Supervisor Male 50 Incumbent 69.24 No
Zhang
Vice GM Male 51 Incumbent 108.16 No
Jianxiang
Wang Jiabin Vice GM, Product Manager Male 56 Incumbent 101.98 No
Zhang Zhanqi Vice GM, GM of Lufeng Company Male 47 Incumbent 93.17 No
Fujiwara
Manager of Japan Office Male 46 Incumbent 113.12 No
Matsuzaka
Zhang
Financial Manager Male 51 Incumbent 69.61 No
Keming
Li Wenji CIO Male 52 Incumbent 63.16 No
Lv Yongchen Vice GM of Lufeng Company Male 51 Incumbent 69.57 No
Yu Shouzheng Energy Business Manager Male 51 Incumbent 69.57 No
Wang
GM assistant, Fabric Marketing Manager Male 45 Incumbent 71.77 No
Changzhao
62
Lu Thai Textile Co., Ltd. Annual Report 2018
Quan Peng Brand Marketing manager Male 52 Incumbent 71.53 No
Shang Manager of Garments Production
Male 46 Incumbent 70.62 No
Chenggang Department
GM assistant and Manager of Strategy
Zhang Wei Male 33 Incumbent 98.57 Yes
Planning Department
Guo Heng Manager of Business Management Male 46 Incumbent 22.15 No
Deputy chief engineer, GM of Lu Thai
Du Lixin Male 43 Incumbent 34.05 No
(Vietnam)
Total -- -- -- -- 2,352.71 --
Equity incentives for directors, supervisors and senior management in the Reporting Period:
□ Applicable √ Not applicable
V Employees
1. Number, Functions and Educational Backgrounds of Employees
Number of in-service employees of the Company as the parent 13,207
Number of in-service employees of major subsidiaries 12,644
Total number of in-service employees 25,851
Total number of paid employees in the Reporting Period 25,851
Number of retirees to whom the Company as the parent or its
0
major subsidiaries need to pay retirement pensions
Functions
Function Employees
Production 19,292
Sales 553
Technical 5,232
Financial 99
Administrative 675
Total 25,851
Educational backgrounds
Educational background Employees
Doctor 5
Master 99
Bachelor 1,145
College 5,354
63
Lu Thai Textile Co., Ltd. Annual Report 2018
High school and below 19,248
Total 25,851
2. Employee Remuneration Policy
The Company has formulated a remuneration management system with its principle being “payment according to one’s work and
more pay for more work”. Through post evaluation and through researches of Social salary levels carried out as multi-faceted, as well
as the formulation of the reasonable salary management system, fully demonstrates the internal fairness, self-fairness and external
fairness. It has greatly motivated the employees and enhanced the corporate management.
3. Employee Training Plans
Trainings will be carried out according to requirements of the Company’s strategic development planning, improvement of
employees’ capability, performance management, employees’ career planning, etc. The annual training plan is determined by carrying
out researches on training needs. And the training courses fall into three major categories, i.e. management, technical skills and
general knowledge. Through these trainings, the Company will improve the knowledge structure of its employees, improve their job
skills and increase their comprehensive quality to provide excellent human resources for the long-term, sustained and stable
development of the Company.
4. Labor Outsourcing
□ Applicable √ Not applicable
64
Lu Thai Textile Co., Ltd. Annual Report 2018
Part IX Corporate Governance
I General Information of Corporate Governance
During the Reporting Period, the Company strictly conforms to Company Law, Securities Law and Governing Rules for Listed
Company, Stock Listing Rules of Shenzhen Stock Exchange, and Standard Operation of Companies Listed on the Main Board of
Shenzhen Stock Exchange as well as relevant stipulations and requirements from normamtive documents. It formed a relationship of
clear division of rights and responsibilities, assuming each own functions and check and balance each other between the management
organ, decision-making organ, supervisory organ and management layer, so as to provide a good internal operational environment for
the Company’s standardized and efficient operation. During the Reporting Period, the Company revised Articles of Lu Thai Textile
Co., Ltd. At present, there is no difference between the actual situation of the Company’s corporate governance structure and the
requirements on the corporate governance of CSRC and Shenzhen Stock Exchange.
1. Shareholders and Shareholders’ General Meeting
The Company shall gather and convene the shareholders meeting in strict accordance with the regulations in the Rules of Procedure
of Shareholders' Meeting. In 2018, according to Company Law of the PRC, Securities Law of the People's Republic of China,
Regulation Guidelines for Listed Companies No. 3-cash Dividends for Listed Companies (CSRC), Notice on Further Implementation
of Matters Related To Cash Dividend of Listed Companies and other related documents, the Company revised some articles of the
Articles of Association regarding "the priority of Cash dividend method in profit distribution, the implementation of differentiated
cash dividend policy", in order to ensure that the profit distribution of the Company not only attaches importance to the reasonable
return on investment to the investors, but also implements the principle of continuous and stable profit distribution, takes into account
the overall interests of all shareholders and the sustainable development of the Company.
2. The relationship between the principal shareholders and the Company
The Company’s principal shareholders acted according to relevant standards without directly or indirectly intervening the Company’s
decision-making and operating activities; the Company was independent with its principal shareholders in business, personnel, assets,
organization, finance, and the Company’s Board of Directors, Supervisory Committee and Internal Organs could completely
independent to operate. There was no situation about annexing the assets or occupation of funds of the Company by principal
shareholders or other events on infringing the interest of the Company and other shareholders.
3. The directors and Board of Directors
In 2018, according to Company Law of the PRC, Securities Law of the People's Republic of China, the Company standardized some
articles of the Articles of Association regarding the nomination and election of directors, replacement of Board of Directors,
qualifications for non-independent directors, etc. The Company nominates and elects directors in strict accordance with the
provisions of the Articles of Association. The composition of the Board of Directors and the number of independent directors meet
the requirements of laws and regulations. Directors and independent directors fully enjoy the functions and powers given by the
Company Law and the Articles of Association to ensure the scientific and fair decision-making of the Board of Directors of the
Company.
4. Supervisors and Supervisory Committee
In 2018, according to Company Law of the PRC, Securities Law of the People's Republic of China, the Company standardized some
articles of the Articles of Association regarding the nomination of candidates for shareholders and supervisors. The Board of
Supervisors and supervisors of the Company can strictly enforce relevant regulations, conscientiously perform their duties, uphold
the tenet of being responsible to shareholders and to listed companies, strictly inspect the financial affairs of the Company, and
supervise the performance of directors and senior executives.
5. Information disclosure
65
Lu Thai Textile Co., Ltd. Annual Report 2018
The Company strictly comforms to the Administrative Measures for the Disclosure of Information of Listed Companies by CSRC,
Stock Listing Rules (Revised in 2018) of Shenzhen Stock Exchange, and Standard Operation of Companies Listed on the Main
Board (Revised in 2015) and other relevant provisions, disclosing the nformation timely, objectively and justly to ensure the
truthfulness, accuracy, completeness.
6. Investor relations management
During the reporting period, to maintain good communication with investors, the Company accepted on-site investigations and
consultations of investors through on-site investigations and telephone consultations, and promptly answered questions asked by
investors on the SZSE Easy-IR.
Indicate by tick market whether there is any material incompliance with the regulatory documents issued by the CSRC governing the
governance of listed companies.
□ Yes √ No
No such cases in the Reporting Period.
II The Company’s Independence from Its Controlling Shareholder in Business, Personnel,
Asset, Organization and Financial Affairs
1. As for the business: the Company completely separates from the controlling shareholders in the business that possesses the entirely
independent production, supply and sales system and the autonomous operating ability.
2. As for the personnel: the Company remains completely independent in the Human Resources aspects such as the labor, the
personnel and the wages with entirely independent self-controlling ability.
3. As for the assets: the Company possesses the entire and independent legal person property right with independent and perfect the
production system, auxiliary production systems and supporting facilities; and possesses the independent ownership of the intangible
assets such as the i Industrial property, trademarks, non-patented technology.
4. As for the institution: the organizations and institutions of the Company are all independent and perfect that there is no any
situation of working with the controlling shareholders.
5. As for the finance: the Company possesses independent financial departments with normative financial accounting system and
financial management system as well as internal control system with independent bank account.
III Horizontal Competition
□ Applicable √ Not applicable
IV Annual and Special General Meetings Convened during the Reporting Period
1. General Meeting Convened during the Reporting Period
Investor Date of the
Meeting Type Disclosure date Index to disclosed information
participation ratio meeting
Announcement on the Resolution of
The 1st the Meeting (No.: 2018-007) disclosed
Extraordinar
Extraordinary on 9 February 2018 on Securities
y General 0.00% 8 February 2018 9 February 2018
General Meeting of Times, China Securities Journal,
Meeting
2018 Shanghai Securities News, Ta Kung
Pao, and http://www.cninfo.com.cn
66
Lu Thai Textile Co., Ltd. Annual Report 2018
Announcement on the Resolution of
nd
The 2 the Meeting (No.: 2018-013) disclosed
Extraordinar
Extraordinary on 24 March 2018 on Securities Times,
y General 0.00% 23 March 2018 24 March 2018
General Meeting of China Securities Journal, Shanghai
Meeting
2018 Securities News, Ta Kung Pao, and
http://www.cninfo.com.cn
Announcement on the Resolution of
the Meeting (No.: 2018-025) disclosed
Annual
The 2017 Annual on 17 May 2018 on Securities Times,
General 0.00% 16 May 2018 17 May 2018
General Meeting China Securities Journal, Shanghai
Meeting
Securities News, Ta Kung Pao, and
http://www.cninfo.com.cn
Announcement on the Resolution of
rd
The 3 the Meeting (No.: 2018-042) disclosed
Extraordinar
Extraordinary 18 September 19 September on 19 September 2018 on Securities
y General 0.00%
General Meeting of 2018 2018 Times, China Securities Journal,
Meeting
2018 Shanghai Securities News, Ta Kung
Pao, and http://www.cninfo.com.cn
2. Special General Meetings Convened at the Request of Preferred Shareholders with Resumed Voting
Rights
□ Applicable √ Not applicable
V Performance of Duty by Independent Directors in the Reporting Period
1. Attendance of Independent Directors at Board Meetings and General Meetings
Attendance of independent directors at board meetings and general meetings
Total number
The independent
of board Board meetings
Board Board meetings director failed to
meetings the attended by Board meetings General
Independent meetings the independent attend two
independent way of attended through meetings
director attended on director failed to consecutive
director was telecommunicat a proxy attended
site attend board meetings
eligible to ion
(yes/no)
attend
Xu Jianjun 8 1 6 1 0 No 0
Zhao Yao 8 1 6 1 0 No 0
Bi Xiuli 8 1 5 2 0 No 1
Pan Ailing 8 1 6 1 0 No 0
Wang Xinyu 8 2 6 0 0 No 1
Why any independent director failed to attend two consecutive board meetings:
67
Lu Thai Textile Co., Ltd. Annual Report 2018
Not applicable.
2. Objections Raised by Independent Directors on Matters of the Company
Indicate by tick mark whether any independent directors raised any objections on any matter of the Company.
□ Yes √ No
No such cases in the Reporting Period.
3. Other Information about the Performance of Duty by Independent Directors
Indicate by tick mark whether any suggestions from independent directors were adopted by the Company.
√ Yes □ No
Suggestions from independent directors adopted or not adopted by the Company:
The Independent Directors of the Company had not raised any objection to the proposals and other events approved and reviewed by
the Board of the Directors while executed the carefully review on the events needed advices and put forward the professional
suggestion and advice as well as stated 15 independent advices which improved the scientificity and objectivity of the
decision-making that exerted the due role on the supervision mechanism for improving the Company.
VI Performance of Duty by Specialized Committees under the Board in the Reporting Period
I. Duty fulfillment of Audit Committee under the Board
1. Major work of the 2018 annual report of the Audit Committee:
(1) The Audit Committee had held the 2018 the 1st Meeting of the Audit Committee on the Financial Audit Work in the meeting room
of the Company on 27 November 2018 and the meeting had confirmed the time and arrangement plan of the 2018 annual financial
audit work unanimously with the 2018 Audit Institution Ruihua CPAs (LLP).
(2) On 12 January 2019, the Audit Committee had held the 2nd Meeting of the 2018 Audit Work, which reviewed and submitted the
financial report audited by Ruihua CPAs (LLP) and issued the written advice.
(3) During the audit process, the Company had been maintained the contract and communication with the project leader of Ruihua
CPAs (LLP) by the methods such as the telephones and e-mails and had been urged which to submit the audit report within the
appointed time.
(4) The 3rd Meeting on 2018 Annual Audit and the 2018 Annual Work Conference, were convened by the Committee on 27 March
2019, where the following proposals were approved as resolutions, namely, the audited 2018 Financial Report of the Company, the
Summary Report on the Audit Conducted by Ruihua CPAs (LLP) on the Company’s 2018 Financial Report.
2. Written opinions, summary report of the annual audit, and resolutions of 2018 Work Conference on Annual Report by Audit
Committee
(1) According to the Rules for Audit Committee of the Board Concerning Annual Reports of Lu Thai Textile Co., Ltd., the Audit
Committee shall perform its duties of conducting supervision and checks in the Company’s preparation and disclosure of its annual
reports. The Committee reviewed the 2018 financial and accounting statements prepared by the Company’s Financial Department
before the presence of the registered accountants for the annual audit, and expressed its opinion as follows:
1. The financial and accounting statements were prepared in accordance with the Company’s accounting policy with proper
application of the accounting policy and reasonable accounting estimates, which were in line with the New Accounting Standards for
Business Enterprises, the Accounting System for Business Enterprises, and the relevant regulations issued by the Ministry of Finance
of PRC;
68
Lu Thai Textile Co., Ltd. Annual Report 2018
2. The subsidiary statements included in the Company’s consolidated statements were complete in terms of contents, providing an
accurate basis for the statement combination;
3. The Company’s financial statements were found objective, factual and accurate with no major misstatements or information
omission.
4. Since there is still a certain period of time from this review of the financial statements to the formal issuance of the auditor’s report
and the financial statements, the Company’s Financial Department is advised to pay close attention to and carefully handle the
matters after the balance sheet date, so as to ensure the fairness, factuality and completeness of the financial statements. The Audit
Committee is of the opinion that the financial and accounting statements are ready to be submitted to the registered accountants for
audit.
(2) Audit Committee’s written opinion on the Company’s financial statements after the preliminary audit opinion was issued by
Ruihua CPAs (LLP):
According to the Rules for Audit Committee of the Board Concerning Annual Reports of Lu Thai Textile Co., Ltd., the Audit
Committee shall perform its duties of conducting supervision and checks in the Company’s preparation and disclosure of its annual
reports. We effectively communicated with the said CPA firm (LLP) at the beginning of the audit. And we once again reviewed the
Company’s 2018 financial and accounting statements following the preliminary audit opinion to the Company’s 2018 financial
statements issued by the CPA firm (LLP), and expressed our opinions as follows:
In accordance with the New Accounting Standards for Business Enterprises and the Company’s relevant financial rules, the financial
statements were prepared in a rational and standardized way, which fairly, factually, accurately and completely presented the
Company’s assets, liabilities, shareholders’ equity and operation results by 31 December 2018.
The Audit Committee is of the opinion that the Company’s 2018 financial and accounting statements preliminarily audited by RSM
China Certified Public Accountants (Special General Partnership) are ready to be submitted to the 24th Meeting of the 8th Board of the
Directors for review.
(3) Resolutions made at 2018 Annual Work Conference of Audit Committee of the Board
The Audit Committee of the Board of Lu Thai Textile Co., Ltd. held its 2018 Annual Work Conference at Banyang Villa Meeting
Room of the Company on 27 March 2019. Three persons were supposed to attend the meeting, and all three of them were in fact
present at the meeting as well as the Chief Accountant, the Manager Assistant of the Audit Department, the project responsible person
of Lu Thai of Ruihua CPAs attended the meeting. Mr. Zhao Yao, Chairman of the Audit Committee, presided over the meeting. The
meeting was convened in accordance with the Company Law and the Articles of Association of the Company. And the following
proposals were passed by vote at the meeting:
I. With 3 favorable votes, 0 negative votes and no abstentions, the 2018 Financial Report of the Company audited by Ruihua CPAs
(LLP) was passed;
II. With 3 favorable votes, 0 negative votes and no abstentions, the Summary Report on the Audit Conducted by Ruihua CPAs (LLP)
on the Company’s 2018 Financial Report was passed;
III. With 3 favorable votes, 0 negative votes and no abstentions, the Company paid RMB1.735 million to the said CPAs firm as fees
for the 2018 annual financial report audit and internal control audit.
IV. With 3 favorable votes, 0 negative votes and no abstentions, the Proposal on Employment of Ruihua CPAs (LLP) as the
Company’s audit agency for 2019 Finance and Internal Control was passed.
The Committee agrees to submit the above-mentioned proposals I and III and IV to the Board of Directors for examination on the 24h
Meeting of the 8th Board of Directors.
II. Duty performance of Remuneration Committee affiliated to the Board of Directors
1. The Remuneration Committee of the Board of Lu Thai Textile Co., Ltd. held the First Conference in 2018 at Banyang Villa
Meeting Room of the Company on 15 April 2018. Five persons were supposed to attend the meeting, and all of them were in fact
69
Lu Thai Textile Co., Ltd. Annual Report 2018
present at the meeting. The meeting held by the Company met with the relevant regulations of Company Law and the Articles of
Association of the Company and reviewed and approved the Proposal on the 2017 Appraisal Result of the Senior Executives of Lu
Thai Company by the voting method and agreed to submit the above-mentioned proposal to the Board of Directors for examination
on the 16th Meeting of the 8th Board of Directors.
2. According to authorization of the 16th Meeting of the 8th Board of Directors of Lu Thai, remuneration committee of board of
directors of Lu Thai Textile Co., Ltd. held the second Meeting of 2018 in the meeting room of Panyang Villa Meeting Room of the
Company on 23 May 2018. Five persons should attend the meeting and five persons actually attended the meeting. Among the five
persons, Zhao Yao, and Pan Ailing voted in the form of communication. Chief accountant and the secretary of board of directors also
attended the meeting. The meeting accorded with relevant stipulations in Company Law and Articles of Company. Proposal for Risk
Fund Assessment and Release Amount for 2017 weas passed at the meeting in voting form.
III. Duty execution of the strategy committee of board of directors
The Strategy Committee of Board of Directors of Lu Thai Textile Co., Ltd. held the 1st Conference of 2018 in the meeting room of
Panyang Villa Meeting Room of the Company on 15 April 2018. 13 persons should attend the meeting and 13 persons actually
attended the meeting. This meeting was hosted by Liu Liu Zibin, the president of strategy committee. The meeting accorded with
relevant stipulations in Company Law and Articles of Association and passed the following proposals in voting form.
1. Overall Strategic Objectives of Yarn Dyed Fabric of Lu Thai Textile Co., Ltd. for 2018-2020.
2. Overall Strategic Objectives of Shirts Processing of Lu Thai Textile Co., Ltd. for 2018-2020.
3. R&D, human resources, fabric information, and clothing manufacture information engineering, and design development sub-plan.
4. Overall Strategic Objectives of Lu Thai Textile Co., Ltd. for 2018-2020
IX. Duty performance of nominations committee affiliated to the Board of Directors
1. The Company held the 1st Meeting of 2018 of the nominations committee of the 8th Board of Directors on 17 January 2108
according to the relevant regulations of the Company Law and Articles of Association, with 6 favorable votes, 0 negative votes and
no abstentions, which reviewed and approved the Proposal on Nominating Du Lixin, Guo Heng, and Zhang Wei as Senior Executives
of the Company. And it was submitted to the 14th Meeting of the 8th Board of Directors for review and approval. The Proposal was
reviewed and approved by the 14th Meeting of the 8th Board of Directors.
2. The Company held the 2nd Meeting of 2018 of the nominations committee of the 8th Board of Directors on 15 April 2018 with 7
favorable votes, 0 negative votes and no abstentions, which reviewed and approved the Proposal on Nominating the Members of the
By-election of Strategy Committee of 8th Board of Directors. Mr. Liu Deming was nominated as the member of the Strategy
Committee of 8th Board of Directors, and the term of office will expire until 5 June 2019. It was submitted to the 16th Meeting of the
8th Board of Directors for review and approval, and the 16th Meeting of the 8th Board of Directors reviewed and approved the
proposal.
VII Performance of Duty by the Supervisory Committee
Indicate by tick mark whether the Supervisory Committee found any risk to the Company during its supervision in the Reporting
Period.
□ Yes √ No
The Supervisory Committee raised no objections in the Reporting Period.
VIII Appraisal of and Incentive for Senior Management
In the Reporting Period, Remuneration Committee of the Board of Directors appraised operating achievements of the Company for
the year 2017 according to Incentive and Restricted Proposal for Senior Executives of Lu Thai Textile Co., Ltd, and drew up
incentive proposal for senior executives, which will be executed after review and approval by the 16th Meeting of the 8th Board of
Directors dated 15 April 2018. During the Reporting Period, the Company constantly improved the performance evaluation
70
Lu Thai Textile Co., Ltd. Annual Report 2018
mechanism and made the evaluation and incentive of the Senior Executives concerned with the Company’s performances and the
individual working results. According to the overall development strategy and the annual operating target of the Company at the
period-begin, the Company confirms the annual performance comprehensive indication and the management duty of each Senior
Executives, and executes the performance examination and the redemption of the rewards and punishment for the Senior Executives
by the Remuneration and Examination Committee affiliated to the Board of Directors at the year-end. The Company will constantly
improve the evaluation and incentive mechanism that to tightly concern the salary of the Senior Executives with the management
level and the operating performance so that to fully mobilize and inspire the initiative and creativity of them.
IX Internal Control
1. Material Internal Control Weaknesses Identified for the Reporting Period
□ Yes √ No
2. Internal Control Self-Evaluation Report
Disclosure date of the internal control
29 March 2019
self-evaluation report
For details, please refer to the Self-appraisal Report on Internal Control of Lu Thai
Index to the disclosed internal control
Textile Co., Ltd. simultaneously disclosed on www.cninfo.com.cn with the 2018
self-evaluation report
Annual Report of the Company.
Evaluated entities’ combined assets as % of
97.51%
consolidated total assets
Evaluated entities’ combined operating
revenue as % of consolidated operating 96.57%
revenue
Identification standards for internal control weaknesses
Weaknesses in internal control over financial Weaknesses in internal control not
Type
reporting related to financial reporting
Great defect: malpractices of the Directors, Great defect: violated the national laws
Supervisors and Senior Executives; the and regulations; the decision-making of
Company revised the published financial the enterprise was not scientific that led
report; the CPA founded the current financial to the mistakes of itself; outflow of the
report occurred significant misstatement management personnel or the technician
while during the operating process of the personnel was serious; frequently
Nature standard internal control could not founded the appeared the negative news from the
misstatement; the supervision of the Audit Media; the significant business lacked of
Committee and the internal audit institution systematic control or the systematic
of the Company on the internal control was control was invalid; the result of the
invalid. Significant defeat: had not abide by internal control assessment which was
the generally accepted accounting principles the great defect event had not been
to choose and apply the accounting policies; revised. Significant defeat: violated the
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Lu Thai Textile Co., Ltd. Annual Report 2018
had not built up the anti-fraud and significant enterprise internal regulations that
counterbalance mechanism and control caused rather serious losses; significant
measures; during the financial report business lacked of systematic control;
process, there occurred single or multiple outflow of the rather important personnel
defects which not reached the recognition was serious; the Media reported the
standard of the significant defeat but negative news that caused rather serious
influenced the true and accurate target of the negative influence; rather important
financial report. General defect: other business lacked of systematic control or
internal control defect which had not the systematic control was invalid; the
constructed as the great defeat, significant results of the internal control assessment
defect. which as the significant defect had not
been revised. General defect: other
internal control defect which had not
constructed as the great defeat,
significant defect.
Great defect: misstatement≥2% of the total
profits amount; misstatement≥0.3% of the
total assets amount; misstatement≥0.3% of
the total operating income;
misstatement≥0.4% of the total owners’
equities amount. Significant defect: 1% of
the total profits amount ≤misstatement<2%
Great defect: the direct financial losses
of the total profits amount; 0.15% of the total
were RMB6 million and above
assets amount ≤misstatement<0.3% of the
Significant defect: RMB3 million
total assets amount; 0.15% of the total
Quantitative standard (including RMB3 million)-RMB6
operating amount ≤misstatement<0.3% of
million General defect: RMB0.5 million
the total operating amount; 0.2% of the total
(including RMB0.5 million)-RMB 3
owners’ equities amount
million
≤misstatement<0.4% of the total owners’
equities amount. General defect:
misstatement<1% of the total profits amount;
misstatement<0.15% of the total assets
amount; misstatement<0.15% of the total
operating income; misstatement<0.2% of the
total owners’ equities amount.
Number of material weaknesses in internal
0
control over financial reporting
Number of material weaknesses in internal
0
control not related to financial reporting
Number of serious weaknesses in internal
0
control over financial reporting
Number of serious weaknesses in internal
0
control not related to financial reporting
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Lu Thai Textile Co., Ltd. Annual Report 2018
X Independent Auditor’s Report on Internal Control
√ Applicable □ Not applicable
Opinion paragraph in the independent auditor’s report on internal control
All shareholders of Lu Thai Textile Co., Ltd.:
According to Audit Guidelines for Enterprise Internal Control and the relevant requirements of Auditing Standards for Chinese
Certified Public Accountants, we have audited the effectiveness of internal control in the financial report of Lu Thai Textile Co.,
Ltd. (Hereinafter referred to as "Lu Thai Textile”) by 31 December 2018.
I. Responsibilities of Lu Thai Textile for internal control
The Board of Directors of Lu Thai Textile is responsible for establishing, improving and implementation the internal controls and
evaluating its effectiveness in accordance with Standard for Enterprise Internal Control, Application Guidelines for Enterprise
Internal Control, Enterprise Internal Control Audit Guidelines.
III. Responsibilities of certified public accountants
It is our responsibility to issue an audit opinion on the effectiveness of internal controls in financial report on the basis of the
implementation of the audit, and to disclose significant deficiencies in the internal controls of non-financial reports that have been
noted.
III. Inherent limitations of internal control
Internal control has inherent limitations, and there is a possibility that misreporting cannot be prevented. In addition, because the
change of circumstances may cause the internal control to become inappropriate or the degree of compliance with the control
policies and procedures is reduced, it is risky to infer the effectiveness of the future internal control based on the audit results of the
internal control.
IV. Audit Opinion on Internal Control in Financial Report
We believe that Lu Thai Textile Co., Ltd. kept effectively internal control on financial reporting in all respects according to
Enterprise Internal Control Basic Specification and the relevant provisions on 31 December 2018.
Independent auditor’s report on
Disclosed
internal control disclosed or not
Disclosure date 29 March 2019
For details, please refer to the Auditor’s Report on Internal Control on www.cninfo.com.cn at
Index to such report disclosed
the same time of disclosing the Company’s 2018 Annual Report.
Type of the auditor’s opinion Unmodified unqualified opinion
Material weaknesses in internal
control not related to financial None
reporting
Indicate by tick mark whether any modified opinion is expressed in the independent auditor’s report on the Company’s internal
control.
□ Yes √ No
Indicate by tick mark whether the independent auditor’s report on the Company’s internal control is consistent with the internal
control self-evaluation report issued by the Company’s Board.
√ Yes □ No
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Lu Thai Textile Co., Ltd. Annual Report 2018
Part X Corporate Bonds
Does the Company have any corporate bonds publicly offered on the stock exchange, which were outstanding before the date of this
Report’s approval or were due but could not be redeemed in full?
No.
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Lu Thai Textile Co., Ltd. Annual Report 2018
Part XI Financial Statements
I Independent Auditor’s Report
Type of the independent auditor’s opinion Unmodified unqualified opinion
Date of signing this report 7 March 2019
Name of the independent auditor Ruihua Certified Public Accountants LLP
Reference number of Audit Report Ruihua Audit Report [2019] No. 37010002
Name of the certified public accountants Wang Chuanshun, and Cui Xiaoli
Text of the Independent Auditor’s Report
To the shareholders of Lu Thai Textile Co., Ltd:
I Opinion
We have audited the financial statements of Lu Thai Textile Co., Ltd. (hereinafter referred to as the “Company”), which comprise the
consolidated and parent company balance sheets as of 31 December 2018, the consolidated and parent company statements of
income, cash flows and changes in owners’ equity for the year then ended, as well as the notes to the financial statements.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated and parent company
financial position of the Company at 31 December 2018, and the consolidated and parent company operating results and cash flows
for the year then ended, in conformity with the Chinese Accounting Standards (CAS).
II Basis for Opinion
We conducted our audits in accordance with the Audit Standards for Chinese Registered Accountants. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for Audit of Financial Statements section of our report. We are
independent of the Company in accordance with the China Code of Ethics for Certified Public Accountants, and we have fulfilled our
other ethical responsibilities in accordance with the said Code of Ethics. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
III Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and
in forming our opinion thereon, and we do not provide a separate opinion on these matters. And key audit matter identified in our
audit is summarized as follows:
(I) Recognition of income
1. Item description
The sales income of Lu Thai Textile Co., Ltd. mainly comes from sales of yarn-dyed fabrics and shirts. The operation income of the
Company in 2018 was RMB6,878,414,700, of which export income accounted for 63.25%. As stated in "Note IV 22 Income" and
“Note VI. 37 Operating Revenue and Cost of Sales” of the financial statements, for the income from domestic sales, the amount of
product sales income is recognized when the products are delivered to purchaser according to the contract. The income is also
recognized when the purchase price has been recovered or the receipt certificate has been received and the related economic benefits
are likely to flow into the Company, and the product-related costs can be measured in a reliable way. For the income from export
75
Lu Thai Textile Co., Ltd. Annual Report 2018
sales, the amount of sales income is recognized when products are declared and depart from port according to the contract, and the
bill of lading is received. The income is also recognized when the purchase price has been recovered or the receipt certificate has
been received and the related economic benefits are likely to flow into the Company, and the product-related costs can be measured
in a reliable way.
Since income is one of the key performance indicators of Lu Thai Textile Co., Ltd., there is an inherent risk that the management
manipulates income to achieve specific goals or expectations, therefore, we identify income recognition as a key audit item.
2. Audit response
(1) Evaluate and test the rationality of the internal control design related to income recognition and the operation effectiveness.
(2) Understand and assess whether the accounting policies related to income recognition by interviews with management and review
of relevant contract terms conform to the regulations of ASBE.
(3) Perform analysis procedures on income and costs, and analyze the rationality of fluctuations in sales volume, unit price and gross
profit of each month and each year.
(4) Check the supporting documents such as sales contracts, delivery receipts, invoices, customs declarations, shipping orders and
receipts.
(5) Confirm the balances of major customers and the amount of transactions, and execute the procedure of customs confirmation of
the amount of export income for the year 2018.
(6) Check the export income with the export tax rebate declaration form and the export data of China's electronic port;
(7) Perform cut-off tests on the income recognized before and after the balance sheet date, check the delivery receipts, invoice,
customs declarations, shipping orders and receipts etc. to assess whether the income is recognized within appropriate period.
(II) Inventory falling price reserves
1. Item description
As of 31 December 2018, the inventory balance of Lu Thai Textile Co., Ltd. was RMB216,0663,200 and the inventory depreciation
reserve was RMB67,296,200. As stated in "Notes IV 10 Inventory" and "Notes VI 5 Inventory" of the financial statements,
inventories are measured by cost or net realizable value, which is lower. The management determines the net realizable value of
inventories with significant judgments and estimates, and therefore, we identify inventory falling price reserves as a key audit item.
2. Audit response
(1) Understand the process of provision for inventory depreciation reserves, evaluate and test the rationality of the internal control
and the effectiveness of the operation of the internal control related to preparation for inventory depreciation.
(2) Monitor the inventory and check the inventory condition, check whether the defective and long-lived inventory have been
identified.
(3) Obtain inventory age table and carry out analytical review of long term inventory;
(4) Check the changes in the current period of the inventory falling price reserves recorded in previous years, and assess the
rationality of the change in inventory falling price reserves;
(5) Test the calculation table for inventory depreciation preparation to assess the rationality of estimated selling price, and compare
the post-sales price with the estimated selling price.
IV Other Information
The Company’s management is responsible for the other information. The other information comprises all of the information
included in the Company’s 2018 Annual Report other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
76
Lu Thai Textile Co., Ltd. Annual Report 2018
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.
V Responsibilities of Management and Those Charged with Governance for Financial Statements
The Company’s management (hereinafter referred to as the “Management”) is responsible for the preparation of the financial
statements that give a fair view in accordance with CAS, and for designing, implementing and maintaining such internal control as
the management determines is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the management is responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
management either intends to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
VI Auditor’s Responsibilities for Audit of Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with CAS will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with CAS, we exercise professional judgment and maintain professional skepticism throughout the
audit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for
our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
(2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances.
(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by the management.
(4) Conclude on the appropriateness of the management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required by CAS to draw
users’ attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, we
should modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Company to cease to continue as a going concern.
(5) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
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Lu Thai Textile Co., Ltd. Annual Report 2018
(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the
Company audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance of the Company regarding the planned scope and timing of the audit and
significant audit findings, including any noteworthy deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards (if applicable).
From the matters communicated with those charged with governance, we determine those matters that were of most significance in
the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our
auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Ruihua Certified Public Accountants LLP Chinese CPA
(Engagement Partner): Wang Chuanshun
Beijing China Chinese CPA: Cui Xiaoli
II Financial Statements
Currency unit for the financial statements and the notes thereto: RMB
1. Consolidated Balance Sheet
Prepared by Lu Thai Textile Co., Ltd.
31 December 2018
Unit: RMB
Item 31 December 2018 31 December 2017
Current assets:
Monetary capital 545,502,709.36 693,989,293.38
Derivative financial assets
Notes and accounts receivable 549,265,034.81 473,357,266.39
Including: Notes receivable 174,657,918.26 139,276,742.34
Accounts receivable 374,607,116.55 334,080,524.05
Prepayments 149,582,616.21 146,463,066.38
Other receivables 63,012,001.10 56,772,785.11
Including: Interest receivable 590,003.07
Dividends receivable
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Lu Thai Textile Co., Ltd. Annual Report 2018
Financial assets purchased under resale agreements
Inventories 2,093,366,992.30 2,100,661,221.93
Assets classified as held for sale
Current portion of non-current assets
Other current assets 86,366,454.56 118,588,703.34
Total current assets 3,487,095,808.34 3,589,832,336.53
Non-current assets:
Loans and advances to customers
Available-for-sale financial assets 85,112,000.00 84,533,000.00
Held-to-maturity investments
Long-term receivables 10,693,844.75
Long-term equity investments 96,018,463.65 97,536,732.02
Investment property 22,880,242.95 24,563,544.58
Fixed assets 5,748,562,385.35 5,421,295,850.03
Construction in progress 337,230,646.42 214,335,626.74
Productive living assets
Oil and gas assets
Intangible assets 478,689,064.45 498,948,301.48
R&D expense
Goodwill 20,613,803.29 20,613,803.29
Long-term prepaid expense 119,126,407.71 107,877,194.52
Deferred income tax assets 88,636,929.06 74,697,159.71
Other non-current assets 43,100,215.87 36,390,478.85
Total non-current assets 7,050,664,003.50 6,580,791,691.22
Total assets 10,537,759,811.84 10,170,624,027.75
Current liabilities:
Short-term borrowings 1,325,273,780.05 1,135,124,996.40
Financial liabilities at fair value through profit or loss 4,877,600.00
Derivative financial liabilities
Notes and accounts payable 353,688,510.95 373,566,904.50
Advances from customers 105,562,378.66 119,785,945.48
Financial assets sold under repurchase agreements
Handling charges and commissions payable
Payroll payable 325,998,210.17 316,836,488.95
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Lu Thai Textile Co., Ltd. Annual Report 2018
Taxes payable 43,556,823.75 33,055,090.58
Other payables 215,946,987.68 129,103,354.75
Including: Interest payable 3,068,841.54 1,572,231.86
Dividends payable 441,113.64 441,113.64
Current portion of non-current liabilities 62,750,292.49
Other current liabilities
Total current liabilities 2,374,904,291.26 2,170,223,073.15
Non-current liabilities:
Long-term borrowings 170,019,083.89
Bonds payable
Including: Preferred shares
Perpetual bonds
Long-term payables
Long-term payroll payable 96,958,178.53 93,843,473.02
Provisions
Deferred income 140,183,446.39 126,737,092.32
Deferred income tax liabilities 28,030,096.38 2,904,899.46
Other non-current liabilities 1,840,000.00 1,840,000.00
Total non-current liabilities 437,030,805.19 225,325,464.80
Total liabilities 2,811,935,096.45 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 stock 486,922,944.94
Other comprehensive income 61,157,013.37 16,810,574.22
Specific reserve
Surplus reserves 1,022,717,451.40 962,933,579.06
General reserve
Retained earnings 4,927,500,989.55 4,629,102,712.06
Total equity attributable to owners of the Company as the parent 7,146,548,467.86 7,230,942,770.16
Non-controlling interests 579,276,247.53 544,132,719.64
Total owners’ equity 7,725,824,715.39 7,775,075,489.80
Total liabilities and owners’ equity 10,537,759,811.84 10,170,624,027.75
Legal representative: Liu Zibin Chief Accountant: Zhang Hongmei Financial Manager: Zhang Keming
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Lu Thai Textile Co., Ltd. Annual Report 2018
2. Balance Sheet of the Company as the Parent
Unit: RMB
Item 31 December 2018 31 December 2017
Current assets:
Monetary capital 191,305,104.80 267,809,829.78
Financial assets at fair value through profit or loss
Derivative financial assets
Notes and accounts receivable 407,781,221.62 399,148,071.79
Including: Notes receivable 91,555,248.34 93,244,480.81
Accounts receivable 316,225,973.28 305,903,590.98
Prepayments 115,020,260.51 81,471,605.69
Other receivables 395,847,213.77 520,008,829.95
Including: Interest receivable 220,590.38
Dividends receivable
Inventories 1,040,433,078.53 1,164,055,145.96
Assets classified as held for sale
Current portion of non-current assets
Other current assets 12,671,631.64 53,657,308.33
Total current assets 2,163,058,510.87 2,486,150,791.50
Non-current assets:
Available-for-sale financial assets 73,112,000.00 72,533,000.00
Held-to-maturity investments
Long-term receivables
Long-term equity investments 2,165,711,579.69 1,816,493,348.06
Investment property 14,804,592.72 15,536,968.08
Fixed assets 2,731,726,695.28 2,811,046,847.91
Construction in progress 61,182,771.86 27,312,701.62
Productive living assets
Oil and gas assets
Intangible assets 242,204,032.54 249,994,817.83
R&D expense
Goodwill
Long-term prepaid expense
Deferred income tax assets 52,758,961.05 51,474,007.76
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Lu Thai Textile Co., Ltd. Annual Report 2018
Other non-current assets 6,047,443.10 27,077,391.31
Total non-current assets 5,347,548,076.24 5,071,469,082.57
Total assets 7,510,606,587.11 7,557,619,874.07
Current liabilities:
Short-term borrowings 622,604,447.52 622,438,413.87
Financial liabilities at fair value through profit or loss 4,877,600.00
Derivative financial liabilities
Notes and accounts payable 120,141,727.66 154,007,599.21
Advances from customers 49,798,551.14 52,314,250.61
Payroll payable 240,090,943.88 240,391,459.47
Taxes payable 30,914,089.32 17,297,415.92
Other payables 303,672,590.72 24,347,633.13
Including: Interest payable 2,475,549.88 973,134.21
Dividends payable 441,113.64 441,113.64
Liabilities directly associated with assets classified as held for sale
Current portion of non-current liabilities
Other current liabilities
Total current liabilities 1,372,099,950.24 1,110,796,772.21
Non-current liabilities:
Long-term borrowings
Long-term payables
Long-term payroll payable 96,958,178.53 93,843,473.02
Provisions
Deferred income 94,390,844.09 80,580,249.14
Deferred income tax liabilities 16,699,530.43 4,950.00
Other non-current liabilities
Total non-current liabilities 208,048,553.05 174,428,672.16
Total liabilities 1,580,148,503.29 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 stock 486,922,944.94
Other comprehensive income 520,200.00 28,050.00
Specific reserve
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Lu Thai Textile Co., Ltd. Annual Report 2018
Surplus reserves 1,019,608,711.76 959,824,839.42
Retained earnings 3,714,813,049.43 3,630,102,526.37
Total owners’ equity 5,930,458,083.82 6,272,394,429.70
Total liabilities and owners’ equity 7,510,606,587.11 7,557,619,874.07
3. Consolidated Income Statement
Unit: RMB
Item 2018 2017
1. Revenue 6,879,058,813.93 6,409,224,044.97
Including: Operating revenue 6,879,058,813.93 6,409,224,044.97
2. Costs and expenses 5,913,127,926.44 5,469,545,482.56
Including: Cost of sales 4,861,443,242.95 4,477,047,784.68
Taxes and surcharges 106,963,626.55 96,231,603.00
Selling expense 158,106,183.74 144,061,780.39
Administrative expense 390,911,763.27 323,126,978.65
R&D expense 289,395,092.58 328,403,990.29
Finance costs 48,779,680.31 63,342,671.31
Including: Interest expense 57,300,653.51 23,753,894.13
Interest income 17,925,826.14 7,488,918.00
Asset impairment loss 57,528,337.04 37,330,674.24
Add: Other income 60,846,383.76 58,099,783.92
Investment income (“-” for loss) -60,273,275.04 2,331,330.34
Including: Share of profit or loss of joint ventures and
-1,518,268.37 -2,463,267.98
associates
Gain on changes in fair value (“-” for loss) -4,877,600.00
Foreign exchange gain (“-” for loss)
Asset disposal income (“-” for loss) 7,826,983.38 1,242,000.54
3. Operating profit (“-” for loss) 969,453,379.59 1,001,351,677.21
Add: Non-operating income 10,652,238.56 12,122,767.09
Less: Non-operating expense 10,598,854.65 9,022,725.64
4. Profit before tax (“-” for loss) 969,506,763.50 1,004,451,718.66
Less: Income tax expense 111,313,191.40 121,132,609.06
5. Net profit (“-” for net loss) 858,193,572.10 883,319,109.60
5.1 Net profit from continuing operations (“-” for net loss) 858,193,572.10 883,319,109.60
5.2 Net profit from discontinued operations (“-” for net loss)
83
Lu Thai Textile Co., Ltd. Annual Report 2018
Net profit attributable to owners of the Company as the parent 811,526,477.83 841,150,934.75
Net profit attributable to non-controlling interests 46,667,094.27 42,168,174.85
6. Other comprehensive income, net of tax 44,346,439.15 -36,482,970.67
Attributable to owners of the Company as the parent 44,346,439.15 -36,482,970.67
6.1 Items that will not be reclassified to profit or loss
6.1.1 Changes caused by 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 44,346,439.15 -36,482,970.67
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
492,150.00 28,050.00
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
43,854,289.15 -36,511,020.67
currency-denominated financial statements
6.2.6 Other
Attributable to non-controlling interests
7. Total comprehensive income 902,540,011.25 846,836,138.93
Attributable to owners of the Company as the parent 855,872,916.98 804,667,964.08
Attributable to non-controlling interests 46,667,094.27 42,168,174.85
8. Earnings per share
8.1 Basic earnings per share 0.90 0.91
8.2 Diluted earnings per share 0.90 0.91
Where business combinations under common control occurred in the current period, the net profit achieved by the acquirees before
the combinations 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 2018 2017
1. Operating revenue 5,234,872,142.46 5,146,496,112.54
Less: Cost of sales 3,878,117,572.95 3,736,059,702.41
84
Lu Thai Textile Co., Ltd. Annual Report 2018
Taxes and surcharges 75,314,816.61 70,180,764.01
Selling expense 93,816,791.69 91,517,514.19
Administrative expense 240,621,922.89 211,887,601.86
R&D expense 202,174,766.82 230,897,165.13
Finance costs 22,580,855.82 21,229,673.23
Including: Interest expense 16,973,906.92 5,911,413.18
Interest income 4,042,869.20 4,147,488.37
Asset impairment loss 35,087,426.51 12,803,852.07
Add: Other income 33,789,992.88 41,705,496.22
Investment income (“-” for loss) -25,036,851.77 20,371,762.61
Including: Share of profit or loss of joint ventures and
-1,518,268.37 -2,463,267.98
associates
Gain on changes in fair value (“-” for loss) -4,877,600.00
Asset disposal income (“-” for loss) -8,418,900.16 -14,364,342.23
2. Operating profit (“-” for loss) 682,614,630.12 819,632,756.24
Add: Non-operating income 7,127,379.86 5,449,927.03
Less: Non-operating expense 6,778,974.37 4,693,009.37
3. Profit before tax (“-” for loss) 682,963,035.61 820,389,673.90
Less: Income tax expense 85,124,312.21 109,759,110.09
4. Net profit (“-” for net loss) 597,838,723.40 710,630,563.81
4.1 Net profit from continuing operations (“-” for net loss) 597,838,723.40 710,630,563.81
4.2 Net profit from discontinued operations (“-” for net loss)
5. Other comprehensive income, net of tax 492,150.00 28,050.00
5.1 Items that will not be reclassified to profit or loss
5.1.1 Changes in caused by remeasurements on defined benefit
pension schemes
5.1.2 Share of other comprehensive income of investees that will
not be reclassified to profit or loss under equity method
5.2 Items that may subsequently be reclassified to profit or loss 492,150.00 28,050.00
5.2.1 Share of other comprehensive income of investees that will
be reclassified to profit or loss under equity method
5.2.2 Gain/Loss on changes in fair value of available-for-sale
492,150.00 28,050.00
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
85
Lu Thai Textile Co., Ltd. Annual Report 2018
currency-denominated financial statements
5.2.6 Other
6. Total comprehensive income 598,330,873.40 710,658,613.81
7. Earnings per share
7.1 Basic earnings per share 0.66 0.77
7.2 Diluted earnings per share 0.66 0.77
5. Consolidated Cash Flow Statement
Unit: RMB
Item 2018 2017
1. Cash flows from operating activities:
Proceeds from sale of commodities and rendering of services 6,589,170,715.37 6,219,235,885.20
Tax rebates 200,637,812.52 219,602,657.95
Cash generated from other operating activities 110,420,123.41 137,131,952.43
Subtotal of cash generated from operating activities 6,900,228,651.30 6,575,970,495.58
Payments for commodities and services 3,361,829,445.15 3,405,465,059.44
Cash paid to and for employees 1,606,604,705.02 1,537,319,127.10
Taxes paid 248,475,301.28 305,512,465.13
Cash used in other operating activities 252,977,536.69 257,163,190.48
Subtotal of cash used in operating activities 5,469,886,988.14 5,505,459,842.15
Net cash generated from/used in operating activities 1,430,341,663.16 1,070,510,653.43
2. Cash flows from investing activities:
Proceeds from disinvestment 50,000,000.00
Investment income 6,069,367.03
Net proceeds from disposal of fixed assets, intangible assets and
32,483,391.91 8,757,416.99
other long-lived assets
Net proceeds from disposal of subsidiaries or other business units
Cash generated from other investing activities 27,272,692.86 75,806,318.05
Subtotal of cash generated from investing activities 115,825,451.80 84,563,735.04
Payments for acquisition of fixed assets, intangible assets and other
928,794,291.04 617,226,044.44
long-lived assets
Payments for investments 210,000,000.00
Net increase in pledged loans granted
Net payments for acquisition of subsidiaries and other business units
Cash used in other investing activities 73,597,959.70 1,263,998.65
Subtotal of cash used in investing activities 1,002,392,250.74 828,490,043.09
86
Lu Thai Textile Co., Ltd. Annual Report 2018
Net cash generated from/used in investing activities -886,566,798.94 -743,926,308.05
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 3,187,659,288.75 2,156,301,279.43
Net proceeds from issuance of bonds
Cash generated from other financing activities 94,300,000.00 199,980,000.00
Subtotal of cash generated from financing activities 3,282,459,288.75 2,356,781,279.43
Repayment of borrowings 2,925,408,591.68 1,924,349,996.85
Payments for interest and dividends 518,987,542.25 524,005,417.80
Including: Dividends paid by subsidiaries to non-controlling
12,023,566.38 12,023,566.38
interests
Cash used in other financing activities 524,987,535.17 178,430,428.00
Subtotal of cash used in financing activities 3,969,383,669.10 2,626,785,842.65
Net cash generated from/used in financing activities -686,924,380.35 -270,004,563.22
4. Effect of foreign exchange rate changes on cash and cash equivalents 1,645,076.17 -39,056,706.97
5. Net increase in cash and cash equivalents -141,504,439.96 17,523,075.19
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 535,134,772.90 676,639,212.86
6. Cash Flow Statement of the Company as the Parent
Unit: RMB
Item 2018 2017
1. Cash flows from operating activities:
Proceeds from sale of commodities and rendering of services 5,055,067,711.94 5,031,327,920.20
Tax rebates 134,608,110.60 147,979,834.16
Cash generated from other operating activities 54,426,092.92 66,325,383.38
Subtotal of cash generated from operating activities 5,244,101,915.46 5,245,633,137.74
Payments for commodities and services 2,867,484,652.12 2,835,545,725.67
Cash paid to and for employees 1,115,678,459.19 1,101,800,926.25
Taxes paid 133,530,662.18 203,201,646.35
Cash used in other operating activities 156,477,992.20 149,048,367.90
Subtotal of cash used in operating activities 4,273,171,765.69 4,289,596,666.17
Net cash generated from/used in operating activities 970,930,149.77 956,036,471.57
2. Cash flows from investing activities:
87
Lu Thai Textile Co., Ltd. Annual Report 2018
Proceeds from disinvestment 50,000,000.00
Investment income 24,045,800.65 17,976,433.62
Net proceeds from disposal of fixed assets, intangible assets and
84,896,956.61 3,857,174.49
other long-lived assets
Net proceeds from disposal of subsidiaries or other business units
Cash generated from other investing activities 621,071,940.73 369,607,376.66
Subtotal of cash generated from investing activities 780,014,697.99 391,440,984.77
Payments for acquisition of fixed assets, intangible assets and other
215,016,290.76 158,989,610.94
long-lived assets
Payments for investments 350,736,500.00 217,934,750.00
Net payments for acquisition of subsidiaries and other business units
Cash used in other investing activities 537,403,361.43 547,733,600.00
Subtotal of cash used in investing activities 1,103,156,152.19 924,657,960.94
Net cash generated from/used in investing activities -323,141,454.20 -533,216,976.17
3. Cash flows from financing activities:
Capital contributions received
Increase in borrowings obtained 1,867,420,105.89 1,549,844,124.40
Net proceeds from issuance of bonds
Cash generated from other financing activities 276,073,100.00 69,000,000.00
Subtotal of cash generated from financing activities 2,143,493,205.89 1,618,844,124.40
Repayment of borrowings 1,895,523,735.81 1,387,780,386.17
Payments for interest and dividends 479,201,499.77 473,154,729.91
Cash used in other financing activities 498,538,235.01 69,000,000.00
Sub-total of cash used in financing activities 2,873,263,470.59 1,929,935,116.08
Net cash generated from/used in financing activities -729,770,264.70 -311,090,991.68
4. Effect of foreign exchange rate changes on cash and cash equivalents 5,476,844.15 -20,935,533.57
5. Net increase in cash and cash equivalents -76,504,724.98 90,792,970.15
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 191,305,104.80 267,809,829.78
7. Consolidated Statements of Changes in Owners’ Equity
88
Lu Thai Textile Co., Ltd. Annual Report 2018
2018
Unit: RMB
2018
Equity attributable to owners of the Company as the parent
Item Other equity instruments Other Non-controlling Total owners’
Less: Treasury Specific General
Share capital Preferre Perpetua Capital reserves comprehensiv Surplus reserves Retained earnings interests equity
Other stock reserve reserve
d shares l bonds e income
1. Balances as at 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
end of the prior year
Add: Adjustments
for changed
accounting policies
Adjustments for
corrections of
previous errors
Adjustments for
business
combinations under
common control
Other adjustments
2. Balances as at the
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/ decrease
in the period (“-” for 53.66 486,922,944.94 44,346,439.15 59,783,872.34 298,398,277.49 35,143,527.89 -49,250,774.41
decrease)
3.1 Total
44,346,439.15 811,526,477.83 46,667,094.27 902,540,011.25
comprehensive
89
Lu Thai Textile Co., Ltd. Annual Report 2018
income
3.2 Capital
increased and 53.66 486,922,944.94 500,000.00 -486,422,891.28
reduced by owners
3.2.1 Ordinary
shares increased by 486,922,944.94 500,000.00 -486,422,944.94
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
59,783,872.34 -513,128,200.34 -12,023,566.38 -465,367,894.38
distribution
3.3.1
Appropriation to 59,783,872.34 -59,783,872.34
surplus reserves
3.3.2
Appropriation to
general reserve
3.3.3
Appropriation to
-453,344,328.00 -12,023,566.38 -465,367,894.38
owners (or
shareholders)
3.3.4 Other
90
Lu Thai Textile Co., Ltd. Annual Report 2018
3.4 Transfers
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 Loss
offset by surplus
reserves
3.4.4 Changes
in defined benefit
pension schemes
transferred to
retained earnings
3.4.5 Other
3.5 Specific
reserve
3.5.1 Increase
in the period
3.5.2 Used in
the period
3.6 Other
4. Balances as at the 1,022,717,451.4
922,602,311.00 699,493,647.48 486,922,944.94 61,157,013.37 4,927,500,989.55 579,276,247.53 7,725,824,715.39
end of the period 0
91
Lu Thai Textile Co., Ltd. Annual Report 2018
2017
Unit: RMB
2017
Equity attributable to owners of the Company as the parent
Item Other equity instruments Other Non-controlling Total owners’
Less: Treasury Specific General
Share capital Preferre Perpetua Capital reserves comprehensiv Surplus reserves Retained earnings interests equity
Other stock reserve reserve
d shares l bonds e income
1. Balances as at the
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 the prior year
Add: Adjustments
for changed
accounting policies
Adjustments for
corrections of
previous errors
Adjustments for
business
combinations under
common control
Other adjustments
2. Balances as at the
beginning of the 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
year
3. Increase/ decrease
-36,482,970.6
in the period (“-” for -61,786,964.01 71,063,056.38 287,236,522.87 69,044,608.47 329,074,253.04
7
decrease)
3.1 Total -36,482,970.6
841,150,934.75 42,168,174.85 846,836,138.93
comprehensive 7
92
Lu Thai Textile Co., Ltd. Annual Report 2018
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 increased by 500,000.00 500,000.00
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
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
93
Lu Thai Textile Co., Ltd. Annual Report 2018
3.4 Transfers
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 Loss
offset by surplus
reserves
3.4.4 Changes
in defined benefit
pension schemes
transferred to
retained earnings
3.4.5 Other
3.5 Specific
reserve
3.5.1 Increase
in the period
3.5.2 Used in
the period
3.6 Other
4. Balances as at 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
end of the period
94
Lu Thai Textile Co., Ltd. Annual Report 2018
8. Statements of Changes in Owners’ Equity of the Company as the Parent
2018
Unit: RMB
2018
Other equity instruments Other
Item Less: Treasury Specific Total owners’
Share capital Preferred Perpetual Capital reserves comprehensi Surplus reserves Retained earnings
Other stock reserve equity
shares bonds ve income
1. Balances as at the end 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
prior year
Add: Adjustments for changed
accounting policies
Adjustments for corrections of
previous errors
Other adjustments
2. Balances as at the beginning of
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
the year
3. Increase/ decrease in the period
53.66 486,922,944.94 492,150.00 59,783,872.34 84,710,523.06 -341,936,345.88
(“-” for decrease)
3.1 Total comprehensive
492,150.00 597,838,723.40 598,330,873.40
income
3.2 Capital increased and
53.66 486,922,944.94 -486,922,891.28
reduced by owners
3.2.1 Ordinary shares
486,922,944.94 -486,922,944.94
increased by shareholders
3.2.2 Capital increased by
holders of other equity
instruments
3.2.3 Share-based payments
95
Lu Thai Textile Co., Ltd. Annual Report 2018
included in owners’ equity
3.2.4 Other 53.66 53.66
3.3 Profit distribution 59,783,872.34 -513,128,200.34 -453,344,328.00
3.3.1 Appropriation to
59,783,872.34 -59,783,872.34
surplus reserves
3.3.2 Appropriation to
-453,344,328.00 -453,344,328.00
owners (or shareholders)
3.3.3 Other
3.4 Transfers 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 Loss offset by surplus
reserves
3.4.4 Changes in defined
benefit pension schemes
transferred to retained earnings
3.4.5 Other
3.5 Specific reserve
3.5.1 Increase in the period
3.5.2 Used in the period
3.6 Other
4. Balances as at the end of the
922,602,311.00 759,836,756.57 486,922,944.94 520,200.00 1,019,608,711.76 3,714,813,049.43 5,930,458,083.82
period
96
Lu Thai Textile Co., Ltd. Annual Report 2018
2017
Unit: RMB
2017
Other equity instruments Other
Item Less: Treasury Specific Total owners’
Share capital Preferred Perpetual Capital reserves comprehensi Surplus reserves Retained earnings
Other stock reserve equity
shares bonds ve income
1. Balances as at the end of the
922,602,311.00 759,793,238.92 888,761,783.04 3,451,836,174.44 6,022,993,507.40
prior year
Add: Adjustments for changed
accounting policies
Adjustments for corrections of
previous errors
Other adjustments
2. Balances as at the beginning of
922,602,311.00 759,793,238.92 888,761,783.04 3,451,836,174.44 6,022,993,507.40
the 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
instruments
3.2.3 Share-based payments
included in owners’ equity
97
Lu Thai Textile Co., Ltd. Annual Report 2018
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 Transfers 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 Loss offset by surplus
reserves
3.4.4 Changes in defined
benefit pension schemes
transferred to retained earnings
3.4.5 Other
3.5 Specific reserve
3.5.1 Increase in the period
3.5.2 Used in the period
3.6 Other
4. Balances as at the end 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
period
98
Lu Thai Textile Co., Ltd. Annual Report 2018
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 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). As of 31 December 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
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Lu Thai Textile Co., Ltd. Annual Report 2018
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 27 March 2019.
There were 16 subsidiaries included into the consolidation scope of the Company in 2018, and for the details, please refer to Notes
IX. “Equities among Other Entities”. There was 1 increased subsidiary in the consolidation scope as compared with last year, and
please refer to Notes VIII. “Changes in Consolidation Scope” for details.
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.
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
Is the Company subject to any disclosure requirements for special industries?
No.
Indication of specific accounting policies and estimations:
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
please refer to the Note V. 23 “Revenue” for details. As for the notes to the important accounting judgment and estimations made by
the management level, please refer to the Note V. 29. “Other important accounting policies and estimations” of the section.
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 31 December 2018,
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Lu Thai Textile Co., Ltd. Annual Report 2018
business results and cash flows for the year 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 Year
The Company’s fiscal periods include fiscal years and fiscal periods shorter than a complete fiscal year. The Company’s fiscal year
starts on 1 Jan. and ends on 31 Dec. 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 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
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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 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
method arising from the acquiree’s re-measurement, the others shall be transferred into current investment gains on the acquiring
date).
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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 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
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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. ①of These deals are
each other to concluded; urrence oftransactions only
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 onthisitssection) and “W here the
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 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 theforeign currency loans arising f acquisition of fixed
assets shall be treated at the principle of capitalization of borrowing costs; gingthe exchange dif
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 diff
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
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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 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
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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 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 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
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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 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
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Lu Thai Textile Co., Ltd. Annual Report 2018
“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 contrac
collecting the cash flow of the said financial asset are terminated; ②allTheofsaid financial asset
risks and rewards related to the ownership of the financial asset to the transferee; or ③ The said financial asset
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
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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 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 not be offset.
(9) Equity instruments
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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 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. Notes and Accounts Receivable
(1) Accounts Receivable with Significant Single Amount for Which the Bad Debt Provision is Made
Individually
Judgement basis or monetary standards of provision
Receivables with the amount of RMB5 million or more than RMB5 million
for bad debts of the individually significant
should recognize as the receivables with significant single amount.
accounts receivable
The Company made an independent impairment test on receivables with
significant single amounts; the financial assets without impairment by
Method of individual provision for bad debts of the independent impairment test should be included in financial assets portfolio
individually significant accounts receivable with similar credit risk to 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
In the groups, adopting other methods to withdraw bad debt provision:
□ Applicable √ Not applicable
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(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
Reason of individually withdrawing bad debt
arbitration; receivables have obvious indication showing that the debtors are
provision
likely to fail to perform the duty of 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 has been impaired, impairment
Withdrawal method for bad debt provision loss shall be recognized on the basis of the gap between the 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.
(4) Reversal of Bad Debt Provision
If there is objective evidence proving that the value of such receivables has been restored and it is objectively related to the event
occurring after recognizing such loss, the impairment loss recognized originally will be recovered and included into the current
profits and losses. However, the book value after recovery shall not exceed the amortized cost of such receivables on the recovery
date in the case of not calculating and withdrawing the impairment reserves.
11. Inventory
Is the Company subject to any disclosure requirements for special industries?
No.
(1) Classification
Inventories mainly include raw materials, work-in-progress, stock products, product processed on entrustment, consumptive
biological assets and 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.
(4) The perpetual inventory system is maintained for stock system.
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(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 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
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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
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.
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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 policy 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
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 1 January
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
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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 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
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Category of fixed assets Method Useful life Salvage value Annual deprecation
Housing and building Average method of useful life 5-30 0-10 3.00-20.00
Machinery equipments Average method of useful life 10-18 0-10 5.00-10.00
Transportation vehicle Average method of useful life 5 0-10 18.00-20.00
Electronic equipments and others Average method of useful life 5 0-10 18.00-20.00
(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.
(4) Other Notes
The subsequent expenditures related to fixed asset shall be included into fixed asset cost and stop the confirmation of the book value
of the substitution part if economic benefits related to such fixed asset may flow in and its cost can be reliably measured. Other
subsequent expenditures except for the above said subsequent expenditure shall be included into the current profits and losses once
occurred.
When the fixed asset is disposed or cannot be expected to produce economic interests through use or disposal, the confirmation of
that asset should be ceased. The balance of the amount left after deducting book value and relevant taxes from the disposal income
obtained from the sale, transfer, abandonment or damage of the fixed assets shall be included in current profits and losses.
The Company shall review the service life, expected net residuals and depreciation method of the fixed assets at least by the end of
the year. In case of any change, it shall be deemed as accounting estimate change.
16. Construction in Progress
Is the Company subject to any disclosure requirements for special industries?
No.
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
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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 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.
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 Expected net salvage Annual deprecation (%)
value (%)
Livestock 5 5% 19
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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 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.
(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.
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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.
(3) Impairment testing method and provision-making method for intangible assets
For details of impairment testing method and provision-making method for intangible assets, see Notes V. 20 “Long-term assets
impairment”.
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 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.
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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
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 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.
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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.
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.
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24. Government Subsidies
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 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 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 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 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. 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
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.
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 year which
in accord to the relevant regulations of the tax law.
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(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 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
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amount or are at the same time acquire the asset as well as liquidate the liabilities.
26. Repurchase of Shares
Consideration and transaction costs paid in share repurchase reduce shareholders' equity. When buying back, transferring or
cancelling shares in the Company, no profits or losses are recognized.
The transfer of inventory shares shall be credited to the capital reserve on the basis of the difference between the amount actually
received and the carrying amount of the treasury stock. Write off surplus reserves and undistributed profits if capital reserves are
insufficient to offset. Write-off of treasury stocks can reduce shares in par with par value and number of write-out stocks. The capital
reserve is offset based on the difference between book balance and face value of cancelled treasury stocks. Write off surplus reserves
and undistributed profits if capital reserves are insufficient to offset.
27. 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 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
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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.
28. Changes in Main Accounting Policies and Estimates
(1) Change of Accounting Policies
□ Applicable √ Not applicable
(2) Changes in Accounting Estimates
□ Applicable √ Not applicable
29. Significant Acounting Adjustemnt 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.
(3) Inventory depreciation reserves
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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 for long-term 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
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
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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 XI.
VI. Taxation
1. Main Taxes and Tax Rate
Category of taxes Tax basis Tax rate
Calculated the output tax at 17%, 16%, 11%, 10%,
6%, 5%, 3%, and 0% of taxable income and paid the 17%、16%、11%、10%、6%、5%、
VAT
VAT by the amount after deducting the deductible 3%、0%
withholding VAT at current period.
Paid at 7%, 5%, 1% of the circulating tax actually
Urban maintenance and construction tax 7%、5%、1%
paid
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 “Lufeng Weaving & Dyeing”) 15%
Lu Thai (Hong Kong) Textile Co., Ltd. (hereinafter refer to as “Lu Thai Hong Kong”) 16.50%
Xinjiang Lu Thai Harvest Cotton Co., Ltd. (“Xinjiang Lu Thai”) 25%
Zibo Luqun Textile Co., Ltd. (hereinafter refer to as “Luqun Textile”) 25%
Zibo Xinsheng Power Co., Ltd. hereinafter refer to as “Xinsheng Power”) 25%
Beijing Innovative Garment Co., Ltd. (hereinafter referred to as “Beijing Innovative” 25%
Shanghai Lu Thai Textile & Garments Co., Ltd. (hereinafter referred to as “Shanghai Lu Thai”) 25%
127
Lu Thai Textile Co., Ltd. Annual Report 2018
Beijing Lu Thai Youxian Electronic Commerce Co., Ltd. (hereinafter referred to as “Beijing
25%
Youxian”)
Shanghai Zhinuo Textile New Materials Co., Ltd. (“Shanghai Zhinuo” 25%
Zibo Helijie Energy-saving Technology Service Co., Ltd. (hereinafter referred to as “Helijie”) 25%
Xinjiang Lu Thai Textile Co., Ltd. (hereinafter referred to as “Xinjiang Textile”) 15%
Lu Thai (Cambodia) Textile Co., Ltd. (hereinafter referred to as “Lu Thai Cambodia”) 0%
Lu Thai (Burma) Textile Co., Ltd. (hereinafter referred to as “Lu Thai Burma”) 0%
Lu Thai (Vietnam) Textile Co., Ltd. (hereinafter referred to as “Lu Thai Vietnam”) 0%
Lu An Garments Co., Ltd. (hereinafter referred to as “Lu An Garments” 0%
Refer to 2. Tax Preference
Lu Thai (America) Textile Co., Ltd. (hereinafter referred to as “Lu Thai America”
presented as follows for details
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. 23 Announcement revised and published by the State
Administration of Taxation in 2018, 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 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.
128
Lu Thai Textile Co., Ltd. Annual Report 2018
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 Major Items in the Consolidated Financial Statements of the Company
1. Monetary Funds
Unit: RMB
Item Ending balance Beginning balance
Cash on hand 9,087,924.86 8,040,420.28
Bank deposits 526,046,848.04 668,598,792.58
Other monetary funds 10,367,936.46 17,350,080.52
Total 545,502,709.36 693,989,293.38
Of which: total amount deposited
92,173,384.32 54,911,636.96
oversees
Other notes
As of 31 December 2018, the monetary capital with restricted ownership of the Company was RMB10,367,936.46 (31 December
2017: RMB17,350,080.52), among which, RMB10,000,000.00 was pledged for short-term borrowings from banks by the Company’s
subsidiary Xinjiang Lu Thai (refer to NoteVII-19 and NoteVII-54), RMB295,288.20 was used as cash deposit for opening L/C and
RMB72,648.26 was used as cash deposit for opening L/G by the subsidiary Lufeng Weaving & Dyeing.
2. Notes Receivable and Accounts Receivable
Unit: RMB
Item Ending balance Beginning balance
Notes receivable 174,657,918.26 139,276,742.34
Accounts receivable 374,607,116.55 334,080,524.05
Total 549,265,034.81 473,357,266.39
(1)Notes Receivable
1) Notes Receivable Listed by Category
Unit: RMB
129
Lu Thai Textile Co., Ltd. Annual Report 2018
Item Ending balance Beginning balance
Bank acceptance bill 72,215,993.39 28,926,913.53
L/C 102,441,924.87 110,349,828.81
Total 174,657,918.26 139,276,742.34
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 178,971,553.11
Total 178,971,553.11
(2)Accounts Receivable
1) Accounts Receivable Classified by Category
Unit: RMB
Ending balance Beginning balance
Bad debt Bad debt
Carrying amount Carrying amount
provision provision
Category
Withdr Carrying Withd Carrying
Proporti awal value rawal value
Amount Amount Amount Proportion Amount
on propor propor
tion tion
Accounts receivable
withdrawal of bad
394,430,83 19,823,71 374,607,1 351,991,9 17,911,39 334,080,52
debt provision by 100.00% 5.03% 100.00% 5.09%
0.86 4.31 16.55 19.14 5.09 4.05
credit risks
characteristics
394,430,83 19,823,71 374,607,1 351,991,9 17,911,39 334,080,52
Total 100.00% 5.03% 100.00% 5.09%
0.86 4.31 16.55 19.14 5.09 4.05
Accounts receivable with significant single amount for which bad debt provision separately accrued at the period-end：
□ Applicable √ Not applicable
Among these groups, accounts receivable adopting aging analysis method to withdraw bad debt provision:
√ Applicable □ Not applicable
Unit: RMB
Ending balance
Aging
Accounts receivable Bad debt provision Withdrawal proportion
Subtotal of within 1 year 393,182,054.12 19,659,102.74 5.00%
130
Lu Thai Textile Co., Ltd. Annual Report 2018
1 to 2 years 851,438.00 85,143.82 10.00%
2 to 3 years 397,338.74 79,467.75 20.00%
Total 394,430,830.86 19,823,714.31 5.03%
Notes of the basis of recognizing the group:
Among these groups, accounts receivable adopting balance percentage method to withdraw bad debt provision:
□ Applicable √ Not applicable
Among these groups, accounts receivable adopting other methods to withdraw bad debt provision:
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 RMB1,955,031.74; the amount of the reversed
or collected part during the Reporting Period was of RMB0.00.
Significant amount of reversed or recovered bad debt provision:
None
3) Particulars of the Actual Verification of Accounts Receivable during the Reporting Period
Unit: RMB
Item Amount
Accounts receivable actually verified 42,712.52
Of which: significant actual verification of accounts receivable
None
Notes of the verification of accounts receivable:
4) Top 5 of the Ending Balance of the Accounts Receivable Collected according to the Arrears Party
The Top 5 of the ending balance of the accounts receivable collected according to the arrears party for the Company was
RMB112,823,256.42 accounting for 28.60% of total ending balance of accounts receivable. And the ending balance of bad debt
provision withdrawn was RMB5,641,162.82.
3. Prepayments
(1) List by Aging Analysis
Unit: RMB
Ending balance Beginning balance
Aging
Amount Proportion Amount Proportion
Within 1 year 149,436,553.91 99.90% 145,673,771.77 99.46%
1 to 2 years 10,838.26 0.01% 625,210.35 0.43%
2 to 3 years 8,319.04 0.01% 162,029.49 0.11%
Over 3 years 126,905.00 0.08% 2,054.77 0.00%
Total 149,582,616.21 -- 146,463,066.38 --
Notes of the reasons of the prepayment ages over 1 year with significant amount but failed settled in time:
131
Lu Thai Textile Co., Ltd. Annual Report 2018
(2) Top 5 of the Ending Balance of the Prepayments Collected according to the Prepayment Target
The total top 5 of the ending balance of the prepayments collected according to the prepayment target for the Company was
RMB106,260,293.93 accounting for 71.04% of total ending balance of prepayments.
Other notes:
4. Other Receivables
Unit: RMB
Item Ending balance Beginning balance
Interest receivable 590,003.07
Other receivables 63,012,001.10 56,182,782.04
Total 63,012,001.10 56,772,785.11
(1) Interest Receivable
1) Category of Interest Receivable
Unit: RMB
Item Ending balance Beginning balance
Fixed time deposits 590,003.07
Total 590,003.07
(2) Other Receivables
1) Other Receivables Classified by Category
Unit: RMB
Ending balance Beginning balance
Carrying amount Bad debt provision Carrying amount Bad debt provision
Category Withdra Withd
Carrying Carrying
Proportio wal Proporti rawal
Amount Amount value Amount Amount value
n proporti on propor
on tion
Other receivables
withdrawn bad debt
68,104,5 5,092,570 63,012,00 62,067,80 5,885,026.0 56,182,782.
provision according 99.14% 7.48% 100.00% 9.48%
71.98 .88 1.10 8.10 6 04
to credit risks
characteristics
Other receivables
592,437. 592,437.2
with insignificant 0.86% 100.00%
23 3
single amount for
132
Lu Thai Textile Co., Ltd. Annual Report 2018
which bad debt
provision separately
accrued
68,697,0 5,685,008 63,012,00 62,067,80 5,885,026.0 56,182,782.
Total 100.00% 8.28% 100.00% 9.48%
09.21 .11 1.10 8.10 6 04
Other receivables with significant single amount for which bad debt provision separately accrued at the period-end:
□ Applicable √ Not applicable
Among these groups, other receivables adopting aging analysis method to withdraw bad debt provision:
√ Applicable □ Not applicable
Unit: RMB
Ending balance
Aging
Other receivables Bad debt provision Withdrawal proportion
Subtotal of within 1 year 59,117,907.18 2,955,895.33 5.00%
1 to 2 years 2,585,348.38 258,534.84 10.00%
2 to 3 years 422,542.07 84,508.41 20.00%
Over 3 years 5,978,774.35 1,793,632.31 30.00%
Total 68,104,571.98 5,092,570.88 7.48%
Notes:
Among these groups, other receivables adopting balance percentage method to withdraw bad debt provision:
□ Applicable √ Not applicable
Among these groups, other receivables adopting 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-200,017.95; the amount of the reversed
or collected part during the Reporting Period was of RMB0.00.
Significant amount of reversed or recovered bad debt provision during the Reporting Period:
None
3) Other Receivables Classified by Account Nature
Unit: RMB
Nature Ending carrying amount Beginning carrying amount
Export taxes refund 25,988,374.88 26,928,248.68
Advance payment 30,975,850.53 19,470,920.20
Cash Pledge & Margin 6,227,752.93 5,915,873.52
Borrowings and petty cash 3,232,785.56 1,533,438.12
Other 2,272,245.31 8,219,327.58
Total 68,697,009.21 62,067,808.10
4) Top 5 of the Ending Balance of the Other Receivables Collected according to the Arrears Party
133
Lu Thai Textile Co., Ltd. Annual Report 2018
Unit: RMB
Proportion to ending
Ending Ending balance of
Name of the entity Nature Aging balance of other
balance bad debt provision
receivables%
Within 1
Export taxes refund receivable Export taxes refund 25,988,374.88 41.25% 1,299,418.74
year
Advances for agricultural Within 1
Advance 7,108,109.14 11.28% 355,405.46
machinery year
Advance money receivable of Within 1
Advance 5,641,728.49 8.95% 282,086.42
the fundraising houses year
Cash deposit for salary of Cash deposit for salary of
migrant workers in Zichuan migrant workers for 2,955,620.10 Over 3 years 4.69% 886,686.03
district of Zibo city construction work
Advances for heating fees of Within 1
Advance 2,043,220.77 3.24% 102,161.04
employees year
Total -- 43,737,053.38 -- 69.41% 2,925,757.69
5. Inventories
Whether the Company need satisfy relevant disclosure requirements governing the real estate industry
No
(1) Category of Inventories
Unit: RMB
Ending balance Beginning balance
Item Falling price Falling price
Carrying amount Carrying value Carrying amount Carrying value
reserves reserves
Raw materials 768,264,219.42 2,069,324.65 766,194,894.77 859,429,529.00 1,172,453.02 858,257,075.98
Goods in process 568,371,033.96 568,371,033.96 508,535,945.66 508,535,945.66
Inventory goods 798,090,300.29 64,960,183.31 733,130,116.98 754,961,464.17 51,653,377.28 703,308,086.89
Consumptive
1,352,241.24 266,680.61 1,085,560.63 1,531,621.67 404,221.67 1,127,400.00
living assets
Assigned
processing 24,585,385.96 24,585,385.96 29,432,713.40 29,432,713.40
products
Total 2,160,663,180.87 67,296,188.57 2,093,366,992.30 2,153,891,273.90 53,230,051.97 2,100,661,221.93
Whether the Company need satisfy relevant disclosure requirements stated in SZSE Industrial Information Disclosure Guidance
No.4---Listed Company Specialized in Seed Industry and Planting Businesses or not?
No
134
Lu Thai Textile Co., Ltd. Annual Report 2018
Whether the Company need satisfy relevant disclosure requirements stated in SZSE Industrial Information Disclosure Guidance
No.11-Listed Company Specialized in Jewelry-related Business or not?
No
(2) Falling Price Reserves of Inventories
Unit: RMB
Increase Decrease
Item Beginning balance Reverse or Ending balance
Withdrawal Other Other
write-off
Raw materials 1,172,453.02 2,069,324.65 1,172,453.02 2,069,324.65
Inventory goods 51,653,377.28 39,925,825.39 26,619,019.36 64,960,183.31
Consumptive
404,221.67 137,541.06 266,680.61
living assets
Total 53,230,051.97 41,995,150.04 27,929,013.44 67,296,188.57
(3) The Withdrawal Basis for Inventory Falling Price Reserves and Reasons for Write-back or Write-off
during the Reporting Period
Item Specific basis of withdrawal of Reasons for write-back Reasons for write-off
inventory falling price reserves
The lower one between cost of each item Disposed in the Reporting Period
Raw materials
of inventory and its realizable net value
The lower one between cost of each item Sold in the Reporting Period
Inventory goods
of inventory and its realizable net value
Consumptive The lower one between cost of each item Sold in the Reporting Period
living assets of inventory and its realizable net value
Note: ① The 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 and long stock age of some raw materials, and
finished goods as well as decrease in market price in consumptive living assets Hu Sheep.
②The Company’s subsidiary Xinjiang Lu Thai pledged inventories with carrying value of RMB270,068,760.00 for short-term
borrowings from the bank (refer to Note VII-19 and Note VII-54).
(4) Notes to the Ending Balance of Inventories Including Capitalized Borrowing Expense
(5) Completed but Unsettled Assets Generated from Construction Contacts at the Period-end
6. Other Current Assets
Unit: RMB
135
Lu Thai Textile Co., Ltd. Annual Report 2018
Item Ending balance Beginning balance
Prepaid income tax to be deducted 4,820,039.66 302,275.14
VAT input tax to be deducted 69,931,124.83 68,286,428.20
Financial products 50,000,000.00
B-share repurchase account 11,615,290.07
Total 86,366,454.56 118,588,703.34
Other notes: none
7. Available-for-sale Financial Assets
(1) List of Available-for-sale Financial Assets
Unit: RMB
Ending balance Beginning balance
Item Carrying Depreciation Carrying Depreciation
Carrying value Carrying value
amount reserves amount reserves
Available-for-dale debt
60,612,000.00 60,612,000.00 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 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 127,894,600.00 42,782,600.00 85,112,000.00 127,315,600.00 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 equity Available-for-sale debt
Category Total
instruments instruments
Equity instrument costs/debt instrument
60,000,000.00 60,000,000.00
amortization costs
Fair value 60,612,000.00 60,612,000.00
Accumulative amount of changes in fair value
612,000.00 612,000.00
included in other comprehensive income
(3) Available-for-sale Financial Assets Measured by Cost at the Period-end
Unit: RMB
136
Lu Thai Textile Co., Ltd. Annual Report 2018
Carrying amount Depreciation reserves Sharehol
Cash
ding
bonus of
Inc proportio
Investee Decre Period-beginni Increa Decrea the
Period-beginning rea Period-end Period-end n among
ase ng se se Reporting
se the
Period
investees
Yantai
Rongchan
g
Pharmacy
Co., Ltd.
(hereinafte
55,282,600.00 55,282,600.00 42,782,600.00 42,782,600.00 3.13%
r refer to
as
“Rongcha
ng
Pharmacy”
)
Shandong
Hongqiao
Power Co.,
12,000,000.00 12,000,000.00 19.38%
Ltd.
(Hongqiao
Power)
Total 67,282,600.00 67,282,600.00 42,782,600.00 42,782,600.00 --
(4) Changes in Depreciation of Available-for-sale Financial Assets during the Reporting Period
Unit: RMB
Available-for-sale equity Available-for-sale debt
Category Total
instruments instruments
Beginning balance of
42,782,600.00 42,782,600.00
impairment withdrawn
Ending balance of impairment
42,782,600.00 42,782,600.00
withdrawn
8. Long-term Receivables
(1) List of Long-term Receivables
Unit: RMB
Ending balance Beginning balance
Interval of
Item Carrying Bad debt Carrying Bad debt Carrying
Carrying value discount rate
amount provision amount provision value
Financing lease accounts 650,000.00 650,000.00 15.37%
Of which: unrealized
105,603.04 105,603.04
financing income
137
Lu Thai Textile Co., Ltd. Annual Report 2018
Long-term advances
10,572,468.16 528,623.41 10,043,844.75
receivable
Total 11,222,468.16 528,623.41 10,693,844.75 --
9. Long-term Equity Investment
Unit: RMB
Increase/decrease Ending
Adjustm balance
Red Gains and Cash Withdra
Additi ent of Chang of
Beginning uced losses bonus or wal of Ending
Investees onal other es of depreci
balance inve recognized profits deprecia Other balance
invest compreh other ation
stme under the announced tion
ment ensive equity reserve
nt equity method to issue reserves
income s
I. Joint ventures
II. Associated enterprises
Ningbo Mei
shan Bonded
Poer Area
Haohong
Equity
Investment
97,536,732.02 -1,518,268.37 96,018,463.65
Partnership
(L.P)
(hereinafter
referred to as
“Haohong
Investment”)
Subtotal 97,536,732.02 -1,518,268.37 96,018,463.65
Total 97,536,732.02 -1,518,268.37 96,018,463.65
10. Investment Property
(1) Investment Property Adopting the Cost Measurement Mode
√ Applicable □ Not applicable
Unit: RMB
Construction in
Item Houses and buildings Land use right Total
progress
I. Original carrying value
138
Lu Thai Textile Co., Ltd. Annual Report 2018
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 3,582,400.00 3,582,400.00
(1) Disposal 3,582,400.00 3,582,400.00
(2) Other transfer
4. Ending balance 32,399,982.40 32,399,982.40
II. Accumulative depreciation and
accumulative amortization
1. Beginning balance 11,418,837.82 11,418,837.82
2. Increased amount of the period 1,368,740.42 1,368,740.42
(1) Withdrawal or amortization 1,368,740.42 1,368,740.42
3. Decreased amount of the period 3,267,838.79 3,267,838.79
(1) Disposal 3,267,838.79 3,267,838.79
(2) Other transfer
4. Ending balance 9,519,739.45 9,519,739.45
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 22,880,242.95 22,880,242.95
2. Beginning carrying value 24,563,544.58 24,563,544.58
11. Fixed Assets
Unit: RMB
Item Ending balance Beginning balance
139
Lu Thai Textile Co., Ltd. Annual Report 2018
Fixed assets 5,748,562,385.35 5,421,295,850.03
Total 5,748,562,385.35 5,421,295,850.03
(1) List of Fixed Assets
Unit: RMB
Machinery Transportation Electronic
Houses and
Item equipment equipment equipment and Total
buildings
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 period 190,717,425.62 610,870,898.51 7,017,277.89 11,065,615.88 819,671,217.90
(1) Purchase 4,663,594.43 445,728,112.67 6,851,625.84 10,460,699.17 467,704,032.11
(2) Transfer from construction
173,880,054.64 145,520,331.02 421,197.50 319,821,583.16
in progress
(3) Enterprise combination
increase
(4) Other 12,173,776.55 19,622,454.82 165,652.05 183,719.21 32,145,602.63
3. Decreased amount of the
75,440,343.48 56,833,448.59 18,930,937.56 4,180,910.06 155,385,639.69
period
(1) Disposal or Scrap 9,029,397.60 56,833,448.59 18,930,937.56 4,180,910.06 88,974,693.81
(2) Transfer of construction in
66,410,945.88 66,410,945.88
progress
10,007,806,939.4
4. Ending balance 3,251,285,811.62 6,567,263,906.52 63,692,200.59 125,565,020.71
4
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 period 100,032,141.65 306,681,594.29 4,513,656.02 11,441,894.54 422,669,286.50
(1) Withdrawal 98,847,636.36 304,101,675.37 4,444,243.23 11,348,582.63 418,742,137.59
(2) Other 1,184,505.29 2,579,918.92 69,412.79 93,311.91 3,927,148.91
3. Decreased amount of the
29,285,208.19 45,885,545.23 17,160,096.30 3,865,431.21 96,196,280.93
period
(1) Disposal or Scrap 6,204,276.94 45,885,545.23 17,160,096.30 3,865,431.21 73,115,349.68
(2) Transfer of construction in
23,080,931.25 23,080,931.25
progress
4. Ending balance 959,511,665.02 3,129,855,046.37 41,145,799.39 86,048,051.87 4,216,560,562.65
III. Depreciation reserves
140
Lu Thai Textile Co., Ltd. Annual Report 2018
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 13,226,669.80 22,880.00 13,249,549.80
(1) Withdrawal 13,226,669.80 22,880.00 13,249,549.80
3. Decreased amount of the
2,701,046.50 2,465.98 2,703,512.48
period
(1) Disposal or Scrap 2,701,046.50 2,465.98 2,703,512.48
4. Ending balance 2,893,416.89 39,649,126.64 24,803.69 116,644.22 42,683,991.44
IV. Carrying value
1. Ending carrying value 2,288,880,729.71 3,397,759,733.51 22,521,597.51 39,400,324.62 5,748,562,385.35
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 18,743,628.71
(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 101,571,711.77
by Housing authorities
Employee’s dormitory building of Ongoing inspection, surveying, verification to application procedures
41,532,673.45
eastern area of industrial park by Housing authorities
Ongoing inspection, surveying, verification to application procedures
Spinning Fourth factory workshop 89,599,430.51
by Housing authorities
Ongoing inspection, surveying, verification to application procedures
Employee’s dormitory building of
121,719,256.73 by Housing authorities for some assets and uncompleted inspection by
western area of industrial park
relevant authorities for some other assets
Eastern sample plant 29,822,729.70 Uncompleted inspection by relevant authorities
Lufeng weaving dye workshop 125,905,390.60 Ongoing registration of premises permit by real estate exchange
Xinjiang construction project of
Ongoing verification to application procedures by Bureau of Land
100,000-spindle spinning 64,788,650.97
Resources
production line
Other notes:
Note: a. The subsidiary of the Company Xinjiang Lu Thai pledged the fixed assets with carrying value of RMB54,356,312.70 for
short-term borrowings from the bank. Refer to Note VII-19 and VII-54 for details.
141
Lu Thai Textile Co., Ltd. Annual Report 2018
b. The other increase in carrying original value of fixed assets and in accumulative depreciation refers to the exchange rate difference
when the recording currencies of overseas subsidiaries were converted into RMB due to changes in exchange rate.
12. Construction in Progress
Unit: RMB
Item Ending balance Beginning balance
Construction in progress 244,493,960.75 157,421,820.68
Engineering materials 92,736,685.67 56,913,806.06
Total 337,230,646.42 214,335,626.74
(1) List of Construction in Progress
Unit: RMB
Ending balance Beginning balance
Item Depreciation Carrying Depreciation
Carrying amount Carrying value Carrying value
reserves amount reserves
Roof transformation
engineering of for the whole
eastern weaving complex
workshop
Renovation project for
exhibition hall and office 24,788,720.86 24,788,720.86
building
Reform project of Xinsheng
12,145,265.65 12,145,265.65 6,192,038.65 6,192,038.65
Thermal Power
Expansion project of
744,000.00 744,000.00
Xinsheng Thermal Power
Expansion project of
Xinsheng Thermal Power 73,512,524.40 73,512,524.40
(Phase II)
Heat supply engineering of
9,025,279.89 9,025,279.89 1,805,751.30 1,805,751.30
Chengshun Heating
Reform engineering of
77,875,603.13 77,875,603.13
100,000-spindle spinning
Lu Thai (Vietnam) project 12,414,796.74 12,414,796.74 34,325,323.53 34,325,323.53
Spinning Phase II of Lu Thai
3,908,174.87 3,908,174.87 4,922,411.28 4,922,411.28
(Vietnam) project
Yarn Dye Phase II of Lu Thai 83,880,726.83 83,880,726.83
142
Lu Thai Textile Co., Ltd. Annual Report 2018
(Vietnam) project
Project of Lu An Garments 4,140,135.90 4,140,135.90 3,371,413.19 3,371,413.19
Other retails projects 20,678,335.61 20,678,335.61 28,185,279.60 28,185,279.60
Total 244,493,960.75 244,493,960.75 157,421,820.68 157,421,820.68
(2) Changes in Significant Construction in Progress during the Reporting Period
Unit: RMB
Of Capita
Proporti
which: lizatio
on of Accumu
amount n rate
accumul lated
Other of of Capit
Transferre ated amount
Beginning Increased decrease Ending Job capitaliz interes al
Item Budget d in fixed investme of
balance amount d balance schedule ed ts for resou
assets nt in interest
amount interests the rces
construc capitaliz
for the Report
tions to ation
Reportin ing
budget
g Period Period
Roof
transfor
mation
engineeri
ng of for
the 36,000,00 43,574,94 43,574,94
100.00% 100.00%
whole 0.00 5.54 5.54
eastern
weaving
complex
worksho
p
Renovati
on
project
for
13,200,00 24,788,72 24,788,72
exhibitio 91.00% 91.00%
0.00 0.86 0.86
n hall
and
office
building
Reform
20,000,00 6,192,038. 12,675,40 6,722,181. 12,145,26
project 94.00% 94.00%
0.00 65 8.76 76 5.65
of
143
Lu Thai Textile Co., Ltd. Annual Report 2018
Xinshen
g
Thermal
Power
Expansio
n project
of
240,000,0 744,000.0 3,725,723. 4,469,723.
Xinshen 100.00% 100.00%
00.00 0 74 74
g
Thermal
Power
Expansio
n project
of
Xinshen
97,950,00 73,512,52 73,512,52
g 75.00% 75.00%
0.00 4.40 4.40
Thermal
Power
(Phase
II)
Heat
supply
engineeri
25,390,00 1,805,751. 15,052,75 7,833,231. 9,025,279.
ng of 66.00% 66.00%
0.00 30 9.93 34 89
Chengsh
un
Heating
Reform
engineeri
ng of 156,000,0 77,875,60 33,443,34 111,318,9
100.00% 100.00%
100,000- 00.00 3.13 0.10 43.23
spindle
spinning
Lu Thai
242,282,3 34,325,32 34,393,70 56,304,23 12,414,79
(Vietnam 99.00% 99.00%
00.00 3.53 5.26 2.05 6.74
) project
Spinning
Phase II
of Lu 52,750,00 4,922,411. 46,104,06 47,118,29 3,908,174.
96.00% 96.00%
Thai 0.00 28 2.95 9.36 87
(Vietnam
) project
144
Lu Thai Textile Co., Ltd. Annual Report 2018
Yarn
Dye
Phase II
110,300,0 83,880,72 83,880,72
of Lu 76.00% 76.00%
00.00 6.83 6.83
Thai
(Vietnam
) project
Project
of Lu An 93,035,70 3,371,413. 32,851,73 32,083,01 4,140,135.
99.00% 99.00%
Garment 0.00 19 6.84 4.13 90
s
Other
28,185,27 2,890,068. 10,397,01 20,678,33
retails
9.60 02 2.01 5.61
projects
1,086,908, 157,421,8 406,893,7 319,821,5 244,493,9
Total -- -- --
000.00 20.68 23.23 83.16 60.75
(3) Engineering Materials
Unit: RMB
Ending balance Beginning balance
Item Depreciation Carrying Depreciation
Carrying amount Carrying value Carrying value
reserves amount reserves
Specific materials
Specific equipment 92,736,685.67 92,736,685.67 56,913,806.06 56,913,806.06
Total 92,736,685.67 92,736,685.67 56,913,806.06 56,913,806.06
13. Intangible Assets
(1) List of Intangible Assets
Unit: RMB
Item Land use right Patent right Software use right Brand use right Total
I. Original carrying value
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
3,000,186.12 3,000,186.12
period
(1) Purchase 3,000,186.12 3,000,186.12
(2) Internal R&D
145
Lu Thai Textile Co., Ltd. Annual Report 2018
(3) Business combination
increase
3. Decreased amount of the
24,002,787.93 24,002,787.93
period
(1) Disposal 5,969,822.39 5,969,822.39
(2) Losing efficiency and
18,032,965.54 18,032,965.54
derecognized
4. Ending balance 580,757,501.63 1,985,176.47 9,710,689.79 300,000.00 592,753,367.89
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
15,058,905.80 198,517.68 3,819,982.05 30,000.00 19,107,405.53
period
(1) Withdrawal 15,058,905.80 198,517.68 3,819,982.05 30,000.00 19,107,405.53
3. Decreased amount of the
19,850,770.31 19,850,770.31
period
(1) Disposal 1,817,804.77 1,817,804.77
(2) Losing efficiency and
18,032,965.54 18,032,965.54
derecognized
4. Ending balance 106,250,709.40 1,621,227.72 6,072,366.32 120,000.00 114,064,303.44
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 474,506,792.23 363,948.75 3,638,323.47 180,000.00 478,689,064.45
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.
(2) Land Use Right with Certificate of Title Uncompleted
Unit: RMB
146
Lu Thai Textile Co., Ltd. Annual Report 2018
Item Carrying value Reason
Land use right 107,288,609.62 Pledged for short-term borrowings
Other notes:
The Company’s subsidiary Xinjiang Lu Thai pledged the land use right with carrying value of RMB107,288,609.62 for short-term
borrowings from the bank. Refer to Note VII-19 and Note VII-54 for details.
14. R&D Expense
Unit: RMB
Increase Decrease
Beginning
Item Recognized as Transferred into the Ending balance
balance Internal R&D expense Other
intangible assets current profit or loss
R&D of products 289,395,092.58 289,395,092.58
Total 289,395,092.58 289,395,092.58
Other notes
15. Goodwill
(1) Original Carrying Value of Goodwill
Unit: RMB
Name of the invested units or
Beginning balance Increase Decrease Ending balance
events 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
16. Long-term Prepaid Expense
Unit: RMB
Amortization
Other decreased
Item Beginning balance Increased amount amount of the Ending balance
amount
period
Land contracting fee of
26,693,642.92 1,086,219.00 25,607,423.92
Xinjiang Luthai
Decoration fee of Xinjiang Lu
865,660.06 192,980.65 672,679.41
Thai
Land rent of overseas
80,148,619.17 15,354,332.37 2,656,647.16 92,846,304.38
subsidiaries
147
Lu Thai Textile Co., Ltd. Annual Report 2018
Housing rent of overseas
169,272.37 2,380.73 171,653.10
subsidiaries
Total 107,877,194.52 15,356,713.10 4,107,499.91 119,126,407.71
17. Deferred Income Tax Assets/Deferred Income Tax Liabilities
(1) Deferred Income Tax Assets that Had not Been Set-off
Unit: RMB
Ending balance Beginning balance
Item Deductible temporary Deferred income tax Deductible temporary Deferred income
difference assets difference tax assets
Provision for impairment of assets 169,477,066.74 27,322,107.95 140,256,135.72 22,531,008.74
Unrealized profit of internal
130,892,601.80 16,151,715.20 100,706,925.35 11,627,841.87
transactions
Deductible losses 16,532,477.30 2,479,871.60
One-time listed decoration expenses 4,140,492.30 1,035,123.08 5,405,702.23 1,351,425.56
Payroll payable 122,397,245.35 18,458,763.12 124,021,657.72 18,701,206.18
Deferred income 140,183,446.39 22,457,708.11 126,737,092.32 20,485,677.36
Changes in fair value of trading
4,877,600.00 731,640.00
financial liabilities
Total 588,500,929.88 88,636,929.06 497,127,513.34 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
difference liabilities difference tax liabilities
Depreciation of fixed assets 162,016,488.25 25,838,853.38 16,820,058.15 2,899,949.46
Unrealized profit of internal
13,996,286.66 2,099,443.00
transactions
Changes in fair value of
612,000.00 91,800.00 33,000.00 4,950.00
available-for-sale financial assets
Total 176,624,774.91 28,030,096.38 16,853,058.15 2,904,899.46
(3) List of Unrecognized Deferred Income Tax Assets
Unit: RMB
148
Lu Thai Textile Co., Ltd. Annual Report 2018
Item Ending balance Beginning balance
Deductible temporary difference 9,323,059.10 11,690,891.52
Deductible losses 26,603,299.43 27,993,886.84
Total 35,926,358.53 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
Y2019 451,833.98 1,456,659.23
Y2020 18,170,464.10 18,458,244.61
Y2021 4,250,703.45 4,250,703.45
Y2022 3,730,297.90 3,730,297.90
Y2023
Total 26,603,299.43 27,993,886.84 --
18. Other Non-current Assets
Unit: RMB
Item Ending balance Beginning balance
Prepayment for equipment 17,275,143.10 28,984,077.85
Prepayment for land 1,996,937.00 7,406,401.00
Prepayment for rental fees of land 23,828,135.77
Total 43,100,215.87 36,390,478.85
19. Short-term Borrowings
(1) Category of Short-term Borrowings
Unit: RMB
Item Ending balance Beginning balance
Mortgage borrowings 450,000,000.00 440,000,000.00
Guaranteed borrowings 250,108,063.34 28,254,022.53
Credit borrowings 625,165,716.71 666,870,973.87
Total 1,325,273,780.05 1,135,124,996.40
Notes of short-term borrowings category:
For details of category and amount for each assets mortgaged for mortgage borrowings, please refer to Note VII-5-11, 13 and 54.
149
Lu Thai Textile Co., Ltd. Annual Report 2018
20. Financial Liabilities at Fair Value through Profit or Loss
Unit: RMB
Item Ending balance Beginning balance
Trading financial liabilities 4,877,600.00
Derivative financial liabilities 4,877,600.00
Total 4,877,600.00
21. Notes Payable and Accounts Payable
Unit: RMB
Item Ending balance Beginning balance
Notes payable 502,347.05 7,301,771.85
Accounts payable 353,186,163.90 366,265,132.65
Total 353,688,510.95 373,566,904.50
(1) Notes Payable Listed by Category
Unit: RMB
Category Ending balance Beginning balance
Trade acceptance 502,347.05 2,441,810.45
Bank acceptance bill 4,859,961.40
Total 502,347.05 7,301,771.85
The total overdue but unpaid notes payable at the period-end were RMB0.00.
(2) List of Accounts Payable
Unit: RMB
Item Ending balance Beginning balance
Purchase of goods 237,111,166.13 219,463,023.43
Engineering equipment 106,527,421.37 134,864,245.66
Other 9,547,576.40 11,937,863.56
Total 353,186,163.90 366,265,132.65
22. Advances from Customers
(1) List of Advances from Customers
Unit: RMB
150
Lu Thai Textile Co., Ltd. Annual Report 2018
Item Ending balance Beginning balance
Advances of goods 105,562,378.66 119,785,945.48
Total 105,562,378.66 119,785,945.48
23. Payroll Payable
(1) List of Payroll Payable
Unit: RMB
Item Beginning balance Increase Decrease Ending balance
I. Short-term salary 316,812,093.17 1,501,921,908.10 1,492,761,856.17 325,972,145.10
II. Post-employment benefit-defined
24,395.78 176,370,847.72 176,369,178.43 26,065.07
contribution plans
Total 316,836,488.95 1,678,292,755.82 1,669,131,034.60 325,998,210.17
(2) List of Short-term Salary
Unit: RMB
Item Beginning balance Increase Decrease Ending balance
1. Salary, bonus, allowance, subsidy 267,328,134.33 1,314,788,873.29 1,313,328,308.86 268,788,698.76
2. Employee welfare 64,655,591.25 64,655,591.25
3. Social insurance 35,231.00 81,906,432.90 81,904,371.77 37,292.13
Of which: Medical insurance premiums 28,800.70 64,893,571.93 64,892,905.94 29,466.69
Work-related injury insurance 5,065.07 8,349,100.43 8,347,874.02 6,291.48
Maternity insurance 1,365.23 8,663,760.54 8,663,591.81 1,533.96
4. Housing fund 1,293.00 13,786,192.10 13,787,485.10
5. Labor union budget and employee
49,447,434.84 26,784,818.56 19,086,099.19 57,146,154.21
education budget
Total 316,812,093.17 1,501,921,908.10 1,492,761,856.17 325,972,145.10
(3) List of Defined Contribution Plans
Unit: RMB
Item Beginning balance Increase Decrease Ending balance
1. Basic pension benefits 22,636.70 169,719,455.35 169,717,072.56 25,019.49
2. Unemployment insurance 1,759.08 6,651,392.37 6,652,105.87 1,045.58
Total 24,395.78 176,370,847.72 176,369,178.43 26,065.07
Other notes:
151
Lu Thai Textile Co., Ltd. Annual Report 2018
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.
24. Taxes Payable
Unit: RMB
Item Ending balance Beginning balance
VAT 4,057,605.21 2,639,133.26
Corporate income tax 18,491,849.09 13,934,074.08
Personal income tax 1,279,197.68 1,453,967.09
Urban maintenance and construction tax 5,509,392.03 3,036,340.88
Stamp tax 187,822.50 400,579.00
Property tax 4,684,717.85 4,618,710.82
Land use tax 4,215,720.49 4,537,230.07
Education surcharge 2,381,414.25 1,314,401.95
Local education surcharge 1,587,021.34 876,267.97
Local water conservancy facility
394,952.66 217,869.46
construction fund
Resource tax 154,200.00 26,516.00
Environmental protection tax 612,930.65
Total 43,556,823.75 33,055,090.58
25. Other Payables
Unit: RMB
Item Ending balance Beginning balance
Interest payable 3,068,841.54 1,572,231.86
Dividends payable 441,113.64 441,113.64
Other payables 212,437,032.50 127,090,009.25
Total 215,946,987.68 129,103,354.75
(1) Interest Payable
Unit: RMB
152
Lu Thai Textile Co., Ltd. Annual Report 2018
Item Ending balance Beginning balance
Interest payable of short-term borrowings 3,068,841.54 1,572,231.86
Total 3,068,841.54 1,572,231.86
List of the significant overdue unpaid interest:
None
(2) 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:
The dividends payable unpaid for over one year were cash dividends of previous year not received by individual shareholders yet.
(3) Other Payables
1) Other Payables Listed by Nature
Unit: RMB
Item Ending balance Beginning balance
Deposits and cash deposits etc. 19,035,286.49 19,600,682.80
Collecting payment on behalf of others 18,288,047.56 17,030,878.91
Intercourse funds 165,655,961.20 66,354,397.71
Other 9,457,737.25 24,104,049.83
Total 212,437,032.50 127,090,009.25
2) Significant Other Payables 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 --
Other notes
26. Current Portion of Non-current Liabilities
Unit: RMB
153
Lu Thai Textile Co., Ltd. Annual Report 2018
Item Ending balance Beginning balance
Current portion of long-term borrowings 62,750,292.49
Total 62,750,292.49
Other notes:
27. Long-term Borrowings
(1) Category of Long-term Borrowings
Unit: RMB
Item Ending balance Beginning balance
Guaranteed borrowings 170,019,083.89 62,750,292.49
Less: current portion of long-term borrowings
-62,750,292.49
(Note VII-26)
Total 170,019,083.89
28. Long-term Payroll Payable
(1) List of Long-term Payroll Payable
Unit: RMB
Item Ending balance Beginning balance
III. Other long-term welfare 96,958,178.53 93,843,473.02
Total 96,958,178.53 93,843,473.02
29. Deferred Income
Unit: RMB
Item Beginning balance Increase Decrease Ending balance Reason for formation
Government subsidies 126,737,092.32 18,954,622.18 5,613,871.15 140,077,843.35 Government subsidies
Unrealized financing incomes 237,606.84 132,003.80 105,603.04 Finance lease
Total 126,737,092.32 19,192,229.02 5,745,874.95 140,183,446.39 --
Item involving government subsidies:
154
Lu Thai Textile Co., Ltd. Annual Report 2018
Unit: RMB
Amount
recorded
Amount
into Amount
recorded into Othe
non-oper offset cost Related to
Beginning Amount of other income r Ending
Item ating in the assets/related
balance newly subsidy in the chan balance
income Reporting income
Reporting ges
in the Period
Period
Reportin
g Period
Related to
Land 59,265,769.33 1,393,157.88 57,872,611.45
assets
Related to
Equipment 64,626,322.95 1,240,100.00 4,075,655.44 61,790,767.51
assets
Related to
Production living assets 691,000.04 132,999.96 558,000.08
assets
Related to
Overseas investment 100,000.00 400,000.00 500,000.00
assets
Related to
R&D 2,054,000.00 3,208,000.00 5,262,000.00
income
Related to
Public housing subsidy 1,250,000.00 12,057.87 1,237,942.13
assets
Subsidy for improvement
Related to
and transformation of 12,856,522.18 12,856,522.18
income
garden green land
30. 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
31. Share Capital
Unit: RMB
Increase/decrease (+/-)
Beginning balance Ending balance
New shares issued Bonus shares Bonus issue from profit Other Subtotal
The sum of
922,602,311.00 922,602,311.00
shares
155
Lu Thai Textile Co., Ltd. Annual Report 2018
32. Capital Reserves
Unit: RMB
Item Beginning balance Increase Decrease Ending balance
Capital premium
640,470,910.34 640,470,910.34
(premium on stock)
Other capital reserves 59,022,683.48 53.66 59,022,737.14
Total 699,493,593.82 53.66 699,493,647.48
33. Treasury Shares
Unit: RMB
Item Beginning balance Increase Decrease Ending balance
Shares of the Company
re-purchased but not 0.00 486,922,944.94 486,922,944.94
cancelled
Total 486,922,944.94 486,922,944.94
Other notes, including changes and reason of change:
The 15th Meeting of the 8th Board of Directors was held on 5 March 2018, on which the Proposal on Counter Purchase of Some
B-shares of the Company was reviewed and approved. The counter purchase price was not higher than HKD9.90 per share. The total
fund for counter purchase did not exceed RMB0.6 billion with term of one year.
34. Other Comprehensive Income
Unit: RMB
Reporting Period
Less:
recorded in
other
comprehensi
Attributable to Attributable
ve income in Less:
Beginning Income before owners of the to
Item prior period Income Ending balance
balance taxation in the Company as non-controll
and tax
Current Period the parent ing interests
transferred expense
after tax after tax
in profit or
loss in the
Current
Period
II. Other comprehensive
income that may 16,810,574.22 44,433,289.15 86,850.00 44,346,439.15 61,157,013.37
subsequently be reclassified
156
Lu Thai Textile Co., Ltd. Annual Report 2018
to profit or loss
Profit or loss generated from
changes in fair value of
28,050.00 579,000.00 86,850.00 492,150.00 520,200.00
available-for-sale financial
assets
Differences arising from
translation of foreign
16,782,524.22 43,854,289.15 43,854,289.15 60,636,813.37
currency-denominated
financial statements
Total of other
16,810,574.22 44,433,289.15 86,850.00 44,346,439.15 61,157,013.37
comprehensive income
35. Surplus Reserves
Unit: RMB
Item Beginning balance Increase Decrease Ending balance
Statutory surplus
959,592,006.48 59,783,872.34 1,019,375,878.82
reserves
Discretional surplus
3,341,572.58 3,341,572.58
reserves
Total 962,933,579.06 59,783,872.34 1,022,717,451.40
Notes, including changes and reason of change:
In accordance with provisions of Articles of Association and Corporate Law, the Company withdrew 10% of net profits as the
statutory surplus reserves.
36. Retained Earnings
Unit: RMB
Item Reporting Period Same period of last year
Beginning balance of retained earnings before adjustments 4,629,102,712.06 4,341,866,189.19
Beginning balance of retained earnings after adjustments 4,629,102,712.06 4,341,866,189.19
Add: Net profit attributable to owners of the Company as the parent 811,526,477.83 841,150,934.75
Less: Withdrawal of statutory surplus reserves 59,783,872.34 71,063,056.38
Dividend of ordinary shares payable 453,344,328.00 482,851,355.50
Ending retained earnings 4,927,500,989.55 4,629,102,712.06
List of adjustment of beginning retained earnings:
(1) RMB0.00 beginning retained earnings was affected by retrospective adjustment conducted according to the Accounting Standards
for Business Enterprises and relevant new regulations.
(2) RMB0.00 beginning retained earnings was affected by changes in accounting policies.
157
Lu Thai Textile Co., Ltd. Annual Report 2018
(3) RMB0.00 beginning retained earnings was affected by correction of significant accounting errors.
(4) RMB0.00 beginning retained earnings was affected by changes in combination scope arising from same control.
(5) RMB0.00 beginning retained earnings was affected totally by other adjustments.
37. 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 6,521,949,742.58 4,623,882,060.39 6,117,830,993.82 4,289,552,667.57
Other operations 357,109,071.35 237,561,182.56 291,393,051.15 187,495,117.11
Total 6,879,058,813.93 4,861,443,242.95 6,409,224,044.97 4,477,047,784.68
38. Taxes and Surtaxes
Unit: RMB
Item Reporting Period Same Period of last year
Urban maintenance and construction tax 33,944,678.18 29,433,844.39
Education Surcharge 15,139,056.40 12,875,631.00
Property tax 509,654.00 26,516.00
Land use tax 20,677,064.40 19,773,203.46
Vehicle and vessel usage tax 18,336,178.97 18,594,973.00
Stamp duty 119,478.40 125,398.56
Local education surcharge 3,530,606.51 3,904,063.89
Local water conservancy facility
10,091,063.11 8,583,754.04
construction fund
Urban maintenance and construction tax 2,443,114.17 2,914,218.66
Environmental protection tax 2,172,732.41
Total 106,963,626.55 96,231,603.00
Other notes:
For details of specific payment standard for each taxes and surtaxes, please refer to Note VI Taxation
39. Selling Expense
Unit: RMB
158
Lu Thai Textile Co., Ltd. Annual Report 2018
Item Reporting Period Same Period of last year
Salary 41,280,390.85 38,293,547.89
Transport fees 45,652,493.32 39,722,184.43
Advertising expense 14,493,972.68 16,846,415.91
Mall costs 1,849,384.70 2,188,487.89
Port surcharge 13,502,640.80 13,661,450.06
Depreciation charge 5,106,206.04 5,364,151.04
Sales service charge 12,086,904.35 3,439,035.08
Business travel charges 3,965,930.06 5,101,239.69
Express fee 3,395,253.39 1,679,556.11
Premium 1,752,795.53 1,774,967.94
Other 15,020,212.02 15,990,744.35
Total 158,106,183.74 144,061,780.39
Other notes:
40. Administrative Expense
Unit: RMB
Item Reporting Period Same Period of last year
Salary 150,178,467.11 107,277,843.02
Depreciation charge 28,922,673.45 24,973,816.12
Warehouse funding 31,869,397.11 27,431,827.37
Travel expense 23,001,296.54 26,081,106.36
Rental charges 14,398,948.38 14,440,878.80
Labor-union expenditure 15,600,583.68 15,289,305.43
Employee education budget 11,186,186.88 10,872,970.81
Amortization of intangible assets 12,954,322.84 11,112,088.24
Transport fees 10,436,445.11 10,015,673.62
Office expense 8,060,077.81 7,878,754.56
Other 84,303,364.36 67,752,714.32
Total 390,911,763.27 323,126,978.65
41. R&D Expense
Unit: RMB
159
Lu Thai Textile Co., Ltd. Annual Report 2018
Item Reporting Period Same Period of last year
Salary 135,380,494.55 167,270,119.29
Materials 119,832,589.83 135,510,566.11
Depreciation 10,069,125.27 10,971,936.72
Other 24,112,882.93 14,651,368.17
Total 289,395,092.58 328,403,990.29
42. Finance Costs
Unit: RMB
Item Reporting Period Same Period of last year
Interest expense 57,300,653.51 23,753,894.13
Less: Interest income 17,925,826.14 7,488,918.00
Less: Amount of capitalized interest
Foreign exchange gains or losses 2,055,009.44 39,937,734.42
Other 7,349,843.50 7,139,960.76
Total 48,779,680.31 63,342,671.31
43. Asset Impairment Loss
Unit: RMB
Item Reporting Period Same Period of last year
I. Bad debt loss 2,283,637.20 2,579,033.02
II. Inventory falling price loss 41,995,150.04 25,220,325.43
VII. Losses on depreciation of fixed assets 13,249,549.80 9,531,315.79
Total 57,528,337.04 37,330,674.24
44. Other Income
Unit: RMB
Sources Reporting Period Same period of last year
Government subsidies 60,846,383.76 58,099,783.92
Total 60,846,383.76 58,099,783.92
45. Investment Income
Unit: RMB
160
Lu Thai Textile Co., Ltd. Annual Report 2018
Item Reporting Period Same Period of last year
Long-term equity investment income
-1,518,268.37 -2,463,267.98
accounted by equity method
Investment income from disposal of financial
-64,824,373.70 4,794,598.32
assets at fair value through profit or loss
Investment income from financial products 6,069,367.03
Total -60,273,275.04 2,331,330.34
Other notes:
46. Gain on Changes in Fair Value
Unit: RMB
Sources Reporting Period Same period of last year
Financial liabilities at fair value through
-4,877,600.00
profit or loss
Total -4,877,600.00
Other notes:
47. Asset Disposal Income
Unit: RMB
Sources Reporting Period Same period of last year
Fixed asset disposal income 4,525,108.75 1,242,000.54
Intangible asset disposal income 3,301,874.63
Total 7,826,983.38 1,242,000.54
48. Non-operating Income
Unit: RMB
Amount recorded in the current
Item Reporting Period Same Period of last year
non-recurring profit or loss
Government subsidies 290,000.00 1,030,000.00 290,000.00
Other 10,362,238.56 11,092,767.09 10,362,238.56
Total 10,652,238.56 12,122,767.09 10,652,238.56
49. Non-operating Expense
Unit: RMB
161
Lu Thai Textile Co., Ltd. Annual Report 2018
Amount recorded in the current
Item Reporting Period Same Period of last year
non-recurring profit or loss
Donations 1,123,744.69 5,004,075.00 1,123,744.69
Losses from damage and scrap
3,020,637.43 2,568,738.39 3,020,637.43
of non-current assets
Other 6,454,472.53 1,449,912.25 6,454,472.53
Total 10,598,854.65 9,022,725.64 10,598,854.65
50. Income Tax Expense
(1) List of Income Tax Expense
Unit: RMB
Item Reporting Period Same Period of last year
Current income tax expense 100,214,613.83 132,080,828.42
Deferred income tax expense 11,098,577.57 -10,948,219.36
Total 111,313,191.40 121,132,609.06
(2) Adjustment Process of Accounting Profit and Income Tax Expense
Unit: RMB
Item Reporting Period
Profit before taxation 969,506,763.50
Current income tax expense accounted at statutory/applicable tax
145,426,014.53
rate
Influence of applying different tax rates by subsidiaries -6,004,653.24
Influence of income tax before adjustment 491,153.57
Influence of non-taxable income -8,168,646.62
Influence of not deductable costs, expenses and losses 4,843,108.96
Influence of deductable losses of unrecognized deferred income
-1,086,891.47
tax assets at the beginning of the Reporting Period
Influence of expense deduction -24,186,894.34
Income tax expense 111,313,191.40
51. Other Comprehensive Income
Refer to Note VII-34 for details.
162
Lu Thai Textile Co., Ltd. Annual Report 2018
52. Cash Flow Statement
(1) Cash Generated from Other Operating Activities
Unit: RMB
Item Reporting Period Same Period of last year
Government subsidies 77,020,849.15 96,833,623.45
Claim income 3,936,691.83 1,292,703.23
Recovery of employee borrowings, petty cash and deposit 13,896,229.53 24,879,575.61
Collection for employees 7,574,231.79 5,363,500.00
Other 7,992,121.11 8,762,550.14
Total 110,420,123.41 137,131,952.43
(2) Cash Used in Other Operating Activities
Unit: RMB
Item Reporting Period Same Period of last year
Freight and miscellaneous charges 62,091,418.60 59,083,362.18
Rental charges 20,722,534.75 18,504,054.24
Advertising expense 1,460,237.64 4,890,771.45
Business travel charges 28,898,308.10 29,550,544.27
Insurance 4,892,563.92 5,350,729.67
Audit advisory announcement fee 7,092,869.11 4,519,003.71
Decoration & repair expenses 7,474,700.27 9,540,186.72
Donation 1,123,744.69 5,004,075.00
Pre-payment 17,052,070.00 10,793,990.64
Payment of employee borrowings, petty cash and deposit 27,292,704.63 28,801,006.36
Other 74,876,384.98 81,125,466.24
Total 252,977,536.69 257,163,190.48
(3) Cash Generated from Other Investing Activities
Unit: RMB
Item Reporting Period Same Period of last year
Interest income 17,685,395.06 6,894,588.05
Income from forward foreign exchange 8,376,097.80 4,858,596.97
Sale of securities 63,962,133.03
163
Lu Thai Textile Co., Ltd. Annual Report 2018
Cash deposit of L/C for purchasing equipment 1,200,000.00
Option cost 11,200.00 91,000.00
Total 27,272,692.86 75,806,318.05
(4) Cash Used in Other Investing Activities
Unit: RMB
Item Reporting Period Same Period of last year
forward settlement exchange loss 73,302,671.50 63,998.65
Payment of deposit for the L/C of equipment purchase 295,288.20 1,200,000.00
Total 73,597,959.70 1,263,998.65
Notes:
(5) Cash Generated from Other Financing Activities
Unit: RMB
Item Reporting Period Same Period of last year
Return of loan guarantees 16,000,000.00 8,000,000.00
Recovery of intercourse accounts 78,300,000.00 191,980,000.00
Total 94,300,000.00 199,980,000.00
Notes:
(6) Cash Used in Other Financing Activities
Unit: RMB
Item Reporting Period Same Period of last year
Payment of the B-share buy-back amount 498,538,235.01
Certificate of deposit pledged 10,000,000.00 16,000,000.00
Payment for intercourse accounts 16,449,300.16 139,000,000.00
Cash consideration paid for business combination under the
23,430,428.00
same control
Total 524,987,535.17 178,430,428.00
Notes:
53. Supplemental Information for Cash Flow Statement
(1) Supplemental Information for Cash Flow Statement
Unit: RMB
164
Lu Thai Textile Co., Ltd. Annual Report 2018
Supplemental information Reporting Period Same period of last year
1. Reconciliation of net profit to net cash flows generated
-- --
from operating activities
Net profit 858,193,572.10 883,319,109.60
Add: Provision for impairment of assets 57,528,337.04 37,330,674.24
Depreciation of fixed assets, oil-gas assets, and productive
420,110,878.01 384,151,246.71
living assets
Amortization of intangible assets 19,107,405.53 16,622,633.32
Amortization of long-term prepaid expenses 4,107,499.91 3,537,929.74
Losses from disposal of fixed assets, intangible assets and
-23,691,064.85 -1,242,000.54
other long-lived assets (gains: negative)
Losses from scrap of fixed assets (gains: negative) 3,020,637.43 2,568,738.39
Losses from changes in fair value (gains: negative) 4,877,600.00
Finance costs (gains: negative) 43,973,551.17 63,104,510.55
Investment loss (gains: negative) 60,273,275.04 -2,331,330.34
Decrease in deferred income tax assets (gains: negative) -13,939,769.35 -11,507,078.95
Increase in deferred income tax liabilities
25,125,196.92 558,859.59
(“-” means decrease)
Decrease in inventory (gains: negative) -6,771,906.97 -270,382,003.89
Decrease in accounts receivable generated from operating
-87,641,526.60 -63,289,943.78
activities (gains: negative)
Increase in accounts payable used in operating activities
66,067,977.78 28,069,308.79
(decrease: negative)
Net cash generated from/used in operating activities 1,430,341,663.16 1,070,510,653.43
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 535,134,772.90 676,639,212.86
Less: beginning balance of cash 676,639,212.86 659,116,137.67
Net increase in cash and cash equivalents -141,504,439.96 17,523,075.19
(2) Cash and Cash Equivalents
Unit: RMB
Item Ending balance Beginning balance
I. Cash 535,134,772.90 676,639,212.86
Including: Cash on hand 9,087,924.86 8,040,420.28
165
Lu Thai Textile Co., Ltd. Annual Report 2018
Bank deposit on demand 526,046,848.04 668,598,792.58
III. Ending balance of cash and cash equivalents 535,134,772.90 676,639,212.86
Other notes:
54. Assets with Restricted Ownership or Right to Use
Unit: RMB
Item Ending carrying value Reason for restriction
Monetary capital 10,367,936.46 Pledged for short-term borrowings, as cash deposit for L/G and L/C
Inventory 270,068,760.00 Mortgaged for short-term borrowings
Fixed assets 54,356,312.70 Mortgaged for short-term borrowings
Intangible assets 107,288,609.62 Mortgaged for short-term borrowings
Total 442,081,618.78 --
Other notes:
55. Foreign Currency Monetary Items
(1) Foreign Currency Monetary Items
Unit: RMB
Item Ending foreign currency balance Exchange rate Ending balance converted to RMB
Monetary capital -- --
Of which: USD 23,669,536.16 6.8632 162,448,760.57
EUR 48,938.81 7.8473 384,034.11
HKD 14,769,878.16 0.8762 12,941,367.25
JPY 22,321,139.00 0.0619 1,381,678.51
GBP 8,140.26 8.6762 70,626.53
CHF 46,040.93 6.9494 319,956.84
Dong 127,005,803,716.75 0.000295 37,466,712.10
MMK 250,055,904.64 0.00439 1,097,745.42
Notes receivable
Of which: USD 14,926,262.51 6.8632 102,441,924.87
Accounts receivable -- --
Of which: USD 41,431,206.26 6.8632 284,350,654.80
EUR
HKD 20,123,741.12 0.8762 17,632,421.97
Dong 15,851,339,679.00 0.000295 4,676,145.21
166
Lu Thai Textile Co., Ltd. Annual Report 2018
Other receivables
Of which: USD 87,654.31 6.8632 601,589.06
JPY 1,595,040.00 0.0619 98,732.98
Dong 3,302,631,511.00 0.000295 974,276.30
GBP 1,500.00 8.6762 13,014.30
Accounts payable
Of which: USD 3,086,275.16 6.8632 21,181,723.67
JPY 76,050,920.00 0.0619 4,707,551.95
EUR 191,497.98 7.8473 1,502,742.11
CHF 482,250.00 6.9494 3,351,348.15
Dong 28,499,554,747.22 0.000295 8,407,368.65
Other payables
Of which: USD 204,867.00 6.8632 1,406,043.20
HKD 28,000.00 0.8762 24,533.60
Dong 651,734,092.00 0.000295 192,261.56
Short-term borrowings
Of which: USD 97,044,473.48 6.8632 666,035,630.41
Dong 82,163,219,117.00 0.000295 24,238,149.64
Long-term borrowings -- --
Of which: USD 24,772,567.30 6.8632 170,019,083.89
(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.
56. Government Subsidy
(1) Basic Information on Government Subsidy
Unit: RMB
Amount recorded in the
Category Amount Listed items
current profit or loss
Award for technical center 2,000,000.00 Other income 2,000,000.00
167
Lu Thai Textile Co., Ltd. Annual Report 2018
Subsidy for leading talent of Mount Tai industry 900,000.00 Other income 900,000.00
Subsidy fund for key project of innovation and development in
600,000.00 Deferred income
Zibo City
Fund for development and research project of high quality
400,000.00 Other income 400,000.00
dope dyeing fiber
Non-operating
2017-2019 award for excellent performance project 290,000.00 290,000.00
income
Subsidy for application technology development and
203,000.00 Deferred income
demonstration of high quality dope dyeing fiber
Government subsidy for gifted and talented persons in Zibo 200,000.00 Other income 200,000.00
Subsidy for export credit insurance premium 557,400.00 Other income 557,400.00
2018 subsidy for municipal-level patent 140,000.00 Other income 140,000.00
Subsidy for dyeing waste water liquid membrane separation
and comprehensive upgrading and reconstruction of waste 117,200.00 Other income 117,200.00
water station
Subsidy for three-dimensional marketing system design and
110,000.00 Other income 110,000.00
marketing value chain distribution and consultation project
Subsidy for development and industrial application of pure
100,000.00 Other income 100,000.00
cotton non-ironing digital ink jet printing fabrics
Subsidy for foreign expert project 100,000.00 Other income 100,000.00
Export bounty of leading enterprise 150,000.00 Other income 150,000.00
Subsidy for international market development project 30,000.00 Other income 30,000.00
Subsidy for international qualification certification 22,000.00 Other income 22,000.00
Subsidy for support of gifted and talented persons 20,000.00 Other income 20,000.00
Subsidy for textile and garments industrial exhibition 14,200.00 Other income 14,200.00
Subsidy for fabrics/accessories exhibition 12,000.00 Other income 12,000.00
2017 award for science and technology education of "light of
10,000.00 Other income 10,000.00
textile"
Return of service charge for withholding and remitting tax 610,075.60 Other income 610,075.60
Subsidy for Key Technology R & D of textile equipment with
1,215,000.00 Deferred income
good shape preservation
Subsidy for key technology R & D of preparation of
comfortable and cool fabric with function of moisture 490,000.00 Deferred income
absorption
Subsidy for research & development and promotion
application project of key technology and processing 700,000.00 Deferred income
technology of high shape-preserving cotton fabric
Government subsidy for Lu Thai (Vietnam) investment project 200,000.00 Deferred income
Subsidy for purchase of technical transformation equipment 417,500.00 Deferred income
168
Lu Thai Textile Co., Ltd. Annual Report 2018
Subsidy for Lu An Garments investment project 200,000.00 Deferred income
Subsidy fund for Xiqu Beiyuan public rental house 1,250,000.00 Deferred income
Subsidy for garden green land promotion and transformation 12,856,522.18 Deferred income
Subsidy for informatization planning project 240,000.00 Other income 240,000.00
Subsidy for promoting TBS Toyota production system 150,000.00 Other income 150,000.00
Subsidy for material classification coding and standard
10,000.00 Other income 10,000.00
management improvement project
Subsidy for production and integration system of fabric
350,000.00 Other income 350,000.00
industry
Subsidy for energy optimization of fabric finishing process
785,700.00 Other income 785,700.00
thermal energy system
Subsidy for country-level industrial design center 2,000,000.00 Other income 2,000,000.00
Subsidy for research and industrialization of pure cotton
500,000.00 Other income 500,000.00
energy conservation cool non-ironing garments
Subsidy for enterprise broadcasting in CCTV 700,000.00 Other income 700,000.00
Subsidy for new industry format of foreign trade 10,600.00 Other income 10,600.00
Subsidy for international market development project 23,200.00 Other income 23,200.00
Subsidy for Textile Asia 5,400.00 Other income 5,400.00
Subsidy fund for Texworld 40,000.00 Other income 40,000.00
Subsidy fund for SaigonTex 21,300.00 Other income 21,300.00
Subsidy for international self-owned brand cultivation 1,700,000.00 Other income 1,700,000.00
Subsidy for service trade development project 10,000.00 Other income 10,000.00
Special subsidy for improving management level of enterprise 304,450.00 Other income 304,450.00
2016 subsidies for transferring Xinjiang cotton to warehouses
464,400.00 Other income 464,400.00
out of Xinjiang
2016 matching subsidy fund for gifted and talented persons 200,000.00 Other income 200,000.00
2017 matching subsidy fund for gifted and talented persons 200,000.00 Other income 200,000.00
Matching subsidy fund for leading persons of Mount Tai
500,000.00 Other income 500,000.00
industry
Science and technology award in Shandong Province 100,000.00 Other income 100,000.00
Award of Zibo "Qilu Cup" Industrial Design Competition 30,000.00 Other income 30,000.00
Social insurance, post subsidy for employing people with job
1,042,819.75 Other income 1,042,819.75
hunting difficulties
2016 subsidy fund for outstanding enterprises in energy
300,000.00 Other income 300,000.00
conservation evaluation in Zibo City
2017 special subsidy for municipal-level patent development 2,000.00 Other income 2,000.00
Subsidy for the reconstruction of landscape 6,970,977.82 Other income 6,970,977.82
Subsidy for stabilizing posts 3,755,585.00 Other income 3,755,585.00
169
Lu Thai Textile Co., Ltd. Annual Report 2018
Subsidy for dynamic monitoring unemployment 1,200.00 Other income 1,200.00
2018 award for science and technology innovation 300,000.00 Other income 300,000.00
2018 post subsidy for enterprise 5,551,940.00 Other income 5,551,940.00
2018 social insurance subsidy for enterprise 2,846,960.47 Other income 2,846,960.47
2018 subsidy for setting up station of Shandong Technician
100,000.00 Other income 100,000.00
Workstation
2018 capital subsidy for province-level international market
26,000.00 Other income 26,000.00
development
2018 award for water-saving enterprise in Shandong Province 3,000.00 Other income 3,000.00
Sludge subsidy 5,503,600.00 Other income 5,503,600.00
Award fund for water-saving enterprise 3,000.00 Other income 3,000.00
Social insurance subsidy 1,785,737.88 Other income 1,785,737.88
Electricity fee subsidy 2,030,064.06 Other income 2,030,064.06
Subsidies for transferring Xinjiang cotton yarn to warehouses
7,194,091.44 Other income 7,194,091.44
out of Xinjiang
Government subsidy for pre-job training 835,290.56 Other income 835,290.56
Subsidy for green high-yield and high-efficiency project of
500,000.00 Other income 500,000.00
cotton
Special fund subsidy for agriculture industrialization
600,000.00 Other income 600,000.00
development
Subsidy for internship of college graduates 300,000.00 Other income 300,000.00
Subsidy for house settlement fee, moving fee in Awat County 1,617,000.95 Other income 1,617,000.95
2017 social insurance subsidy 117,997.56 Other income 117,997.56
Loan with discounted interest 2,543,714.36 Finance costs 2,543,714.36
Subsidy for investment of technical transformation equipment 822,600.00 Deferred income
Subsidy for people with job hunting difficulties 7,321.52 Other income 7,321.52
(2) Return of Government Subsidy
□ Applicable √ Not applicable
VIII. Changes of Consolidation Scope
1. Other
The subsidiary cancelled in the Reporting Period is Beijing Sichuang Clothing Co.,Ltd. The subsidiary established in the Reporting
Period is Shanghai Zhinuo Textile New Materials Co., Ltd.
170
Lu Thai Textile Co., Ltd. Annual Report 2018
IX. Equity in Other Entities
1. Equity in Subsidiary
(1) Subsidiaries
Holding percentage
Main operating Registration (%)
Name Nature of business Way of gaining
place place Indirectl
Directly
y
Wholesale and
Luthai (Hong Kong) Hong Kong Hong Kong 100.00% Set-up
retail industry
Wholesale and
Shanghai Luthai Shanghai Shanghai 100.00% Set-up
retail industry
Manufacturing Business combination not
Xinjiang Luthai Xinjiang Xinjiang 59.92%
industry under the 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
Xinsheng Power Zibo Zibo 100.00%
industry under the same control
Xinjiang Textile Manufacturing
Xinjiang Xinjiang 59.92% Set-up
(sub-subsidiary) industry
Business combination not
Helijie (sub-subsidiary) Zibo Zibo Service 100.00%
under the same control
Chengshun Heating Manufacturing Business combination
Zibo Zibo 100.00%
(sub-subsidiary) industry under the same control
Wholesale and
Beijing Youxian Beijing Beijing 90.00% Set-up
retail industry
Technology
development,
technical
Shanghai Zhinuo Shanghai Shanghai 100.00% Set-up
consultancy and
transfer of
technologies
Manufacturing
Lu Thai (Cambodia) Cambodia Cambodia 100.00% Set-up
industry
Lu Thai (Burma) Burma Burma Manufacturing 100.00% Set-up
171
Lu Thai Textile Co., Ltd. Annual Report 2018
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
proportion of The profit or loss attributable to Declaring dividends distributed to Balance of non-controlling
Name
non-controlling the non-controlling interests non-controlling interests interests at the period-end
interests
Xinjiang
40.08% 16,216,794.15 12,023,566.38 200,636,304.75
Luthai
Lufeng
Weaving & 25.00% 30,357,729.74 378,029,637.88
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 577,801, 569,395, 1,147,19 628,672, 4,814,37 633,486, 533,910, 552,920, 1,086,83 593,505, 4,950,67 598,456,
Luthai 870.44 421.71 7,292.15 392.36 3.04 765.40 300.91 939.85 1,240.76 546.28 5.96 222.24
Lufeng
Weaving 908,054, 820,360, 1,728,41 176,914, 33,049,2 209,963, 756,065, 841,883, 1,597,94 168,738, 29,616,0 198,354,
& 381.50 513.63 4,895.13 108.80 34.56 343.36 670.02 193.85 8,863.87 484.34 32.10 516.44
Dyeing
172
Lu Thai Textile Co., Ltd. Annual Report 2018
Unit: RMB
Reporting Period Same period of last year
Cash flows Cash flows
Total Total
Name Operating from Operating from
Net profit comprehensi Net profit comprehensi
revenue operating revenue operating
ve income ve income
activities activities
Xinjiang 708,959,464. 32,871,893.8 32,871,893.8 196,160,759. 477,021,975. 47,297,093.4 47,297,093.4 -18,512,573.3
Luthai 82 3 3 22 57 1 1 0
Lufeng
1,780,246,45 118,857,204. 118,857,204. 179,357,371. 1,664,817,65 104,083,484. 104,083,484. 140,455,230.
Weaving &
9.14 34 34 51 9.70 23 23 55
Dyeing
Other notes:
2. Equity in Joint Ventures or Associated Enterprises
(1) Significant Joint Ventures or Associated Enterprises
Holding percentage (%) Accounting
treatment of the
Main operating Nature of investment to
Name Registration place
place business Directly Indirectly joint venture or
associated
enterprise
Haohong Equity
Ningbo Ningbo 33.33% Equity method
Investment investment
Notes to holding proportion of joint venture or associated enterprise different from voting proportion: none
Basis of holding less than 20% of the voting rights but has a significant impact or holding 20% or more voting rights but does not
have a significant impact: none
(2) Main Financial Information of Significant Joint Ventures
Unit: RMB
Beginning balance/The same
Ending balance/Reporting Period
period of last year
Current assets 100,703,096.38 128,880,401.95
Non-current assets 187,501,100.00 163,879,055.06
Total assets 288,204,196.38 292,759,457.01
Current liabilities 150,000.00 150,000.00
Total liabilities 150,000.00 150,000.00
Equity attributable to shareholders of the Company as the parent 288,054,196.38 292,609,457.01
173
Lu Thai Textile Co., Ltd. Annual Report 2018
Net assets shares calculated at the shareholding proportion 96,018,463.65 97,536,732.02
Carrying value of investment to associated enterprises 96,018,463.65 97,536,732.02
Net profit -4,555,260.63 -7,390,542.99
Total comprehensive income -4,555,260.63 -7,390,542.99
Other notes
X. 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 VII”. 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 December 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
Cash and cash equivalents 216,061,990.69 556,296,995.92
Notes receivable 102,441,924.87 110,349,828.81
Account receivable 306,659,681.14 252,210,660.04
Other receivables 1,687,612.64 6,010,153.41
Accounts payable 39,150,734.53 44,343,006.71
Other payables 1,622,838.36 4,566,032.47
Short-term borrowings 690,273,780.05 695,124,996.40
Current portion of long-term borrowings 62,750,292.49
Long-term borrowings 170,019,083.89
Foreign exchange risk sensitivity analysis:
174
Lu Thai Textile Co., Ltd. Annual Report 2018
Based on the monetary assets and liabilities of foreign currency at the end of the year, and with other variables unchanged, the
pre-tax impact of reasonable changes in the exchange rate on current profit and loss and shareholders' equity is as follows:
Change in interest Reporting Period Same period of last year
rate
Influence on the Influence on equity of Influence on the Influence on equity
profits shareholders profits of shareholders
Up 10% against RMB 30,624,611.46 30,624,611.46 -5,234,092.49 -5,234,092.49
Down 10% against -30,624,611.46 -30,624,611.46 5,234,092.49 5,234,092.49
RMB
(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 in interest rate Reporting Period Same period of last year
Influence on the Influence on equity of Influence on the Influence on equity
profits shareholders profits of shareholders
Increase 100 BP -16,014,828.88 -14,083,265.20 -11,312,164.38 -10,086,733.25
Decrease 100 BP 16,014,828.88 14,083,265.20 11,312,164.38 10,086,733.25
2. Credit Risk
On 30 December 2018, maximum 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 RMB535 million. In recent two years, the average of net
cash flow of operation activities was RMB1.25 billion. The Company believed that the liquidity risk was insignificant.
XI. The Disclosure of Fair Value
1. Ending Fair Value of Assets and Liabilities at Fair Value
Unit: RMB
175
Lu Thai Textile Co., Ltd. Annual Report 2018
Ending fair value
Fair value
Item Fair value measurement Fair value measurement
measurement items at Total
items at level 2 items at level 3
level 1
I. Consistent fair value measurement -- -- -- --
(II)Available-for-sale financial assets 60,612,000.00 60,612,000.00
(1) Debt instrument investment 60,612,000.00 60,612,000.00
The total amount of assets
60,612,000.00 60,612,000.00
consistently measured at fair value
(5) Trading financial liabilities 4,877,600.00 4,877,600.00
Derivative financial liabilities 4,877,600.00 4,877,600.00
The total amount of liabilities
4,877,600.00 4,877,600.00
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 December 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.
XII. Related Party and Related-party Transactions
1. Information Related to the Company as the Parent of the Company
Registrat Proportion of share held by the Proportion of voting rights owned
Registered
Name ion Nature of business Company as the parent against the by the Company as the parent
capital
place Company (%) against the Company (%)
Zibo
Lucheng
Textile, chemistry and RMB63,260
Textile Zibo 15.21% 15.21%
investment ,000
Investment
Co., Ltd.
Notes: information on the Company as the parent
The final controllers of the Company are Mr. Liu Zibin and Mr. Liu Deming.
176
Lu Thai Textile Co., Ltd. Annual Report 2018
2. Subsidiaries of the Company
Refer to Note IX-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 for details of significant joint ventures or associated
enterprises of the Company.
4. Information on Other Related 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)
Hong Kong Tung Hoi International Company Limited
Wholly-owned subsidiary of the Company as the parent
(hereinafter called Tung Hoi International)
Shandong Chengshun Petrochemical Co., Ltd. (hereinafter
Wholly-owned subsidiary of the Company as the parent
referred to as Chengshun Petrochemical)
Other notes: none
5. List of Connected Transactions
(1) Information on Acquisition of Goods and Reception of Labor Service
Information on acquisition of goods and reception of labor service
Unit: RMB
The approval trade Whether exceed Same period of
Related party Content Reporting Period
credit trade credit or not last year
Zibo Lucheng Towels, socks, oils, supermarket
Textile retail, welfare, electronics,
13,489,689.69 23,116,700.00 No 13,051,075.96
Investment Co., computer equipment, computer
Ltd. supplies, paper cores, etc.
Taimei Ties Goods processing fee, materials 3,415.03 No 1,072,762.83
177
Lu Thai Textile Co., Ltd. Annual Report 2018
Limin Purified Recycled water, sewage treatment,
24,915,630.44 35,388,000.00 No 23,742,561.84
Water materials
Chengshun
Gas 36,438,292.48 54,000,000.00 No 19,719,905.39
Petrochemical
Lurui Fine
Auxiliaries 100,403,329.00 136,000,000.00 No 91,452,731.48
Chemical
Stanluian Materials 6,344.03 No
Information of sales of goods and provision of labor service
Unit: RMB
Related party Content Reporting Period Same period of last year
Sales of materials, electricity, running water, draught
Lucheng Textile 125,194.09 244,822.05
water, gas etc.
Lucheng Textile Sales of grey yarn, dyed yarn, garment etc. 324,500.22 560,701.89
Taimei Ties Sales of electricity, heating charges 17,715.81
Stanluian
Sales of materials, electricity, and running water 6,926.79 52,431.80
Company
Limin Purified
Sales of materials, garment, electricity etc. 1,096,870.07 71,473.11
Water
Lurui Fine Sales of garment, shell fabric, yarn, water&electricity,
241,453.88 442,833.05
Chemical lunch components and materials
Lujia Property Sales of materials and recycled water 60,753.33 68,442.42
(2) Information on Related-party 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
Zibo Lucheng Textile
Houses and buildings 48,965.14 30,857.15
Investment Co., Ltd.
Lurui Fine Chemical Houses and buildings 8,183.64 8,183.64
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 3,614,857.20 3,614,857.20
Investment Co., Ltd.
Zibo Lucheng Textile Rent of gas station 501,714.24 501,714.24
178
Lu Thai Textile Co., Ltd. Annual Report 2018
Investment Co., Ltd.
Zibo Lucheng Textile
Rent of land and buildings 11,259,371.47 11,460,190.52
Investment Co., Ltd.
Luqun Property Rent of land and buildings 1,394,285.64 1,394,285.64
(3) Information on Inter-bank Lending of Capital of Related Parties
Unit: RMB
Related party Amount Start date End date Note
Borrowing
Zibo Lucheng
Textile Borrowed by the Company’s subsidiaries
137,520,000.00 2 August 2017 31 December 2018
Investment Xinsheng Power and Chengshun Heating
Co., Ltd.
Borrowed by the Company’s subsidiary
Lujia Property 600,000.00 30 March 2017 31 December 2018
Chengshun Heating
Stanluian Borrowed by the Company’s subsidiary
1,450,000.00 17 August 2017 31 December 2018
Company Chengshun Heating
Borrowed by the Company’s subsidiary
Taimei Ties 1,300,000.00 31 March 2017 31 December 2018
Chengshun Heating
(4) Information on Remuneration for Key Management Personnel
Unit: RMB
Item Reporting period Same period of last year
Remuneration for key management personnel 23,527,100.00 21,881,300.00
6. Accounts Receivable and Payable of Related Party
(1) Accounts Payable
Unit: RMB
Item Related party Ending carrying amount Beginning carrying amount
Zibo Lucheng Textile
Other payables 127,139,981.30 60,456,317.14
Investment Co., Ltd.
Other payables Lujia Property 646,472.50 620,010.00
Other payables Stanluian Company 1,537,779.37 1,473,828.33
Other payables Taimei Ties 1,420,277.49 1,362,942.08
179
Lu Thai Textile Co., Ltd. Annual Report 2018
XIII. Commitments and Contingency
1. Significant Commitments
Significant commitments on 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 on constructing and purchasing 4,528.59 6,364.72
long-lived assets
Total 4,528.59 6,364.72
2. Contingency
(1) Significant Contingency on Balance Sheet Date
As of 31 December 2018, there was no significant contingency for the Company to disclose.
(2) In Despite of no Significant Contingency to Disclose, the Company Shall Also Make Relevant
Statements
There was no significant contingency in the Company to disclose.
XIV. Events after Balance Sheet Date
1. Profit Distribution
Unit: RMB
Profits or dividends to be distributed 429,060,770.50
Profits or dividends announced to be distributed after the approval 429,060,770.50
2. Notes to Other Events after Balance Sheet Date
Influence of implementation of new accounting standards since 1 January 2019
The Ministry of Finance issued the following standards on 31 March 2017: Accounting Standards for Business Enterprises
No.22-Recognization and Measurement of Financial Instruments (revised in 2017) (CK [2017] No.7), Accounting Standards for
Business Enterprises No.23-Transfer of Financial Assets (revised in 2017) (CK [2017] No.8), Accounting Standards for Business
Enterprises No.24-Hedge Accounting (revised in 2017) (CK [2017] No.9), and issued the Accounting Standards for Business
Enterprises No.37-Presentation of Financial Instruments (revised in 2017) (CK [2017] No. 14) on 2 May 2017 (the above standards
were referred to as “new financial instrument standards” collectively hereafter) and required all domestically listed companies to
180
Lu Thai Textile Co., Ltd. Annual Report 2018
implement since 1 January 2019. Approved by the 24th Meeting of the 8th Board of Directors held on 27 March 2019, the Company
will carry out the aforesaid new financial instrument standards since 1 January 2019 and made changes in relevant accounting
policies pursuant to above new financial instrument standards.
Accounting policy changes mainly involve the following:
Under new Financial Instruments Standards, all recognized financial assets are subsequently measured at amortized cost or fair value.
On the date of implementation of new financial instrument standards, the business model of managing financial assets is evaluated on
the basis of the existing facts and circumstances of the Company on the same date, the characteristics of contractual cash flow on
financial assets are evaluated on the basis of facts and circumstances at the time of initial recognition of the financial assets, and
financial assets are classified into three categories: measured at amortized cost, measured at fair value with changes included in other
comprehensive income, measured at fair value with changes included in profits and losses. For equity instrument investments
measured at fair value with changes included in other comprehensive income, when the recognition of the financial asset is
terminated, the accumulated gains or losses previously included in other comprehensive income will be transferred from other
comprehensive income to retained income, and not included in the current profits and losses.
Under new financial instrument standards, the Company makes provisions for impairment and recognition of credit impairment
losses, based on the expected credit loss, for financial assets measured at amortized cost, investment in debt instruments measured at
fair value with changes included in other comprehensive income, lease receivables, contractual assets and financial guarantee
contracts.
XV. Notes of Main Items in the Financial Statements of the Company as the Parent
1. Notes Receivable and Accounts Receivable
Unit: RMB
Item Ending balance Beginning balance
Notes receivable 91,555,248.34 93,244,480.81
Accounts receivable 316,225,973.28 305,903,590.98
Total 407,781,221.62 399,148,071.79
(1) Notes Receivable
1) Notes Receivable Listed by Category
Unit: RMB
Item Ending balance Beginning balance
Bank acceptance bill 28,101,500.00 10,051,004.05
L/C 63,453,748.34 83,193,476.76
Total 91,555,248.34 93,244,480.81
2) Notes Receivable Endorsed by the Company or Discounted and not due on the Balance Sheet Date at the Period-end
Unit: RMB
181
Lu Thai Textile Co., Ltd. Annual Report 2018
Item Derecognized Amount at the period-end Non-derecognized amount at the period-end
Bank acceptance bill 122,902,178.11
Total 122,902,178.11
(2) Accounts Receivable
1) Accounts Receivable Classified 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
Accounts receivable
withdrawal of bad
332,953, 16,727,6 316,225,9 322,076 16,172,61 305,903,59
debt provision of by 100.00% 5.02% 100.00% 5.02%
633.50 60.22 73.28 ,206.04 5.06 0.98
credit risks
characteristics
332,953, 16,727,6 316,225,9 322,076 16,172,61 305,903,59
Total 100.00% 5.02% 100.00% 5.02%
633.50 60.22 73.28 ,206.04 5.06 0.98
Accounts receivable with significant single amount for which bad debt provision separately accrued at the period-end
□ Applicable √ Not applicable
Among these groups, accounts receivable adopting aging analysis method to withdraw bad debt provision:
√ Applicable □ Not applicable
Unit: RMB
Ending balance
Aging
Accounts receivable Bad debt provision Withdrawal proportion
Subtotal within 1 year 332,019,229.97 16,600,961.50 5.00%
1 to 2 years 601,819.84 60,181.99 10.00%
2 to 3 years 332,583.69 66,516.73 20.00%
Total 332,953,633.50 16,727,660.22 5.02%
Notes:
Among these groups, accounts receivable adopting balance percentage method to withdraw bad debt provision:
□ Applicable √ Not applicable
Among these groups, accounts receivable adopting other methods to withdraw bad debt provision:
2) Bad Debt Provision Withdrawal, Reversed or Recovered in the Reporting Period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB597,757.68; the amount of the reversed or
collected part during the Reporting Period was of RMB0.00.
182
Lu Thai Textile Co., Ltd. Annual Report 2018
597,757.68
Significant amount of reversed or recovered bad debt provision: none
3) Particulars of the Actual Verification of Accounts Receivable during the Reporting Period
Unit: RMB
Item Amount
Accounts receivable actually verified 42,712.52
Of which: significant actual verification of accounts receivable: none
Notes to verification of accounts receivable: none
4) Top5 of the Ending Balance of the Accounts Receivable Collected according to Arrears Party
The total top5 of the ending balance of the accounts receivable collected according to arrears party during the Reporting Period was
RMB83,283,235.83 accounting for 25.01% of total ending balance of accounts receivable. The total ending balance of bad debt
provision withdrawn was RMB4,164,161.79.
2. Other Receivables
Unit: RMB
Item Ending balance Beginning balance
Interest receivable 220,590.38
Other receivables 395,847,213.77 519,788,239.57
Total 395,847,213.77 520,008,829.95
(1) Interest Receivable
1) Category of Interest Receivable
Unit: RMB
Item Ending balance Beginning balance
Fix time deposit 220,590.38
Total 220,590.38
(2) Other Receivables
1) Other Receivables Disclosed by Category
Unit: RMB
183
Lu Thai Textile Co., Ltd. Annual Report 2018
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 with
significant single 358,031, 358,031,8 486,974 486,974,19
89.82% 93.16%
amount for which 837.54 37.54 ,195.33 5.33
bad debt provision
separately accrued
Other accounts
receivable withdrawn
40,576,2 2,760,88 37,815,37 35,729, 2,915,363 32,814,044.
bad debt provision 10.18% 6.80% 6.84% 8.16%
64.00 7.77 6.23 408.00 .76 24
according to credit
risks characteristics
398,608, 2,760,88 395,847,2 522,703 2,915,363 519,788,23
Total 100.00% 0.69% 100.00% 0.56%
101.54 7.77 13.77 ,603.33 .76 9.57
Other receivables with significant single amount for which bad debt provision separately accrued at the end of the period
√ Applicable □ Not applicable
Unit: RMB
Ending balance
Other receivables (by unit)
Other receivables Bad debt provision Withdrawal proportion Withdrawal reason
no impairment for the
Lu Thai (Vietnam) 280,680,488.53
individual test
no impairment for the
Lu An Garments 77,351,349.01
individual test
Total 358,031,837.54 -- --
Among these groups, other receivables adopting aging analysis method to withdraw bad debt provision:
√ Applicable □ Not applicable
Unit: RMB
Ending balance
Aging
Other receivables Bad debt provision Withdrawal proportion
Subtotal of within 1 year 35,844,751.49 1,792,237.58 5.00%
1 to 2 years 2,067,517.79 206,751.78 10.00%
2 to 3 years 373,000.00 74,600.00 20.00%
Over 3 years 2,290,994.72 687,298.42 30.00%
184
Lu Thai Textile Co., Ltd. Annual Report 2018
Total 40,576,264.00 2,760,887.77 6.80%
Notes:
Among these groups, other receivables adopting balance percentage method to withdraw bad debt provision
□ Applicable √ Not applicable
Among these groups, other receivables adopting other methods to withdraw bad debt provision:
□ Applicable √ Not applicable
2) Bad Debt Provision Withdrawal, Reversed or Recovered in the Reporting Period
The withdrawal amount of the bad debt provision during the Reporting Period was of RMB-154,475.99; the amount of the reversed
or collected part during the Reporting Period was of RMB0.00.
Significant amount of reversed or recovered bad debt provision: none
3) Other Receivables Classified by Nature
Unit: RMB
Nature Ending carrying amount Beginning carrying amount
Intercourse funds 358,031,837.54 486,974,195.33
Export rebates 22,505,284.46 16,370,989.66
Payment on behalf 13,005,358.64 14,593,482.76
Guarantee deposit and cash deposit 3,221,373.64 2,532,658.50
Borrowings and petty cash 1,774,825.33 1,044,226.03
Other 69,421.93 1,188,051.05
Total 398,608,101.54 522,703,603.33
4) Top 5 of the Ending Balance of Other Receivables Collected according to the Arrears Party
Unit: RMB
Proportion to ending Ending balance
Name of the entity Nature Ending balance Aging balance of total of bad debt
other receivables% provision
Within 1
Lu Thai (Vietnam) Intercourse funds 280,680,488.53 70.41% 14,034,024.43
year
Within 1
Lu An Garments Intercourse funds 77,351,349.01 19.41% 3,867,567.45
year
Refund of tax for export Within 1
Export rebates 22,505,284.46 5.65% 1,125,264.22
receivable year
Accounts receivable of
Advance money for the
advance money for the
social security undertake by Within 1
social security undertake by 5,536,517.43 1.39% 276,825.87
the individual of the year
the individual of the
employee
employee
Within 1
Advances of heating charge Advances 2,043,220.77 0.51% 102,161.04
year
185
Lu Thai Textile Co., Ltd. Annual Report 2018
Total -- 388,116,860.20 -- 97.37% 19,405,843.01
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 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 96,018,463.65 96,018,463.65 97,536,732.02 97,536,732.02
enterprises
Total 2,165,711,579.69 2,165,711,579.69 1,841,693,348.06 25,200,000.00 1,816,493,348.06
(1) Investment to Subsidiaries
Unit: RMB
Ending balance
Beginning Depreciation
Investee Increase Decrease Ending balance of depreciation
balance reserve withdrawn
reserve
Beijing Innovative 25,200,000.00 25,200,000.00
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
(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
186
Lu Thai Textile Co., Ltd. Annual Report 2018
(2) Investment to Joint Ventures and Associated Enterprises
Unit: RMB
Increase/decrease
Ending
Adjustm Withdra
Gains and Cash balance
Additi Reduc ent of Change wal of
Beginning losses bonus or Ending of
Investee onal ed other s of impairm
balance recognized profits Other balance depreciati
invest invest compreh other ent
under the announce on
ment ment ensive equity provisio
equity method d to issue reserve
income n
I. Joint ventures
II. Associated enterprises
Haohong
Investme 97,536,732.02 -1,518,268.37 96,018,463.65
nt
Subtotal 97,536,732.02 -1,518,268.37 96,018,463.65
Total 97,536,732.02 -1,518,268.37 96,018,463.65
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 4,949,117,460.00 3,635,767,983.52 4,912,726,656.13 3,548,107,954.49
Other operations 285,754,682.46 242,349,589.43 233,769,456.41 187,951,747.92
Total 5,234,872,142.46 3,878,117,572.95 5,146,496,112.54 3,736,059,702.41
Other notes:
5. Investment Income
Unit: RMB
Item Reporting Period Same period of last year
Long-term equity investment income
17,976,433.62 17,976,433.62
accounted by cost method
Long-term equity investment income
-1,518,268.37 -2,463,267.98
accounted by equity method
Investment income generated from disposal
of financial assets at fair value through profit -47,564,384.05 4,858,596.97
or loss
187
Lu Thai Textile Co., Ltd. Annual Report 2018
Investment income from financial products 6,069,367.03
Total -25,036,851.77 20,371,762.61
XVI. 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 20,670,427.42
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 63,680,098.12
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
-63,632,606.67
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 2,784,021.34
Less: Income tax effects 6,656,476.16
Non-controlling interests effects 10,516,810.50
Total 6,328,653.55 --
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
EPS (Yuan/share)
Profit as of Reporting Period Weighted average ROE (%)
EPS-basic EPS-diluted
Net profit attributable to ordinary
11.24% 0.90 0.90
shareholders of the Company
Net profit attributable to ordinary
shareholders of the Company after
11.15% 0.90 0.90
deduction of non-recurring profit or
loss
188
Lu Thai Textile Co., Ltd. Annual Report 2018
Part XII Documents Available for Reference
1. The financial statements signed and stamped by the Company’s legal representative, Chief Accountant and
Financial Manager;
2. The original copy of the Independent Auditors’ Report carrying the seal of the CPA firm, as well as the personal
signatures of the engagement certified public accountants.
3. 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.
29 March 2019
189
