LU THAI TEXTILE CO., LTD.
SEMI-ANNUAL REPORT
==2010==
Shandong · Zibo
17 Aug. 2010Contents
Section I Important Notice………………………………………………………….3
Section II Company Profile…………………………………………………...…….3
Section III Changes in Share Capital and Shares Held by Shareholders………...…6
Section IV Particulars about Directors, Supervisors and Senior Executives……….7
Section V Report of the Board of Directors…………………………….……..……7
Section VI Significant Events…………………………………………………….. 10
Section VII Financial Report………………………………………………………13
Section VIII Documents Available for Reverence………………………………...85Section I Important Notice
The Board of Directors, the Supervisory Committee as well as directors, supervisors
and senior executives of the Company guarantee that there are no any omissions,
fictitious or serious misleading statements carried in the report and will take all
responsibilities, individual and/or joint, for the authenticity, accuracy and integrality
of the whole contents.
All directors of the Company voted at the Board meeting.
Chairman of the Board of the Company Mr. Liu Shizhen, Chief in Charge of
Accounting and Person in Charge of Accounting Organ Ms. Zhang Hongmei hereby
declared that the Financial Report enclosed in the Semi-Annual Report is true and
complete.
The Semi-annual Financial Report 2010 has not been audited.
Section II Company Profile
I. Basic Information of the Company
1. Legal name of the Company
In Chinese: 鲁泰纺织股份有限公司
In English: LU THAI TEXTILE CO., LTD.
2. Legal Representative: Liu Shizhen
3. Contact methods of Secretary of the Board of Directors and Securities Affairs
Representative
Secretary of the Board of Directors Securities Affairs Representative
Name Qin Guiling Zheng Weiyin
Address
No. 81, Songling East Road, Zichuan
District, Zibo
No. 81, Songling East Road, Zichuan
District, Zibo
Telephone 0533-5285166 0533-5285166
Fax 0533-5418833 5282188 0533-5418833 5282188
E-mail qinguiling@lttc.com.cn wyzheng@lttc.com.cn
4. Registered address: No. 11, Mingbo Road, High-tech Development Zone, Zibo,
Shandong
Postal code: 255086
Office address: No. 81, Songling East Road, Zichuan District, Zibo
No. 11, Mingbo Road, High-tech Development Zone, Zibo
Postal code: 255100
E-mail: lttc@public.zbptt.sd.cn
Internet website: www.lttc.com.cn
5. Newspapers designated for disclosing information of the Company: Securities
Times, Shanghai Securities News and Ta Kung Pao
Internet website designated by CSRC for publishing the Interim Report:
www.cninfo.com.cn
The place where the Interim Report is prepared and placed: Securities Department
of the Company6. Stock Exchange Listed with: Shenzhen Stock Exchange
Short Form of the Stock: LUTHAI A, LUTHAI B
Stock Code: 000726, 200726
7. Other Relevant Information of the Company
Registration date after change: 4 Jun. 2009
Place: Zibo Municipal Administration Bureau for Industry and Commerce
Registered number of enterprise legal person’s business license: 370300400002843
Registered number of taxation: 370302613281175
Organization code: 61328117-5
II. Main financial data and indices
1. Accounting data in current year
Unit: RMB Yuan
At the end of the
report period
At the period-end of
last year
Increase/decrease (%)
Total assets 6,444,789,851.07 6,303,066,959.60 2.25%
Owners’ equity attributable to shareholders of the
listed company
4,033,064,006.99 3,919,660,709.28 2.89%
Share capital 994,864,800.00 994,864,800.00 0.00%
Net assets per share attributable to shareholders of
the listed company (Yuan/share)
4.05 3.94 2.79%
In the report period
(from Jan. to Jun.)
The same period of
last year
Increase/decrease (%)
Total operating income 2,246,850,916.86 1,842,366,191.98 21.95%
Operating profit 443,572,068.68 294,436,470.67 50.65%
Total profit 463,393,367.66 302,253,103.63 53.31%
Net profit attributable to shareholders of the listed
company
366,877,951.37 263,569,483.82 39.20%
Net profit attributable to shareholders of the listed
company after deducting non-recurring gains and
losses
348,475,975.27 261,863,605.05 33.08%
Basic earnings per share (Yuan/share) 0.37 0.26 42.31%
Diluted earnings per share (Yuan/share) 0.37 0.26 42.31%
Net return on equity (%) 9.10% 7.29% 1.81%
Net cash flows from operating activities 290,608,340.78 274,388,805.35 5.91%
Net cash flows from operating activities per share
(Yuan/share)
0.29 0.28 3.57%
Note: Impact amount of non-recurring gains and losses on net profit was RMB
18,401,976.10, of which composing was as follows:
Items of non-recurring gains and losses Amount Notes (if applicable)
Gains and losses from non-current asset disposal -2,095,629.66
Government subsidies recorded into current gains and losses, excluding those subsidies which
are closely related to the normal operation of the Company and are enjoyed at fixed amounts or
proportions according to certain state standards
14,818,833.35Gains and losses from changes in fair value of transaction financial assets and transaction
financial responsibilities, and investment income from disposal of transaction financial
assets/responsibilities and financial assets available for sale, excluding valid hedging business
relating to normal operation.
-1,978,227.74
Other non-operating incomes/expenses besides the items above 7,098,095.29
Effect on income tax 2,610,513.48
Effect on minority interests -2,051,608.62
Total 18,401,976.10 -
2. Explanation on the difference in net profit and net assets under IAS and CAS
Unit: RMB Yuan
Net profit attributable to shareholders
of the listed company
Owners’ equity attributable to shareholders of
the listed company
Amount in the
current period
Amount in the
previous period
Amount at the
period-end
Amount at the
period-begin
Data under IAS 368,002,451.37 264,693,983.82 4,014,765,506.99 3,900,237,709.28
Data under CAS 366,877,951.37 263,569,483.82 4,033,064,006.99 3,919,660,709.28
Items and total adjusted under IAS:
Increase of fixed assets arising from
translating the USD statements into RMB
statements in 1996 not recognized under
IFRSs
0.00 0.00 -3,230,000.00 -3,230,000.00
Switching back of evaluation increment of
Luqun, which recognized as effect of current
period
265,500.00 265,500.00 -6,003,500.00 -6,269,000.00
Tax deduction due to the
domestically-manufactured equipment
purchased by the parent company recognized
as deferred income
859,000.00 859,000.00 -9,065,000.00 -9,924,000.00
Total of difference under IAS and CAS 1,124,500.00 1,124,500.00 -18,298,500.00 -19,423,000.00
Explanation on difference between IFRS and
PRC GAAP
1. Impact of increment from exchange of foreign currency fixed assets
Recording currency of the Company was changed from USD to RMB in 1996, and fixed
assets appraised due to fluctuation of exchange rate. The increment was listed in original
value and capital public reserves according to PRC GAAP but was not recognized under
IFRS. According to regulations in IFRS, the Company will amortize the difference in
accordance with use term of fixed assets, and then will adjust net profit and net assets.
2. Impact of evaluation increment of assets
The Company invested on Luqun Textile according to appraisal of fixed assets, and the
increment of appraisal will record in capital public reserves under PRC GAAP but will
not be recognized under IFRS. According to regulations in IFRS, the Company will
amortize the difference in accordance with use term of fixed assets, and then will adjust
net profit and net assets.
3. Impact of tax deduction due to the domestically-manufactured equipment
The Company enjoyed the right of purchase of domestically-manufactured equipment to
deduct tax, and reduce income tax directly under PRC GAAP, but recognized as deferredincome relating to assets under IFRS. According to regulations in IFRS, the Company
will amortize the difference in accordance with use term of fixed assets, and then will
adjust net profit and net assets.
III. Relevant financial indices
Net assets earning ratio (%) Earnings per share (RMB/share)
Fully diluted
Weighted
average
Basic earnings
per share
Diluted earnings per
share
Net profit attributable to owners of the parent company 9.10% 9.23% 0.37 0.37
Net profit attributable to owners of the parent Company
after deducting non-recurring profit and loss
8.64% 8.76% 0.35 0.35
Section III Changes in Share Capital and Shares Held by Shareholders
I. Statement on changes in shares
Unit: Share
Before the change Increase/decrease during the change (+/-) After the change
Amount
Proportio
n
Issuance
of new
shares
Bonus
shares
Capitalization
of public
reserve
Others Subtotal Amount Proportion
I. Shares subject to trading
moratorium
217,923,592 21.90% 217,923,592 21.90%
1. Shares held by state
2. Shares held by
state-owned corporation
3. Shares held by other
domestic investors
98,358,000 9.89% 98,358,000 9.89%
Including: shares held by
domestic non-state-owned
corporation
98,358,000 9.89% 98,358,000 9.89%
Shares held by domestic
natural person
4. Shares held by foreign
investors
118,232,400 11.88% 118,232,400 11.88%
Including: shares held by
foreign corporation
118,232,400 11.88% 118,232,400 11.88%
Shares held by foreign
natural person
5. Shares held by senior
executives
1,333,192 0.13% 1,333,192 0.13%
II. Shares not subject to
trading moratorium
776,941,208 78.10% 776,941,208 78.10%
1. RMB ordinary shares 452,952,028 45.53% 452,952,028 45.53%
2. Domestically listed
foreign shares
323,989,180 32.57% 323,989,180 32.57%3. Overseas listed foreign
shares
4. Others
III. Total shares 994,864,800 100.00% 994,864,800 100.00%
Note: “Others” in “Increase or decrease during the change” is the number of released
shares held by senior executives of the Company in the report period.
II. Shares held by the top ten shareholders at the at of report period
Unit: Share
Total shareholders 133,698
Particulars about shares held by the top ten shareholders
Name of shareholders
Nature of
shareholders
Shareholdin
g ratio
Total shares
held
Shares subject
to trading
moratorium
Shares
pledged or
frozen
Zibo Lucheng Textile Investment Co., Ltd
Domestic
non-state-owned
corporation
12.40% 123,314,700 98,358,000
Tailun Co., Ltd
Foreign
corporation
11.88% 118,232,400 118,232,400
DBS VICKBRS(HONG KONG)LTD A/C CLIENTS
Foreign
corporation
4.08% 40,626,252
Guotai Jinma Stable Return Securities Investment Fund
Domestic
non-state-owned
corporation
0.90% 9,000,000
Changsheng Tongqing Separated Stock Fund
Domestic
non-state-owned
corporation
0.71% 7,043,722
MANULIFE GLOBAL FUND
Foreign
corporation
0.67% 6,668,171
Triumph Selected Stock Fund
Domestic
non-state-owned
corporation
0.46% 4,600,697
China Life Insurance Co., Ltd.-Dividend-Personal
Dividend-005L-FH002 SZ
Domestic
non-state-owned
corporation
0.39% 3,850,000
The Pacific Insurance Co., Ltd.-Traditional-Common
Insurance Product-022L-CT001 SZ
Domestic
non-state-owned
corporation
0.37% 3,695,010
HTHK-VALUE PARTNERS INTELLIGENT FD-CHINA
B SHS FD
Foreign
corporation
0.36% 3,603,926
Particulars about shares held by the top ten shareholders not subject to trading moratorium
Name of shareholders
Shares not subject to trading
moratorium held
Type of shares
Zibo Lucheng Textile Investment Co., Ltd 24,956,700 RMB ordinary sharesDBS VICKBRS(HONG KONG)LTD A/C CLIENTS 40,626,252
Domestically listed foreign
shares
Guotai Jinma Stable Return Securities Investment Fund 9,000,000 RMB ordinary shares
Changsheng Tongqing Separated Stock Fund 7,043,722 RMB ordinary shares
MANULIFE GLOBAL FUND 6,668,171
Domestically listed foreign
shares
Triumph Selected Stock Fund 4,600,697 RMB ordinary shares
China Life Insurance Co., Ltd.-Dividend-Personal Dividend-005L-FH002
SZ
3,850,000 RMB ordinary shares
The Pacific Insurance Co., Ltd.-Traditional-Common Insurance
Product-022L-CT001 SZ
3,695,010 RMB ordinary shares
HTHK-VALUE PARTNERS INTELLIGENT FD-CHINA B SHS FD 3,603,926
Domestically listed foreign
shares
TOYO SECURITIES ASIA LIMITED-A/C CLIENT. 3,420,820
Domestically listed foreign
shares
Explanation on associated
relationship among the
aforesaid shareholders or
acting-in-concert
Among the aforesaid shareholders, Zibo Lucheng Textile Investment Co., Ltd is the first principal
shareholder and Tailun Co., Ltd is the sponsor of foreign shares. Other shareholders were shareholders
holding circulation shares. The Company was unknown whether there exists associated relationship
among the top ten shareholders of tradable share.
III. Particulars about changes in controlling shareholder or the actual controller during
the report period.
The principal shareholder and the actual controller of the Company remained
unchanged in the report period.
Section IV Directors, Supervisors and Senior Executives
I. Particulars about changes in shares held by directors, supervisor and senior
executives
Shares held by the Company’s directors, supervisors and senior executives remained
unchanged during the report period.
II Particulars about new engagement and dismissal of directors, supervisors and senior
executives
The Company convened the 2009 Annual Shareholders’ General Meeting on 4 Jun.
2010, at which the Board of Directors and the Supervisory Committee were re-elected.
Liu Shizhen, Xu Zhinan, Liu Zibin, Tengyuan Yingli, Chen Ruimo, Wang Fangshui,
Qin Guiling, Sun Zhigang and Zeng Fa were elected as directors for the Company’s
6th Board of Directors, with Li Zhixian, Zhou Zhiji, Qi Haodong, Wang Lei and Bi
Xiuli as independent directors for the 6th Board. And Zhu Lingwen and Liu Zilong
were elected as supervisors for the Company’s 6th Supervisory Committee. At the 10th
Meeting of the 3rd Workers’ Congress convened on 29 May 2010, Dong Shibing was
elected as the staff-representative supervisor for the 6th Supervisory Committee.
At the 1st Meeting of the 6th Board of Directors convened on 4 Jun. 2010, Liu Shizhen
was elected as Chairman for the 6th Board of Directors, Xu Zhinan as Vice Chairman,
Liu Zibin as GM, Wang Fangshui and Li Tongmin as vice GMs, Zhang Hongmei asChief Accountant, Qin Guiling as Secretary to the Board and Zheng Weiyin as
Securities Affair Representative. At the same time, 14 senior executives were engaged.
And Zhu Lingwen was elected as Chairman for the 6th Supervisory Committee at the
1st Meeting of the 6th Supervisory Committee.
Section V Report of the Board of Directors
I. Discussion and analysis of the Board of Directors
(I) Discussion and analysis of operation status in the report period
In the report period, along with the gradual economic recovery after the global
financial crisis, consumer confidence was on the rise, which boosted the sales prices
of the Company’s products. As such, gross profit rates of the Company’s products
increased in the report period, producing a positive influence on operating results of
the Company in the report period. For the report period, the Company achieved an
operating income of RMB 2,246,850,900, an operating profit of RMB 443,572,100
and a net profit attributable to owners of the parent company amounting to RMB
366,878,000, respectively up by 21.95%, 50.65% and 39.20% as compared with the
same period of last year.
(II) Operating results of the Company in the report period
Item Unit Current period Same period of
last year
Increase/decrease
Operating income Ten thousand (RMB) 224,685.09 184,236.62 21.95
Operating profit Ten thousand (RMB) 44,357.21 29,443.65 50.65%
Net profit attributable to
shareholders of the listed
company
Ten thousand (RMB) 36,687.80 26,356.95 39.20%
Net cash flows from operating
activities
Yuan/share (RMB) 0.29 0.28 3.57%
ROE % 9.10% 7.29% 1.81 percentage
point
Closing amount Opening amount
Total assets Ten thousand (RMB) 644,478.98 630,306.70 2.25%
Owners’ equity attributable to
the parent company
Ten thousand (RMB) 403,306.40 391,966.07 2.89%
(III) Main business scope and operation status
1. Main business scope
The Company is of comprehensive produce textile enterprise with mixture of cotton
planting, pinning, dyeing with color, weaving, after-finishing and making clothing,
main products is yarn-dyed of fabric for making shirts. 80% products of the Company
exported outside, market covering Japan, Korea, America, England and Italy, etc. 30
countries and areas, is the largest production base for yarn-dyed fabric cloth.
2. Businesses of the Company classified according to products
Unit: RMB Ten thousandMain businesses classified according to products
Industries or
products
Operating
income
Operating cost
Gross profit rate
(%)
Year-on-year
increase/decreas
e of operating
income (%)
Year-on-year
increase/decreas
e of operating
cost (%)
Year-on-year
increase/decrease
of gross profit
rate (%)
Shirt fabrics 147,681.12 96,262.30 34.82% 24.04% 11.27% 7.48%
Shirts 51,082.64 33,051.10 35.30% 2.85% -2.72% 3.70%
Lint 7,798.20 5,786.26 25.80% 132.31% 104.47% 10.10%
Chinese patent
medicine
683.96 549.02 19.73% -18.55% -28.07% 10.63%
Electricity and gas 6,174.53 6,441.88 -4.33% 78.48% 121.81% -20.38%
Others 11,264.64 6,647.12 40.99% 43.51% 26.53% 7.92%
Total 224,685.09 148,737.68 33.80% 21.95% 12.48% 5.58%
3. Sales of products classified according to regions
Unit: RMB Ten thousand
Region Report period Proportion (%) Same period of last year Proportion (%)
Japan, South Korea 21,773.41 8.41% 21,548.29 11.70
Hong Kong 18,903.42 9.69% 14,157.24 7.68
Southeast Asia 55,077.53 24.51% 41,399.84 22.47
Europe, America 52,456.54 23.35% 48,732.61 26.45
Others 23,067.63 10.27% 11,401.06 6.19
Homeland 53,406.57 23.77% 46,997.58 25.51
Total 224,685.09 100.00% 184,236.62 100.00
(IV) Profit composing and main business of the Company remained unchanged in the
report period.
(V) There were no other operating activities that had greatly influenced the profit of
the Company.
(VI) Investment income from any single share-holding company has not influenced
the Company’s net profit by 10%.
(VII) Problems and difficulties met in operation
In the report period, along with the gradual economic recovery after the financial
crisis, the Company’s export business resumed to some degree with an increase of its
product prices. As such, operating results of the Company improved as compared with
the same period of last year. However, another Renminbi appreciation may affect the
export business of the Company to a certain extent.
II. Investments in the report period
1. Continued use of raised proceeds in the report period
In 2008, the Company raised RMB 973.50 million through the public listing of
additional 150 million A-shares. And the actual net amount of the raised capital after
deducting all the issuance expenses stood at RMB 950,814,500, of which the use in
the report period was detailed as follows:(1) About the Production Project for 150-thousand Ingot Top-grade Fine Combed
Yarns. The original planned investment amount was RMB 264,609,300. The
Company invested RMB 4,785,400 in the report period, and accumulative investment
amounted to RMB 264,609,300, which meant that 100.00% of the planned investment
has been accomplished. And the project was basically put into production and run in
Aug. 2008.
(2) About the 50-thousand Ingot Two-for-one Twisting Production Line Project. The
original planned investment amount was RMB 40,868,300. The Company invested
RMB 2,688,600 in the report period, and accumulative investment amounted to RMB
40,868,300, which meant that 100.00% of the planned investment has been
accomplished. The project was already put into production and run in Jan. 2009.
(3) About the Project for Brand and Marketing Network Development. The original
planned investment amount was RMB 200 million. The Company invested RMB
3,667,300 in the report period, and accumulative investment amounted to RMB
15,440,000, which meant that 7.72% of the planned investment has been
accomplished. So far, the Company has built 36 exclusive shirt shops in domestic
major cities such as Beijing, Shanghai, Chongqing, Chengdu, Kunming, Zhengzhou,
Jinan and so on, and the shops have formally started to operate. In the report period,
sales business in internet also operated effectively.
(4) About the Project for Supplementing the Working Capital. Upon the arrival of the
raised proceeds in Dec. 2008, a sum of RMB 300 million was used to supplement the
working capital.
(5) About the Production Line Project for 10-million-meter Top-grade Jacquard
Fabrics for Women’s Wear. A sum of raised proceeds RMB 145,336,900 was
originally planned to be put into the project. The Company invested RMB
112,990,800 in the report period, and accumulative investment amounted to RMB
141,339,000, which meant that 97.25% of the planned investment has been
accomplished. The project was already put into operation in the report period.
2. Investment with non-raised capital in the report period
(1) About the Production Line Project for 3-million Top-grade Shirts. The planned
investment in the project was RMB 66.87 million. And the Company invested RMB
24,239,500 in the project during the report period. Part of the production line was
already put into the trial production in the report period.
(2) About the Yarn Dyed Fabric Technical Reconstruction Project. The planned
investment in the project was RMB 381.93 million. And the Company invested RMB
51,541,700 in the project in the report period. At present, the project is in progress as
scheduled.
III. In the report period, no adjustment has been made to the planned annual indices of
the Company.
Section VI Significant Events
I． Corporate governance
In the report period, the Company modified relevant provisions of its Articles of
Association and Rules for Procedure of the Board of Directors according to Rules forListing Shares in Shenzhen Stock Exchange and Guidelines on Information
Disclosure of companies listed with Shenzhen Stock Exchange No.8—Investment on
Derivative Products. And the modified Articles of Association was reviewed and
approved at 2009 Annual Shareholders’ General Meeting.
II. Implementation of profit distribution and interim profit distribution pre-plan of
2010
1. Profit distribution and capitalization of public reserves plans drafted in previous
periods and implemented in report period
The profit distribution plan of the Company for the year 2009: based on the total
shares of 994,864,800 shares as at 31 Dec. 2009, a cash dividend of RMB 2.50 (tax
included) was distributed for every 10 shares. After deducting 10% for individual
income tax, the cash dividend distributed for every 10 shares stood at RMB 2.25. And
the dividends for B-share holders were paid in HKD converted according to the
middle price of the reference exchange rate announced by People’s Bank of China on
the following day of the 2009 Annual Shareholders’ General Meeting.
Particulars about implementation of the aforesaid distribution plan: the Board of
Directors of the Company disclosed the Public Notice on Implementation of Dividend
Distribution for 2009 dated 23 Jun. 2010, which recognized the record date for A
shares on 30 Jun. 2010, the ex-dividend day on 1 Jul. 2010; the last trading date for B
shares on 30 Jun. 2010, the record date on 1 Jul. 2010 and the ex-dividend date on 5
Jul. 2010.
2. Interim profit distribution preplan for 2010
The Company would not conduct profit distribution or capitalization of public
reserves in the interim of 2010.
III. In the report period, the Company was not involved in any significant lawsuits and
arbitrations. And there existed no such lawsuits or arbitrations carried down from
previous periods to the report period.
IV. In the report period, the Company held no equity of other listed companies,
financial enterprises such as commercial banks, securities companies, insurance
companies, trust companies and futures companies, or companies to be listed.
V. In the report period, the Company conducted no significant asset acquisition, sale
or reorganization.
VI. In the report period, there occurred no significant asset acquisition, sale or
mergers of the Company. Nor there existed such transactions carried down from
previous period to the report period.
VII. There occurred no material related transactions in the report period, and the
routine related transactions were detailed in Note VIII Relationship Between Related
Parties and Transactions.VIII. Significant contracts and their implementation
1. Trusteeship, contract and lease of other companies’ assets in the reporting period
In the reporting period, the Company leased land, houses and gas station from the
principal shareholder Zibo Lucheng Co., Ltd, with the leasing charge aggregating
RMB 2,340,600. Meanwhile, the wholly-owned subsidiary Luqun Textile leased
equipments and places from the principal shareholder Zibo Lucheng Co. Ltd, with the
leasing charge aggregating RMB 4,355,000 and the Company leased cotton storage
location from Luqun Land Co., Ltd, with the leasing charge aggregating RMB
2,077,500. Controlling subsidiary of the Company Lufeng Weaving & Dyeing Co.,
Ltd leased houses from the principal shareholder Zibo Lucheng Co., Ltd, with rent of
RMB 348,300, and the principal shareholder Zibo Lucheng Co., Ltd leased houses
from the Company with rent of RMB 76,800.
2. Significant guarantee
In the report period, there was no new guarantee. Guarantees lasted to this period was
credit guarantee provided to loan of RMB 10 million for controlling subsidiary
Lufeng Weaving & Dyeing Co., Ltd. The term was from 11 Aug. 2009 to 10 Aug.
2010. the borrowing has been returned on 12 Apr. 2010 in advance.
3. Particulars about entrusting other parties with cash asset management in report
period or such entrustment carried down from previous periods to report period: the
Company had not entrusted, did not and will not entrust other parties with cash asset
management.
IX. Implementation of commitments made by the Company or shareholders holding
over 5% of the Company’s shares in report period, and those carried down from
previous periods to report period
1. Fulfillment of Commitment Made by the Company
The Profit Distribution Plan for 2009 promised by the Company in this year has been
fulfilled at the beginning of Jul. 2010.
2. Fulfillment of Commitment Made by Shareholders with more than 5% Shares
(1) The commitments made by shareholders holding original non-tradable shares
during the share merger reform and their implementation
Name of
shareholders
Commitment
Fulfillment of
commitments
Remarks
Zibo Lucheng
Textile
Investment Co.,
Ltd.
Zibo Lucheng will not reduce its shareholding within 60 months
after share merger reform and, within 24 months after that, the
price of selling holding shares shall not be lower than RMB 15 per
share (if the share capital changes, ex-rights will be conducted); it
proposed and voted for a cash distribution not lower than 50% of
the profit available for distribution in the year at the 2006
Shareholders’ General Meeting and 2007 Shareholders’ General
Meeting; it will increase the LUTHAI A shares held by it through
trading at the secondary market with the dividends received in
2005 and 2006, and the increase of the LUTHAI A shares held
In progress
The increase of
shares with dividends
in 2005 and 2006 has
been finished. And
the total profit in
2008 has increased
58.06% compared
with that in 2005.shall be accomplished within 12 months after the dividend is
transferred to its account. In 2008, the total profit increased by not
less than 30% compared with that in 2005.
(2) The quantity of shares not subject to moratorium, held by shareholders of
originally non-tradable shares, who held more than 5% of total shares at the end of the
reporting period
Name of shareholders
Amount of circulating shares
not subject to moratorium held
on the date when shares subject
to moratorium were listed
(share unit: 0,000)
Amount of
Increase/decrease
(share unit: 0,000
share)
Reason for
change
Amount of shares not subject to
moratorium held at the end of the
reporting period (share unit:
0,000)
Zibo Lucheng Textile
Investment Co., Ltd
2,495.67 0 -- 2,495.67
X. In the report period, the Company and its directors, supervisors, senior
management staff, shareholders, actual controller as well as purchaser received no
investigations from relevant authorities, enforcement actions from judicial and
disciplinary departments, being transferred to judicial bodies, investigations for
criminal responsibilities, investigations from CSRC, administrative punishment from
CSRC, bans on entry into the securities market, criticism by circular, being
recognized as an inappropriate individual, punishment from other administrative
authorities or open criticism from stock exchanges.
XI. Reception of field researches, interviews and visits received in report period
Time Place
Way of
reception
Visitor
Main discussion and materials
provided by the Company
8 Apr. 2010
Reception room of
the Company
Field research
Kun Jun from Chian Jianyin
Investment Securities
Basic information of the
Company and revival of export
20 Jun. 2010
Reception room of
the Company
Field research
Lu Jing from Guotai Asset
Management Co., Ltd.
Basic information of the
Company and revival of export
XII. Derivatives investment in the report period
In the report period, the Company conducted derivative products trade including
forward settlement, forward exchange purchase and forward exchange transation,
which was detailed as follows:
(I) Position of derivatives products as at the end of the report period
As of 30 Jul. 2010, the due financial derivative products held by the Company totaled
about USD 279,617,400. Of which forward settlement was about USD 263,000,000
and forward purchase approximately aggregated USD 16,617,400. The two above
financial derivative products took up 46.44% of net assets in the same period.
(II) Delivery and earnings of derivatives products transactions in the report period
In the first half year of 2010, the due forward financial derivative products of the
Company totally equaled to USD 297,533,700, of which USD 227,533,700 wasactually delivered and the loss was USD 49,348,300. The due forward settlement was
USD 291,000,000, of which USD 221000000 was delivered as scheduled, generating
loss of RMB 47,276,800, and USD 70,000,000 was extended; due foreign exchange
amount equaled to USD 6,533,700, which was wholly delivered and cause loss of
RMB 2,070,000.
(III) Analysis on risks and control measures concerning derivatives products
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 earnings from exchanges. 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 risk of
laws and regulations, credit risk, operation risk and market risk.
1. Risk of laws and regulations
When conducting hedging business, the Company must abide by relevant laws,
regulations and rules of the stock exchange, and the rights and obligations between
the Company and the bank must be specified.
Precautionary measures: The Company carefully studied and mastered relevant laws,
regulations and market rules, formulated internal control rules for the forward
settlement hedging business, strengthened supervision, and strictly abided by relevant
laws, regulations and the Company’s internal management rules.
2. Credit risk and liquidity risk
Derivatives products transaction developed by the Company was carried out on the
basis of contract of forward settlement of exchange signed between the Company and
bank, the delivery on schedule or extension is recognized based on one of the contract
price and exchange tendency after such contract of forward settlement of exchange
falls due, no default risk exists in the Company so as to ensure delivery on schedule or
extension.
Precaution measure: the Company formulated Administrative System on Transaction
of Derivative Products of Lu Thai Textile Co., Ltd and Plan on Derivative Products
Transaction in the Next Twelve Month approved by the 1st Meeting of the 6th Board of
Directors, stipulated the appropriate authorization system, and confirmed amount for
hedging by installments in accordance with the production and operation scale and
exchange revenue progress, and ensure no credit risk and liquidity risk occurred by
means of extension at the specified date.
3. Operation risk
Faulty internal progress, employees, as well as system and external matters resulted in
risk as well in the course of hedging, including employee risk, process risk, system
risk and external risk.
Precaution measure: the Company set up stringent authorization and approval system,
stipulated organization, business operating process and examination and approval
process, and perfect regulation can reduce the operation risk effectively.
4. Market risk
In the operation of hedging of forward settlement and surrender exchange, if the RMB
is devalued by a large margin on the basis of the current situation before the contractis due, so then, the larger losses shall incur in the contract on forward settlement of
exchange signed by the Company.
Risk analysis and precaution measure: at present, in face of the appreciation pressure
on Renminbi, there was no risk on large devaluation of the RMB before the contract is
due signed by the Company. According to price quoted from each bank, the RMB
shows appreciation tendency within 1 year, thus, gain on change in fair value shall
occur in the forward contract signed by the Company.
XIII. Significant Events listed in Article 62 of Securities Law and Article 17 of
Implementation Measures on Information Disclosure of the Companies Publicly
Issuing Shares which occurred in the Company during the Reporting Period
In the reporting period, the Company had no significant events as listed in the above
regulations.
Section VII Financial Report (Un-audited)
Financial Statements
Balance Sheet
Prepared by Lu Thai Textile Co., Ltd. 30 Jun. 2010 Unit: RMB Yuan
Items
Closing balance Opening balance
Consolidation Parent company Consolidation Parent company
Current Assets:
Monetary funds 616,648,947.98 415,660,045.25 569,968,526.84 324,783,025.04
Transaction financial assets
Notes receivable 117,529,351.73 117,177,589.02 141,412,742.46 120,774,297.57
Accounts receivable 181,211,390.53 163,125,620.41 154,069,325.62 167,091,056.87
Accounts paid in advance 49,899,772.21 315,053,225.65 160,759,295.40 435,828,408.63
Interest receivable
Dividends receivable 22,182,101.91
Other receivables 56,693,691.87 10,948,890.99 49,697,710.62 14,017,123.91
Inventories 1,325,153,929.27 930,191,343.00 1,229,494,890.25 801,504,131.77
Non-current assets due within 1 year
Other current assets
Total current assets 2,347,137,083.59 1,974,338,816.23 2,305,402,491.19 1,863,998,043.79
Non-current assets:
Available-for-sale financial assets
Held-to-maturity investments
Long-term receivables
Long-term equity investment 67,442,600.00 868,930,823.17 160,000.00 897,482,752.85
Investment real estate
Fixed assets 3,577,871,332.11 2,179,506,420.93 3,620,298,059.46 2,141,043,636.81
Construction in progress 87,894,427.06 65,755,005.58 73,045,428.62 53,545,369.31
Engineering materials 48,123,656.90 48,123,656.90 11,712,153.66 11,712,153.66Oil assets
Intangible assets 263,947,133.92 166,151,940.70 228,956,536.92 116,170,958.25
Development expense
Goodwill 20,563,803.29 20,563,803.29
Long-term expense to be apportioned
Deferred tax assets 31,809,814.20 22,573,533.91 42,928,486.46 25,551,960.18
Other non-current assets
Total of non-current assets 4,097,652,767.48 3,351,041,381.19 3,997,664,468.41 3,245,506,831.06
Total assets 6,444,789,851.07 5,325,380,197.42 6,303,066,959.60 5,109,504,874.85
Legal Representative: Liu Shizhen
Person-in-charge of accounting: Zhang Hongmei
Person-in-charge of accounting firm: Zhang Hongmei
Balance Sheet (Continued)
Prepared by Lu Thai Textile Co., Ltd. 30 Jun. 2010 Unit: RMB Yuan
Items
Closing balance Opening balance
Consolidation Parent company Consolidation Parent company
Current liabilities:
Short-term borrowings 1,138,190,964.86 529,745,935.59 1,032,541,840.01 356,415,782.53
Transaction financial liabilities 14,038,123.52 13,966,923.52 61,408,150.00 50,861,900.00
Notes payable 118,742,644.25 383,563,146.05 100,969,783.06 385,837,761.77
Accounts payable 198,953,771.46 249,348,330.94 275,876,805.53 149,446,372.99
Accounts received in advance 96,545,595.87 36,841,743.13 41,441,458.66 24,231,017.36
Payroll payable 229,821,474.32 202,934,627.63 220,359,174.53 186,391,924.39
Taxes payable 8,962,044.34 11,325,230.07 28,682,631.04 18,959,689.49
Interest payable 2,298,563.32 2,298,563.32 490,102.22 490,102.22
Dividends payable 40,523,790.21 25,031,809.44 442,538.04 442,538.04
Other accounts payable 99,105,462.13 13,313,529.19 90,408,797.00 13,425,412.94
Non-current liabilities due within 1 year 59,798,315.00 59,798,315.00 157,379,900.00 157,379,900.00
Other current liabilities
Total current liabilities 2,006,980,749.28 1,528,168,153.88 2,010,001,180.09 1,343,882,401.73
Non-current liabilities:
Long-term borrowings 81,508,455.00 81,508,455.00 92,612,200.00 92,612,200.00
Bonds payable
Long-term payables 9,735,560.00 9,735,560.00
Deferred income tax liabilities 403,060.14 406,802.45
Other non-current liabilities 34,962,111.98 32,288,666.65 2,673,445.33
Total non-current liabilities 126,609,187.12 113,797,121.65 105,428,007.78 92,612,200.00
Total liabilities 2,133,589,936.40 1,641,965,275.53 2,115,429,187.87 1,436,494,601.73
Owners’ equity (or shareholders’ equity)
Paid-in capital (or share capital) 994,864,800.00 994,864,800.00 994,864,800.00 994,864,800.00
Capital reserves 1,130,490,929.68 1,127,872,201.27 1,135,356,168.72 1,125,522,201.27Less: treasury stock
Specific reserves
Surplus reserves 374,429,529.19 374,429,529.19 374,429,529.19 374,429,529.19
Provision for general risks
Retained profits 1,536,630,454.01 1,186,248,391.43 1,418,468,702.64 1,178,193,742.66
Foreign exchange difference -3,351,705.89 -3,458,491.27
Total owners' equity attributable to parent
company
4,033,064,006.99 3,683,414,921.89 3,919,660,709.28 3,673,010,273.12
Minority interest 278,135,907.68 267,977,062.45
Total owners’ equity 4,311,199,914.67 3,683,414,921.89 4,187,637,771.73 3,673,010,273.12
Total liabilities and owners’ equity 6,444,789,851.07 5,325,380,197.42 6,303,066,959.60 5,109,504,874.85
Legal Representative: Liu Shizhen
Person-in-charge of accounting: Zhang Hongmei
Person-in-charge of accounting firm: Zhang Hongmei
Income Statement
Prepared by Lu Thai Textile Co., Ltd. Jan.-Jun. 2010 Unit: RMB Yuan
Items
Current period Same period of last year
Consolidation Parent company Consolidation Parent company
I. Total operation income 2,246,850,916.86 1,751,991,954.12 1,842,366,191.98 1,518,204,839.23
Including: Sales income 2,246,850,916.86 1,751,991,954.12 1,842,366,191.98 1,518,204,839.23
II. Total operation cost 1,811,173,858.52 1,440,748,302.68 1,548,256,721.31 1,279,722,976.56
Including: Cost of sales 1,487,376,845.39 1,235,835,692.33 1,322,374,198.75 1,164,999,278.44
Interest expenses
Handling charges and commission
expenses
993,285.02 1,585,216.04
Selling expenses 68,719,116.26 24,201,970.48 67,585,100.30 21,205,550.70
Administrative expenses 224,789,075.22 170,818,713.12 119,323,395.86 73,400,457.30
Financial expenses 21,691,445.04 9,491,579.80 37,604,091.92 20,117,690.12
Asset impairment loss 7,604,091.59 400,346.95 -215,281.56
Add: gain from change in fair value (“-”
means loss)
47,370,026.48 36,894,976.48 -20,453,300.00 -26,482,500.00
Gain from investment (“-” means loss) -39,475,016.14 -49,779,448.79 20,780,300.00 48,867,789.21
Including: income form
investment in affiliated enterprise and joint
ventures
Foreign exchange difference (“-” means
loss)
III. Operation profit (“-” means loss) 443,572,068.68 298,359,179.13 294,436,470.67 260,867,151.88
Add: non-operation income 24,385,856.61 9,804,213.56 10,639,026.77 3,704,977.35
Less: non-business expense 4,564,557.63 3,179,278.85 2,822,393.81 1,158,378.43
Including: loss from non-current asset
disposalIV. Total profit (“-” means loss) 463,393,367.66 304,984,113.84 302,253,103.63 263,413,750.80
Less: income tax expense 70,864,590.29 48,213,265.07 34,907,267.06 32,202,168.36
V. Net profit (“-” means loss) 392,528,777.37 256,770,848.77 267,345,836.57 231,211,582.44
Attributable to owners of parent
company
366,877,951.37 256,770,848.77 263,569,483.82 231,211,582.44
Minority interest 25,650,826.00 3,776,352.75
VI. Earnings per share
(I) Basic earnings per share 0.37 0.26 0.26 0.23
(II) Diluted earnings per share 0.37 0.26 0.26 0.23
VII. Other composite income -4,758,453.66 2,350,000.00 -11,081.31
VIII. Total composite income 387,770,323.71 259,120,848.77 267,334,755.26 231,211,582.44
Attributable to owners of parent
company
362,119,497.71 259,120,848.77 263,558,402.51 231,211,582.44
Minority interest 25,650,826.00 3,776,352.75
Legal Representative: Liu Shizhen
Person-in-charge of accounting: Zhang Hongmei
Person-in-charge of accounting firm: Zhang Hongmei
Cash Flow Statement
Prepared by Lu Thai Textile Co., Ltd. Jan.-Jun. 2010 Unit: RMB Yuan
Items
Current period Same period of last year
Consolidation Parent company Consolidation Parent company
Ⅰ.Cash flows from operating activities:
Cash received from sale of commodities and
rendering of service
2,388,095,445.18 1,813,042,113.77 1,801,140,682.35 1,500,536,818.89
Tax refunds received 72,312,447.45 47,564,837.26 56,288,073.28 43,465,816.14
Other cash received relating to operating activities 71,142,710.06 49,980,350.45 30,888,575.57 11,724,555.27
Subtotal of cash inflows from operating activities 2,531,550,602.69 1,910,587,301.48 1,888,317,331.20 1,555,727,190.30
Cash paid for purchase of commodities and
reception of service
1,686,333,341.13 1,299,960,779.49 1,126,222,497.37 1,086,507,081.46
Cash paid to and for employees 366,528,959.32 296,682,297.65 315,319,175.97 245,286,469.82
Various taxes paid 86,885,044.45 49,221,300.06 64,055,763.69 18,143,110.12
Other cash paid relating to operating activities 101,194,917.01 61,803,671.59 108,331,088.82 48,300,216.67
Subtotal of cash outflows from operating activities 2,240,942,261.91 1,707,668,048.79 1,613,928,525.85 1,398,236,878.07
Net cash flows from operating activities 290,608,340.78 202,919,252.69 274,388,805.35 157,490,312.23
Ⅱ. Cash flows from investment activities:
Cash received from disposal of investments
Investment income 20,780,300.00 26,697,500.00
Net cash received from disposal of fixed assets,
intangible assets and other long-term assets
2,671,494.22 2,641,994.22 151,100.18 151,100.18
Net cash received from disposal of subsidiaries or
other business units
Other cash received relating to investment 1,422,063.03 893,994.31 2,912,504.19 31,988,356.84activities
Subtotal of cash inflows from investment activities 4,093,557.25 3,535,988.53 23,843,904.37 58,836,957.02
Cash paid to acquire fixed assets, intangible assets
and other long-term assets
302,812,923.60 262,269,704.09 91,718,732.97 53,539,105.66
Cash paid for investment 12,000,000.00 5,000,000.00 27,000,000.00
Other cash paid relating to investment activities 49,348,254.22 38,409,621.02 15,000,000.00
Subtotal of cash outflows from investment
activities
364,161,177.82 305,679,325.11 91,718,732.97 95,539,105.66
Net cash flows from investment activities -360,067,620.57 -302,143,336.58 -67,874,828.60 -36,702,148.64
Ⅲ. Cash flows from financing activities
Cash received from capital contribution 1,005,685.30
Of which: cash received from capital contribution
to subsidiaries by minority shareholders
Cash received from borrowings 794,539,059.82 736,996,079.82 624,960,484.37 375,960,484.37
Cash received from issuance of bonds
Other cash received relating to financing activities 17,600,000.00 3,000,000.00
Subtotal of cash inflows from financing activities 812,139,059.82 736,996,079.82 628,966,169.67 375,960,484.37
Cash paid for repaying debts 449,739,949.71 319,739,949.71 1,194,634,291.70 866,394,291.70
Cash paid for interest expenses and distribution of
dividends or profit
235,223,006.13 226,294,416.26 201,700,325.94 188,264,011.49
Of which: dividends and profits paid to minority
shareholders by subsidiaries
Other cash paid relating to financing activities 10,000,000.00
Subtotal of cash outflows from financing activities 694,962,955.84 546,034,365.97 1,396,334,617.64 1,054,658,303.19
Net cash flows from financing activities 117,176,103.98 190,961,713.85 -767,368,447.97 -678,697,818.82
Ⅳ. Effect of foreign exchange changes on cash and
cash equivalents
-1,036,403.05 -860,609.75 -291,299.46 -189,946.06
Ⅴ. Net increase of cash and cash equivalents 46,680,421.14 90,877,020.21 -561,145,770.68 -558,099,601.29
Plus: beginning balance of cash and cash
equivalents
569,968,526.84 324,783,025.04 1,141,056,407.10 884,493,526.89
Ⅵ.Closing balance of cash and cash equivalents 616,648,947.98 415,660,045.25 579,910,636.42 326,393,925.60
Legal Representative: Liu Shizhen
Person-in-charge of accounting: Zhang Hongmei
Person-in-charge of accounting firm: Zhang HongmeiStatement of Changes in Owners’ Equity (Consolidated)
Prepared by Lu Thai Textile Co., Ltd. 30 Jun. 2010 Unit: RMB Yuan
Items
Amount for the current period
Owners’ equity attributable to parent company
Minority interests
Total owners’
equity
Paid-in capital
(or share
capital)
Capital reserve
Less:
treasury
stock
Specific
reserves
Surplus public
reserve
General
risk
reserve
Retained profits Others
I. Balance at the end of last year 994,864,800.00 1,135,356,168.72 374,429,529.19 1,418,468,702.64 -3,458,491.27 267,977,062.45 4,187,637,771.73
Add: change of accounting policy
Correction of errors in previous
periods
Others
II. Balance at the beginning of this
year
994,864,800.00 1,135,356,168.72 374,429,529.19 1,418,468,702.64 -3,458,491.27 267,977,062.45 4,187,637,771.73
III. Increase/ decrease of amount in
this year (“-” means decrease)
-4,865,239.04 118,161,751.37 106,785.38 10,158,845.23 123,562,142.94
(I) Net profit 366,877,951.37 25,650,826.00 392,528,777.37
(II) Other composite income -4,865,239.04 106,785.38 -4,758,453.66
Subtotal of (I) and (II) -4,865,239.04 366,877,951.37 106,785.38 25,650,826.00 387,770,323.71
(III) Capital input and reduction by
owners
1. Capital input of owners
2. Amount of stock payment included
in owners’ equity
3. Others
(IV) Profit distribution -248,716,200.00 -15,491,980.77 -264,208,180.771. Withdrawing surplus public reserve
2. Withdrawing general risk reserve
3．Distribution to owners
(shareholders)
-248,716,200.00 -15,491,980.77 -264,208,180.77
4．Others
(V) Internal carrying forward of
owners’ equity
1. New increase of capital (or share
capital) from capital reserves
2. Converting surplus reserves to
capital (or share capital)
3. Surplus reserves make up losses
4. Others
(VI) Specific reserves
1. Appropriated in current period
2. Used in current period
IV. Balance at the end of this period 994,864,800.00 1,130,490,929.68 374,429,529.19 1,536,630,454.01 -3,351,705.89 278,135,907.68 4,311,199,914.67
Statement of Changes in Owners’ Equity (Consolidated) (Continued)
Prepared by Lu Thai Textile Co., Ltd. 30 Jun. 2010 Unit: RMB Yuan
Items
Amount for the previous period
Owners’ equity attributable to parent company
Minority interests
Total owners’
equity
Paid-in capital
(or share
capital)
Capital reserve
Less:
treasury
stock
Specific
reserves
Surplus public
reserve
General
risk reserve
Retained profits Others
I. Balance at the end of last year 994,864,800.00 1,128,135,713.77 330,662,535.20 1,090,990,313.22 -3,418,700.75 239,755,787.08 3,780,990,448.52Add: change of accounting policy
Correction of errors in previous
periods
Others
II. Balance at the beginning of this
year
994,864,800.00 1,128,135,713.77 330,662,535.20 1,090,990,313.22 -3,418,700.75 239,755,787.08 3,780,990,448.52
III. Increase/ decrease of amount in
this year (“-” means decrease)
7,215,239.03 64,596,523.82 -11,081.31 -20,508,791.87 51,291,889.67
(I) Net profit 263,569,483.82 3,776,352.75 267,345,836.57
(II) Other composite income -11,081.31 -11,081.31
Subtotal of (I) and (II) 263,569,483.82 -11,081.31 3,776,352.75 267,334,755.26
(III) Capital input and reduction by
owners
7,215,239.03 -9,049,768.71 -1,834,529.68
1. Capital input of owners
2. Amount of stock payment included
in owners’ equity
3. Others 7,215,239.03 -9,049,768.71 -1,834,529.68
(IV) Profit distribution -198,972,960.00 -15,235,375.91 -214,208,335.91
1. Withdrawing surplus public reserve
2. Withdrawing general risk reserve
3. Distribution to owners
(shareholders)
-198,972,960.00 -15,235,375.91 -214,208,335.91
4．Others
(V) Internal carrying forward of
owners’ equity
1. New increase of capital (or sharecapital) from capital reserves
2. Converting surplus reserves to
capital (or share capital)
3. Surplus reserves make up losses
4. Others
(VI) Specific reserves
1. Appropriated in current period
2. Used in current period
IV. Balance at the end of this period 994,864,800.00 1,135,350,952.80 330,662,535.20 1,155,586,837.04 -3,429,782.06 219,246,995.21 3,832,282,338.19
Statement of Changes in Owners’ Equity (Parent Company)
Prepared by Lu Thai Textile Co., Ltd. 30 Jun. 2010 Unit: RMB Yuan
Items
Amount for the current period
Paid-in capital (or share
capital)
Capital reserve
Less: treasury
stock
Specific
reserves
Surplus public
reserve
General risk
reserve
Retained profit
Total owners’
equity
I. Balance at the end of last year 994,864,800.00 1,125,522,201.27 374,429,529.19 1,178,193,742.66 3,673,010,273.12
Add: change of accounting policy
Correction of errors in previous periods
Others
II. Balance at the beginning of this year 994,864,800.00 1,125,522,201.27 374,429,529.19 1,178,193,742.66 3,673,010,273.12
III. Increase/ decrease of amount in this year
(“-” means decrease)
2,350,000.00 8,054,648.77 10,404,648.77
(I) Net profit 256,770,848.77 256,770,848.77
(II) Other composite income 2,350,000.00 2,350,000.00
Subtotal of (I) and (II) 2,350,000.00 256,770,848.77 259,120,848.77(III) Capital input and reduction by owners
1. Capital input of owners
2. Amount of stock payment included in
owners’ equity
3. Others
(IV) Profit distribution -248,716,200.00 -248,716,200.00
1. Withdrawing surplus public reserve
2. Withdrawing general risk reserve
3. Distribution to owners (shareholders) -248,716,200.00 -248,716,200.00
4．Others
(V) Internal carrying forward of owners’
equity
1. New increase of capital (or share capital)
from capital reserves
2. Converting surplus reserves to capital (or
share capital)
3. Surplus reserves make up losses
4. Others
(VI) Specific reserves
1. Appropriated in current period
2. Used in current period
IV. Balance at the end of this period 994,864,800.00 1,127,872,201.27 374,429,529.19 1,186,248,391.43 3,683,414,921.89
Statement of Changes in Owners’ Equity (Parent Company) (Continued)
Prepared by Lu Thai Textile Co., Ltd. 30 Jun. 2010 Unit: RMB YuanItems
The same period of last year
Paid-in capital (or share
capital)
Capital reserve
Less:
treasury
stock
Specific
reserves
Surplus public
reserve
General risk
reserve
Retained profit
Total owners’
equity
I. Balance at the end of last year 994,864,800.00 1,125,522,201.27 330,662,535.20 983,263,756.75 3,434,313,293.22
Add: change of accounting policy
Correction of errors in previous periods
Others
II. Balance at the beginning of this year 994,864,800.00 1,125,522,201.27 330,662,535.20 983,263,756.75 3,434,313,293.22
III. Increase/ decrease of amount in this year
(“-” means decrease)
32,238,622.44 32,238,622.44
(I) Net profit 231,211,582.44 231,211,582.44
(II) Other composite income
Subtotal of (I) and (II) 231,211,582.44 231,211,582.44
(III) Capital input and reduction by owners
1. Capital input of owners
2. Amount of stock payment included in
owners’ equity
3. Others
(IV) Profit distribution -198,972,960.00 -198,972,960.00
1. Withdrawing surplus public reserve
2. Withdrawing general risk reserve
3. Distribution to owners (shareholders) -198,972,960.00 -198,972,960.00
4．Others
(V) Internal carrying forward of owners’equity
1. New increase of capital (or share capital)
from capital reserves
2. Converting surplus reserves to capital (or
share capital)
3. Surplus reserves make up losses
4. Others
(VI) Specific reserves
1. Appropriated in current period
2. Used in current period
IV. Balance at the end of this period 994,864,800.00 1,125,522,201.27 330,662,535.20 1,015,502,379.19 3,466,551,915.66Lu Thai Textile Co., Ltd.
Notes to Financial Statement
For the First Half Year of 2010
（The following amount is expressed in RMB unless otherwise special
explanation）
I. 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 Feb. 3, 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 August 19, 1997 with B-shares stock code of 200726. On November 24, 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 December 25, 2000 with A-shares stock code of 000726 through
approval by Shenzhen Stock Exchange with No. (2000) 162 Listing Notice. As approved by 2000
Shareholders’ 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 Shareholders’ 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 Shareholders’ 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 Dec. 25, 2003, the inner employees’ shares
reach 3 years since listing on the A-share stock market, and they set out circulation on Dec.26,
2003. As approved by the Shareholders’ 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 Dec. 2008. As at 30 June 2010,
the Company’s registered capital was RMB 994.8648 million.
The Company’s registered address: No. 11, Mingbo Road, Hi-tech Development Zone, Zibo,
Shandong
The Company’s legal representative: Liu Shizhen
The Company’s business scope includes production and sales of cotton yarn, yarn dyed fabrics,shirts, fashion accessories, health underwear and other textile products and their supporting series
products.
The Company’s financial statement has been approved by the Board of Directors of the Company
on 16 August 2010.
II. Preparation basis of financial statement
With going-concern assumption as the basis, the Company prepares its financial statement in light
of the actual transactions and matters, as well as the accounting standard for business
enterprise-basic standard promulgated by the Ministry of Finance of PRC in Feb. 2006, and 38
accounting standards, application guide, interpretation and other relevant regulations (hereinafter
referred to as “Accounting Standard for Business Enterprise”).
III. Statement for complying with the accounting standard for business
enterprise
The financial statements for the first half year of 2009 prepared by the Company are in
compliance with the requirements of the accounting standard for business enterprise, and have
reflected the Company’s financial status as at 30 June 2010, operating results and cash flows in an
accurate and complete way for the first half year of 2009. Furthermore, these financial statements,
in all material respects, were also in line with disclosure requirements of relevant financial
statement and its notes stipulated in Compilation Rules for Information Disclosures by Companies
That Offer Securities to the Public No.15 - General Provisions for Financial Reports amended by
China Securities Regulatory Commission (hereinafter referred to as “CSRC”) in 2009.
IV. Major accounting policies and accounting estimates
1. Fiscal period
The Company’s accounting periods are divided into annual periods (yearly) and interim periods.
The interim period is a reporting period which is shorter than a full fiscal year. Gregorian calendar
is adopted for fiscal year of the Company, namely from 1 Jan. to 31 Dec. every year.
2. Bookkeeping base currency
The Company adopts Renminbi as a bookkeeping base currency. But Lu Thai (Hong Kong) Co.,
Ltd. (hereinafter referred to as “Lu Thai Hong Kong”), a subsidiary company of the Company,
adopts Hong Kong dollars as a bookkeeping base currency. Such HKD shall be translated into
Renminbi according to accounting policies related to foreign currency translation when
consolidating financial statement.
3. Accounting process of business combinations
Business combinations are divided into business combination under the same control and not
under the same control.
1) Business combinations under the same control:
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 shall be adjusted. If the additional paid-in capital 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
As for business combinations not under the same control, the combination costs shall be 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, and all relevant direct
costs incurred for the business combination. For a business combination realized by two or more
transactions of exchange, the combination costs shall be the summation of the costs of all separate
transactions. Where any future event that is likely to affect the combination costs is stipulated in
the combination contract or agreement, if it is likely to occur and its effects on the combination
costs can be measured reliably, the acquirer shall record the said amount into the combination
costs. In business combinations not under the same control, the acquirer shall, on the acquisition
date, measured the identifiable assets given, the liabilities and contingent liabilities incurred by the
acquiree in light of the fair values.
The positive balance between the combination costs and the fair value of the identifiable net assets
the acquirer obtains from the acquiree is recognized as business reputation. The acquirer shall,
pursuant to the following provisions, treat the balance between the combination costs and the fair
value of the identifiable net assets it obtains from the acquiree: a. it shall reexamine 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; b. if, after the reexamination, the
combination costs are still less than the fair value of the identifiable net assets it obtains from the
acquiree, it shall record the balance into the profits and losses of the current period.
4. Preparation methods for consolidated financial statements
(1) The scope of consolidated financial statements shall be confirmed based on the control.
Control means the Company can decide the financial and manage policy of investee entity and
have authority to earn the benefit from the investee entity. The Company having more than half of
total assets with voting rights (excluding 50%) of investee entities, or having less than half of total
assets with voting rights but having actual control rights, then these investee entities shall be
included into the consolidated scope.
(2) Preparation methods for consolidated financial statements
Consolidated financial statement shall be prepared by parent enterprise based on the financial
statements of parent enterprise and subsidiaries, accounting with other relevant materials, as
adjusted long-term equity investment by equity method, which is offset the equity capital
investment of parent enterprise and share of owner’s equity of subsidiaries enjoyed by parent
company and major transaction and internal current between the company and its subsidiaries or
among the subsidiaries. “Minority shareholders’ equity” belongs to the owner’s equity in the
consolidated balance sheet; “Minority shareholders’ profit and loss” is under the net profit of the
consolidated financial statement. As parent enterprise prepares financial statement, the accounting
policy and accounting period of subsidiaries are different from which of parent enterprise, which
shall be adjusted as parent enterprise; or subsidiaries shall prepared financial statement again
required by parent company.
In the reporting period, for the added subsidiary companies controlled by the same enterprise,
while preparing the consolidated balance sheet, its opening amount shall be adjusted. For the
added subsidiary companies not controlled by the same enterprise, while preparing the
consolidated balance sheet, its opening amount shall not be adjusted. In the reporting period, for
the parent company settling the subsidiaries, while preparing the consolidated balance sheet, itsopening amount shall not be adjusted.
In the reporting period, for the added subsidiaries controlled by the same enterprise, the incomes,
expenses and profits of the combining party incurred from the beginning of the current period to
the combining date shall be involved into consolidated profit statement. For the added subsidiaries
not controlled by the same enterprise, the incomes, expenses and profits of the combining party
incurred from the acquisition date to the end of reporting period shall be involved into the
consolidated profit statement.
During the reporting period, for the added subsidiaries controlled by the same enterprise, the
consolidated cash flow statement shall include the cash flow of the parties to the combination
from the beginning of the current period to the reporting period. For the added subsidiaries not
controlled by the same enterprise, the consolidated cash flow statement shall include the cash flow
from the acquisition date to the end to reporting period. During the settling the subsidiaries, the
consolidated cash flow statement shall included the cash flow form the beginning of the current
period to the settlement date.
5. Recognition standard for cash and cash equivalents
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.
6. Business of foreign currencies and the transaction of foreign currency statements
(1) Translation methods of foreign currency transaction
At the time of initial recognition of a foreign currency transaction, the Company shall convert the
amount in a foreign currency into amount in its Renminbi at the spot exchange rate (generally
refer to the middle price of market exchange rate published by the People’s Bank of China, the
same below) on the day the transaction is occurred. Of which, as for such transactions as foreign
exchange or involving in foreign exchange, the Company shall converted into amount in the
Renminbi at actual exchange rate the transaction is occurred.
(2) Treatment method for the foreign currency monetary items and foreign currency non-monetary
items:
On the balance sheet date, the foreign currency monetary items shall be translated at the spot
exchange rate. The balance of exchange 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
tot the balance sheet date shall be recorded into the profits and losses at the current period except
that the balance of exchange arising from foreign currency borrowings for the purchase and
construction or production of qualified assets shall be capitalized in the light of the provisions of
the Accounting Standards for Business Enterprises No. 17 – Borrowing Costs. The foreign
currency non-monetary items measured at the historical cost shall still be translated at the spot
exchange rate on the transaction date, of which the amount of functional currency shall not be
changed.
The foreign currency non-monetary items measured at the fair value shall be translated at the spot
exchange rate on the fair value confirming date, from which the exchange difference shall be
treated as change in fair value (including change in exchange rate) and recorded in the profit and
loss of the current period.(3) Translation for foreign currency financial statements
The Company shall, on the basis of the following provisions, translate its foreign currency
financial statements into RMB financial statements.
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 the ones as “retained profits”, others
shall be translated at the spot exchange rate at the time when they are incurred.
The income and expense items in the profits statements shall be translated at the average exchange
rate of the current period on transaction date. When disposing an overseas business, the Company
shall shift the balance, which arisen form the translation of foreign currency financial statements
related to this oversea business, into the disposal profits and losses of the current period. If the
overseas business is disposed of partially, the Company shall calculate based on the disposal rate.
The balance arisen from the translation of foreign currency financial statements in compliance
with the aforesaid methods shall be presented separately under the owner’s equity item of the
balance sheets.
Cash flow statement expressed at foreign currency shall be translated at the average exchange rate
of current period on the cash flow date. The influence on cash due to change of exchange rate
shall be presented separately under the cash flow statement.
7. Financial instruments
(1) Recognition thereunder of financial instruments
Recognition thereunder of financial instruments: When the Company becomes a party to a
financial instrument.
(2) Classification of financial instruments
Financial assets held by the Company shall be classified into the following four categories based
on investment objective and economic entity: 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 measured at their fair
values and of which the variation is included in the current profits and losses; ② held-to-maturity
investments; ③ loans and the account receivables; and ④ financial assets available for sale.
Financial liabilities burden by the Company shall be classified into the following two categories
based on economic entity:① the financial liabilities which are measured at their fair values and of
which the variation is included in the current profits and losses, including transactional financial
liabilities and the designated financial liabilities which are measured at their fair values and of
which the variation is included in the current profits and losses; and ② other financial liabilities.
(3) Measurement of financial instruments
① For financial assets and financial liabilities measured at their fair values and of which the
variation is recorded into the profits and losses of the current period
The initial amount of the financial assets and financial liabilities shall be recognized at fair value
(excluding cash dividends that have been declared but not yet distributed or bond interests that
have matured but not yet received) when they are acquired. The transaction expense thereof shall
be directly recorded into the profits and losses of the current period. The interests or cash
dividends acquired, during the holding period, shall be recognized as investment income, and at
the end of reporting period, the change in the fair value shall be recorded into the profits and
losses of the current period. When financial assets and financial liabilities are disposed, the
balance between fair value and initial amount shall be recognized as investment income, at thesame time, the profits and losses arising from the change in the fair value of financial assets and
financial liabilities shall be adjusted.
② Held-to-maturity investments
When held-to-maturity investments are acquired, its initial amount shall be recognized the sum
between the fair value (excluding bond interests that have matured but not yet received) and the
transaction expense thereof. The interest on bonds in payment, of which the mature interest is not
drawn, shall be solely recognized as the receivables.
During the holding period, interest income is recognized as investment income based on amortized
cost and actual interest rate (where there is very small gap between actual interest rate and
nominal rate of which interests income shall be measured at the nominal rate). The actual interest
rate is determined upon acquisition and remains unchanged during the expected holding period or
a shorter period for applicable.
When held-to-maturity investments are disposed, the difference between the acquired price and
investment book value shall be recorded into the investment income.
③ Accounts receivable
The creditor’s rights arising from selling goods or providing service by the Company and other
creditor’s rights to other enterprises held by the company that are not quoted in an active market,
including accounts receivable, notes receivable, other receivables, long-term receivables, etc., the
contract or agreement price should be taken as the initial recognition amount. If it has the nature of
financing, it shall be recognized by present value.
Difference between the amount received and book value of the receivables shall be included into
the profit or loss of the current period upon collection or disposal.
④ Available-for-sale financial assets
When available-for-sale financial assets are acquired, its initial amount shall be recognized at the
fair value (excluding cash dividends that have been declared but not yet distributed or bond
interests that have matured but not yet received) plus transaction expense thereof. The interests or
cash dividends acquired, during the holding period, shall be recognized as investment income. At
the end of reporting period, it shall be measured at the fair value and the change in fair value
thereof shall be recorded into the capital reserves (Other Capital Reserves). Difference between
the amount received and the book value of the financial assets shall be recognized as investment
gain or loss upon disposal. Meanwhile, the accumulated changes in fair value previously
recognized in the owners’ equity are transferred into investment gain or loss.
⑤ Other financial liabilities
Other financial liabilities shall be initially recognized at fair value plus transaction costs. The
subsequent measurement shall be made by adopting amortized costs, with the exception of those
under the following circumstances:
A. For the derivative financial liabilities, which are connected to the equity instrument for which
there is no quotation in the active market and whose fair value cannot be reliably measured, and
which must be settled by delivering the equity instrument, they shall be measured on the basis of
their costs.B. For the financial guarantee contracts which are not designated as a financial liability measured
at its fair value and the variation thereof is recorded into the profits and losses of the current
period, and for the commitments to grant loans which are not designated to be measured at the fair
value and of which the variation is recorded into the profits an losses of the current period and
which will enjoy an interest rate lower than that of the market, a subsequent measurement shall be
made after they are initially recognized according to the higher one of the following:
a. the amount as determined according to the Accounting Standard for Business Enterprise No. 13
– contingencies; or
b. the surplus after accumulative amortization as determined according to the principles of the
Accounting Standard for Business Enterprises No. 14 – Revenues is subtracted from the initially
recognized amount.
(4) Recognition and measurement of transfer of financial assets
Where an enterprise has transferred nearly all of the risks and rewards relating to the ownership of
the financial asset to the transferee, it shall stop recognizing the financial asset. If it retains nearly
all of the risks and rewards relating to the ownership of the financial asset, it shall not stop
recognizing the financial asset.
Substance over form philosophy should be adopted to determine whether the transfer of a financial
asset can satisfy the conditions as described in these Standards for de-recognition of a financial
asset. An enterprise shall differentiate the transfer of a financial asset into the entire transfer and
the partial transfer of financial assets.
If the transfer of an entire financial asset satisfies the conditions for stop recognition, the
difference between the amounts of the following 2 items shall recorded in the profits and losses of
the current period:
i) The carrying amount of the transferred financial asset;
ii) The aggregate consideration received from the transfer, and the accumulative amount of the
changes of the fair value originally recorded in the owner’s equities (in the event that the financial
asset involved in the transfer is a financial asset available for sale).
If the transfer of partial financial asset satisfies the conditions for stopping recognition, the
carrying amount of the entire financial asset transferred shall be allocated at their respective
relevant fair value, between the portion whose recognition has stopped and the portion whose
recognition has not stopped, and the difference between the amounts of the following 2 items:
i) The carrying amount of the portion whose recognition has stopped;
ii) The aggregate consideration of the portion whose recognition has stopped, and the portion of
the accumulative amount of the changes in the fair value originally recorded in the owner’s
equities which is corresponding to the portion whose recognition has stopped (in the event that the
financial asset involved in the transfer is a financial asset available for sale).
The transfer of financial assets does not meet the de-recognition condition, the financial assets
shall continue to be recognized, and the consideration received will be recognized as financial
liabilities.
(5) Determination of the fair value of financial instruments
① 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 shall be determined based on the following principles:a. In the active market, the quoted prices of the Company for the financial assets it holds or the
financial liabilities it plans to assume shall be the present actual offer, while the quoted prices of
the Company for the financial assets it plans to acquire or the financial liabilities it has assumed
shall be the available charge.
b. Where there is no available offer or charge for a financial asset or financial liability, the
Company shall adopt the market quoted price of the latest transaction or the market quoted price
of the latest transaction after adjustment to determine the fair value of the said financial asset or
financial liability, otherwise that the Company has adequate evidences to prove that the market
quoted price of the latest transaction is not a fair value.
② Where there is no active market for financial assets and financial liabilities, the Company
concerned shall adopt value appraisal techniques to determine its fair value.
(6) Impairment of financial assets
The Company shall carry out an inspection, on the balance sheet date, on the carrying amount of
the financial assets. Where there is any objective evidence proving that such financial asset has
been impaired, an impairment provision shall be made. The expression “objective evidence
proving that the financial asset has been impaired” refers to the actually incurred events which,
after the financial asset is initially recognized, have an impact on the predicted future cash flow of
the said financial asset that can be reliably measured by the enterprise.
① Held-to-maturity investments
Where held-to-maturity investments measured on the basis of post-amortization costs is impaired,
the carrying amount of the said held-to-maturity investments shall be written down to the current
value (discount rate is by adopting the original actual interest rate) of the predicted future cash
flow (excluding the loss of future credits not yet occurred), and the amount as written down shall
be recognized as loss of the impairment of the asset and shall be recorded into the profits and
losses of the current period. An independent impairment test shall be made on the held-to-maturity
investments with significant single amounts. With regard to the held-to-maturity investments with
insignificant single amounts, they may be included in a combination of held-to-maturity
investments with similar credit risk features so as to carry out an impairment-related test. Where,
upon independent test, the held-to-maturity investments has not been impaired, it shall be included
in a combination of held-to-maturity investments with similar risk features so as to conduct
another impairment test. The held-to-maturity investments which have suffered from an
impairment loss in any single amount shall not be included in any combination of held-to-maturity
investments with similar risk features for any impairment test.
② Accounts receivable
For withdrawal method of impairment for accounts receivable, please refer to Note IV. Accounts
receivable.
③Available-for-sale financial asset
If the fair value of financial assets available for sale has greatly dropped at the end of reporting
period, or after considering of all the relevant factors and expecting decrease trend is
non-temporary, the impairment should be recognized at the variation that the fair value is lower
than carrying value, and the provision for impairment shall be withdrawn, when confirming
impairment, accumulated losses due to decreases in fair value previously recognized directly in
capital reserve are reversed and charged to profit or loss for the current period.
④ OtherWhere the impairment-related losses 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 and
which shall be settled by delivering the said equity instrument, the balance between the equity
instrument investment or the derivative financial asset’s book value and the present value
confirmed according to similar financial assets’ current market yield against future cash flow
discount should be confirmed as a depreciation loss and reckoned in the period’s gains and losses.
After the impairment-related losses 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, may not be
reversed.
8. Accounts receivable
(1) Recognition of provision for bad debts:
The Company shall test the book value of accounts receivable on the balance sheet date. Where
there is any objective evidence proving that such accounts receivable has been impaired, an
impairment provision shall be made.
① debtor has serious financial difficult;
② debtor goes against the contract clause (for instance, breach of faith or overdue paying interests
or principal);
③ debtors have a great probability of bankruptcy or other financial reorganization;
④ other objective evidence proving such accounts receivable has been impaired;
(2) Withdrawal method of provision for bad debt
On the balance sheet date, an independent impairment test shall be carried out on the
accounts receivable with significant single amounts (the balance over RMB 5 million) and
accounts receivable with insignificant single amounts but with high credit risk Group. If any
objective evidence shows that the accounts receivable has been impaired, impairment loss shall be
recognized on the basis of the gap between the current values of the future cash flow lower than its
carrying value so as to withdraw provision for bad debts. Accounts receivable with insignificant
single amounts and ones that has not be impaired through independent impairment test shall be
divided into several combinations in the light of aging, and then the impairment loss shall be
recognized on the basis of a certain proportion of closing balance of accounts receivable
combination so as to withdraw provision for bad debts. If there is small difference between
predicted future cash flow of short-term accounts receivable and its current value, the predicted
future cash flow shall not be discounted when confirming relevant impairment loss Withdrawing
proportion of bad debts are as below:
Aging
Accounts
receivable Other receivables Aging
Within 1 year (including 1 year, the same below) 5% 5%
1-2 years 10% 10%2-3 years 20% 20%
Over 3 years 30% 30%
(3) If there is any objective evidence proving that the value of the said accounts receivable has
been restored, and it is objectively related to the events that occur after such loss is recognized, the
impairment-related losses as originally recognized shall be reversed and be recorded into the
profits and losses of the current period. However, the reversed carrying amount shall not be any
more than the post-amortization costs of the said accounts receivable on the day of reverse under
the assumption that no provision is made for the impairment.
9. Inventory
(1) Classification
Inventories of the Company are classified as: raw materials, goods in process, processing
materials on consignment and merchandise inventory etc.
(2) Pricing method of outgoing and obtaining inventories
The inventories shall be measured in light of their cost when obtained. The cost of inventory
consists of purchase costs, processing costs and other costs. A raw material is accounted as per the
planned cost. The difference between planned cost of and actual cost of raw materials is accounted
through the cost variance item, and the planned cost is adjusted to the actual cost according to the
cost difference which the carryover and given-out inventory should shoulder in the period. Other
inventories shall be measured in line with weighted average method when obtained and outgone.
(3) Recognition standard and withdrawal method of depreciation reserves for inventories
On the balance sheet date, the inventories shall be measured according to the cost or the net
realizable value, whichever is lower.
The net realizable value refers, in the ordinary course of business, to the account after deducting
the estimated cost of completion, estimated sale expense and relevant taxes from the estimated
sale price of inventories. Of which: ①Finished goods, merchandise inventories, and available for
sale materials which are applied directly for sales of stock inventory, under normal producing
process, to the amount after deducting the estimated sale expense and relevant taxes from the
estimated sell price of the inventory, the net realizable value has been recognized. ② Material
inventories which need to be processed, under normal producing process, to the amount after
deducting the estimated cost of completion, estimated sale expense and relevant taxes from the
estimated sale price of produced finished goods, the net realizable value has been recognized. ③
The net realizable value of inventories held for the execution of a sales contract or labor contract
shall be calculated on the basis of the contract price. If an enterprise holds more inventories than
the quantities subscribed in the sales contract, the net realizable value of the excessive inventories
shall be calculated on the basis of the general sales price.
The Company shall make provision for loss on decline in value of inventories on the basis of each
item of inventories at the yean-end.
On the balance sheet date, where the cost of inventories is higher than its net realizable value, the
provision for loss on decline in value of inventories shall be made, which recorded into the profits
and losses of the current period. If the factors, which cause any write-down of the inventories,
have disappeared, the amount of write-down shall be resumed and shall be reversed from the
provision for the loss on decline in value of inventories which has been made. The reversed
amount shall be included in the profits and losses of the current period.(4) Inventory system for inventories: Perpetual inventory system.
(5) Amortization method of the low-value consumption goods and packing articles
The Company shall amortize the low-value consumption goods and packing through the one-off
amortization method.
10. Long-term equity investment
(1) As for the long-term equity investment formed in business combinations under the same
control, the initial cost shall be ascertained at the share of the book value of the owner's equity of
the merged enterprise. For the long-term equity investment formed in business combinations
under different control, the merging party shall make initial measurement to at the merger costs
ascertained. For long-term equity investment through other methods, the initial costs shall be
recognized by difference acquisition method, e.g. the cash paid actually, the fair value of the
equity securities issued, the value stipulated in the investment contract or agreement. The initial
cost consists of the expenses directly relevant to the obtainment of the long-term equity
investment, taxes and other necessary expenses.
As for the long-term equity investment formed in business combinations under the same control,
the Company shall, on the date of merger, regard the share of the book value of the owner's equity
of the merged enterprise as the initial cost of the long-term equity investment. The variation
between the initial investment cost of the long-term equity investment and the book value of
combined consideration paid (or total par value of shares issued) shall offset against the capital
reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. The
direct related costs occurred for the business combination of the combining party shall be included
into the profit and loss of current accounting period at the time of merger. The bonds issued for a
business combination or the handling fees and commissions for assuming other liabilities shall be
recorded into the amount of initial measurement of bonds issued and other debts. The handling
fees and commissions for the issuance of equity securities for the business combination shall be
shall offset against the surplus of equity securities. If the surplus is insufficient to dilute, the
retained earnings shall be offset.
As for the long-term equity investment formed in business combinations not under the same
control, the Company shall, on the acquisition date, regard the combination costs as the initial cost
of long-term equity investment. The combination costs shall be the fair values, on the acquisition
date, of the assets paid, the liabilities incurred or assumed and the equity securities issued by the
Company in exchange for the control on the acquiree, and all relevant direct costs incurred to the
acquirer for the business combination. For a business combination realized by two or more
transactions of exchange, the combination costs shall be the summation of the costs of all separate
transactions. Where any future event that is likely to affect the combination costs is stipulated in
the combination contract or agreement, if it is likely to occur and its effects on the combination
costs can be measured reliably, the acquirer shall record the said amount into the combination
costs. The bonds issued for a business combination or the handling fees and commissions for
assuming other liabilities shall be recorded into the amount of initial measurement of bonds issued
and other debts. The handling fees and commissions for the issuance of equity securities for the
business combination shall be shall offset against the surplus of equity securities. If the surplus is
insufficient to dilute, the retained earnings shall be offset.
The initial cost of a long-term equity investment obtained by making payment in cash shall be the
purchase cost which is actually paid. The initial cost consists of the expenses directly relevant tothe obtainment of the long-term equity investment, taxes and other necessary expenses.
The initial cost of a long-term equity investment obtained on the basis of issuing equity securities
shall be the fair value of the equity securities issued.
The initial cost of a long-term equity investment of an investor shall be the value stipulated in the
investment contract or agreement except the unfair value stipulated in the contract or agreement.
The initial cost of a long-term investment obtained by the exchange of non-monetary assets shall
be ascertained in accordance with the Accounting Standards for Enterprises No. 7 - Exchange of
Non-monetary Assets.
The initial cost of a long-term equity investment obtained by recombination of liabilities shall be
ascertained in accordance with Accounting Standards for Enterprises No. 12 - Debt Restructuring.
The Company makes the corporate system restructuring, therefore, the book value of assets and
liabilities are adjusted at the appraisal value, resulting in recognition of initial investment cost of
long-term equity investment at the appraisal value.
Besides all relevant direct costs incurred for the business combination, the initial cost of long-term
equity investment obtained by other means consists of the expenses directly relevant to the
obtainment of the long-term equity investment, taxes and other necessary expenses.
Where cash dividends that have been declared but not yet distributed and profits are included into
the consideration paid as acquiring investment, it shall be recognized receivables, instead of the
initial cost of the long-term equity investment.
(2) Subsequent measurement of long-term equity investment and recognized method of
investment income
① The long-term equity investment of the Company that is able to control the invested enterprise
and which of the Company that does not do joint control or does not have significant influences on
the invested entity, and has no offer in the active market and its fair value cannot be reliably
measured, it shall be measured by employing the cost method.
The price of a long-term equity investment measured by employing the cost method shall be
included at its initial investment cost. If there are additional investments or disinvestments, the
cost of the long-term equity investment shall be adjusted. The dividends or profits declared to
distribute by the invested entity shall be recognized as the current investment income.
② A long-term equity investment of the Company that does joint control or significant influences
over the invested entity shall be measured by employing the 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 the 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.
After the Company obtains a long-term equity investment, it shall, in accordance with the
attributable share of the net profits or losses of the invested entity, recognize the investment profits
or losses and adjust the book value of the long-term equity investment. The Company shall, in the
light of the profits or cash dividends declared to distribute by the invested entity, calculate the
proportion it shall obtain, and shall reduce the book value of the long-term equity investment
correspondingly.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, unless the investing enterprise has
the obligation to undertake extra losses. If the invested entity realizes any net profits later, the
investing enterprise shall, after the amount of its attributable share of profits offsets against its
attributable share of the un-recognized losses, resume to recognize its attributable share of profits.
Where any change is made to the owner's equity other than the net profits and losses of the
invested entity, the book value of the long-term equity investment shall be adjusted and be
included in the owner's equity. Where the said investment is disposed, the part that is included in
the owner’s equity (only included in capital reserve) shall be transferred into the profit and loss of
the current period by the proportion.
(3) Recognition basis of joint control and significant influences
①Recognition basis of joint control: any a joint venture party can not individually control
production and operation activities of the joint venture enterprise. The decision-making involved
in basic operation activities of the joint venture enterprise shall be needed to make consensus of
opinion by each joint venture party.
② Recognition basis of significant influences: where the Company directly or indirectly through
subsidiary company holds over 20% (including 20%) but no more than 50% of voting shares of
invested enterprise shall be confirmed the significant influence on the invested enterprise except
that there is any evidence proving that the Company can not enjoy the production and operation
decision-making of invested enterprise under such situation. Where the Company holds no more
than 20% (excluding 20%) of voting shares of invested enterprise shall be confirmed the no
significant influence on invested enterprise. But the Company shall be confirmed as significant
influence on invested enterprise when the following situations are accorded with:
A. appointed representative in the Board of Directors and power department; B. participated in the
course of policies establishment of invested enterprise; C. the material transaction occurred
between the Company and invested enterprise; D. appointed management person to invested
enterprise; E. provided the key technology information to invested enterprise.
(4) Testing of impairment and withdrawal method of provision for impairment
The Company shall, on the day of balance sheet, make a judgment on whether there is any sign of
possible impairment of the long-term equity investment according to the following materials.
Where there is sign of impairment, the Company shall estimate the recoverable amount of the
long-term equity investment and made impairment testing.
1 The current market price of long-term equity investment falls, and its decrease is obviously
higher than the expected drop over time or due to the normal use;
2 The economic, technological or legal environment in which the Company operates, or the
market where the long-term equity investment is situated will have any significant change in
the current period or in the near future, which will cause adverse impact on the enterprise;
3 The market interest rate or any other market investment return rate has risen in the current
period, and thus the discount rate of the Company for calculating the expected future cash
flow of the long-term equity investment will be affected, which will result in great decline of
the recoverable amount of the long-term equity investment;
4 The long-term equity investment have been or will be left unused, or terminated for use, or
disposed ahead of schedule;5 Any evidence in the internal report of the Company shows that the economic performance of
the long-term equity investment have been or will be lower than the expected performance,
for example, the net cash flow created by long-term equity investment or the operating profit
(or loss) realized is lower (higher) than the excepted amount, etc.; and
6 Other evidence indicates that the impairment of long-term equity investment has probably
occurred.
The recoverable amount shall be determined in light of the higher one of the net amount of the fair
value of the long-term equity investment minus the disposal expenses and the current value of the
expected future cash flow of the long-term equity investment. The Company shall, on the basis of
single item long-term equity investment, estimate recoverable amount.
Where the recoverable amount of single item long-term equity investment is lower than its
carrying value, the carrying value of the long-term equity investment shall be recorded down to
the recoverable amount, and the reduced amount shall be recorded as the profit or loss for the
current period. Simultaneously, a provision for the impairment of the long-term equity investment
shall be made accordingly.
Once any loss of impairment of the long-term equity investment is recognized, it shall not be
switched back in the future accounting periods.
11. Investment real estates
The Company’s investment real estates consist of the right to use any land which has already been
rented; the right to use any land which is held and prepared for transfer after appreciation; and the
right to use any building which has already been rented.
The Company shall make a follow-up measurement to the investment real estates through the cost
pattern. As for investment properties that its follow-up measurement shall be made by employing
the cost pattern, its depreciation policy and amortization shall be the same as ones of same or
similar fixed assets and intangible assets.
The Company shall, on the day of balance sheet, make a judgment on whether there is any sign of
possible impairment of the investment real estates according to the following materials. Where
there is sign of impairment, the Company shall estimate the recoverable amount of the investment
real estates and made impairment testing.
1 The current market price of investment real estates falls, and its decrease is obviously higher
than the expected drop over time or due to the normal use;
2 The economic, technological or legal environment in which the Company operates, or the
market where the investment real estates is situated will have any significant change in the
current period or in the near future, which will cause adverse impact on the enterprise;
3 The market interest rate or any other market investment return rate has risen in the current
period, and thus the discount rate of the Company for calculating the expected future cash
flow of the investment real estates will be affected, which will result in great decline of the
recoverable amount of the investment real estates;
4 Any evidence shows that the investment real estates have become obsolete or have been
damaged substantially;
5 The investment real estates have been or will be left unused, or terminated for use, or disposed
ahead of schedule;
6 Any evidence in the internal report of the Company shows that the economic performance of
the investment real estates have been or will be lower than the expected performance, forexample, the net cash flow created by investment real estates or the operating profit (or loss)
realized is lower (higher) than the excepted amount, etc.; and
7 Other evidence indicates that the impairment of investment real estates has probably occurred.
The recoverable amount shall be determined in light of the higher one of the net amount of the fair
value of the investment real estates minus the disposal expenses and the current value of the
expected future cash flow of the investment real estates. The Company shall, on the basis of single
item investment real estates, estimate recoverable amount.
Where the recoverable amount of single item investment real estates is lower than its carrying
value, the carrying value of the investment real estates shall be recorded down to the recoverable
amount, and the reduced amount shall be recorded as the profit or loss for the current period.
Simultaneously, a provision for the impairment of the investment real estates shall be made
accordingly. Once any loss of impairment of the investment real estates is recognized, it shall not
be switched back in the future accounting periods.
12. Fixed assets
(1)Recognized standard of fixed assets
The term "fixed assets" refers to the tangible assets that simultaneously possess the features as
follows: they are held for the sake of producing commodities, rendering labor service, renting or
business management; and their useful life is in excess of one fiscal year. No fixed asset may be
recognized unless it simultaneously meets the conditions as follows: ① The economic benefits
pertinent to the fixed asset are likely to flow into the enterprise; and ② The cost of the fixed asset
can be measured reliably.
(2) Category of fixed assets and depreciation
The Company shall withdraw the depreciation of fixed assets by adopting the straight-line method.
Useful life, expected net salvage value and annual depreciation rate of each fixed assets are as
below:
Category of fixed assets depreciation life (Y)
Expected net
salvage value（%）
Annual
deprecation rate
（%）
Housing and building 5-20 5-10% 19.00-4.50
Machinery equipments 10-13 5-10% 6.92-9.50
Electronic equipments
and other
5
5-10%
19.00-18.00
Transportation vehicle 5 5-10% 19.00-18.00
As for the fixed assets, the provision for depreciation has been made, its withdrawal method of
depreciation: For a fixed asset, the provision for depreciation has been made, it shall be withdrawn
depreciation in the light of the amount after deducting expected net salvage value, depreciation
withdrawn and impairment provision from original value of such fixed assets and the remained
useful life. As for the fixed assets, its expected conditions for use has been reached but not handle
completion settlement, its cost shall be confirmed in the light of estimated value and withdrew
depreciation; after completion settlement, the original estimated value shall be adjusted in line
with the actual cost, but original depreciation withdrawn shall not be adjusted.
At least, the Company shall make recheck to useful life, expected net salvage value and
depreciation method of the fixed assets when the end of each accounting year, if necessary, the
Company shall make adjustment.(3) Testing of impairment and withdrawal method of provision for impairment
The Company shall, on the day of balance sheet, make a judgment on whether there is any sign of
possible impairment of the fixed assets according to the following materials. Where there is sign
of impairment, the Company shall estimate the recoverable amount of the fixed assets and made
impairment testing.
1 The current market price of fixed assets falls, and its decrease is obviously higher than the
expected drop over time or due to the normal use;
2 The economic, technological or legal environment in which the Company operates, or the
market where the fixed assets is situated will have any significant change in the current period
or in the near future, which will cause adverse impact on the enterprise;
3 The market interest rate or any other market investment return rate has risen in the current
period, and thus the discount rate of the Company for calculating the expected future cash
flow of the fixed assets will be affected, which will result in great decline of the recoverable
amount of the fixed assets;
4 Any evidence shows that the fixed assets have become obsolete or have been damaged
substantially;
5 The fixed assets have been or will be left unused, or terminated for use, or disposed ahead of
schedule;
6 Any evidence in the internal report of the Company shows that the economic performance of
the fixed assets have been or will be lower than the expected performance, for example, the
net cash flow created by fixed assets or the operating profit (or loss) realized is lower (higher)
than the excepted amount, etc.; and
7 Other evidence indicates that the impairment of fixed assets has probably occurred.
The recoverable amount shall be determined in light of the higher one of the net amount of the fair
value of the fixed assets minus the disposal expenses and the current value of the expected future
cash flow of the fixed assets. The Company shall, on the basis of single item fixed assets, estimate
recoverable amount. Where it is difficult to do so, it shall determine the recoverable amount of the
group assets on the basis of the asset group to which the asset belongs. The recognition of an asset
group shall base on whether the main cash inflow generated by the asset group is independent of
those generated by other assets or other group assets.
Where the recoverable amount of single item fixed assets or asset group to which the asset belongs
is lower than its carrying value, its carrying value shall be recorded down to the recoverable
amount, and the reduced amount shall be recorded as the profit or loss for the current period.
Simultaneously, a provision for the impairment of the fixed assets shall be made accordingly.
Once any loss of impairment of the fixed assets is recognized, it shall not be switched back in the
future accounting periods.
(4) Fixed assets by financing leased
For recognized basis, pricing method and depreciation method of fixed assets by financing lease,
please refer to “Note IV. Lease”.
13. Constructions in progress
The Company’s constructions in progress include the preliminary works, constructional
engineering, erection works and technical innovation projects, as well as major repair works etc.,
which shall be priced in the light of the actual cost. Constructions in progress shall be carried
down to fixed assets according to their actual costs when completing and achieving estimatedusable status.
The Company shall, on the day of balance sheet, make a judgment on whether there is any sign of
possible impairment of the constructions in progress according to the following materials. Where
there is sign of impairment, the Company shall estimate the recoverable amount of the
constructions in progress and made impairment testing.
1 The current market price of constructions in progress falls, and its decrease is obviously
higher than the expected drop over time or due to the normal use;
2 The economic, technological or legal environment in which the Company operates, or the
market where the constructions in progress is situated will have any significant change in the
current period or in the near future, which will cause adverse impact on the enterprise;
3 The market interest rate or any other market investment return rate has risen in the current
period, and thus the discount rate of the Company for calculating the expected future cash
flow of the constructions in progress will be affected, which will result in great decline of the
recoverable amount of the constructions in progress;
4 Any evidence shows that the constructions in progress have become obsolete or have been
damaged substantially;
5 The constructions in progress have been or will be left unused, or terminated for use, or
disposed ahead of schedule;
6 Any evidence in the internal report of the Company shows that the economic performance of
the constructions in progress have been or will be lower than the expected performance, for
example, the net cash flow created by constructions in progress or the operating profit (or loss)
realized is lower (higher) than the excepted amount, etc.; and
7 Other evidence indicates that the impairment of constructions in progress has probably
occurred.
The recoverable amount shall be determined in light of the higher one of the net amount of the fair
value of the constructions in progress minus the disposal expenses and the current value of the
expected future cash flow of the fixed assets. The Company shall, on the basis of single item
constructions in progress, estimate recoverable amount. Where it is difficult to do so, it shall
determine the recoverable amount of the group assets on the basis of the asset group to which the
constructions in progress belongs. The recognition of an asset group shall base on whether the
main cash inflow generated by the asset group is independent of those generated by other assets or
other group assets.
Where the recoverable amount of single item constructions in progress or asset group to which the
constructions in progress belongs is lower than its carrying value, its carrying value shall be
recorded down to the recoverable amount, and the reduced amount shall be recorded as the profit
or loss for the current period. Simultaneously, a provision for the impairment of the constructions
in progress shall be made accordingly. Once any loss of impairment of the constructions in
progress is recognized, it shall not be switched back in the future accounting periods.
14. Borrowing costs
The term "borrowing costs" refers to the interest and other relevant costs, which are incurred by an
enterprise in the borrowing of loans, including interest on borrowings, amortization of discounts
or premiums on borrowings, ancillary expenses, and exchange balance on foreign currency
borrowings. Where the borrowing costs incurred to the Company can be directly attributable to the
acquisition and construction or production of assets eligible for capitalization, it shall becapitalized and recorded into the costs of relevant assets. Other borrowing costs shall be
recognized as expenses on the basis of the actual amount incurred, and shall be recorded into the
current profits and losses.
(1) Recognition principle of capitalization of borrowing costs
The borrowing costs shall not be capitalized unless they simultaneously meet the following
requirements:
a. The asset disbursements have already incurred;
b. The borrowing costs has already incurred; and
c. The acquisition and construction or production activities which are necessary to prepare the
asset for its intended use or sale have already started.
(2) Capitalization period
The capitalization period shall refer to the period from the commencement to the cessation of
capitalization of the borrowing costs, excluding the period of suspension of capitalization of the
borrowing costs.
Where the acquisition and construction or production of a qualified asset is interrupted abnormally
and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs
shall be suspended. The borrowing costs incurred during such period shall be recognized as
expenses, and shall be recorded into the profits and losses of the current period, till the acquisition
and construction or production of the asset restarts. If the interruption is a necessary step for
making the qualified asset under acquisition and construction or production ready for the intended
use or sale, the capitalization of the borrowing costs shall continue.
When the qualified asset under acquisition and construction or production is ready for the intended
use or sale, the capitalization of the borrowing costs shall be ceased. The borrowing costs incurred
after the qualified asset under acquisition and construction or production is ready for the intended
use or sale shall be recognized as expenses at the incurred amount when they are incurred, and
shall be recorded into the profits and losses of the current period.
(3) Measurement of capitalization amount
During the period of capitalization, the to-be-capitalized amount of interests (including the
amortization of discounts or premiums) in each accounting period shall be determined according
to the following provisions:
a. As for specifically borrowed loans for the acquisition and construction or production of assets
eligible for capitalization, the to-be-capitalized amount of interests shall be determined in
light of the actual cost incurred of the specially borrowed loan at the present period minus the
income of interests earned on the unused borrowing loans as a deposit in the bank or as a
temporary investment.
b. Where a general borrowing is used for the acquisition and construction or production of assets
eligible for capitalization, the enterprise shall calculate and determine the to-be-capitalized
amount of interests on the general borrowing by multiplying the weighted average asset
disbursement of the part of the accumulative asset disbursements minus the general borrowing
by the capitalization rate of the general borrowing used. The capitalization rate shall be
calculated and determined in light of the weighted average interest rate of the general
borrowing.
15. Intangible assets
(1) Initial measurementThe intangible assets shall be initially measured according to its cost. The actual cost shall be
recognized on the basis on the following principles:
1 The cost of outsourcing intangible assets shall include the purchase price, relevant taxes and
other necessary expenditures directly attributable to intangible assets for the expected
purpose. Where the payment of purchase price for intangible assets is delayed beyond the
normal credit conditions, which is of financing intention, the cost of intangible assets shall be
determined on the basis of the current value of the purchase price. The difference between the
actual payment and the current value of the purchase price shall be recorded into profit or loss
for the credit period, unless it shall be capitalized under the Accounting Standards for
Enterprises No. 17 - Borrowing Cost.
2 The cost invested into intangible assets by investors shall be determined according to the
conventional value in the investment contract or agreement, except for those of unfair value in
the contract or agreement.
3 The cost of self-developed intangible assets shall include the total expenditures incurred
during the period from the time when it meets the provisions of recognition of intangible
assets to the time when the expected purposes of use are realized, except that the expenditures
which have already been treated prior to the said period shall not be adjusted.
4 The costs of intangible assets acquired from non-monetary assets transaction, debt
recombination, government subsides, and merger of enterprises shall be determined
respectively according to the Accounting Standard for Business Enterprises No. 7 -Exchange
of non-monetary assets, Accounting Standard for Business Enterprises No. 12 - Debt
Restructurings, Accounting Standard for Business Enterprises No. 16 - Government Grants
and Accounting Standard for Business Enterprises No. 20 -Business Combinations.
(2) Subsequent measurement
The Company shall analyze and judge the service life of intangible assets, when it obtains
intangible assets. The service lift of the intangible assets shall be recognized based on the period
when the intangible asset can bring economic benefits to the Company. If it is unable to forecast
the period when the intangible asset can bring economic benefits to the Company, it shall be
regarded as an intangible asset with uncertain service life.
As for intangible assets being derived from any contractual right or other statutory rights
possessed or controlled by the Company, the useful life of intangible assets can not exceed the
time limit regulated by contractual right or other statutory rights. If the contractual right or other
statutory right is renewed at maturity, and there is evidence shows that the Company has not to
pay a large sum of costs, the renewal term shall be included into the service life. If useful life is
not be regulated by contractual right or other statutory rights, the Company shall synthesize each
factors to determine term of economic benefit is expected to be brought by some intangible assets
to the Company. If term of economic benefit is expected to be brought by some intangible assets
to the Company is still not be confirmed according to the above method, such intangible assets
shall be regarded as intangible asset with uncertain useful life.
With regard to intangible assets with limited service life, its amortization amount shall be
amortized within its service life systematically and reasonably. The Company amortizes intangible
assets by the straight-line method.
The reasonable amortization amount of intangible assets shall be its cost minus the expected
residual value. For intangible assets with an impairment provision, the accumulative amount ofimpairment provision shall be deducted from the cost as well. The amortized amount of intangible
assets shall be recorded into profit or loss for the current period. Intangible assets with uncertain
service life may not be amortized.
The Company shall, at the end of each year, check the service life and the amortization method of
intangible assets with limited service life, which shall be adjusted if desired.
The Company shall check the service life of intangible assets with uncertain service life during
each accounting period. Where there are evidences to prove the intangible assets have limited
service life, it shall be treated according to the above policies applicable to intangible assets with
limited service life.
(3) Expenditures for research and development
The expenditures for its internal research and development projects of the Company shall be
classified into research expenditures and development expenditures. The term "research
expenditures" refers to expenditures occurred for the creative and planned investigation to acquire
and understand new scientific or technological knowledge. The research expenditures for its
internal research and development projects of the Company shall be recorded into the profit or
loss for the current period. The term "development expenditures" refers to expenditures for the
application of research achievements and other knowledge to a certain plan or design, prior to the
commercial production or use, so as to produce any new material, device or product, or
substantially improved material, device and product. The development expenditures for its internal
research and development projects of the Company may be capitalized when they satisfy the
following conditions simultaneously:
a. It is feasible technically to finish intangible assets for use or sale;
b. It is intended to finish and use or sell the intangible assets;
c. 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;
d. 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; and
e. The development expenditures of the intangible assets can be reliably measured.
(4) Testing of impairment and withdrawal method of provision for impairment
The Company shall, on the day of balance sheet, make a judgment on whether there is any sign of
possible impairment of the intangible assets according to the following materials. Where there is
sign of impairment, the Company shall estimate the recoverable amount of the intangible assets
and made impairment testing. Intangible assets with uncertain service life shall be made an
impairment testing at the end of every accounting year no matter whether there is sign of
impairment.
1 The current market price of intangible assets falls, and its decrease is obviously higher than
the expected drop over time or due to the normal use;
2 The economic, technological or legal environment in which the Company operates, or the
market where the intangible assets is situated will have any significant change in the current
period or in the near future, which will cause adverse impact on the enterprise;
3 The market interest rate or any other market investment return rate has risen in the current
period, and thus the discount rate of the Company for calculating the expected future cashflow of the intangible assets will be affected, which will result in great decline of the
recoverable amount of the intangible assets;
4 Any evidence shows that the intangible assets have become obsolete or have been damaged
substantially;
5 The intangible assets have been or will be left unused, or terminated for use, or disposed
ahead of schedule;
6 Any evidence in the internal report of the Company shows that the economic performance of
the intangible assets have been or will be lower than the expected performance, for example,
the net cash flow created by intangible assets or the operating profit (or loss) realized is lower
(higher) than the excepted amount, etc.; and
7 Other evidence indicates that the impairment of intangible assets has probably occurred.
The recoverable amount shall be determined in light of the higher one of the net amount of the fair
value of the intangible assets minus the disposal expenses and the current value of the expected
future cash flow of the intangible assets. The Company shall, on the basis of single item intangible
assets, estimate recoverable amount. Where it is difficult to do so, it shall determine the
recoverable amount of the group assets on the basis of the asset group to which the intangible
assets belongs. The recognition of an asset group shall base on whether the main cash inflow
generated by the asset group is independent of those generated by other assets or other group
assets.
Where the recoverable amount of single item intangible assets or asset group to which the
intangible assets belongs is lower than its carrying value, its carrying value shall be recorded down
to the recoverable amount, and the reduced amount shall be recorded as the profit or loss for the
current period. Simultaneously, a provision for the impairment of the intangible assets shall be
made accordingly. Once any loss of impairment of the intangible assets is recognized, it shall not
be switched back in the future accounting periods.
16. 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.
Long-term deferred expense shall be recoded into book in the light of the actual expenditure, and
amortized averagely within benefit period.
17. Estimated debts
(1) Recognition basis of estimated debts
The obligation such as external guaranty, pending litigation or arbitration, product quality
assurance, layoff plan, loss contract, restructuring and disposal of fixed assets, pertinent to a
contingencies shall be recognized as an estimated debts when the following conditions are
satisfied simultaneously:
a. That obligation is a current obligation of the enterprise;
b. It is likely to cause any economic benefit to flow out of the enterprise as a result of performance
of the obligation; and
c. The amount of the obligation can be measured in a reliable way.
(2) Measurement method of estimated debts
The estimated debts shall be initially measured in accordance with the best estimate of the
necessary expenses for the performance of the current obligation. To determine the best estimate,the Company shall take into full consideration of the risks, uncertainty, time value of money, and
other factors pertinent to the Contingencies. If the time value of money is of great significance, the
best estimate shall be determined after discounting the relevant future outflow of cash. The
Company shall check the book value of the estimated debts on the balance sheet date. If there is
any exact evidence indicating that the book value cannot really reflect the current best estimate,
the Company shall adjust the book value in accordance with the current best estimate.
18. Share-based payment
(1) Category of share-based payment
The share-based payments shall consist of equity-settled share-based payments and cash-settled
share-based payments.
(2) Recognition of the fair value of the equity instruments
The equity-settled share-based payment in return for employee services shall be measured at the
fair value of the equity instruments granted to the employees.
1 The fair value of equity instruments for which there is an active market shall be recognized at
quotation in the active market;
2 Where there is no active market for a equity instruments, the Company shall adopt value
appraisal techniques to determined its fair value. The value appraisal techniques mainly
include 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.
19. Revenue
(1) Recognition method of revenue from selling goods
No revenue from selling goods may be recognized unless the following conditions are met
simultaneously:
a. The significant risks and rewards of ownership of the goods have been transferred to the
buyer by the enterprise;
b. The enterprise retains neither continuous management right that usually keeps relation with
the ownership nor effective control over the sold goods;
c. The relevant amount of revenue can be measured in a reliable way;
d. The relevant economic benefits may flow into the enterprise; and
e. The relevant costs incurred or to be incurred can be measured in a reliable way.
(2) Recognition method of revenue from providing labor services
The Company can, on the date of the balance sheet, reliably estimate the outcome of a transaction
concerning the labor services it provides, it shall recognize the revenue from providing services by
employing the percentage-of-completion method. The schedule of completion under the
transaction concerning the providing of labor services shall be recognized in the light of the
proportion of the costs incurred against the estimated total costs.
If the Company can not, on the date of the balance sheet, measure the result of a transaction
concerning the providing of labor services in a reliable way, it shall be conducted in accordance
with the following circumstances, respectively:
① If the cost of labor services incurred is expected to be compensated, the revenue from the
providing of labor services shall be recognized in accordance with the amount of the cost of laborservices incurred, and the cost of labor services shall be carried forward at the same amount; or
② If the cost of labor services incurred is not expected to compensate, the cost incurred should be
included in the current profits and losses, and no revenue from the providing of labor services may
be recognized.
(3) Recognition method of revenue from abalienating the right to use assets
① Recognition principle of revenue from abalienating the right to use assets
The revenue from abalienating of right to use assets consists of interest revenue and royalty
revenue. No revenue from abalienating of right to use assets may be recognized unless the
following conditions are met simultaneously:
A. The relevant economic benefits are likely to flow into the enterprise; and
B. The amount of revenues can be measured in a reliable way.
② Recognition method
A. The amount of interest revenue should be measured and confirmed in accordance with the
length of time for which the enterprise's cash is used by others and the actual interest rate; or
B. The amount of royalty revenue should be measured and confirmed in accordance with the
period and method of charging as stipulated in the relevant contract or agreement.
20. Government subsidies
The Company’s government subsidies consist of the government subsidies pertinent to assets and
government subsidies pertinent to income.
(1) Recognized conditions of government subsidy
No government subsidy may be recognized unless the following conditions are met
simultaneously as follows:
① The Company can meet the conditions for the government grants; and
② The Company can obtain the government grants.
(2) Measurement
① If a government subsidy is a monetary asset, it shall be measured in the light of the received or
receivable amount. If a government subsidy is a non-monetary asset, it shall be measured at its fair
value. If its fair value cannot be obtained in a reliable way, it shall be measured at its nominal
amount (RMB 1.00).
② The government subsidies pertinent to assets shall be recognized as deferred income, equally
distributed within the useful lives of the relevant assets, and included in the current profits and
losses. But the government subsidies measured at their nominal amounts shall be directly included
in the current profits and losses. The government subsidies pertinent to incomes shall be treated
respectively in accordance with the circumstances as follows: (a) Those subsidies used for
compensating the related future expenses or losses of the enterprise shall be recognized as
deferred income and shall included in the current profits and losses during the period when the
relevant expenses are recognized; or (b) Those subsidies used for compensating the related
expenses or losses incurred to the enterprise shall be directly included in the current profits and
losses.
③ If it is necessary to refund any government subsidy which has been recognized, it shall be
treated respectively in accordance with the circumstances as follows: (a) If there is the deferred
income concerned, the book balance of the deferred income shall be offset against, but the
excessive part shall be included in the current profits and losses; and (b) If there is no deferred
income concerned to the government subsidy, it shall be directly included in the current profitsand losses.
21. Deferred income tax assets and deferred income tax liabilities
The temporary difference between the carrying amount of an asset or liability and its tax base, and
as for an item that has not been recognized as an asset or liability, if its tax base can be determined
in light of the tax law, the temporary difference between the tax base and its carrying amount,
shall withdraw deferred income tax by employing the balance sheet approach.
(1) Recognition of deferred income tax assets
As for the deductible temporary difference, any deductible loss or tax deduction that can be
carried forward to the next year, the Company shall recognize the deferred income tax assets
arising from a deductible temporary difference, any deductible loss or tax deduction to the extent
of the amount of the taxable income, otherwise, the deductible temporary difference occurred in
the following transactions:
① This transaction is not business combination, and at the time of transaction, the accounting
profits will not be affected, nor will the taxable amount or deductible loss be affected.
② Where the deductible temporary difference related to the investments of the subsidiary
companies, associated enterprises and joint enterprises can meet the following requirements
simultaneously, the enterprise shall recognize the corresponding deferred income tax assets: A.
The temporary differences are likely to be reversed in the expected future; and B. It is likely to
acquire any amount of taxable income tax that may be used for making up the deductible
temporary differences.
(2) Recognition of deferred income tax liabilities
① Except for the deferred income tax liabilities arising from the following transactions, the
Company shall recognize the deferred income tax liabilities arising from all taxable temporary
differences:
A. the initial recognition of business reputation;
B. the initial recognition of assets or liabilities arising from the following transactions which are
simultaneously featured by the following: The transaction is not business combination; at the time
of transaction, the accounting profits will not be affected, nor will the taxable amount or
deductible loss be affected.
② The taxable temporary differences related to the investments of subsidiary companies,
associated enterprises and joint enterprises shall recognize corresponding deferred income tax
liabilities. However, those that can simultaneously meet the following conditions shall be
excluded: (a) The investing enterprise can control the time of the reverse of temporary differences;
and (b) The temporary differences are unlikely to be reversed in the excepted future.
22. Leases
(1) Recognition standard of financing leases and operating leases
Where a lease satisfies one or more of the following criteria, it shall be recognized as a finance
lease: ① The ownership of the leased asset is transferred to the lessee when the term of lease
expires; ② The lessee has the option to buy the leased asset at a price which is expected to be far
lower than the fair value of the leased asset at the date when the option becomes exercisable. Thus,
on the lease beginning date, it can be reasonably determined that the option will be exercised; ③
Even if the ownership of the asset is not transferred, the lease term covers the major part of the use
life (generally refer to 75% or over 75%) of the leased asset; ④ In the case of the lessee, thepresent value of the minimum lease payments on the lease beginning date amounts to substantially
all of the fair value of the leased asset on the lease beginning date (generally refer to 90% or over
90%); in the case of the lessor, the present value of the minimum lease receipts on the lease
beginning date amounts to substantially all of the fair value of the leased asset on the lease
beginning date; and ⑤ The leased assets are of a specialized nature that only the Company (the
lessee) can use them without making major modifications.
The term "operating lease" shall refer to a lease other than a financing lease.
(2) Accounting treatment of financing leases
① Accounting treatment of lessee of financing leases
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.
The initial direct costs (ditto) such as commissions 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. As for the unrecognized financing charge, the Company shall
adopt the effective interest rate method to calculate and recognize the financing charge in the
current period. Contingent rents shall be recognized as a profits and losses of the current period in
which they are actually incurred.
In calculating the depreciation of a leased asset, the Company should adopt a depreciation policy
for leased assets consistent with that for depreciable assets which are owned by the Company.
② Accounting treatments of lessors in financing leases
On the beginning date of the lease term, a lessor shall recognize the sum of the minimum lease
receipts on the lease beginning date and the initial direct costs as the entering value in an account
of the financing lease values receivable, and record the unguaranteed residual value at the same
time. The balance between the sums 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.
As for the unrealized financing income, the Company shall calculate the financing income at the
current period by adopting the effective interest rate method.
Contingent rents shall be recorded into the profits and losses of the period in which they actually
occurred.
(3) Accounting treatment of lessees in operating leases
The rents from operating leases shall be recorded by the lessor or lessee in the profits and losses of
the current period by using the straight-line method. The initial direct costs incurred by the lessor
or lessee 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.
23. Assets the Company holds for sale
Non-current assets (excluding financial assets and deferred income tax assets) shall be divided
into assets the Company holds for sale when the following conditions are met simultaneously:
(1) the Company has made proposal to dispose the said non-current assets;
(2) the Company has signed irrevocable transfer agreement with assignee; and
(3) The said transfer will be completed due within one year.Assets for sale shall be divided into single item assets and disposal group (refers to a group of
asset that is sold as a whole or disposed together by other way), they shall be measured at the
balance that the fair value minus disposal expenses, and may not exceed the original carrying
value which is in compliance with conditions for sale. If the original carrying value is higher than
the balance that the fair value minus disposal expenses, the said balance shall be recognized as
loss on assets impairment and recorded into the profit and loss of the current period.
24. Change in major accounting policies and accounting estimates
(1) Change in accounting policies
No accounting policy changed in the Company.
(2) Change in accounting estimates
No accounting estimates changed in the Company.
25. Corrections of prior accounting errors
The Company has no matter related to correction of prior-period errors.
V. Taxation
1. Main taxes and tax rate
Category of taxes Tax base Tax rate
VAT Sales revenue 17%、13%
Business tax Taxable income 5%
Tax for maintaining and building
cities
Circulating tax 7%、1%
Extra charges of education funds Circulating tax 3%
Local education surcharge Circulating tax 1%
Corporate income tax Payable income tax amount 12.5%、15%、16.5%、25%
Housing property tax
Taxable original value of the
real estates and rental income
of real estates
1.2%、12%
Land use tax Area of land for tax RMB 7 and 8/㎡
The Company is a VAT General Taxpayer. VAT payable shall be the balance that the output tax of
the current period set off against input tax that can be offset. As for products to be sold in China,
such as yarn-dyed fabric cloth and garments, their output VAT rate shall be 17%, while such as
cotton and steam, their output VAT rate shall be 13%.
As for the export products, the Company shall, in accordance with the provision of CS [2007] No.
7 document, perform “tax exemption, deduction and rebate”. Pursuant to the Circulation of the
Ministry of Finance, the State Administration of Taxation of the People’s Republic of China, on
Raising the Export Rebate Rates for Textiles and Other Light Industries, Electronic Information
and Other Products (CS [2009] No. 43), the export rebate rates for textiles and clothing shall be
raised to 16% from 1 Apr. 2009.
2. Tax preference and official documents
The Company, in accordance with the Notice on Recognition of the First Batch of New High-tech
Enterprise for the Year 2008 (LJGZ [2009] No. 12 document) from Department of Science &
Technology of Shandong Province, Finance Bureau of Shandong Province, National Taxation
Bureau of Shandong and Local Taxation Bureau of Shandong Province, was recognized as a NewHigh-tech Enterprise and obtained the Certificate of New High-tech Enterprise on 5 Dec. 2008.
The Company shall, in line with the Article 28 of Enterprise Income Tax Law of the People’s
Republic of China and Notice of the State Administration of Taxation on the Issues concerning the
Administration of Enterprise Income Tax Deduction and Exemption (GSF [2008] No. 111
document), enjoy a 15-percent rate for enterprise income tax.
Lufeng Weaving & Dyeing Co., Ltd. (hereinafter called “Lufeng Weaving & Dyeing”) is
productive foreign funded enterprise, therefore, it shall enjoy a preferential enterprise income tax
policy of “Two plus three” (Exemption of enterprise income tax for the first two years of making
profit, and 50% tax reduction for following three years). Between 2006 and 2007, Lufeng
Weaving & Dyeing enjoyed exemption from the enterprise income tax, and shall pay half of the
enterprise income tax from 2008 to 2010. In accordance with the provisions of the Notice of the
State Council on Carrying out the Transitional Preferential Policies on Enterprise Income Tax (GF
[2007] No. 39 document), Lufeng Weaving & Dyeing paid the enterprise income tax at tax rate of
12.5% in 2009.
Luthai (Hong Kong), 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%.
VI. Business combination and consolidated financial statement
1. Subsidiaries
(1) Subsidiaries obtained by establishment and investment
Unit: RMB’0000
Subsidiaries Type
Registered
place
Business
nature
Registered
capital
Business scope
Actual amount of
investments at
the period-end
Other
essential
investment
Beijing
Luthai Shirt
Co.,
Limited
(“Beijing
Luthai”)
Holding
subsidiary
Beijing
Limited
liability
company
RMB 560
Design, manufacturing
and sale of clothing
RMB 336
Beijing
Sichuang
Apparel
Co., Ltd.
(hereinafter
called
“Beijing
Sichuang”)
Holding
subsidiary
Beijing
Limited
liability
company
(Sino-foreign
joint venture)
RMB 3,500
Design, manufacturing
and sale of garment
RMB 2,100
Luthai
(Hong
Kong)
Wholly-owned
subsidiary
Hong
Kong
Limited
liability
company
HKD 600
Import & export trade,
collection of market
information,
information consultation
RMB 636.66
Xinjiang Holding Xinjiang Limited RBM11,863 Planting, processing and RMB6,517.63Subsidiaries Type
Registered
place
Business
nature
Registered
capital
Business scope
Actual amount of
investments at
the period-end
Other
essential
investment
Luthai
Harvest
Cotton Co.,
Ltd.
(“Xinjiang
Luthai”)
subsidiary liability
company
sale of Economic Crops,
cooking oil crops;
purchase, processing and
sale of cotton and
cotton-by products;
production and sale of
cotton textile products
Lufeng
Weaving &
Dyeing Co.,
Ltd.
(Lufeng
Weaving &
Dyeing)
Holding
subsidiary
Zibo
Limited
liability
company
(Joint
Ventures
Funded by
Hongkong
Macao and
Taiwan)
RMB48,616
Production and sale of
textile and printing and
dyeing products
RMB36,462
Zibo Luqun
Textile Co.,
Ltd. (Luqun
Textile)
Wholly-owned
subsidiary
Zibo
Limited
liability
company
(sole
corporation)
RMB16,822 Sale of cotton yarn RMB17,178.46
Zibo
Xinsheng
Power Co.,
Ltd.
(Xinsheng
Power)
Wholly-owned
subsidiary
Zibo
Limited
liability
company
（sole
corporation）
RMB16,243.56
Power, steam and hot
water
RMB17,634.07
Beijing
Lufeng
Sunshine
Garment
Co., Ltd.
(“Lufeng
Sunshine”)
Wholly-owned
subsidiary
Beijing
Limited
liability
company
(foreign
invested
enterprise,
sole
corporation)
RMB 500
Wholesale of garments
and commodities, design
of clothing, technology
promotion service
RMB 500
(Con.)
Unit: RMB’0000
Subsidiaries
The
proportion
of holding
shares
The
proportion
of voting
rights（%）
Included in
consolidated
statement
Minority
interests
Deductible
minority interests
Balance of parent company’s
equity after deducting the
difference that loss of minority
interests exceed equity obtained（%） by minority shareholders
Beijing
Luthai
60 60 Yes 254.40
Beijing
Sichuang
60 60 Yes 1,377.49
Luthai
(Hong
Kong)
100 100 Yes
Xinjiang
Luthai
57.41 57.41 Yes 8,181.00
Lufeng
Weaving &
Dyeing
75 75 Yes 18,000.70
Luqun
Textile
100 100 Yes
Xinsheng
Power
100 100 Yes
Lufeng
Sunshine
100 100 Yes
Total 27,813.59
2. Entities that are included into the consolidated scope and are no longer
included into
(1) Subsidiaries who are included into the consolidated scope
Unit: RMB Yuan
Name Date
Net assets as at the
end of reporting
period
Net profit as of the
reporting period
Beijing Lufeng Sunshine
Garment Co., Ltd.
27 April 2010 4,927,466.27 -72,533.73
Note: The Proposal on Investing RMB 5 million to Establish Beijing Lufeng Sunshine Garment
Co., Ltd. was examined and approved at the 38th meeting of the 5th Board of Directors. Lufeng
Sunshine had obtained the business license of legal entity on 27 April 2010.
(2) Subsidiaries who are no longer included into the consolidated scope
Unit: RMB Yuan
Name Date
Net assets as at the
end of reporting
period
Net profit as of the
reporting period
Lu Thai Huanzhong
Pharmaceutical Co., Ltd.
2 June 2010 52,624,600.96 -3,846,487.07
Note: Pursuant to the resolution made at the 35th meeting of the 5th Board of Directors, the
Company invested in Yantai Rongchang Pharmaceutical Co., Ltd. (hereinafter referred to as
“Rongchang Pharmaceutical”) with its 100% equities of Luthai Zhonghuan, from which theCompany obtained 5.555% equities of Rongchang Pharmaceutical. Rongchang Pharmaceutical
had registered the change with the administrative authorities for industry and commerce on 2 June
2010. Therefore, the Company no longer included Luthai Zhonghuan into the consolidated scope.
3. Conversion rate of main statements for overseas business entity
The balance sheet items of Luthai (Hong Kong) are converted at closing exchange rate between
the RMB and the Hong Kong dollar of 1:0.8724; while the income statement items and cash flow
statement items are converted at average value between exchange rate of the RMB against the
Hong Kong dollar at the period-begin and at the period-end , i.e. 1:0.8764.
VII. Notes to the financial statements
Unless otherwise noted in the following items (including notes to the financial statement of parent
company), the year-end refers to 30 Jun. 2010, and the year-begin refers to 1 Jan. 2010. The
current period refers to Jan.-Jun. 2010, and the last period refers to Jan.-Jun. 2009.
1. Monetary funds
(1) Breakdown of monetary fund
Items
Closing amount Opening amount
Original currency
Exchange
rate
Translated to
RMB
Original
currency
Exchange
rate
Translated to RMB
Cash:
-RMB 2,180,438.89 1.0000 2,180,438.89 1,444,059.37 1.0000 1,444,059.37
-USD 6,856.80 6.7909 46,563.84 26,479.68 6.8282 180,808.55
-EURO 30,305.38 8.2710 250,655.80 3,803.33 9.7971 37,261.60
-JPY 69,638.00 0.0767 5,341.24 109,638.00 0.0738 8,091.29
-HKD 10,365.14 0.8724 9,042.55 8,715.64 0.8805 7,674.12
-THB 120.19 0.2097 25.20 120.19 0.2046 24.59
-SGD 0.20 4.8351 0.97 0.20 4.8605 0.97
-GBP 1,774.27 10.2135 18,121.51
-AUD 4,746.03 5.7608 27,340.93
Subtotal 2,537,530.93 1,677,920.49
Bank deposit:
-RMB 311,616,488.82 1.0000 311,616,488.82 469,959,879.71 1.0000 469,959,879.71
-USD 20,705,242.78 6.7909 140,607,238.26 6,978,636.14 6.8282 47,651,523.33
-EURO 625,253.43 8.2710 5,171,471.12 926,914.51 9.7971 9,081,074.14
-JPY 11,526,963.00 0.0767 884,118.07 3,201,551.00 0.0738 236,274.47
-HKD 27,780,637.69 0.8724 24,235,828.32 23,497,324.56 0.8805 20,689,394.27
-SF 6,753.79 6.2736 42,370.58 46,692.65 6.5938 307,882.00
Subtotal 482,557,515.17 547,926,027.92
Other monetary
fund
-RMB 111,432,071.45 1.0000 111,432,071.45 4,000,000.00 1.0000 4,000,000.00
-USD 2,946,087.47 6.7909 20,006,585.40 2,396,587.11 6.8282 16,364,376.12-JPY 1,500,689.00 0.0767 115,102.85
-EURO 17.19 8.2710 142.18 20.65 9.7971 202.31
Subtotal 131,553,901.88 20,364,578.43
Total 616,648,947.98 569,968,526.84
(2) Item “RMB deposit” under “Other monetary fund”, RMB 1,650,566.43 is margin deposits for
acceptance bill, another RMB 109,781,505.02 pledged margin deposit for security in the financing
services. Item “US dollar deposit” under “Other monetary fund” is foreign currency payment,
from which the Company exported the products, being in verification stage in accordance with the
State Administration of Foreign Exchange.
2. Notes receivable
(1) Categories
Categories Closing amount Opening amount
Bank acceptance bill 10,200,602.23 7,348,990.25
Letter of credit (LC) 107,328,749.50 134,063,752.21
Total 117,529,351.73 141,412,742.46
(2) The notes that the Company had made endorsement to other party but not yet due are RMB
28,715,509.10. The total amount of the top five entities is RMB 18,261,919.40.
(3) No mortgaged note in the reporting period.
3. Accounts receivable
(1) Breakdown of accounts receivable listed by categories
Categories
Closing amount
Book balance Provision for bad debts
Amount Proportion（%） Amount Proportion（%）
Individually significant accounts
receivable
82,003,650.88 42.89 4,100,182.54 5.00
Accounts receivable which are not
individually significant, but are
assessed at high risk level through
credit risk combination
Other non-material receivables 109,191,060.74 57.11 5,883,138.55 5.39
Total 191,194,711.62 100.00 9,983,321.09 5.22
(Con.)
Categories
Opening amount
Book balance Provision for bad debts
Amount Proportion（%） Amount
Proportion
（%）
Individually significant accounts
receivable
70,254,295.63 43.20 3,512,714.78 5.00
Accounts receivable which are notindividually significant, but are
assessed at high risk level through
credit risk combination
Other non-material receivables 92,378,220.81 56.80 5,050,476.04 5.47
Total 162,632,516.44 100.00 8,563,190.82 5.27
Accounts receivable with significant single amount refer to accounts receivable that the closing
balance is over RMB 5 million.
(2) Withdrawal of provision for bad debts at the period-end
① Withdrawal of provision for bad debts of accounts receivable which single amount is
significant or single amount is not significant but its impairment test is individually made:
Contents Book amount
Provision for
bad debts
Proportion Reason
TAL APPAREL LIMITED 23,199,539.06 1,159,976.94 5% Note IV. 8. (2)
OXFORD PRODUCTS (INTERNATIONAL)
LIMITED
20,173,824.71 1,008,691.24 5% Note IV. 8. (2)
ITOCH TEXTILE PROMINENT(ASIA)
LIMITED
9,474,962.80 473,748.14 5% Note IV. 8. (2)
Zibo Power Supply Company 6,445,855.13 322,292.76 5% Note IV. 8. (2)
Chen Feng (Jin Tan) Garments Co., Ltd. 6,180,415.65 309,020.78 5% Note IV. 8. (2)
PHILLIPS VANHEUSEN SHIRT GROUP 5,856,643.12 292,832.16 5% Note IV. 8. (2)
MARUBENI HONG KONG AND SOUTH
CHINA LIMITED
5,474,531.03 273,726.55 5% Note IV. 8. (2)
INDITEX ASIA LINITED 5,197,879.38 259,893.97 5% Note IV. 8. (2)
Total 82,003,650.88 4,100,182.54
② Breakdown of accounts receivable listed by aging and withdrawal of bad debts
Aging
Closing amount Opening amount
Book balance
Provision for
bad debts
Book balance
Provision for
Amount bad debts
Proportion
（%）
Amount
Proportion
（%）
Within 1
year
188,928,894.72 98.81 9,446,444.73 160,218,732.11 98.52 8,010,936.61
1-2 years 668,002.72 0.35 66,800.27 819,363.89 0.50 81,936.39
2-3 years 92,681.68 0.05 18,536.34 80,083.18 0.05 16,016.64
Over 3
years
1,505,132.50 0.79 451,539.75 1,514,337.26 0.93 454,301.18
Total 191,194,711.62 100.00 9,983,321.09 162,632,516.44 100.00 8,563,190.82
(3) Accounts receivable written off actually in the reporting period
Name of entities Nature Amount Reason
Occurred due from
related transaction or
notANDREAZZA &
CASTELLI SRL
Payment for
goods
330,506.47
Irrecoverable
payment
No
Total 330,506.47
(4) There was no accounts receivable due from shareholders with more than 5% (including
5%) of the voting shares of the Company.
(5) The information list for the top 5 customers:
Customers
Relationship
with the
Company
Amount Aging
Proportion to
total accounts
receivable（%）
TAL APPAREL LIMITED Trade debtors 23,199,539.06 Within 1 year 12.13
OXFORD PRODUCTS
(INTERNATIONAL) LIMITED
Trade debtors 20,173,824.71 Within 1 year 10.55
ITOCH TEXTILE PROMINENT
(ASIA) LIMITED
Trade debtors 9,474,962.80 Within 1 year 4.96
Zibo Power Supply Company Trade debtors 6,445,855.13 Within 1 year 3.37
Chen Feng (Jin Tan) Garments Co.,
Ltd.
Trade debtors 6,180,415.65 Within 1 year 3.23
Total 65,474,597.35 34.24
4. Advances to the supplier
(1) Aging analysis:
Aging
Closing amount Opening amount
Amount Proportion（%） Amount Proportion（%）
Within 1 year 49,428,008.45 99.06 160,214,862.72 99.66
1-2 years 301,433.11 0.60 238,174.46 0.15
2-3 years 65,448.5 0.13 84,454.74 0.05
Over 3 years 104,882.15 0.21 221,803.48 0.14
Total 49,899,772.21 100.00 160,759,295.40 100.00
(2) The information list for the top 5supplieers
Name of suppliers
Relationship with
the Company
Amount Aging
Reason for
unsettlement
ALLENBERG COTTON CO. Supplier 8,087,076.37 Within 1 year
Purchasing payment
in advance
J.G.BOSWELL COMPANY Supplier 6,572,708.31 Within 1 year
Purchasing payment
in advance
SSM SCHARER SCHWEITER
METTLER AG
Supplier 6,266,576.70 Within 1 year
Purchasing payment
in advance
Awat County Zhenzhong Plastic Products
Co., Ltd.
Supplier 4,267,500.00 Within 1 year
Purchasing payment
in advance
Shanghai Liyang Industrial Co., Ltd. Supplier 4,215,178.33 Within 1 year
Purchasing payment
in advance
Total 29,409,039.71(3) There was no advance to the suppliers due from shareholders with more than 5%
(including 5%) of the voting shares of the Company.
(4) The closing amount of advances to the suppliers decreased by 68.96% compared with the
opening amount, mainly due to decrease of advance payment for purchasing import materials
as at the end of reporting period.
5. Other receivables
(1) Breakdown of other receivables listed by categories
Categories
Closing amount
Book balance Provision for bad debts
Amount Proportion（%） Amount
Proportion
（%）
Individually significant other receivables 16,738,299.56 24.91 5,021,489.87 30.00
Other receivables which are not
individually significant, but are assessed
at high risk level through credit risk
combination
Other non-material other receivables 50,464,931.28 75.09 5,488,049.10 10.87
Total 67,203,230.84 100.00 10,509,538.97 15.64
(Con.)
Categories
Opening amount
Book balance Provision for bad debts
Amount Proportion（%） Amount
Proportion
（%）
Individually significant other receivables 23,691,525.51 39.75 5,412,401.40 22.85
Other receivables which are not
individually significant, but are assessed
at high risk level through credit risk
combination
Other non-material other receivables 35,908,680.23 60.25 4,490,093.72 12.50
Total 59,600,205.74 100.00 9,902,495.12 16.61
Other receivables with significant single amount refer to ones that the closing balance is over
RMB 5 million.
(2) Withdrawal of provision for bad debts at the period-end
① Withdrawal of provision for bad debts of other receivables which single amount is significant
or single amount is not significant but its impairment test is individually made:
Contents Book amount
Provision for bad
debts
Proportion Reason
Awat County Tian Hong State-owned 16,738,299.56 5,021,489.87 30% Note IV. 8（2）Assets Investment Operation Co., Ltd
Total 16,738,299.56 5,021,489.87
② Breakdown of other receivables listed by aging and withdrawal of bad debts
Aging
Closing amount Opening amount
Book balance
Provision for
bad debts
Book balance
Provision for
Amount bad debts
Proportion
（%）
Amount
Proportion
（%）
Within 1
year
33,669,856.08 50.10 1,683,492.81 25,544,733.25 42.86 1,277,236.67
1-2 years 4,889,235.42 7.28 488,923.54 5,495,836.41 9.22 549,583.64
2-3 years 2,561,191.82 3.81 512,238.37 4,922,160.28 8.26 984,432.07
Over 3
years
26,082,947.52 38.81 7,824,884.25 23,637,475.80 39.66 7,091,242.74
Total 67,203,230.84 100.00 10,509,538.97 59,600,205.74 100.00 9,902,495.12
(3) There was no other receivable due from shareholders with more than 5% (including 5%) of the
voting shares of the Company.
(4) Nature or content of other receivables with the greater amount
Name Amount Nature or content
Awat County Tian Hong
State-owned Assets Investment
Operation Co., Ltd
16,738,299.56
Advance payment of operating funds for
Awat County Government due to
Xinjiang Luthai’s restructuring
Total 16,738,299.56
(5) The top 5 entities:
Name Relationship with the Company Amount Aging
Proportion to
total other
Receivables（%）
Awat County Tian Hong
State-owned Assets
Investment Operation Co., Ltd
Advance payment of operating
funds for Awat County Government
due to Xinjiang Luthai’s
restructuring
16,738,299.56 Over 3 years 24.91
Bureau of Finance of Zichuan
District of Zibo
Refundable export rebates by local
government
2,665,685.60
1-2 years,
2-3 years,
Over 3 years
3.97
Petroleum and Natural Gas
Transport Corporation of
China
Advance construction payment for
project of cotton field drip irrigation
1,300,000.00 Over 3 years 1.93
Bureau of Land and Resources
of Awat County
Advance payment for materials 1,003,601.72 Over 3 years 1.49
Zibo Lusha Real Estates
Development Co., Ltd.
Accounts receivable for purchase of
property
989,056.35 Over 3 years 1.47
Total 22,696,643.23 33.776. Inventory
(1) Category
Items
Closing amount
Book balance
Provision for falling
price
Net book value
Raw materials 553,707,722.19 243,454.48 553,464,267.71
Goods in process 340,318,341.75 22,696.46 340,295,645.29
Merchandise inventory 446,993,736.09 44,316,548.80 402,677,187.29
Consigned materials for
processing
28,716,828.98 28,716,828.98
Total 1,369,736,629.01 44,582,699.74 1,325,153,929.27
(Con.)
Items
Opening amount
Book balance
Provision for falling
price
Net book value
Raw materials 680,591,538.75 326,645.83 680,264,892.92
Goods in process 286,575,574.09 22,696.46 286,552,877.63
Merchandise inventory 284,415,234.52 45,046,370.16 239,368,864.36
Consigned materials for
processing
23,308,255.34 23,308,255.34
Total 1,274,890,602.70 45,395,712.45 1,229,494,890.25
(2) Provision for falling price of inventory
Items
Opening
amount
Withholding
in the current
period
Decreased this period
Closing amount
Reversal Written off
Raw materials 326,645.83 197,947.75 197,947.75 83,191.35 243,454.48
Goods in
process
22,696.46 22,696.46
Merchandise
inventory
45,046,370.16 4,590,156.52 121,402.43 5,198,575.45 44,316,548.80
Total 45,395,712.45 4,788,104.27 319,350.18 5,281,766.80 44,582,699.74
(3) Provision for falling price of inventory
Thereunder
Reason for transferring to
provision for falling price of
inventory
Proportion to the closing
balance of the inventory
(%)
Raw materials
The lower of cost or
net realizable value
No longer including Luthai
Zhonghuan into the
consolidated scope,
accordingly, the provision
for falling price of inventory
decreased.
0.04Goods in process
The lower of cost or
net realizable value
Merchandise
inventory
The lower of cost or
net realizable value
No longer including Luthai
Zhonghuan into the
consolidated scope,
accordingly, the provision
for falling price of inventory
decreased.
0.03
(4) Basis of withdrawal of provision for falling price of inventory
On the balance sheet date, the provision for falling price of inventory shall be withdrawn at cost
and net realizable value. Where the cost of inventory is higher than its net realizable value, the
inventory shall be measured at the net realizable value, meanwhile, the provision for falling price
of inventory shall be withdrawn at the balance of the cost higher than the net realizable value. The
net realizable value shall be recognized as below:
① the inventories for sale directly such as finished goods, commodities and materials for sale, in
the course of normal production and operation, the net realizable value of such inventories is an
amount after deducting estimated sale expense and relevant taxes from the estimated sale price of
inventories;
② materials inventory that need to go through processing, in the course of normal production
and operation, the net realizable value of such inventories is an amount after deducting the
estimated cost of completion, estimated sale expense and relevant taxes from the estimated sale
price of products manufactured by the Company.
At the end of reporting period, due to the part of raw materials with the longer aging, dyed yarn
with quality problems and shirt and fabrics with the longer aging, the costs of inventory is higher
than its net realizable value, the balance between which is withdrawn as the provision for falling
price of inventory.
(5) Inventories used for security for a debt
Items Book value Remark
Merchandise
inventory
135,410,478.77 Mortgage
Total 135,410,478.77
The ginned cotton is used for mortgage by Xinjiang Luthai for a short-term loan of RMB 115
million from the bank. Please see “Note IX.1” for details.
7. Long-term equity investment
(1) Category
Items
Opening
amount
Increase this
period
Decrease this
period
Closing amount
Investment in joint venture enterprises
Investment in other enterprises 160,000.00 67,282,600.00 67,442,600.00
Less: provision for impairment of long-term
equity investment
Total 160,000.00 67,282,600.00 67,442,600.00(2) Breakdown of long-term equity investment
Name of invested entities
Accounting
method
Initial
investment cost
Opening
amount
Increase/
decrease
Closing amount
Zibo Chengshun Heating Co., Ltd. Cost method 160,000.00 160,000.00 160,000.00
Yantai Rongchang Pharmaceutical
Co., Ltd.
Cost method 55,282,600.00 55,282,600.00 55,282,600.00
Gaoqing Hongqiao Thermoelectric
Co., Ltd.
Cost method 12,000,000.00 12,000,000.00 12,000,000.00
Total 67,442,600.00 160,000.00 67,282,600.00 67,442,600.00
(Con.)
Name of invested entities
Proportions
of
shareholding
（%）
Proportions
Of voting
rights（%）
Provision
for
impairment
Impairment
provision
withdrawn
in the
current
period
Cash
dividends in
the current
period
Zibo Chengshun Heating
Co., Ltd.
2.00 2.00
Yantai Rongchang
Pharmaceutical Co., Ltd.
5.555 5.555
Gaoqing Hongqiao
Thermoelectric Co., Ltd.
20.6756 20.6756
Total
(3) The Company invested in Rongchang Pharmaceutical with its 100% equities of Luthai
Zhonghuan, from which the Company obtained 5.555% equities of Rongchang Pharmaceutical.
8. Fixed assets
(1) Breakdown of fixed assets
Items Opening amount Increase this period Decrease this
period
Closing amount
I. Cost 5,535,026,910.84 179,987,736.50 120,154,894.55 5,594,859,752.79
Including: House and building 1,528,210,391.16 35,873,487.58 39,778,412.16 1,524,305,466.58
Machinery equipment 3,886,508,756.65 139,406,224.86 75,702,852.97 3,950,212,128.54
Transportation vehicles 51,667,982.15 2,376,784.02 563,410.00 53,481,356.17
Electronic equipment and other 68,639,780.88 2,331,240.04 4,110,219.42 66,860,801.50
II. Accumulative depreciation 1,908,322,691.07 174,083,328.38 70,978,513.44 2,011,427,506.01
Including: House and building 334,799,123.76 34,820,177.37 10,566,146.98 359,053,154.15
Machinery equipment 1,492,619,368.19 134,189,036.99 57,333,329.06 1,569,475,076.12
Transportation vehicles 33,810,506.10 1,844,742.36 530,273.50 35,124,974.96
Electronic equipment and other 47,093,693.02 3,229,371.66 2,548,763.90 47,774,300.78
III. The net book value 3,626,704,219.77 3,583,432,246.78Including: House and building 1,193,411,267.40 1,165,252,312.43
Machinery equipment 2,393,889,388.46 2,380,737,052.42
Transportation vehicles 17,857,476.05 18,356,381.21
Electronic equipment and other 21,546,087.86 19,086,500.72
IV. Provision for impairment
loss
6,406,160.31 845,245.64 5,560,914.67
Including: House and building 98,456.34 - 98,456.34
Machinery equipment 6,086,179.16 845,245.64 5,240,933.52
Transportation vehicles 160,866.53 160,866.53
Electronic equipment and other 60,658.28 60,658.28
V. Total book value 3,620,298,059.46 3,577,871,332.11
Including: House and building 1,193,312,811.06 1,165,153,856.09
Machinery equipment 2,387,803,209.30 2,375,496,118.90
Transportation vehicles 17,696,609.52 18,195,514.68
Electronic equipment and other 21,485,429.58 19,025,842.44
Note: the depreciation was RMB 174,083,328.38 in the current period. The original price that the
construction in progress was transferred into fixed assets was RMB 48,020,295.07.
(2) Fixed assets leased by operating lease
Items Original book value Remake
House and building 1,933,978.40 Lessee is Lucheng Textile
Total 1,933,978.40
(3) Fixed assets that the property certificates has not been completed
Items Reason
Expected time for
completion
Book value
House property of 50
million-meter yarn-dyed fabric
project
Ongoing inspection, surveying,
verification to application procedures
by Housing authorities
2010 9,564,500.07
Luqun Spinning workshop
Ongoing inspection, surveying,
verification to application procedures
by Housing authorities
2010 53,353,764.14
Main factory building of 6#
boiler of electric power plant
Ongoing inspection, surveying,
verification to application procedures
by Housing authorities
2010 4,418,493.41
Production line project of
3000000-piece high-grade
shirts
Ongoing inspection, surveying,
verification to application procedures
by Housing authorities
2011 20,418,854.17
50000-ingot double-twist
project
Ongoing inspection, surveying,
verification to application procedures
by Housing authorities
2011 7,471,875.00
Total 95,227,486.79Note: Xinjiang Luthai mortgaged the machinery equipment and land use right with the net book
value of RMB 59,109,664.49 for short-term bank loans of RMB 69.69 million. Please see “Note
IX. 1” for details.
9. Construction in progress
(1) Breakdown of construction in progress
Items
Closing amount Opening amount
Book balance
Provision
for
impairment
Book value Book balance
Provision
for
impairment
Book value
Lu Thai Industry Park 1,432,206.82 1,432,206.82 1,274,882.42 1,274,882.42
Other small projects 15,016,674.39 14,273,474.39 13,290,593.95 13,290,593.95
50 million-meter yarn-dyed
fabric
2,939,071.27 3,682,271.27 3,516,943.40 3,516,943.40
Twisting plant project 25,265,173.18 25,265,173.18 25,243,565.54 25,243,565.54
Piece dyeing project 846,715.18 846,715.18 737,191.85 737,191.85
Spinning project of Xinjiang
Luthai
1,480,451.53 1,480,451.53 40,000.00 40,000.00
Expansion project of Xinsheng
Power
13,499,094.81 13,499,094.81 7,538,641.42 7,538,641.42
Renovation project of
double-twist plant of Luqun
Textile
1,145,502.35 1,145,502.35 487,819.62 487,819.62
Production line project of
3000000-piece high-grade
shirts
4,388,549.96 4,388,549.96 8,265,467.62 8,265,467.62
150000-ingot high-grade
combing yarn project
2,211,920.23 2,211,920.23 3,882,747.07 3,882,747.07
50000-ingot double-twist
project
4,538,040.84 4,538,040.84 8,349,379.59 8,349,379.59
project of 10 million-meter
high-grade fabrics in women’s
wear
6,553,516.06 6,553,516.06 418,196.14 418,196.14
Renovation project of yarn
dyed fabric
8,577,510.44 8,577,510.44
Total 87,894,427.06 87,894,427.06 73,045,428.62 73,045,428.62
(2) Profiles of main construction in progress and changes
Project
Budget
(RMB’0000)
Opening amount
Increase this
period
Transferred to
fixed assets this
year
Other
decrease
this year
Closing amount
Lu Thai Industry Park 980 1,274,882.42 157,324.40 1,432,206.82Project
Budget
(RMB’0000)
Opening amount
Increase this
period
Transferred to
fixed assets this
year
Other
decrease
this year
Closing amount
Other small projects 2,900 13,290,593.95 4,327,409.57 2,601,329.13 15,016,674.39
50 million-meter
yarn-dyed fabric
27,007 3,516,943.40 165,327.87 743,200.00 2,939,071.27
Twisting plant project 11,921 25,243,565.54 21,607.64 25,265,173.18
Piece dyeing project 29,187 737,191.85 2,827,314.57 2,717,791.24 846,715.18
Spinning project of
Xinjiang Luthai
1,565 40,000.00 1,440,451.53 1,480,451.53
Expansion project of
Xinsheng Power
3,100 7,538,641.42 5,960,453.39 13,499,094.81
Renovation project of
double-twist plant
6,300 487,819.62 1,216,448.60 558,765.87 1,145,502.35
Production line project
of 3000000-piece
high-grade shirts
6,687 8,265,467.62 24,239,507.16 28,116,424.82 4,388,549.96
150000-ingot
high-grade combing
yarn project
26,461 3,882,747.07 1,355,157.17 3,025,984.01 2,211,920.23
50000-ingot
double-twist project
4,086 8,349,379.59 3,688,661.25 7,500,000.00 4,538,040.84
project of 10
million-meter
high-grade fabrics in
women’s wear
14,534 418,196.14 9,635,319.92 3,500,000.00 6,553,516.06
Renovation project of
yarn dyed fabric
38193 8,577,510.44 8,577,510.44
Total 73,045,428.62 63,612,493.51 48,020,295.07 743,200.00 87,894,427.06
(Con.)
Project
Accumulative
amount of
capitalization
of interest
Including:
amount of
capitalization of
interest this year
Interest
capitalization
rate this year
（%）
Proportion of
Engineering
input to
budget（%）
Progress
（%）
Sources
Lu Thai Industry Park 98 98 Other
Other small projects 97 97 Other
50 million-meter yarn-dyed
fabric
98 98 Other
Twisting plant project 96 96 Other
Piece dyeing project 99 99 Other
Spinning project of Xinjiang
Luthai
99 99 Other
Expansion project of 54 54 OtherXinsheng Power
Renovation project of
double-twist plant
99 99 Other
Production line project of
3000000-piece high-grade
shirts
49 49 Other
150000-ingot high-grade
combing yarn project
100.00 100.00
Raised
capital
50000-ingot double-twist
project
100.00 100.00
Raised
capital
project of 10 million-meter
high-grade fabrics in women’s
wear
97.25 97.25
Raised
capital
Renovation project of yarn
dyed fabric
16.50 16.50 Other
Total
(3) Progress of main construction in process
Items Progress Remark
150000-ingot high-grade combing yarn project 100.00%
50000-ingot double-twist project 100.00%
project of 10 million-meter high-grade fabrics
in women’s wear
97.25%
(4) As at 30 Jun. 2010, there was no situation that book value of the construction in progress is
higher than its recoverable amount.
10. Engineering material
(1) Breakdown of engineering material
Items Opening amount
Increase this
period
Decrease this
period
Closing balance
Engineering material 11,712,153.66 164,571,282.77 128,159,779.53 48,123,656.90
Total 11,712,153.66 164,571,282.77 128,159,779.53 48,123,656.90
(2) The closing amount of engineering material was 3.11 times greater as against the opening
amount, which was due to increase in procurement of equipments.
(3) As at 30 Jun. 2010, there was no situation that book value of the engineering material is higher
than its recoverable amount.
11. Intangible assets
(1) Breakdown of intangible assets
Items
Opening book
balance
Increase this
period
Decrease this
period
Closing book
balance
I. Cost 252,761,833.49 53,378,922.50 14,940,753.08 291,200,002.91
Land use right 173,828,868.33 53,378,922.50 227,207,790.83Items
Opening book
balance
Increase this
period
Decrease this
period
Closing book
balance
Land use right of Xinsheng Power 12,155,433.14 12,155,433.14
Water use right 280,000.04 280,000.04
Luthai Huanzhong-drug concession 5,599,999.96 5,599,999.96
Luthai Huanzhong-non-patent
technology
996,333.26 996,333.26
Lufeng Weaving & Dyeing-land use
right
12,204,217.94 12,204,217.94
Luqun Textile-land use right 39,632,561.00 39,632,561.00
Luthai Huanzhong-land use right 8,064,419.82 8,064,419.82
II. Accumulative amortization 23,805,296.57 4,480,674.37 1,033,101.95 27,252,868.99
Land use right 18,393,919.05 3,543,482.34 21,937,401.39
Land use right of Xinsheng Power 1,915,906.30 253,671.66 2,169,577.96
Water use right
Luthai Huanzhong-drug concession
Luthai Huanzhong-non-patent
technology
Lufeng Weaving & Dyeing-land use
right
759,080.51 128,119.16 887,199.67
Luqun Textile-land use right 1,840,343.87 418,346.10 2,258,689.97
Luthai Huanzhong-land use right 896,046.84 137,055.11 1,033,101.95
III. The net book value 228,956,536.92 263,947,133.92
Land use right 155,434,949.28 205,270,389.44
Land use right of Xinsheng Power 10,239,526.84 9,985,855.18
Water use right 280,000.04
Luthai Huanzhong-drug concession 5,599,999.96
Luthai Huanzhong-non-patent
technology
996,333.26
Lufeng Weaving & Dyeing-land use
right
11,445,137.43 11,317,018.27
Luqun Textile-land use right 37,792,217.13 37,373,871.03
Luthai Huanzhong-land use right 7,168,372.98
IV. Total provision for impairment 280,000.04 280,000.04
Land use right
Land use right of Xinsheng Power
Water use right 280,000.04 280,000.04
Luthai Huanzhong-drug concession
Luthai Huanzhong-non-patent
technology
Lufeng Weaving & Dyeing-land use
rightItems
Opening book
balance
Increase this
period
Decrease this
period
Closing book
balance
Luqun Textile-land use right
Luthai Huanzhong-land use right
V. Total book value 228,956,536.92 263,947,133.92
Land use right 155,434,949.28 205,270,389.44
Land use right of Xinsheng Power 10,239,526.84 9,985,855.18
Water use right 280,000.04
Luthai Huanzhong-drug concession 5,599,999.96
Luthai Huanzhong-non-patent
technology
996,333.26
Lufeng Weaving & Dyeing-land use
right
11,445,137.43 11,317,018.27
Luqun Textile-land use right 37,792,217.13 37,373,871.03
Luthai Huanzhong-land use right 7,168,372.98
Note: Amortization amount was RMB 4,480,674.37 in the current period.
(2) The cost of intangible assets decreased by RMB 14,940,753.08, mainly because that Luthai
Huangzhong was no longer included the consolidated scope.
(3) As at 30 Jun. 2010, there was no situation that book value of the intangible assets is higher
than its recoverable amount.
(4) Xinjiang Luthai mortgaged the land use right and machinery equipment with the net book
value of RMB 33,348,667.73 for short-term bank loans of RMB 114.69 million. Please see “Note
IX. 1” for details.
12. Goodwill
(1) Breakdown of goodwill
Name of invested entity
Opening
balance
Increase
this
period
Decrease
this
period
Closing
balance
Provision for
impairment at
the year-end
Xinsheng Power 20,563,803.29 20,563,803.29
Total 20,563,803.29 20,563,803.29
(2) Impairment testing of goodwill and withdrawal method of impairment reserve: No matter
whether there is any sign of possible impairment, the goodwill formed by the business
combination shall be subject to impairment test at the end of year at least. The Company shall, as
of the purchasing day, apportion the book value of the good formed by business combination to
the relevant asset groups by a reasonable method. Where it is difficult to do so, the Company shall
be apportioned to the relevant combinations of asset groups. The related asset group or
combination of asset groups shall be the asset group or combination of asset groups that can
benefit from the synergy effect of enterprise merger, and shall be smaller than the reporting
segments as determined by the Company. When making an impairment test on the relevant asset
groups or combination of asset groups containing goodwill, if any evidence shows that the
impairment of asset groups or combinations of asset groups is possible, the Company shall first
make an impairment test on the asset groups or combinations of asset groups not containinggoodwill, calculate the recoverable amount and recognize the corresponding impairment loss.
Then the Company shall make an impairment test of the asset groups or combinations of asset
groups containing goodwill, and compare the carrying value of these asset groups or combinations
of asset groups with the recoverable amount. Where the recoverable amount of an asset group or a
combination of asset groups is lower than its carrying value, the amount of the impairment loss
shall first charge against the book value of the headquarter' assets and goodwill which are
apportioned to the asset group or combination of asset groups, then charge it against the book
value of other assets in proportion to the weight of other assets in the asset group or combination
of asset groups with the goodwill excluded. Once any impairment loss of the above goodwill is
recognized, it shall not be switched back in the future accounting periods.
13. Deferred income tax assets / Deferred income tax liabilities
(1) Deferred income tax assets and deferred income tax liabilities that are recognized
Items Closing amount Opening amount
Deferred income tax assets:
Provision for assets impairment 10,168,099.74 10,941,874.02
Accumulated depreciation 75,695.56 75,695.56
Profit and loss on change in fair
value
2,103,938.53 8,947,566.25
Unrealized gross profit from
inventory
6,315,260.27 12,494,164.40
Payroll payable 13,146,820.10 10,469,186.23
Subtotal 31,809,814.20 42,928,486.46
Deferred income tax liabilities:
Accumulated depreciation 403,060.14 406,802.45
Subtotal 403,060.14 406,802.45
14. Breakdown of assets impairment
(1) Breakdown of assets impairment
Items
Opening
amount
Withdrawal
this year
Decrease this period
Closing amount
Reversal Written off
(1) Bad debt reserve 18,465,685.94 2,535,987.28 167,725.37 341,087.79 20,492,860.06
(2) Provision for falling price of
inventory
45,395,712.45 4,788,104.27 319,350.18 5,281,766.80 44,582,699.74
(3) Provision for impairment of
intangible assets
280,000.04 280,000.04
(4) Provision for impairment of fixed
assets
6,406,160.31 845,245.64 5,560,914.67
Total 70,267,558.70 7,604,091.59 767,075.59 6,468,100.23 70,636,474.47
(2) Among the breakdown of assets impairment, item “Reversal” for this period totaled to RMB
767,075.59, which was because Luthai Huanzhong was no longer included into the consolidated
scope of the Company.15. Assets with restricted ownership and use right
Items Closing amount Reason
Assets used for guarantee
Inventory 135,410,478.77 Mortgage loan
Fixed assets 59,109,664.49 Mortgage loan
Intangible assets 33,348,667.73 Mortgage loan
Total 227,868,810.99
16. Short-term loan
(1) Category
Items Closing amount Opening amount
Mortgage loan 229,690,000.00 229,690,000.00
Guaranteed loan 10,000,000.00
Credit loan 908,500,964.86 792,851,840.01
Total 1,138,190,964.86 1,032,541,840.01
(2) The closing credit loan included foreign currency loans of USD 92,569,847.31 and YEN
25,533,100, converting into RMB 630,590,964.86.
(3) As for the mortgage for mortgage loan, please refer to “Note IX. 1”.
17. Tradable financial liabilities
(1) Breakdown of tradable financial liabilities
Items Closing fair value Opening fair value
Derivative financial liabilities 14,038,123.52 61,408,150.00
Total 14,038,123.52 61,408,150.00
(2) Closing amount of tradable financial liabilities decrease by RMB 47,370,026.48 compared
with the opening amount, which was caused by the change in fair value of derivative financial
liabilities in the reporting period
18. Notes payable
(1) Breakdown of notes payable
Category Closing amount Opening amount
Bank acceptance bill 77,209,357.04 28,820,100.80
Trade acceptance bill 41,533,287.21 72,149,682.26
Total 118,742,644.25 100,969,783.06
(2) Amount of RMB 118,742,644.25 will fall due in the next accounting period.
19. Accounts payable
(1) Breakdown of accounts payableItems Closing amount Opening amount
Within 1 year 191,270,477.11 264,848,696.55
1-2 years 4,352,188.36 6,881,994.72
2-3 years 1,112,823.58 868,922.49
Over 3 years 2,218,282.41 3,277,191.77
Total 198,953,771.46 275,876,805.53
(2) The balance related to the shareholders holding over 5 percent (including 5 percent) stocks is
as followings:
Items Closing amount Opening amount
Lucheng Textile 1,000,000.00 1,260,493.77
Total 1,000,000.00 1,260,493.77
20. Advance form customer
(1) Breakdown of advance from customers
Items Closing amount Opening amount
Within 1 year 93,470,098.68 39,326,731.19
1-2 years 1,791,519.24 1,390,192.13
2-3 years 855,690.13 367,031.41
Over 3 years 428,287.82 357,503.93
Total 96,545,595.87 41,441,458.66
(2) There was no advance from customers due from shareholders with more than 5% (including
5%) of the voting shares of the Company.
(3) Closing amount of advance from customers has increased by 132.97% compared with opening
amount, which was caused by increase of advance payment for cotton by the end of reporting
period.
21. Payroll payable
(1) Breakdown of payroll payable
Items Opening amount Increase this period
Decrease this
period
Closing amount
I. Wage, bonus, allowance and
subsidies
204,494,331.63 320,997,520.27 322,509,890.70 202,981,961.20
II. Employee welfare 38,246,562.09 38,246,562.09
III. Social insurance 1,846,198.70 76,243,081.60 65,272,205.43 12,817,074.87
Endowment insurance 1,157,719.69 52,721,144.10 44,651,746.55 9,227,117.24
Medical insurance 244,517.58 17,228,854.50 14,700,585.60 2,772,786.48
Insurance against injuries at
work
120,584.05 1,369,471.19 1,436,873.42 53,181.82
Insurance for unemployment 217,276.18 3,842,398.15 3,358,519.83 701,154.50
Maternity insurance 106,101.20 1,081,213.66 1,124,480.03 62,834.83
IV. Housing fund 3,255,465.48 6,202,959.30 7,250,691.40 2,207,733.38V. Other 10,763,178.72 6,954,397.34 5,902,871.19 11,814,704.87
Total 220,359,174.53 448,644,520.60 439,182,220.81 229,821,474.32
(2) Item “Other” under payroll payable includes labor union fund and employee education fund.
22. Tax payable
(1) Breakdown of tax payable
Items Closing amount Opening amount
VAT -29,580,618.40 -2,645,709.16
Business tax 301,536.47 307,941.13
Urban maintenance and construction tax 105,092.68 165,085.98
Enterprise income tax 34,719,611.06 27,024,578.42
Personal income tax 1,318,904.62 732,854.03
Stamp tax 85,804.52 620,280.31
Property tax 903,162.94 1,313,808.63
Use tax of land 1,040,474.53 1,050,219.98
Education surtax 55,631.56 86,210.01
Local tax for education 12,444.36 27,361.71
Total 8,962,044.34 28,682,631.04
(2) Closing amount of tax payable decreased by 68.75% compared with opening amount, which
was caused by the increase of overpaid VAT as at the end of reporting period.
23. Interest payable
(1) Breakdown of interest payable
Items Closing amount Opening amount
Interest payable for borrowing 2,298,563.32 490,102.22
Total 2,298,563.32 490,102.22
(2) The closing amount of interest payable increased by RMB 1,808,461.10 compared
with the opening amount, which was caused by withholding interests.
24. Dividends payable
(1) Breakdown of dividends payable
Name Closing amount Opening amount Reason of unpaid over 1 year
Dividends payable for
individual shareholders
442,309.44 442,538.04
Individual shareholders failed to
receive cash dividend
distributed in the previous years
Dividends payable for
Lucheng Textile
24,589,500.00
Dividends payable for
Beijing Sichuang
2,716,347.50
Dividends payable for
Xinjiang Luthai
12,775,633.27
Total 40,523,790.21 442,538.04
(2) The closing amount of dividend payable increased by RMB 40,081,252.17 compared with theopening amount, which was caused by unpaid payment on dividend as at the end of reporting
period.
25. Other payables
(1) Breakdown of other payable
Items Closing amount Opening amount
Within 1 year 44,763,680.76 37,756,104.08
1-2 years 21,681,807.54 26,163,398.67
2-3 years 8,480,816.06 8,907,217.05
Over 3 years 24,179,157.77 17,582,077.20
Total 99,105,462.13 90,408,797.00
(2) The balance related to the shareholders holding over 5 percent (including 5 percent) stocks is
as followings:
Items Closing amount Opening amount
Lucheng Textile 12,958,257.75 10,287,625.00
Total 12,958,257.75 10,287,625.00
(3) The details of significant other payables with aging over 1 year are as follows:
Name Amount Reason for unpaid
Whether return
after balance sheet
date
Contracting fees for locus contractus 11,931,488.48
Receiving contracting
fees in locus contractus
No
Cotton and Jute Company in Xinjiang AR 11,925,000.00
Received earnest
money for Cotton Sale
Contract
No
Total 23,856,488.48
(4) The details of significant other payables are as follows
Name Closing amount Nature or contents
Lucheng Textile 12,958,257.75
a loan borrowed by Luqun
Textile from Lucheng
Textile
Contracting fees in locus contractus
11,931,488.48
Contracting fees in locus
contractus
Cotton and Jute Company in Xinjiang AR
11,925,000.00
Earnest money for Cotton
Sale Contract
Total 36,814,746.23
26. Non-current liabilities due within 1 year
(1) Breakdown of non-current liabilities due within 1 yearItems Closing amount Opening amount
Long-term borrowing due within one
year
59,798,315.00 157,379,900.00
Total 59,798,315.00 157,379,900.00
(2) Long-term borrowing due within one year
① Breakdown of long-term borrowing due within one year
Item Closing amount Opening amount
Credit loan 59,798,315.00 157,379,900.00
Total 59,798,315.00 157,379,900.00
② The top five
Units
Starting
date
Ending
date
Interest rate Currency
Closing amount Opening amount
Foreign
amount
Converted into
RMB
Foreign
amount
Converted into
RMB
China
Construction
Bank Corporation
Zibo Branch
Zichuan
Subbranch
2009-3-30 2011-3-29 LIBOR+1% USD 4,000,000.00 27,163,600.00
China
Construction
Bank Corporation
Zibo Branch
Zichuan
Subbranch
2007-3-26 2011-6-26 3LIBOR+1% USD 1,350,000.00 9,167,700.00 1,200,000.00 8,193,840.00
Societe Generale
Wuhan Branch
2010-6-21 2011--6-22 3.8043% USD 1,200,000.00 8,149,100.00
Bank of China
Limited Zibo
Branch Zichuan
Subbranch
2007-8-20 2010-8-19 3LIBOR+1.01% USD 1,000,000.00 6,790,900.00
China
Construction
Bank Corporation
Zibo Branch
Zichuan
Subbranch
2007-3-29 2011-6-29 3LIBOR+2.5%
CHF
Swissie
700,000.00 4,391,900.00
Bank of China
Limited Zibo
Branch Zichuan
Subbranch
2009-3-30 2010-1-15 3LIBOR+1.01% USD 6,300,000.00 43,017,660.00
Bank of China
Limited Zibo
2007-3-23 2010-3-22 3LIBOR+1.01% USD 3,500,000.00 23,898,700.00Units
Starting
date
Ending
date
Interest rate Currency
Closing amount Opening amount
Foreign
amount
Converted into
RMB
Foreign
amount
Converted into
RMB
Branch Zichuan
Subbranch
Bank of China
Limited Zibo
Branch Zichuan
Subbranch
2007-4-20 2010-4-19 3LIBOR+1.01% USD 2,800,000.00 19,118,960.00
China
Construction
Bank Corporation
Zibo Branch
Zichuan
Subbranch
2008-6-19 2010-6-18 LIBOR+1.4% USD 7,000,000.00 47,797,400.00
55,663,200.00 142,026,560.00
(3) Of which: Long-term loan due within 1 year – foreign currency
Items Conditions of loan Closing amount Opening amount
US dollar loan Credit 51,271,295.00 148,854,760.00
EURO loan Credit 4,135,500.00 4,898,550.00
SF loan Credit 4,391,520.00 3,626,590.00
Total 59,798,315.00 157,379,900.00
27. Long-term loan
(1) Breakdown of long-term loan
① Category of long-term loan
Items
Closing amount Opening amount
Foreign amount
(USD, EURO, SF)
Exchange
rate
RMB Yuan
Foreign amount
(USD, EURO, SF)
Exchange
rate
RMB Yuan
US dollar loan 7,950,000.00 6.7909 53,987,655.00 7,900,000.00 6.8282 53,942,780.00
EURO loan 2,000,000.00 8.2710 16,542,000.00 2,500,000.00 9.7971 24,492,750.00
SF loan 1,750,000.00 6.2736 10,978,800.00 2,150,000.00 6.5938 14,176,670.00
Total 81,508,455.00 92,612,200.00
② The top five
Units Starting date Ending date Interest rate Currency
Closing amount Opening amount
Foreign
amount
Converted
into RMB
Foreign
amount
Converted
into RMB
China
Construction
Bank
Corporation
2009-3-30 2011-3-29 1LIBOR+1% USD 4,000,000.00 27,312,800.00Zibo Branch
Zichuan
Subbranch
China
Construction
Bank
Corporation
Zibo Branch
Zichuan
Subbranch
2007-3-5 2013-3-5 3LIBOR+1.7% EURO 3,150,000.00 21,391,335.00 2,500,000.00 24,492,750.00
China
Construction
Bank
Corporation
Zibo Branch
Zichuan
Subbranch
2007-3-26 2013-3-25 3LIBOR+1% USD 2,000,000.00 16,542,000.00 3,900,000.00 26,629,980.00
China
Construction
Bank
Corporation
Zibo Branch
Zichuan
Subbranch
2007-3-29 2013-3-28 3LIBOR+2.5% SF 1,750,000.00 10,978,800.00 2,150,000.00 14,176,670.00
Societe
Generale
Wuhan Branch
2010-6-21 2012-6-22 3.8043% USD 4,800,000.00 32,596,320.00
Total 81,508,455.00 92,612,200.00
28. Long-term accounts payable
(1) The top five
Items Closing amount Opening amount
Long-term accounts payable 9,735,560.00 9,735,560.00
(2) The top five
Unit Initial amount
Interest
rate（%）
Interest
accrued
Closing
balance
Conditions of
loans
Power bonds 9,735,560.00 9,735,560.00 Credit
Total 9,735,560.00 9,735,560.00
29. Other non-current liabilities
(1) Breakdown of other non-current liabilitiesItems Closing amount Opening amount
Other non-current liabilities 34,962,111.98 2,673,445.33
(2) During the reporting period, other non-current liabilities increased by RMB 32,288,666.65,
which was mainly because the Company received a special funds for financial support (land) of
RMB 32,560,000.00 from Zichuan District People’s Government.
30. Share capital
Items
Before the change Increase/decrease（+，-） After the change
Number Ratio
Issuance
of new
shares
Bonus
Capitalization
of capital
reserve
Other Sub-total Number Ratio
I. Shares subject to
trading moratorium
217,923,592 21.90% 217,923,592 21.90%
1. Shares held by the
State
2. Share held by
state-owned
corporation
3. Shares held by other
domestic investors
98,358,000 9.89% 98,358,000 9.89%
Among which: Shares
held by domestic
non-state-owned
corporation
98,358,000 9.89% 98,358,000 9.89%
Shares held by
domestic natural
persons
4. Shares held by
foreign investors
118,232,400 11.88% 118,232,400 11.88%
Among which: Shares
held by foreign
corporation
118,232,400 11.88% 118,232,400 11.88%
Shares held by foreign
natural persons
5. Shares held by
senior management
1,333,192 0.13% 1,333,192 0.13%
II. Shares not subject to
moratorium
776,941,208 78.10% 776,941,208 78.10%
1. RMB ordinary
shares
452,952,028 45.53% 452,952,028 45.53%
2. Domestically listed
foreign shares
323,989,180 32.57% 323,989,180 32.57%
3. Overseas listedforeign shares
4. Others
III. Total shares 994,864,800 100.00% 994,864,800 100.00%
31. Capital reserve
(1) Breakdown of capital reserve
Items Opening amount
Increase this
period
Decrease this
period
Closing amount
Premium on share capital 1,065,164,874.44 1,065,164,874.44
Other 70,191,294.28 2,350,000.00 7,215,239.04 65,326,055.24
Total 1,135,356,168.72 2,350,000.00 7,215,239.04 1,130,490,929.68
(2) During the reporting period, item “Other” under capital reserve increased by RMB
2,350,000.00, which was mainly caused by special subsides and funds for the “Eleventh
Five-year” energy-saving reforming received by the Company in accordance with Circular of the
Ministry of Finance, the National Development and Reform Commission of the People's Republic
of China, on Printing and Issuing the Provisional Measures for Administration of the Financial
Reward Capital for the Innovation of Energy-saving Technology (CJ (2007) No. 371).
(3) During the reporting period, item “Other” under capital reserve decreased by RMB
7,215,239.04, which was mainly caused by minority interests of Luthai Zhonghuan purchased by
the Company in March 2009, and Luthai Huanzhong was no longer included into the consolidated
scope of the Company in the reporting period.
32. Surplus reserve
(1) Breakdown of surplus reserve
Items Opening amount Increase this Decrease this Closing amount
Statutory surplus reserve 371,087,956.61 371,087,956.61
Discretionary surplus 3,341,572.58 3,341,572.58
Total 374,429,529.19 374,429,529.19
33. Retained profit
(1) Change in retained profit
Items Amount
Proportion for
withdrawing or
distribution
Retained profit at the end of previous year before
adjustment
1,418,468,702.64
Adjustment: Total retained profit as at 31
December 2009 (increase “+”, decrease “-”)
Retained profit at the beginning of year after adjustment 1,418,468,702.64
Add: Net profit attributable to owners of parent company
in this period
366,877,951.37
Recovery of losses with surplus reserveOther transfer-in
Less: appropriating statutory surplus reserve
Appropriating discretionary surplus reserve
Common share dividend payable 248,716,200.00 0.25 元/股
Retained profit at the period-end 1,536,630,454.01
(2) Note to profit distribution
The cash dividend of RMB 248,716,200.00 was distributed in accordance with the profit
distribution plan 2009 approved by the Shareholders’ General Meeting 2009 on 4 June 2010.
34. Operating income and operating cost
(1) Operating income and operating cost
Items This period Last period
Income from main operation 2,145,447,957.22 1,787,904,396.36
Other operating income 101,402,959.64 54,461,795.62
Total operating income 2,246,850,916.86 1,842,366,191.98
Cost of main operation 1,427,122,029.45 1,286,667,954.35
Other operating cost 60,254,815.94 35,706,244.40
Total operating cost 1,487,376,845.39 1,322,374,198.75
(2) Main business (categories by product)
Name of products
This period Last period
Operating income Operating cost Operating income Operating cost
Yarn-dyed fabric 1,476,811,154.33 962,623,024.58 1,190,628,201.99 865,118,879.22
Shirt 510,826,385.21 330,511,011.76 496,684,395.25 339,746,436.13
Cotton 77,981,978.41 57,862,627.98 33,568,420.65 28,298,178.61
Drugs 6,839,609.41 5,490,183.33 8,396,980.09 7,633,045.65
Power and steam 61,745,265.62 64,418,835.62 34,595,287.41 29,042,743.78
Other 11,243,564.24 6,216,346.18 24,031,110.97 16,828,670.96
Total 2,145,447,957.22 1,427,122,029.45 1,787,904,396.36 1,286,667,954.35
(3) Turnover from top 5 clients:
Name of clients Operating income
Portion in total
turnover
（%）
TAL APPAREL LIMITED 228,806,380.46 10.18%
OXFORD PRODUCTS (INTERNATIONAL) LIMITED 191,269,246.76 8.51%
PHILLIPS VANHEUSEN SHIRT GROUP 153,940,258.20 6.85%
Chen Feng (Jin Tan) Garments Co., Ltd. 122,855,136.23 5.47%
ITOCH TEXTILE PROMINENT(ASIA) LIMITED 91,697,465.16 4.08%
Total 788,568,486.81 35.09%35. Business tax and surcharge
(1) Breakdown of business tax and surcharge
Items This period Last period
Withholding
standard
Business tax 10,147.33
-
5%
City maintenance and
construction tax
563,330.78 936,330.59 7%、1%
Education surtax 320,169.22 491,955.76 3%
Local education surcharge 99,637.69 156,929.69 1%
Total 993,285.02 1,585,216.04
(2) During the reporting period, business tax and surcharge decreased by RMB 37.34% compared
with the last period, which caused by decrease of City maintenance and construction tax and
education surtax.
36. Sales expenses
Items This period Last period
Sales expenses 68,719,116.26 67,585,100.30
37. Administrative expenses
(1) Breakdown of administrative expenses
Items This period Last period
Administrative expenses 224,789,075.22 119,323,395.86
(2) During the reporting period, administrative expenses increased by 88.39% than
last period, which was caused by increase of R&D expense and salary in the reporting
period.
38. Financial expenses
(1) Breakdown of financial expenses
Items This period Last period
Interest expenses 22,944,675.97 36,141,414.98
Less: Interest income 1,425,577.71 2,898,074.64
Exchange losses 8,566,269.80 9,923,857.10
Less: exchange gain 13,118,184.59 9,935,654.03
Commission charge 4,724,261.57 4,372,548.51
Total 21,691,445.04 37,604,091.92
(2) During the reporting period, financial expenses decreased by 42.32% than last
period, which was caused by decrease of interest expenses in the reporting period.39. Loss on assets impairment
(1) Breakdown of loss on assets impairment
Items This period Last period
Loss on bad debts 2,535,987.28 -215,281.56
Loss on falling price of inventory 4,788,104.27
Loss on impairment of fixed assets 280,000.04
Total 7,604,091.59 -215,281.56
(2) During the reporting period, occurred amount of loss on assets impairment
increased by RMB 7,819,373.15 compared with last year, which was caused by
withholding loss on falling price of inventory and loss on bad debts.
40. Gain from change in fair value
(1) Breakdown of gain from change in fair value
Resource This period Last period
Transaction financial liabilities 47,370,026.48 -20,453,300.00
Total 47,370,026.48 -20,453,300.00
(2) During the reporting period, occurred amount of gain from change in fair value
increased by RMB 67,823,326.48 compared with last year, which was caused by
change in fair value of transaction financial liabilities.
41. Investment income
(1) Breakdown of investment income
Items This period Last period
Long-term equity investment income 9,873,238.08
Investment income during holding tradable financial
assets (liabilities)
-49,348,254.22 20,780,300.00
Total -39,475,016.14 20,780,300.00
Note: There exists no major limitation to repatriation of investment income.
(2) Long-term equity investment income is from those incomes on investments abroad with
the equity of Luthai Huanzhong (the subsidiary of the Company).
(3) During the reporting period, occurred amount of investment income during holding tradable
financial assets (liabilities) decreased by RMB 70,128,554.22 compared with last period, which
was caused by increase of loss on transaction financial liabilities.
42. Non-operating income
(1) Breakdown of non-operating income
Items This period Last period
Profit from disposal of non-current 447,493.54 199,220.21assets
Of which: Profit from disposal of
fixed assets
447,493.54 199,220.21
Income from claim for
compensation
3,387,277.56 461,136.11
Income from penalty 568,937.46 587,141.98
Government grants 14,818,833.35 7,476,729.26
Other 5,163,314.70 1,914,799.21
Total 24,385,856.61 10,639,026.77
(2) During the reporting period, occurred amount of non-operating income increased 1.29 times as
against last period, which was caused by increase of government grants in the reporting period.
(3) Breakdown of government grants
Items This period Last period 说明
Financial appropriations 13,691,333.35 4,180,000.00
Financial discount 1,127,500.00 3,296,729.26
Total 14,818,833.35 7,476,729.26
(4) Explanation on government grants received by the Company in the reporting period:
Items
Amount this
period
Document
Subsidies for Moving costs of cotton
out from out of Xinjiang
5,060,000.00 The Circular of the Ministry of Finance (CJ [2008] No. 396)
Subsidies for transportation charges
of cotton yarn out of Xinjiang
850,000.00 The Circular of the Ministry of Finance (CJ [2009] No. 561)
2008 provincial level subsidy fund for
prevention and control of air pollution
2,000,000.00
The Circular of Shandong Provincial Department of Finance and
Shandong Provincial Environmental Protection Agency (LCJZ
[2008] No. 151)
2009 provincial level subsidy fund for
air pollution control
500,000.00
The Circular of Shandong Provincial Department of
Finance(LCJZ [2009] No.75)
Import/export discount 1,127,500.00
The Circular of Shandong Provincial Office of Mechanical and
Electronic Products Import & Export (LJDHZ [2010] No. 2)
Progress prize in scientific and
technology
10,000.00
Awards Measures of Zichuan District People’s Government on
Zichuan District Giving Countenance to Self-renovation
Advanced units award for training
base
20,000.00
The Notification of Shandong Provincial Economics and
Information Committee, Shandong Provincial Department of
Education and Shandong Provincial Employee Education Office
([2009] No. 505)
The national science & technology
support programs for 2009-rewards
for production of starch size and
replacing PVA applied key
technology
4,960,000.00
The Circular of the Ministry of Science and Technology (GKFC
[2009] No. 682)
Progress prize in scientific and
technology
20,000.00
Measures of Shandong Provincial Department of Technology on
Science and Technology Awards of Shandong ProvinceItems
Amount this
period
Document
Financial support fund 271,333.35
Special funds for financial support of Zichuan District People’s
Government.
