LU THAI TEXTILE CO., LTD.
SEMI-ANNUAL REPORT
==2011==
Shandong Zibo
11 Aug. 2011
English Translation for Reference Only
Contents
Section I Important Notice………………………………………………………….3
Section II Company Profile…………………………………………………...…….3
Section III Changes in Share Capital and Shares Held by Shareholders………...…5
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………………………………………………………14
Section VIII Documents Available for Reverence………………………………..114
2
English Translation for Reference Only
Section 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.
Li Zhixian, independent director of the Company didn’t attended the Board Meeting
due to work arrangement, nor did he consign other independent directors to voting on
his behalf. All the other directors 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 2011 has not been audited.
English Translation for Reference Only. Should there be any discrepancy between the
two versions, the Chinese version shall prevail.
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
No. 81, Songling East Road, Zichuan No. 81, Songling East Road, Zichuan
Address
District, Zibo 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@lttc.com.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 Semi-annual Report:
www.cninfo.com.cn
The place where the Semi-annual Report is prepared and placed: Securities
Department of the Company
6. 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
3
English Translation for Reference Only
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 At the period-end of
Increase/decrease (%)
reporting period last year
Total assets 7,355,255,187.71 7,015,883,263.33 4.84%
Owners’ equity attributable to shareholders
4,647,919,144.80 4,404,133,413.47 5.54%
of the listed company
Share capital 994,864,800.00 994,864,800.00 0.00%
Net assets per share attributable to
shareholders of the listed company 4.67 4.43 5.42%
(Yuan/share)
In the reporting
The same period of
period (from Jan. to Increase/decrease (%)
last year
Jun.)
Total operating income 2,980,813,097.20 2,246,850,916.86 32.67%
Operating profit 623,059,761.14 443,572,068.68 40.46%
Total profit 627,922,258.35 463,393,367.66 35.51%
Net profit attributable to shareholders of the
491,647,065.96 366,877,951.37 34.01%
listed company
Net profit attributable to shareholders of the
listed company after deducting 476,456,565.30 348,475,975.27 36.73%
non-recurring gains and losses
Basic earnings per share (Yuan/share) 0.49 0.37 32.43%
Diluted earnings per share (Yuan/share) 0.49 0.37 32.43%
Weighted average return on equity (%) 10.86% 9.23% 1.63%
Weighted average return on equity after
10.53% 8.76% 1.77%
deducting non-recurring gain and loss (%)
Net cash flows from operating activities 428,569,250.90 290,608,340.78 47.47%
Net cash flows from operating activities per
0.43 0.29 48.28%
share (Yuan/share)
Note: Impact amount of non-recurring gains and losses on net profit was RMB 15,190,500.66, of
which composing was as follows:
Items of non-recurring gains and losses Amount
Gains and losses from non-current asset disposal -7,353,835.83
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 12,444,285.74
proportions according to certain state standards
Gains 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
19,840,081.05
and financial assets available for sale, excluding valid hedging business relating to normal
operation.
Other non-operating incomes/expenses besides the items above -227,952.70
Effect on income tax -6,710,756.03
Effect on minority interests -2,801,321.57
Total 15,190,500.66
2. Explanation on the difference in net profit and net assets under IAS and CAS
4
English Translation for Reference Only
Unit: RMB Yuan
Net profit attributable to shareholders of the Owners’ equity attributable to shareholders
Company of the Company
Same period of last
Reporting period Closing amount Opening amount
year
Data under IFRS 492,771,565.96 368,002,451.37 4,631,869,644.80 4,386,959,413.47
Data under PRC GAAP 491,647,065.96 366,877,951.37 4,647,919,144.80 4,404,133,413.47
Items and total adjusted under IFRS:
Value increments of fixed
assets due to translating the
USD statements into RMB
0.00 0.00 -3,230,000.00 -3,230,000.00
statements in 1996, which
was not recognized under
IFRSs
Impact on the reporting
period of the evaluated
value increments of fixed
265,500.00 265,500.00 -5,472,500.00 -5,738,000.00
asset investments, which
was not recognized under
IFRSs
Impact of deductible tax for
domestic equipments being
859,000.00 859,000.00 -7,347,000.00 -8,206,000.00
recognized as deferred
income under IFRSs
Total of difference under
1,124,500.00 1,124,500.00 -16,049,500.00 -17,174,000.00
IFRS and PRC GAAP
1. Impact of the value increments from translating 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 the evaluated value increments of assets
Explanation on difference
The Company invested on Luqun Textile according to appraisal of fixed assets, and the increment
between IFRS and PRC
of appraisal will record in capital public reserves under PRC GAAP but will not be recognized
GAAP
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 income tax deduction due to domestically-manufactured equipments
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 deferred income 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)
Basic Diluted
Fully Weighted
earnings earnings per
diluted average
per share share
Net profit attributable to owners of the
10.58% 10.86% 0.49 0.49
parent company
Net profit attributable to owners of the
parent Company after deducting 10.25% 10.53% 0.48 0.48
non-recurring profit and loss
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
Issuance Capitaliz
Bonus
Amount Proportion of new ation of Others Subtotal Amount Proportion
shares
shares public
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English Translation for Reference Only
reserve
I. Shares subject to
217,923,792 21.90% -98,358,000 -98,358,000 119,565,792 12.01%
trading moratorium
1. Shares held by state
2. Shares held by
state-owned corporation
3. Shares held by other
98,358,000 9.89% -98,358,000 -98,358,000 0
domestic investors
Including: shares held
by domestic
98,358,000 9.89% -98,358,000 -98,358,000 0
non-state-owned
corporation
Shares held by
domestic natural person
4. Shares held by
118,232,400 11.88% 118,232,400 11.88%
foreign investors
Including: shares held
118,232,400 11.88% 118,232,400 11.88%
by foreign corporation
Shares held by foreign
natural person
5. Shares held by senior
1,333,392 0.13% 1,333,392 0.13%
executives
II. Shares not subject to
776,941,008 78.10% 98,358,000 98,358,000 875,299,008 87.99%
trading moratorium
1. RMB ordinary shares 452,951,828 45.53% 98,358,000 98,358,000 551,309,828 55.42%
2. Domestically listed
323,989,180 32.57% 323,989,180 32.57%
foreign shares
3. Overseas listed
foreign shares
4. Others
III. Total shares 994,864,800 100.00% 0 994,864,800 100.00%
Note: “Others” in “Increase or decrease during the change” is a number of shares
totaling 98.358 million held by Zibo Lucheng Textile Investment Co., Ltd, shareholders
of the Company was released for trading in the reporting period.
II. Shares held by the top ten shareholders at the at of reporting period
Unit: Share
Total shareholders 121,231
Particulars about shares held by the top ten shareholders
Shares subject Shares
Nature of Shareholding Total shares
Name of shareholders to trading pledged or
shareholders ratio held
moratorium frozen
Domestic
ZIBO LUCHENG TEXTILE INVESTMENT CO., LTD non-state-owned 12.40% 123,314,700 0 0
corporation
Foreign
TAILUN CO., LTD 11.88% 118,232,400 118,232,400 0
corporation
Foreign
DBS VICKERS (HONG KONG) LTD A/C CLIENTS 4.08% 40,628,642 0 0
corporation
Domestic
E FUND VALUE GROWTH MIXED FUND non-state-owned 0.66% 6,599,929 0 0
corporation
Foreign
AVIVA INVESTORS 0.60% 5,965,096 0 0
corporation
Domestic
BOSERA TERTIARY INDUSTRY GROWTH STOCK
non-state-owned 0.50% 4,999,976 0 0
FUND
corporation
GUOTAI JUNAN SECURITIES(HONGKONG) Foreign
0.40% 4,004,613 0 0
LIMITED corporation
Domestic natural
LU BEISHE 0.40% 3,946,372 0 0
person
Domestic
YUHONG INVESTMENT FUND 0.33% 3,300,000 0 0
non-state-owned
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English Translation for Reference Only
corporation
Foreign
TOYO SECURITIES ASIA LIMITED-A/C CLIENT. 0.31% 3,128,121 0 0
corporation
Particulars about shares held by the top ten shareholders not subject to trading moratorium
Shares not subject to
Name of shareholders trading moratorium Type of shares
held
ZIBO LUCHENG TEXTILE INVESTMENT CO., LTD 123,314,700 RMB ordinary shares
Domestically listed
DBS VICKERS (HONG KONG) LTD A/C CLIENTS 40,628,642
foreign shares
E FUND VALUE GROWTH MIXED FUND 6,599,929 RMB ordinary shares
Domestically listed
AVIVA INVESTORS 5,965,096
foreign shares
BOSERA TERTIARY INDUSTRY GROWTH STOCK FUND 4,999,976 RMB ordinary shares
Domestically listed
GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED 4,004,613
foreign shares
LU BEISHE 3,946,372 RMB ordinary shares
YUHONG INVESTMENT FUND 3,300,000 RMB ordinary shares
Domestically listed
TOYO SECURITIES ASIA LIMITED-A/C CLIENT. 3,128,121
foreign shares
ORIENT SECURITIES ASSET MANAGEMENT COMPANY LIMITED – BANK OF
3,000,000 RMB ordinary shares
CHINA – ORIENT RED NO.2 PLAN ON MANAGEMENT OF COLLECTED ASSETS
Among the aforesaid shareholders, Zibo Lucheng Textile Investment Co., Ltd is
the first principal shareholder and Tailun Co., Ltd is the sponsor of foreign
Explanation on associated relationship among the
shares. Other shareholders were shareholders holding circulation shares. The
aforesaid shareholders or acting-in-concert
Company was unknown whether there exists associated relationship among the
top ten shareholders of tradable share.
III. Particulars about changes in controlling shareholders or the actual controller during
the reporting period.
The principal shareholder and the actual controller of the Company remained
unchanged in the reporting 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 reporting period.
II. Particulars about new engagement and dismissal of directors, supervisors and senior
executives
There was no new engagement or dismissal of directors, supervisors or senior
executives in the reporting period.
Section V Report of the Board of Directors
I. Discussion and analysis by the Board of Directors
(I) Discussion and analysis on the Company’s performance during the reporting
period
Cotton prices experienced sharp fluctuations during the reporting period, which made
it harder for the Company to control its production costs. The rise of cotton prices was
the biggest in the Company’s history. Due to a long production chain, costs of the
ultimate products began to increase quite a while after the cotton price rise. Therefore,
impact of the rise on the Company’s costs was not so obvious in the first half of the
year. Prices of the Company’s products also increased a bit while cotton prices went
up greatly. However, due to a relatively long order cycle, the Company’s product
prices rose not so quickly and greatly as cotton prices. But the rise of the Company’s
product prices still cushioned impact of the cotton price increase on the Company’s
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English Translation for Reference Only
costs. For the reporting period, the Company achieved operating revenues of RMB
2,980,813,100, operating profit of RMB 623,059,800, and net profit attributable to
owners of the Company of RMB 491,647,100, up 32.67%, 40.46% and 34.01%
respectively from a year earlier.
(II) Operating results of the Company for the reporting period
Same period of
Item Unit Current period Increase/decrease
last year
Ten
Operating revenues thousand 298,081.31 224,685.09 32.67%
(RMB)
Ten
Operating profit thousand 62,305.98 44,357.21 40.46%
(RMB)
Ten
Net profit attributable to shareholders
thousand 49,164.71 36,687.80 34.01%
of the Company
(RMB)
Net cash flows per share from RMB
0.43 0.29 48.28%
operating activities Yuan/share
Return on equity % 10.58% 9.10% 148 basic points
Closing Opening
amount amount
Ten
Total assets thousand 735,525.52 701,588.33 4.84%
(RMB)
Ten
Equity attributable to owners of the
thousand 464,791.91 44,0413.34 5.54%
Company
(RMB)
(III) Main business scope and operating results
1. Main business scope
The Company is a comprehensive textile enterprise engaged in cotton planting,
pinning, bleaching & dyeing, weaving, after-finishing and clothes making, with its
main products being yarn-dyed fabrics for making shirts. Exporting 80% of its
products to over 30 countries and regions such as Japan, South Korea, America,
Britain and Italy, the Company is the largest production base for yarn-dyed fabrics in
the world.
2. Operating results by industries and products
Unit: RMB Ten thousand
Main business lines classified by industries
Year-on-year Year-on-year Year-on-year
Operating Gross profit rate increase/decreas increase/decreas increase/decrease
Industries or products Operating cost
revenue (%) e of operating e of operating of gross profit
revenue (%) cost (%) rate (%)
Textile and garment 269,903.18 173,973.72 35.54% 35.79% 34.54% 0.60%
Agriculture (cotton
6,553.41 5,597.93 14.58% -15.96% -3.25% -11.22%
planting)
Thermo-electricity
6,571.99 6,696.85 -1.90% 6.44% 3.96% 2.43%
(electricity and gas)
Other 15,052.73 10,408.55 30.85% 33.63% 56.59% -10.14%
Total 298,081.31 196,677.05 34.02% 32.67% 32.23% 0.22%
Main business lines classified by products
Shirt fabrics 206,072.69 132,081.36 35.91% 39.54% 37.21% 1.09%
Shirts 63,830.49 41,892.36 34.37% 24.96% 26.75% -0.93%
Lint 6,553.41 5,597.93 14.58% -15.96% -3.25% -11.22%
Electricity and gas 6,571.99 6,696.85 -1.90% 6.44% 3.96% 2.43%
Others 15,052.73 10,408.55 30.85% 33.63% 56.59% -10.14%
Total 298,081.31 196,677.05 34.02% 32.67% 32.23% 0.22%
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3. Sales of products by regions
Unit: RMB Ten thousand
Same period of last
Region Reporting period Proportion (%) Proportion (%)
year
Japan, South 24,440.28 8.20 21,773.41 8.41
Korea
Hong Kong 27,846.28 9.34 18,903.42 9.69
Southeast Asia 66,443.13 22.29 55,077.53 24.51
Europe, America 72,324.31 24.26 52,456.54 23.35
Others 43,057.35 14.45 23,067.63 10.27
China Mainland 63,969.96 21.46 53,406.56 23.77
Total 298,081.31 100.00 224,685.09 100.00
(IV) No substantial change occurred in the Company’s profit composition and main
business during the reporting period.
(V) There were no other operating activities that had greatly influenced the profit of
the Company for the reporting period.
(VI) Investment income from any individual joint venture has not been able to
influence the Company’s net profit by 10%.
(VII) Problems and difficulties
Prices of raw cotton—the main raw material for the Company’s
production—experienced sharp fluctuations during the reporting period, which made
it harder for the Company to control its production costs. The rise of cotton prices was
the biggest in the Company’s history. Due to a long production chain, costs of the
ultimate products began to increase quite a while after the cotton price rise. Therefore,
impact of the rise on the Company’s costs was not so obvious in the first half of the
year. Due to a relatively long production chain and order cycle, the Company’s
product prices rose not so quickly and greatly as cotton prices. Cotton prices dropped
significantly right after a leap. Hesitant sentiment is strong among customers, who
have been demanding a decrease of the Company’s product prices. As a result, the
Company may have to bring down its product prices due to market pressure while the
rise of its product prices has not yet caught up with the rise of cotton prices. Therefore,
it is uncertain how much the sharp fluctuations will affect the Company’s
performance for the whole year.
The rapid appreciation of RMB in the reporting period also affected the Company’s
performance to some degree. The Company executed hedging on its forward
exchanges, locking up in advance its cost in the exchange settlement business. But the
move may not be able to completely offset the rise of the Company’s export costs
caused by RMB appreciation.
II. Investments made in the reporting period
1. Continued use of raised proceeds in the reporting period
In Dec. 2008, the Company carried out re-financing project through the public listing
of additional 150 million A-shares. And the net amount of raised capital stood at RMB
950,814,500, which was input in the projects respectively such as the Production
Project for 150-thousand Ingot Top-grade Fine Combed Yarns, the 50-thousand Ingot
Two-for-one Twisting Production Line Project, the Production Line Project for
10-million-meter Top-grade Jacquard Fabrics for Women’s Wear, the Project for
9
English Translation for Reference Only
Marketing Network Development, the Project for Supplementing the Working Capital
and etc.. Among the above projects, the Production Project for 150-thousand Ingot
Top-grade Fine Combed Yarns, the 50-thousand Ingot Two-for-one Twisting
Production Line Project, the Production Line Project for 10-million-meter Top-grade
Jacquard Fabrics for Women’s Wear, the Project for Supplementing the Working
Capital had been finished before the end of the reporting period.
Besides, the Company increased to invest RMB 7,253,700 on the Project for
Marketing Network Development, with accumulative investment of RMB 34,545,000.
Currently, the Company has opened 36 franchised shops, and tried to expand its
on-line marketing channel through “Luthai Online”.
2. Investment with non-raised capital in the reporting period
In the reporting period, the Company added investment on Lufeng Weaving & Dyeing
Co., Ltd. with the dividends of RMB 0.165 billion from such company. Lufeng
Weaving & Dyeing Co., Ltd. has planned to implement 50-million-meter Piece
Dyeing Fabric Production Expansion Project, which will be carried out by two phases,
and the first phase will be put into production in the middle of 2012, while the second
phase in 2013. After the project being put into production, the annual output of piece
dyeing fabric will amount to 100 million meters.
III. In the reporting period, no adjustment has been made to the planned annual
indices of the Company.
Section VI Significant Events
I. Corporate governance
During the reporting period, the Company didn’t revise the relevant rules and systems
of corporate governance.
During the reporting period, the Company, as a pilot unit of Implementing Internal
Control in Listed Companies of Shandong Province, was in accordance with its
Implementation Schedule on Internal Control and integrated with its ongoing
management work on excellent performance to unscramble 18 related business flows,
promulgate risk lists, find out deficits on internal control. And the work on internal
control will be finished at the end of this year as schedule.
II. Implementation of profit distribution and semi-annual profit distribution pre-plan
of 2011
1. Profit distribution and capitalization of public reserves plans drafted in previous
periods and implemented in reporting period
The profit distribution plan of the Company for the year 2010: based on the total
shares of 994,864,800 shares as at 31 Dec. 2010, 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 2010 Annual Shareholders’ General Meeting.
Particulars about implementation of the aforesaid distribution plan: the above plan
was reviewed and approved on the Shareholders’ General Meeting for Y2010, and the
Board of Directors of the Company disclosed the Public Notice on Implementation of
Dividend Distribution for 2010 dated 26 May 2011, which recognized the record date
for A shares on 1 Jun. 2011, the ex-dividend day on 2 Jun. 2011; the last trading date
for B shares on 1 Jun. 2011, the record date on 7 Jun. 2011 and the ex-dividend date
on 2 Jun. 2011. And the profit distribution plan has been finished.
2. Semi-annual profit distribution preplan for 2011
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The Company would not conduct profit distribution or capitalization of public reserves
in the interim of 2011.
III. In the reporting 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 reporting period.
IV. In the reporting 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 reporting period, the Company conducted no significant asset acquisition,
sale or reorganization.
VI. In the reporting 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 reporting period.
VII. There occurred no material related transactions in the reporting 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. and its wholly owned subsidiary Luqun
Land Co., Ltd., with the leasing charge aggregating RMB 3,241,900. Meanwhile, the
wholly-owned subsidiary Luqun Textile leased equipments from the principal
shareholder Zibo Lucheng Co. Ltd., with the leasing charge aggregating RMB
2,086,700. And 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 reporting period, the 12th Session of the 6th Board of Directors reviewed and
approved the Company’s Providing RMB 300 million of Credit Line Guarantee for Its
Controlling Subsidiary Lufeng Weaving & Dyeing Co., Ltd., with the
counter-guarantee from Lufeng Weaving & Dyeing Co., Ltd.. The public notice on
the guarantee was disclosed on Securities Times, Shanghai Securities News and Ta
Kung Pao dated 13 May 2011. The guarantee is credit line guarantee with no actual
guarantee occurring up to the end of reporting period.
3. Particulars about entrusting other parties with cash asset management in reporting
period or such entrustment carried down from previous periods to reporting 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 reporting period, and those carried down from
previous periods to reporting period
1. Fulfillment of Commitment Made by the Company
The Profit Distribution Plan for 2010 promised by the Company in this year has been
fulfilled at the beginning of Jun. 2011.
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 Fulfillment of
Commitment Remarks
shareholders commitments
Zibo Lucheng Zibo Lucheng will not reduce its shareholding Fully fulfilled. The increase of shares
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Textile Investment within 60 months after share merger reform; it with dividends in 2005
Co., Ltd. proposed and voted for a cash distribution not and 2006 has been
lower than 50% of the profit available for finished. And the total
distribution in the year at the 2006 profit in 2008 has
Shareholders’ General Meeting and 2007 increased 58.06%
Shareholders’ General Meeting; it will compared with that in
increase the LUTHAI A shares held by it 2005. As at 12 Jun. 2011,
through trading at the secondary market with the period of trading
the dividends received in 2005 and 2006, and moratorium on the
the increase of the LUTHAI A shares held 98,358,000 shares held by
shall be accomplished within 12 months after Zibo Lucheng Textile
the dividend is transferred to its account. In Investment Co., Ltd.
2008, the total profit increased by not less than became due, and those
30% compared with that in 2005. shares have been released
for trading since 24 Jun.
2011.
Within 24 months after that, the price of
The committed term
selling holding shares shall not be lower than
In progress ranges from 24 Jun. 2011
RMB 15 per share (if the share capital
to 24 Jun. 2013.
changes, ex-rights will be conducted)
(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
Amount of
shares not
Amount of circulating
subject to
shares not subject to Amount of
moratorium
Name of moratorium held on the Increase/decrease
Reason for change held at the
shareholders date when shares subject (share unit: 0,000
end of the
to moratorium were listed share)
reporting
(share unit: 0,000)
period (share
unit: 0,000)
As at 12 Jun. 2011, the period
of trading moratorium on the
Zibo Lucheng 98,358,000 shares held by Zibo
Textile Investment 2,495.67 9,835.80 Lucheng Textile Investment 12,331.47
Co., Ltd Co., Ltd. became due, and
those shares have been released
for trading since 24 Jun. 2011.
X. In the reporting 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 reporting period
Way of Main discussion and materials
Time Place Visitor
reception provided by the Company
Reception room of Wang Liping, a researcher from SWS Basic information of the
31 Mar. 2011 Field research
the Company Research Co., Ltd. Company
Reception room of Zhang Hao, a researcher from Harvest Basic information of the
31 Mar. 2011 Field research
the Company Fund Management Co., Ltd. Company
Chen Lei, a researcher from Bosera
Reception room of Basic information of the
6 Apr. 2011 Field research Asset Management (International) Co.,
the Company Company
Limited
12 Apr. 2011 Reception room of Field research Xu Xiao Basic information of the
12
English Translation for Reference Only
the Company Shanghai Zhiyuan Investment Company
Management Co., Ltd.
Reception room of Kong Jun Basic information of the
13 Apr. 2011 Field research
the Company China Securities Co., Ltd. Company
Wang Sheng
Reception room of Basic information of the
13 Apr. 2011 Field research Beijing StarRock Investment
the Company Company
Management Co., Ltd.
Wang Hui
Reception room of Basic information of the
13 Apr. 2011 Field research Orient Securities Asset Management
the Company Company
Company Limited
Reception room of Weng Di Basic information of the
13 Apr. 2011 Field research
the Company Milestone Asset Management Co., Ltd. Company
XII. Derivatives investment in the reporting period
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 amount of the Company for derivatives products transaction. 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
Analysis on risks and control risk exists in the Company so as to ensure delivery on schedule or extension.
measures concerning Precaution measure: The Company fulfilled relevant procedures for examination and
derivatives products approval in conducting investment business of derivative products, and all procedures accord
(including but not limited in with relevant laws and regulations of the state, as well as rules stipulated in Articles of
market risk, liquidity risk, Association, Administrative System on Transaction of Derivative Products of Lu Thai Textile
credit risk, operation risk, law Co., Ltd, and Plan on Transaction of Derivative Products of Y2011 of the Company, which
risk, and so on) was passed at the 1st Special Shareholders’ General Meeting of the Company in 2011.
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: In terms of conducting investment business of derivative products, the
Company has established and perfected the corresponding internal control system concerning
organization, structure, the process of business operation, and the process of examination and
approval. The internal control system can be effectively implemented, reducing operation
risk in an effective way.
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 contract is 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.
13
English Translation for Reference Only
1. As of 30 Jul. 2011, the undue financial derivative products held by the Company totaled
Change in market price or fair
about USD 219 million, which was all constructed by a total of 15 forward settlement
value of invested derivative
contracts. Financial derivative products accounted for 30.73% of net assets as at the
products, and the Company
period-end.
should disclose the method
2. In the first half year of 2011, the due forward financial derivative products of the Company
specifically used in analyzing
totally equaled to USD 297,617,400, of which USD 283,617,400 was actually delivered and
the fair value of derivative
the earning was USD 40,469,100. The due forward settlement was USD 281 million, of
products, and setting of
which USD 267 million was delivered as scheduled, generating earning of RMB 43,676,200,
relevant assumptions and
and USD 14 million was extended; due foreign exchange amount equaled to USD
parameters
16,617,400, which was wholly delivered as scheduled and cause loss of RMB 3,207,100.
Explanation on whether
there’s significant change in
the reporting period in
specific rules of accounting
None
policy and calculation of
derivative products of the
Company as compared with
last period
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. 2011 Unit: RMB Yuan
Closing balance Opening balance
Items
Consolidation The Company Consolidation The Company
Current Assets:
Monetary funds 602,875,935.34 390,690,627.69 604,175,236.37 361,992,869.89
Transactional financial assets 17,838,500.00 14,127,600.00 40,418,200.00 34,232,000.00
Notes receivable 162,647,666.87 135,453,982.16 137,384,889.66 110,798,047.01
Accounts receivable 229,089,123.22 258,062,868.27 155,354,359.04 199,861,650.50
Accounts paid in advance 161,296,466.46 367,204,725.52 387,788,595.85 532,649,958.83
Interest receivable 1,568,105.85 1,568,105.85
Dividend receivable 757,735.18 4,957,735.18
Other accounts receivable 57,178,349.81 15,821,327.37 74,903,936.45 29,173,351.08
Financial assets purchased
under agreements to resell
Inventories 1,965,688,948.01 1,489,089,612.08 1,466,286,582.16 818,532,240.13
Non-current assets due within 1
year
Other current assets
Total current assets 3,196,614,989.71 2,671,208,478.27 2,867,879,905.38 2,093,765,958.47
Non-current assets:
Available-for-sale financial
assets
Held-to-maturity investments
Long-term accounts receivable
Long-term equity investment 68,942,600.00 1,063,495,189.90 68,942,600.00 894,295,189.90
Investing property
Fixed assets 3,570,154,535.50 2,188,862,926.84 3,644,240,059.73 2,225,236,167.82
Construction in progress 131,285,951.82 30,705,736.73 66,439,271.92 34,661,741.56
Engineering materials 9,193,455.62 9,193,455.62 1,164,182.23 1,164,182.23
Disposal of fixed assets
14
English Translation for Reference Only
Production biological assets
Oil-gas assets
Intangible assets 296,923,282.95 168,842,398.22 293,314,520.77 163,305,988.78
R&D expense
Goodwill 20,563,803.29 20,563,803.29
Long-term deferred expenses
Deferred income tax assets 61,576,568.82 26,401,395.81 53,338,920.01 26,495,459.57
Other non-current assets
Total of non-current assets 4,158,640,198.00 3,487,501,103.12 4,148,003,357.95 3,345,158,729.86
Total assets 7,355,255,187.71 6,158,709,581.39 7,015,883,263.33 5,438,924,688.33
Legal representative: Liu Shizhen Head of the accounting work: Zhang Hongmei
Head of the accounting department: Zhang Hongmei
Balance Sheet (Continued)
Prepared by Lu Thai Textile Co., Ltd. 30 Jun. 2011 Unit: RMB Yuan
Current liabilities:
Short-term borrowings 1,270,010,628.14 1,088,530,892.02 869,557,204.66 639,536,604.66
Transactional financial
1,950,713.28 1,950,713.28
liabilities
Notes payable 20,181,314.79 18,198,745.01 78,598,872.76 95,746,948.58
Accounts payable 172,776,971.03 144,889,681.96 469,527,076.77 180,827,824.08
Accounts received in advance 110,695,917.73 38,546,541.39 147,284,467.21 38,437,023.40
Financial assets sold for
repurchase
Handling charges and
commissions payable
Employee’s compensation
346,765,137.57 316,225,981.63 331,045,622.56 289,512,883.21
payable
Tax payable 33,489,030.35 29,778,247.05 -12,806,832.19 15,139,752.22
Interest payable 4,993,214.54 4,993,214.54 4,805,148.11 4,805,148.11
Dividend payable 473,881.74 442,309.44 3,259,512.84 442,309.44
Other accounts payable 160,631,031.77 39,337,122.92 138,264,754.93 12,940,429.46
Non-current liabilities due
70,193,820.00 70,193,820.00 69,364,725.00 69,364,725.00
within 1 year
Other current liabilities
Total current liabilities 2,190,210,947.66 1,751,136,555.96 2,100,851,265.93 1,348,704,361.44
Non-current liabilities:
Long-term borrowings 59,453,825.00 39,453,825.00 86,368,685.00 86,368,685.00
Bonds payable
Long-term payables 9,735,560.00 9,735,560.00
Specific payables
Estimated liabilities
Deferred income tax liabilities 5,223,332.68 2,119,140.00 8,908,329.73 5,134,800.00
Other non-current liabilities 68,952,175.74 32,832,471.61 68,422,326.66 31,963,066.63
Total non-current liabilities 143,364,893.42 74,405,436.61 173,434,901.39 123,466,551.63
Total liabilities 2,333,575,841.08 1,825,541,992.57 2,274,286,167.32 1,472,170,913.07
Owners’ equity
Paid-up capital 994,864,800.00 994,864,800.00 994,864,800.00 994,864,800.00
Capital reserves 1,132,013,228.18 1,129,442,356.86 1,130,442,805.12 1,127,872,338.27
Less: Treasury stock
Specific reserves
Surplus reserves 428,440,485.70 428,440,485.70 428,440,485.70 428,440,485.70
Provisions for general risks
Retained profits 2,097,764,035.59 1,780,419,946.26 1,854,833,169.63 1,415,576,151.29
Foreign exchange difference -5,163,404.67 -4,447,846.98
Total equity attributable to owners
4,647,919,144.80 4,333,167,588.82 4,404,133,413.47 3,966,753,775.26
of the Company
Minority interests 373,760,201.83 337,463,682.54
Total owners’ equity 5,021,679,346.63 4,333,167,588.82 4,741,597,096.01 3,966,753,775.26
Total liabilities and owners’
7,355,255,187.71 6,158,709,581.39 7,015,883,263.33 5,438,924,688.33
equity
Legal representative: Liu Shizhen Head of the accounting work: Zhang Hongmei
Head of the accounting department: Zhang Hongmei
15
English Translation for Reference Only
Income Statement
Prepared by Lu Thai Textile Co., Ltd. Jan.-Jun. 2011 Unit: RMB Yuan
Reporting period Same period of last year
Items
Consolidation The Company Consolidation The Company
I. Total operating revenues 2,980,813,097.20 2,446,037,080.40 2,246,850,916.86 1,751,991,954.12
Including: Sales income 2,980,813,097.20 2,446,037,080.40 2,246,850,916.86 1,751,991,954.12
II. Total operating cost 2,377,593,417.11 1,932,536,609.64 1,811,173,858.52 1,440,748,302.68
Including: Cost of sales 1,966,770,465.74 1,659,122,418.86 1,487,376,845.39 1,235,835,692.33
Interest expenses
Business taxes and
10,183,946.29 7,016,584.58 993,285.02
surcharges
Selling and distribution
69,650,595.48 24,526,783.77 68,719,116.26 24,201,970.48
expenses
Administrative expenses 302,871,120.98 234,105,097.30 224,789,075.22 170,818,713.12
Financial expenses 24,919,948.09 3,962,671.65 21,691,445.04 9,491,579.80
Asset impairment loss 3,197,340.53 3,803,053.48 7,604,091.59 400,346.95
Add: Gain/(loss) from change in
-20,628,986.72 -18,153,686.72 47,370,026.48 36,894,976.48
fair value (“-” means loss)
Gain/(loss) from investment
40,469,067.77 198,590,067.77 -39,475,016.14 -49,779,448.79
(“-” means loss)
Including: share of profits in
associates and joint ventures
Foreign exchange gains (“-”
means loss)
III. Business profit (“-” means
623,059,761.14 693,936,851.81 443,572,068.68 298,359,179.13
loss)
Add: non-operating income 16,132,647.68 4,367,494.26 24,385,856.61 9,804,213.56
Less: non-operating expense 11,270,150.47 8,600,188.35 4,564,557.63 3,179,278.85
Including: loss from non-current
8,210,095.87 5,770,478.89 2,543,123.20 1,915,165.19
asset disposal
IV. Total profit (“-” means loss) 627,922,258.35 689,704,157.72 463,393,367.66 304,984,113.84
Less: Income tax expense 102,778,942.74 76,144,162.75 70,864,590.29 48,213,265.07
V. Net profit (“-” means loss) 525,143,315.61 613,559,994.97 392,528,777.37 256,770,848.77
Attributable to owners of the
491,647,065.96 613,559,994.97 366,877,951.37 256,770,848.77
Company
Minority shareholders’
33,496,249.65 25,650,826.00
income
VI. Earnings per share
(I) basic earnings per share 0.49 0.62 0.37 0.26
(II) diluted earnings per
0.49 0.62 0.37 0.26
share
Ⅶ. Other comprehensive incomes 854,442.31 1,570,000.00 -4,758,453.66 2,350,000.00
Ⅷ. Total comprehensive incomes 525,997,757.92 615,129,994.97 387,770,323.71 259,120,848.77
Attributable to owners of the
492,501,508.27 615,129,994.97 362,119,497.71 259,120,848.77
Company
Attributable to minority
33,496,249.65 25,650,826.00
shareholders
Legal representative: Liu Shizhen Head of the accounting work: Zhang Hongmei
Head of the accounting department: Zhang Hongmei
Cash Flow Statement
Prepared by Lu Thai Textile Co., Ltd. Jan.-Jun. 2011 Unit: RMB Yuan
Reporting period Same period of last year
Items
Consolidation The Company Consolidation The Company
I. Cash flows from operating
activities:
Cash received from sale of
commodities and rendering of 2,907,657,809.50 2,355,123,348.10 2,388,095,445.18 1,813,042,113.77
service
Tax refunds received 137,376,748.67 107,772,367.45 72,312,447.45 47,564,837.26
Other cash received relating to
48,671,086.04 29,124,826.60 71,142,710.06 49,980,350.45
operating activities
Subtotal of cash inflows from 3,093,705,644.21 2,492,020,542.15 2,531,550,602.69 1,910,587,301.48
16
English Translation for Reference Only
operating activities
Cash paid for goods and
1,885,346,210.11 1,571,780,676.70 1,686,333,341.13 1,299,960,779.49
services
Cash paid to and for employees 497,151,067.50 388,412,338.02 366,528,959.32 296,682,297.65
Various taxes paid 156,133,413.22 96,261,008.25 86,885,044.45 49,221,300.06
Other cash payment relating to
126,505,702.48 60,275,376.56 101,194,917.01 61,803,671.59
operating activities
Subtotal of cash outflows from
2,665,136,393.31 2,116,729,399.53 2,240,942,261.91 1,707,668,048.79
operating activities
Net cash flows from operating
428,569,250.90 375,291,142.62 290,608,340.78 202,919,252.69
activities
II. Cash flows from investing
activities:
Cash received from withdrawal
of investments
Cash received from return on
investments
Net cash received from disposal
of fixed assets, intangible assets 1,441,308.55 1,435,553.94 2,671,494.22 2,641,994.22
and other long-term assets
Net cash received from disposal
of subsidiaries or other business
units
Other cash received relating
43,850,591.47 36,611,151.54 1,422,063.03 893,994.31
to investing activities
Subtotal of cash inflows
45,291,900.02 38,046,705.48 4,093,557.25 3,535,988.53
from investing activities
Cash paid to acquire fixed
assets, intangible assets and other 179,444,420.85 99,193,611.36 302,812,923.60 262,269,704.09
long-term assets
Cash paid for investment 12,000,000.00 5,000,000.00
Net increase of pledged loans
Net cash paid to acquire
subsidiaries and other business
units
Other cash payments relating to
49,348,254.22 38,409,621.02
investing activities
Subtotal of cash outflows from
179,444,420.85 99,193,611.36 364,161,177.82 305,679,325.11
investing activities
Net cash flows from investing
-134,152,520.83 -61,146,905.88 -360,067,620.57 -302,143,336.58
activities
III. Cash Flows from Financing
Activities:
Cash received from capital
contributions
Including: Cash received from
minority shareholder investments
by subsidiaries
Cash received from
737,509,387.29 277,825,850.55 794,539,059.82 736,996,079.82
borrowings
Cash received from issuance
of bonds
Other cash received relating to
87,790,000.00 82,790,000.00 17,600,000.00
financing activities
Subtotal of cash inflows from
825,299,387.29 360,615,850.55 812,139,059.82 736,996,079.82
financing activities
Repayment of borrowings 762,214,009.23 312,316,771.73 449,739,949.71 319,739,949.71
Cash paid for interest
expenses and distribution of 263,058,159.37 252,267,176.13 235,223,006.13 226,294,416.26
dividends or profit
Including: dividends or profit
paid by subsidiaries to minority
shareholders
Other cash payments relating
13,460,000.00 10,000,000.00
to financing activities
17
English Translation for Reference Only
Sub-total of cash outflows from
1,038,732,168.60 564,583,947.86 694,962,955.84 546,034,365.97
financing activities
Net cash flows from financing
-213,432,781.31 -203,968,097.31 117,176,103.98 190,961,713.85
activities
IV. Effect of foreign exchange
rate changes on cash and cash -1,063,249.79 -258,381.63 -1,036,403.05 -860,609.75
equivalents
V. Net increase in cash and cash
79,920,698.97 109,917,757.80 46,680,421.14 90,877,020.21
equivalents
Add: Opening balance of
522,955,236.37 280,772,869.89 569,968,526.84 324,783,025.04
cash and cash equivalents
VI. Closing balance of cash and
602,875,935.34 390,690,627.69 616,648,947.98 415,660,045.25
cash equivalents
Legal representative: Liu Shizhen Head of the accounting work: Zhang Hongmei
Head of the accounting department: Zhang Hongmei
18
English Translation for Reference Only
Statement of Changes in Owners’ Equity (Consolidated)
Prepared by Lu Thai Textile Co., Ltd. Jan.-Jun. 2011 Unit: RMB Yuan
Amount for the reporting period
Equity attributable to owners of the Company
Less:
Items General Minority Total owners’
Paid-up capital (or treasu Specific
Capital reserve Surplus reserve risk Retained profit Others interests equity
share capital) ry reserve
reserve
stock
I. Balance at the end of
994,864,800.00 1,130,442,805.12 428,440,485.70 1,854,833,169.63 -4,447,846.98 337,463,682.54 4,741,597,096.01
the previous year
Add: change of
accounting policy
Correction of errors in
previous periods
Other
II. Balance at the
994,864,800.00 1,130,442,805.12 428,440,485.70 1,854,833,169.63 -4,447,846.98 337,463,682.54 4,741,597,096.01
beginning of the year
III. Increase/ decrease of
amount in the year (“-” 1,570,423.06 242,930,865.96 -715,557.69 36,296,519.29 280,082,250.62
means decrease)
(I) Net profit 491,647,065.96 33,496,249.65 525,143,315.61
(II) Other
1,570,000.00 -715,557.69 854,442.31
comprehensive incomes
Subtotal of (I) and (II) 1,570,000.00 491,647,065.96 -715,557.69 33,496,249.65 525,997,757.92
(III) Capital paid in and
423.06 57,800,269.64 57,800,692.70
reduced by owners
19
English Translation for Reference Only
1. Capital paid in by
57,800,000.00 57,800,000.00
owners
2. Amounts of
share-based payments
recognized in owners’
equity
3. Others 423.06 269.64 692.70
(IV) Profit distribution -248,716,200.00 -55,000,000.00 -303,716,200.00
1. Appropriations to
surplus reserves
2. Appropriations to
general risk provisions
3. Appropriations to
-248,716,200.00 -55,000,000.00 -303,716,200.00
owners (or shareholders)
4. Other
(V) Internal
carry-forward of owners’
equity
1. New increase of
capital (or share capital)
from capital public
reserves
2. New increase of
capital (or share capital)
from surplus reserves
3. Surplus reserves
20
English Translation for Reference Only
for making up losses
4. Other
(Ⅵ) Specific reserve
1. Withdrawn for the
period
2. Used in the period
(Ⅶ) Other
IV. Closing balance 994,864,800.00 1,132,013,228.18 428,440,485.70 2,097,764,035.59 -5,163,404.67 373,760,201.83 5,021,679,346.63
Statement of Changes in Owners’ Equity (Consolidated) (Continued)
Prepared by Lu Thai Textile Co., Ltd. Jan.-Jun. 2011 Unit: RMB Yuan
Amount for the previous year
Equity attributable to owners of the Company
Less: Specif
Items General
Paid-up capital (or treasu ic Minority interests Total owners’ equity
Capital reserve Surplus reserve risk Retained profit Others
share capital) ry reserv
reserve
stock e
I. Balance at the end
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
of the previous year
Add: change of
accounting policy
Correction of
errors in previous
periods
Other
II. Balance at the 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
21
English Translation for Reference Only
beginning of the year
III. Increase/ decrease
of amount in the year -4,913,363.60 54,010,956.51 436,364,466.99 -989,355.71 69,486,620.09 553,959,324.28
(“-” means decrease)
(I) Net profit 739,091,623.50 75,961,486.46 815,053,109.96
(II) Other
comprehensive 2,350,000.00 -989,355.71 1,360,644.29
incomes
Subtotal of (I) and
2,350,000.00 739,091,623.50 -989,355.71 75,961,486.46 816,413,754.25
(II)
(III) Capital paid in
and reduced by -7,263,363.60 9,223,686.70 1,960,323.10
owners
1. Capital paid
10,679,050.43 10,679,050.43
in by owners
2. Amounts of
share-based payments
0.00
recognized in
owners’ equity
3. Others -7,263,363.60 -1,455,363.73 -8,718,727.33
(IV) Profit
54,010,956.51 -302,727,156.51 -15,698,553.07 -264,414,753.07
distribution
1.
Appropriations to 54,010,956.51 -54,010,956.51
surplus reserves
2.
22
English Translation for Reference Only
Appropriations to
general risk
provisions
3.
Appropriations to
-248,716,200.00 -15,698,553.07 -264,414,753.07
owners (or
shareholders)
4. Other
(V) Internal
carry-forward of
owners’ equity
1. New increase
of capital (or share
capital) from capital
public reserves
2. New increase
of capital (or share
capital) from surplus
reserves
3. Surplus
reserves for making
up losses
4. Other
(Ⅵ) Specific reserve
1. Withdrawn
for the period
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2. Used in the
period
(Ⅶ) Other
IV. Closing balance 994,864,800.00 1,130,442,805.12 428,440,485.70 1,854,833,169.63 -4,447,846.98 337,463,682.54 4,741,597,096.01
Statement of Changes in Owners’ Equity (the Company)
Prepared by Lu Thai Textile Co., Ltd. Jan.-Jun. 2011 Unit: RMB Yuan
Amount for the reporting period
Items Paid-up capital (or share Less: treasury Specific General
Capital reserve Surplus reserve Retained profit Total owners’ equity
capital) stock reserve risk reserve
I. Balance at the end of the
994,864,800.00 1,127,872,338.27 428,440,485.70 1,415,576,151.29 3,966,753,775.26
previous year
Add: change of accounting
policy
Correction of errors in
previous periods
Other
II. Balance at the beginning
994,864,800.00 1,127,872,338.27 428,440,485.70 1,415,576,151.29 3,966,753,775.26
of the year
III. Increase/ decrease of
amount in the year (“-” 1,570,018.59 364,843,794.97 366,413,813.56
means decrease)
(I) Net profit 613,559,994.97 613,559,994.97
(II) Other comprehensive
1,570,000.00 1,570,000.00
incomes
Subtotal of (I) and (II) 1,570,000.00 613,559,994.97 615,129,994.97
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(III) Capital paid in and
18.59 18.59
reduced by owners
1. Capital paid in by
owners
2. Amounts of
share-based payments
recognized in owners’ equity
3. Others 18.59 18.59
(IV) Profit distribution -248,716,200.00 -248,716,200.00
1. Appropriations to
surplus reserves
2. Appropriations to
general risk provisions
3. Appropriations to
-248,716,200.00 -248,716,200.00
owners (or shareholders)
4. Other
(V) Internal carry-forward
of owners’ equity
1. New increase of
capital (or share capital) from
capital public reserves
2. New increase of
capital (or share capital) from
surplus reserves
3. Surplus reserves for
making up losses
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4. Other
(Ⅵ) Specific reserve
1. Withdrawn for the
period
2. Used in the period
(Ⅶ) Other
IV. Closing balance 994,864,800.00 1,129,442,356.86 428,440,485.70 1,780,419,946.26 4,333,167,588.82
Statement of Changes in Owners’ Equity (the Company) (Continued)
Prepared by Lu Thai Textile Co., Ltd. Jan.-Jun. 2011 Unit: RMB Yuan
Amount for the previous year
Less:
Items Specific General risk Total owners’
Paid-up capital (or share capital) Capital reserve treasury Surplus reserve Retained profit
reserve reserve equity
stock
I. Balance at the end of the
994,864,800.00 1,125,522,201.27 374,429,529.19 1,178,193,742.66 3,673,010,273.12
previous year
Add: change of accounting
policy
Correction of errors in
previous periods
Other
II. Balance at the beginning
994,864,800.00 1,125,522,201.27 374,429,529.19 1,178,193,742.66 3,673,010,273.12
of the year
III. Increase/ decrease of
amount in the year (“-” 2,350,137.00 54,010,956.51 237,382,408.63 293,743,502.14
means decrease)
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English Translation for Reference Only
(I) Net profit 540,109,565.14 540,109,565.14
(II) Other comprehensive
2,350,000.00 2,350,000.00
incomes
Subtotal of (I) and (II) 2,350,000.00 540,109,565.14 542,459,565.14
(III) Capital paid in and
137.00 137.00
reduced by owners
1. Capital paid in by
owners
2. Amounts of
share-based payments
recognized in owners’ equity
3. Others 137.00 137.00
(IV) Profit distribution 54,010,956.51 -302,727,156.51 -248,716,200.00
1. Appropriations to
54,010,956.51 -54,010,956.51
surplus reserves
2. Appropriations to
general risk provisions
3. Appropriations to
-248,716,200.00 -248,716,200.00
owners (or shareholders)
4. Other
(V) Internal carry-forward
of owners’ equity
1. New increase of
capital (or share capital) from
capital public reserves
2. New increase of
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English Translation for Reference Only
capital (or share capital) from
surplus reserves
3. Surplus reserves for
making up losses
4. Other
(Ⅵ) Specific reserve
1. Withdrawn for the
period
2. Used in the period
(Ⅶ) Other
IV. Closing balance 994,864,800.00 1,127,872,338.27 428,440,485.70 1,415,576,151.29 3,966,753,775.26
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Lu Thai Textile Co., Ltd.
Notes to the Financial Statements
For the First Half of 2011
（The following amounts are all expressed in RMB Yuan unless otherwise
stated.）
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 2011,
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
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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.
These financial statements have been resolved for issue at the Company’s board session on 10
Aug. 2011.
II. Basis for the preparation of financial statements
With the going-concern assumption as the basis, the Company and its subsidiaries (jointly referred
to as “the Group” hereafter) prepared its financial statements in light of the actual transactions and
events, as well as the Basic Standard and 38 specific standards of Accounting Standards for
Business Enterprises issued by the Ministry of Finance of the PRC on 15 Feb. 2006, the
Application Guidance of Accounting Standards for Business Enterprises, the Interpretation of
Accounting Standards for Business Enterprises and other regulations issued thereafter (jointly
referred to as “the Accounting Standards for Business Enterprises”), and the Rules for Preparation
Convention of Disclosure of Public Offering Companies No.15—General Regulations for
Financial Reporting (revised in 2010) by China Securities Regulatory Commission (CSRC).
In accordance with the Accounting Standards for Business Enterprises, accounting activities of the
Group were conducted on the accrual basis. Except for some financial instruments, the financial
statements were prepared on the basis of historical costs. Where impairment occurred in an asset,
the corresponding impairment provision was withdrawn according to relevant rules.
III. Statement of compliance with the accounting standards for business
enterprises
The financial statements for the first half of 2011 prepared by the Group are in compliance with
the requirements of the Accounting Standards for Business Enterprises, factually and completely
presenting the Company’s and the Group’s financial positions as at 30 Jun. 2011, and operating
results, cash flows and other relevant information for the six months then ended. Furthermore,
these financial statements, in all material respects, are also in line with relevant disclosure
requirements for financial statements and notes thereof stipulated in the Rules for Preparation
Convention of Disclosure of Public Offering Companies No.15—General Regulations for
Financial Reporting (revised in 2010) by CSRC.
IV. Major accounting policies and accounting estimates
1. Fiscal period
The Group’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. Recording currency
Renminbi (RMB) is the prevailing currency used in the main economic circumstances of the
Company and its domestic subsidiaries. The Company and its domestic subsidiaries adopt RMB as
the recording currency. In light of the prevailing currency used in their main economic
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circumstances of the Company’s overseas subsidiaries, they adopt the Hong Kong dollars as the
recording currency. When preparing the financial statements for Y2010, the Group adopted RMB
as the recording currency.
3. Accounting methods for business combinations
A business combination refers to a transaction or event bringing together two or more separate
enterprises into one reporting entity. Business combinations are divided into business
combinations under the same control and those not under the same control.
(1) Business combinations under the same control
A business combination under the same control is a business combination in which all the
enterprises involved in the combination are ultimately controlled by the same party or parties both
before and after the business combination and on which the control is not temporary. In a business
combination under the same control, the party which obtains control of other enterprise(s)
involved in the business combination on the combining date is the combining party, and the other
enterprise(s) involved in the business combination is (are) the combined party. The "combining
date" refers to the date on which the combining party obtains actual control on the combined party.
The assets and liabilities that the combining party obtains in a business combination shall be
measured on the basis of their carrying amount in the combined party on the combining date. As
for the balance between the carrying amount of the net assets obtained by the combining party and
the carrying amount of the consideration paid by it (or the total par value of the shares issued), the
additional paid-in capital 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
A business combination not under the same control is a business combination in which the
combining enterprises are not ultimately controlled by the same party or the same parties both
before and after the business combination. In a business combination not under the same control,
the party which obtains the control on other combining enterprise(s) on the purchase date is the
acquirer, and other combining enterprise(s) is (are) the acquiree. The "acquisition date" refers to
the date on which the acquirer actually obtains the control on the acquiree.
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 intermediary
agency fees for auditing, legal, consulting services, etc. and other administrative expenditures
incurred for the business combination, which were recorded in the profits and losses at the current
period when incurred. The trading expenditures arising from the acquirer’s issuance of equity or
liabilities securities as the consideration for the business combination are recorded in the initial
recognition amount for the equity or liabilities securities. Where an adjustment to the combination
costs is likely to occur and can be measured reliably, the contingent consideration is recognized
and the subsequent measurement has an influence on business reputation. The contingent
consideration involved is recorded in the combination costs according to its fair value on the
acquisition date. Where new or further evidence against the existing circumstances on the
acquisition date occurs within 12 months after the acquisition date, which makes it necessary to
adjust the contingent consideration, the combined business reputation is adjusted accordingly. For
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a business combination realized by two or more transactions of exchange, in the Group’s
consolidated financial statements, as for the equity interests of the acquiree held by the Group
before the acquisition date, they are re-measured according to their fair value on the acquisition
date. The difference between their fair value and their carrying amount is recorded in investment
gains for the period comprising the acquisition date. Other comprehensive incomes arising from
the equity interests of the acquiree held by the Group before the acquisition date are transferred to
investment gains at the current period. The combination costs are the summation of the fair value
on the acquisition date of the equity interests of the acquiree held by the Group before the
acquisition date and the fair value on the acquisition date of the equity interests of the acquiree
acquired by the Group on the acquisition date.
The combination costs of the acquirer and the identifiable net assets obtained in the combination
are both measured at their fair values on the acquisition date. 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.
As for the unrecognized deductible temporary differences of the acquiree obtained by the acquirer
due to their not satisfying the recognition criteria for deferred income tax assets on the acquisition
date, if new or further information within 12 months after the acquisition date shows that the
relevant circumstances on the acquisition date has existed and that the economic benefits arising
from the deductible temporary differences of the acquiree on the acquisition date are expected to
be realized, the corresponding deferred income tax assets are recognized and the business
reputation is written down in the mean time. If the business reputation is not sufficient to offset,
the difference is recognized in the profits and losses at the current period. Except for the aforesaid
circumstance, the recognized deferred income tax assets in relation to the business combination
are recorded in the profits and losses at the current period.
4. Preparation of consolidated financial statements
(1) Ascertainment of the consolidation scope
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 consolidation scope includes the
Company and all its subsidiaries. The Company’s subsidiaries refer to the enterprises or entities
controlled by the Company.
(2) Preparation methods for consolidated financial statements
The Group consolidates a subsidiary from the date when the Group obtains actual control over the
subsidiary’s net assets and production and operation decision-making and de-consolidates it from
the date when such control ceases. As for a disposed subsidiary, its operating results and cash
flows before the disposal date are properly included in the consolidated income statement and the
consolidated cash flow statement. As for a subsidiary disposed in the current period, the opening
accounts in the consolidated balance sheet are not restated. For a subsidiary acquired in a business
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combination not under the same control, its operating results and cash flows after the acquisition
date are properly included in the consolidated income statement and the consolidated cash flow
statement, and the opening accounts and comparative accounts in the consolidated financial
statements are not restated. For a subsidiary acquired in a business combination under the same
control, its operating results and cash flows for the period from the beginning of the reporting
period to the combination date are properly included in the consolidated income statement and the
consolidated cash flow statement, and the comparative accounts in the consolidated financial
statements are restated in the mean time.
In the preparation of the consolidated financial statements, where a subsidiary adopts different
accounting policies or accounting periods from those of the Company, the subsidiary’s financial
statements are adjusted according to the Company’s accounting policy and accounting periods.
For a subsidiary obtained in a business combination not under the same control, its financial
statements are adjusted on the basis of the fair value of its identifiable net assets on the acquisition
date.
All significant balances, transactions and unrealized profits within the Group are offset in the
preparation of the consolidated financial statements.
The portions in a subsidiary’s shareholders’ equity and net current profits and losses that are not
attributable to the Company are separately presented, as minority interests and minority
shareholder gains and losses respectively, under the shareholders’ equity item and the net profit
item in the consolidated financial statements. The portion in the subsidiary’s current net gains and
losses that belongs to minority interests is presented as “minority shareholder gains and losses”
under the net profit item in the consolidated income statement. Where the subsidiary’s losses
attributable to minority shareholders exceed the portion in the subsidiary’s opening owners’ equity
attributable to minority shareholders, minority interests are offset.
Where the Company loses control over a former subsidiary due to disposal of some equity
investment or other reasons, the residual equity interests are re-measured according to the fair
value on the date when such control ceases. The summation of the consideration obtained from the
equity disposal and the fair value of the residual equity interests, minus the portion in the former
subsidiary’s net assets measured on a continuous basis from the acquisition date that is attributable
to the Company according to its former shareholding ratio in the subsidiary, is recorded in the
investment gains for the reporting period when the Company’s control over the subsidiary ceases.
Other comprehensive incomes in relation to the former equity investment in the subsidiary are
transferred to the investment gains at the current period when the Company’s control over the
subsidiary ceases. Later on, subsequent measurement is carried out on the residual equity interests
in accordance with the “Accounting Standards for Business Enterprises No.2—Long-term Equity
Investment” or the “Accounting Standards for Business Enterprises No.22—Recognition and
Measurement of Financial Instruments” and other relevant regulations. For more details, please
refer to “10. Long-term Equity Investment” or “7. Financial Instruments” under the Note IV.
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.
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6. Foreign currency businesses and translation of foreign currency financial statements
(1) Translation of foreign currency transactions
At the time of initial recognition of a foreign currency transaction, the Group 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 are translated at the spot exchange
rate on the date. Exchange differences are recorded in the profits and losses at the current period
except for the following circumstances: ① Exchange differences arising from the special foreign
currency borrowings for the acquisition and construction of assets eligible for capitalization are
treated in accordance with the principle of borrowing cost capitalization; ② Exchange differences
arising from the net investment hedging instruments in an overseas operation are recorded in other
comprehensive incomes and can be recognized in the profits and losses at the current period only
when the net investment is disposed; and ③ Exchange differences arising from changes in the
carrying balances other than the amortized costs of foreign currency monetary items available for
sale are recorded in other comprehensive incomes.
Foreign currency non-monetary items measured at historical costs are translated into RMB at the
spot exchange rate on the transaction date. The foreign currency non-monetary items measured at
the fair value are translated at the spot exchange rate on the fair value confirming date, from which
the exchange difference is treated as change in fair value (including change in exchange rate) and
recorded in the profit and loss of the current period, or treated as other comprehensive incomes
and recorded in the capital reserves.
(3) Translation of foreign currency financial statements
Where the consolidated financial statements involve an overseas operation and foreign currency
monetary items form in a substantial basis on the net investment in the overseas operation,
exchange differences arising from exchange rate changes are recorded in the “translation
difference of foreign currency statements” item under the owners’ equity item; and recorded in the
profits and losses at the reporting period of the disposal when the overseas operation is disposed.
The foreign currency financial statements of an overseas operation are translated in RMB in
accordance with the following methods: The asset and liability items in the balance sheets shall be
translated at a spot exchange rate on the balance sheet date. Among the owner’s equity items,
except 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. The opening retained profit
is the closing retained profit as of the previous year after translation; The closing retained profit is
measured and stated according to profit distribution items after translation; And the difference
between the asset items and the summation of the liability and shareholders’ equity items after
translation, as the translation difference of foreign currency statements, is recognized in other
comprehensive incomes and is presented separately under the shareholders’ equity item in the
balance sheet. Where an overseas operation is disposed and the Group’s control on the overseas
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operation ceases, the foreign currency statement translation difference in relation to the overseas
operation and presented under the shareholders’ equity items in the balance sheet is, all or
according to the disposal rate of the overseas operation, transferred to the profits and losses at the
reporting period comprising the disposal.
Foreign currency cash flows and cash flows generated by overseas subsidiaries are translated at
the average exchange rate for the current period on the date when the cash flow is generated. The
influence on cash due to change of exchange rate shall be presented separately under the cash flow
statement.
The opening amounts and the actual amounts in the previous year are presented on the basis of the
translated financial statements for the previous year.
7. Financial instruments
(1) Ascertainment of fair values of financial assets and liabilities
The “fair value” refers to the amount, at which both parties to a transaction who are familiar with
the condition exchange assets or clear off debts under fair conditions. As for the financial
instrument for which there is an active market, the Group determines its fair value using the
quoted price in the active market. The quoted prices in the active market refer to the prices, which
are easily available from the stock exchange, brokers, industry associations, pricing service
institutions, etc. at a fixed term, and which represent the prices at which actually incurred market
transactions are made under fair conditions. Where there is no active market for a financial
instrument, the Group adopts value appraisal techniques to determine 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..
(2) Classification, recognition and measurement of financial assets
Financial assets bought in and sold out in the conventional way are recognized and de-recognized
in accordance with the transaction dates. In the initial recognition, financial assets are divided into
financial assets measured at fair values and whose changes are recorded in current profits and
losses, held-to-maturity investments, loans and accounts receivables, and available-for-sale
financial assets. In the initial recognition, a financial asset is measured at its fair value. For a
financial asset measured at fair value and whose changes are recorded in current gains and losses,
the relevant trading expenditures are directly recorded in the gains and losses at the current period.
And the trading expenditures for the other financial assets are recorded in the initially recognized
amount.
① Financial assets measured at fair values and whose changes are recorded in current profits and
losses
Such financial assets include transactional financial assets and financial assets designated to be
measured at fair values and whose changes are recorded in current gains and losses. The Group’s
financial assets measured at fair values and whose changes are recorded in current profits and
losses are all transactional financial assets.
A transactional financial asset refers to a financial asset meeting any of the following requirements:
(1) The purpose to acquire the financial asset is mainly for selling or repurchase of it in the near
future; (2) Forming a part of the identifiable combination of financial instruments which are
managed in a centralized way and for which there are objective evidences proving that the Group
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may manage the combination by way of short-term profit making in the near future; and (3) Being
a derivative instrument, excluding the designated derivative instruments which are effective
hedging instruments, or derivative instruments to financial guarantee contracts, and the derivative
instruments which are connected with the equity instrument investments for which there is no
quoted price in the active market, whose fair value cannot be reliably measured, and which shall
be settled by delivering the said equity instruments.
A transactional financial asset is subsequently measured at the fair value. The gains and losses
arising from the fair value changes, as well as the dividend and interest incomes from the financial
asset, are recorded in the gains and losses for the current period.
② Held-to-maturity investments
A held-to-maturity investment refers to a non-derivative financial asset with a fixed date of
maturity, a fixed or determinable amount of repo price and which the Group holds for a definite
purpose or the Group is able to hold until its maturity.
A held-to-maturity investment is subsequently measured according to the amortized cost using the
actual interest rate method. The gains or losses arising from de-recognition, impairment or
amortization of the investment are recorded in the profits and losses for the current period.
The actual interest rate method refers to the method by which the post-amortization costs and the
interest incomes of different installments or interest expenses are calculated in light of the actual
interest rates of the financial assets or financial liabilities (including a set of financial assets or
financial liabilities). The actual interest rate refers to the interest rate adopted to cash the future
cash flow of a financial asset or financial liability within the predicted term of existence or within
a shorter applicable term into the current carrying amount of the financial asset or financial
liability.
When calculating the actual interest rate, the Group predicts the future cash flow (not taking into
account the future credit losses) on the basis of taking into account all the contractual provisions
concerning the financial asset or financial liability. The various fee charges, trading expenses,
reduced values, premiums, etc., which are paid or collected by the parties to a financial asset or
financial liability contract and which form a part of the actual interest rate, are also taken into
account in the determination of the actual interest rate.
③ Loans and accounts receivable
Loans and accounts receivable refer to the non-derivative financial assets for which there is no
quoted price in the active market and of which the repo amount is fixed or determinable. The
financial assets defined by the Group as loans and accounts receivable include notes receivable,
accounts receivable, interest receivable, dividend receivable, other receivables, etc..
Loans and accounts receivable are subsequently measured according to the amortized cost using
the actual interest rate method. The gains or losses arising from de-recognition, impairment or
amortization of the loans and accounts receivable are recorded in the profits and losses for the
current period.
④ Available-for-sale financial assets
Available-for-sale financial assets include the non-derivative financial assets which are designated
as available for sale when they are initially recognized, as well as the financial assets other than
the financial assets measured at fair values and whose changes are recorded in current gains and
losses, loans and accounts receivable and held-to-maturity investments.
Available-for-sale financial assets are subsequently measured at their fair values. Impairment
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losses and the exchange differences of foreign currency monetary financial assets in relation to the
amortized cost are recorded in the profits and losses for the current period. Other gains or losses
arising from fair value changes are recognized as other comprehensive incomes and recorded in
the capital reserves, and transferred out and recorded in the profits and losses for the current
period when the financial asset is de-recognized.
Interest obtained during the period of holding an available-for-sale financial asset and the cash
dividends declared and distributed by an invested party are recorded in investment gains.
(3) Impairment of financial assets
For the financial assets other than the financial assets measured at fair values and whose changes
are recorded in current gains and losses, the Group runs a check on their carrying amounts on
every balance sheet date. Where there is any objective evidence proving that such a financial asset
has been impaired, an impairment provision is made.
The Group carries out a separate impairment test for every financial asset which is individually
significant. As for a financial asset which is individually insignificant, an impairment test is
carried out separately or in the financial asset group with similar credit risk. Where the financial
asset (individually significant or insignificant) is found not impaired after the separate impairment
test, it is included in the financial asset group with similar credit risk and tested again on the group
basis. Where the impairment loss is recognized for an individual financial asset, it is not included
in the financial asset group with similar credit risk for an impairment test.
① Impairment of held-to-maturity investments, loans and accounts receivable
Where a financial asset measured on the basis of costs or amortized costs is impaired, the carrying
amount of the said financial asset is written down to the current value of the predicted future cash
flow. The amount written down is recognized as the impairment loss of the asset and is recorded
in the profits and losses for the current period. Where a financial asset is recognized as having
suffered from any impairment loss, if there is any objective evidence proving that the value of the
said financial asset has been restored, and it is objectively related to the events that occur after
such loss is recognized, the impairment losses as originally recognized are reversed. The reversed
carrying amount of the said financial asset does not exceed the amortized cost of the said financial
asset on the day of reverse under the assumption that no provision is made for the impairment.
② Impairment of available-for-sale financial assets
Where an available-for-sale financial asset is impaired, the accumulative losses arising from the
decrease of the fair value of the capital reserve which is directly included are transferred out and
recorded in the profits and losses for the current period. The accumulative losses transferred out
are the balance obtained from the initially obtained cost of the said financial asset after deducting
the principals as taken back, the amortized amount, the current fair value and the impairment loss
originally recorded in the profits and losses.
Where the impairment loss has been recognized for an available-for-sale financial asset, if, within
the accounting periods thereafter, there is any objective evidence proving that the value of the said
financial asset has been restored and the restoration is objectively related to the events that occur
after the impairment loss was recognized, the originally recognized impairment loss is reversed.
The impairment losses on the available-for-sale equity instrument investments are reversed and
recognized as other comprehensive incomes, and the impairment losses on the available-for-sale
liability instruments are reversed and recorded in the profits and losses for the current period.
The impairment loss incurred to an equity instrument investment for which there is no quoted
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price in the active market and whose fair value cannot be reliably measured, or incurred to a
derivative financial asset which is connected with the said equity instrument investment and which
must be settled by delivering the said equity investment, is not reversed.
(4) Recognition and measurement of financial asset transfers
Where a financial asset satisfies any of the following requirements, the recognition of it is
terminated: ① The contractual rights for collecting the cash flow of the said financial asset are
terminated; ② The said financial asset has been transferred and nearly all of the risks and rewards
related to the ownership of the financial asset to the transferee; or ③ The said financial asset has
been transferred. And the Group has ceased its control on the said financial asset though it neither
transfers nor retains nearly all of the risks and rewards related to the ownership of the financial
asset.
Where the Group neither transfers nor retains nearly all of the risks and rewards related to the
ownership of a financial asset, and it does not cease its control on the said financial asset, it
recognizes the relevant financial asset and liability accordingly according to the extent of its
continuous involvement in the transferred financial asset. The term "continuous involvement in
the transferred financial asset" refers to the risk level that the enterprise faces resulting from the
change of the value of the financial asset.
If the transfer of an entire financial asset satisfies the conditions for stopping recognition, the
difference between the amounts of the following 2 items is recorded in the profits and losses of the
current period: (1) The book value of the transferred financial asset; and (2) The sum of
consideration received from the transfer, and the accumulative amount of the changes of the fair
value originally recorded in other comprehensive incomes.
If the transfer of partial financial asset satisfies the conditions to stop the recognition, the book
value of the transferred financial asset is apportioned between the portion whose recognition has
been stopped and the portion whose recognition has not been stopped according to their respective
relative fair value, and the difference between the amounts of the following 2 items is included
into the profits and losses of the current period: (1) The summation of the consideration received
from the transfer and the portion of the accumulative amount of changes in the fair value
originally recorded in other comprehensive incomes which corresponds to the portion whose
recognition has been stopped; and (2) The amortized carrying amounts of the aforesaid amounts.
(5) Classification and measurement of financial liabilities
In the initial recognition, financial liabilities are divided into the financial liabilities measured at
fair values and whose changes are recorded in current gains and losses and other financial
liabilities. Financial liabilities are initially recognized at their fair values. As for a financial
liability measured at fair value and whose changes are recorded in current gains and losses, the
relevant trading expense is directly recorded in the profits and losses for the current period. As for
other financial liabilities, the relevant trading expenses are recorded in the initially recognized
amounts.
① Financial liabilities measured at fair values and whose changes are recorded in current gains
and losses
Such financial liabilities are divided into transactional financial liabilities and financial liabilities
designated to be measured at fair values and whose changes are recorded in current gains and
losses in the initial recognition under the same conditions where such financial assets are divided
into transactional financial assets and financial assets designated to be measured at fair values and
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whose changes are recorded in current gains and losses in the initial recognition.
Financial liabilities measured at fair values and whose changes are recorded in current gains and
losses are subsequently measured at their fair values. Gains or losses arising from the fair value
changes, as well as the dividend and interest expenses in relation to the said financial liabilities,
are recorded in the profits and losses for the current period.
② Other financial liabilities
As for a derivative financial liability connected to an equity instrument for which there is not
quoted price in an active market and whose fair value cannot be reliably measured and which must
be settled by delivering the equity instrument, it is subsequently measured on the basis of costs.
Other financial liabilities are subsequently measured according to the amortized cost using the
actual interest rate method. Gains or losses arising from de-recognition or amortization of the said
financial liabilities are recorded in the profits and losses for the current period.
(6) De-recognition of financial liabilities
Only when the prevailing obligations of a financial liability are relieved in all or in part may the
recognition of the financial liability be terminated in all or partly. Where the Group (debtor) enters
into an agreement with a creditor so as to substitute the existing financial liabilities by way of any
new financial liability, and if the contractual stipulations regarding the new financial liability is
substantially different from that regarding the existing financial liability, it terminates the
recognition of the existing financial liability, and at the same time recognizes the new financial
liability.
Where the recognition of a financial liability is totally or partially terminated, the enterprise
concerned shall include into the profits and losses of the current period for the gap between the
book value which has been terminated from recognition and the considerations it has paid
(including the non-cash assets it has transferred out and the new financial liabilities it has
assumed)
(7) Derivative instrument and embedded derivative instrument
Derivative instrument shall be initially measured at its fair value on the signing date for relevant
contracts, and made the follow-up measurement at fair value. Except those are designated as
hedging instrument with high effectiveness of hedging, and the gain/loss from the changes in the
fair value is fixed in the recorded period by the nature of hedging relationship in accordance with
the requirements of hedging accounting, gain/loss from the changes in the fair value of the other
derivative instrument shall be recorded into gain/loss at current period.
Where a mixed instrument including an embedded derivative instrument fails to be designated as a
financial asset or financial liability measured at its fair value and of which the variation is included
in the current profits and losses, and it can simultaneously meet the two conditions that there is no
close relationship between it and the principal contract in terms of economic features and risks, as
well as there is no close relationship between it and the principal contract in terms of economic
features and risks. Then the embedded derivative instrument shall be separated from the mixed
instrument and treated as an independent derivative instrument. Where it is impossible to make an
independent measurement when it is obtained or subsequently on the balance sheet date, the
mixed instrument shall be designated entirely as a financial asset or financial liability measured at
its fair value and of which the variation is included in the current profits and losses.
(8) The offset of financial assets and financial liabilities
When the Group has the legal right to offset the confirmed financial assets and financial liabilities,
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and can execute this legal right now, meanwhile, the Group plans to settle them at their net amount
or realize the financial assets and pay off the financial liabilities at the same time, the financial
assets and financial liabilities should be listed in the balance sheet by the amount after their offset
with each other. Apart from this, the financial assets and financial liabilities should be listed in the
balance sheet respectively and should not offset with each other.
(9) Equity instruments
The "equity instruments" refers to the contracts which can prove that the Group holds the surplus
equities of the assets after the deduction of all the debts. The transaction cost from issuance of
equity instruments by the combining party in the business combination shall offset the premium
income of equity instrument, if it is not enough to offset, the difference should be offset from
retained profits. For other equity instruments, the consideration received in the issuance after
deducting the transaction cost shall be recorded in the owners’ equity.
The owners’ equity decreased from the Group’s various distribution (excluding the dividend
distribution) to the owners of equity instruments, the Group shall not make it as the change in the
fair value of equity instruments.
8. Receivables
Receivables includes account receivables and other accounts receivables.
(1) Recognition of provision for bad debts:
The Group shall test the carrying amount of receivables on the balance sheet date. Where there is
any objective evidence proving that such receivables 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 has a great probability of bankruptcy or other financial reorganization;
④ other objective evidence proving such accounts receivable has been impaired;
(2) Withdraw method of provision for bad debts
① The recognition criteria and method of individual provision for bad debts of receivables that
are individually significant
The Group recognized the receivables with amount above RMB 5 million as receivables with
significant single amounts.
The Group made an independent impairment test on receivables with significant single amounts,
the financial assets without impairment by independent impairment test should be included in
financial assets portfolio with similar credit risk to take the impairment test. Receivables was
recognized with impairment should no longer be included in receivables portfolio with similar
credit risk to take the impairment test.
② The recognition and method of provision for bad debts of receivables by credit risk portfolio
Recognition of credit risk portfolio
Receivables that are not individually significant and individually significant but without
impairment by independent impairment test, are grouped on the basis of similarity and relevance
of credit risk. This credit risk usually reflects the debtor’s ability to repay all the due accounts in
accordance with contract for such assets, which also are related with the measurement on future
cash flow of the examined assets.
Recognition of different portfolio:
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Item Recognition of portfolio
Aging portfolio Provision for bad debts by aging analysis
In the portfolio, provision for bad debts by aging analysis
Proportion of provision for bad
Proportion of provision for bad
Age debts of other accounts
debts of accounts receivable（%）
receivable（%）
Within 1 year（including 1 year, the
5 5
same below）
1-2 years 10 10
2-3 years 20 20
Over 3 years 30 30
③ Receivables with insignificant amount but being individually withdrawn the provision for bad
debts
The Group made independent impairment test on receivables with insignificant amount but with
the following characteristics, if any objective evidence shows that the accounts receivable has
been impaired, impairment loss shall be recognized on the basis of the gap between the current
values of the future cash flow lower than its book value so as to withdraw provision for bad debts:
receivables exist dispute with the other parties or involving lawsuit and arbitration; receivables
exist obvious indication showing that the debtors are likely to fail to perform the duty of
repayment, etc..
(3) Reversal of provision for bad debts
If there is any objective evidence proving that the value of the said receivables has been restored,
and it is objectively related to the events occurred 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. Inventory is accounted by weight
average method upon receiving and giving. 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 out-gone.
(3) Recognition standard of net realizable value and withdrawal method of depreciation reserves
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for inventories
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. The net realizable value of inventories shall be fixed on the basis of valid
evidence as well as under consideration of purpose of inventories and the effect of events after
balance-sheet-date.
On the balance sheet date, the inventories shall be measured according to the cost or the net
realizable value, whichever is lower. If the net realizable value is lower than the cost, it shall
withdraw the depreciation reserves for inventories, which was withdrawn in accordance with the
balance that the cost of individual inventory item exceeding the net realizable value.
After withdrawing the depreciation reserves for inventories, if the factors, which cause any
write-down of the inventories, have disappeared, causing the net realizable value of inventories is
higher than its carrying amount, the amount of write-down shall be reversed from the original
amount of depreciation reserve for inventories. 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) Recognition of investment cost
The initial cost of the long-term equity investment formed in business combination shall be
ascertained in accordance with the following provisions: For the business combination under the
same control, it shall regard the share of the carrying amount of the owner's equity of the
combined party on the date of combination as the initial cost of the long-term equity investment.
For the business combination under different control, the combination costs shall be the sum of the
fair values of the assets paid, the liabilities incurred or assumed and the equity securities issued by
the Company; the commission fees for audit, law services, assessment & consultancy services and
other relevant expenses occurred in the business combination by the combining party, shall be
recorded into current profits and losses upon their occurrence; the transaction expense from the
issuance of equity securities or bonds securities which are as consideration for combination by the
combining party, should be recorded as the initial amount of equity securities and bonds securities.
Besides the long-term equity investments formed by business combination, the other long-term
equity investments shall be initially measured by cost, the cost is fixed in accordance with the
ways of gaining, such as actual cash payment paid by the Group, the fair value of equity securities
issued by the Group, the agreed value of the investment contract or agreement, the fair value or
original carrying amount of exchanged assets from non-monetary assets exchange transaction, the
fair value of the long-term equity investments, etc. The expenses, taxes and other necessary
expenditures directly related with gaining the long-term equity investments shall also be recorded
into investment cost.
(2) Follow-up measurement of long-term equity investment and recognized method of profits and
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losses
The long-term equity investment that the Company does not have joint control or 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 adopting the cost method; a long-term equity
investment that the Company has joint control or significant influences over the invested entity
shall be measured by employing the equity method; a long-term equity investment that the
Company does not have control, joint control or significant influence on the invested entity, as
well as its fair value can be reliably measured, it shall be accounted as financial assets
available-for-sale.
Moreover, long-term equity investment adopting the cost method in the financial statements, and
which the Company has control on invested entity.
① Long-term equity investment measured by adopting cost method
The price of a long-term equity investment measured by adopting the cost method shall be
included at its initial investment cost, the return on investment at current period shall be
recognized in accordance with the cash dividend or profit announced to distribute by the invested
entity, except the announced but not distributed cash dividend or profit included in the actual
payment or consideration upon gaining the investment.
②Long-term equity investment measured by adopting equity method
If the initial cost of a long-term equity investment is more than the Company's attributable share
of the fair value of the invested entity's identifiable net assets for 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.
When measured by adopting equity method, the investment profits or losses at current period shall
be the attributable share of the net profits or losses of the invested entity. The investing enterprise
shall, on the ground of the fair value of all identifiable assets of the invested entity when it obtains
the investment, and in accordance with the accounting policies and accounting periods, recognize
the attributable share of the net profits and losses of the invested entity after it adjusts the net
profits of the invested entity. For the profits and losses of unrealized insider dealing between the
Group and joint-operative enterprise or co-operative enterprise, the investment profits and losses
shall be recognized after the part attributable to the Group calculated by proportion of shares held
being offset. However, if the losses of unrealized insider dealing between the Group and
joint-operative enterprise or co-operative enterprise was attributed to the impairment losses of the
transferred assets in accordance with the Accounting Standards for Enterprises No. 8— Asset
Impairment, which shall not be offset. The other comprehensive profits from invested entity shall
be recognized as other comprehensive profits after adjusting the book value of long-term equity
investment, and then recorded into capital reserves
The Group 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
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net investment made to the invested entity are reduced to zero. However, if the Group has the
obligation to undertake extra losses, which shall be recognized as the estimated liabilities in
accordance with the estimated duties and then recorded into investment losses at current period. If
the invested entity realizes any net profits later, the Group 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.
For the long-term equity investment on joint-enterprise and co-operative enterprise held by the
Group before the initial execution of New Accounting Standards for Enterprise as 1 Jan. 2007, if
there existed the balance of debtor for equity investment related with such long-term equity
investment, which shall be recorded into current profits and losses with the amount by
straight-line amortization in the remained period.
③ Acquiring shares of minority interest
In the preparation for the financial statements, the balance existed between the long-term equity
investment increased by acquiring shares of minority interest and the attributable net assets on the
subsidiary calculated by the increased shares held since the purchase date (or combination date),
the capital reserves shall be adjusted, if the capital reserves are not sufficient to offset, the retained
profits shall be adjusted.
④ Disposal of long-term equity investment
In the preparation of financial statements, the Company disposed part of the long-term equity
investment on subsidiaries without losing its controlling right on them, the balance between the
disposed price and attributable net assets of subsidiaries by disposing the long-term equity
investment shall be recorded into owners’ equity; where the Company losses the controlling right
by disposing part of long-term equity investment on such subsidiaries, it shall treated in
accordance with the relevant accounting policies in Note IV. 4 (2)— Method on preparation of
combined financial statements.
For other ways on disposal of long-term equity investment, the balance between the book value of
the disposed equity and its actual payment gained shall be recorded into current profits and losses;
for the long-term equity investment measured by adopting equity method, the other
comprehensive income originally recorded into owners’ equity shall be transferred into current
profits and losses by proportions upon the disposal. The remained equity shall be recognized as
long-term equity investment or other relevant financial assets in accordance with the book value,
and carried out the follow-up measurement in accordance with the above accounting policies for
the long-term equity investment or financial assets. If the measurement method of remained equity
is transferred from cost method to equity method, it shall be subject to retrospective adjustment in
accordance with relevant rules and stipulations.
(3) Recognition basis of joint control and significant influences
The term "control" refers to the power to determine the financial and operating polices of an
enterprise and obtain benefits from its operating activities of the enterprise. The term "joint
control" refers to the control over an economic activity in accordance with the contracts and
agreements, which does not exist unless the investing parties of the economic activity with one an
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assent on sharing the control power over the relevant important financial and operating decisions.
The term "significant influences" refers to the power to participate in making decisions on the
financial and operating policies of an enterprise, but not to control or do joint control together with
other parties over the formulation of these policies. When ascertaining whether or not it is able to
control or have significant influences on an invested entity, an enterprise shall take into
consideration the invested enterprises' current convertible corporate bonds and current executable
warrants held by the investing enterprise and other parties, as well as other potential factors
concerning the voting rights.
(4) Testing method of impairment and withdrawal method of provision for impairment
The Group 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. Where there is sign of impairment, the
Group shall estimate the recoverable amount of the long-term equity investment. Where the
recoverable amount of the long-term equity investment is lower than its book value, which
balance shall be withdrawn the provision for impairment and recorded into current profits and
losses.
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 term "investment real estates" refers to the real estates held for generating rent and/or capital
appreciation. It includes 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, the right to use any building
which has already been rented and so on.
The initial measurement of the investment real estates shall be made at its cost. For the follow-up
cost of the investment real estates, where the economic benefits pertinent to this investment real
estates are likely to flow into the enterprise and its cost can be reliably measured, which shall be
recorded into the cost of investment real estates. The other follow-up cost shall be current profits
and losses upon the occurrence.
The Group made a follow-up measurement on the investment real estate through the cost pattern,
and made the depreciation and amortization by the same policies for Houses & Buildings or the
use right of land.
For the details of the testing method for impairment and withdraw method for impairment
provision on investment real estates, please refer to Note IV. 17— Impairment of non-current
non-financial assets.
When any self-use real estate or real estate for inventory is converted to investment real estate, or
investment real estate is converted to self-use real estate or real estate, the book value of the real
estate prior to the conversion shall be entry value after conversion.
If an investment real estate is disposed of, or if it withdraws permanently from use and if no
economic benefit will be obtained from the disposal, the recognition of it as an investment real
estate shall be terminated. When the Group sells, transfers or discards any investment real estate,
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or when any investment real estate of the Group is damaged or destroyed, the Group shall deduct
the book value of the investment real estate as well as the relevant taxes from the disposal income,
and include the amount in the current profits and losses.
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.
(2) Category of fixed assets and depreciation
The initial measurement of a fixed asset shall be made at its cost after considering the effect of
expected discard expenses. The Group shall withdraw the depreciation of fixed assets by adopting
the straight-line method since the second month of its useful life. Useful life, expected net salvage
value and annual depreciation rate of each fixed assets are as below:
Annual
Rate of residual
Category of fixed assets Depreciable life (Y) deprecation
value（%）
rate（%）
Housing and building 5-20 5-10 19.00-4.50
Machinery equipments 10-13 5-10 6.92-9.50
Transportation vehicle 5 5-10 19.00-18.00
Electronic equipments and other 5 5-10 19.00-18.00
The "expected net salvage value" refers to the expected amount that the Group may obtain from
the current disposal of a fixed asset after deducting the expected disposal expenses at the
expiration of its expected useful life.
(3) Testing method of impairment and withdrawal method of provision for impairment on fixed
assets
For details, please refer to Note IV. 17— Impairment of non-current non financial assets.
(4) Recognition basis and pricing method of fixed assets by finance lease
The "finance lease" shall refer to a lease that has transferred in substance all the risks and rewards
related to the ownership of an asset. Its ownership may or may not eventually be transferred. The
fixed assets by finance lease shall adopt the same depreciation policy for self-owned fixed assets.
If it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when
the lease term expires, the leased asset shall be fully depreciated over its useful life. If it is not
reasonable to be certain that the lessee will obtain the ownership of the leased asset at the expiry
of the lease term, the leased asset shall be fully depreciated over the shorter one of the lease term
or its useful life.
(5) Other explanations
The follow-up expenses related to a fixed asset, if the economic benefits pertinent to this fixed
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asset are likely to flow into the enterprise and its cost can be reliably measured, shall be recorded
into cost of fixed assets and ultimately recognized as the book value of the replaced part;
otherwise, they shall be included in the current profits and losses.
When the Group sells, transfers or discards any fixed assets, or when any fixed assets of the Group
is damaged or destroyed, the Group shall deduct the book value of the fixed assets as well as the
relevant taxes from the disposal income, and include the amount in the current profits and losses.
The Group shall check the useful life, expected net salvage value and depreciation method of the
fixed assets at the end of the year at least, if there is any change, it shall be regarded as a change of
the accounting estimates.
13. Construction in progress
Construction in progress is measured at actual cost. Actual cost comprises construction costs,
borrowing costs that are eligible for capitalization before the fixed assets being ready for their
intended us and other relevant costs. Construction in progress is transferred to fixed assets when
the assets are ready for their intended use
For details of the testing method of impairment and withdraw method of impairment provision on
construction in progress, please refer to Note IV. 17— Impairment of non-current non financial
assets.
14. Borrowing costs
The borrowing costs shall include 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 an enterprise can be directly attributable to the acquisition and
construction or production of assets eligible for capitalization, it shall start to be capitalized when
the asset disbursements have already incurred, the borrowing costs has already incurred and the
acquisition and construction or production activities which are necessary to prepare the asset for
its intended use or sale have already started; When the qualified asset under acquisition and
construction or production is ready for the intended use or sale, it shall stop to be capitalized.
Other borrowing costs shall be recognized as costs upon their occurrence.
The to-be-capitalized amount of interests shall be determined in light of the actual interests
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; the
enterprise shall calculate and determine the to-be-capitalized amount 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.
During the period of capitalization, the exchange balance on foreign currency special borrowings
shall be capitalized; the exchange balance on foreign currency general borrowings shall be
recorded into current profits and losses.
The term “assets eligible for capitalization” refers to the fixed assets, investment real estate,
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inventories and other assets, of which the acquisition and construction or production may take
quite a long time to get ready for its intended use or for sale.
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 until the acquisition and construction or production of a qualified asset resume
again
15. Intangible assets
(1) Intangible assets
The term "intangible asset" refers to the identifiable non-monetary assets possessed or controlled
by enterprises which have no physical shape.
The intangible assets shall be initially measured according to its cost. The costs related with the
intangible assets, if the economic benefits related to intangible assets are likely to flow into the
enterprise and the cost of intangible assets can be measured reliably, shall be recorded into the
costs of intangible assets; otherwise, it shall be recorded into current profits and losses upon the
occurrence.
The use right of land gained is usually measured as intangible assets. For the self-developed and
constructed factories and other constructions, the related expenditures on use right of land and
construction costs shall be respectively measured as intangible assets and fixed assets. For the
purchased houses and buildings, the related payment shall be distributed into the payment for use
right of land and the payment for buildings, if it is difficult to be distributed, the whole payment
shall be treated as fixed assets.
For intangible assets with a finite service life, from the time when it is available for use, the cost
after deducting the sum of the expected salvage value and the accumulated impairment provision
shall be amortized by straight line method during the service life. While the intangible assets
without certain service life shall not be amortized.
At the end of period, the Group shall check the service life and amortization method of intangible
assets with finite service life, if there is any change, it shall be regarded as a change of the
accounting estimates. Besides, the Group shall check the service life of intangible assets without
certain service life, if there is any evidence showing that the period of intangible assets to bring
the economic benefits to the enterprise can be prospected, it shall be estimated the service life and
amortized in accordance with the amortization policies for intangible assets with finite service life.
(2) 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.
Expenditures for research and development shall be recorded into current profits and losses upon
the occurrence.
The development expenditures for its internal research and development projects of an enterprise
may be confirmed as intangible assets when they satisfy the following conditions simultaneously,
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otherwise，it shall be recorded into current profits and losses.
① It is feasible technically to finish intangible assets for use or sale;
② It is intended to finish and use or sell the intangible assets;
③ The usefulness of methods for intangible assets to generate economic benefits shall be proved,
including being able to prove that there is a potential market for the products manufactured by
applying the intangible assets or there is a potential market for the intangible assets itself or the
intangible assets will be used internally;
④ It is able to finish the development of the intangible assets, and able to use or sell the intangible
assets, with the support of sufficient technologies, financial resources and other resources; and
⑤ The development expenditures of the intangible assets can be reliably measured.
If the expenditures for research and expenditures for development can not be distinguished from
each other, all the expenditures for research and development shall be recorded into current profits
and losses.
(3) Testing method of impairment and withdraw method of impairment provision for intangible
assets
For details, please refer to Note IV. 17— Impairment of non-current non financial assets.
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 amortized averagely within benefit period.
17. Impairment of non-current non-financial assets
For the non-current non-financial assets, such as fixed assets, construction in progress, intangible
assets with finite service life, investment real assets measured by cost mode as well as long-term
equity investment on subsidiaries, co-operative enterprise and joint-operative enterprise, etc., are
tested for impairment if there is any indication that an asset may be impaired at the balance date.
If there is any sign of possible assets impairment, the Group shall estimate the recoverable amount
and made the impairment tests. No matter whether there is any sign of possible assets impairment,
the good will, intangible assets without certain service life, intangible assets not ready for use shall
be subject to impairment test every year.
If the result of the impairment test indicates that the recoverable amount of the asset is less than its
book value, a provision for impairment and an impairment loss are recognized for the amount by
which the asset’s book value exceeds its recoverable amount. The recoverable amount is the
higher of an asset’s fair value less costs to sell and the present value of the future cash flows
expected to be derived from the asset. The fair value of an asset shall be determined in light of the
basis of the price as stipulated in the sales agreement. Where there is no sales agreement but there
is an active market of assets, the fair value of the asset shall be determined according to the price
bidden by the buyer of the asset; Where there is no sales agreement and no active market of assets,
the fair value of an asset shall be estimated in light of the best information available. The disposal
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expenses shall include the relevant legal expenses, relevant taxes, trucking charge as well as the
direct expenses for bringing the assets into a marketable state. The current value of the expected
future cash flow of an asset shall be determined by the discounted cash with an appropriate
discount rate, on the basis of the expected future cash flow generated during the continuous use or
final disposal of an asset. A provision for asset Impairment is determined and recognized on an
individual asset basis. If it is not possible to estimate the recoverable amount of an individual
asset, the recoverable amount of the group of assets to which the asset belongs is determined. A
group of assets is the smallest group of assets that is able to generate independent cash inflows.
For the goodwill separately listed in the financial statements, during the impairment test, the book
value of this goodwill is allocated to the related asset group or groups of asset group which is
expected to benefit from the synergies of the business combination. If the result of the test
indicates that the recoverable amount of an asset group or groups of asset group including the
goodwill allocated is lower than its book value, the corresponding impairment loss is recognized.
The impairment loss is first deducted from the book value of goodwill allocated to the asset group
or groups of asset group, and then deducted from the book value of the remaining assets of the
asset group or groups of asset group pro rata with goodwill.
Once the asset impairment loss mentioned above is recognized, it is not allowed to be reversed
even if the value is recovered in the subsequent periods.
18. Revenue
(1) Revenue from selling goods
No revenue from selling goods may be recognized unless the following conditions are met
simultaneously: the significant risks and rewards of ownership of the goods have been transferred
to the buyer by the enterprise; the enterprise retains neither continuous management right that
usually keeps relation with the ownership nor effective control over the sold goods; the relevant
amount of revenue can be measured in a reliable way; the relevant economic benefits may flow
into the enterprise; and the relevant costs incurred or to be incurred can be measured in a reliable
way.
(2) Revenue from providing labor services
If an enterprise can reliably estimate the outcome of a transaction concerning the labor services it
provides, it shall recognize the revenue from providing services employing the
percentage-of-completion method on the balance sheet date. The percentage-of-completion is
determined by the proportion of the costs incurred against the estimated total costs.
The outcome of a transaction concerning the providing of labor services can be measured in a
reliable way, means that the following conditions shall be met simultaneously: ① The amount of
revenue can be measured in a reliable way; ② The relevant economic benefits are likely to flow
into the enterprise; ③ The schedule of completion under the transaction can be confirmed in a
reliable way; ④ The costs incurred or to be incurred in the transaction can be measured in a
reliable way.
If the Company can not 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,
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respectively: If the cost of labor services incurred is expected to be compensated, the
compensation amount for the cost of labor services shall be recognized as the revenue from
providing labor service, and the cost of labor service incurred shall be as the current cost; if the
cost of labor services incurred is not expected to compensate, no revenue from the providing of
labor services may be recognized.
Where a contract or agreement signed between Group and other enterprises concerns selling goods
and providing of labor services, if the part of sale of goods and the part of providing labor services
can be distinguished from each other and can be measured respectively, the part of sale of goods
and the part of providing labor services shall be treated respectively. If the part of selling goods
and the part of providing labor services can not be distinguished from each other, or if the part of
sale of goods and the part of providing labor services can be distinguished from each other but can
not be measured respectively, both parts shall be conducted as selling goods.
(3) Royalty revenue
In accordance with relevant contract or agreement, the amount of royalty revenue should be
recognized as revenue on accrual basis.
(4) Interest revenue
The amount of interest revenue should be measured and confirmed in accordance with the length
of time for which the Group’s monetary fund is used by others and the actual interest rate;
19. Government subsidies
A government subsidy means the monetary or non-monetary assets obtained free by the Group
from the government, but excluding the capital invested by the government as the owner of the
enterprise. Government subsidies consist of the government subsidies pertinent to assets and
government subsidies pertinent to income.
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. The government subsidies measured at their nominal amounts shall be directly included
in the current profits and losses.
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. The government subsidies pertinent to incomes shall be treated respectively in accordance
with the circumstances as follows: 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
those subsidies used for compensating the related expenses or losses incurred to the enterprise
shall be directly included in the current profits and losses.
Where it is necessary to refund any government subsidy which has been recognized, it shall be
treated respectively in accordance with the circumstances as follows: if there is the deferred
income concerned, the book balance of the deferred income shall be offset against, but the
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excessive part shall be included in the current profits and losses; or if there is no deferred income
concerned to the government subsidy, it shall be directly included in the current profits and losses.
The government capital investment is not government subsidies.
20. Deferred income tax assets and deferred income tax liabilities
(1) Current income tax
On the balance sheet date, the current income tax liabilities (or assets) incurred in the current
period or prior periods shall be measured on the basis of the expected payable (refundable)
amount of income tax, which is calculated according to the tax law. The taxable income which is
the basis to calculate current income tax is the pre-tax accounting profits at the period after
adjustment in accordance with the stipulations of relevant tax laws.
(2) Deferred income tax assets and deferred income tax liabilities
The balance between the book value of deferred tax assets and deferred tax liabilities and its
taxable amount, as well as the temporary difference between the book value of those unrecognized
as assets and liabilities but with clear taxable amount and the taxable amount should adopt law of
liabilities for balance sheet to recognize deferred income tax assets and deferred income tax
liabilities.
No deferred tax liability is recognized for a temporary difference arising from the initial
recognition of goodwill, the initial recognition of assets or liabilities due to a transaction other
than a business combination, which affects neither accounting profit nor taxable profit (or
deductible loss). Besides, no deferred tax assets is recognized for the taxable temporary
differences related to the investments of subsidiary companies, associated enterprises and joint
enterprises, and the investing enterprise can control the time of the reverse of temporary
differences as well as the temporary differences are unlikely to be reversed in the excepted future.
Otherwise, the Group should recognize the deferred income tax liabilities arising form other
taxable temporary difference.
No deferred taxable assets should be recognized for the deductible temporary difference of initial
recognition of assets and liabilities arising from the transaction which is not business combination,
the accounting profits will not be affected, nor will the taxable amount or deductible loss be
affected at the time of transaction. Besides, no deferred taxable assets should be recognized for the
deductible temporary difference related to the investments of the subsidiary companies, associated
enterprises and joint enterprises, which are not likely to be reversed in the expected future or is not
likely to acquire any amount of taxable income tax that may be used for making up such
deductible temporary differences. Otherwise, the Company shall recognize the deferred income
tax assets arising from a deductible temporary difference basing on the extent of the amount of the
taxable income that is likely to be acquired to make up such deductible temporary differences
For any deductible loss or tax deduction that can be carried forward to the next year, the
corresponding deferred income tax asset shall be determined to the extent that the amount of
future taxable income to be offset by the deductible loss or tax deduction to be likely obtained.
On the balance sheet date, the deferred income assets and deferred income tax liabilities shall be
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measured at the tax rate applicable to the period during which the assets are expected to be
recovered or the liabilities are expected to be settled.
The book value of deferred income tax assets shall be reviewed at each balance sheet date. If it is
unlikely to obtain sufficient taxable income to offset against the benefit of the deferred income tax
asset, the book value of the deferred income tax assets shall be written down. Any such
write-down should be subsequently reversed where it becomes probable that sufficient taxable
income will be available.
(3) Income tax expense
Income tax expense includes current income tax and deferred income tax.
Except the current income tax and deferred income tax, which was recognized as other
comprehensive income or related with the transactions or events directly recorded in the owner's
equities, should be recorded in other comprehensive income or owners’ equity, and the book value
of deferred income tax from business combination after adjusting the good will, the other
expenses or income of current income tax and deferred income tax should be recorded into current
profits and losses.
(4) The offset of income tax
When the Group has the legal right to settle with net amount, and intends to settle, purchase assets,
liquidate liabilities with net amount at the same time, the current income tax assets and current
income tax liabilities of the Group shall be listed by the net amount after the offset.
When the Group has the legal right to settle current income tax assets and current income tax
liabilities with net amount, as well as the deferred income tax assets and deferred income tax
liabilities are related with the income tax that the same taxation authority collects towards the
same tax payer or different tax payer, but during every period of reversal for significant deferred
income tax assets and liabilities in the future, if the tax payer intends to settle the current income
tax assets and liabilities or purchase assets and liquidate liabilities with the net amount, the
Group’s deferred income tax assets and deferred income tax liabilities shall be listed as the net
amount after offset.
21. Leasing
The “finance lease” shall refer to a lease that has transferred in substance all the risks and rewards
related to the ownership of an asset. The ownership of it may or may not eventually be transferred.
Except financial lease, the other leases are operating lease.
(1) The Group records the operating lease as the leasee
The rental payment from operating leases shall be recorded by the lessee in the relevant asset costs
or the profits and losses of the current period by using the straight-line method over each period of
the lease term. The initial direct costs incurred by a 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.
(2) The Group records the operating lease as the leasor
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The rental income from operating leases shall be recorded by the lessee in the profits and losses of
the current period by using the straight-line method over each period of the lease term. The initial
direct costs with large amount shall be capitalized upon the occurrence, and recorded into current
profits and losses by using the recognition basis for rental income method over each period of the
lease term; the initial direct costs with small amount shall be recorded into current profits and
losses upon occurrence. The contingent rents shall be recorded into the profits and losses of the
current period in which they actually arise.
(3) The Group records the finance lease as the leasee
On the lease beginning date, a lessee 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. Otherwise,
the initial direct costs incurred during the process of lease negotiating and signing the leasing
agreement which can be included into the items of lease shall be recorded in the asset value of the
current period. The balance that the minimum lease payment minus the unrecognized financing
charges should be listed as long-term liabilities and long-term liabilities due within 1 year
respectively.
The unrecognized financing charges should be recorded into current financing charges measured
by adopting effective interest method during the lease period. The contingent rents should be
recorded into current profits and losses upon occurrence.
(4) The Group records the finance lease as the lessor
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. A lessor shall present the balances between the financial lease income minus the
unrecognized financing income as long-term creditor’s right and long-term creditor’s right due
within 1 year respectively.
The unrealized financing income should be recorded into current financing income measured by
adopting effective interest method during the lease period. The contingent rents should be
recorded into current profits and losses upon occurrence.
22. Employee compensation
The Group recorded the employee compensation payables as liabilities during the service period
of employee.
The Group joins in the employee social security system established by the government institution
in accordance with relevant rules and laws, which includes the basic retirement insurance, medical
insurance and other social insurances, as well as the housing accumulation fund, and the relevant
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expenditures should be recorded into cost of relevant assets or current profits and losses upon the
occurrence.
If an enterprise cancels the labor relationship with any employee prior to the expiration of the
relevant labor contract or brings forward any compensation proposal for the purpose of
encouraging the employee to accept a layoff, and the following conditions are met concurrently,
the enterprise shall recognize the expected liabilities incurred due to the compensation for the
cancellation of the labor relationship with the employee, and shall simultaneously record them into
the profit or loss for the current period: the enterprise has formulated a formal plan on the
cancellation of labor relationship or has brought forward a proposal on voluntary layoff and will
execute it soon; and the enterprise is unable to unilaterally withdraw the plan on the cancellation
of labor relationship or the layoff proposal.
The inside employee retirement plan is treated by adopting the same principle with the above
dismission welfare. The group would recorded the salary and the social security insurance fees
paid and so on from the employee’s service terminative date to normal retirement date into current
profits and losses (dismission welfare) under the condition that they meet the recognition
conditions of estimated liabilities.
23. Change in major accounting policies and accounting estimates
(1) Change in accounting policies
No accounting policy changed in the Group.
(2) Change in accounting estimates
No accounting estimates changed in the Group.
24. Corrections of prior accounting errors
The Group has no matter related to correction of prior-period errors.
25. Critical accounting judgments and estimates
Due to the inside uncertainty of operating activity, the Group needed to make judgments, estimates
and assumption on the book value of the accounts without accurate measurement during the
employment of accounting policies. And these judgments, estimates and assumption were made
basing on the prior experience of the senior executives of the Group, as well as in consideration of
other factors. These judgments, estimates and assumption would also affect the report amount of
income, costs, assets and liabilities, as well as the disclosure of contingent liabilities on balance
sheet date. However, the uncertainty of these estimates were likely to cause significant adjustment
on the book value of the affected assets and liabilities.
The Group would check periodically the above judgments, estimates and assumption on the basis
of continuing operation. For the changes in accounting estimates only affected on the current
period, the influence should be recognized at the period of change occurred; for the changes in
accounting estimates affected the current period and also the future period, the influence should be
recognized at the period of change occurred and future period.
On the balance sheet date, the Group needed to make judgments, estimates and assumption on the
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accounts in the following important items:
(1) Categorization of leasing
In accordance with Accounting Standards for Enterprises No. 21 – Leasing, the Group categorized
the leasing into operating lease and finance lease. During the categorization, the management level
needed to make analysis and judgment on whether all the risk and compensation related with the
leased assets had been transferred to the leasee, or whether the Group had already undertaken all
the risk and compensation related with the leased assets.
(2) Provision for bad debts
In accordance with the accounting policies of accounts receivable, the Group measured the losses
for bad debts by adopting allowance method. The impairment of accounts receivable was based on
the appraisal of the recoverability of accounts receivable. The impairment of accounts receivable
was dependent on the judgment and estimates. The actual amount and the difference of previous
estimates would affect the book value of accounts receivable and the withdrawal and reversal on
provision for bad debts of accounts receivable during the period of estimates being changed.
(3) Provision for falling price of inventories
In accordance with the accounting policies of inventories, for the inventories that the costs were
more than the net realizable value as well as out-of-date and dull-sale inventories, the Group
withdrew the provision for falling price of inventories on the lower one between costs and net
realizable value. Evaluating the falling price of inventories needed the management level gain the
valid evidence and take full consideration of the purpose of inventories, influence of events after
balance sheet date and other factors, and then made relevant judgments and estimates. The actual
amount and the difference of previous estimates would affect the book value of inventories and the
withdrawal and reversal on provision for bad debts of inventories during the period of estimates
being changed.
(4) The fair value of financial instrument
For the financial instruments without active market, the Group recognized the fair value by
various method. These evaluation methods included discounted cash flow mode analysis, etc.. The
Group needed to estimate the future cash flow, credit risk, fluctuation rate of market and relativity
and other factors, as well as choose the property discount rate. Due to the uncertainty of relevant
assumptions, so their changes would affect the fair value of financial instrument.
(5) Provision for impairment of non-financial non-current assets
The Group made a judgment on the non-current assets other than financial assets whether they had
any indication of impairment on the balance sheet date. For the intangible assets without finite
service life, other than the annual impairment test, they should be subject to the impairment test
when there was any indication of impairment. For other non-current non-financial assets, which
should subject to impairment test when there was indication of impairment showing that the book
value can’t be recoverable.
When the book value of the assets or assets portfolio was more than the recoverable amount,
which was the higher one between the net amount of fair value after deducting the disposal
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expenses and the discounted amount of the estimated future cash flow, it means impairment
incurred.
The net amount of fair value after deducting the disposal expenses should be fixed the price in the
sale agreement for similar assets in the fair transaction minus the increased costs directly
attributable to the assets disposal.
When estimated the discounted value of future cash flow, the Group needed to make important
judgment on the output, selling price, relevant costs and the discount rate for calculating the
discounted amount, etc. When estimated the recoverable amount, the Group would adopt all the
available documents, including the predicts for relevant output, selling price and relevant
operating costs arising from reasonable and supportive assumptions.
The Group made the impairment test on goodwill at least one time per year, which required to
predict the discounted amount of the future cash flow of the assets or assets portfolio with the
distributed good will, for which, the Group needed to predict the future cash flow of the assets or
assets portfolio, and adopt the property discounted rate to decide the discounted amount of future
cash flow.
(6) Depreciation and amortization
For the investment real estate, fixed assets and intangible assets, the Group withdrew the
depreciation and amortization by adopting the straight-line method during the service life after full
consideration of the salvage value. The Group checked the service life periodically so as to decide
the amount of depreciation and amortization at each reporting period. The service life was fixed
by the Group in accordance with the previous experience of the similar assets and the expected
technical update. If there was any significant change on the previous estimates, the depreciation
and amortization expenses should be adjusted.
(7) Expenditures for development
When fixing the amount of capitalization, the management level of the Group needed to make
assumption on the predicted future cash flow, property discounted rate and estimated beneficiary
period for relevant assets.
(8) Deferred income tax assets
Within the limit that it was likely to have sufficient taxable profits to offset the losses, the Group
recognized the deferred income tax assets by all the unused tax losses, which needed the
management level of the Group to estimate time and amount of the future taxable profits incurred
with many judgments, as well as integrate strategy of tax payment, to decide the amount of
deferred income tax assets which should be recognized.
(9) Income tax
During the routine operating activities, there were some uncertainty in the ultimate tax treatment
and calculation for parts of transactions. Some accounts of such transaction could be listed as
pre-tax expenditures only after the approval of taxation authorities. If there were any differences
between the ultimate result of recognition for these taxation maters and their initial estimates, the
differences would affect the current income tax and deferred income tax at the period of ultimate
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recognition.
V. Taxation
1. Main taxes and tax rate
Category of taxes Particulars on tax rates
Calculated the output tax at 17%, 13% of taxable income and
VAT paid the VAT by the amount after deducting the deductable
withholding VAT at current period.
Business tax Paid by 3%-5% of taxable business income
Urban maintenance and
Paid at 7%, 5% of the circulating tax actually paid
construction tax
Enterprise income tax Paid at 15%, 16.5%, 25% of taxable income respectively
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 New
High-tech Enterprise and obtained the Certificate of New High-tech Enterprise on 5 Dec. 2008. In
line with the Public Notice Promulgated by State Administration of Taxation on Issues about
Advance Payment of Business Income Tax During the Period When the Qualification as a New
High-tech Enterprise is Being Rechecked (No.4, Y2011, Public Notice of State Administration of
Taxation), the enterprise shall, before the qualification of new high-tech enterprise is rechecked
and passed, prepay tax at the rate of 15% during the valid term of new high-tech enterprise
qualification.
Luthai (Hong Kong) Co., Ltd. (hereinafter refers as 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%.
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VI. Business combination and consolidated financial statement
1. Subsidiaries
(1) Subsidiaries obtained by establishment and investment
Unit: RMB’0000
Balance of other
Actual amount of items actually
Registered Business Registered Business Type of Legal
Subsidiaries Type Organization code investments at the constructing net
place nature capital scope corporate representative
period-end investments on
subsidiaries
Wholesale
clothing,
Limited
commodity;
Beijing Lufeng Sunshine Garment Wholly-owned liability
Wholesale and costume
Co., Ltd. (hereinafter refer to as subsidiary Beijing 1,000 company Liu Shizhen 55488176-X 1,000
retail industry designing;
“Lufeng Sunshine”) (sole
service of
corporation)
technology
diffusion
Limited
Design, liability
Beijing Sichuang Apparel Co., Ltd. Wholesale and manufacturing company
Controlled subsidiary Beijing 4,200 Liu Shizhen 105717748438 2,520
(“Beijing Sichuang”) retail industry and sale of (Sino-foreign
garment joint
venture)
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Import &
export trade,
collection of Limited
Wholly-owned Wholesale and
Luthai (Hong Kong) Hong Kong HKD 6 million market liability Liu Shizhen 636.66
subsidiary retail industry
information, company
information
consultation
Design,
technology Limited
R&D of liability
Shanghai Luthai Textile Co., Ltd. Wholly-owned Wholesale and
Shanghai 500 textile and company Liu Shizhen 56659750-4 500
(Shanghai Lutai) subsidiary retail industry
garment; (sole
textile and corporation)
garment retail
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Planting,
processing
and sale of
Economic
Crops,
cooking oil
crops;
purchase, Limited
Xinjiang Luthai Harvest Cotton Co., Controlled subsidiary
Xinjiang Manufacturing 14,653 processing liability Liu Shizhen 75165238-4 8,240.07
Ltd. (“Xinjiang Luthai”)
and sale of company
cotton and
cotton-by
products;
production
and sale of
cotton textile
products
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Limited
liability
company
Production
(Joint
and sale of
Venture, of
Lufeng Weaving & Dyeing Co., Ltd. Controlled subsidiary textile and
Zibo Manufacturing 70,616 which Liu Shizhen 76001835-0 52,962.00
(Lufeng Weaving & Dyeing) printing and
investments
dyeing
come from
products
Taiwan,
Hong Kong,
and Macao)
Limited
liability
Zibo Luqun Textile Co., Ltd. (Luqun Wholly-owned Sale of cotton
Zibo Manufacturing 16,822 company Liu Shizhen 76870633-4 17,178.46
Textile) subsidiary yarn
(sole
corporation)
Limited
Zibo Xinsheng Power Co., Ltd. liability
Wholly-owned Power, steam
(Xinsheng Power) Zibo Manufacturing 16,243.56 company Liu Shizhen 61329023-1 17,634.07
subsidiary and hot water
(sole
corporation)
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(Con.)
Unit: RMB’0000
Balance of parent
Included
The company’s equity after
The in
proportion Deductible deducting the difference
proportion consolid Minority
Subsidiaries of holding minority that loss of minority Remark
of voting ated interests
shares interests interests exceed equity
rights（%） statemen
（%） obtained by minority
t
shareholders
Lufeng
100 100 Yes
Sunshine
Beijing
60 60 Yes 1,639.02
Sichuang
Luthai
100 100 Yes
(Hongkong)
Shanghai
100 100 Yes
Luthai
Xinjiang
58.24 58.24 Yes 13,801.54
Luthai
Lufeng
Weaving & 75 75 Yes 21,935.46
Dyeing
Luqun Textile 100 100 Yes
Xinsheng
100 100 Yes
Power
2. In the reporting period, entities involved in consolidation scope kept unchanged.
3. Exchange rate of overseas operating entities on main reporting items
Assets and liabilities
Item
30 Jun. 2011 1 Jan. 2011
Luthai (Hongkong) HKD 1= RMB 0.8316 HKD 1= RMB 0.8521
Income, expense and cash flow items
Item
Jan.-Jun. 2011 Jan.-Jun. 2010
Luthai (Hongkong) HKD 1= RMB 0.8419 HKD 1=RMB 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 period-begin refers to 1 Jan. 2011, and the period-end refers to 30 Jun. 2011. The
last period refers to Jan.-Jun. 2010, and the current period refers to Jan.-Jun. 2011.
1. Monetary funds
Items Closing amount Opening amount
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Amount in Amount in
Exchange Exchange
foreign Amount in RMB foreign Amount in RMB
rate rate
currency currency
Cash on hand: 2,497,198.88 1,713,120.64
-RMB 1,985,192.48 1,489,594.04
-USD 13,827.83 6.4716 89,488.19 6,429.65 6.6227 42,581.64
-EURO 32,870.04 9.3612 307,703.02 14,867.73 8.8065 130,932.66
-JPY 69,638.00 0.0802 5,584.97 69,638.00 0.0813 5,661.57
-HKD 76,405.30 0.8316 63,538.65 9,291.64 0.8509 7,906.26
-THB 120.19 0.2097 25.20 120.19 0.2193 26.36
-SGD 0.20 5.2443 1.05 0.2 5.1191 1.02
-GBP 1,234.36 10.3986 12,835.61 445.55 10.2182 4,552.72
-AUD 4,746.03 6.9173 32,829.71 4,746.03 6.7139 31,864.37
Bank deposit: 594,369,777.56 477,348,917.61
-RMB 536,716,717.48 362,271,637.99
-USD 6,413,690.19 6.4716 41,506,837.44 16,006,883.19 6.6227 106,008,785.31
-EURO 1,174.06 9.3612 10,990.63 47,562.97 8.8065 418,863.31
-JPY 65,407,404.00 0.0802 5,245,673.81 10,707,985.00 0.0813 870,559.18
-HKD 13,083,172.69 0.8316 10,879,966.41 9,131,527.24 0.8509 7,770,016.53
-SF 1,235.18 7.7655 9,591.79 1,283.31 7.0562 9,055.29
Other monetary
6,008,958.90 125,113,198.12
fund
-RMB 780,000.00 112,833,505.02
-USD 805,991.47 6.4716 5,216,054.41 1,854,158.11 6.6227 12,279,532.92
-EURO 17.69 9.3612 165.60 18.19 8.8065 160.18
-JPY 158,839.00 0.0802 12,738.89
Total 602,875,935.34 604,175,236.37
Note: ①On 30 Jun. 2011, RMB 780,000.00 in other monetary fund of the Group (as at 31 Dec.
2010: RMB 3,052,000.00) were bank savings used as the security deposit of the Group for its
purpose of applying bank acceptance bills from the bank.
②Deposit in USD, EURO, and JPY in the item of other monetary fund is foreign currency
payment for the Company’s exported products, and is now in verification stage in accordance with
rules related to foreign exchange control of the state.
③On 30 Jun. 2011, monetary fund of the Group deposited overseas could be converted to RMB
10,936,747.54 (as at 31 Dec. 2010: RMB 7,769,681.07), which was the deposit of monetary fund
of Luthai (Hongkong), the wholly-owned subsidiary of the Group.
2. Transactional financial assets
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Item Closing fair value Opening fair value
Derivative financial assets 17,838,500.00 40,418,200.00
Total 17,838,500.00 40,418,200.00
3. Notes receivable
(1) Categories
Categories Closing amount Opening amount
Bank acceptance bill 27,364,535.24 29,812,440.05
Letter of credit (LC) 135,283,131.63 107,572,449.61
Total 162,647,666.87 137,384,889.66
(2) Particulars on the notes that the Company has made endorsement to other party but not yet due.
(Details of the top five entities are as follows):
Whether
terminate
Entities Date of draft Date due Amount Remark
recognition
or not
Jiangsu Baozitou Fashion Co., Ltd. 2011-1-18 2011-7-18 2,000,000.00 Yes
Wenzhou Baozitou Garment Co., Yes
2011-2-21 2011-8-16 2,000,000.00
Ltd.
Wenzhou Baozitou Garment Co., Yes
2010-1-7 2011-7-5 2,000,000.00
Ltd.
Jiangsu Baozitou Fashion Co., Ltd. 2011-3-2 2011-8-31 1,000,000.00 Yes
Jiangsu Baozitou Fashion Co., Ltd. 2011-5-19 2011-11-19 1,000,000.00 Yes
Total 8,000,000.00
4. Accounts receivable
(1) Breakdown of accounts receivable listed by categories
Closing amount
Categories Book balance Provision for bad debts
Amount Proportion（%） Amount Proportion（%）
Accounts receivable with significant
single amount and being individually
withdrawn bad debt provision
Accounts receivable withdrawn bad
debt provision by groups
Aging group 241,643,144.91 100.00% 12,554,021.69 5.20
Subtotal by group 241,643,144.91 100.00% 12,554,021.69 5.20
Accounts receivable with insignificant
single amount but being individually
withdrawn bad debt provision
Total 241,643,144.91 100.00% 12,554,021.69 5.20
(Con.)
Categories Opening amount
65
English Translation for Reference Only
Book balance Provision for bad debts
Amount Proportion（%） Amount Proportion（%）
Accounts receivable with significant
single amount and being individually
withdrawn bad debt provision
Accounts receivable withdrawn bad
debt provision by groups
Aging group 163,979,516.14 100.00 8,625,157.10 5.26
Subtotal by group 163,979,516.14 100.00 8,625,157.10 5.26
Accounts receivable with insignificant
single amount but being individually
withdrawn bad debt provision
Total 163,979,516.14 100.00 8,625,157.10 5.26
(2) Breakdown of accounts receivable listed by aging
Closing amount Opening amount
Items
Amount Proportion (%) Amount Proportion (%)
Within 1 year 239,106,111.14 98.96 161,780,518.73 98.66
1-2 years 757,734.67 0.31 504,312.75 0.31
2-3 years 108,470.85 0.04 227,055.05 0.14
Over 3 years 1,670,828.25 0.69 1,467,629.61 0.89
Total 241,643,144.91 100.00 163,979,516.14 100.00
(3) Withdrawal of provision for bad debts
Accounts receivable withdrawn bad debt provision by groups
Accounts receivable withdrawn bad debt provision by aging analysis method in groups
Closing amount Opening amount
Book balance Provision for bad Book balance
Age Provision for
Proport debts Proportion
Amount Amount bad debts
ion (%) (%)
Within 1 year 239,106,111.14 98.96 11,955,305.57 161,780,518.73 98.66 8,089,025.93
1-2 years 757,734.67 0.31 75,773.47 504,312.75 0.31 50,431.28
2-3 years 108,470.85 0.04 21,694.17 227,055.05 0.14 45,411.01
Over 3 years 1,670,828.25 0.69 501,248.48 1,467,629.61 0.89 440,288.88
Total 241,643,144.91 100.00 12,554,021.69 163,979,516.14 100.00 8,625,157.10
(4) There was no accounts receivable due from shareholders or related parties with more than
5% (including 5%) of the voting shares of the Company.
(5) The information list for the top 5 customers:
Proportion to total
Relationship with
Customers Amount Age accounts
the Company
receivable（%）
Non-related
OXFORD 48,746,620.12 Within 1 year 20.17
customer
66
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Proportion to total
Relationship with
Customers Amount Age accounts
the Company
receivable（%）
Non-related
TAL 27,687,590.72 Within 1 year 11.46
customer
Non-related
Chen Feng (Jin Tan) Garments Co., Ltd. 25,155,792.94 Within 1 year 10.41
customer
Non-related
OLYMP 14,978,408.05 Within 1 year 6.20
customer
Central Heating Office at Zibo District Non-related
9,475,015.13 Within 1 year 3.92
of Zibo City customer
Total 126,043,426.96 52.16
(6) Breakdown of original currency amount and exchange rate in foreign currency receivable
Closing amount Opening amount
Item Foreign currency Exchange RMB Foreign currency Exchange RMB
amount rate (Converted) amount rate (Converted)
USD 26,907,502.82 6.4716 174,134,884.77 18,985,311.84 6.6227 125,734,281.41
Total 174,134,884.77 125,734,281.41
5. Advances to the supplier
(1) Breakdown of advances to the supplier listed by aging
Closing amount Opening amount
Age
Amount Proportion (%) Amount Proportion (%)
Within 1 year 160,494,896.99 99.50 386,820,360.12 99.75
1-2 years 559,530.51 0.35 952,318.65 0.25
2-3 years 231,840.50 0.14 4,291.50 0.00
Over 3 years 10,198.46 0.01 11,625.58 0.00
Total 161,296,466.46 100.00 387,788,595.85 100.00
(2) The information list for the top 5 suppliers
Relationship with Time for Reason for
Name of suppliers Amount
the Company prepayment unsettlement
Advances to
Allenberg Cotton Co. Non-related supplier 48,562,129.42 May - Jun. 2011
supplier
Zibo Power Supply Co., Ltd. of
Advances to
Shandong Electric Power Non-related supplier 26,752,438.89 May - Jun. 2011
supplier
Corporation
Advances to
Done on Co., Ltd.（U.K.） Non-related supplier 13,353,229.51 Apr .- May 2011
supplier
Cotton and Jute Company of
Xinjiang Production and Advances to
Non-related supplier 6,440,040.66 Nov. - Dec. 2010
st
Construction Corps Agriculture 1 supplier
Division
Xiamen Tongrun Industrial And Non-related supplier 3,135,450.00 May - Jun. 2011 Advances to
67
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Trade Co., Ltd. supplier
Total 98,243,288.48
(3) There was no advance to the suppliers due from shareholders or related parties with more
than 5% (including 5%) of the voting shares of the Company.
(4) Breakdown of original currency amount and exchange rate in foreign advances to suppliers
Closing amount Opening amount
Items Foreign currency Exchange RMB Foreign currency Exchang RMB
amount rate (Converted) amount e rate (Converted)
USD 9,715,254.84 6.4716 62,873,243.23 13,469,517.71 6.6227 89,204,574.94
JPY 794,750.00 0.0802 63,738.95 1,248,006.00 0.0813 101,462.89
EURO 86,836.58 9.3612 812,894.59 232,081.81 8.8065 2,043,828.47
SF 8,005.00 7.7655 62,162.83 21,500.25 7.0562 151,710.06
Total 63,812,039.60 91,501,576.36
6. Interest receivable
Item Opening amount Increase at this period Decrease at last period Closing amount
Profit of security
1,568,105.85
deposit
Total 1,568,105.85
7. Other accounts receivable
(1) Listed by category
Closing amount
Category Book balance Provision for bad debts
Amount Proportion (%) Amount Proportion (%)
Other accounts receivable with
significant single amount and being
individually withdrawn bad debt
provision
Other accounts receivable withdrawn
bad debt provision by groups
Aging group 67,889,560.14 100.00 10,711,210.33 15.78
Subtotal by group 67,889,560.14 100.00 10,711,210.33 15.78
Other accounts receivable with
insignificant single amount but being
individually withdrawn bad debt
provision
Total 67,889,560.14 100.00 10,711,210.33 15.78
(Con.)
Closing amount
Category Book balance Provision for bad debts
Amount Proportion (%) Amount Proportion (%)
Other accounts receivable with
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significant single amount and being
individually withdrawn bad debt
provision
Other accounts receivable withdrawn
bad debt provision by groups
Aging group 86,541,977.33 100.00 11,638,040.88 13.45
Subtotal by group 86,541,977.33 100.00 11,638,040.88 13.45
Other accounts receivable with
insignificant single amount but being
individually withdrawn bad debt
provision
Total 86,541,977.33 100.00 11,638,040.88 13.45
(2) Breakdown of other accounts receivable listed by aging
Closing balance Opening balance
Items
Amount Proportion (%) Amount Proportion (%)
Within 1 year 34,749,223.97 51.19 53,721,988.43 62.08
1-2 years 3,736,286.67 5.50 2,277,153.70 2.63
2-3 years 2,210,943.78 3.26 4,386,244.59 5.07
Over 3 years 27,193,105.72 40.05 26,156,590.61 30.22
Total 67,889,560.14 100.00 86,541,977.33 100.00
(3) Provision for bad debts
Other accounts receivable withdrawn bad debt provision by groups
Other accounts receivable withdrawn bad debt provision by aging analysis method in groups
Closing amount Opening amount
Book balance Book balance
Age Provision for bad Provision for
Proportion Proportion
Amount debts Amount bad debts
(%) (%)
Within 1 year 34,749,223.97 51.19 1,737,461.19 53,721,988.43 62.08 2,686,099.42
1-2 years 3,736,286.67 5.50 373,628.66 2,277,153.70 2.63 227,715.36
2-3 years 2,210,943.78 3.26 442,188.76 4,386,244.59 5.07 877,248.92
Over 3 years 27,193,105.72 40.05 8,157,931.72 26,156,590.61 30.22 7,846,977.18
Total 67,889,560.14 100.00 10,711,210.33 86,541,977.33 100.00 11,638,040.88
(4) There was other accounts receivable due from shareholders or related parties with more than
5% (including 5%) of the voting shares of the Company.
(5) The information list for the top 5 entities:
Proportion to
total other
Name Relationship with the Company Amount Age accounts
receivables
（%）
Tianhong State Own Within 1 year, over 3
Non-related customer 17,102,834.40 25.19
Assets Investment and years
69
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Business Co., Ltd.
Export refund tax
Non-related customer 8,194,686.77 Within 1 year 12.07
receivable
Bureau of Finance at
Non-related customer 2,665,685.60 Over 3 years 3.93
Zichuan District of Zibo
Advances receivable on
Non-related customer 2,337,964.87 Within 1 year 3.44
water expense
Petroleam And Natural
Gas Transport Corporation Non-related customer 1,300,000.00 Over 3 years 1.92
Of China
Total 31,601,171.64 46.55
(6) Breakdown of original currency amount and exchange rate in foreign currency other accounts
receivable
Closing amount Opening amount
Item Foreign currency Exchange RMB Foreign currency Exchang RMB
amount rate (converted) amount e rate (converted)
USD 15,000.00 6.4716 97,074.00 49,174.50 6.6227 325,667.96
Total 97,074.00 325,667.96
8. Inventories
(1) Categories
Closing amount
Items
Book balance Falling price reserve Net book value
Raw materials 896,186,976.84 896,186,976.84
Goods in process 474,518,637.29 474,518,637.29
Merchandise inventory 601,809,810.72 42,509,987.73 559,299,822.99
Consigned materials for
35,683,510.89 35,683,510.89
processing
Total 2,008,198,935.74 42,509,987.73 1,965,688,948.01
(Con.)
Opening amount
Items
Book balance Falling price reserve Net book value
Raw materials 599,859,604.27 599,859,604.27
Goods in process 396,281,904.02 396,281,904.02
Merchandise inventory 485,213,444.26 42,509,987.73 442,703,456.53
Consigned materials for
27,441,617.34 27,441,617.34
processing
Total 1,508,796,569.89 42,509,987.73 1,466,286,582.16
(2) Changes in provision for falling price of inventory
Provision in Decrease this period
Items Opening amount Closing amount
current period Reversal Written off
Merchandise 42,509,987.73 42,509,987.73
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inventory
Total 42,509,987.73 - - - 42,509,987.73
9. Long-term equity investment
(1) Category
Decrease
Opening Increase in this
Items in last Closing amount
amount period
period
Investment on joint venture
Investment on associate enterprises
Other equity investment 68,942,600.00 68,942,600.00
Less: provision for impairment of
long-term equity investment
Total 68,942,600.00 68,942,600.00
(2) Breakdown of long-term investment
Accounting Initial Increase/
Name of invested entities Opening amount Closing amount
method investment cost decrease
Zibo Chengshun Heating Co.,
Ltd. (hereinafter refer to as Cost method 160,000.00 160,000.00 160,000.00
“Chengshun Heating” )
Zibo Limin Walling Material Co.,
Cost method 1,500,000.00 1,500,000.00 1,500,000.00
Ltd. (Limin Walling)
Rongchang Pharmacy 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
(Hongqiao Thermoelectric)
Total 68,942,600.00 68,942,600.00
(Con.)
Explanation on
difference Impairment Cash
Proportions
Proportions between Provision provision dividends
of
Name of invested entities Of voting proportions of for withdrawn in in the
shareholding
rights（%） shareholding and impairment the current current
（%）
voting rights in period period
invested entities
Chengshun Heating 2 2
Limin Walling 15 15
Rongchang Pharmacy 5.555 5.555
Hongqiao Thermoelectric 20.68 20.68
Total
Note: According to articles of association stimulated in Hongqiao Thermoelectric, the Company
didn’t send representatives to the Board of Directors of Hongqiao Thermoelectric, thus it has no
significant impact on Hongqiao Thermoelectric, then the Company adopted cost method to
71
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accounting.
10. Fixed assets
(1) Breakdown of fixed assets
Items Opening amount Increase in this period Decrease in last Closing amount
period
I. Cost 5,846,023,843.72 123,004,838.16 42,080,378.89 5,926,948,302.99
Including: House and building 1,578,106,959.69 54,104,766.91 7,642,497.25 1,624,569,229.35
Machinery equipment 4,137,186,185.69 61,119,688.02 28,657,206.93 4,169,648,666.78
Transportation vehicles 59,233,730.98 857,896.58 606,990.00 59,484,637.56
Electronic equipment and other 71,496,967.36 6,922,486.65 5,173,684.71 73,245,769.30
II. Depreciation Provision in this period
Accumulated depreciation 2,163,472,195.72 185,587,029.70 26,991,875.08 2,322,067,350.34
Including: House and building 391,192,127.28 37,214,162.16 1,270,535.00 427,135,754.44
Machinery equipment 1,686,965,427.57 142,653,050.99 21,046,827.35 1,808,571,651.21
Transportation vehicles 35,013,636.33 2,617,974.54 546,291.00 37,085,319.87
Electronic equipment and other 50,301,004.54 3,101,842.01 4,128,221.73 49,274,624.82
III. Total net book value 3,682,551,648.00 3,604,880,952.65
Including: House and building 1,186,914,832.41 1,197,433,474.91
Machinery equipment 2,450,220,758.12 2,361,077,015.57
Transportation vehicles 24,220,094.65 22,399,317.69
Electronic equipment and other 21,195,962.82 23,971,144.48
IV. Total provision for
38,311,588.27 195,306.49 3,780,477.61 34,726,417.15
impairment loss
Including: House and building 6,902,565.96 10,813.11 6,891,752.85
Machinery equipment 30,852,135.75 195,306.49 3,347,047.94 27,700,394.30
Transportation vehicles 109,355.40 26,600.00 82,755.40
Electronic equipment and other 447,531.16 396,016.56 51,514.60
V. Total book value 3,644,240,059.73 3,570,154,535.50
Including: House and building 1,180,012,266.45 1,190,541,722.06
Machinery equipment 2,419,368,622.37 2,333,376,621.27
Transportation vehicles 24,110,739.25 22,316,562.29
Electronic equipment and other 20,748,431.66 23,919,629.88
Note: Depreciation this period was RMB 185,587,029.70, and original price of fixed assets
transferred in this period was RMB 58,734,392.40.
(2) Fixed assets leased by operating lease
Items Closing book value Opening book value
House and building 982,180.78 1,026,010.62
Total 982,180.78 1,026,010.62
(3) Fixed assets that the property certificates has not been completed
Expected time for
Items Reason Book value
completion
72
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Ongoing inspection, surveying,
Luqun Spinning workshop verification to application procedures by 2011 49,506,225.42
Housing authorities
Ongoing inspection, surveying,
Luqun Spining and
verification to application procedures by 2011 30,043,083.33
Dressmaking workshop
Housing authorities
Ongoing inspection, surveying,
Comprehensive building 3rd
verification to application procedures by 2011 8,189,776.67
factory of spinning
Housing authorities
Main factory building of 6# Ongoing inspection, surveying,
boiler of Xinsheng verification to application procedures by 2011 4,052,602.19
Thermoelectric Housing authorities
Total 91,791,687.61
Note: Xinjiang Luthai gained RMB 57,050,000.00 of short-term bank borrowings by pledging its
equipments and house and building with net book value of RMB 119,325,627.70 (For details,
please refer to Note VII. 17/18)
11. Construction in process
(1) Breakdown of construction in process
Closing amount Opening amount
Provision Provision
Items
Book balance for Book value Book balance for Book value
impairment impairment
Lu Thai Industry Park 1,241,786.80 1,241,786.80 98,572.48 98,572.48
Other small projects 20,159,632.69 20,159,632.69 9,257,174.02 9,257,174.02
Twisting plant project 2,591,984.56 2,591,984.56 361,654.00 361,654.00
Piece dyeing project 7,026,131.23 7,026,131.23 8,008,750.13 8,008,750.13
Spinning project of Xinjiang
7,928,121.02 7,928,121.02 2,880,200.43 2,880,200.43
Luthai
Power plant expansion
26,675,678.07 26,675,678.07 19,383,509.14 19,383,509.14
project
Production line project of 3
million - piece high-grade 6,631,566.51 6,631,566.51 457,988.01 457,988.01
shirts
5 million - meter high-grade
57,676,986.45 57,676,986.45
piece dyeing project
8 million - meter yarn dyed
1,354,064.49 1,354,064.49 25,991,423.71 25,991,423.71
fabric reconstruction project
Total 131,285,951.82 131,285,951.82 66,439,271.92 66,439,271.92
(2) Changes on main construction in progress
73
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Other
Budget Transferred to decrea
Opening Increase in this
Name of project (RMB’000 fixed assets this se in Closing amount
amount period
0) year this
period
Lu Thai Industry Park 980 98,572.48 1,143,214.32 - 1,241,786.80
Other small projects 3,600 9,257,174.02 21,814,903.60 10,912,444.93 20,159,632.69
Twisting plant project 11,921 361,654.00 2,230,330.56 - 2,591,984.56
Piece dyeing project 2,600 8,008,750.13 7,057,266.98 8,039,885.88 7,026,131.23
Spinning project of
859 2,880,200.43 5,446,572.06 398,651.47 7,928,121.02
Xinjiang Luthai
Power plant expansion
3,200 19,383,509.14 7,751,817.22 459,648.29 26,675,678.07
project
Production line project of
3 million - piece 6,687 457,988.01 15,097,340.33 8,923,761.83 6,631,566.51
high-grade shirts
5 million - meter
high-grade piece dyeing 65,993 57,676,986.45 - 57,676,986.45
project
8 million - meter yarn
dyed fabric reconstruction 18,000 25,991,423.71 5,362,640.78 30,000,000.00 1,354,064.49
project
Total 66,439,271.92 123,581,072.30 58,734,392.40 131,285,951.82
(Con.)
Including:
Accumulative Interest Proportion of
amount of
amount of capitalizatio Engineering Progress
Name of project capitalization of Sources
capitalization n rate this input to budget （%）
interest this
of interest period（%） （%）
period
Lu Thai Industry Park 99 99 Other
Other small projects 99 99 Other
Twisting plant project 99 99 Other
Piece dyeing project 98 98 Other
Spinning project of
92 92 Other
Xinjiang Luthai
Power plant expansion
85 85 Other
project
Production line project
of 3 million - piece 96 96 Other
high-grade shirts
5 million - meter
high-grade piece dyeing 7.84 7.84 Other
project
8 million - meter yarn 96 96 Other
74
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Including:
Accumulative Interest Proportion of
amount of
amount of capitalizatio Engineering Progress
Name of project capitalization of Sources
capitalization n rate this input to budget （%）
interest this
of interest period（%） （%）
period
dyed fabric
reconstruction project
Total
12. Engineering material
Increase in this Decrease in last
Item Opening amount Closing balance
period period
Specific equipment 1,164,182.23 46,702,738.71 38,673,465.32 9,193,455.62
Total 1,164,182.23 46,702,738.71 38,673,465.32 9,193,455.62
13. Intangible assets
Increase in this Decrease in last
Items Opening amount Closing amount
period period
I. Cost 325,115,644.91 8,525,607.20 333,641,252.11
Land use right 227,207,790.83 6,540,430.73 233,748,221.56
Land use right of Xinsheng
12,155,433.14 12,155,433.14
Thermoelectric
Lufeng Weaving & Dyeing-land use
46,119,859.94 46,119,859.94
right
Luqun Textile-land use right 39,632,561.00 39,632,561.00
Luthai Texitle-non-patent
technology –Patent right of Nu
1,985,176.47 1,985,176.47
Torque Singles Ring Yarn
Technology
II. Accumulative amortization 31,801,124.14 4,916,845.02 36,717,969.16
Land use right 25,572,278.74 3,644,640.34 29,216,919.08
Land use right of Xinsheng
2,423,249.62 253,671.66 2,676,921.28
Thermoelectric
Lufeng Weaving & Dyeing-land use
1,128,559.71 467,841.80 1,596,401.51
right
Luqun Textile-land use right 2,677,036.07 418,346.10 3,095,382.17
Luthai Texitle-non-patent
technology –Patent right of Nu
132,345.12 132,345.12
Torque Singles Ring Yarn
Technology
III. Total book value 293,314,520.77 296,923,282.95
Land use right 201,635,512.09 204,531,302.48
Land use right of Xinsheng
9,732,183.52 9,478,511.86
Thermoelectric
Lufeng Weaving & Dyeing-land use 44,991,300.23 44,523,458.43
75
English Translation for Reference Only
Increase in this Decrease in last
Items Opening amount Closing amount
period period
right
Luqun Textile-land use right 36,955,524.93 36,537,178.83
Luthai Texitle-non-patent
technology –Patent right of Nu
1,852,831.35
Torque Singles Ring Yarn
Technology
Note: ① Amortization amount was RMB 4,916,845.02 in this period.
② On 30 Jun. 2011, the ownership of intangible assets with book value of Xinjiang Luthai was
RMB 22,451,591.41 (RMB 9,658,676.12 on 31 Dec. 2010) was controlled due to Xinjiang Lutai
mortgaged land use right with the net book value of RMB 22,451,591.41 for bank loans of RMB
50,000,000.00 (Please refer to Note VII. 17/18 for details); In Jan. – Jun. 2011, the amortization
amount of the said land use right was RMB 518,113.64.
14. Goodwill
(1) Breakdown of goodwill
Provision for
Increase in Decrease in
Name of invested entity Opening balance Closing balance impairment at the
this period this period
period-end
Xinsheng Thermoelectric 20,563,803.29 20,563,803.29
Total 20,563,803.29 20,563,803.29
(2) Impairment test method provision for impairment on goodwill
Please refer to Note Ⅳ. 17
15. Deferred income tax assets / Deferred income tax liabilities
(1) Deferred income tax assets and deferred income tax liabilities confirmed
① Deferred income tax confirmed
Closing amount Opening amount
Item Deferred income tax Deductible temporary Deferred income tax Deductible temporary
assets differences assets differences
Provision for impairment 17,333,943.13 100,501,636.90 17,429,250.73 101,084,773.98
Change on gains and
292,606.99 1,950,713.28
losses of fair value
Accumulated depreciation 1,070,116.02 5,577,350.64 1,070,116.02 5,577,350.64
Unrealized gross profit on
20,976,340.47 139,842,269.83 12,396,298.84 82,641,992.28
inventories
Payroll payable 8,909,733.76 57,334,371.75 8,909,733.76 57,334,371.75
Deferred income 13,286,435.44 66,278,730.41 13,240,913.67 65,748,881.33
Total 61,576,568.82 369,534,359.53 53,338,920.01 314,338,083.26
② Deferred income tax liabilities confirmed
Closing amount Opening amount
Items Deferred income Taxable temporary Deferred income Taxable temporary
tax liabilities differences tax liabilities differences
Accumulated depreciation 2,176,467.68 13,190,713.21 2,226,979.73 13,496,846.85
76
English Translation for Reference Only
Change on gains and
3,046,865.00 17,838,500.00 6,681,350.00 40,418,200.00
losses of fair value
Total 5,223,332.68 31,029,213.21 8,908,329.73 53,915,046.85
16. Breakdown of assets impairment provision
Withdrawal this Decrease this period
Items Opening amount Closing amount
period Reversal Written off
(1) Bad debt reserve 20,263,197.98 3,002,034.04 23,265,232.02
(2) Provision for falling
42,509,987.73 42,509,987.73
price of inventory
(3) Provision for
38,311,588.27 195,306.49 3,780,477.61 34,726,417.15
impairment of fixed assets
Total 101,084,773.98 3,197,340.53 - 3,780,477.61 100,501,636.90
17. Assets with restricted ownership and use right
Items Closing amount Reason
Subtotal of assets used for
141,777,219.11
guarantee:
Fixed assets 119,325,627.70 Mortgage for short-term loans
Intangible assets 22,451,591.41 Mortgage for short-term loans
Total 141,777,219.11
18. Short-term loan
Items Closing amount Opening amount
Pledged loan 106,783,162.91
Mortgaged loan 107,050,000.00 115,000,000.00
Guaranteed loan -
Credit loan 1,162,960,628.14 647,774,041.75
Total 1,270,010,628.14 869,557,204.66
Note: For category of mortgaged assets of mortgaged loan and their amount, please refer to Note
Ⅶ. 10 and Note Ⅶ. 13.
19. Transactional financial liabilities
Items Closing fair value Opening fair value
Derivative financial liabilities 1,950,713.28
Total 1,950,713.28
20. Notes payable
Category Closing amount Opening amount
Bank acceptance bill 780,000.00 60,368,263.58
Trade acceptance bill 19,401,314.79 18,230,609.18
Total 20,181,314.79 78,598,872.76
Note: Amount due on the next accounting period was RMB 20,181,314.79.
21. Accounts payable
(1) Breakdown of accounts payable listed by aging
77
English Translation for Reference Only
Items Closing amount Opening amount
Within 1 year 163,946,054.17 461,001,689.25
1-2 years 2,542,408.00 2,279,274.10
2-3 years 3,898,493.16 3,995,261.08
Over 3 years 2,390,015.70 2,250,852.34
Total 172,776,971.03 469,527,076.77
(2) Breakdown of accounts payable listed by content
Items Closing amount
Purchase loan 142,890,327.69
Construction and equipment account 22,873,076.64
Other 7,013,566.70
Total 172,776,971.03
(3) There were no accounts payable due to shareholders entities or related parties with more than
5% (including 5%) of the voting shares of the Company in this period.
(4) Foreign currency balance included in accounts payable listed as follows
Closing amount Opening amount
Items Foreign currency Exchange Foreign currency Exchange RMB
RMB (converted)
amount rate amount rate (converted)
USD 824,088.85 6.4716 5,333,173.39 738,540.12 6.6227 4,891,129.65
JPY 85,752,460.00 0.0802 6,877,347.29 59,072,010.00 0.0813 4,802,554.41
EUR 44,497.50 9.3612 416,550.00 82,560.43 8.8065 727,068.42
SF 113,847.50 7.7655 884,082.76 107,283.50 7.0562 757,013.83
Total 13,511,153.44 11,177,766.31
22. Advance from customer
(1) Breakdown of advance from customer listed by aging
Items Closing amount Opening amount
Within 1 year 106,954,295.39 144,296,845.42
1-2 years 1,680,509.31 1,362,183.54
2-3 years 1,196,111.07 993,857.75
Over 3 years 865,001.96 631,580.50
Total 110,695,917.73 147,284,467.21
(2) Breakdown of accounts payable listed by content
Item Closing amount
Advance from customers 110,695,917.73
Total 110,695,917.73
(3) There were no advances from customers due to shareholders entities or related parties with
more than 5% (including 5%) of the voting shares of the Company.
(4) Foreign currency balance included in accounts payable
Closing amount Opening amount
Item Foreign currency Exchange Foreign currency Exchange RMB
RMB (converted)
amount rate amount rate (converted)
78
English Translation for Reference Only
USD 6,742,976.74 6.4716 43,637,848.28 5,239,756.64 6.6227 34,701,336.29
JPY 1,808,249.00 0.0802 145,021.57
Total 43,782,869.85 34,701,336.29
23. Payroll payable
Items Opening amount Increase in this period Decrease in last period Closing amount
I. Wage, bonus, allowance
314,888,777.36 454,735,458.48 457,988,670.54 311,635,565.30
and subsidiaries
II. Employee welfare 44,812,890.46 44,812,890.46 -
III. Social insurance 911,224.80 93,785,308.41 79,724,412.79 14,972,120.42
Including: 1. Medical
53,596.31 21,014,911.28 17,764,629.26 3,303,878.33
insurance
2. Endowment
697,951.25 65,204,262.91 55,206,798.16 10,695,416.00
insurance
3. Insurance for
117,844.11 4,704,567.23 3,992,597.59 829,813.75
unemployment
4. Insurance against
11,582.97 1,605,274.85 1,550,279.09 66,578.73
injuries at work
5. Maternity insurance 30,250.16 1,256,292.14 1,210,108.69 76,433.61
IV. Housing fund 10,982.72 6,400,429.50 5,984,609.62 426,802.60
V. Expense for labor union
and expense for education of 15,234,637.68 8,334,684.67 3,838,673.10 19,730,649.25
employees
Total 331,045,622.56 608,068,771.52 592,349,256.51 346,765,137.57
Note: There were no payroll payable fell into arrears.
24. Tax payable
Items Closing amount Opening amount
VAT -24,381,557.91 -46,646,893.99
Business tax 459,846.84 97,931.77
Urban maintenance and construction tax 2,785,472.16 1,307,302.45
Enterprise income tax 31,645,376.98 24,129,401.21
Personal income tax 20,529,089.32 2,291,067.05
Stamp tax 255,068.61 303,213.63
Property tax -804,380.89 2,655,862.46
Use tax of land 997,960.28 2,050,983.67
Education surtax 1,241,994.05 625,059.98
Local tax for education 760,160.91 379,239.58
Total 33,489,030.35 -12,806,832.19
25. Interest payable
Items Closing amount Opening amount
Long-term and short-term borrowing interests
4,993,214.54 4,805,148.11
payable
79
English Translation for Reference Only
Total 4,993,214.54 4,805,148.11
26. Dividends payable
Name Closing amount Opening amount Reason of unpaid over 1 year
Minority shareholders’ dividends
31,572.30 2,817,203.40
paid by subsidiaries
Cash dividends haven’t been
Individual shareholders’ dividends
442,309.44 442,309.44 withdrawn for previous years
paid by the Group
by individual shareholders
Total 473,881.74 3,259,512.84
27. Other payables
(1) Breakdown of other payables listed by aging
Items Closing amount Opening amount
Within 1 year 101,892,900.10 79,573,570.20
1-2 years 15,127,976.05 14,156,710.72
2-3 years 3,042,176.66 24,135,953.85
Over 3 years 40,567,978.96 20,398,520.16
Total 160,631,031.77 138,264,754.93
(2) For other payables due to shareholders entities or related parties with more than 5%
(including 5%) of the voting shares of the Company, please refer to Note Ⅷ. 5 Accounts
receivable from related parties.
(3) The details of other payables with aging over 1 year are as follows:
Whether return
Name Amount Reason for unpaid after balance sheet
date
Received earnest money for Sale
Cotton and Jute Company 11,925,000.00 No
Contract
Contracting fees in contract Receiving contracting fees in
9,516,043.40 No
place contract place in trust
Total 21,441,043.40
(4) The details of significant other payables with aging over 1 year are as follows:
Name Closing amount Nature or contents
Lucheng Textile 34,400,000.00 Flow borrowings
Earnest money for Sale
Cotton and Jute Company 11,925,000.00
Contract
Contracting fees in
Contracting fees in contract place 9,516,043.40
contract place
Guarantee deposit paid for
Guarantee deposit paid for forestry office 6,017,670.00
planted forestry
Total 61,858,713.40
(5) Foreign currency balance included in other accounts payable listed as follows:
Item Closing amount Opening amount
80
English Translation for Reference Only
Foreign
Foreign currency Exchange Exchange RMB
RMB (converted) currency
amount rate rate (converted)
amount
USD 129,532.28 - 6.4716 - 838,281.10 82,480.25 6.6227 546,241.98
Total 838,281.10 546,241.98
28. Non-current liabilities due within 1 year
(1) Breakdown of non-current liabilities due within 1 year
Item Closing amount Opening amount
Long-term borrowing due within 1 year 70,193,820.00 69,364,725.00
Total 70,193,820.00 69,364,725.00
(2) Long-term borrowing due within 1 year
① Breakdown of long-term borrowing due within one year
Item Closing amount Opening amount
Credit loan 70,193,820.00 69,364,725.00
Total 70,193,820.00 69,364,725.00
②The top five entities on non-current liabilities due within 1 year
Closing amount Opening amount
Starting Ending Interest rate
Entities Currency Foreign Converted into Foreign Converted
date date (%)
amount RMB amount into RMB
China
Construction
26 Mar. 29 Mar.
Bank Corporation 1LIBOR+1 USD 4,000,000.00 26,490,800.00
2009 2011
Zibo Zichuan
Subbranch
China
Construction
26 Mar. 26 Jun.
Bank Corporation 3LIBOR+1 USD 1,800,000.00 11,648,880.00 1,650,000.00 10,927,455.00
2007 2012
Zibo Zichuan
Subbranch
Societe Generale
22 Jun. 22 Jun.
Private Banking COF+120bps USD 4,800,000.00 31,063,680.00 2,400,000.00 15,894,480.00
2010 2012
Wuhan
China
Construction
29 Mar. 29 Jun.
Bank Corporation 3LIBOR+2.5 SF 1,000,000.00 7,765,500.00 900,000.00 6,350,580.00
2007 2012
Zibo Zichuan
Subbranch
Societe Generale
29 Sep. 29 Mar.
Private Banking COF+120bps USD 1,600,000.00 10,354,560.00 800,000.00 5,298,160.00
2010 2012
Wuhan
China
5 Mar. 5 Mar.
Construction 3LIBOR+1.7 EURO 1,000,000.00 9,361,200.00
2007 2012
Bank Corporation
81
English Translation for Reference Only
Closing amount Opening amount
Starting Ending Interest rate
Entities Currency Foreign Converted into Foreign Converted
date date (%)
amount RMB amount into RMB
Zibo Zichuan
Subbranch
Total 70,193,820.00 64,961,475.00
29. Long-term loan
① Category of long-term loan
Item Closing amount Opening amount
Credit loan 129,647,645.00 155,733,410.00
Less: Long-term loan due within 1 year (Note
70,193,820.00 69,364,725.00
Ⅶ 28)
Total 59,453,825.00 86,368,685.00
② The top five entities on long-term loan
Closing amount Opening amount
Starting Ending Interest rate
Entities Currency Foreign Converted into Foreign Converted
date date (%)
amount RMB amount into RMB
Societe
Generale
Private 2010-6-22 2012-6-22 COF+120bps USD 3,600,000.00 23,841,720.00
Banking
Wuhan
Societe
Generale
Private 2010-9-29 2012-9-28 COF+120bps USD 2,400,000.00 15,531,840.00 3,200,000.00 21,192,640.00
Banking
Wuhan
China
Construction
Bank
2007-3-5 2013-3-5 3LIBOR+1.7 EURO 1,000,000.00 9,361,200.00 2,000,000.00 17,613,000.00
Corporation
Zibo Zichuan
Subbranch
China
Construction
Bank
2007-3-26 2013-3-25 3LIBOR+1.01 USD 1,350,000.00 8,736,660.00 2,250,000.00 14,901,075.00
Corporation
Zibo Zichuan
Subbranch
China
Construction 2007-3-29 2013-3-28 3LIBOR+2.5 SF 750,000.00 5,824,125.00 1,250,000.00 8,820,250.00
Bank
82
English Translation for Reference Only
Closing amount Opening amount
Starting Ending Interest rate
Entities Currency Foreign Converted into Foreign Converted
date date (%)
amount RMB amount into RMB
Corporation
Zibo Zichuan
Subbranch
Agricultural
Bank of China
Corporation 2011-4-7 2014-4-7 6.40% 20,000,000.00
Zibo Zichuan
Subbranch RMB
Total 59,453,825.00 86,368,685.00
30. Long-term accounts payable
(1) Breakdown of long-term accounts payable listed by category
Item Closing amount Opening amount
Power bonds payable 9,735,560.00 9,735,560.00
Less: The part that due within 1 year
Total 9,735,560.00 9,735,560.00
(2) The top five entities on long-term accounts payable
Interest rate Interest Conditions of
Entity Opening amount Closing balance
（%） accrued loans
Power bonds 9,735,560.00 9,735,560.00 信用
Total 9,735,560.00 9,735,560.00
31. Other non-current liabilities
Items Content Closing amount Opening amount
Deferred income Subsidies from local gove 66,278,730.41 65,748,881.33
Other government 2,673,445.33 2,673,445.33
Total 68,952,175.74 68,422,326.66
Of which, breakdown of deferred income is as follows:
Items Closing amount Opening amount
Subsidy from local government that
66,278,730.41 65,748,881.33
related to assets
Including: Land subsidies 66,278,730.41 65,748,881.33
Total 66,278,730.41 65,748,881.33
32. Share capital
Opening amount Increase/decrease（+，-） Closing amount
Issuance Capitalization
Items
Amount Proportion of new Bonus of public Other Sub-total Amount Proportion
shares reserve
83
English Translation for Reference Only
Opening amount Increase/decrease（+，-） Closing amount
Issuance Capitalization
Items
Amount Proportion of new Bonus of public Other Sub-total Amount Proportion
shares reserve
I. Shares subject
to trading 217,923,792 21.90% -98,358,000 -98,358,000 119,565,792 12.01%
moratorium
1. Shares held by
the State
2. Share held by
state-owned
corporation
3. Shares held by
other domestic 98,358,000 9.89% -98,358,000 -98,358,000
investors
Among which:
Shares held by
domestic 98,358,000 9.89% -98,358,000 -98,358,000
non-state-owned
corporation
Shares held by
domestic natural
persons
4. Shares held by
118,232,400 11.88% 118,232,400 11.88%
foreign investors
Among which:
Shares held by
118,232,400 11.88% 118,232,400 11.88%
foreign
corporation
Shares held by
foreign natural
persons
5. Shares held by
senior 1,333,392 0.13% 1,333,392 0.13%
management
II. Shares not
subject to 776,941,008 78.10% 98,358,000 98,358,000 875,299,008 87.99%
moratorium
1. RMB ordinary
452,951,828 45.53% 98,358,000 98,358,000 551,309,828 55.42%
shares
2. Domestically
listed foreign 323,989,180 32.57% 323,989,180 32.57%
shares
3. Overseas listed
84
English Translation for Reference Only
Opening amount Increase/decrease（+，-） Closing amount
Issuance Capitalization
Items
Amount Proportion of new Bonus of public Other Sub-total Amount Proportion
shares reserve
foreign shares
4. Others
III. Total shares 994,864,800 100.00% 994,864,800 100.00%
33. Capital reserve
Increase in this Decrease in
Items Opening amount Closing amount
period last period
Premium on share capital 1,065,164,874.44 404.47 1,065,165,278.91
Including: capital received from investors 1,065,164,874.44 404.47 1,065,165,278.91
Other comprehensive income 2,350,000.00 1,570,000.00 3,920,000.00
Other capital reserve 62,927,930.68 18.59 62,927,949.27
Including: Recovery of capital reserve
62,922,072.87 62,922,072.87
under original system
Total 1,130,442,805.12 1,570,423.06 1,132,013,228.18
Note: ① Other comprehensive income increased RMB 1,570,000.00 in this period, due to capital
received on technology of energy-saving and reform. In accordance with regulation of Interim
Method on Management of Financial Reward Fund on Technology of Energy-saving and Reform
stipulated by State Development and Reform Commission under Ministry of Finance, the said
income recorded into capital reserve.
② Other capital reserve increased RMB 18.59 in this period, due to scattered dividends the
Company recovered.
34. Surplus reserve
Increase in the Decrease in the
Items Opening amount Closing amount
current period current period
Statutory surplus reserve 425,098,913.12 425,098,913.12
Discretionary surplus reserve 3,341,572.58 3,341,572.58
Total 428,440,485.70 428,440,485.70
Note: According to regulations of Company Laws, Articles of Association, the Company
appropriating statutory surplus reserve at 10% profit after tax. When the accumulated statutory
surplus reserve amounted over 50% of registration capital, then appropriation ceased.
35. Retained profit
(1) Change in retained profit
Same period of last Ratio of withdrawal
Items Current period
year or appropriation
Retained profit as at the end of the previous period before
1,854,833,169.63 1,418,468,702.64
adjustment
Total adjustment of the retained profit as at the beginning
of the period (increase “+”, decrease “-”)
Opening retained profit after adjustment 1,854,833,169.63 1,418,468,702.64
85
English Translation for Reference Only
Add: Net profit attributable to owners of the Company
491,647,065.96 366,877,951.37
for the current period
Recovery of losses with surplus reserve
Other transfer-in
Less: appropriating statutory surplus reserve -
Appropriating discretionary surplus reserve
Common share dividend payable 248,716,200.00 248,716,200.00 0.25 yuan per share
Closing retained profit 2,097,764,035.59 1,536,630,454.01
(2) Note to profit distribution
In accordance with proposal of shareholders general meeting 2010 held on 28 Apr. 2011, the
Company distributed at RMB 0.25 Yuan /share (tax included), which was RMB 248,716,200.00
measured at the issued shares of 994,864,800 in number.
36. Operating income and operating cost
(1) Operating income and operating cost
Items Current period Same period of last year
Income from main operation 2,844,570,820.27 2,145,447,957.22
Other operating income 136,242,276.93 101,402,959.64
Total operating income 2,980,813,097.20 2,246,850,916.86
Cost of main operation 1,872,575,562.07 1,427,122,029.45
Other operating cost 94,194,903.67 60,254,815.94
Total operating cost 1,966,770,465.74 1,487,376,845.39
(2) Main business (categories by product)
Current period Same period of last year
Name of product
Operating income Operating cost Operating income Operating cost
Yarn-dyed fabric 2,060,726,860.93 1,320,813,606.52 1,476,811,154.33 962,623,024.58
Shirt 638,304,874.31 418,923,632.18 510,826,385.21 330,511,011.76
Cotton 65,534,144.93 55,979,266.60 77,981,978.41 57,862,627.98
Drugs - - 6,839,609.41 5,490,183.33
Power and steam 65,719,852.72 66,968,529.92 61,745,265.62 64,418,835.62
Other 14,285,087.38 9,890,526.85 11,243,564.24 6,216,346.18
Subtotal 2,844,570,820.27 1,872,575,562.07 2,145,447,957.22 1,427,122,029.45
Less: Internal offset
amount
Total 2,844,570,820.27 1,872,575,562.07 2,145,447,957.22 1,427,122,029.45
(3) Operating revenues from the top five customers
Total operating revenues from the top Proportion in the revenues for the period
Period
five customers (%)
Jan.-Jun. 2011 884,315,648.09 29.67
Jan.-Jun. 2010 788,568,486.81 35.09
37. Business tax and surcharge
86
English Translation for Reference Only
Items Current period Same period of last year
Business tax 10,147.33
City maintenance and construction
5,884,910.37 563,330.78
tax
Education surtax 2,635,879.50 320,169.22
Local education surcharge 1,663,156.42 99,637.69
Total 10,183,946.29 993,285.02
Note: Please refer to NoteⅤ. 1 “Main tax and tax rate” for details about all business tax and
surcharges.
38. Sales expense
Items Current period Same period of last year
Transport charges 16,595,153.50 14,320,249.78
Payroll 9,450,565.30 12,873,327.08
Market expense 15,835,676.02 15,995,644.91
Advertisement expense 4,606,973.62 2,511,225.49
Port surcharge 2,443,542.44 2,726,944.34
Copy right fee 1,899,412.74 2,219,356.86
Marketing expense for agency 1,901,348.14 1,634,364.30
Lease rent 1,635,804.78 1,818,818.36
Inspection fee 2,266,416.34 1,930,567.03
Patent fee 617,378.53 1,226,861.25
Other 12,398,324.07 11,461,756.86
Total 69,650,595.48 68,719,116.26
39. Administration expenses
Items Current period Same period of last year
R&D expense 112,518,799.63 98,086,018.41
Remuneration 106,219,512.96 51,724,693.57
Depreciation cost 13,224,013.97 12,324,824.61
Taxes 11,879,805.29 10,649,828.40
Warehouse charges 5,812,977.14 5,607,796.25
Decoration and repair charges 7,075,447.62 1,478,168.14
Amortization of intangible assets 4,706,645.98 4,232,679.06
Labor union expenditure 4,468,274.52 3,784,624.58
Premium 3,778,238.10 4,087,511.52
Transportation charges 3,590,209.97 3,375,024.95
Others 29,597,195.80 29,437,905.73
Total 302,871,120.98 224,789,075.22
40. Financial expenses
Items Current period Same period of last year
Interest expenses 34,091,070.74 22,944,675.97
Less: Interest income 3,474,525.43 1,425,577.71
87
English Translation for Reference Only
Items Current period Same period of last year
Less: Capitalized amount of interest
Profits and losses on exchange -10,505,860.71 -4,551,914.79
Less: Capitalized amount of profits and
losses on exchange
Others 4,809,263.49 4,724,261.57
Total 24,919,948.09 21,691,445.04
41. Asset impairment losses
Items Current period Same period of last year
Bad debt loss 3,002,034.04 2,535,987.28
Loss on falling price of inventory - 4,788,104.27
Loss on impairment of fixed assets 195,306.49
Loss on impairment of intangible assets - 280,000.04
Total 3,197,340.53 7,604,091.59
42. Gain from change in fair value
Resource generating income from change in fair value Current period Same period of last year
Transactional financial assets -22,579,700.00
Of which: gain from change in fair value of derivative
-22,579,700.00
financial instrument
Transactional financial liabilities 1,950,713.28 47,370,026.48
Total -20,628,986.72 47,370,026.48
43. Investment income
Items Current period Same period of last year
Invest income arising from disposal of long-term equity
9,873,238.08
investment
Investment income arising from disposal of transactional
40,469,067.77 -49,348,254.22
financial assets (liabilities)
Others
Total 40,469,067.77 -39,475,016.14
Note: There exists no major limitation to repatriation of investment income.
44. Non-operating income
Amount recorded into
Same period of non-recurring profits
Items Current period
last year and losses of the
period
Profit from disposal of non-current assets 856,260.04 447,493.54 856,260.04
Of which: Profit from disposal of fixed assets 856,260.04 447,493.54 856,260.04
Government subsidies (for details, please refer to
the following statement: breakdown of government 12,444,285.74 14,818,833.35 12,444,285.74
subsidies)
Others 2,832,101.90 9,119,529.72 2,832,101.90
88
English Translation for Reference Only
Amount recorded into
Same period of non-recurring profits
Items Current period
last year and losses of the
period
Total 16,132,647.68 24,385,856.61 16,132,647.68
Of which: breakdown of government subsidies:
Amount of this Amount of last
Item Explanation
period period
Notice on Providing Premium Subsidies For Enterprises
Subsidies for
Involved in Export Credit Insurance (Zi-Zheng-Ban-Zi [2009]
export credit 130,000.00
No.96)of the General Office of People’s Government of Zibo
premium
Municipality
Circular on Commending Scientific and Technological Progress
Scientific and
Award of Y2010 of People’s Government of Zichuan District
technological 18,000.00
(Chuan-Zheng-Fa [2011] No.18) – Document of People’s
progress award
Government of Zichuan District
Circular of People’s Government of Zichuan District on
Reward for
Rewarding Advanced Units and Advanced Enterprises in
energy-saving and
10,000.00 Zichuan District in Energy-saving and Consumption
consumption
Reduction in 2010 (Chuan-Zheng-Fa [2011] No.21) --
reduction
Document of People’s Government of Zichuan District
Reward for
outstanding Resolution of Zichuan District Committee of CCP on
scientific and Commending and Rewarding Some Enterprises and Projects of
100,000.00
technological Y2010 (Chuan-Wei [2011] No.34) – (Resolution of) Zichuan
cooperation District Committee of CCP
projects of Y2010
Circular of the General Office of People’s Government of Zibo
Reward for
Municipality on Announcing the List of Enterprises Which Win
innovative and
the Special Fund for Supporting the Development of Innovative
growth-oriented 900,000.00
and Growth-oriented Enterprises of Zibo Municipality of
enterprises of Zibo
Y2010 (Zi-Zheng-Ban-Zi [2011] No.37) of the General Office
Municipality
of People’s Government of Zibo Municipality
Subsidies for
Notice on Printing and Distributing Temporary Management
transporting
Method for Subsidies for Transporting Xinjiang Cotton Yarn
Xinjiang Cotton 3,760,600.00
out of Xinjiang (Cai-Jian [2009] No. 561) of the Ministry of
Yarn out of
Finance
Xinjiang
Fund for interest Circular on Transmitting the 4th Batch of Plans on Investment
discount of the Within the Budget Scope of the Central Government of Y2009
loan applied to on the Project of Renovating and Transforming Production
250,000.00
renovation and Equipment of Cotton Processing Factories in Aqsu Region
transformation of (A-Di-Fa-Gai-Ji [2009] No.629) of the Development and
production Reform Commission of Aqsu Region
89
English Translation for Reference Only
Amount of this Amount of last
Item Explanation
period period
equipment of
cotton processing
Factories
Subsidies for
Circular on Distributing Subsidies for Instructors and
instructors and
15,000.00 Enumerators in Population Census (Wa-Ren-Pu-Ban-Zi [2011]
enumerators in
No.5) of the Office of Population Census of Awat County
population census
Circular on Thoroughly Implementing Relevant Work Ruled in
Xin-Dang-Fa [2009] No.11 Document (Xin-Ren-She-Fa [2010]
Subsidies for
1,074,860.10 No.1) of the Department of Human Resources and Social
social insurance
Security, the Department of Finance, the Department of Health,
and the Department of Education of the Autonomous Region
Notice on Printing and Distributing Management Method for
Key Economic Parks in Gaoqing County (Gao-Cai-Fa [2002]
No.28) of People’s Government of Gaoqing County and
Local support fund 3,243,674.72 Supplementary Agreement Signed between People’s
Government of Gaoqing County, the Management Committee
of Economic Development District of Gaoqing County, and the
Company
Funds for
Notice on Issuing Special Funds for Provincial Environment
environment
600,000.00 Protection in 2010 (Zi-Cai-Qi-Zhi [2010] No.65)of Zibo
management (air
Finance Bureau
pollution)
Circular on Printing and Distributing the Action Plan
Funds for
(2008-2010) for Green Water and Blue Sky in Zibo
environment 330,000.00
Municipality (Zi-Zheng-Fa [2008] No.8) of People’s
management
Government of Zibo Municipality
Circular of People’s Government of Zichuan District on
Energy-saving and
Rewarding Advanced Units and Enterprises in Zichuan District
consumption 10,000.00
in Energy-saving and Consumption Reduction of Y2010
reduction
(Chuan-Zheng-Fa [2011] No.21)
Fund for
Circular on Submitting the Item of Fund for Constructing the
constructing the
Public Service Platform for Foreign Trade
public service 500,000.00
(Lu-Shang-Wu-Gui-Cai-Han-Zi [2010] No.51) of the
platform for
Department of Commerce of Shandong Province
foreign trade
Circular on Printing and Distributing the Financial Support
Subsidies for Policy for Promoting Fast and Stable Development of
export credit 500,000.00 International Economy and Trade of Shandong Province of
premium Y2010 (Lu-Cai-Qi [2010] No.26) of the Finance Bureau and
the Department of Commerce of Shandong Province
Reward of Zibo 100,000.00 Resolution on Science and Technology Reward of Zibo
90
English Translation for Reference Only
Amount of this Amount of last
Item Explanation
period period
Municipality for Municipality of Y2010 (Zi-Zheng-Fa [2011] No.14) of People’s
science progress Government of Zibo Municipality
Implementation Opinion on Underemployed University
Graduates form Zibo Municipality Engaging in Employment
Apprentice and Apprentice (Zi-Ren-Fa [2008] No.87)of Human Resource
27,000.00
subsidies Bureau of Zibo Municipality / Finance Bureau of Zibo
Municipality / Labor and Social Security Bureau of Zibo
Municipality
Subsidies for Circular on Transmitting Development Plans (the 1st Batch) on
development plans Science and Technology of Shandong Province of Y2009
200,000.00
on science and (Lu-Ke-Ji-Zi [2009] No.94) of the Department of Science and
technology Technology and the Finance Bureau of Shandong Province
Notice on Printing and Distributing Management Method for
Subsidies of for
Special Funds for Patent Development of Shandong Province
patent 8,000.00
(Lu-Cai-Jiao [2009] No.36)of Shandong Province Finance
development
Bureau and Intellectual Property Office of Shandong
Subsidies for
Transferring The Circular on Printing and Distributing the Notice on
Xinjiang Cotton Temporary Management Method for Subsidies for Transferring
5,060,000.00
Yarn to Xinjiang Cotton Yarn to Warehouses Out of Xinjiang (Cai-Jian
Warehouses out of [2008] No. 396)of the Ministry of Finance
Xinjiang
Subsidies for
Notice on Printing and Distributing Temporary Management
transporting
Method for Subsidies for Transporting Xinjiang Cotton Yarn
Xinjiang Cotton 850,000.00
out of Xinjiang (Cai-Jian [2009] No. 561)of the Ministry of
Yarn out of
Finance
Xinjiang
Funds for
Provincial Air Notice on Issuing Budget Target of Funds for Provincial Air
Pollution Pollution Prevention and Treatment Project in 2008
2,000,000.00
Prevention and (Lu-Cai-Jian-Zhi [2008] No.151)of the Finance Bureau and the
Treatment Project Environmental Protection Bureau of Shandong Province
in 2008
Funds for
Notice on Issuing Budget Target of Funds for Provincial Air
provincial air
500,000.00 Pollution Treatment Project in 2009 (Lu-Cai-Jian-Zhi [2009]
pollution treatment
No.75) of the Finance Bureau of Shandong Province
project in 2009
Notice on Allotting Funds for Import Discount Interest of
Interest-discount
Y2008 (Lu-Ji-Dian-Han-Zi [2010] No.2)of the Import & Export
for import and 1,127,500.00
Office for Mechanical and Electrical Products of Shandong
export
Province
Award for 10,000.00 Rewarding Method of Encouraging Self-innovation of Zichuan
91
English Translation for Reference Only
Amount of this Amount of last
Item Explanation
period period
scientific and District issued by the People’s Government of Zichuan District
technological
Progress
Circular on Rewarding Advanced Units and Individuals of
Award for Shandong Province in Cooperation Between Enterprises and
advanced units that Universities for Training Talents （Lu-Jing-Mao-Pei-Zi [2009]
20,000.00
build training No.505）of Shandong Economic and Information Committee,
centers Shandong Provincial Education Department and Employee
Education Office of Shandong Province
The national
science &
technology support
programs --
Notice on Issuing Funds Budget for the National Science &
2009-rewards for
4,960,000.00 Technology Program in 2009 (Guo-Ke-Fa-Cai [2009]
production of
No.682)of the Ministry of Science and Technology
starch size and
replacing PVA
applied key
technology
Award for
Rewarding Method in Science and Technology of Shandong
scientific and
20,000.00 Province issued by the Department of Science and Technology
technological
of Shandong Province
progress
Amortization of
667,150.92 271,333.35 Amortization of deferred income
deferred income
Total 12,444,285.74 14,818,833.35
45. Non-operating expenses
Amount recorded into
Amount of current Amount of previous non-recurring profits
Item
period period and losses of the current
period
Loss from disposal of non-current
8,210,095.87 2,543,123.20 8,210,095.87
assets
Of which: Loss from disposal of fixed
8,210,095.87 2,543,123.20 8,210,095.87
assets
Expenditure for penalty 18,108.41 1,750.00 18,108.41
Expenditure for compensation 232,679.03 469,842.60 232,679.03
Expenditure for external donation 2,741,771.83 1,495,153.71 2,741,771.83
Other 67,495.33 54,688.12 67,495.33
Total 11,270,150.47 4,564,557.63 11,270,150.47
92
English Translation for Reference Only
46. Income tax expenses
Amount of previous
Item Amount of current period
period
Income tax calculated by tax law and relevant provisions of
114,651,076.55 60,296,060.79
current period
Adjustment of deferred income tax -11,872,133.81 10,568,529.50
Total 102,778,942.74 70,864,590.29
47. Basic earnings per share and diluted earnings per share
For the Company, the basic earnings per share shall be calculated by dividing the current net
profits belonging to shareholders of ordinary shares by the weighted average number of ordinary
shares issued to the public. In accordance with the specific terms and clauses of the issuance
contract, the number of newly issued ordinary shares shall be calculated and decided as of the date
of receivable consideration (generally the date of issuance of shocks).
Based on net profit attributable to ordinary shareholders of the Company of the current period,
numerators of diluted earnings per share shall be determined after adjusting the following factors:
(1) Interests of diluted potential ordinary shares recognized as expenses at the current period; (2)
Incomes or expenses arising from the transfer of diluted potential ordinary shares; and (3) Income
tax influence related to the aforesaid adjustment.
Denominators of diluted earnings per share equal to the sum of the following two items: (1) The
weighted average number of ordinary shares issued by the parent company in basic earning per
share; and (2) The weighted average number of ordinary shares which are newly added due to the
transfer of the assumed diluted potential ordinary shares to ordinary shares.
When calculating the weighted average number of increased ordinary shares resulted from that the
diluted potential ordinary shares convert into ordinary shares already issued, the diluted potential
ordinary shares issued in prior periods shall be supposed to be converted at the beginning of the
current period. The diluted potential ordinary shares issued in the current period shall be supposed
to be converted on the date of issuance.
(1) Basic earnings per share and diluted earnings per share of each period
Amount of current period Amount of previous period
Profits of the reporting
period Basic earning per Diluted earnings Basic earning per Diluted earnings per
share per share share share
Net profit attributable to
shareholder of ordinary 0.49 0.49 0.37 0.37
shares of the Company
Net profit attributable to
shareholders of ordinary
shares of the Company
0.48 0.48 0.35 0.35
after deducting
non-recurring gains and
losses
(2) Process of calculating basic earnings per share and diluted earnings per share
In the reporting period, there’s no diluted potential ordinary share. Therefore, diluted earnings per
share equal to basic earnings per share.
93
English Translation for Reference Only
① When basic earnings per share are being calculated, the net profits attributable to shareholders
of ordinary shares are:
RMB Yuan
Item Amount of current period Amount of previous period
Net profits attributable to shareholders of ordinary shares of the current
491,647,065.96 366,877,951.37
period
Of which: net profits attributable to sustainable operation 491,647,065.96 366,877,951.37
Net profits attributable to terminated operation
Net profits attributable to shareholders of ordinary shares
of the Company after deducting non-recurring profits and 476,456,565.30 348,475,975.27
losses
Of which: net profits attributable to sustainable operation 476,456,565.30 348,475,975.27
Net profits attributable to terminated operation
② While basic earnings per share are being calculated, the denominator is the average
weighted number of ordinary shares issued publicly, and the calculation is as the following:
RMB Yuan
Item Amount of current period Amount of previous period
Ordinary shares publicly issued at the beginning of the
994,864,800.00 994,864,800.00
period
Add: Weighted average number of ordinary shares issued
at the current period
Less: Weighted average number of ordinary share
repurchased at the current period
Weighted average number publicly issued at the end of the
994,864,800.00 994,864,800.00
period
48. Other comprehensive income
Amount of current Amount of previous
Item
period period
1. Gains (losses) from available-for-sale financial assets
Less: Income tax influence of available-for-sale financial assets
Net amount written into other gains and transferred into gain/loss in
previous terms
Subtotal
2. Shares in other gains of investees on equity basis
Less: Income tax influence of shares in other gains of investees on equity basis
Net amount written into other gains and transferred into gain/loss in
previous terms
Subtotal
3. Amount of gains (or losses) from cash flow hedge instrument
Less: Income tax influence of cash flow hedge instruments
Net amount written into other gains and transferred
into gain/loss in previous terms
94
English Translation for Reference Only
Adjusted amount transferred to initial amount of the target project
Subtotal
4. Difference from translating of foreign currency financial statements -715,557.69 106,785.38
Less: Net amount of disposing overseas business and transferred to current
gain/loss
Subtotal -715,557.69 106,785.38
5. Others 1,570,000.00 2,350,000.00
Less: Income tax influence by other accounted into other miscellaneous
incomes
Net amount accounted into other misc. income and transferred into
7,215,239.04
current gain/loss in previous terms
Subtotal 1,570,000.00 -4,865,239.04
Total 854,442.31 -4,758,453.66
49. Notes to the cash flow statement
(1) Other cash received related with operating activities
Amount of previous
Item Amount of current period
period
Government grants 13,641,285.74 48,397,500.00
Collection of employee’s payment 161,545.94 6,401,553.76
Compensation 1,499,016.32 2,659,375.25
Penalty 161,042.00 4,752.90
Withdrawing borrowing by employees, reserve funds and
2,136,781.56 3,851.32
deposits
Others 31,071,414.48 13,675,676.83
Total 48,671,086.04 71,142,710.06
(2) Other cash paid related to operating activities
Amount of previous
Item Amount of current period
period
Freight and miscellaneous charges 26,454,027.10 21,800,706.20
Rental fees and management cost for shopper 5,094,030.95 8,824,041.96
Rental fees 12,748,597.90 2,371,054.47
Advertising expenses 4,084,762.46 3,553,575.57
Fees for business trip and office 4,203,898.02 4,605,782.13
Insurance premium 5,139,879.34 4,225,195.96
Bank's service charge 1,090,956.83 910,282.67
Commodity inspection fee 3,749,847.54 2,128,769.00
Payment of royalty 2,323,922.85 2,219,356.86
Disclosure fees for auditing consulting 222,096.90 279,675.20
Fixture and fitting fare 3,251,035.24 186,741.92
Charge for water and power 576,384.46 1,208,074.91
External donation 2,746,800.00
95
English Translation for Reference Only
Amount of previous
Item Amount of current period
period
Farm expense pay in advance 21,710,244.89
Others 33,109,218.00 48,881,660.16
Total 126,505,702.48 101,194,917.01
(3) Other Cash received related to investing activities
Amount of current Amount of previous
Item
period period
Interest income 3,381,523.70 1,442,063.03
Investment income from transactional financial assets (liabilities) 40,469,067.77
Total 43,850,591.47 1,442,063.03
(4) Other cash paid for investing activities
Amount of current Amount of previous
Item
period period
Disposal of transactional financial assets (liabilities) 49,348,254.22
Total 49,348,254.22
(5) Other cash received related to financing activities
Amount of current Amount of previous
Item
period period
Recovery of fixed deposit receipt pawned for more than 3 months 81,220,000.00
Leasing in account from related entities 5,000,000.00 17,600,000.00
Receive of funds for energy-saving and reconstruction 1,570,000.00
Total 87,79,000.00 17,600,000.00
(6) Other cash paid related to financing activities
Amount of previous
Item Amount of current period
period
Accounts returned to related entities 13,460,000.00 10,000,000.00
Total 13,460,000.00 10,000,000.00
50. Supplementary information to consolidated cash flow statement
(1) Adjusting net profit into cash flow arising from operating activities
Amount in current Amount in previous
Item
period period
1.Net profit adjusted to cash flow of operation:
Net profit 525,143,315.61 392,528,777.37
Plus: Asset impairment provision 3,197,340.53 7,604,091.59
Fixed asset depreciation, gas and petrol depreciation,
185,587,029.70 174,083,328.38
production goods depreciation
Amortization of intangible assets 4,916,845.02 4,480,674.37
Amortization of long-term deferred expenses
Loss on disposal of fixed assets, intangible assets and other
6,539,060.77 2,095,629.66
long-term assets (income is listed as “-”)
96
English Translation for Reference Only
Amount in current Amount in previous
Item
period period
Loss on retirement of fixed assets (income is listed as “-”) 814,775.06
Losses on change in fair value （income is listed as “-”） 20,628,986.72 -47,370,026.48
Financial expense（income is listed as “-”） 24,992,416.97 16,010,823.54
Investment losses（income is listed as “-”） -40,469,067.77 39,475,016.14
Decrease in deferred income tax assets（increase is listed as
-8,237,648.81 11,118,672.26
“-”）
Increase in deferred income tax liabilities（decrease is listed as
-3,684,997.05 -3,742.31
“-”）
Decrease of inventories (increase is listed as “-”) -499,402,365.85 -94,846,026.31
Decrease in operating receivables (increase is listed as “-”) 126,172,267.05 -72,519,115.81
Increase in operating payables (decrease is listed as “-”) 82,371,292.95 -142,049,761.62
Other
Net cash flows arising from operating activities 428,569,250.90 290,608,340.78
2. Investment and financing activities not involving in cash flow
Liabilities converted to capital
Convertible bond expire within 1 year
Fixed assets acquired under finance leases
3. Net increase in cash and cash equivalents:
Closing balance of cash 602,875,935.34 616,648,947.98
Less: Opening balance of cash 522,955,236.37 569,968,526.84
Add: Closing balance of cash equivalents
Less: Opening balance of cash equivalents
Net increase in cash and cash equivalents 79,920,698.97 46,680,421.14
(2) Information related to acquisition or disposal of subsidiaries and other operating entities in the
reporting period
Amount of current Amount of previous
Item
period period
Ⅰ. Information related to acquisition of subsidiaries other
operating entities:
1. Prices for acquiring subsidiaries and other operating entities
2. Cash and cash equivalents paid to acquire subsidiaries and other
operating entities
Less: Cash and cash equivalents held by subsidiaries and other
operating entities
3. Net amount of cash paid to acquire subsidiaries and other operating
entities
4. Net assets of subsidiaries acquired
Of which: Current assets
Non-current assets
97
English Translation for Reference Only
Amount of current Amount of previous
Item
period period
Current liabilities
Non-current liabilities
Ⅱ. Information related to disposal of subsidiaries and other
operating entities
1. Prices for disposing subsidiaries and other operating entities 55,282,600.00
2. Cash and cash equivalents received by disposing subsidiaries and
other operating entities
Less: Cash and cash equivalents held by subsidiaries and other
operating entities
3. Net amount of cash received by disposing subsidiaries and other
related operating entities
4. Net assets of subsidiaries disposed 52,624,600.96
Of which: Current assets 11,768,191.42
Non-current assets 54,528,048.77
Current liabilities 13,671,639.23
Non-current liabilities
(3) Composition of cash and cash equivalents
Item Closing amount Opening amount
Ⅰ. Cash 602,875,935.34 522,955,236.37
Of which: cash in hand 2,497,198.88 1,713,120.64
Bank deposits available for payment at any time 594,369,777.56 479,817,717.52
Other monetary capital available for payment at
6,008,958.90 41,424,398.21
any time
Accounts deposited in the Central Bank available
for payment
Accounts deposited in other financial institutions
Accounts borrowed in other financial institutions
Ⅱ. Cash equivalents
Of which: Bond investment due with 3 months
Ⅲ. Balance of cash and cash equivalents at the period-end 602,875,935.34 522,955,236.37
Ⅷ. Related parties and related transactions
1. Parent company of the Company
Relationship Legal
Registered
Name with the Type representativ Business Nature
address
Company e
Parent Limited liability Investment of textile,
Lucheng Textile Zibo Liu Shizhen
company company power and pharmacy
(Con)
98
English Translation for Reference Only
Proportions of Proportions of Ultimate
Registered parent company’s parent company’s controller of
Name Organization Code
Capital shareholding to voting right to the the
the Company（%） Company（%） Company
Lucheng
63,260,000 12.40 12.40 Liu Shizhen 16420039-1
Textile
Note: Mr. Liu Shizhen is the first principal shareholder of Lucheng Textile, holding 21% equities,
as well as ultimate controller of the Company.
2. Subsidiaries of the Company
For details, please refer to Note Ⅵ. Ⅰ. Subsidiaries
3. Other related parties of the Group
Name Relationship Organization Code
Zibo Stanluian Cosmetics Co., Ltd. (hereinafter called Affiliated person (same
61329036-2
“Stanluian”) chairman as the Company)
Zibo Taimei Ties Co., Ltd. (hereinafter called Taimei Controlled subsidiary of
61329035-4
Ties) the parent company
Zibo Limin Purified Water Co., Ltd. (hereinafter Controlled subsidiary of
76575998-3
called Limin Purified Water) the parent company
Zibo Luqun Land Co., Ltd (hereinafter called Luqun Controlled subsidiary of
77630667-2
Land) the parent company
Dongtai International Development CO., Ltd. Wholly-owned subsidiary
(hereafter called Dongtai International) of the parent company
Zibo Chengshun Heating Co., Ltd. (hereinafter refer Wholly-owned subsidiary
69544896-X
to as “Chengshun Heating” ) of the parent company
4. Transactions of related parties
(1) Related transactions of purchasing goods, providing and receiving labor service
① Transactions of purchasing goods or receiving labor service
Pricing Amount of current period Amount of previous period
principle
Proportion Proportion
and
to amounts to amounts
Related party Content of related transaction decision
Amount of similar Amount of similar
procedure
transaction transaction
of related
s (%) s (%)
transaction
Lucheng Market
T-shirt, towel, sock, oil product 2,746,597.01 100.00 2,688,295.54 100.00
Textile price
Gift box for cosmetic, lotion,
Stanluian Market
washing-up liquid, Liquid 61,180.54 100.00 619,021.45 100.00
Company price
soap, etc.
Market
Taimei Ties Ties 135,292.31 100.00 111,662.39 100.00
price
Lucheng Processing charges for the leg Market
144,998.03 0.11 77,777.33 0.07
Textile of a stocking price
Taimei Ties Processing charges for Market 462,288.46 0.34 403,861.81 0.34
99
English Translation for Reference Only
commodities and quilt cover price
Limin
Market
Purified Sewage disposal 2,561,816.00 100.00 2,648,109.00 100.00
price
Water
Loan
Lucheng interest
Pay for interests 1,564,130.58 4.59 258,257.75 1.13
Textile rates in the
same period
② Related transactions of providing goods or services
Pricing Amount of current period Amount of previous period
principle
Proportion Proportion
and
to amounts to amounts
Related party Content of related transaction decision
Amount of similar Amount of similar
procedure
transaction transactions
of related
s (%) (%)
transaction
Lucheng Materials, electricity, running Market
142,459.53 1.39 147,448.26 1.69
Textile water and steam price
Lucheng Dyed yarn, facing material and Market
148,417.36 0.00 350,969.05 0.00
Textile garments price
Market
Taimei Ties Electricity, heating charges 7,312.26 0.07 7,910.34 0.09
price
Market
Taimei Ties Garments 512.65 0.00
price
Stanluian Materials, electricity, running Market
4,715.30 0.05 7,496.03 0.09
Company water and heating charges price
Limin
Market
Purified Materials and garment 10,831.88 0.00 102,580.84 0.00
price
Water
Chenshun Market
Garment 10,119.66 0.00
Power price
(2) Related lease
①When the Group is the lessor
Basis for Leasing income
Name of the Name of the Category of the Beginning End leasing
recognizing leasing recognized of the
lessor lessee leasing asset leasing date date
income current year
Luthai Lucheng Housing and
2008-7-1 2013-12-31 Market price 76,818.00
Textile Textile buildings
②When the Group is the lessee:
Leasing fee
Name of the Name of the Category of the Beginning End leasing Pricing basis for
recognized of the
lessee lessor leasing asset leasing date date leasing fee
current year
Lucheng
Luthai Textile Land 2010-1-1 2012-12-31 Market price 1,897,578.00
Textile
100
English Translation for Reference Only
Leasing fee
Name of the Name of the Category of the Beginning End leasing Pricing basis for
recognized of the
lessee lessor leasing asset leasing date date leasing fee
current year
Lucheng
Luthai Textile Gas station 2008-8-1 2013-12-31 Market price 241,278.00
Textile
Luqun
Luthai Textile Land and housing 2011-1-1 2012-12-31 Market price 901,272.00
Property
Lucheng
Luthai Textile Land and housing 2008-1-1 2013-12-31 Market price 201,720.00
Textile
Lufeng
Lucheng
Weaving & Housing 2010-1-1 2012-12-31 Market price 348,323.22
Textile
Dyeing
Lucheng
Luqun Textile Equipment 2010-1-1 2012-12-31 Market price 2,077,518.24
Textile
Lucheng
Luqun Textile Equipment 2011-5-1 2012-12-31 Market price 9,200.00
Textile
(3) Capital borrowed and loaned of related parties
Amount
Related party borrowed and Starting date Due date Remark
loaned
Borrowings:
Borrowed by Luqun Textile; RMB 50,000 of
Taimei Ties 2,700,000.00 2011-1-5 2011-12-31
the payment has been paid
Stanluian Borrowed by Luqun Textile; RMB 110,000
2,300,000.00 2011-1-5 2011-12-31
Company of the payment has been paid
5. Receivables and payables of related parties
Payables and accounts received in advance of related parties
Name Closing amount Opening amount
Other payables
Lucheng Textile 34,400,000.00 47,988,147.00
Stanluian Company 2,190,000.00
Taimei Ties 2,650,000.00
Dongtai International 2,494,800.00 2,552,700.00
Total 41,734,800.00 50,540,847.00
IX. Contingencies
As at 30 Jun. 2011, physical assets pledged by controlled subsidiaries for the purpose of acquiring
bank loans
Entity Pledged asset Asset value Acquired loan Term of borrowing
Equipments and
Xinjiang Luthai 119,325,627.70 57,050,000.00 2011.3.9-2012.3.8
housing
Xinjiang Luthai Land-use right 22,451,591.41 50,000,000.00 2011.3.9-2012.3.8
101
English Translation for Reference Only
Total 141,777,219.11 107,050,000.00
Ⅹ. Commitments
1. Significant commitments
RMB Ten thousand
Item Closing amount Opening amount
Commitments signed but hasn’t been recognized in
financial statements
- Commitment for constructing and purchasing
20,730 1,979
long-term assets
Total 20,730 1,979
2. Fulfillment of prior commitments
Contracted amount (RMB Fulfillment of prior
Item
Ten thousand) commitments
Commitment for constructing and purchasing
1,979 Fulfilled
long-term assets
Ⅺ. Explanation on other significant event
Assets and liabilities measured by fair value
Impairment
Profits and losses Accumulated of
on changes in fair changes in fair withdrawal
Item Opening amount Closing amount
value of the value recorded of the
current period into equity current
period
Transactional financial assets
Financial assets measured by
fair value and of which changes
recorded into profit and loss of
the current period (excluding
derivative financial assets)
Derivative financial assets 40,418,200.00 -22,579,700.00 17,838,500.00
Financial assets available for
sale
Subtotal of financial assets 40,418,200.00 -22,579,700.00 17,838,500.00
Transactional financial liabilities 1,950,713.28 1,950,713.28
Ⅻ. Notes to major items in financial statements of the Company
1. Accounts receivable
(1) Accounts receivable listed by category
Closing amount
Category
Book balance Bad debt provisions
102
English Translation for Reference Only
Amount Proportion（%） Amount Proportion（%）
Accounts receivable with single
significant amount and are individually
allotted for bad debt provisions
Accounts receivable allotted in
combination for bad debt provisions
Aging combinations 274,136,012.53 100.00 16,073,144.26 5.86
Subtotal of combinations 274,136,012.53 100.00 16,073,144.26 5.86
Accounts receivable with insignificant
amount and are individually allotted for
bad debt provisions
Total 274,136,012.53 100.00 16,073,144.26 5.86
(Con.)
Opening amount
Category Book balance Bad debt provisions
Amount Proportion（%） Amount Proportion（%）
Accounts receivable with single
significant amount and are individually
allotted for bad debt provisions
Accounts receivable allotted in
combination for bad debt provisions
Aging combinations 211,422,918.84 100.00 11,561,268.34 5.47
Subtotal of combinations 211,422,918.84 100.00 11,561,268.34 5.47
Accounts receivable with insignificant
amount and are individually allotted for
bad debt provisions
Total 211,422,918.84 100.00 11,561,268.34 5.47
(2) Accounts receivable listed by aging
Item Closing amount Opening amount
Amount Proportion（%） Amount Proportion（%）
Within 1 year 249,774,051.71 91.11 195,181,041.23 92.32
1-2 years 12,879,504.94 4.70 14,461,592.47 6.84
2-3 years 11,482,455.88 4.19 1,780,285.14 0.84
Total 274,136,012.53 100.00 211,422,918.84 100.00
(3) Withdrawal of bad debt provisions
Accounts receivable allotted in combination for bad debt provisions
Accounts receivable allotted for bad debt provision by aging analysis method in combinations:
Closing amount Opening amount
Book balance Book balance
Aging Bad debt Bad debt
Proportion Proportion
Amount provisions Amount provisions
（%） （%）
103
English Translation for Reference Only
Within 1 year 249,774,051.71 91.11 12,488,702.59 195,181,041.23 92.32 9,759,052.06
1-2 years 12,879,504.94 4.70 1,287,950.49 14,461,592.47 6.84 1,446,159.25
2-3 years 11,482,455.88 4.19 2,296,491.18 1,780,285.14 0.84 356,057.03
Total 274,136,012.53 100.00 16,073,144.26 211,422,918.84 100.00 11,561,268.34
(4) There was no accounts receivable due from shareholders with more than 5% (including 5%) of
the voting shares of the Company.
(5) Top 5 entities in amount of accounts receivable
Proportion to
Relation to the
Name of entity Amount Term total accounts
Company
receivable (%)
Non-related Within 1 y
OXFORD 48,746,620.12 17.78
client ear
Controlled
Beijing Sichuang 33,555,460.19 1-3 years 12.24
subsidiary
Controlled Within 1 y
Lufeng Weaving & Dyeing 28,800,063.66 10.51
subsidiary ear
Non-related Within 1
Chen Feng (Jin Tan) Garments Co., Ltd. 25,155,792.94 9.17
client year
Non-related Within 1
TAL 21,300,111.73 7.77
client year
Total 157,558,048.64 57.47
(6) Breakdown of original currency amount and exchange rate in foreign currency receivable
Closing amount Beginning amount
Item
Foreign currency Exchang RMB Foreign Exchang RMB
USD amount
30,415,841.52 rate
e6.4716 (Converted)
196,839,159.93 currency amount
24,961,745.58 e6.6227
rate (Converted)
165,314,152.48
2. Other receivables
(1) Other receivable listed by category
Closing amount
Category Book balance Bad debt provisions
Amount Proportion（%） Amount Proportion（%）
Other receivables with single significant
amount and are individually allotted for
bad debt provisions
Other receivables allotted in
combination for bad debt provisions
Aging combinations 17,157,683.36 100.00 1,336,355.99 7.79
Subtotal of combinations 17,157,683.36 100.00 1,336,355.99 7.79
Other receivables with insignificant
amount and are individually allotted for
bad debt provisions
Total 17,157,683.36 100.00 1,336,355.99 7.79
(Con)
104
English Translation for Reference Only
Opening amount
Category Book balance Bad debt provisions
Amount Proportion（%） Amount Proportion（%）
Other receivables with single significant
amount and are individually allotted for
bad debt provisions
Other receivables allotted in
combination for bad debt provisions
Aging combinations 31,413,836.00 100.00 2,240,484.92 7.13
Subtotal of combinations 31,413,836.00 100.00 2,240,484.92 7.13
Other receivables with insignificant
amount and are individually allotted for
bad debt provisions
Total 31,413,836.00 100.00 2,240,484.92 7.13
(2) Other receivables listed by aging
Closing amount Opening amount
Item
Amount Proportion（%） Amount Proportion（%）
Within 1 year 13,391,450.80 78.05 27,466,355.49 87.44
1-2 years 1,646,159.22 9.60 917,585.18 2.92
2-3 years 1,338,544.71 7.80 1,335,599.65 4.25
Over 3 years 781,528.63 4.55 1,694,295.68 5.39
Total 17,157,683.36 100.00 31,413,836.00 100.00
(3) Withdrawal of bad debt provisions
Other receivables allotted in combination for bad debt provisions
Other receivables allotted for bad debt provision by aging analysis method in combinations:
Closing balance Opening balance
Book balance Book balance
Aging Bad debt Bad debt
Proportion Proportion
Amount provisions Amount provisions
（%） （%）
Within 1 year 13,391,450.80 78.05 669,572.54 27,466,355.49 87.44 1,373,317.77
1-2 years 1,646,159.22 9.60 164,615.92 917,585.18 2.92 91,758.52
2-3 years 1,338,544.71 7.80 267,708.94 1,335,599.65 4.25 267,119.93
Over 3 years 781,528.63 4.55 234,458.59 1,694,295.68 5.39 508,288.70
Total 17,157,683.36 100.00 1,336,355.99 31,413,836.00 100.00 2,240,484.92
(4) There were no other receivables due from shareholders with more than 5% (including 5%) of
the voting shares of the Company.
(5) Top 5 entities in amount of other receivables
Proportion to
Relation to the total amount of
Name of entity Amount Term
Company other receivables
(%)
105
English Translation for Reference Only
Within 1 year,
Zibo Custom Non-related customers 2,129,575.43 12.41
1-2 years
Fund for department of technology Advanced repurchase Within 1 year,
1,973,042.99 11.50
building fund 1-3 years
Advanced repurchase Within 1 year,
Payment for staff quarters 692,431.73 4.04
fund 1-2 years
International Business Department Non-related customers 161,190.79 Within 1 year 0.94
Alipay (www.alipay.com) Non-related customers 142,249.58 Within 1 year 0.83
Total 5,098,490.52 29.72
(6) Amount in original currency of other receivables of foreign currency and discounted exchange
rate
Closing amount Opening amount
Amount in Amount in
Item Exchange Converted Exchang
foreign foreign Converted
rate amount in RMB e rate
currency currency amount in RMB
USD 15,000.00 6.4716 97,074.00 34,174.50 6.6227 226,327.46
3. Long-term equity investment
(1) Categories of long-term equity investment
Increase in the Decrease in the
Item Opening amount Closing amount
current period current period
Investment on subsidiaries 837,512,589.90 169,200,000.00 1,006,712,589.90
Investment on joint ventures
Investment on associated
enterprises
Other equity investments 56,782,600.00 56,782,600.00
Less: Impairment provisions for
long-term equity investment
Total 894,295,189.90 169,200,000.00 1,063,495,189.90
(2) Breakdown of long-term equity investments
Accounting
Invested entity Investment cost Opening amount Increase / Decrease Closing amount
method
Beijing Sichuang Cost method 21,000,000.00 21,000,000.00 4,200,000.00 25,200,000.00
Xinjiang Luthai Cost method 65,176,335.24 82,400,701.97 82,400,701.97
Xinsheng Power Cost method 176,340,737.93 176,340,737.93 176,340,737.93
Lufeng Weaving &
Cost method 364,620,000.00 364,620,000.00 165,000,000.00 529,620,000.00
Dyeing
Luqun Textile Cost method 171,784,550.00 171,784,550.00 171,784,550.00
Luthai (Hong Kong) Cost method 6,366,600.00 6,366,600.00 6,366,600.00
Lufeng Sunshine Cost method 10,000,000.00 10,000,000.00 10,000,000.00
Shanghai Luthai Cost method 5,000,000.00 5,000,000.00 5,000,000.00
Rongchang Pharmacy Cost method 55,282,600.00 55,282,600.00 55,282,600.00
Limin Wall Material Cost method 1,500,000.00 1,500,000.00 1,500,000.00
106
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Accounting
Invested entity Investment cost Opening amount Increase / Decrease Closing amount
method
Total 894,295,189.90 169,200,000.00 1,063,495,189.90
(Con.)
Explanation on
Shareholdin Withdrawn
inconformity between
g proportion Proportion of impairment
shareholding proportion Impairment Cash dividends of
Invested entity over voting rights provisions of
and voting right provisions the current period
invested over invested the current
proportion over
entity (%) entity (%) period
invested entity
Beijing
60 60
Sichuang
Xinjiang
58.24 58.24
Luthai
Xinsheng
100 100
Power
Lufeng
Weaving & 75 75 165,000,000.00
Dyeing
Luqun Textile 100 100
Luthai (Hong
100 100
Kong)
Lufeng
100 100
Sunshine
Shanghai
100 100
Luthai
Rongchang
5.555 5.555
Pharmacy
Limin Wall
15 15
Material
Total 165,000,000.00
4. Operating income and operating cost
(1) Operating income and operating cost
Item Amount of current period Amount of previous period
Income from main operation 2,308,393,542.03 1,653,165,327.23
Other operating income 137,643,538.37 98,826,626.89
Total operating income 2,446,037,080.40 1,751,991,954.12
Cost of main operation 1,552,619,364.84 1,168,412,636.72
Other operating cost 106,503,054.02 67,423,055.61
Total operating cost 1,659,122,418.86 1,235,835,692.33
(2) Main business (categorized by product)
Product name Amount of current period Amount of previous period
107
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Operating income Operating cost Operating income Operating cost
Yarn-dyed fabric 1,727,830,220.45 1,155,080,806.78 1,200,938,170.94 851,814,584.92
Shirt 580,563,321.58 397,538,558.06 452,227,156.29 316,598,051.80
Total 2,308,393,542.03 1,552,619,364.84 1,653,165,327.23 1,168,412,636.72
(3) Operating income from the top 5 clients of the Company
Total operating income from Proportion to operating incomes
Term
the top 5 clients at the same period (%)
Jan. to Jun. 2011 722,259,353.83 29.53
Jan. to Jun. 2010 641,392,168.30 36.61
5. Investment income
(1) Breakdown of investment income
Amount of previous
Name of invested unit Amount of current period
period
Long-term equity investment income measured by cost method 165,000,000.00 22,182,101.91
Long-term equity investment income measured by equity
method
Investment income arising from disposal of long-term equity
-33,551,929.68
investment
Investment income generated during the period of holding
transactional financial assets
Investment income generated during the period of holding
held-to-maturity investment
Investment income generated during the period of holding
financial assets available for sale
Investment income arising from disposal of transactional
33,590,067.77 -38,409,621.02
financial assets (liabilities)
Investment income arising from held-to-maturity investment
Investment income arising from financial assets available for
sale
Other
Total 198,590,067.77 -49,779,448.79
Note: There exists no major limitation to repatriation of investment income.
(2) Long-term equity investment income measured by cost method
Amount of previous
Invested entity Amount of current period
period
Beijing Sichuang 4,957,735.18
Xinjiang Luthai 17,224,366.73
Lufeng Weaving & Dyeing 165,000,000.00
Total 165,000,000.00 22,182,101.91
6. Supplementary information to consolidated cash flow statement
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Amount of previous
Item Amount of current period
period
1. Net profit adjusted to cash flow of operation:
Net profit 613,559,994.97 256,770,848.77
Plus: Asset impairment provision 3,803,053.48 400,346.95
Fixed asset depreciation, gas and petrol depreciation,
106,469,045.00 99,649,268.94
production goods depreciation
Amortization of intangible assets 2,989,197.76 2,758,053.55
Amortization of long-term deferred expenses -
Loss on disposal of fixed assets, intangible assets and other
4,961,425.10 1,498,984.88
long-term assets (income is listed as “-”)
Loss on retirement of fixed assets (income is listed as “-”) -
Losses on change in fair value （income is listed as “-”） 18,153,686.72 -36,894,976.48
Financial expense（income is listed as “-”） 12,957,180.51 4,984,823.00
Investment losses（income is listed as “-”） -198,590,067.77 49,779,448.79
Decrease in deferred income tax assets（increase is listed as
94,063.76 2,978,426.27
“-”）
Increase in deferred income tax liabilities（decrease is listed
-3,015,660.00
as “-”）
Decrease of inventories (increase is listed as “-”) -670,557,371.95 -127,461,474.05
Decrease in operating receivables (increase is listed as “-”) 17,182,655.65 48,710,031.59
Increase in operating payables (decrease is listed as “-”) 467,283,939.39 -100,254,529.52
Other -
Net cash flows arising from operating activities 375,291,142.62 202,919,252.69
2. Investment and financing activities not involving in cash
flow
Liabilities converted to capital
Convertible bond expire within 1 year
Fixed assets acquired under finance leases
3. Net increase in cash and cash equivalents:
Closing balance of cash 390,690,627.69 415,660,045.25
Less: Opening balance of cash 280,772,869.89 324,783,025.04
Add: Closing balance of cash equivalents
Less: Opening balance of cash equivalents
Net increase in cash and cash equivalents 109,917,757.80 90,877,020.21
XIII. Supplementary information
1. Details of non-recurring gain/loss of current period
Unit: RMB Yuan
Amount in Amount in
Item
current period previous period
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Gain/loss from disposal of non-current capital -7,353,835.83 -2,095,629.66
Refunding and exemption of taxes in excess of authority or without official
approval documents
Government subsidies accounted into current income account (except for those
government subsidies closely related to the Company’s business, and received at 12,444,285.74 14,818,833.35
national statutory standard and amount)
Capital adoption fee collected from non-financial organizations and accounted into
current gain/loss
Gain/loss from differences between the cost of enterprise merger and the fair value
of recognizable net asset of the invested entities
Gain/loss from non-monetary assets
Gain/loss from commissioned investment or assets
Asset impairment provisions provided for force-majeure
Gain/loss from debt reorganization
Enterprise reorganizing expenses, such as employee placement fee and integration
fee
Gain/loss from trade departing from fair value
Current net gain/loss of subsidiaries under same control from beginning of term till
date of consolidation
Gain/loss generated by contingent liabilities without connection with main
businesses
Gain/loss from change of fair value of transactional asset and liabilities, and
investment gains from disposal of transactional financial assets and liabilities and
19,840,081.05 -1,978,227.74
sellable financial assets, other than valid period value instruments related to the
Company’s common businesses
Restoring of receivable account impairment provision tested individually
Gain/loss from commissioned loans
Gain/loss from change of fair value of investment property measured at fair value in
follow-up measurement
Influence of one-time adjustment made on current gain/loss account according to
the laws and regulations regarding tax and accounting
Consigning fee received for consigned operation
Other non-business income and expenditures other than the above -227,952.70 7,098,095.29
Other gain/loss items satisfying the definition of nonrecurring gain/loss account
Subtotal 24,702,578.26 17,843,071.24
Influenced amount of income tax 6,710,756.03 -2,610,513.48
Influenced amount of minor shareholders’ equity (after tax) 2,801,321.57 2,051,608.62
Total 15,190,500.66 18,401,976.10
Note: As for numbers in items of non-recurring gains and losses, “+” shows profit or income, “-”
shows loss or expenditure
The recognition of items of non-recurring gains and losses of the Group is in line with
Explanatory Public Notice on Information Disclosure of Companies Publicly Issuing Securities
No.1 – Non-recurring Gains and Losses (Zheng-Jian-Hui-Gong-Gao [2008] No.43).
2. Difference in net assets and net profit under IAS and PRC GAAP
110
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(1) Difference in net profit and net asset in the financial statement disclosed as per IFRS and PRC
GAAP
Net profits Net assets
Item Amount of current Amount of Amount of current Amount of previous
period previous period period period
Data under PRC GAAP 491,647,065.96 366,877,951.37 4,647,919,144.80 4,404,133,413.47
Increase of fixed assets arising
from translating the USD
statements into RMB statements -3,230,000.00 -3,230,000.00
in 1996 not recognized under
IFRS
Influence on the current period
due to that asset appraisal
appreciation of fixed assets 265,500.00 265,500.00 -5,472,500.00 -5,738,000.00
investment under the IFRS is not
be recognized
Impact of tax deductible of
domestic equipment recognized 859,000.00 859,000.00 -7,347,000.00 -8,206,000.00
as deferred income under IFRS
Data under IFRS 492,771,565.96 368,002,451.37 4,631,869,644.80 4,386,959,413.47
3. Return on equity and earnings per share
Weighted average return on EPS (RMB/share)
Profit as of reporting period
equity Basic Diluted
Net profit attributable to
shareholders of ordinary 10.86% 0.49 0.49
shares of the Company
Net profit attributable to
shareholders of ordinary
10.53% 0.48 0.48
shares after deducting
non-recurring gains and losses
Note: For details about calculation of EPS and diluted EPS, please refer to Note VII. 47.
4. Movements of major items in the Group’s consolidated financial statements and reasons
for the movements
(1) Transactional financial assets stood at RMB 17,838,500.00 as at 30 Jun. 2011, down 55.87%
from the opening amount, which was mainly due to fair value changes of derivative financial
assets settled in the current period.
(2) Accounts receivable stood at RMB 229,089,123.22 as at 30 Jun. 2011, up 47.46% from the
opening amount, which was mainly due to increase of sales receivables.
(3) Prepayments stood at RMB 161,296,466.46 as at 30 Jun. 2011, down 58.41% from the opening
amount, which was mainly because the cotton purchase amount was prepaid in the same period of
last year and settled in the current period.
(4) Interest receivable stood at RMB 0.00 as at 30 Jun. 2011, down by RMB 1,568,105.85 from
the opening amount, which was mainly because the interest receivable on marginal deposits for
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English Translation for Reference Only
security at banks was drawn in upon maturity.
(5) Inventory stood at RMB 1,965,688,948.01 as at 30 Jun. 2011, up 34.06% from the opening
amount, which was mainly due to increase of raw material stocks.
(6) Construction in process stood at RMB 131,285,951.82 as at 30 Jun. 2011, up 97.60% from the
opening amount, which was mainly due to increase of input for construction projects in the current
period.
(7) Engineering materials stood at RMB 9,193,455.62 as at 30 Jun. 2011, up by RMB
8,029,273.39 from the opening amount, which was mainly due to increase of special equipments
used in the current period.
(8) Short-term borrowings stood at RMB 1,270,010,628.14 as at 30 Jun. 2011, up 46.05% from the
opening amount, which was mainly because the Company obtained more credit loans in the
current period.
(9) Transactional financial liabilities stood at RMB 0.00 as at 30 Jun. 2011, down by RMB
1,950,713.28 from the opening amount, which was mainly because the transactional financial
liabilities were due and settled.
(10) Notes payable stood at RMB 20,181,314.79 as at 30 Jun. 2011, down 74.32% from the
opening amount, which was mainly because some notes payable were due and settled.
(11) Accounts payable stood at RMB 172,776,971.03 as at 30 Jun. 2011, down 63.20% from the
opening amount, which was mainly because the payables for unginned cotton in the same period
of last year were settled in the current period.
(12) Taxes and fares payable stood at RMB 33,489,030.35 as at 30 Jun. 2011, up 361.49% from
the opening amount, which was mainly because overpaid VAT decreased and payable individual
income taxes on dividends withheld by the Company increased.
(13) Dividend payable stood at RMB 473,881.74 as at 30 Jun. 2011, down 85.46% from the
opening amount, which was mainly because the subsidiary Beijing Innovative Garment Co., Ltd.
paid the dividend for the same period of last year.
(14) Long-term borrowings stood at RMB 59,453,825.00 as at 30 Jun. 2011, down 31.16% from
the opening amount, which was mainly because some long-term borrowings were paid off upon
maturity.
(15) Deferred income tax liabilities stood at RMB 5,223,332.68 as at 30 Jun. 2011, down 41.37%
from the opening amount, which was mainly due to decrease of deferred income tax liabilities
caused by transactional financial assets.
(16) Operating revenue was RMB 2,980,813,097.20 for the current period (Jan.-Jun. 2011), up
32.67% from a year earlier, which was mainly due to increase in both the sales volume and the
selling prices.
(17) Operating cost was RMB 1,966,770,465.74 for the current period (Jan.-Jun. 2011), up
32.23% from a year earlier, which was mainly due to increase in both the sales volume and costs.
(18) Business taxes and surcharges were RMB 10,183,946.29 for the current period (Jan.-Jun.
2011), up 925.28% from a year earlier, which was mainly due to increase in both the city
maintenance tax and the educational surcharges.
(19) Administrative expense was RMB 302,871,120.98 for the current period (Jan.-Jun. 2011), up
34.74% from a year earlier, which was mainly due to increase in both the payroll expense and the
R&D expense in the current period.
(20) Asset impairment loss was RMB 3,197,340.53 for the current period (Jan.-Jun. 2011), down
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57.95% from a year earlier, which was mainly due to decrease of inventory falling-price
provisions for the current period.
(21) Gain on fair value changes was RMB -20,628,986.72 for the current period (Jan.-Jun. 2011),
down 143.55% from a year earlier, which was mainly because some transactional financial assets
were settled upon maturity and the relevant gain on fair value changes previously recognized was
carried forward accordingly.
(22) Investment gain was RMB 40,469,067.77 for the current period (Jan.-Jun. 2011), up 202.52%
from a year earlier, which was mainly due to increase of the investment gain on transactional
financial assets (liabilities).
(23) Non-operating income was RMB 16,132,647.68 for the current period (Jan.-Jun. 2011), down
33.84% from a year earlier, which was mainly due to decrease of government subsidies in the
current period.
(24) Non-operating expense was RMB 11,270,150.47 for the current period (Jan.-Jun. 2011), up
146.91% from a year earlier, which was mainly due to increase of the loss on fixed asset disposal
in the current period.
(25) Income tax was RMB 102,778,942.74 for the current period (Jan.-Jun. 2011), up 45.04%
from a year earlier, which was mainly because total profits for the current period increased and the
income tax rose accordingly.
113
English Translation for Reference Only
SECTION VIII. DOCUMENTS AVAILABLE FOR REFERENCE
1. Accounting statements carried with personal signatures and seals of legal representative, Chief
Financial Officer and Financial Principal.
2. Original of Interim Report 2011 carried with the seal of the Chairman of the Board of the
Company;
3. Originals of all documents and manuscripts of Public Notices of the Company disclosed
publicly on Securities Times, Shanghai Securities News and Ta Kung Pao in the reporting period.
Board of Directors
Lu Thai Textile Co., Ltd.
11 Aug. 2011
Chairman of the Board: --------------------
114
