Lu Thai Textile Co., Ltd. Third Quarter Report 2019 (Summary) Stock Code: 000726, 200726 Stock Name: LTTC, LTTC-B Announcement No.: 2019-066 LU THAI TEXTILE CO., LTD. THIRD QUARTER REPORT 2019 (SUMMARY) 1 Lu Thai Textile Co., Ltd. Third Quarter Report 2019 (Summary) Part I Important Notes The Board of Directors (or the “Board”), the Supervisory Committee as well as the directors, supervisors and senior manage ment of Lu Thai Textile Co., Ltd. (together with its consolidated s ubsidiaries, the “Company”, except where the context otherwise requires) hereby guarantee the factuality, accuracy and completeness of the conte nts of this Report and its summary, and shall be jointly and severally liable for any misrepresentations, misleading statements or mate rial omissions therein. All the Company’s directors have attended the Board meeting for the review of this Report and its summary. Liu Zibin, the Company’s legal representative, Zhang Hongmei, the Company’s Chief Accountant, and Zhang Keming, the Company’s Financial Manager hereby guarantee that the financial statements carried in this Report are factual, accurate and complete. This Report and its summary have been prepared in both Chinese and Engl ish. Should there be any discrepancies or misunderstandings between the two versions, the Chinese versions shall prevail. 2 Lu Thai Textile Co., Ltd. Third Quarter Report 2019 (Summary) Part II Key Corporate Information I Key Consolidated Financial Information Indicate by tick mark whether there is any retrospectively restated datum in the table below. □ Yes √ No 30 September 2019 31 December 2018 Change (%) Total assets (RMB) 11,348,273,338.95 10,537,759,811.84 7.69% Equity attributable to the listed company’s 7,351,503,162.46 7,146,548,467.86 2.87% shareholders (RM B) Q3 2019 YoY change (%) Q1-Q3 2019 YoY change (%) Operating revenue (RM B) 1,626,165,317.03 -6.71% 4,811,613,661.04 -4.22% Net profit attributable to the listed company’s 176,453,154.53 -15.79% 587,899,371.12 0.17% shareholders (RM B) Net profit attributable to the listed company’s 172,442,753.62 -23.06% 549,259,289.55 -6.99% shareholders before exceptional items (RM B) Net cash generated from/used in operating activities -- -- 481,803,616.13 -57.10% (RM B) Basic earnings per share (RM B/share) 0.20 -13.04% 0.68 6.25% Diluted earnings per share (RM B/share) 0.20 -13.04% 0.68 6.25% Weighted average return on equity (%) 2.44% -0.51% 8.14% 0.06% Exceptional gains and losses: √ Applicable □ Not applicable Unit: RM B Item Q1-Q3 2019 Note Gain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) -510,901.65 Government subsidies charged to current profit or loss (exclusive of government subsidies given in the Company’s ordinary course of business at fixed quotas or amounts as per 35,960,594.57 government’s uniform standards) Gain/Loss on changes in fair value arising from holding of trading financial assets and liabilities, derivative financial assets and liabilities and investment income from disposal of trading financial assets and liabilities, derivative financial assets and liabilities and other 19,090,653.31 investments in debt obligation other than effective hedge business related to the Company’s normal operating businesses Non-operating income and expense other than above -5,090,217.43 Less: Income tax effects 7,880,401.60 3 Lu Thai Textile Co., Ltd. Third Quarter Report 2019 (Summary) Non-controlling interests effects (net of tax) 2,929,645.63 Total 38,640,081.57 -- Explanation of why the Company reclassifies as recurrent an exceptional gain/loss item defined or listed in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Exceptional Gain/Loss Items: □ Applicable √ Not applicable No such cases for the Reporting Period. II Total Numbe r of Shareholde rs and Holdings of Top 10 Shareholde rs at 30 September 2019 1. Numbers of Ordinary Shareholders and Preferred Shareholders with Resumed Voting Rights as well as Holdings of Top 10 Shareholders Unit: share Number of preferred shareholders with resumed Number of ordinary shareholders 56,184 0 voting rights (if any) Top 10 shareholders Shares in pledge or Shareholdin Restricted Name of shareholder Nature of shareholder Number of shares frozen g percentage shares Status Shares Domestic Zibo Lucheng Textile Investment Co., non-state-owned legal 16.36% 140,353,583 Ltd. person Tailun (Thailand) Textile Co., Ltd. Foreign legal person 13.78% 118,232,400 118,232,400 Hong Kong Securities Clearing Co. Ltd Foreign legal person 3.03% 25,984,811 Central Huijin Assets M anagement Co., State-owned legal 2.37% 20,315,300 Ltd. person T.ROWE PRICE INTL DISCOVERY Foreign legal person 2.32% 19,948,219 FUND Domestic China Securities Finance Corporation non-state-owned legal 2.13% 18,313,391 Limited person Hong Kong M onetary Foreign legal person 2.04% 17,487,884 Authority-Self-owned Fund National Social Security Fund Portfolio Other 1.40% 11,999,897 103 National Social Security Fund Other 0.95% 8,190,051 Portfolio 413 ASSICURAZIONI Other 0.76% 6,558,889 4 Lu Thai Textile Co., Ltd. Third Quarter Report 2019 (Summary) GENERALI-DIVIDEND 2 Top 10 unrestricted shareholders Unrestricted Shares by type Name of shareholder shares Type Shares Zibo Lucheng Textile Investment Co., Ltd. 140,353,583 RM B-denominated ordinary stock 140,353,583 Hong Kong Securities Clearing Co. Ltd 25,984,811 RM B-denominated ordinary stock 25,984,811 Central Huijin Assets M anagement Co., Ltd. 20,315,300 RM B-denominated ordinary stock 20,315,300 T.ROWE PRICE INTL DISCOVERY FUND 19,948,219 Domestically listed foreign stock 19,948,219 China Securities Finance Corporation Limited 18,313,391 RM B-denominated ordinary stock 18,313,391 Hong Kong M onetary Authority -Self-owned Fund 17,487,884 RM B-denominated ordinary stock 17,487,884 National Social Security Fund Portfolio 103 11,999,897 RM B-denominated ordinary stock 11,999,897 National Social Security Fund Portfolio 413 8,190,051 RM B-denominated ordinary stock 8,190,051 ASSICURAZIONI GENERALI-DIVIDEND 2 6,558,889 RM B-denominated ordinary stock 6,558,889 RBC EM ERGING M ARKETS SM ALL CAP EQUITY FUND 6,181,462 Domestically listed foreign stock 6,181,462 Zibo Lucheng Textile Investment Co., Ltd. is the largest shareholder and the actual controller of the Company. Tailun (Thailand) Textile Co., Ltd. is the second largest shareholder and the foreign sponsor of Related or acting-in-concert parties among shareholders above the Company. All the other shareholders are hold ing tradable A-shares or B-shares. And it is unknown whether there is any related party or acting-in-concert party among them. Top 10 ordinary shareholders involved in securities margin Naught trading (if any) Indicate by tick mark whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary shareholders of the Company conducted any promissory repo during the Reporting Period. □ Yes √ No No such cases in the Reporting Period. 2. Number of Preferred Shareholders and Shareholdings of Top 10 of Them □ Applicable √ Not applicable 5 Lu Thai Textile Co., Ltd. Third Quarter Report 2019 (Summary) Part III Significant Events I Changes in Key Financial State ment Line Items and Explanation of why √ Applicable □ Not applicable 30 September 31 December Item Change Reason for change 2019 2018 Increase in prepayments for agricultural means of Prepayments 196,906,160.26 149,582,616.21 31.64% production in the Reporting Period Current portion of Purchase of trust financial products in the 52,256,130.79 - 100.00% non-current assets Reporting Period Transfer of operating leased houses into Investment property 38,266,359.35 22,880,242.95 67.25% investment property in the Reporting Period Construction in Increase in inputs in Yarn Dye II Project of Lu 502,791,371.42 337,230,646.42 49.09% progress Thai (Vietnam) and equipment Short-term Increase in borrowings from banks in the 2,117,741,665.40 1,325,273,780.05 59.80% borrowings Reporting Period Increase in bank’s acceptance bills opened for Notes payable 22,125,109.37 502,347.05 4304.35% payments of materials in the Reporting Period Payments for raw materials and equipment in the Accounts payable 229,909,541.78 353,186,163.90 -34.90% Reporting Period Current portion of Increase in current portion of long-term 111,331,864.72 - 100.00% non-current liabilities borrowings Reclassification of current portion of long-term Long-term 18,961,030.32 170,019,083.89 -88.85% borrowings into current portion of non-current borrowings liabilities Capital stock premium from repurchased B-shares Capital reserve 256,632,428.28 699,493,647.48 -63.31% cancelled in the Reporting Period Cancellation of repurchased B-shares in the Treasury stock - 486,922,944.94 -100.00% Reporting Period Increase in differences arising from the translation Other comprehensive 111,894,866.80 61,157,013.37 82.96% of foreign currency-denominated financial income statements in the Reporting Period Item Q1~Q3 2019 Q1~Q3 2018 Change Reason for change Finance cost 61,156,464.30 37,733,821.10 62.07% Increase in interest expense in the Reporting Period Increase in income from investments in derivative Investment income 16,777,341.81 -18,388,041.25 191.24% financial instruments and associated enterprises in 6 Lu Thai Textile Co., Ltd. Third Quarter Report 2019 (Summary) the Reporting Period Losses on changes in fair value of fails-to-delivery Gain on changes in 5,638,067.04 -44,112,150.00 112.78% derivative financial instruments of the same period fair value of last year Asset disposal Recognition of disposal income from demolition 162,416.20 23,233,253.44 -99.30% income by Xinjiang Lu Thai in the same period of last year Non-operating Payments for relief donations in the Reporting 9,785,667.21 3,623,862.73 170.03% expense Period Increase in net cash outflow in relation to operating activities: 1. YoY increase of RM B331 million in cash paid for purchase of commodities and Net cash generated acceptance of labor services, which driven by from/used in 481,803,616.13 1,123,152,616.75 -57.10% increase in payments for cotton; 2. YoY decrease operating activities of RM B222 million in cash received from sales of commodities and providing of labor services, which driven by decline in sales of products Net cash generated YoY decrease in payments for B-share repurchase from/used in 212,302,378.28 -288,801,161.03 173.51% and YoY increase in cash received from obtaining financing activities borrowings in the Reporting Period II Progress, Influence and Solutions with regard to Significant Events √ Applicable □ Not applicable The 28th M eeting of the 8th Board of Directors reviewed and approved ten proposals on 23 M ay 2019, including the Proposal of M eeting the Conditions for Public Issuance of A-share Convertible Corporate Bonds, the Proposal of Plan on Public Issuance of A-share Convertible Corporate Bonds and the Proposal of Preplan on Public Issuance of A -share Convertible Corporate Bonds. For details, please refer to the announcement (announcement No.: 2019-039) disclosed on www.cninfo.com.cn on 24 M ay 2019. The 3rd Extraordinary General M eeting of 2019 reviewed and approved ten proposals on 16 September 2019, including the Proposal of M eeting the Conditions for Public Issuance of A-share Convertible Corporate Bonds, the Proposal of Plan on Public Issuance of A-share Convertible Corporate Bonds, the Proposal of Preplan on Public Issuance of A-share Convertible Corporate Bonds and the Proposal of Change in Audit Institution. For details, please refer to the announcement (announcement No.: 2019-059) disclosed on www.cninfo.com.cn on 17 September 2019. The Company received the Acceptance Form on Application for CSRC Administrative License issued by CSRC (No. 192620) on 15 October 2019. For details, please refer to the relevant announcement (announcement No.: 2019-064) disclosed on www.cninfo.com.cn on 16 October 2019. Overview of significant events Disclosure date Announcement index 24 M ay 2019 Announcements on www.cninfo.com.cn The progress of relevant matters for public issuance of A-share Convertible Corporate 17 September 2019 Announcements on www.cninfo.com.cn Bonds 15 October 2019 Announcements on www.cninfo.com.cn Progress of any share repurchase: □ Applicable √ Not applicable 7 Lu Thai Textile Co., Ltd. Third Quarter Report 2019 (Summary) Progress of any reduction of the repurchased shares through centraliz ed bidding: □ Applicable √ Not applicable III Commitments that the Company’s Actual Controller, Shareholders, Related Parties, Acquirers, the Company Itself or Other Parties, Failed to Fulfill on Time during the Reporting Period □ Applicable √ Not applicable No such cases in the Reporting Period. IV Securities Investments □ Applicable √ Not applicable No such cases in the Reporting Period. V Wealth Manage ment Entrustment √ Applicable □ Not applicable Unit: RM B'0,000 Type of wealth Outstanding amount Funding source Principal Overdue amount management before maturity Other Self-funded 0 3,000 0 Trust finance products Self-funded 5,000 5,000 0 Total 5,000 8,000 0 High-risk wealth management entrustments with amounts that are individually significant, or with low security, low liquidity, or no protection of the principal: √ Applicable □ Not applicable Unit: RM B’0,000 Collecti Throu Overvie Refere Actual Type of Invest Expect on/paym Impair gh Any w and nce gain/lo wealth Fundin ment ed ent of ment prescri plan for index to Type of Princi Start End Way of annual ss in Trustee manage g with return gain/loss allowa bed further more trustee pal date date payback ized Report ment source princi (if in nce (if proced entrustm informat return ing product pal any) Reportin any) ure or ent ion (if (%) Period g Period not any) Granti Annual ng of payment Gopher 22 26 Fund trust of Asset Fixed-in Self-fu Dece Dece Tempora corporati 3,000 loans interests 8.50% 255 250.32 N/A Yes M anagemen come nded mber mber rily no on to and t Co., Ltd 2017 2019 HOM payment E of 8 Lu Thai Textile Co., Ltd. Third Quarter Report 2019 (Summary) CRED principal IT upon maturity Payment of Invest Trust 7 9 principal Avic trust Fixed-in Self-fu ment Tempora compan 5,000 M arch M arch and 8.00% 400 0 N/A Yes co. LTD come nded trust rily no y 2019 2020 interest assets upon maturity Total 8,000 -- -- -- -- -- -- 655 250.32 -- -- -- -- Wealth management entrustments with possible impairments including an expectedly unrecoverable principal: □ Applicable √ Not applicable VI Investments in Derivative Financial Instruments √ Applicable □ Not applicable Unit: RM B’0,000 Ending Relate Relation Impair investment Actual d-part Type ship Initial Purchased in Sold in ment Ending as % of gain/loss Counterpa y of Start Beginning with the investment End date Reporting Reporting allowa investme the in rty transac derivat date investment Compan amount Period Period nce (if nt Company’ Reporting tion or ive y any) s ending Period not net assets Forwa rd 11 Commerci Non-con exchan 19 June No 98,187.76 November 6,512.05 91,675.71 93,944.02 4,243.74 0.53% 776.34 al bank nected ge 2018 2019 settle ment Foreig n 23 Commerci Non-con 30 August No exchan 16,018.76 M arch 1,909.89 14,108.87 16,018.76 0 40.15 al bank nected 2019 ge 2018 option Forwa rd 28 Commerci Non-con exchan 10 M ay No 3,049.7 Septemb 1,610.11 1,439.59 3,049.7 0 50.04 al bank nected ge 2019 er 2018 transac tions 9 Lu Thai Textile Co., Ltd. Third Quarter Report 2019 (Summary) Total 117,256.22 -- -- 10,032.05 107,224.17 113,012.48 4,243.74 0.53% 866.53 Funding source Self-funded Legal matters involved (if applicable) N/A Disclosure date of board of directors 27 April 2018 announcement on approval of derivative 30 April 2019 investment (if any) Disclosure date of general meeting of shareholders announcement on approval of derivative investment (if any) The Company conducted derivatives products transaction in order for hedging. And the forward settlement hedging was operated by installments, with the relevant amount not more than the planned derivatives products transactions. And all derivatives products transaction was zero-deposit. M eanwhile, the Company had a complete risk control system for sufficient analysis and prevention of possible risks such as market risk, liquidity risk and credit risk, operation risk and risk of laws and regulation. 1. M arket risk: when the international and domestic economic situations change, the corresponding changes in exchange rates and interest rates may have an adverse impact on the financial derivatives transactions of the Company. Precautionary measures to be taken include: the Company chooses risk-controlled financial derivative tools with simple structure and good liquidity to carry out the hedging business, strictly controls the scale of financial derivatives trading by staged operations, and adjusts the strategy according to market changes in a timely manner. 2. Liquidity risk and credit risk: a credit risk arising from failure of the contractually due Company or counterparty in performing the contract due to liquidity or factors other than liquidity. Analysis of risks and control measures associated Precautionary measures to be taken include: the Company determines the upper limit of derivatives with derivative investments held in Reporting transaction amounts according to production and operation scale as well as foreign exchange income, Period (including but not limited to market risk, and conducts operations by stage according to the budget of future collections and disbursement. The liquidity risk, credit risk, operational risk, legal derivative trades are free of guarantee deposit and can still be guaranteed in performance after the risk, etc.) contract expires by means of extension and balance settlement etc. to prevent the Company from credit damages due to lack of liquidity. The Company selects financial institutions with strong capability and good reputation as a counterparty and signs standard derivative trading contracts to strictly control credit risk of the counterparty. 3. Operation risk: The derivatives had high specialty and complexity, so imperfect internal operation procedures, staffs and external events would make the Company to undertake risks during the transaction. Risk control measures: The Company promulgated strict authorization and approval system and perfect regulatory mechanism, fixed the operation procedures and approval procedures system to conduct derivative products transaction, implemented strict authorization and post checks and balances system, meanwhile, it improved the overall quality of relevant personnel through strengthening the professional ethics education and business training for them. Besides, it established the Syst em of Reporting the Abnormal Situation Timely so as to ensure to lower the operation risks to the maximum. 4. Risk of laws and regulation: 10 Lu Thai Textile Co., Ltd. Third Quarter Report 2019 (Summary) The Company conducted derivatives products transaction in strict accordance with relevant laws and rules. If there were no standard operation procedures and strict approval procedures, it was easy to cause compliant and regulatory risks existing in the validity and feasibility of contract, commitments and other legal documents signed. Risk control measures: The Company carefully studied and mastered laws, regulations and policies relevant to derivative products transaction, formulated internal control rules for the forward settlement hedging business, standardized the operation procedures. And strengthened the compliant examination on derivative products transaction business. The Company conducted derivative transaction business according to the relevant approval procedure, which was in line with relevant laws, regulations, the Company’s Articles of Association, the M anagement Rules for Derivative Transaction of Lu Thai Textile Co., Ltd., and the Proposal on the Plan of Lu Thai Textile Co., Ltd. for Derivative Transactions approved at the 17 th M eeting of the 8th Board of Directors on 25 April 2018 and the 26 th M eeting of the 8th Board of Directors on 29 April 2019, and performed relevant information disclosure responsibilities. 1. As of 30 September 2019, the Company held financial derivative worth USD6 million in totals, which was forward settlement of exchange executed in accordance with the contracts. The latest contract expiration date was 11 November 2019. Financial derivatives occupied 0.53 % of the net assets as at the period end. Changes in market prices or fair value of 2. In Q1~Q3 2019, the amount of maturing financial derivatives of the Company amounted to derivative investments in Reporting Period (fair USD165.0969 million which was executed as per the contract in full, which generated an income of value analysis should include measurement RM B8.6653 million. The delivery amount of forward settlement of exchange amounted to method and related assumptions and parameters) USD137.1132 million which generated an income of RM B7.7634 million; the delivery amount of foreign exchange options was USD23.5 million which generated an income of RM B0.4015 million. The delivery amount of foreign exchange transaction amounted to USD4.4837 million which generated an income of RM B0.5004 million. M ajor changes in accounting policies and specific accounting principles adopted for derivative No significant changes investments in Reporting Period compared to last reporting period The Company’s independent directors Zhou Zhiji, Bi Xiuli, Pan Ailing, Wang Xinyu and Qu Dongmei concerning conducting derivatives business, have issued the following professional advice: We are of the opinion that it will strengthen the Company’s competitiveness to use derivative transactions with focus on forward settlement and purchase as an effective tool to avoid foreign Opinion of independent directors on derivative exchange risks, to strengthen the relevant internal control and to carry out the loss and risk investments and risk control prevention measures so as to improve the operation and management. In conducting derivative transactions with focus on forward settlement and purchase, the Company follows a legal approval procedure, has sound relevant institutions and keeps the risks relatively controllable. No harm has been done to the interests of the Company’s shareholders. VII Communications with the Investment Community such as Researches, Inquiries and Inte rvie ws during the Reporting Period √ Applicable □ Not applicable Date Way of communication Type of communication Index to main information 11 Lu Thai Textile Co., Ltd. Third Quarter Report 2019 (Summary) party communicated 29 M arch 2019 By phone Individual Basic information of the Company VIII Irregularities in the Provision of Guarantees □ Applicable √ Not applicable No such cases in the Reporting Period. IX Occupation of the Company’s Capital by the Controlling Shareholder or Its Related Parties for Non-Operating Purposes □ Applicable √ Not applicable No such cases in the Reporting Period. Signature of the Chairman of the Board: Liu Zibin Lu Thai Textile Co., Ltd. 30 October 2019 12