GUANGDONG RIEYS GROUP COMPANY LTD.
INTERIM REPORT 2010
August 2010Guangdong Rieys Group Company Ltd.
Interim Report 2010
Section I Important Notice and Contents
I. Important Notice
The Board of Directors, the Supervisory Committee as well as directors, supervisors
and senior management of Guangdong Rieys Group Company Ltd. (hereinafter
referred to as the Company) confirm that there are no material omissions or errors that
would render any statement misleading and individually and collectively accept
responsibility for the correctness, accuracy and completeness of the contents of this
report.
None of directors, supervisors and senior management stated that he (she) could not
ensure the correctness, accuracy and completeness of the contents of the Interim
Report or have objection for this report.
Mr. Chen Hongcheng, Chairman of the Board, Ms. Chen Peixia, Chief Financial
Officer and Financial Principal hereby confirm that the Financial Report enclosed in
the Interim Report is true and complete.
The interim financial report 2010 of the Company has not been audited.
II. Contents
Section I Important Notices and Contents 2
Section II Company Profile 3
Section III Changes in Capital Shares and Particulars about Main Shareholders 5
Section IV Particulars about Directors, Supervisors and Senior Management 6
Section V Report of the Board of Directors 7
Section VI Significant Events 10
Section VII Financial Report (Un-audited) 12
Section VIII Documents Available for Reference 12Section II Company Profile
I. Basic information
(I) Legal Chinese Name:广东雷伊（集团）股份有限公司
Abbr. of Chinese Name: 雷伊
English Name of the Company: Guangdong Rieys Group Company Ltd.
Abbr. of English Name: Rieys
(II) Legal Representative: Mr. Chen Hongcheng
(III) Contact method of secretary of the Board and securities affairs representative:
Secretary of the Board Securities Affairs Representative
Name Xu Wei Chen Yaoji
Contact address 12/F of Orient Plaza, Dongmen Middle Road, Luohu District, Shenzhen
Tel 0755-82250045
Fax 0755-82251182
E-mail xw@200168.com jacobchen63@yahoo.com
(IV) Registered address: Meixin Industrial Park of Jun Bu Town, Puning, Guangdong
Office address: 12/F of Orient Plaza, Dongmen Middle Road, Luohu District,
Shenzhen
Post code: 518001
Company’s Internet Website: http://www.200168.com
E-mail of the Company: rieys@200168.com
(V) Newspapers Chosen for Disclosing the Information of the Company:
Securities Times and Hong Kong Ta Kung Pao
Internet Website Designated by CSRC for Publishing the Interim Report:
http://www.cninfo.com.cn
The Place Where the Interim Report is Prepared and Placed: BOD Office, 12/ F of
Orient Plaza, Dongmen Middle Road, Luohu District, Shenzhen
(VI) Stock Exchange Listed with: Shenzhen Stock Exchange
Short Form of the Stock: ST RIEYS-B
Stock Code: 200168
(VII) Other material
Registration code of corporate business license: 4400001000088
Registration code of tax: 445281231131833
Organization code: 23113183-3
II. Main financial data and indices
(I) Main financial data and indices in the report period
Unit: RMB Yuan
At the end of this report
period
At the end of last year
Increase/decrease of the end of report
period compared with the period-end of
the last year (%)Total assets 606,293,229.00 640,024,704.10 -5.27%
Owners’ equity (or shareholders’ equity) 338,008,555.28 349,348,058.06 -3.25%
Share capital 318,600,000 318,600,000 0
Net asset per share attributable to
shareholders of listed companies
1.06 1.10 -3.64%
The report period
The same period of last
year
Increase/decrease during the report
period compared with that of the last year
(%)
Operating revenue 79,628,557.04 73,925,080.31 7.72%
Operating profit -6,610,032.77 -19,308,145.81 -65.77%
Total profit -7,362,420.31 -19,753,705.64 -62.73%
Net profit -11,339,502.78 -20,461,569.66 -44.58%
Net profit after deducting non-recurring
gains and losses
-10,586,307.45 -21,962,117.51 -51.80%
Basic earnings per share -0.04 -0.06 -33.33%
Diluted earnings per share -0.04 -0.06 -33.33%
Net return on equity -3.35% -6.29% -46.74%
Net cash flow from operating activities 40,248,096.62 3,747,210.00 974.08%
Net cash flow from operating activities per
share
0.13 0.01 1200.00%
(II) Items of non-recurring gains and losses
Unit: RMB Yuan
Specific item Amount
Gains and losses from non-current asset disposal 2,600.00
Net non-operating incomes and expenses -754,987.54
Sub-total -752,387.54
Income tax expenses deductible from non-recurring gains and losses -3,197.47
Minority interest income 2,389.68
Total -753,195.33
(III) The net profit and net assets in the financial report prepared under PRC GAAP
are the same as those in the financial report prepared under IFRS.
(IV) Relevant financial indicesROE (%) EPS (RMB Yuan/share)
Fully diluted
Weighted
average
Basic EPS Diluted EPS
Net profit attributable to owners of parent company -3.35 -3.03 -0.04 -0.04
Net profit attributable to owners of parent company after
deducting non-recurring gains and losses
-3.13 -3.08 -0.03 -0.03
Section III Changes in Capital Shares and Particulars about Main
Shareholders
I. The share capital of the Company remained unchanged in the report period.
II. Particulars about shares held by main shareholders in the report period:
(Unit: Share)
Total shareholders at the period-end 15,979
Name of shareholders
Nature of
shareholders
Percentage
of
shareholding
Total number of
shares held
Non-tradable
shares held
Shares pledged
or frozen
Puning Shenghengchang Trade
Development Co., Ltd
Corporate
shares
36.99% 117,855,000 117,855,000 Pledged
SHENZHEN RISHENG INVESTMENT
CO., LTD.
Corporate
shares
10.68% 34,020,000 34,020,000 Pledged
SHANTOU LIANHUA INDUSTRIAL
CO., LTD.
Corporate
shares
3.81% 12,150,000 12,150,000 Pledged
Su Youhe B share 3.92% 6,061,344 0 Unknown
Name of shareholders
Nature of
shareholders
Percentage
of
shareholding
Total number of
shares held
Non-tradable
shares held
Shares pledged
or frozen
Xu Xinfen B share 1.14% 1,768,470 0 Unknown
LUO DONG HUI B share 0.91% 1,400,000 0 Unknown
Xu Hai B share 0.89% 1,375,200 0 Unknown
Taifook Securities Company
Limited-Account Client
B share 0.87% 1,347,459 0 Unknown
Xu Xinhu B share 0.74% 1,148,900 0 Unknown
NGAI KWOK PAN (Wei Guobin) B share 0.74% 1,145,816 0 Unknown
Particulars about shares held by the top ten shareholders not subject to trading moratoriumName of shareholder Number of tradable shares held Type of share
Su Youhe 6,061,344 B share
Xu Xinfen 1,768,470 B share
LUO DONG HUI 1,400,000 B share
Xu Hai 1,375,200 B share
Taifook Securities Company
Limited-Account Client
1,347,459 B share
Xu Xinhu 1,148,900 B share
NGAI KWOK PAN (Wei Guobin) 1,145,816 B share
Wu Fenqiang 1,015,600 B share
Liu Tingyu 737,691 B share
Chen Zhenqi 701,800 B share
Explanation on associated relationship
among the aforesaid shareholders or
acting-in-concert
There exists associated relationship among Puning Shenghengchang Trade Development
Co., Ltd, Shenzhen Risheng Investment Co., Ltd. and Shantou Lianhua Industrial Co., Ltd..
Other associated relationship is unknown.
Section IV Particulars about Directors, Supervisors and Senior
Management
I. In the report period, directors, supervisors and senior management of the Company
didn’t hold any stock and stock option of the Company or were given any restricted
shares.
II. In the report period, directors, supervisors and senior management of the Company
remained unchanged.
Section V Report of the Board of Directors
I. Discuss and analysis
2010 marks the first year after the Company has successfully transformed from a
traditional enterprise producing and selling garments to an enterprise engaging in both
garments and real estate. For the first six months of 2010, the Company achieved a
net profit attributable to shareholders of the listed company amounting to RMB -11.34
million, representing a loss reduction about RMB 9 million from RMB -20.46 million
at the corresponding period of last year. To be specific, in terms of the garment
business, the Company achieved an operating income reaching RMB 78.79 million,up by 6.59% from RMB 73,925,100 at the same period of last year. As for the real
estate business, RMB 18 million was input for preparations for real estate projects
(land area at 48 mu and construction area about 160,000 square meters), of which
planning has been finished and construction has begun.
The closing balance of monetary funds stood at RMB 10.6 million, up by 388.92%
from the opening balance of RMB 2.17 million. And the closing balance of other
receivables stood at RMB 72.62 million, down by 40.21% from the opening balance
of RMB 121.47 million. The sharp increase of monetary funds and decrease of other
receivables were mainly because the Company strengthened collection of goods
payment and other payments and it successfully collected some funds. The closing
balance of construction in process stood at RMB 4.86 million, up by 366.94% from
the opening balance of RMB 1.04 million. And the increase in construction in process
was due to fence building for business needs.
The Board of Directors believes that considering the actual situation of the Company,
it should put its focus on the real estate projects. As for the garment business, the
Company will maintain its current business scale and try to put as many as resources
to those real estate projects. Currently, the real estate projects are in smooth progress.
However, the overall construction progress is interrupted because planning
optimization is conducted in the planning period, which makes the planning period
much longer than planned, and it rains often where the projects are located in the past
months. As a result, the real estate projects may not be able to be completed and
settled within the year of 2010.
The Board of Directors also notices that in the report period, along with
implementation of various specific macro-control measures on house prices, the effect
of those macro-control measures became visible. Nevertheless, the Company is a
regional real estate developer aiming at cities of second and third scales. At present,
the Company focuses markets in Jieyang and Puning. Although the government is
strengthening its macro-control over the real estate market, the impact from
government macro-control measures on local real estate projects in Jieyang and
Puning is limited due to the reason that the two cities are densely populated by people
with a comparatively higher income and a stronger purchasing power. What’s more,
the two cities belong to cities of second and third scales, the original city scales are
limited and those cities are in the process to activate urbanization.
For the coming six months, the Company will try to do a good job in its garment and
real estate business and it will also reinforce its collection of goods payment and other
payments so as to ensure sufficient funds for real estate project development and its
being able to pay off loans borrowed from the Shenzhen branch of China
Construction Bank on time and obtained an interest reduction about RMB 10 million
from the bank. (For details about the interest reduction, please refer to Ⅶ Liability
Restructuring of the Section Ⅵ Significant Events of this report.)
II. Operation of the Company in the report period
(Ⅰ) Overall operation
Unit: RMB YuanItem Current period Same period of last year Increase/decrease
Total operating income 79,628,557.04 73,925,080.31 7.72%
Operating profit -6,610,032.77 -19,308,145.81 -65.77%
Net profit attributable to shareholders of the
listed company
-11,339,502.78 -20,461,569.66 -44.58%
1. The total operating income increased by a small margin as compared with the same
period of last year, which was mainly due to the sales income increase from garment
export and processing.
2. The operating profit registered a considerable loss reduction from the same period
of last year, which was mainly because: (1) the total operating income increased; (2)
administrative expenses dropped significantly year on year; and (3) some bad debts
were recovered.
3. The net profit attributable to shareholders of the listed company registered a
considerable loss reduction from the same period of last year because the operating
profit showed a significant loss reduction as compared with the corresponding period
of last year.
(Ⅱ) Main businesses classified according to industries
Unit: RMB Yuan
Item Operating income Operating cost Gross profit rate
Overseas sales of garments 72,348,209.67 55,862559.96 22.79%
Domestic sales of garments 20,344,021.98 14,137,278.63 30.51%
Sub-total 92,692,231.65 69,999,838.59 ——
Internal purchase and sales
offsetting
13,897,674.61 13,897,674.61 ——
Total 78,794,557.04 56,102,163.98 28.80%
(Ⅲ) No significant changes occurred in the profit breakdown, main business structure
and main business profitability of the Company during the report period.
(Ⅳ) There existed no other operating activities that produced a significant influence
on the profit in the report period.
(Ⅴ) No investment gains of single stock joint company influenced the net profit of
the Company greatly.
(Ⅵ) Difficulties and problems met in operation
Besides problems mentioned in the discussion and analysis above, the Company also
encountered the following difficulties and problems during the report period:
1. The capital issue is still the biggest problem for the Company’s development.
Although the Company improved its asset quality through asset exchange and reached
a liability restructuring agreement with banks in the first half, which was bringing theoperation of the Company back to the right track, self-owned funds of the Company
could only maintain the existing business scale and were unable to promote a rapid
development of the Company. Concerning the Company’s current business, the
foundation of the real estate business lies in its land resource reserves available for
constant development. Therefore, the Company is trying every possible means to
solve the capital problem so that it can summon up necessary land resource reserves
as soon as possible.
2. The real estate sector is a whole new field for the Company. The current human
resource reserve of the Company cannot satisfy the current business needs. During the
report period, the Human Resource Department of the Company satisfied the business
needs through recruitment and specific trainings, but in the long run, the Company
lacks a group of professionals with real estate talent. Therefore, one of the Company’s
priorities in the coming months is to set up a management team for the Company’s
real estate business.
3. Currently, the Company engages in garments and real estate, which are not very
related, and this is not good for resource allocation within the Company. The
Company’s real estate business has just begun, so it is not a good time for the
Company to quickly withdraw from the garment sector. Therefore, how to shift from
an enterprise engaging in both garments and real estate to an enterprise mainly
engaging in real estate is also a key task for the Company in the months to come.
III. Investments in the report period
(I) In the report period, the Company did not raise any funds, nor there existed such
funds carried down from the previous periods to the report period.
(II) In the report period, the Company did not make any significant investment with
non-raised proceeds.
IV. Statement on loss in the net profit incurred in the period from the year-begin to the
end of the next report period
Real estate projects developed by the Company are still in the development and
construction phase and they could not be completed and settled within the year 2010.
As such, the period from Jan. to Sept. 2010 may continue to see a loss of the
Company. The net profit for the period from Jan. to Sept. 2010 is estimated to stand at
RMB -20 million, representing a loss reduction about RMB 8 million from the net
profit of RMB -28,459,689.00 at the same period of last year.
V. Statement given by the Board of Directors on the matters mentioned in the
non-standard opinion for the 2009 annual financial report
Asia (Group) Accounting Firm, the accounting firm engaged by the Company for the
2009 annual audit, issued an unqualified audit report with pinpointed matters for the
2009 Annual Financial Report of the Company.
The said pinpointed matters were stated as, “In the year 2009, net profit attributable to
owners of the parent company stood at RMB 3,726,700 and at RMB -48,631,600 after
deducting non-recurring gains and losses, which represented a successive loss of themain business for a third year. In 2010, the main business scope of the Company was
transformed from garments to both garments and real estate development. But there
still existed uncertainty whether the real estate business would generate a profit or not.
The Company had disclosed in detail improvement measures to be taken in the notes
to the financial statements, but there still existed a significant uncertainty about the
going-concern ability of the Company. The statements above will not affect the
unqualified audit opinion that has been issued.”
The Board of Directors is of the opinion that the biggest obstacle to the Company’s
development has been removed through the asset exchange at the end of 2009, which
greatly improves its asset quality. Although the Company is still in loss in the report
period, a loss reduction about RMB 9 million has been achieved as compared with the
loss about RMB 20 million in the same period of last year. As is shown, the loss is
decreasing. Meanwhile, the traditional business of garments also grows year on year.
The real estate projects in Puning currently developed by the Company have
completed relevant planning and started construction. Due to periodicity of real estate
development, those projects may not bring any profit to the Company in the short run.
To sum up, the Company’s business is beginning to turn in a positive direction and its
continual operation ability is fully guaranteed.
Section VI Significant Events
I. Actual corporate governance in report period
In accordance with the Code of Corporate Governance for Listed Companies issued
by CSRC, as well as other relevant laws and regulations, the Company established
and improved step by step the Shareholders’ General Meeting, the Board of Director,
the Supervisory Committee and other governance mechanism. Actuality of corporate
governance of the Company basically in line with requirements of normative
documents such as Code of Corporate Governance for Listed Companies.
In the report period, in accordance with relevant regulations, the Company formulated
System on Training of Securities Business for Directors, Supervisors and Senior
Executives, System on Responsibility for Serious Mistakes in Disclosure of the
Annual Report, System on Record of Insider, Administrative System on Report and
Use of External Information and Management on Stock Holding and Trading of the
Company by Directors, Supervisors and Senior Executives further perfect corporate
governance structure.
In the report period, the Company conducted self-examination on information
disclosure and formulated relevant rectification plan in accordance with Notice on
Carrying Out Special Activity of Examination of Information Disclosure of Listed
Companies issued by CSRC Guangdong Bureau.
II. The Company did not implement profit distribution or capitalization of public
reserves in 2009
The Company will not distribute profit or transfer public reserves to share capita in
the first half year of 2010.III. No significant lawsuit or arbitration occurred in the report period or in previous
period lasting to the report period.
IV. In the report period, the Company held no equity of other listed companies,
financial enterprises such as commercial banks, securities companies, insurance
companies, trust companies and futures companies, or companies to be listed.
V. No significant assets acquisition, sales or enterprise merger occurred in the report
period or in the previous period lasting to report period.
VI. There was no significant related transaction in the report period.
VII. Significant Contract and fulfillment in the report period
(I) Fulfillment of debt reorganization contract
On 20 Apr. 2010, the Company and China Construction Bank Shenzhen Branch
signed Agreement on Interest Deduction (Hereinafter refer to as “Shenzhen Branch”),
in which reached agreement on reorganization of loan totaling RMB 96,800,055.36
from Shenzhen Branch and relevant interest.
The Company will repay the principal in six installments within two years, that is: (1)
to return RMB 9,3855,055.36 in late Nov. 2010; (2) to return RMB 9,415,000.00 in
late Dec. 2010; (3) to return RMB 19,500,000.00 in late Mar. 2011; (4) to return RMB
19,500,000.00 in late Jun. 2011; (5) to return RMB 19,500,000.00 in late Sep. 2011;
(6) to return RMB 19,500,000.00 in late Dec. 2011. In case that the Company return
the fund as the above repayment scheme, Shenzhen Branch will deduct all loan
interest till the discharge date. In case that the Company fail to repay the debt as
schemed, the interest deduction will be invalidated. Shenzhen Branch was entitled to
claim the unpaid interest since the loan issue date.
On 26 Apr. 2010, the Company received requisition on interest deduction from
Shenzhen Branch, in which Shenzhen Branch decided to deduct loan interest of RMB
4,919,585.47, accumulatively deducted interest of RMB 4,919,585.47.
The Company will repay the loan as the above stated time and amount, and Shenzhen
Branch will confirm interest deduction by written once repay a installment loan, and
the Company will disclose in time. The Company will record the deducted interest
into income from debt reorganization in 2011 in case that the Company pay off the
principal of loan as stated in Agreement on Interest Deduction.
(II) In the report period, the Company did not sign any contract for holding in trust,
contracting and leasing assets of other companies.
(III) The Company did not provide any guarantee for external parties in the report
period.
VIII. Special explanation and independent opinions of independent directors on
related parties’ fund occupation and external guarantees provided by the Company
There was no non-operating capital occupation by controlling shareholder or otherrelated parties.
There was no guarantees occurred in the report period or carried down from the
previous years to the report period. There was no guarantee for holding subsidiary
companies when the Company released from guarantees for loans of controlling
subsidiary of the Company-Shenzhen Rieys Industrial Co., Ltd
IX. The Company and the shareholders holding over 5% (including 5%) shares of the
Company had no commitments in the report period.
X. Particulars about reception of research, investigations and visit in the report period
Reception
time
Reception place Reception way Visitor
Main discussion and materials provided
by the Company
1 Feb. 2010
Office of the Board
of Directors
By telephone Shareholder
Inquiring about basic situation of the
Company
11 Jun. 2010
Office of the Board
of Directors
By telephone Shareholder
Inquiring about basic situation of the
Company
23 Jun. 2010
Office of the Board
of Directors
By telephone Shareholder
Inquiring about basic situation of the
Company
Section VII Financial Report (Unaudited)
I. Financial Statements (attached behind)
II. Notes to Financial Statements (attached behind)
Section VIII Documents Available for Reference
I. Text of Interim Report 2010 carrying the signature of Legal Representative;
II. Text of financial report with the signatures and seals of Legal Representative and
CFO;
III. Texts of all documents of the Company ever disclosed publicly on newspapers
designated by CSRC as well as the originals of all the public notices.
The report is prepared in both Chinese and English. Should there be any difference in
interpretation between the two versions, the Chinese version shall prevail.
Guangdong Rieys (Group) Company Ltd.
Chairman of the Board of Directors: Chen Hongcheng
23 Aug. 2010Consolidated Balance Sheet
30 Jun. 2010
Prepared by Guangdong Rieys (Group) Company Ltd. Unit: RMB Yuan
Items Note V Closing balance
Opening
balance
Items Note V Closing balance
Opening
balance
Current assets: Current liabilities:
Monetary funds (I) 10,602,651.10 2,168,571.06 Short-term loans (XIII) 185,000,055.36 213,583,282.66
Settlement fund reserve
Loans from central
bank
Dismantle fund
Deposits received and
hold for others
Transaction financial
asset
Call loan received
Notes receivable
Held-for-trading
financial liabilities
Account receivable
(II)
71,704,328.58 56,358,542.78
Notes payable
Advances to suppliers
(III)
59,195,070.98 63,583,703.28
Accounts payable
(XIV)
4,036,490.81 4,521,832.85
Premium receivables
Advance from
customers (XV)
63,094.69 570,447.24
Receivables from
reinsurers
Financial assets sold
under agreements to
repurchaseReinsurance contract
reserve receivables
Fees and commissions
payable
Interest receivable
Payroll payable
(XVI)
1,784,800.61 2,666,808.00
Dividend receivable
Taxes payable
(XVII)
7,737,295.27 8,406,437.19
Other account
receivable (IV)
73,610,763.78 121,470,760.04
Interest payable
(XVIII)
52,947,946.57 46,682,049.12
Financial assets
purchased under
agreements to resell
Dividend payable
Inventories
(V)
193,307,991.66 195,246,476.67
Other payables
(XIX)
5,654,388.88 7,721,559.81
Non-current assets due
within 1 year (VI)
5,000,000.00 5,000,000.00
Amount due to
reinsurance
Other current assets
9,853.19 53,335.50
Insurance contract
provision
Entrusted trading of
securities
Amount payables under
security underwriting
Non-current liabilities
due within 1-year
Other current liabilities
Total current assets
413,430,659.29 443,881,389.33
Total current liabilities:
257,224,072.19 284,152,416.87
Non-current assets: Non-current liabilities:
Loans and advance Long-term loans
Available for sale
financial assets
Bonds payable
Held to maturity
investments
Long-term payables
Long-term account
receivable
-
Specific payables
Long-term equity
investment
-
Provision for liabilities
(XX)
4,919,585.47
Investment real estates
Deferred taxes
liabilities
Fixed assets
(VII)
109,053,953.67 113,529,392.33
Other non-current
liabilities (XXI)
500,000.00 500,000.00
Construction in
progress (VIII)
4,858,812.22 1,040,571.59
Total non-current
liabilities
5,419,585.47 500,000.00Engineering materials
(IX)
1,530,000.00 1,530,000.00
Total liabilities
262,643,657.66 284,652,416.87
Disposal of fixed assets Shareholders’ equity:
Production
biological assets
Share capital
(XXI)
318,600,000.00 318,600,000.00
Oil-gas assets
Capital surplus
(XXIII)
52,129,496.58 52,129,496.58
Intangible assets
(X)
67,192,938.57 67,944,705.09
Less: Treasury Stock
R&D expenses Specific reserve
Goodwill Surplus reserve (XXIV)
86,036,260.20 86,036,260.20
Long-term deferred
expenses
General risk provision
Deferred tax assets
(XI)
10,226,865.25 12,098,645.76
Retained earnings
(XXV)
-118,757,201.5
0
-107,417,698.7
2
Other non-current
assets
Foreign exchange
difference
Total non-current assets
192,862,569.71 196,143,314.77
Total shareholders' equity
attributable to holding
company
338,008,555.28 349,348,058.06
Minority interest
5,641,016.06 6,024,229.17
Total shareholder's equity
343,649,571.34 355,372,287.23
Total assets
606,293,229.00 640,024,704.10
Total liabilities &
shareholder's equity
606,293,229.00 640,024,704.10
Balance Sheet of Parent Company
30 Jun. 2010
Prepared by Guangdong Rieys (Group) Company Ltd. Unit: RMB Yuan
Note XI Closing balance
Opening
balance
Items Note XI Closing balance
Opening
balance
Current Assets: Current liabilities:
Monetary funds
7,691,509.95 647,412.49
Short-term borrowings
170,000,055.36 192,765,650.75
Transaction financial
assets
Transaction financial
liabilities
Notes receivable
Notes payable
-
Accounts receivable
(I)
2,069,332.86 11,421,549.96
Account payable
19,940.47 102,434.92Accounts paid in
advance
- 4,039,432.45
Account received in
advance
-
Interest receivable
Accounts received in
advance
165,406.69 428,362.11
Dividend receivable
Employee’s
compensation payable
548,186.82 2,235,632.14
Other accounts
receivable (II)
121,648,989.46 149,219,951.35
Taxes payable
48,285,639.83 42,298,670.85
Inventories
774.42 3,884,313.41
Interest payable
-
Non-current assets
due within 1 year
5,000,000.00 5,000,000.00
Dividend payable
82,400,811.26 88,842,039.66
Other current assets
Other accounts
payable
Non-current liabilities
due within 1 year
Total current assets
136,410,606.69 174,212,659.66
Other current
liabilities
301,420,040.43 326,672,790.43
Non-current assets: Non-current liabilities:
Available for sale
financial assets
Long-term
borrowings
Held to maturity
investments
Bonds payable
Long-term account
receivable
Long-term payables
Long-term equity
investment (III)
250,832,508.68 250,832,508.68
Specific purpose
account payables
Investing property
Accrued liabilities
4,919,585.47
Fixed asset
101,315,948.95 105,415,799.26
Deferred tax
liabilities
Project in
construction
4,858,812.22 1,040,571.59
Other non-current
liabilities
Engineering material
1,530,000.00 1,530,000.00
Total non-current
liabilities
4,919,585.47
Fixed asset disposal
Total liabilities
306,339,625.90 326,672,790.43
Bearer biological
asset
Shareholders’ equity
Oil assets Share capital318,600,000.00 318,600,000.00
Intangible assets
67,192,938.57 67,944,705.09
Capital surplus
52,129,496.58 52,129,496.58
Development
expense
Less: Treasury Stock
Goodwill Special reserve
Long-term expense to
be apportioned
Surplus reserve
86,036,260.20 86,036,260.20
Deferred tax assets
2,366,374.16 2,513,148.55
General risk provision
Other non-current
assets
Retained earnings
-198,598,193.41 -179,949,154.38
Total of non-current
assets
428,096,582.58 429,276,733.17
Total shareholder’s
equity
258,167,563.37 276,816,602.40
Total assets
564,507,189.27
603,489,392.83
Total liabilities and
shareholder’s equity
564,507,189.27 603,489,392.83
Consolidated Income Statement
Jan.-Jun. 2010
Prepared by Guangdong Rieys (Group) Company Ltd. Unit: RMB Yuan
Items Note V In current period The same period of last year
I. Total operation income 79,628,557.04 73,925,080.31
Including: Sales income (XXVI) 79,628,557.04 73,925,080.31
Interest income
Premium income
Handling charges and commission income
II. Total operation cost 86,238,589.81 95,080,642.71
Including: Cost of sales (XXVI) 56,902,691.96 53,784,803.97
Interest expenses
Handling charges and commission expenses
Surrender value
Net amount of claims
Net amount of insurance contract reserve
withdrawn
Expenditure on policy dividends
Reinsurance premium expenses
Taxes and associate charges 58,049.75 83,104.87
Selling expenses 6,538,427.31 7,787,001.86Administrative expenses 14,330,786.24 18,364,689.87
Financial expenses (XXVI) 13,225,200.36 12,182,998.38
Impairment loss (XXVIII) -4,816,565.81 2,878,043.76
Add: gain from change in fair value (“-” means loss)
Gain from investment (“-” means loss) - 1,847,416.59
Including: income form investment in
affiliated enterprise and joint ventures - 1,847,416.59
Foreign exchange difference (“-” means loss)
III. Operation profit (“-” means loss) -6,610,032.77 -19,308,145.81
Add: non-operation income (XXIX) 58,912.39 34,489.22
Less: non-business expense (XXX) 811,299.93 480,049.05
Including: loss from non-current asset disposal
IV. Total profit (“-” means loss) -7,362,420.31 -19,753,705.64
Less: income tax expense (XXXI) 4,360,295.57 729,025.84
V. Net profit (“-” means loss) -11,722,715.88 -20,482,731.48
Attributable to owners of parent company -11,339,502.78 -20,461,569.66
Minority interest -383,213.10 -21,161.82
VI. Earnings per share
(I) Basic earnings per share (XXXII) -0.04 -0.06
(II) Diluted earnings per share (XXXII) -0.04 -0.06
VII. Other composite income
VIII. Total composite income
Attributable to owners of parent company
Minority interest
In case that there are enterprise combination under the same control in this period, net profit realized by the
combined enterprise before combination was RMB 0
Income Statement of Parent Company
Jan.-Jun. 2010
Prepared by Guangdong Rieys (Group) Company Ltd. Unit: RMB Yuan
Items Note XI In current period The same period of last year
I. Total operation income (IV) 8,823,130.70 321,719.23
Including: Sales income (IV) 8,261,093.28 332,946.08
Taxes and associate charges
Selling expenses 86,111.28 5,974.00
Administrative expenses 7,773,965.87 6,098,698.85
Financial expenses 11,026,145.09 10,028,010.23
Asset impairment loss -587,097.57
Add: gain/(loss) from changes in fair value (“-”means loss)
Investment income (“-” means loss)
Including: income form investment in affiliated
enterprises and joint stock enterprises
II. Operation profit (“-” means loss) -17,737,087.25 -16,143,909.93
Add: non-operation income 16,218.01 10.00
Less: non-business expense 781,395.40 50,793.20
Including: loss from non-current asset disposal
III. Total profit (“-” means loss) -18,502,264.64 -16,194,693.13
Less: income tax expense 146,774.39
IV. Net profit (“-” means loss) -18,649,039.03 -16,194,693.13
V. Earnings per share
(I) Basic earnings per share -0.06 -0.05
(II) Diluted earnings per share -0.06 -0.05
VI. Other composite income
VII. Total composite income
Consolidated Cash Flow
Jan.-Jun. 2010
Prepared by Guangdong Rieys (Group) Company Ltd. Unit: RMB Yuan
Items Note V In current period
The same period
of last year
I. Cash flows for operating activities:
Cash received from sales of goods or rending of services 63,775,418.69 92,894,927.00
Cash received on deposits and from banks and other financial
institutions
Net increased cash received on borrowings from central bank
Cash received on placements from other financial institutions
Premium received
Cash received from reinsurance
Net increased amount received on policyholder deposit and investment
Cash received from disposal of held for trading financial assets
Interests, handling charges and commission received
Cash received on placements from bank, net
Cash received under repurchasing, net
Refund of tax and fare received 7,107,735.16 5,420,704.00
Other cash received relating to operating activities (XXXIII) 77,564,525.41 10,046,829.00
Sub-total of cash inflows 148,447,679.26 108,362,460.00
Cash paid for goods and services 48,850,254.47 67,802,550.00
Loans and advances drawn
Cash paid to central bank, banks and other financial institutions, netClaims paid
Interests, handling charges and commission paid
Dividends paid to policyholders
Cash paid to and on behalf of employees 12,872,850.17 14,680,554.00
Tax and fare paid 5,222,764.97 3,119,923.00
Other cash paid relating to operating activities (XXXIII) 41,253,713.03 19,012,223.00
Sub-total of cash outflows 108,199,582.64 104,615,250.00
Net cash flow from operating activities 40,248,096.62 3,747,210.00
II. Cash Flows from Investment Activities:
Cash received from return of investments 2,000,000.00
Cash received from investment income
Net cash received from disposal of fixed assets, intangible assets and
other long-term assets
2,600.00 3,398,849.00
Proceeds from sale of subsidiaries and other operating units 1.00
Other cash received relating to investment activities
Sub-total of cash inflows 2,002,600.00 3,398,850.00
Cash paid for acquiring fixed assets, intangible assets and other
long-term assets
4,228,920.71 3,586,538.00
Cash paid for acquiring investments
Net increase in pledged loans
Net cash used for acquiring subsidiaries and other operating units
Other cash paid relating to investment activities
Sub-total of cash outflows 4,228,920.71 3,586,538.00
Net cash flows from investing activities -2,226,320.71 -187,688.00
III. Cash Flows from Financing Activities:
Cash received from absorbing investment
Including: Cash received by subsidiaries from increase in minority
interests
Cash received from borrowings 15,000,000.00
Cash received from issuing debentures
Other proceeds relating to financing activities
Sub-total of cash inflows 15,000,000.00
Cash paid for settling debts 28,583,227.30 16,000,000.00
Cash paid for distribution of dividends or profit or reimbursing interest 1,004,468.57 1,688,567.00
Including: dividends or profit paid by subsidiaries to minority interests
Other cash payments relating to financing activities
Sub-total of cash outflows 29,587,695.87 17,688,567.00
Net cash flows from financing activities -29,587,695.87 -2,688,567.00
IV. Effect of foreign exchange rate changes on cash and cash equivalents
V. Net increase in cash and cash equivalents 8,434,080.04 870,955.00
Add: beginning balance of cash and cash equivalents 2,168,571.06 13,151,057.00VI. Closing balance of cash and cash equivalents 10,602,651.10 14,022,012.00
Cash Flow of Parent Company
Jan.-Jun. 2010
Prepared by Guangdong Rieys (Group) Company Ltd. Unit: RMB Yuan
Items Note V
In current
period
The same period of
last year
I. Cash flows from operating activities
Cash received from sales of goods or rending of services 18,175,347.80 16,283,024.00
Taxes and fares refund
Other cash received from operating activities 50,806,436.58 7,618,374.00
Sub-total of cash inflows 68,981,784.38 23,901,398.00
Cash paid for goods and services 4,064,128.79 2,067,618.00
Cash paid to and on behalf of employees 1,447,760.61 1,221,506.00
Tax and fare paid 3,200,184.38 204,480.00
Other cash paid relating to operating activities 28,489,276.12 15,217,721.00
Sub-total of cash outflows 37,201,349.90 18,711,325.00
Net cash flow from operating activities 31,780,434.48 5,190,073.00
II. Cash Flows from Investment Activities:
Cash received from return of investments 2,000,000.00
Cash received from investment income
Net cash received from disposal of fixed assets, intangible assets
and other long-term assets 48,000.00
Proceeds from sale of subsidiaries and other operating units 1.00
Other cash received relating to investment activities
Sub-total of cash inflows 2,000,000.00 48,001.00
Cash paid for acquiring fixed assets, intangible assets and other
long-term assets 3,818,240.63
Cash paid for acquiring investments
Net cash used for acquiring subsidiaries and other operating units
Other cash paid relating to investment activities
Sub-total of cash outflows 3,818,240.63
Net cash flows from investing activities -1,818,240.63 48,001.00
III. Cash Flows from Financing Activities:
Cash received from absorbing investment
Cash received from borrowings
Other proceeds relating to financing activities
Sub-total of cash inflows
Cash paid for settling debts 22,765,595.39 1,000,000.00
Cash paid for distribution of dividends or profit or reimbursing
interest 152,501.00 1,660,740.00Other cash payments relating to financing activities
Sub-total of cash outflows 22,918,096.39 2,660,740.00
Net cash flows from financing activities -22,918,096.39 -2,660,740.00
IV. Effect of foreign exchange rate changes on cash and cash
equivalents
V. Net increase in cash and cash equivalents 7,044,097.46 2,577,334.00
Add: beginning balance of cash and cash equivalents 647,412.49 1,602,714.00
VI. Closing balance of cash and cash equivalents 7,691,509.95 4,180,048.0023
Consolidated Statement of Changes in Owners’ Equity
Prepared by Guangdong Rieys (Group) Company Ltd. Jan.-Jun. 2010 Unit: RMB Yuan
Items
Amount for the current period Amount of last year
Owners’ equity attributable to parent company
Minority
interest
Total
owners’
equity
Owners’ equity attributable to parent company
Minority
interest
Total
owners’
equity
Share
capital
Capital
reserve
Less:
treasury
stock
Surplu
s
public
reserve
General
risk reserve
Retained
profits
Other
s
Share
capital
Capital
reserve
Less:
treasury
stock
Surplus
public
reserve
General
risk
reserve
Retained
profits
Oth
ers
I. Balance at the end of
last year
318,600
,000
52,129,
497
86,036,
260
-107,417
,699
6,024,22
9
355,372,2
87
318,600,
000
52,129,
497
86,036,
260
-111,144,
440
6,487,92
1
352,109,238
Add: change of
accounting policy
Correction of errors in
previous periods
II. Balance at the
beginning of this year
318,600
,000
52,129,
497
86,036,
260
-107,417
,699
6,024,22
9
355,372,2
87
318,600,
000
52,129,
497
86,036,
260
-111,144,
440
6,487,92
1
352,109,238
III. Increase/decrease of
amount in this year (“-”
means decrease)
-11,339,
503
-383,213
-11,722,7
16
-20,461,5
70
-21,162
-20,482,732
(I) Net profit
-11,339,
503
-383,213
-11,722,7
16
-20,461,5
70
-21,162
-20,482,732
(II) Gain/loss listed to24
owners’ equity directly
1. Net amount of changes
in fair value of financial
assets available for sale
2. Effect on changes in
other owners’ equity of
invested units under
equity method
3. Effect on income tax
related to items listed to
owners’ equity
4. Others
Subtotal of (I) and (II)
-11,339,
503
-383,213
-11,722,7
16
-20,461,5
70
-21,162
-20,482,732
(III) Capital input and
reduction of owners
1. Input capital of owners
2. Amount of stock
payment included in
owners’ equity
3. Others
(IV) Profit distribution
1. Withdrawing surplus
public reserve
2. Withdrawing general25
risk reserve
3. Distribution to owners
(or shareholders)
4．Others
(V) Internal carrying
forward of owners’
equity
1. New increase of
capital (or share capital)
from capital reserves
2. Converting surplus
reserves to capital (or
share capital)
3. Surplus reserves make
up losses
4. Others
IV. Balance at the end of
this period
318,600
,000
52,129,
497
86,036,
260
-118,757
,202
5,641,01
6
343,649,5
71
318,600,
000
52,129,
497
86,036,
260
-131,606,
010
-
6,466,75
9
331,626,50626
Statement of Changes in Owners’ Equity of Parent Company
Prepared by Guangdong Rieys (Group) Company Ltd. Jan.-Jun. 2010 Unit: RMB Yuan
Items
Amount for the current period Amount of last year
Paid-in capital
(or share
capital)
Capital
reserve
Less:
treasury
stock
Surplus
public
reserve
Retained
profit
Total owners’
equity
Paid-in capital
(or share
capital)
Capital
reserve
Less:
treasury
stock
Surplus
public
reserve
Retained
profit
Total owners’
equity
I. Balance at the end of last year 318,600,000 52,129,497
86,036,26
0
-179,949,
154
276,816,603
318,600,000
52,129,497
-
86,036,26
0
-134,303,
031
322,462,726
Add: change of accounting policy
Correction of errors in previous periods
II. Balance at the beginning of this year 318,600,000 52,129,497
-
86,036,26
0
-179,949,
154
276,816,603
318,600,000
52,129,497
-
86,036,26
0
-134,303,
031
322,462,726
III. Increase/decrease of amount in this year (“-”
means decrease)
-18,649,0
39
-18,649,039
-16,194,6
93
-16,194,693
(I) Net profit
-18,649,0
39
-18,649,039
-16,194,6
93
-16,194,693
(II) Gain/loss listed to owners’ equity directly
1. Net amount of changes in fair value of
financial assets available for sale
2. Effect on changes in other owners’ equity of
invested units under equity method
3. Effect on income tax related to items listed to
owners’ equity27
4. Others
Subtotal of (I) and (II)
-18,649,0
39
-18,649,039
-16,194,6
93
-16,194,693
(III) Capital input and reduction of owners
1. Input capital of owners
2. Amount of stock payment included in owners’
equity
3. Others
(IV) Profit distribution
1. Withdrawing surplus public reserve
3. Distribution to owners (or shareholders)
4．Others
(V) Internal carrying forward of owners’ equity
1. New increase of capital (or share capital) from
capital reserves
2. Converting surplus reserves to capital (or
share capital)
3. Surplus reserves make up losses
4. Others
IV. Balance at the end of this period 318,600,000 52,129,497
-
86,036,26
0
-198,598,
193
258,167,564
318,600,000
52,129,497
-
86,036,26
0
-150,497,
724
306,268,03328
GUANGDONG RIEYS (GROUP) JOINT-STOCK
COMPANY
For the First Half of Year 2010
Notes to the Financial Statements
I. General information
Guangdong Rieys (Group) Joint-stock Company(hereinafter referred to as “the Company”) is a
listed company established by five enterprises including Puning Haicheng Industrial Co.,
Ltd(which changed its name to Shenzhen Shenghengchang Industrial Co., Ltd when it relocated to
Shenzhen,and then its name changed to Guangzhou Shenghengchang Investment Co., Ltd in 2007,
in 2008 this company was renamed to Guangzhou Shenghengchang Trade Development Co., Ltd,
in January 28, 2010 this company was renamed to Puning Shenghengchang Trade Development
Co., Ltd.), original sino-foreign cooperated enterprise of Hongxing Company. under approval of
Guangdong Economic System Reform Committee (1997) No. 113 on November 17, 1997 after
joint stock system restructure based on Puning Hongxing Textile and Apparel Production Factory
Co., Ltd., which originally was a sino-foreign joint venture. The registered capital of the Company
is RMB80,000,000 when established, which divided into 80,000,000 shares of RMB1.00 each.
In March 1999, after the approval of the shareholders’ general meeting, the Company declared a
Bonus Issue of 3.5 shares per 10 shares based on the total number of shares accrued in the register
as at December 31, 1998 (80 million shares), making the registered capital increased to
108,000,000 shares.
The Company issued 60,000,000 shares of foreign invested stock domestically listed (“Stock B”)
for foreign investors on October 17, 2000, and issued 9,000,000 shares of Stock B for exercise of
over-allotment options during the period from October 27 to November 22, 2000 in accordance
with approval of ZJFXZ (2000) No. 133 issued by China Bond Supervision Management
Committee on September 29, 2000. The registered capital of the Company increased to
RMB177,000,000 after issuance of Stock B, which divided into 177,000,000 shares of RMB1.00
each. The registered capital of the Company increased to 318,600,000 after years of bonus
distribution and transfer increase in paid-in capital, which divided into 318,600,000 shares of
RMB1.00 each.
As of December 31, 2009, the Company’s total share capital was 318,600,000 shares, including
164,025,000 non-tradable legal shares (representing 51.48% of total shares and 154,575,000
domestic listed foreign shares (stock B) (representing 48.52% of total shares).
The Company and its subsidiaries (hereinafter referred to as “the Group”)’s main scopes of
business are development of real estates, manufacture, process and sales of various kinds of
clothes including suit, fashion clothing, uniform, and knit goods, sales of industrial material for
production, hardware, chemical product, daily necessities, furniture, arts and crafts and
agricultural product and etc. (excluding commodities for exclusive sales, special control or
monopolization) and various kinds of investment.
II. Principal accounting policies and estimates and previous errors29
(1) Basis for the preparation
The consolidated financial statements of the Company and its subsidiaries are prepared based
on assumption of the Company’s continuing operations, according to transactions and events
actually occurred, and based on the following important accounting policies and accounting
estimates.
(2) Statement of complying with Accounting Standards for Business Enterprises
The financial statements prepared by the Company meet the requirements of "Accounting
Standards for Business Enterprises - Basic Standards" issued by the Ministry of Finance on
February 15, 2006 and 38 special accounting standards, as well as application guidance of the
accounting standards for business enterprise, interpretation of the accounting standards for
business enterprise and other relevant regulations (hereafter referred as “Accounting Standard for
Business Enterprise”), and truly and completely reflect the financial conditions, operation results
and cash flow of the Company.
In addition, the Group's financial statements also comply with the disclosure requirements on
financial statements and notes thereof in “Compilation Rules for Information Disclosures by
Companies That Offer Securities to the Public No.15 - General Provisions for Financial Reports”
(hereinafter referred to as "the No. 15 ") amended by China Securities Regulatory Commission
(hereinafter referred to as "SFC") in 2010.
(3) Fiscal year
The fiscal year of the Company is the solar calendar year, which is from January 1 to
December 31.
(4) Recording currency
Recording currency is RMB.
(5) Accounting treatment for business combinations under the common control and not
under the common control
1. Business combination under the common control
Business combination under the common control refers to that parties involved in the merger
are subject to the ultimate control of the same party or same multi parties before & after the
merger and such control is not temporary.
Assets and liabilities acquired by merging parties in a business combination are measured at
the book value of the combined parties at the merge date.Upon any difference between book value
of net assets obtained by merging parties and book value the merging price they pay (or the
aggregate nominal amount of issued shares), it should adjust the capital surplus (share premium),
and if capital surplus (share premium) isn’t sufficient to dilute, then adjust retained
earnings.Merger date refers the date that the merging parties actually gain the control of the
combined parties.
2. Business combination not under the common control
Business combination not under the common control refers to that parties involved in the
merger are not subject to the ultimate control of the same party or same multi parties before &
after the merger.
Costs of the combination paid by the purchasers are the sum of assets paid to obtain the
control of the combined parties, liabilities incurred or assumed, the fair value of equity securities
issued at the purchase date, and various direct costs occurred in the business combination. The30
difference between the fair value of its assets paid and the book value thereof is accrued to current
profit or loss. Purchase date is refers the date that the purchasers actually gain the control of the
purhcased parties.
The purchasers allocate the costs of combination on the purchase date, and confirm the fair
values of identifiable assets, liabilities and contingent liabilities of the purchased parties they
obtain. The difference that costs of combination exceed the fair value of identifiable assets of the
purchased parties obtained in the merger will be recognized as goodwill; the difference that costs
of combination are less than the fair value of identifiable assets of the purchased parties obtained
in the merger will be accrued in current profit or loss.
(6) Preparation of the consolidated financial statements
The combined scope of consolidated financial statements includes the Company and its
subsidiaries. Subsidiary's operating results and financial position are included in the consolidated
financial statements from the controlled date until the end date.
As for subsidiary obtained by the Company through business combination under the common
control, in the preparation of current consolidated financial statements, it will be deemed that the
combined subsidiary is incorporated into the consolidation scope when the ultimate controlling
party of the Company implements the control right, and the beginning balance of consolidated
financial statements and comparative statements will be adjusted accordantly.
As for subsidiary obtained by the Company through business combination not under the
common control, in the preparation of current consolidated financial statements, the financial
statements of such subsidiary will be adjusted based on the fair value of the identifiable assets and
liabilities determined at the purchase date, and since the purchase date, the consolidated subsidiary
will be incorporated into the consolidation scope.
If the accounting period or accounting policy adopted by subsidiary and parent company are
not consistent, a necessary adjustment shall be made to the financial statements of subsidiary in
accordance with the accounting period or accounting policy of parent company when the
consolidated financial statements are prepared.All major transactions, balances and unrealized
profit or loss among enterprises within the consolidation scope will be offset in the preparation of
consolidated financial statements.
Interests and income attributable to minority shareholders of subsidiary will be listed
separately respectively under the Shareholders’ Equity in the Consolidated Balance Sheet and
under the Net Profit in the Consolidated Income Statement.
If the losses attributable to the minority shareholders exceed the share of minority
shareholders enjoyed in the ownership interest of the subsidiary, in addition to the part that the
minority shareholders have the obligation and the ability to take, the balance will offset against the
shareholders’ equity of parent company. If the subsidiary makes a profit subsequently, before
making up the loss attributed to relevant minority shareholders beared by shareholders’ equity of
parent company, all the profits are attributable to shareholders’ equity of parent company.
(7) Confirmation standard for cash and cash equivalent
In preparing the cash flow statement, the cash equivalents of the Company include the
investments with short period (it usually expires within three months from the purchase date),
characteristics of high liquidity, easy conversion to certain amount of cash and little risk of value
change.
(8) Transactions of foreign currencies and conversion of financial statements in foreign31
currencies
1. Foreign currency transactions are converted into RMB for recording purpose at the
exchange rate on the first day of the period when the transaction occurs.
Adjustments are made to foreign currency accounts in accordance with the exchange rate
prevailing on the balance sheet date. Value of non currency item accrued at fair value by foreign
currency is adjusted in accordance with the exchange rate prevailing on fair value confirm date.
Conversion differences arising from those specific borrowings are to be capitalized as part of the
cost of the construction in progress in the period before the fixed assets being acquired and
constructed has not yet reached working condition for its intended use. Conversion differences
arising from other accounts are charged to financial expenses.
2. In balance sheet, assets and liabilities items are converted into RMB at the exchange rate
prevailing on the consolidated balance sheet date. Owner’s equity items (excluding Undistributed
profit item) are converted into RMB at the exchange rate when the transaction occurs. In income
statement, revenue and expenses items are accrued by the proper method and the approximate rate
when the transaction accurs. Translation difference occurred for above reason is disclosed in the
consolidated balance sheet as a separate item.
(9) Financial instruments
1. Classification of financial instruments
Based on the purposes of obtaining the financial assets and assuming the liabilities, the
Company’s management classfies the financial instruments into: the financial assets or financial
liabilities that are calculated in the fair values and whose changes are accrued to current profit or
loss, including trading financial assets or financial liabilities, and those directly designated to be
calculated in the fair values and whose changes are accrued to current profit or loss; the
held-to-maturity investments; loans and receivables; available-for-sale financial assets; and other
financial liabilities, etc.
2. Confirmation basis and measurement of financial instruments
(1) The financial assets (or financial liabilities) that are calculated in the fair values and
whose changes are accrued to current profit or loss
The fair values (excluding cash dividends that have been declared but have not been
distributed and bond interests that have exceeded the expiry dates but have not been drawn) are
deemed as the initial confirmation amount on acquisition. Relevant transaction expenses are
charged to profit or loss of the period.
The interests or cash dividends obtained during the holding period are recognized as
investment income. Change of fair values is charged to profit or loss of the period at the year end.
Difference between the fair value and initial book value is recognized as investment income
upon disposal. Adjustment is made to gain or loss from changes in fair values.
(2) Held-to-maturity investments
The sum of fair values (excluding bond interests that have exceeded the expiry dates and
have not been drawn) and relevant transaction expenses are deemed as the initial confirmation
amount.
During the holding period, interest income is recognized as investment income based on the
amortized cost and actual interest rate (if the difference between the actual interest rate and the
nominal interest rate is tiny, calculation is based on the nominal interest rate). The actual interest
rates are determined upon acquisition and remain unchanged during the expected holding period32
or a shorter period applicable.
Difference between the amount received and book value of the investment is charged to profit
or loss of the period upon disposal.
If the Company sells or re-classifies a large amount of held to maturity investments prior to
maturity (large amount refers to the total amount relative to such investments prior to the sale or
re-classification), then the Company will re-classify the rest of such type of investment as
financial assets available for sale, and the Company will not re-classify any financial assets as held
to maturity in the current accounting period or following two full fiscal years, but the following is
excepted: the sale date or re-classification date is near to the maturity or redemption date of such
investment (such as three months before maturity), and the market interest rate changes have no
significant effect on the fair value of the investment; all the initial principal of such investment is
nearly recovered according to the periodic payments or early repayment under the contract, resell
or re-classify the remaining; sale or re-classification is caused by independent matters the
Company can’t control, not expected to recur and difficult to predict reasonably.
(3) Receivables and loans
Receivables primarily are the amount receivable formed from sales of goods or service
provision of the Company and other claims, which initial recognition amount will be confirmed
according to the contract or agreement price receivable from the purchasers. For recovery or
disposal of loans and receivables, the difference between the price obtained and the book value of
loans and receivables is charged to current profit or loss.
Loans are mainly loans issued by financial companies. For loans issued by financial
institutions according to the current market conditions, the initial recognition amount will be
confirmed according to the principal of loans issued and related transaction expenses. Interest
income recognized during the holding period of the loan will be calculated at the actual rate. Real
interest rate will be determined upon obtaining loans, and will be unchanged within the expected
duration of the loan or applicable shorter period. If the difference between real interest rate and the
contract interest rate is small, then the income will be calculated at the contract interest rate.
(4) Available-for-sale financial assets
The sum of fair values (excluding cash dividends that have been declared but have not been
distributed and bond interests that have exceeded the expiry dates but have not been drawn) and
relevant transaction expenses is deemed as the initial confirmation amount.
The interests and cash dividends generated during the holding period are accrued to
investment income. At year end, available-for-sale financial assets are calculated in the fair values
and the changes in fair values are accrued to the capital reserves (other capital reserves).
Difference between the amount received and the book value of the financial assets is
recognized as investment gain or loss upon disposal. At the same time, the accumulated changes in
fair value previously recognized in the owners’ equity are transferred into investment gain or loss.
(5) Other financial liabilities
The sum of fair values and relevant transaction expenses is deemed as the initial confirmation
amount. The subsequent calculation adopts the amortized cost method. Method for determining
fair value: directly refer to quotations in active markets (or using valuation techniques, etc.).(For
using valuation techniques, it should disclose relevant valuation assumptions in accordance with
various types of financial assets or financial liabilities, including prepayment rates, expected credit
loss rate, interest rate or discount rate.)33
3. Confirmation and measurement of transform of financial assets
The Company should terminate recognizing these financial assets when the transform occurs
and almost all risk and return of the financial assets ownership have been transferred to the
transferee; The Company should not terminate recognizing this financial assets if almost all risk
and return of the financial assets ownership have been remained.
Essence is more important than form when judging whether the transform meets the
requirements of the financial assets termination recognition conditions mentioned above. The
Company divides the transform of financial assets into entire transfer and partial transfer.
(1) If the transfer of an entire financial asset satisfies the conditions for stopping recognition,
the difference between the amounts of the following two items shall be recorded in current profit
or loss:
① The book value of the transferred financial asset;
② The sum of consideration received from the transfer, and the accumulative amount of the
changes in the fair values originally recorded in the owners’ equities (in the case that the
financial asset involved in the transfer is an available-for-sale financial asset).
(2) For partial transfers of financial assets that meet the recognition conditions of termination
in recognition, the book value of the whole financial assets are spitted into the derecognised
portion and the exderecognised portion according to their respective relative fair values (under this
situation, the retained service assets are deemed as a part of the exterminated financial assets), and
the difference between the following two items shall be recorded in the current profit or loss:
① Book value of the derecognised portion;
② The sum of the consideration of the derecognised portion and the accumulated changes
in fair value previously recognized in the owners’ equity related to the derecognised
portion (in the case that the assets transferred are available-for-sale financial assets).
For transfers of financial assets that do not meet the conditions of termination in recognition,
the financial assets remain recognition and the consideration received is recognized as financial
liabilities.
(3) Derecognised financial liabilities
If the existing obligations of financial liabilities have been discharged in whole or in part,
then the Company will derecognise such financial liability or part thereof.
If all or part of the financial liabilities is derecognized, the difference between the book value
of the derecognized financial liabilities and payment will be charged into current profit or loss.
4. Confirmation of fair values of financial assets and financial liabilities
For financial assets or financial liabilities measured at fair value by the Company, the
Company will use all or part of the quotations in the market (or use valuation techniques) as their
fair values.
(1) Impairment of available-for-sale financial assets:
If at the year end the fair values of the available-for-sale financial assets decline significantly,
or the trend of the decline is expected to be non-temporary after consideration of all relevant
factors, the assets are deemed impaired and impairment loss is recognized together with the
amount transferred from the accumulated decreases in fair values previously recognized in the
owners’ equity.
(2) Impairment of held-to-maturity financial assets and loans:
For held-to-maturity investments and loans, if there is objective evidence on the incidence of34
impairment, then the impairment loss will be calculated and recognized according to the difference
between the book value and the present value of estimated future cash flows.
(10) Receivables
If there is objective evidence at the year end to indicate that impairment exists in accounts
receivable (including accounts receivable, notes receivable, other receivables, long-term
receivables, etc.), their carrying amount should be decreasingly recorded as recoverable amount.
The decreased amount should be recognized as impairment loss of assets and be recorded into
current profit or loss.
Prepayment’s risk characteristics are subject to the nature of prepayment, if the prepayment is
for the purchase of goods or equipment, then before the agreed delivery date, or not settled but
delivered, no provision for bad debts; if the other party of the contract fails to deliver and overdue
more than one year after the contract data, provision for bad debts will be made according to the
risk characteristics of receivables. For prepayment paid for the construction project, if not fully
pay the whole price and the ownership of the construction project is expected to be obtained, no
provision for bad debts.
For intra-group receivables, provision for bad debts will be made according to expected bad
debt losses may occur.
Conduct impairment testing separately on accounts receivable with relatively higher
individual price at end of the period. If there is objective evidence to indicate that impairment
exists, recognize impairment loss and provide for bad and doubtful debts in accordance with the
difference between its future cash flow and carrying amount.
Individual material receivables are the top five largest receivables or sum of receivables
which account for 10% of ending balance of accounts receivable.
For individual receivables not material at end of the period, the Company can conduct
impairment testing separately; for receivables without impairment through separate testing
(including receivables material and not material), the Company will categorize them into the
receivables groups with similar risk factors, and assigns a certain percentage of the end of the
period balance of the receivable groups to determine the impairment loss and make provision for
bad debts.
Except the receivables provided impairment loss separately, the Company set the provision
rate in accordance with the actual loss percentage of the same or similar credit risk group by aging
divided in the previous years and the real circs as follows:
Aging
Appropriation proportion of
receivables(%)
Within 1 year 2%
1 to 2 years 10%
2 to 3 years 50%
Over 3 years 80%
(11) Inventory35
1. Inventory classification
Inventory is classified to:
(1) Real estate development products: completed development products, development
products in construction, and products to be developed.
(2) Non-real estate products: raw materials, products in production, stock merchandise,
delivery commodity, commission processing materials, etc.
2. Inventory valuation
Inventories are valued at the lower of cost and net realizable value.
Real estate development product costs include land cost, construction costs and other costs.
Borrowing costs meet the capitalization conditions are also included in real estate development
product costs.
Non-real estate development product costs include purchase cost, process cost and other
costs.
The inventory is calculated using weighted average method when delivered.
3. Confirmation of net realizable value of inventory and Recording method of provision for
inventory devaluation
At the end of the year, after overall check of the inventory, draw or adjust provision for
inventory devaluation according to the lower of the cost of inventory and net realizable values of
inventory.
In normal operation process, net realizable values of commodities inventories for direct sales
including finished goods, commodities and materials for sales are determined by the estimated
selling prices minus the estimated selling expenses and relevant taxes and fees; In normal
operation process, net realizable values of materials that need further processing are determined by
the estimated selling prices of the finished goods minus estimated cost to completion, estimated
selling expenses and relevant taxes. For the inventory held to implement sales contract or work
contract, its net realizable value is calculated on the basis of contract price. For the balance of
inventory beyond the amount of the sales contract, its net realizable value is calculated on the
basis of general selling price.
Provision for inventory devaluation is provided for based on individual inventory item at end
of the period. For inventory that has large quantity and low unit price, the provision for inventory
devaluation is provided for based on categories of the inventory. For inventory related to the
products manufactured and sold in the same district, with same or similar use or purpose, and
difficult to account for separately from other items, the provision for inventory devaluation is
provided for on a consolidated basis.
When the factors that influence the decreased bookkeeping of inventory value have
disappeared, switch back from the provision for inventory devaluation amount that previously
appropriated and the amount that switched back is charged to profit or loss of current period.
4. System of stock inventories
Perpetual inventory system is applied.
5. Amortization for low cost and short lived articles and package materials
For low cost and short lived articles, use step-amortization method；
For package materials, use lump-sum amortization method.
(12) Long-term Equity Investment
Confirmation of initial investment cost36
(1) Long-term equity investment caused by the enterprise merger
In case the long-term equity investment are made to obtain the equities of the enterprises
under the common control and the Company pays the cash, transfers the non-cash assets or bears
the liabilities as the consideration for the merger, the book value share on the merging date to
obtain the owners’ equities of the merging party will be deemed as the initial investment cost of
long-term equity investment. The difference between the initial investment cost of long-term
equity investment and paid cash, transferred non-cash assets and book values of liabilities will be
supplemented by the capital reserve; in case the capital reserve is not enough, the remaining gains
will be adjusted. In case the Company issues the equity securities as the merger consideration, the
book value share on the merging date to obtain the owners’ equities of the merging party will be
deemed as the initial investment cost of long-term equity investment. If the book value amount of
the issued shares is deemed as the capital, the difference between the initial investment cost of
long-term equity investment and the book value amount of the issued shares will be supplemented
by the capital reserve; in case the capital reserve is not enough, the remaining gains will be
adjusted. All direct expenses related to the enterprise merger, including the auditing expense,
evaluation expense, legal service expense, etc will be accrued to the current profit or loss.
In case the long-term equity investment are made to obtain the equities of the merging
enterprises which are not under the common control, the consolidation cost determined according
to ‘Accounting Standard for Business Enterprises No. 20 – Business Combinations’ on the
purchase date will be deemed as the initial investment cost.
(2) Other types of long-term equity investment
In case the long-term equity investment is made by cash payment, the actual payment amount
will be deemed as the initial investment cost.
In case the long-term equity investment is made by issuing the equity securities, the fair
values of issued equity securities will be deemed as the initial investment cost.
For the long-term equity investment made by the investors, the values agreed in the
investment contracts or agreements (deducting the cash dividends or profits that have been
declared but have not been dismissed) will be deemed as the initial investment cost, except that the
contracts or agreements provide that the values are not fair.
In case the long-term equity investment is made by exchanging the non-currency assets, and
this exchange has the commercial substance and the fair values of exchanged assets can be reliably
calculated, the fair values of assets surrendered will be deemed as the initial investment cost,
unless there is conclusive evidence that the fair values of assets received are more reliable; for
exchange of non-currency assets that do not satisfy the above conditions, the sum of book value of
assets surrendered and relevant taxes payable will be deemed as the initial investment cost.
In case the long-term equity investment is made by the mode of liability restructure, the fair
values of the obtained equities will be deemed as the initial investment cost.
2. Judgment criteria of joint control and significant influence in the invested companies
If, in accordance with provisions in the contracts, the Company enjoys joint control over
certain economic activities only when taking part in significant financial and operational decisions
with investors in need of share of control who unanimously agree, the Company is deemed to
enjoy joint control with other parties over the invested companies. If the Company is authorized to
take part in decision making with regard to the financial and operational policies, but is unable to
control or control jointly with other parties over the invested company, the Company is deemed to37
be able to exercise significant influence over the invested companies.
3. Subsequent measurement and profit & loss recognition
When the Company is able to exercise significant influence or joint control, the difference of
cost of initial investment in excess of the proportion of the fair value of the net identifiable assets
in the invested companies is not adjusted against the initial cost of long-term equity investment.
The difference of cost of initial investment in short of the proportion of the fair value of the net
identifiable assets in the invested companies is charged into the current profit or loss statement. .
The Company’s long-term equity investments in subsidiaries are accounted for by the cost
method and adjusted according to the equity method when preparing consolidated financial
statements. For joint ventures, proportional consolidation method is not applicable.
When the Company has neither joint control nor significant influence in the invested
companies, there is no quotation available on the active market, and the fair value of the
investment cannot be reliably measured, the long-term equity investment is accounted for under
the cost method.
When the Company has joint control or significant influence over the invested companies,
the long-term equity investment is accounted for under the equity method.
For profit or loss of internal transactions occurred among the Company and joint ventures,
the proportion attributable to the Company will be calculated according to shareholdings and
offset in the application of equity method.
Recognition of share of losses of the invested companies under the equity method is treated
in the following steps: First, reduce the book value of the long-term equity investment. Second,
when the book value is insufficient to cover the share of losses, investment losses are recognized
up to a limit of book values of other long-term equity which form net investment in substance by
reducing the book value of long term receivables, etc. Finally, after all the above treatments, if the
Company is still responsible for any additional liabilities in accordance with the provisions
stipulated in the investment contracts or agreements, estimated liabilities are recognized and
charged into current investment loss according to the liabilities estimated.
If the invested company achieve profit in subsequent periods, the treatment is in the reversed
steps described above after deduction of any unrecognized investment losses, i.e., reduce book
value of estimated liabilities recognized, restore book values of other long-term equity which form
net investment in substance, and in long-term equity investment, and recognize investment income
at the same time.
Treatment of other equity changes except for net profit or loss in the invested companies: For
other equity changes except for net profit or loss in the invested companies, if the proportion of
investments remain unchanged, the Company calculates the proportion it shall enjoy or bear and
adjust book value of long-term equity investment, and increase or decrease capital reserves – other
capital reserves at the same time.
4. Impairment testing and impairment provision methods
In case the cost method is used to calculate the long-term equity investments which are not
quoted in the active market or whose fair values cannot be reliably calculated, the depreciation
loss will be determined based on the difference between the book values and current values
determined by the discounting of future cash flow in line with the current market return rate of
similar financial assets.
For other long-term equity investments, in case the calculation results of receivable amounts38
indicate that the receivable amount of this long-term equity investment is less than their book
values, the difference will be confirmed as the asset depreciation losses.
Once the depreciation loss of long-term equity investment is confirmed, they will not be
reversed.
(13) Investment properties
Investment properties refer to properties held to earn rentals or for capital appreciation, or
both, including leased land use right and those held and ready to transfer after value added, and
leased buildings.
The Company uses the cost model to measure existing investment properties. For investment
properties and rental assets measured at the cost model, they will be implemented the same
depreciation policy similar to fixed assets, land use right for rental will be implemented the same
amortization policy to intangible assets; for those with the indication of impairment, the
recoverable amount can only be estimated, and if recoverable amount is lower than its book value,
the corresponding impairment loss should be confirmed.
(14) Fixed assets
1. Recognition standard of fixed assets
Fixed assets are tangible assets that are held for use in the production or supply of services,
for rental to others, or for administrative purposes; they have useful lives over one fiscal year. And
they shall be recognized only when both of the following conditions are satisfied:
It is probable that economic benefits associated with the assets will flow to the enterprise; and
The cost of the fixed assets can be measured reliably.
2. Initial measurement of fixed assets
Fixed assets are recorded at the actual cost on acquisition.
(1) The cost of fixed assets purchased includes purchase price, related tax, transportation
expenses, loading and uploading expenses, installment expenses and specialist service expenses
attributable to the assets that arise before the assets are completed and put into use.
(2) Where payment for the purchase price of a fixed asset is deferred beyond normal credit
terms, such that the arrangement is in substance of a financing nature, the cost of the fixed asset
shall be determined based on the present value of the purchase price, The difference between the
purchase price and its present value shall be recognized in profit or loss over the period of credit.
The cost of a self-constructed fixed asset comprises those expenditures necessarily incurred for
bringing the asset to working condition for its intended use.
(3) For fixed assets formed through obtaining them by the debtor paying for debt in debt
restructure, recognize its recording value as fair value of the fixed assets, and record the difference
between the carrying amounts of debt restructure and the fixed assets used for paying debt into
current profit or loss.
(4) In the circumstance of the non monetary assets exchange has commercial nature and fair
value of surrendered or received assets can be measured reliably, recording value of received
assets should be recognized as fair value of surrendered assets unless there is clear evidence to
indicate that fair value of received assets is more reliable; for non monetary assets exchange which
doesn’t meet the requirement of premise mentioned above, cost of received assets should be
recognized as carrying amount and related tax expenses payable of surrendered assets and should
not be recognized as profit or loss.
(5) Recording value of fixed assets obtained by absorbing and consolidated by enterprise39
under the common control should be recognized as carrying amount of the consolidated party;
recording value of fixed assets obtained by absorbing and consolidated by enterprise under
different control should be recognized as fair value.
(6) Recording value of financing leasehold should be recognized as fair value of leasing
assets and present value of lowest leasing payment when leasing occurs whichever is lower.
3. Depreciation method of fixed assets
Depreciation of fixed assets is provided for on a straight-line basis, the depreciation rate is
recognized in accordance with category, estimated useful life and estimated residual rate of fixed
assets.
Fixed assets renovations expenses that meet the criteria of capitalization are depreciated on
an individual basis over the interval of two renovations or remaining useful life of the fixed assets,
whichever is shorter (2-5 years).
For fixed assets leased through finance lease, if it can reasonably determine that the
ownership of the leased assets will be obtained when the lease period expires, provison for
depreciation will be made in useful life of leased assets; if it can’t reasonably determine that the
ownership of the leased assets will be obtained when the lease period expires, provison for
depreciation will be made in the lease period and useful life of leased assets, whichever is shorter.
Fixed assets renovations expenses that meet the criteria of capitalization are averagely
amortized according to the period between the two renovations, remaining lease period and the
useful life of fixed assets, whichever is short.
Estimated useful life and annual depreciation rate of fixed assets by categories are as follows:
Category
Estimated useful life
(year)
Estimated net residual
value rate (%)
Annual depreciation
rate (%)
Buildings and
constructions 35 5% 2.71%
Machinery
equipment 10 5% 9.50%
Transportation
equipment 8 5% 11.88%
Office equipment
and others 5 5% 19.00%
(15) Construction in progress
1. Classification of construction in progress
The Construction in progress will be calculated based on the classification of proposed
projects.
2. Transfer time of construction in progress to fixed assets
For the construction in progress, all expenses occurring before they are ready for the use will
be the book values as the fixed assets. In case the construction in progress has been ready for use
but the final accounts for completion have not been handled, from the date when such projects has
been ready for use, the Company will evaluate the values and determine the costs based on the
project budgets, prices or actual costs of projects, etc and the depreciation amount will also be
withdrawn; when the final accounts for completion are handled, the Company will adjust the40
originally evaluated values subject to the actual costs, but will not adjust the withdrawn
depreciation amount.
(16) Borrowing expenses
1. Confirmation principle of capitalization of borrowing expenses
In case the borrowing expenses occurring in the Company may directly be attributable to the
construction and productions of assets complying with the capitalization conditions, they will be
capitalized and accrued to the relevant capital costs; other borrowing expenses will be confirmed
as the expenses based on the actual amount at the time of occurrence and accrued to the current
profit or loss.
The assets complying with the capitalization conditions mean the assets such as fixed assets,
investment real estates and inventory, etc that need a long time of construction and production
activities before they are ready for use or for sales.
The borrowing expenses begin to be capitalized under the following circumstances:
(1) The asset payment have been made which include the payment such as the paid cashes,
transferred non-currency assets or borne liabilities with the interests to construct or
produce the assets complying with the capitalization conditions;
(2) The borrowing expenses have occurred;
(3) The necessary construction or production activities to make the assets ready for use or
sales have been launched.
In case during the construction or production period the assets complying with the
capitalization conditions are abnormally suspended and the suspension period exceeds 3 months
continuously, the capitalization of borrowing expenses will also be suspended.
The capitalization of borrowing expenses for the assets that have been constructed or
produced and are ready for use or sales will be stopped.
When parts of the purchased assets or assets whose production satisfies the capitalization
conditions are completed respectively and can be used individually, the capitalization of the
borrowing expenses of these parts will be stopped.
2. Capitalization period of borrowing expenses
The capitalization period means the period from the moment that the borrowing expenses
start to be capitalized to the moment that the capitalization is stopped, which does not include the
period that the capitalization of borrowing expenses is suspended.
3. Calculation method about capitalization amount of borrowing expenses
The interest expenses for special loans (after the deduction of interest income generated by
the unused loan capitals or the investment return obtained from the temporary investments) and
auxiliary expenses will be capitalized before the assets complying with the capitalization
conditions are ready for the expected use or sales.
The interest amount of general loans to be capitalized will be determined by multiplying the
weighted average amount of the asset payment by which the accumulated assets exceed the special
loans with the capitalization rate of general loans. The capitalization rate will be determined based
on the weighted average interest rate of general loans.
In case the loans have the discounts or premiums, the Company will adjust the interest
amount in each period based on the amortized discount and premium amount in each accounting
period in accordance with the actual interest rate method.
(17) Accounting method of intangible assets41
1. Calculation method of intangible assets
When acquiring, the intangible assets are generally recorded according to actual cost.
(1) For those the price of intangible assets deferred paid exceed normal credit condition so
substantively has financing character, the cost of intangible assets is confirmed on the basis of
present value of purchasing price.
(2)For fixed assets formed through obtaining them by the debtor paying for debt in debt
restructure, recognize its recording value as fair value of the fixed assets, and record the difference
between the carrying amounts of debt restructure and the fixed assets used for paying debt into
current profit or loss; in the circumstance of the non monetary assets exchange has commercial
nature and fair value of surrendered or received assets can be measured reliably, recording value
of received assets should be recognized as fair value of surrendered assets unless there is clear
evidence to indicate that fair value of received assets is more reliable; for non monetary assets
exchange which doesn’t meet the requirement of premise mentioned above, cost of received assets
should be recognized as carrying amount and related tax expenses payable of surrendered assets
and should not be recognized as profit or loss.
(3) Recording value of fixed assets obtained by absorbing and consolidated by enterprise
under the common control should be recognized as carrying amount of the consolidated party;
recording value of fixed assets obtained by absorbing and consolidated by enterprise under
different control should be recognized as fair value.
2. Useful life and amortization of intangible assets
(1) Estimation of useful life for intangible assets with finite useful life:
At end of each year, the Company will recheck the useful life of intangible assets with the
definite useful life and amortization method will be rechecked.
According to the re-check, the useful life and amortization method of the intangible assets at
the end of the year are not different from those estimated before.
(2) Amortization of intangible assets:
In case their useful life is limited, the intangible assets are amortized evenly over the period
in which they produce economic profit for the Company; in case it is impossible to evaluate the
useful life when the intangible assets bring the benefits to enterprises, it will be deemed that the
useful life of such intangible assets is uncertain and amortization is not applicable.
(18) Amortization method and term of long-term expenses to be amortized
Long-term expenses to be amortized will be averagely amortized in the benefit period,
including:
1. Prepaid rentals for operating leased fixed assets will be averagely amortized according to
the term stipulated in the lease contract.
2. Fixed assets improvement expenses for operating leased fixed assets will be averagely
amortized according to the remaining lease period and the useful life of leased assets, whichever is
shorter.
(19) Impairment of fixed assets, construction in progress, intangible assets, goodwill and
other long-term non-financial assets
For long-term non-financial assets such as fixed assets, construction in progress, intangibles,
etc, the Company assesses whether signs of possible impairment exist at end of each year.
Impairment tests are performed on goodwill arises from business combinations and intangibles
with uncertain useful life regardless of whether signs of possible impairment exist.42
For assets with signs of impairment, recoverable amounts are estimated:
(1) When there are signs of possible impairment on assets, the Company estimates the
recoverable amount of the assets on an individual basis.
(2) If it is not possible to estimate the recoverable amount of the individual asset, the
Company shall determine the recoverable amount of the asset group to which the asset belongs.
(3) Recoverable amounts are determined as the fair value of the assets after netting off costs
of disposal, and the current value of projected future cash flows generated by the assets, whichever
is higher.
When the recoverable amount of an asset is lower than the book value of the asset, the book
value of the asset is reduced to its recoverable amount. The amount reduced is recognized as
impairment loss on assets in the current profit or loss statement, and provision for impairment loss
on assets is recorded at the same time. Future depreciation or amortization of assets is adjusted
after recognition of impairment loss so that the adjusted book value of the assets (less estimated
residual value) is amortized systematically over their remaining useful life.
Impairment loss on long-term non-financial assets such as fixed assets, construction in
progress, intangibles, etc shall not be reversed once recognized.
When there are signs of possible impairment on assets, the Company estimates the
recoverable amount of the assets on an individual basis. If it is not possible to estimate the
recoverable amount of the individual asset, the Company shall determine the recoverable amount
of the asset group to which the asset belongs.
(20) Estimated liabilities
1. Recognizing principles:
When businesses related to external security, pending litigation or arbitration, product quality
assurance, retrenchment plan, contract of loss, reconstruction obligation, disposing obligation of
fixed assets and other contingencies satisfy all the following conditions, the Company will
recognize them as liabilities:
(1) The obligation is the present obligation of the Company;
(2) The performance of such obligation is likely to lead to an outflow of economic benefits;
(3) The amount of the obligation can be reliably measured.
2. Measurement methods
Estimated liabilities shall be initially measured according to the best estimated amount
required to be paid when current obligations are fulfilled.
When determining the best estimated amount, it should take full consideration of the risks,
uncertainties and time value of money related to contingencies.
Best estimated amount is handled under the following circumstances:
(1) if the amount required is in a continuous range, and the likelihood of various outcomes
within the scope is same, then the estimated amount is determined according to the median of the
range, that is the average amount of upper and lower caps.
(2) if the amount required isn’t in a continuous range, or there isn‘t such a continuous range
but the likelihood of various outcomes within the scope isn’t same, such as the contingency
involves a single item, then the best estimated amount is determined in accordance with the
amount with most likelihood; if the contingency involves several items, then the best estimated
amount is determined according to various possible outcomes and associated probabilities.
If expenses required to settle all or part of estimated debt are expected to be compensated by43
a third party, then the amount of compensation will be separately recognized as an asset upon
basically being identified to be received, and the amount of compensation recognized will not
exceed the book value of projected liabilities.
(21) Income
1. Sale of goods
Revenue from the sale of goods is recognized when the enterprise has transferred to the buyer
the significant risks and rewards of ownership of the goods; the enterprise retains neither
continuing managerial involvement to the degree usually associated with ownership nor effective
control over the goods sold; it is probable that the economic benefits associated with the
transaction will flow to the enterprise; and the relevant amount of revenue and costs can be
measured reliably.
Real estate sales will be confirmed the realization of revenue thereof upon the complete and
acceptance of real estate, meeting the delivery terms of sales contract, and obtaining the proof of
payment made by the purchasers according to the agreement under the contract on delivering real
estate (usually after receiving the first phase of sales contract payment and confirming the
payment arrangements of the remaining).
2. Rendering of service
In case on the preparation date of balance sheet the results about service transaction can be
reliably evaluated, the labor income will be confirmed by the completion percentage method. The
completed percentage of service transactions is determined by the measurement of finished work
(or the proportion of services performed to date to the total services to be performed, or the
proportion of costs incurred to date to the estimated total costs).
The Company will determine the total amount of rendering of service based on the prices in
contracts and agreements that have been received or will be receivable, except that such prices are
not fair. On the balance sheet date, the current labor incomes will be determined based on the
amount after the total labor income amount multiplied by the completion progress deducts the
accumulated labors in the past accounting periods. At the same time, the current labor incomes
will be carried forward based on the amount after the estimated total labor cost multiplied by the
completion progress deducts the accumulated labors in the past accounting periods.
In case the service transaction results on the preparation date of balance sheet cannot be
reliably evaluated, they will be determined in the following methods:
(1) In case the service costs that have occurred can be compensated, the service income will
be confirmed based on such service costs and the same amounts will be settled as the service
costs.
(2) In case the service costs that have occurred cannot be compensated, such service costs
will be accrued to the current profit or loss and will not be confirmed as the service costs.
3. Use right of transferred assets
In case the economic benefits related to the transaction will probably flow into the enterprise
and the income amounts can be reliably calculated, the Company will determine the income
amount about use right of transferred assets by the following means:
(1) The interest income amount will be calculated and determined based on the use time of
currency capital from the Company by others and actual interest rate.
(2) The income amount of use expenses will be calculated and determined subject to the
charging time and method agreed in the relevant contracts and agreements.44
4. Government grants
Government grants refer to monetary assets or non-monetary assets obtained free by a
company from the government, but not include the capital invested by government as a business
owner. Government grants are classified to government grants related to assets and government
grants related to income.
Government grants will be recognized upon meeting both of the following two conditions:
(1) The company can meet the conditions attached to government grants;
(2) The company can receive government grants.
Government grants related to assets are recognized as deferred income and are averagely
distributed in the life of relevant assets, and recorded to current profit or loss. Government grants
related to income are handled under the following circumstances:
(1) If such grants are used to compensate for relevant costs and losses of the company during
later periods, they will be recognized as deferred income and recorded to current profit or loss
upon recognizing related costs;
(2) If such grants are used to compensate for relevant costs and losses occurred of the
company, they will be directly through current profit or loss.
(22) Deferred income tax assets / deferred income tax liabilities
Corporate income tax will be calculated by liability method of the balance sheet.
The company’s tax base will be determined upon the company obtains the assets or liabilities;
on the balance sheet date, take the balance sheet as the basis, and if the book value of related
assets or liabilities are different to the tax bases provided by tax laws, it will calculate and confirm
the deferred income tax assets or deferred income tax liabilities occurred in accordance with the
provisions of tax laws, which effect will be included in current income tax expense.
The company is subject to the limit of the amount of taxable income likely to be used to
offset temporary difference, thus confirms the deferred income tax asset produced by the
deductible temporary difference.
In addition to the cases specified under income guidelines that no need to confirm the
deferred income tax liabilities, the company should recognize related deferred income tax
liabilities for all taxable temporary differences.
(23) Operating lease and finance lease
If the terms of the lease will be transfered to the lessee substantially together with all the risks
and rewards related to the ownership of leased assets, then the lease is a finance lease, and other
lease is operating lease.
1. The Company is as lessor
In finance lease, at the lease beginning date, the Company takes the minimum lease receipt
and the initial direct costs as the entry value of finance lease receivable, and records the
unguaranteed residual value; and the difference between the sum of minimum lease receipt, initial
direct costs and unguaranteed residual value and its present value is recognized as unrealised
finance income. For unrealised finance income each period during the lease term, it will use the
effective interest method to confirm the current financing income.
For rent in operating lease, the Company will use the straight-line method to recognize profit
or loss in each period during the lease term. Initial direct costs occurred will be through current
profit or loss.
2. The Company is as lessee45
In finance lease, at the lease beginning date, the Company will take the lower of the fair value
of the leased assets and the present value of minimum lease payment as the entry value of leased
assets, and take the minimum lease payment as the entry value of long-term payables, and their
difference will be as unrecognized finance cost. Initial direct costs are included in the value of
leased assets. For unrecognized finance income each period during the lease term, it will use the
effective interest method to confirm the current financing cost.
The Company uses depreciation policy consistent with its own fixed assets to make provision
for depreciation of leased assets.
For rent in operating leases, the Company will use the straight-line method to record it into
the cost of relevant assets or current profit or loss in each period during the lease term; and initial
direct costs occurred will be through current profit or loss.
Rent in operating leases will be recorded into the cost of relevant assets or current profit or
loss in each period during the lease term.
(24) Changes of key accounting polices, accounting estimates and previous errors
There are no changes of key accounting polices, accounting estimates and correction of
material accounting errors and relevant effects in 2009.
III. Taxation
(1) Main type of tax and tax rate of the Company
Type of tax Tax rate Taxable basis
VAT 17% Revenue of product
Business tax 5% Rental income
Enterprise income tax 25% Taxable income
1. The sales branch company under the subsidiary of the Company —Shenzhen Chuanger
Garment Co., Ltd. adopts 4% VAT arte applicable to small-sized taxpayer (business enterprise).
Since January 1 2009, 3% VAT rate of small-sized taxpayer (business enterprise) has been
implemented.
2. The Company implements the uniform tax rebate policy of export, i.e. the export is exempt
from VAT and the input-VAT of goods is refunded with refund rate according to relevant rules
before export in accordance with the requirements of tax law.
3. Since January 1, 2008, other subsidiaries of the Company has adopted the applicable
income tax rate of 25%, except for those company established in the below-mentioned districts.
Companies established in Shenzhen Special Economic Zone are entitled to preferential
enterprise income tax policy during five-year transitional period, i.e. since January 1, 2008,
applicable enterprise income tax rate of 18%, 20%, 22%, 24% and 25% are adopted from 2008 to
2012 respectively.
Companies established in Hong Kong SAR are entitled to a profits tax rate of 16.5%.
IV. Business combination and the consolidated financial statements
The Company adopts the Accounting Policies for Business Enterprises No.33 – Consolidated46
Financial Statements issued in February 2006. All subsidiaries under the Company’s control and
main body with special objectives are included in the scope of consolidation.
The consolidated financial statements are prepared by the parent company based on the
individual financial statements of the parent company as well as the subsidiaries included in the
scope of consolidation, with reference made to other relevant information and after adjustment to
the long-term investments in subsidiaries’ equity under equity method. The internal equity
investment and the owner’s equity of subsidiaries, internal investment income and profit
distribution of subsidiaries, internal transactions, internal claims and liabilities will be offset upon
consolidation.
The accounting policies adopted by subsidiary and parent company are consistent. (If they
are not consistent, a necessary adjustment shall be made to the financial statements of subsidiary
in accordance with the accounting policy of parent company when the consolidated financial
statements are prepared.)
Unless otherwise specified, the unit of data listed in this section is RMB10,000.
(1) Status of subsidiaries
1. Subsidiaries obtained through the establishment or investment
Name Type
Place of
Registration
Nature
Registered
capital (10
thousand)
Scope of
business
Actual
investment
as at period
end(10
thousand)
Balance of net
investment in
subsidiaries in
substance
Shareholdings
(%)
Voting
(%)
Consolidated
or not
Shenzhen
Rieys
Industrial Co.,
Ltd.
Co.,
Ltd.
Shenzhen Trading 5000
Investment
and import
& export
trading
4500 90 90 Yes
Puning Tianhe
Garment
Manufacturing
Factory Co.,
Ltd.
Co.,
Ltd.
Puning Manufacture 6510(HKD)
Production
and sales of
clothes and
knitting
colorized
cloth
6133(HKD) 100 100 Yes
Shenzhen
Tianqi
Garment
Manufacturing
Co., Ltd.
Co.,
Ltd.
Shenzhen Manufacture 100
Cloth
production
100 100 100 Yes
2. Subsidiaries obtained through business consolidation under common control
Name Type
Place of
Registration
Nature
Registered
capital (10
thousand)
Scope of
business
Actual
investment
as at
period end
Balance of net
investment in
subsidiaries in
substance
Shareholdings
(%)
Voting
(%)
Consolidated
or not47
Tianrui (HK)
Trading Co.,
Ltd.
Co.,
Ltd.
Hong Kong Trading 1(USD) Trading 1(USD) 100 100 Yes
Shenzhen
Chuanger
Garment
Co., Ltd.
Co.,
Ltd.
Shenzhen Manufacture 1200
Production
and sales of
clothes,
sewing
products,
etc.
752 86 86 Yes
Puning
Hengda Real
Estate
Development
Co., Ltd.
Co.,
Ltd.
Puning
Property
development
2600
Property
development
(operate
with valid
qualification
certificate)
14660 100 100 Yes
3. Minority shareholders’ equity and profit&loss of minority shareholders
Name of subsidiaries
Minority
shareholders’
equity
Profit & loss of
minority
shareholders
Balance of the owner's
equity of parent company
after deducting the share of
current losses of minority
shareholders over the share
of owner’s equity enjoyed
by such minority
shareholders in the
subsidiary in the period
beginning
Method to obtain
subsidiary
Shenzhen Rieys Industrial Co., Ltd. 4,410,153.80 -40,363.14 Invest to establish
Shenzhen Chuanger Garment Co., Ltd. 1,230,862.26 -342,849.96 M&P
(2) Subjects newly included in current scope of consolidation and subjects no longer included in
current scope of consolidation
As at 31 Dec. 2009, a total of 6 subsidiaries, or entities with special purposes or business entities
which controlling right is formed by entrusted operation or lease were included in the
consolidation scope.
As at 30 June 2010, a total of 6 business entities which controlling right is formed by entrusted
operation or lease were included in the consolidation scope. The scope of consolidated balance
sheet remained unchanged compared with the last year.48
V. Notes to the items of consolidated financial statement
(1) Monetary funds
Item
Closing balance Opening balance
Foreign
currency
Exchange
rate
Equivalent to
RMB
Foreign
currency
Exchange
rate
Equivalent to
RMB
Cash
RMB 3,348,560.79 1.00000 3,348,560.79 948,201.17 1.00000 948,201.17
USD 1.00 6.79090 6.79 1.00 6.82820 6.83
HKD 3.70 0.87239 3.23 3.70 0.88048 3.26
Subtotal 3,348,570.81 948,211.26
Bank
deposits
RMB 7,248,748.55 1.00000 7,248,748.55 1,219,430.89 1.00000 1,219,430.89
USD 232.99 6.79090 1,582.22 57.08 6.82820 389.75
HKD 4,297.99 0.87239 3,749.52 612.35 0.88048 539.16
Subtotal 7,254,080.29 1,220,359.80
Other
currency
funds
RMB
Subtotal
Total 10,602,651.10 2,168,571.06
Note: The number of currency funds at period end is less than the period beginning by RMB
8,434,080.04, representing a change ratio of 388.92%, the reasons for the change is due to the
collection of current payment at the current period.
(2) Accounts receivable
1. Disclosure of accounts receivable by category
Category
Closing balance Opening balance
Book balance Provision for bad debts Book balance Provision for bad debts
Amount
Percent
(%)
Amount
Percent
(%)
Amount
Percent
(%)
Amount
Percent
(%)
Accounts receivable
with significant
16,156,076.92 16.26 14,348,928.48 51.84 20,768,021.03 24.73 14,348,928.48 51.9649
individual amount
Accounts receivable
with insignificant
individual in high
risk portfolio after
grouping by credit
risk characteristics
82,724,255.63 83.23 12,827,075.49 46.35 62,705,877.46 74.67 12,766,427.23 46.23
Other accounts
receivable not
significant
501,435.24 0.51 501,435.24 1.81 501,435.24 0.60 501,435.24 1.81
Total 99,381,767.79 100.00 27,677,439.21 100.00 83,975,333.73 100.00 27,616,790.95 100.00
2. Provision for bad debts of accounts receivable with significant individual amount or with
insignificant individual amount but tested for impairment separately at period end
(1) Accounts receivable with significant individual amount
Content of accounts receivable Book balance Bad debts
Provision
ratio
Reasons
Victoria International(USA) INC 16,156,076.92 14,348,928.48 88.81% * Note
Total 16,156,076.92 14,348,928.48
Note: On December 31, ① 2008, the payment receivable by the Company from Victoria
International (USA) INC is RMB28,697,856.96; the Company's major customer has filed for
bankruptcy, resulting a major impact on such company's business, so the Company has made
provision for bad debt by 50% of accounts receivable;
② The Company recovered RMB7,929,835.93 in 2009, recovered RMB4,611,944.11 from
January to June 2010, representing the cumulative recovery of RMB12,541,780.04, accounting for
43.70% of the balance in 2008.After the analysis of assessing the possibility of their bad debts, the
amount of provision for bad debts has been keeping unchanged with a provision ratio of 88.81%.
(2)Accounts receivable with insignificant individual in high risk portfolio after grouping by
credit risk characteristics
Aging
Closing balance Opening balance
Book balance Provision for
bad debts
Book balance Provision for
Amount % Amount % bad debts
Within 1
year 67,214,123.57 81.25% 1,344,282.47 46,714,017.65 74.50% 934,280.36
1-2
years 1,285,564.47 1.56% 128,556.45 1,337,033.54 2.13% 133,703.36
2-3
years 84,725.00 0.10% 42,362.50 84,725.00 0.14% 42,362.50
Over 3
years 14,139,842.59 17.09% 11,311,874.07 14,570,101.27 23.23% 11,656,081.01
Total 82,724,255.63 100.00% 12,827,075.49 62,705,877.46 100.00% 12,766,427.2350
3. There aren’t shareholders accounts holding more than 5% (including 5%) of the
Company’s voting shares in current accounts receivable;
4. Top 5 units in outstanding amount of accounts receivable
Name of unit
Relationship
with the
Company
Amount Aging
Percent in
total
accounts
receivable
HONOURLINK Customer 29,133,341.49 Within 1 year 29.31%
KEENZONE LIMITED Customer 21,809,774.84 Within 1 year 21.95%
Victoria International(USA) INC. Customer 16,156,076.92 1-2 years 16.26%
KEENZONE LIMITED Customer 8,240,881.70 Within 1 year 8.29%
HONOURLINK Customer 5,216,640.08 Within 1 year 5.25%
Total 80,556,715.03 81.06%
5. Accounts receivable at period end is less than period beginning by RMB 15,345,785.80,
representing a change ratio of 27.23%, the reason for the change is: increase of export sales
business.
(3) Other receivables
1. Disclosure of other receivables by category
Category
Closing balance Opening balance
Book balance Provision for bad debts Book balance Provision for bad debts
Amount % Amount % Amount % Amount %
Other receivables
with significant
individual amount
31,999,492.74 34.34 639,989.85 3.27 62,277,492.74 42.68 1,245,549.85 5.10
Other receivables
with insignificant
individual in high
risk portfolio after
grouping by credit
risk characteristics
49,451,042.62 53.08 7,189,928.54 36.77 70,700,399.76 48.46 10,261,582.61 42.00
Other accounts
receivable not
significant
11,724,765.54 12.58 11,724,765.54 59.96 12,924,765.54 8.86 12,924,765.54 52.90
Total 93,175,300.90 100.00 19,554,683.93 100.00 145,902,658.04 100.00 24,431,898.00 100.00
2. Provision for bad debts of other receivables with significant individual amount or with
insignificant individual amount but tested for impairment separately
(1) Other receivables with significant individual amount51
Content of other
receivables
Book balance Bad debts
Provision
ratio
Remark
Puning Rieys Paper
Industrial Co., Ltd.
31,999,492.74 639,989.85 2% Arrears
Total 31,999,492.74 639,989.85
Note: Rieys Paper’s arrears are detailed in Note 10 (1).
(2) Other receivables with insignificant individual in high risk portfolio after grouping by
credit risk characteristics
Aging
Closing balance Opening balance
Book balance Provision for
bad debts
Book balance Provision for
Amount % Amount % bad debts
Within
1 year 27,691,170.23 56.00% 553,824.31 36,988,522.24 52.32% 654,508.20
1-2
years 13,104,920.85 26.50% 1,310,492.09 14,729,335.54 20.83% 1,472,933.55
2-3
years 5,327,830.36 10.77% 2,663,915.19 13,322,976.64 18.85% 4,380,939.06
Over 3
years 3,327,121.18 6.73% 2,661,696.95 5,659,565.34 8.00% 3,753,201.80
Total 49,451,042.62 100.00% 7,189,928.54 70,700,399.76 100.00% 10,261,582.61
3. There isn’t shareholders overdue payment holding more than 5% (including 5%) of the
Company’s voting shares in current other receivables
4. Top 5 in outstanding amount of other receivables in period end
Name of unit
Relationship with the
Company
Amount Aging
Percent in
total other
receivable
Puning Rieys Paper Industrial Co., Ltd. Original subsidiary 31,999,492.74 Within 1 year 34.34%
Puning Huaqiao Construction Co., Ltd. Engineering construction party 3,749,659.50 Within 1 year 4.02%
Bei Xi Fan Investment Co., Ltd. Non-related parties transaction 2,922,925.00 Over 3 years 3.14%
Chen Chunyu Supplier 1,400,000.00 2-3 years 1.50%
Wuzhou Color Printing Co., Ltd. Supplier 1,311,929.20 Within 1 year 1.41%
Total 41,384,006.44 44.41%
Note: (1) Up to June 2010, the Company received the overdue payment totally RMB 3
million repaid by Pu Ning Yanlilai Trading Co., Ltd. instead of Pu Ning Huaqiao Construction Co.,
Ltd.; and signed a construction project contract of RMB 3,818,200.
(2) In June 2010, the Company received the overdue payment totally RMB 30.278 million
repaid by Rieys Paper, which arrears are detailed in note 10 (1).52
5. Other receivables at period end decreased RMB 47,859,996.26 than period beginning,
representing a change ratio of 39.40%, the reason for the change is: the Company took back
arrearage of RMB 30,278,000 from Rieys Paper and enhanced the recovery for current payment in
the reporting period, withdrawing the part of arrearage.
(4) Prepayment
1. Aging analysis
Aging
Closing balance Opening balance
Amount % Amount %
Within 1
year 59,195,070.98 100.00% 63,583,703.28 100.00%
1-2 years
2-3 years
Over 3
years
Total 59,195,070.98 100.00% 63,583,703.28 100.00%
2. Top 5 units in prepayment
Name of unit
Relationship
with the
Company
Amount Year
Pending
reasons
Puning Jin Hao Hui Ltd. Supplier 4,850,000.00 2010
Puning Guangmin Weaving Co.,
Ltd.
Supplier 4,720,000.00 2009
Puning Lai Li Sheng Ltd. Supplier 4,450,000.00 2010
Quanzhou Jin Ke Ltd. Supplier 3,442,346.64 2010
Jieyang Gu Jian Da Concrete
Co., Ltd.
Builders 3,000,000.00 2009
Total 20,462,346.64
3. There aren’t shareholders accounts holding more than 5% (including 5%) of the
Company’s voting shares in current prepayment.
(5) Inventories and provisions for impairment in value of inventory
1. Classification of inventory
Items
Closing balance Opening balance
Book balance
Provision for
impairment
Book balance
Provision for
impairment53
Raw materials 18,391,709.97 776,222.29 32,340,779.97 3,526,901.52
Goods in stock 27,641,836.31 7,151,739.84 28,474,864.70 7,151,739.84
Products in
production
2,192,379.79 2,673,211.58
Turnover
materials
Production cost
Goods delivered 2,652,661.34 1,936,676.89
Package
materials
Low cost and
short lived
articles
Product to be
developed
150,357,366.38 140,499,584.89
Total 201,235,953.79 7,927,962.13 205,925,118.03 10,678,641.36
Product to be developed is “Shang Di Central Residential Quarters”, of which the
construction scale approved in the permit for a planned construction project is as follows: Total
construction area on the ground is 159,400 sq.m., basement construction area is 48,600 sq.m.. At
present, the project is being applied for building.
2. Provision for impairment in value of inventory
Category
Book balance
at year
beginning
Current
provision
Current decrease Book
balance at
Reversed year end
Other
decrease
Raw materials 3,526,901.52 2,750,679.23 776,222.29
Goods in stock 7,151,739.84 7,151,739.84
Products in production
Turnover materials
Production cost
Goods delivered
Package materials
Low cost and short lived articles
Total 10,678,641.36 2,750,679.23 7,927,962.13
Note: For other decrease in the current provision for impairment in value of inventory, it is
caused by that raw materials disposed in the current period has been withdrawn the provision for
impairment.
3. Inventory of period end decreases RMB 1,938,485.01 than period beginning, representing
a change ratio of 0.99%.
(6) Non-current assets due within 1 year54
Item Content or nature Closing amount Opening amount
Zhao Guohao
Payment for equity
transfer (received by
installment)
5,000,000.00 5,000,000.00
Total 5,000,000.00 5,000,000.00
Note: (1) The Company transferred its 27.78% share rights of Shanxi Chuanglian
Information Network Technology Co., Ltd to Mr. Zhao Guohao for the consideration of RMB8
million on December 8, 2008, subject to repayment of three installments as follows: RMB1
million shall be paid before December 15, 2008, RMB2 million before December 25, 2009 and
RMB5 million before December 25, 2010. Mr. Zhao Guohao has pledged his own property to the
Company to ensure the repayment of such amounts. The first phase of equity transfer payment
RMB1 million was recovered in 2008, as of 30 June 2010, the Company received the second
phase of equity transfer payment of RMB 2 million.
(7) Original cost of fixed assets and accumulated depreciation
1. Original cost of fixed assets
Category Opening amount Increase this period Decrease this period Closing amount
Buildings and constructions 119,342,730.74 81,820.20 1,403,097.00 118,021,453.94
Machinery equipment 72,500,176.02 105,000.00 72,605,176.02
Transportation equipment 13,493,333.10 193,000.00 13,686,333.10
Office equipment and others 9,823,859.44 293,684.73 531,232.00 9,586,312.17
Total 215,160,099.30 673,504.93 1,934,329.00 213,899,275.23
Note: (1) Original cost of fixed assets disposed in the current period is RMB 1,934,329.00;
（2）Original cost of fixed assets under mortgage or guarantee at the period end is RMB
59,869,418.09, please see note 8 (1) for details.
2. Accumulated depreciation
Category Opening amount Increase this period Decrease this period Closing amount
Buildings and constructions 25,776,836.20 2,001,980.67 1,403,097.00 26,375,719.87
Machinery equipment 57,709,388.28 2,441,066.51 60,150,454.79
Transportation equipment 9,655,244.29 360,782.30 10,016,026.59
Office equipment and others 8,375,438.23 318,769.82 504,887.71 8,189,320.34
Total 101,516,907.00 5,122,599.30 1,907,984.71 104,731,521.5955
3. Provision for impairment losses on fixed assets
Category
Opening
amount
Increase this
period
Decrease this
period
Closing
amount
Buildings and
constructions
Machinery equipment 113,799.97 113,799.97
Transportation
equipment
Office equipment and
others
Total 113,799.97 113,799.97
Note: according to the assessment results of Assessment Report “Shen Gao Zi Ping Zi [2010]
No. 0308” issued by Shenzhen Gao Feng An Asset Assessment Trading Co., Ltd.on March 24,
2010, a provision for fixed assets impairment of RMB 113,799.97 are made on equipments placed
in Dezhou in 2009, through analysis and evaluation in the current period, the original amount of
impairment provision withdrawn maintained unchanged.
4. Carrying amount of fixed assets
Category Opening amount Increase this period Decrease this period Closing amount
Buildings and constructions 93,565,894.54 65,648.81 1,985,809.28 91,645,734.07
Machinery equipment 14,676,987.77 104,170.50 2,440,237.01 12,340,921.26
Transportation equipment 3,838,088.81 149,075.30 316,857.60 3,670,306.51
Office equipment and others 1,448,421.21 267,076.79 318,506.17 1,396,991.83
Total 113,529,392.33 585,971.40 5,061,410.06 109,053,953.67
5. Operating lease of fixed assets
Category
Original book
value
Accumulated
depreciation
Net book value
Buildings and constructions 43,664,187.20 6,423,447.45 37,240,739.75
Machinery equipment
Transportation equipment
Office equipment and others56
Total 43,664,187.20 6,423,447.45 37,240,739.75
Note: In September 2009, the Company and Puning Rieys Paper Industrial Co., Ltd. signed
“Lease Contract”, the Company leased the land use rights of the land "Pu Fu Guo Yong (2006) No.
Te 01371" and the property ownership "Yue Fa Di Zhen Zi No. C3929364" to Rieys Paper for a
period of two years from September 1, 2009 to August 31, 2011, the monthly rent was RMB
139,000 and the annual rent was RMB1.668 million, nd the monthly rent should be paid on the
15th each month. The contract agrees that if the Company intends to sell the above land and plant,
Puning Rieys Paper Industrial Co., Ltd. has the pre-emptive rights.
6. Fully depreciated fixed assets still in use
Category
Original book
value
Accumulated
depreciation
Net book value
Buildings and constructions
Machinery equipment 21,370,532.10 20,302,005.49 1,068,526.61
Transportation equipment 8,157,800.00 7,749,910.00 407,890.00
Office equipment and others 4,154,915.70 3,947,319.90 207,595.80
Total 33,683,247.80 31,999,235.39 1,684,012.41
7. Fixed assets under guarantee
Category
Original book
value
Accumulated
depreciation
Net book value
Buildings and constructions 40,281,405.99 12,116,969.72 28,164,436.27
Machinery equipment 19,588,012.10 18,472,457.64 1,115,554.46
Transportation equipment
Office equipment and others
Total 59,869,418.09 30,589,427.36 29,279,990.73
Note: Please see note 8 (1) for the details of guarantee of relevant fixed assets at period end.
8. Fixed assets as at period end is less than period beginning by RMB 4,475,438.66,
representing a change ratio of 3.94%.
(8) Construction in progress
Name of project Budget
Opening
amount
Increase
Decrease
Closing
amount
Capital
resource
Transferred
to fixed
Other
decreases57
assets
Wall buildings
of the
Company
3,818,240.63
3,818,240.6
3
自有
Expenditure of
accessory of
the Company
1,040,571.59
1,040,571.5
9
自有
Total 1,040,571.59 3,818,240.63
4,858,812.2
2
Note: Construction in progress at period end increased by RMB 3,818,240.63 compared with
the period beginning, representing a change ratio of 366.94%, the reason for the change is: the
Company newly signed a “Wall Construction Project Contract” with Puning Huaqiao Construction
Co., Ltd., totaling to RMB 3,818,240.63.
(9) Project materials
Category
Opening amount
Increase
this
period
Decrease
this
period
Closing amount
Book
balance
Provision
for
impairment
Book
balance
Provision
for
impairment
Gravel 1,530,000.00 1,530,000.00
Total
1,530,000.00
1,530,000.00
(10) Intangible assets
1. Original cost of intangible assets
Item
Original cost at
period beginning Increase this period Decrease this period
Original cost at
period end
Land use right 75,185,944.00 75,185,944.00
Computer software 373,115.00 373,115.00
Total 75,559,059.00 75,559,059.00
Of which: (1) Original cost of intangible assets for collateral or security at year end is
RMB13,863,200.00, which is for the loan of RMB 40 million from China Everbright Bank,
Guangzhou Branch, the maturity date is September 27, 2009, please see note 6 (4) for details;
(2) The lease situation of land use right is detailed in note 5 (7) 5.
2. Accumulated amortization58
Items Opening amount Amortization this period Decrease this period Closing amount
Land use right 7,241,238.91 751,766.52 7,993,005.43
Computer software 373,115.00 373,115.0
Total 7,614,353.91 751,766.52 8,366,120.43
3. Carrying amount of intangible assets
Items
Opening
amount
Increase this
period
Decrease this
period
Closing
amount
Land use right 67,944,705.09 -751,766.52 67,192,938.57
Computer software
Total 67,944,705.09 -751,766.52 67,192,938.57
Note: (1) As of 30 June 2010, the Company has not obtained the relevant certificate of land
use right for the land of 298.56 mu. The Company had signed a “Contract on land occupancy for
construction project” with a local economic association located in Zhenchen Valley Junfu area of
Puning on December 3, 2003 to occupy the land. The Company has paid related land use
compensation amounted to RMB23,526,500 according to the contract in the year 2004, and
applied for the certificate of land use right from the local government. The Board of Directors has
consigned Guangdong Haima law office to issue the Legal Opinion on the land matter on March
23, 2010. It is possible for the Company to obtain the certificate according to such Legal Opinion
from land departments. On June 8, 2004, the Company and Puning Huaqiao Construciotn Co., Ltd.
signed a Construction Contract for construction of the land leveling and sewage channels, the
contract cost is RMB18 million, and the project has been completed and accepted and included in
intangible assets.
4. The Company conducted impairment testing on construction in progress, and had not to
accrue the impairment of assets since the recoverable amount of construction in progress was
higher than its book value.
(11) Deferred income tax assets
1. Recognized deferred income tax assets
Items Opening amount
Increase this period Decrease this period
Closing
amount
Provision for
impairment of
assets
12,098,645.76 1,871,780.51 10,226,865.25
Initial
expenditure
Deductible loss
Subtotal 12,098,645.76 1,871,780.51 10,226,865.25
2. Unrecognized deferred income tax assets59
Items Closing amount Opening amount
Deductible temporary
difference
3,591,606.07 3,611,636.82
Deductible loss 24,121,669.77 34,195,423.18
Total 27,713,275.84 37,807,060.00
3. Temporary differences corresponding to assets or liabilities causing temporary differences
Item Amount of temporary differences
Loss remediable 96,486,679.08
Provision for impairment 55,273,885.23
Other
Total 151,760,564.31
(12) Details of provision for asset impairment
Items
Opening book
balance
Increase this
period
Decrease this period Closing book
Reversal Written off balance
1. Provision for bad
debts
52,048,688.94 -4,816,565.81 47,232,123.14
Of which：Accounts
receivable
27,616,790.95 60,648.26 27,677,439.21
Other receivables 24,431,898.00 -4,877,214.07 19,554,683.93
Prepayment
2. Provisions for
impairment in value of
inventory
10,678,641.36 2,750,679.23 7,927,962.13
3. Provision for
impairment losses on
fixed assets
113,799.97 113,799.97
Total 62,841,130.27 -4,816,565.81 2,750,679.23 55,273,885.23
(13) Short-term loan
1. Short-term loan
Items Closing balance Opening balance
Credit loan
Pledged loan 45,000,000.00 48,735,650.7560
Mortgaged loan 96,800,055.36 115,830,000.00
Secured loan 43,200,000.00 49,017,631.91
Total 185,000,055.36 213,583,282.66
Note: Please see note 6 (4) for details on relevant pledge, mortgage and security.
2. Expired but unpaid short-term loans:
Unit Amount
Interest
rate
Purpose
Overdue
reason
Expected
repay
date
Remark
(repaid
after
statement
date should
be
specified)
Puning Association of
Country Credit Union
Liusha West Union
28,200,000.00 10.449‰
Borrow the
new to pay
the old
financial
difficulty
Puning Association of
Country Credit Union
Liusha West Union
11,000,000.00 9.3375‰
Borrow the
new to pay
the old
financial
difficulty
Construction Bank of
China, Shenzhen
Branch
96,800,055.36 9.2070%
Borrow the
new to pay
the old
Assets
restructuring
The end
of 2011
Puning Association of
Country Credit Union
Liusha West Union
15,000,000.00 10.80%
Borrow the
new to pay
the old
financial
difficulty
China Everbright
Bank, Guangzhou
Branch
34,000,000.00 12.33%
Borrow the
new to pay
the old
financial
difficulty
The end
of 2011
Total 185,000,055.36
Note: (1) As of 30 June 2010, the Company’s loan balance in Puning Association of
Country Credit Union Liusha West Union was RMB 54.2 million, and all loans are all overdue;
(2) Part of loan overdue to Shenzhen Branch of China Construction Bank was repaid, and
an Agreement on Reduction or Remission of Interest was signed.
On April 16, 2010, the Company repaid the loan of RMB19.0299 million to Construction
Bank of China, Shenzhen Branch (hereinafter referred to as "CBC Shenzhen"), and on April 20,
2010, the Company and CBC Shenzhen signed the Interest Waiver Agreement" which stipulated:
as of 20 April 2010 the principal amount of the Company’s outstanding borrowings to CBC
Shenzhen is RMB96.8 million and interest will be postponed. The Company shall repay all of the
loan principal according to the following periods, before December 31, 2010 repay the loan61
principal of RMB18.8 million, of which: in November 2010 repay RMB9.385 million, and repay
RMB9.415 million in December. The last repayment date each month is the end of the
month.RMB78 million of loan principal should be repaid at equal installments quarterly in 2011,
that is quarterly repay of RMB19.5 million, the last repayment date each quarter is the end of the
quarter. If the Company is able to repay all the loan principal by the above deadline, the CBC
Shenzhen agrees to waive all the loan interest outstanding until the date repaying all loan principal.
CBC Shenzhen agrees that when the Company settles loan principal under single borrowing
contract, all the loan interest owed under the loan contract will be removed accordingly. However,
if there are the cases that fail to arrange full repayment of debt principal as schedule or there are
quota contracts, or other default responsibilities under borrowings contract, then the above waiver
of interest will be invalid from the beginning, the interest waiver occurred before will be invalid
also, and CBC Shenzhen is entitled to recover all the outstanding overdue interest from the date of
loan from the Company as if waive interest never occurred. When all the loan principal owed by
the Company is settled, CBC Shenzhen will promptly handle the collateral cancellation procedures
for collateral objects.
(3) China Everbright Bank
To the reporting date, the Company has repaid to China Everbright Bank the loan principal of
RMB3.7357 million. There are still RMB34 million outstanding loan principal, which is granted
RMB34 million credit quota by China Everbright Bank, and the Company and China Everbright
Bank, Guangzhou Branch are going through on-lending procedures.
(4) As of the closing date of the financial report, the overdue loans above haven’t been
claimed by the loan bank for payment.
(14) Accounts payable
Items
Closing balance Opening balance
Amount ％ Amount ％
Within 1 year 3,176,842.31 78.70% 3,438,576.21 76.05%
1-2 years 238,834.86 5.92% 272,259.34 6.02%
2-3 years 502,625.03 12.45% 680,635.69 15.05%
Over 3 years 118,188.61 2.93% 130,361.61 2.88%
Total 4,036,490.81 100.00% 4,521,832.85 100.00%
1. There is no accounts payable due from shareholder who has more than 5% (including 5%)62
voting shares of the Company in year end balance.
2. There is no accounts payable due to related parties in year end balance.
3. Accounts payable at year end decrease by RMB 485,342.04 compared with year beginning,
representing a decrease percentage of 10.73%, the reason is: repayment of part debt this period.
(15) Advances from customers
Aging
Closing balance Opening balance
Amount ％ Amount ％
Within 1 year 23,273.45 36.89%
1-2 years 17,532.84 27.79% 548,158.84 96.09%
2-3 years 15,800.02 25.04% 15,800.02 2.77%
Over 3 years 6,488.38 10.28% 6,488.38 1.14%
Total 63,094.69 100.00% 570,447.24 100.00%
1. There is no advance from customers due from shareholder who has more than 5%
(including 5%) voting shares of the Company in year end balance.
2. There is no advance from customers due to related parties in year end balance.
(16) Employee benefits payable
Item
Opening
book
balance
Increase this
period
Decrease this period Closing
book
balance
Payment this
period
Other decrease
1. Salaries and
wages, bonus,
allowance and
subsidies
2,540,626.01 10,147,147.75 9,194,433.03 1,664,378.62
2. Employee
welfare
126,181.99 1,385,967.76 1,391,727.76 120,421.99
3. Social
insurance
457,727.27 457,727.27
4. Housing
welfare fund
5. Union
welfare fund
and employee
education fund63
Total 2,666,808.00 11,990,842.78 12,872,850.17 1,784,800.61
Note: According to social insurance policy specified by local government, the Company has
gradually improved the specific policies and payment standards of social insurance based upon its
practical conditions.
(17) Taxes and surcharges payable
Items Closing balance Opening balance
Applied statutory
tax rate
VAT -852,257.81 -12,707.48 17%
Business Tax 35,624.09 35,624.09 5%
City Construction &
education surcharges
179,606.27 171,588.36 5%、3%
Enterprise Income Tax 8,079,097.03 6,224,356.54 25%
Individual income tax 92,616.67 123,138.47
Real estate tax 136,707.71 1,312,824.93 1.20%
Stamp tax 41,999.43 45,158.89
Land use tax 22,770.00 503,010.00 RMB6/sq.m.
Other 1,131.88 3,443.39
Total 7,737,295.27 8,406,437.19
(18) Interests payable
Items Closing balance Opening balance
Long-term loan interest by installment with
repayment of principal on due
Corporate bond interest
Short-term loan interest 52,947,946.57 46,682,049.12
Total 52,947,946.57 46,682,049.12
Note: Interest payable is loan interest overdue to financial institutions, the year end amount
increase RMB 6,265,897.45 than the year beginning, representing an increase ratio of 13.42%, the
reason for the change is: the unpaid interest of overdue loans increase.
Note: Please see note 5 (13) for overdue interest of the Company.
(19) Other payables
Items Closing balance Opening balance64
Within 1 year 3,415,526.10 4,026,476.99
1-2 years 1,882,940.48 3,220,935.29
2-3 years 351,298.80 361,965.80
Over 3 years 4,623.50 9,048.80
Total 5,654,388.88 7,618,426.88
1. There are no other payables due from shareholder who has more than 5% (including 5%)
voting shares of the Company in year end balance.
2. For other payables due to related parties in year end balance, please see note 6 (4) 3.
3. Other payables at year end decrease RMB 1,964,038.00 than year beginning, representing
a change ratio of 25.78%, the reason is: repayment of part debt this period.
(20) Accrued liabilities
Items Closing balance Opening balance
Reduction or remission of interest 4,919,585.47 -
Note: After the balance sheet date, the Company has repaid the part of loan to Shenzhen
Branch of CBC. And the Agreement of Reduction or Remission of Interest was signed between the
two parties, please refer to Note 5 (13) 2 for details. Shenzhen Branch of CBC issued the advice
note on reduction or remission of interest on 22 April 2010, remitting interests on loan amounting
to RMB 4,919,585.47 for the loan contract with No. 0293073R1-3.
In accordance with the provision of the agreement, if there are the cases that fail to arrange
full repayment of debt principal as schedule or there are quota contracts, or other default
responsibilities under borrowings contract, then the above waiver of interest will be invalid from
the beginning, the interest waiver occurred before will be invalid.
(21) Other non-current liabilities
Item and content Closing book balance Opening book balance
Deferred revenue 500,000.00 500,000.00
Total 500,000.00 500,000.00
Note: Puning Tianhe Garment Manufacturing Factory Co., Ltd. received the grant funds
RMB500,000 for garment production computer hanging automation systems transformation65
according to the documents of Guangdong Provincial Economic and Trade Commission and
Guangdong Provincial Financial Department, “Notice on Issue of 2009 Financial Innovation
Funds for Transformation Project (second)" Yue Jing Mao Chi Gai [2009] No. 666.
(22) Share capital
Item
Opening
amount
Percent
Increase(+) decrease(－)
Closing
amount
New Percent
shares
issue
Bonus
shares
Share
capital
by
transfer
of
capital
reserve
Other Subtotal
I. Unlisted shares
in circulation
164,025,000 51.48% 164,025,000 51.48%
1.sponsor’s
shares
164,025,000 51.48% 164,025,000 51.48%
Including: shares
held by the State
Shares held by
domestic legal
person
164,025,000 51.48% 164,025,000 51.48%
Shares held by
foreign legal
person
2. Raised legal
person shares
3. Employee
shares
4. Preferred stock
or other
II. Listed shares
in circulation
154,575,000 48.52% 154,575,000 48.52%
1. RMB ordinary
shares
2. Domestic listed
foreign shares
154,575,000 48.52% 154,575,000 48.52%
3. Overseas listed
foreign shares
4. Other66
III. Total shares 318,600,000 100.00% 318,600,000 100.00%
Note: 1. Puning Shenghengchang Trade Development Co., Ltd., the largest shareholder of the
Company (holds 117,855,000 domestic legal shares which accounts for 36.99% of total share
capital of the Company), pledged total domestic legal shares of the Company to Construction
Bank of China Shenzhen Branch on April 28, 2005 and the related shares are still under pledge.
For details, please see note 6 (4).
2. Shenzhen Rishen Investment Co., Ltd., the second largest shareholder of the Company,
(holds 34,020,000 domestic legal shares which accounts for 10.67% of total share capital of the
Company), pledged total domestic legal shares of the Company to Construction Bank of China
Shenzhen Branch on April 28, 2005 and the related shares are still under pledge. For details,
please see note 6 (4).
3. Shantou Lianhua Industrial Co., Ltd., the third largest shareholder of the Company, (holds
12,150,000 domestic legal shares which accounts for 3.81% of total share capital of the Company),
pledged total domestic legal shares of the Company to Construction Bank of China Shenzhen
Branch on April 28, 2005 and the related shares are still under pledge. For details, please see note
6 (4).
4. The above pledge is the secure for applying current funds loan with upper limit of
RMB110,000,000 and RMB40,000,000 to Construction Bank of China Shenzhen Branch. The
pledge period is from April 28, 2005 to the maturity of loan contract. The above pledge has been
registered in China Security Registration and Settlement Co., Ltd. Shenzhen Branch. For details,
please see note 6 (4).
(23) Capital reserves
Item
Opening
amount
Increase this
period
Decrease this
period
Closing
amount
Share capital premium 48,536,895.00 48,536,895.00
Other capital reserves 3,592,601.58 3,592,601.58
Total 52,129,496.58 52,129,496.58
(24) Surplus reserves
Item Opening Increase this Decrease this Closing67
amount period period amount
Statutory Surplus Reserves 49,036,260.20 49,036,260.20
Discretionary surplus
reserves
37,000,000.00 37,000,000.00
Total 86,036,260.20 86,036,260.20
(25) Retained profit
Item Amount
Withdraw or
distribution ratio
Undistributed profit at the end of previous
year before adjustment
-107,417,698.72
Total undistributed profit at beginning of
adjustment year (add ＋, less －)
Adjusted undistributed profit at year
beginning
-107,417,698.72
Increase： Net profit attributable to owner of
parent company this year
-11,339,502.78
Less: Appropriating statutory surplus reserve
Appropriating discretionary surplus
reserve
Appropriating general risk reserve
Common stock dividend payable
Common stock dividend transferred as
share capital
Retained profit at period end -118,757,201.50
(26) Operating revenue and operating cost
1. Operating revenue
Item Current period Previous year
Income from main operations 78,794,557.04 73,925,080.31
Other operation income 834,000.00
Cost of main operations 56,102,163.98 53,784803.97
Other operation cost 800,527.98
2. Main operations (by industry)
Industry Current period Previous year68
Operating
revenue
Operating cost
Operating
revenue
Operating cost
Industry 71,934,344.91 55,368,648.13 59,798,820.00 48,635,465.00
Commerce 20,757,886.74 14,631,190.46 27,918,010.00 18,941,089.00
Total 92,692,231.65 69,999,838.59 87,716,830.00 67,576,553.00
Internal offset and
deduction
13,897,674.61 13,897,674.61 13,791,750.00 13,791,749.00
Total 78,794,557.04 56,102,163.98 73,925,080.00 53,784,804.00
3. Main operations (by region)
Region
Current period Previous year
Operating
revenue
Operating cost
Operating
revenue
Operating cost
Export sales of
clothes
72,348,209.67 55,862,559.96 72,508,688.00 60,014,419.00
Domestic sales of
clothes
20,344,021.98 14,137,278.63 15,208,142.00 7,562,134.00
Subtotal 92,692,231.65 69,999,838.59 87,716,830.00 67,576,553.00
Internal offset and
deduction
13,897,674.61 13,897,674.61 13,791,750.00 13,791,749.00
Total 78,794,557.04 56,102,163.98 73,925,080.00 53,784,804.00
4. The total sales to Top 5 customers of the Company amounted to RMB 67,729,099.85,
accounting for 85.05% of total revenue the Company this year.
Name of customer Operating revenue
Percent in total operating
revenue of the Company (%)
HONOURLINK 31,756,604.56 39.88%
KEENZONE LIMITED 26,263,506.73 32.98%
Brendwood International Corp` 5,615,956.46 7.05%
HONOURLINK 3,397,603.10 4.27%
COCO PARK 695,429.00 0.87%
Total 67,729,099.85 85.05%
(27) Financial expenses
Items Current period Previous year69
Interest expenses 12,189,951.49 11,803,434.00
Less: Interest income 38,127.33 101,146.00
Exchange loss 940,694.28 112,684.00
Less: Exchange gain
Other 132,681.92 368,026.00
Total 13,225,200.36 12,182,998.00
Note: Financial expenses increased by RMB 1,042,202.36 than that of last year, the
decrease percentage is 8.55%,
(28) Impairment loss on assets
Items Current period Previous year
1．Loss on bad debts -4,816,565.81 2,878,043.76
2．Loss on falling price of inventory
3. Impairment loss on financial assets available
for sale
4. Impairment loss on investment held to maturity
5. Impairment loss on long-term equity
investment
6. Impairment loss on investment property
7. Impairment loss on fixed assets
8. Other
Total -4,816,565.81 2,878,043.76
(29) Non-operating revenue
Items Current period Previous year
1. Total gain on disposal of
non-current assets
Of which: gain on disposal of
fixed assets
34,479.22
Gain on disposal of
intangible assets
2. Gain on debt restructuring
3. Profits of non-monetary70
assets exchanged
4. Donations
5. Government grants
6. Other 58,912.39 10.00
Total 58,912.39 34,489.22
(30) Non-operating expenses
Items Current period Previous year
1. Total loss on disposal of non-current
assets
23,744.29 249,723.35
Of which: loss on disposal of fixed assets 23,744.29 249,723.35
Loss on disposal of intangible
assets
2. Loss on debt restructuring 120,000.00
3. Loss of non-monetary assets
exchanged
4. Donation expenses 510,250.00 100,000.00
5. Settlement loss
6. Surcharge expenditures 277,305.64 8,606.07
7. Other 1,719.63
Total 811,299.93 480,049.05
(31) Income tax expenses
Items Current period Previous year
Income tax for current period calculated by tax
law and relevant regulations
2,488,515.06 1,448,706.00
Deferred tax adjustment 1,871,780.51 -719,680.00
Total 4,360,295.57 729,026.00
(33) Calculation of ROE, basic earnings per share and diluted earnings per share
Profit of the reporting period
Weighted average
ROE
EPS
Basic EPS Diluted EPS
Net profit attributable to -0.0336 -0.04 -0.0471
ordinary shareholders of the
Company
Net profit attributable to
ordinary shareholders of the
Company after deducting
non-recurring gain or loss
-0.0313 -0.03 -0.03
The above data is calculated using the following formulae:
Weighted average return on net asset
Weighted average return on net asset = P0/(E0＋NP÷2＋Ei×Mi÷M0– Ej×Mj÷M0±Ek×Mk÷M0)
Where: P0 is net profit attributable to ordinary shareholders of the Company or net profit
attributable to ordinary shareholders of the Company after deducting non-recurring gain or loss; E0
is the year beginning equity attributable to ordinary shareholders of the Company; Ei is increased
equity attributable to ordinary shareholders of the Company which arises from new issuance of
shares or conversion of debt instruments to stocks in the reporting period; Ej is reduced equity
attributable to ordinary shareholders of the Company due to stock repurchase or cash dividend in
the reporting period; M0 is the number of months of the reporting period; Mi is the number of
accumulative months from the next month that equity is increased to the year end of the reporting
period; Mj is the number of months from the next month that equity is decreased to the year end of
the reporting period; Ek is the change of equity resulting from other transactions or events and
attributable to ordinary shareholders; Mk is the number of accumulative months from the next
month that other change of equity occurs to the year end of the reporting period.
Basic earnings per share
Basic earnings per share = P0÷S
S= S0＋S1＋Si×Mi÷M0– Sj×Mj÷M0-Sk
Where: P0 is net profit attributable to ordinary shareholders of the Company or net profit
attributable to ordinary shareholders of the Company after deducting non-recurring gain or loss; S
is weighted average number of ordinary shares outstanding; S0 is the total number of shares at the
beginning of the year; S1 is the number of increased shares as a result of capitalization of reserves
or scrip dividend during the reporting period; Si is the number of increased shares as a result of
new issuance of shares or conversion of debt instruments to stocks during the reporting period; Sj
is the number of reduced shares as a result of stock repurchase; Sk is the number of consolidated
shares in the reporting period; M0 is the number of months of the reporting period; Mi is the
number of accumulative months from the next month that the number of shares is increased to the
year end of the reporting period; Mj is the number of accumulative months from the next month
that the number of shares is decreased to the year end of the reporting period.
(If the Company have any dilutive potential ordinary shares , they should be adjusted
respectively and attributable to net profit of reporting period of ordinary shareholders and
weighted average common shares outstanding, and bywhich calculate the diluted earnings per
share)
Diluted earnings per share = P1/(S0 ＋ S1 ＋ Si×Mi÷M0–Sj×Mj÷M0–Sk+weighted average
number of increased ordinary shares arising from warrants, stock options and convertible debts)
Where: P1 is net profit attributable to ordinary shareholders of the Company or net profit
attributable to ordinary shareholders of the Company after deducting non-recurring gain or loss,
and after the consideration of the effects of dilutive potential ordinary shares, make adjustment
according to relevant provisions of “Accounting Standards of Enterprises”.
In calculating the diluted earnings per share, the Company has taken into consideration the
effects of all dilutive potential ordinary shares on net profit attributable to the Company's common
shareholders or net profit attributable to the Company's common shareholders after deducting
non-recurring profit or loss as well as weighted average number of shares, until the diluted
earnings per share reach the lowest amount.
(1) During period from balance sheet date to the date approved to issue the financial report, if
the occurred stock dividend, reserve capitalization, share split or share consolidation impact the
number of outstanding ordinary shares or potential common shares but without influent the
amount of owner's equity, it should recalculate the earnings per share each comparative period at
adjusted number of shares.
(2) If business combination under the common control occurred during the reporting period,
and the merging parties issue new shares as the price in the merger date, when calculate basic
earnings per share for the reporting period, such new shares should be treated as outstanding
common shares issued at the beginning of merge (weight average by weight of 1).When
calculating of basic earnings per share during the comparison period, such shares should be treated
as outstanding common shares issued at the beginning of comparison period.When calculating the
earnings per share after deducting non-recurring profit or loss at the end of reporting period, the
new shares issued by the merging parties on the merger date will be weighted from the month next
to the combined date.When calculating the earnings per share after deducting non-recurring profit
or loss during the comparison period, the new shares issued by the merging parties on the merger
date will not be weighted (the weight is 0).For the occurrence of business combination under the
common control at the reporting period, and the merging parties issue new shares as the price in
the merger date, when calculating the diluted earnings per share in the reporting period and
comparison period, it should be treated according to the principles on calculation of basic earnings
per share.73
(3) In the reporting period, if the company realizes the unlished companies to list indirectly
through share issue to purchase assets or other means and which composing a reverse purchase,
then when calculating earnings per share of the reporting period:
Weighted average number of ordinary shares in reporting period ＝ weighted average
number in the month from reporting period beginning to purchase date ＋ weighted average
number from the next month to purchase date to reporting period end
Weighted average number in the month from reporting period beginning to purchase date ＝
weighted average number of purchaser (subsidiary in law) × exchange ratio in Purchase
Agreement × number of cumulative months from year beginning to purchase date ÷ number of
months of reporting period
Weighted average number in the next month to purchase date to reporting period end ＝
weighted average number of acquiree(parent company in law) × number of cumulative months
from the next month to purchase date to reporting period end ÷ number of months of reporting
period
In the reporting period, if the company realizes the unlished companies to list indirectly
through share issue to purchase assets or other means, then when calculating earnings per share of
the comparison period:
Weighted average number of common shares in comparison period ＝ Purchaser (subsidiary
in law) × exchange ratio in Purchase Agreement
(33) Notes to cash flow statement
1. Other cash received relevant to operating activities
Item Amount
Other current payments received 52,780,692.64
Other loans received 18,500,000.00
Interest income received 38,043.83
Other 6,245,788.94
Total 77,564,525.41
2. Other cash paid relevant to operating activities
Item Amount
Other current payments paid 8,351,003.70
Other loans repaid 18,500,000.00
Audit and other intermediary fees paid 4,615,016.7374
Fees relevant to operating activities paid 7,021,859.70
Other 2,765,832.90
Total 41,253,713.03
(34) Supplementary information for cash flow statement
1. Supplementary information for cash flow statement
Items This period Last period
1. Reconciliation of net profit to net cash flows generated
from operating activities
Net profit -11,722,715.88 -20,482,731.00
Add: Provision for impairment of assets -4,816,565.81 2,878,044.00
Depreciation of fixed assets, of oil-gas assets, of
productive biological assets
5,122,599.30 10,655,921.00
Amortization of intangible assets 751,766.52 767,553.00
Amortization of long-term deferred expense
Losses on disposal of property, plant and equipment,
intangible assets and other long-term assets (gains: negative)
23,744.29 215,244.00
Loss on retirement of fixed assets (gains: negative)
Losses from variation of fair value (gains: negative)
Financial cost (gains: negative) 12,189,951.49 11,803,434.00
Investment loss (gains: negative) -1,847,417.00
Decrease in deferred income tax assets (gains: negative) 1,871,780.51 -719,511.00
Increase in deferred income tax liabilities (decrease:
negative)
Decrease in inventory (gains: negative) 1,938,485.01 10,057,164.00
Decrease in accounts receivable from operating
activities (gains: negative)
39,500,066.02 -461,296.00
Increase in payables from operating activities (decrease:
negative)
-4,611,014.83 -9,006,511.00
Other
Net cash flows generated from operating activities 40,248,096.62 3,859,894.00
II. Investing and financing activities that do not involving
cash receipts and payment:75
Conversion of debt into capital
Convertible bond due within one year
Fixed assets financed by finance leases
III. Net increase in cash and cash equivalents
Closing balance of cash 10,602,651.10 14,022,011.00
Less: Opening balance of cash 2,168,571.06 13,151,057.00
Closing balance of cash equivalents
Less: Opening balance of cash equivalents
Net increase in cash and cash equivalents 8,434,080.04 870,954.00
2. Relevant information on acquiring or disposing subsidiaries and other business entities
Items This period Last period
I. Acquisition of subsidiaries and other business
entities
1. Price for acquisition of subsidiaries and other
business entities
2. Cash and cash equivalents paid for acquisition of
subsidiaries and other business entities
Less: Cash and cash equivalents held by subsidiaries
and other business entities
3. Net cash paid for acquisition of subsidiaries and
other business entities
4.Net assets of subsidiaries acquired
Current assets
Non-current assets
Current liabilities
Non-current liabilities
II. Disposal of subsidiaries and other business
entities：
1. Price for disposal of subsidiaries and other
business entities
2. Cash and cash equivalents received for disposal of
subsidiaries and other business entities
1.00
Less: cash and cash equivalents held by
subsidiaries and other business entities
3. Net cash received for disposal of subsidiaries and76
other business entities
4. Net assets of subsidiaries disposed
Current assets
Non-current assets
Current liabilities
Non-current liabilities
3. Composition of cash and cash equivalents
Items This period Last period
1. Cash 10,602,651.10 14,022,011.00
Of which: Cash in hand 3,348,570.81 5,496,700.00
Bank deposit available to pay at any time 7,254,080.29 8,525,311.00
Other money funds available to pay at any time
2. Cash equivalents
Of which： Bonds maturing within 3 months
3. Ending balance of cash and cash equivalents 10,602,651.10 14,022,011.00
Of which: cash and cash equivalents restricted to use for
parent company or subsidiaries within the Group
VI. Related parties and related parties transaction
(1) Parent company of the Company
Name Relationship Type
Registered
address
Legal
representative
Business
Nature
Registered
Capital
Proportion of
parent
company’s
shareholding
to the
Company（%）
Proportions
of parent
company’s
voting right
to the
Company
（%）
Ultimate
controller
of the
Company
Organizat
ion Code
Puning
Shengheng
chang
Trade
Developm
ent Co.,
Ltd.
Parent
company
limited
liabilit
y
No. 212,
Build 46,
Qiao Guan
Village, Liu
Sha North
Street,
Puning
Chen Yuyi Trading 9800 36.99% 36.99%
Chen
Hongchen
g
7412223
2-177
Note: Puning Shenghengchang Trade Development Co., Ltd., Shenzhen Rishen Investment
Co., Ltd. and Shantou Lianhua Industrial Co., Ltd. are controlled by the same family, which belong
to action-in-concert promulgated by Measures for the Administration of Disclosure of Information
on the Change of Shareholdings in Listed Companies.
(2) Subsidiaries of the Company
For the Company's subsidiaries, please refer to note 4 (1) "Subsidiaries".
(3) Other related parties of the Company
Name of entities Relationship with the Company
Shenzhen Rishen Investment Co.,
Ltd.
Shareholder holding 10.68% stake of the Company,
affiliate controlled under Chen Hongcheng’s family
Shantou Lianhua Industrial Co., Ltd.
Shareholder holding 3.81% stake of the Company, affiliate
controlled under Chen Hongcheng’s family
Shanghai Hong Yi Property Limited Affiliate controlled under Chen Hongcheng’s family
Chen Xuewen, Ma Chanying Direct relatives of Cheng Hongcheng
Chen Meixiang Direct relatives of Cheng Hongcheng
Ding Lihong
Vice-Board chairman of the Company, relative of Cheng
Hongcheng
Wand Shaoying Shareholder of the Company’s holding subsidiary
Chen Yuyi
Legal representative of parent company and Shenzhen
Rishen Investment Co., Ltd.
(4) Related parties transactions
1. Related party transactions of purchase and sale of goods, provide and receive services
For subsidiaries having controlling relationship and have been included in the scope of our
consolidated financial statements, the sales and procurement and other transactions among them as
well as the parent company's sales and procurement and other transactions have been offset, not
detailed, and no related party transactions with other related parties.
2. Guarantee of related parties
Guarantee Secured party Bank issuing loan
Loan
balance
Maturity
date of
guarantee
Guarantee
has been
fully
performed
or not
Puning Shenghengchang
Trade Development Co.,
Guangdong
Rieys (Group)
Puning Association
of Country Credit
2570
Oct. 25,
2009
No.78
Ltd. Company
Limited
Union Liusha West
Union
Puning Shenghengchang
Trade Development Co.,
Ltd.
Guangdong
Rieys (Group)
Company
Limited
Puning Association
of Country Credit
Union Liusha West
Union
250
Sep. 20,
2008
No.
Shenzhen Chuanger
Garment Co., Ltd.,
Dongguan Jinjing Textile
Co., Ltd., Puning
Shenghengchang Trade
Development Co., Ltd.,
Shenzhen Rieys Industrial
Co., Ltd., Puning Tianhe
Garment Manufacturing
Factory Co., Ltd., Puning
Rieys Paper Industrial Co.,
Ltd.
Guangdong
Rieys (Group)
Company
Limited
Construction Bank
of China, Shenzhen
Branch
9680*1
Jan. 21,
2008
No.
Chen Hongcheng, Chen
Xuewen, Ding Lihong,
Dongguan Jinjing Textile
Co., Ltd., Puning
Shenghengchang Trade
Development Co., Ltd.,
Puning Tianhe Garment
Manufacturing Factory Co.,
Ltd., Shantou Lianhua
Industrial Co., Ltd.,
Shenzhen Rieys Industrial
Co., Ltd., Shenzhen Rishen
Investment Co., Ltd.,
Shanghai Hong Yi Property
Limited
Guangdong
Rieys (Group)
Company
Limited
China Everbright
Bank, Guangzhou
Branch
3400*2
Sep. 27,
2009
No.
Puning Shenghengchang
Trade Development Co.,
Ltd.
Puning Tianhe
Garment
Manufacturing
Factory Co.,
Ltd.
Puning Association
of Country Credit
Union Liusha West
Union
1000
Jan. 5,
2010
No.
Puning Shenghengchang
Trade Development Co.,
Ltd.
Puning Tianhe
Garment
Manufacturing
Factory Co.,
Ltd.
Puning Association
of Country Credit
Union Liusha West
Union
500
Apr. 10,
2010
No.79
*1 As mentioned in note 5 (19), Puning Shenghengchang Trade Development Co., Ltd.,
Shenzhen Rishen Investment Co., Ltd. and Shantou Lianhua Industrial Co., Ltd.had pledged all
the legal shares of the Company they held to the Construction Bank of China, Shenzhen Branch in
April 28 2005, in order to obtain the above bank loans for the Company.
*2 As mentioned in note 5 (7) (9), the Company took factory dormitory, machinery &
equipment and land use right as collateral, meanwhile Ma Chanying took the two sets of
properties in its name as collateral, in order to obtain the above bank loans for the Company.
3. Accounts payable among related parties
Name of project
Closing amount
(RMB10 thousand)
Opening amount
(RMB10 thousand)
Other payables:
Wang Shaoying 8.5 8.5
VII. Contingencies
Except for the events on reduction or remission of interest listed in Note 5 (20), the Company
hasn’t any contingency that need to be disclosed.
VIII. Commitments
(1) Assets mortgage
1. The Company mortgaged its real estate to obtain RMB6,000,000 borrowing from Puning
Association of Country Credit Union Liusha West Union. The maturity date is December 10,
2008;
2. The Company mortgaged its real estate to obtain RMB5,000,000 borrowing from Puning
Rural Credit Union West Liusha Branch. The maturity date is January 20, 2009;
3. The Company mortgaged its dormitory, machinery and equipment as well as land use right,
in order to obtain RMB40 million borrowing from China Everbright Bank, Guangzhou Branch.
The maturity date is September 27, 2009. Please see note 6 (4) for details.
The original carrying value of such part of fixed assets and intangible assets was RMB
73,732,618.09, and the net value was RMB 41,162,803.90.
IX. Post-balance sheet events
The Company hasn’t any post-balance sheet date events that need to be disclosed.
X. Other significant events
(1) Debts receivable from Puning Rieys Paper Industrial Co., Ltd.80
The Company took its claims RMB58.6 million on Rieys Paper to make up the price
difference of above equity, Rieys Paper still owed to the Company RMB61.96 million.On
December 8, 2009, the Company and Rieys Paper signed a repayment agreement, which stipulated:
before April 30, 2010, Rieys Paper should repay RMB30 million by installments or one time
according to its own situation, and before December 31, 2010, Rieys Paper should repay the
balance RMB31.96 million by installments or one time according to its own situation.At the same
time, to ensure the fulfillment of the above repayment agreement, the Company, Rieys Paper and
Hong Cheng Trading signed a mortgage and security agreement, which stipulated: Rieys Paper
took a batch of machines and equipment as collateral, which were the production lines No. 1, 2
and 3 of Rieys Paper with the book value RMB80.15 million, and Hong Cheng Trading provided
irrevocable guarantee.
As of December 30 June 2010, Rieys Paper owed a total of RMB 32 million to the Company,
and in the reporting period, the Company received a total overdue payment RMB 30.278 million
from Rieys Paper.
XI. Notes to financial statements of parent company
(1) Accounts receivable
1. Constitution of accounts receivable
Category
Closing balance Opening balance
Book balance Provision for bad debts Book balance Provision for bad debts
Amount
Percent
(%)
Amount
Percent
(%)
Amount
Percent
(%)
Amount
Percent
(%)
Accounts
receivable
with
significant
individual
amount
Accounts
receivable
with
insignificant
individual in
high risk
portfolio after
grouping by
credit risk
characteristics
5,461,184.56 91.59% 3,391,851.70 87.12% 14,813,401.66 96.73% 3,391,851.70 87.12%81
Other
accounts
receivable not
significant
501,435.24 8.41% 501,435.24 12.88% 501,435.24 3.27% 501,435.24 12.88%
Total 5,962,619.80 100.00% 3,893,286.94 100.00% 15,314,836.90 100.00% 3,893,286.94 100.00%
2. Provision for bad debts of accounts receivable with significant individual amount or with
insignificant individual amount but tested for impairment separately at period end
Content of accounts
receivable
Book balance Bad debts
Provision
ratio
Reasons
Beijing Capital Airport 21,713.00 21,713.00 100%
Long-term credit, the
balance is
controversial
Guangzhou Industry and
Commerce Bureau
117,462.99 117,462.99 100%
Long-term credit, the
balance is
controversial
Ningbo Industrial and
Commercial Bureau
26,354.45 26,354.45 100%
Long-term credit, the
balance is
controversial
Guangzhou Chen Shunqin 335,904.80 335,904.80 100%
Long-term credit, the
balance is
controversial
Total 501,435.24 501,435.24
3. Accounts receivable with insignificant individual in high risk portfolio after grouping by
credit risk characteristics:
Aging
Closing balance Opening balance
Book balance Provision for
bad debts
Book balance Provision for
Amount % Amount % bad debts
Within 1
year 1,221,369.93 22.36% 10,573,587.03 71.38%
1-2 years
2-3 years
Over 3
years 4,239,814.63 77.64% 3,391,851.70 4,239,814.63 28.62% 3,391,851.70
Total 5,461,184.56 100.00% 3,391,851.70 14,813,401.66 100.00% 3,391,851.70
4. Top 5 units in outstanding amount of accounts receivable82
Name of unit
Relationship
with the
Company
Amount Aging
Percent in total
accounts receivable
(%)
Hongkong Jinhua Trading
Company
Customer
4,224,304.63 Over 3 years 70.85%
Puning Tianhe Garment
Manufacturing Factory
Co., Ltd.
Subsidiary 1,221,369.93
Within 1
year
20.48%
Guangzhou Chen Shunqin Customer 335,904.80 Over 3 years 5.63%
Guangzhou Industry and
Commerce Bureau
Customer
117,462.99 Over 3 years 1.97%
Ningbo Industrial and
Commercial Bureau
Customer
26,354.45 Over 3 years 0.44%
5. Accounts receivable at period end is less than period beginning by RMB 9,352,217.10,
representing a change ratio of 81.88%, the reason for the change is: Tianhe Company refunded the
arrears for the previous period.
(2) Other receivables
1. Constitution of other receivables
Category
Closing balance Opening balance
Book balance
Provision for bad
debts
Book balance
Provision for bad
debts
Amount % Amount % Amount % Amount %
Other
receivables
with significant
individual
amount
31,999,492.7
4
25.18 639,989.85 11.73
62,277,492.7
4
40.11
1,245,549.
85
20.60
Other
receivables
with
insignificant
individual in
high risk
portfolio after
grouping by
credit risk
characteristics
90,862,790.9
0
71.48 573,304.33 10.50
88,742,850.3
6
57.16 554,841.90 9.18
Other accounts
receivable not
significant
4,245,115.55 3.34
4,245,115.5
5
77.77 4,245,115.55 2.73
4,245,115.
55
70.2283
Total
127,107,399.
19
100.0
0
5,458,409.7
3
100.0
0
155,265,458.
65
100.0
0
6,045,507.
30
100.00
2. Provision for bad debts of other receivables with significant individual amount or with
insignificant individual amount but tested for impairment separately:
Content of other receivables Book balance Bad debts
Provision
ratio
Reasons
Puning Rieys Paper Industrial
Co., Ltd.
31,999,492.74 639,989.85 2.00%
Export tax rebates receivable /
VAT
2,331,608.20 2,331,608.20 100.00%
Yu Panglin Hotel Management
(Shenzhen) Co., Ltd., Panglin
Hotel
1,964.40 1,964.40 100.00%
Li Yuelong 1,000.00 1,000.00 100.00%
Shenzhen Jin Ming Ren
Information Consulting
Company
200,000.00 200,000.00 100.00%
Zong Tongquan 100,000.00 100,000.00 100.00%
Shenzhen Zhao Tong
Investment Co., Ltd.
600,000.00 600,000.00 100.00%
Qi Xing Construction Materials
Distribution Shop, Bao'an
District of Shenzhen
200,000.00 200,000.00 100.00%
Guangzhou Nan Xiang
Construction Company
500,000.00 500,000.00 100.00%
Changsha Hat Factory 10,542.95 10,542.95 100.00%
Lin Jialin 300,000.00 300,000.00 100.00%
3. Other receivables with insignificant individual in high risk portfolio after grouping by
credit risk characteristics
Aging
Closing balance Opening balance
Book balance Provision for
bad debts
Book balance Provision for
Amount % Amount % bad debts
Within 1
year 23,217,713.81 25.55% 161,167.47 20,147,457.03 22.70% 157,029.40
1-2 years 2,592,512.45 2.85% 251,091.25 2,606,889.74 2.94% 250,728.9784
2-3 years 68,124.15 0.08% 7,062.08 461,260.20 0.52% 11,500.00
Over 3 years 64,984,440.49 71.52% 153,983.53 65,527,243.39 73.84% 135,583.53
Total 90,862,790.90 100.00% 573,304.33 88,742,850.36 100.00% 554,841.90
4. Top 5 in outstanding amount of other receivables in period end
Name of unit
Relationship with
the Company
Amount Aging
Percent in total
other receivable
Tianrui (HK) Trading Co., Ltd. Subsidiary 64,927,561.08 Over 3 years 51.08%
Puning Rieys Paper Industrial Co., Ltd. Original subsidiary 31,999,492.74 Within 1 year 25.18%
Shenzhen Rieys Industrial Co., Ltd. Subsidiary 10,590,834.70 Within 1 year 8.33%
Puning Hengda Real Estate Development
Co., Ltd.
Subsidiary 4,568,505.58 Within 1 year 3.59%
Puning Huaqiao Construction Co., Ltd. Customer 3,749,659.50 Within 1 year 2.95%
Total 115,836,053.60 91.13%
(3) Long-term equity investments
Investee
Audit
method
Initial investment
Balance at year
beginning
Change
(increase
or
decrease)
Balance at year end
Stake in the
investee (%)
Voting in the
investee (%)
Difference
statement
Shenzhen Rieys
Industrial Co.,
Ltd.
Cost
method
45,000,000.00 45,000,000.00 45,000,000.00 90 90
Puning Tianhe
Garment
Manufacturing
Factory Co.,
Ltd.
Cost
method
51,712,500.42 51,712,500.42 51,712,500.42 75 100
Subsidiary holds
25%
Tianrui (HK)
Trading Co.,
Ltd.
Cost
method
8.26 8.26 8.26 100 100
Shenzhen
Chuang’er
Garment Co.,
Ltd.
Cost
method
7,520,000.00 7,520,000.00 7,520,000.00 86 86
Puning Hengda
Real Estate
Development
Co., Ltd.
Cost
method
146,600,000.00 146,600,000.00 146,600,000.00 100 10085
(4) Operating revenue and operating cost
Item Current period Previous year
Operating revenue 8,823,130.70 321,719.00
Operating cost 8,261,093.28 332,946.00
Operating profit 562,037.42 -11,227.00
Note: The main products of the Company are processing knitted fabrics, all which are sold to
the subsidiary Puning Tianhe Garment Manufacturing Factory Co., Ltd. Operating revenue of this
period increased RMB 8,501,411.70 than last year, representing a change ratio of 2642.50%, the
reason for the change is: sales volume of Tianhe Company increase in this period, resulting in
increase of demands of raw materials.
(5) Investment income
Name of investee Current period Previous year
Long-term equity investment income recognized
with cost method
Long-term equity investment income recognized
with equity method
Investment income generated from disposal of
long-term equity investments
Investment income generated from financial
assets held for trading
Investment income generated during the
investment return achieved from investments held
to maturity
Investment income generated from holding
financial assets available for sale
Investment income generated from disposal of
trading financial assets
Investment income generated from investment
held to maturity
Investment income generated from financial
assets available for sale
Other
Total86
(6) Supplementary information for cash flow statement
Items This period Last period
1. Reconciliation of net profit to net cash flows generated
from operating activities
Net profit -18,649,039.03 -16,194,693.13
Add: Provision for impairment of assets -587,097.57
Depreciation of fixed assets, of oil-gas assets, of
productive biological assets
4,099,850.31 2,758,003.74
Amortization of intangible assets 751,766.52 553,804.32
Amortization of long-term deferred expense
Losses on disposal of property, plant and equipment,
intangible assets and other long-term assets (gains: negative)
26,123.86
Loss on retirement of fixed assets (gains: negative)
Losses from variation of fair value (gains: negative)
Financial cost (gains: negative) 11,059,055.45 10,026,033.86
Investment loss (gains: negative)
Decrease in deferred income tax assets (gains: negative) 146,774.39
Increase in deferred income tax liabilities (decrease:
negative)
Decrease in inventory (gains: negative) 3,883,538.99 -2,655,613.10
Decrease in accounts receivable from operating activities
(gains: negative)
39,549,709.01 9,922,098.05
Increase in payables from operating activities (decrease:
negative)
-8,474,123.59 754,315.40
Other
Net cash flows generated from operating activities 31,780,434.48 5,190,073.00
II. Investing and financing activities that do not involving
cash receipts and payment:
Conversion of debt into capital
Convertible bond due within one year87
Fixed assets financed by finance leases
III. Net increase in cash and cash equivalents
Closing balance of cash 7,691,509.95 4,180,048.00
Less: Opening balance of cash 647,412.49 1,602,714.00
Closing balance of cash equivalents
Less: Opening balance of cash equivalents
Net increase in cash and cash equivalents 7,044,197.46 2,577,334.00
XII. Supplementary information
(1) List of current non-recurring gains or losses
Items of non-recurring gains or losses Amount Remark
1. Profit or loss from disposal of non-current assets, including
written-off parts made the provision for asset impairment;
2,600.00
2. Ultra vires approval, or without official approval
documents, or occasional tax return or relief;
3. Government subsidies through current profit or loss, but
are closely related to normal operations of the Company, in
line with national policies and regulations. Except
government subsidies continued to enjoy according to certain
standard amount or quantitaty;
4. Funds occupation fee through current profit or loss
collected from non-financial enterprises;
5. The investment cost for the Company to obtain subsidiaries
and joint ventures is less than the revenue generated from fair
value of the identifiable net assets of investee when obtaining
investment;
6. Non-monetary assets exchange profit or loss;
7. Profit or loss from entrusting others to invest or manage
assets;
8. Various provision for impairment of assets made due to
force majeure, such as natural disasters;
9. Debt restructuring gains and losses;
10. Corporate restructuring costs, such as the employees
placement expenses, integration costs, etc.;
11. Profit or loss over the part of fair value generated by88
transactions with obviously unfair trading price;
12. Current net profit or loss generated by subsidiary from
business combination under the common control from year
beginning to the merge date;
13. Profit or loss generated by contingencies not related to the
Company's normal business;
14. In addition to effective hedging business related to the
normal operations of the Company, profit or loss from
changes in fair values of financial assets held for trading and
trading financial liabilities, as well as investment income
from the disposal of trading financial assets, trading financial
liabilities and financial assets available for sale;
15. Reversal of provision for impairment of receivables
through separate impairment test;
16. Profit or loss from entrusted external loans;
17. Profit or loss generated from changes in fair value of
investment property that using fair value method for
subsequent measurement;
18. According to tax, accountancy law and other regulations,
the effect of one-time adjustment on current profit or loss
which made on current profit or loss according to tax,
accountancy law and other regulations;
19. Commission Income obtained from commission
operation;
20. Other non-operating income and expenditure in addition
to the above items;
-754,987.54
21. Other profit or loss items meet the definition of
non-recurring gains and losses.
Subtotal -752,387.54
Income tax expense should be deducted from aforementioned
non-recurring gains and losses
3,197.47
Profit or loss of minority shareholders in consolidated
financial statement
-2,389.68
Total -753,195.33
(3) The anomalies in the Company’s financial statements and the reasons
Item Change amount Percent Remark
Monetary fund 8,434,080.04 388.92% the collection of current payment at the current period
Other
receivables
-47,859,996.26 -39.40%
he Company enhanced the recovery for current
payment in the reporting period and took back the part89
of arrearage
Construction
in progress
3,818,240.63 366.94%
the Company newly signed a “Wall Construction
Project Contract”
Impairment
loss of assets
-7,694,609.57 -267.36% Decrease in loss on bad debts
Income tax
expense
3,631,269.73 498.10%
Income tax withdrawn by the subsidiary and
adjustment of deferred income tax
XIII. Approval and disclosure of financial statements
The financial statements have been approved by the Board to disclose on 23 August 2010.
[The understanding on this English text of the Report should be subject to the Chinese text.]
Guangdong Rieys (Group) Co., Company Limited
23 August 2010
