GUANGDONG RIEYS GROUP COMPANY LTD.
INTERIM REPORT 2011
August 2011
Guangdong Rieys Group Company Ltd.
Interim Report 2011
(English Translation for Reference Only)
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 2011 of the Company has not been audited.
II. Contents
Section I Important Notices and Contents
Section II Company Profile
Section III Changes in Capital Shares and Particulars about Main Shareholders
Section IV Particulars about Directors, Supervisors and Senior Management
Section V Report of the Board of Directors
Section VI Significant Events
Section VII Financial Report (Un-audited)
Section VIII Documents Available for Reference
Section 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
Room 4005, 40/F International Chamber of Commerce Tower， No. 3 Fuhua Road,
Contact address
Futian 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: Room 4005, 40/F International Chamber of Commerce Tower，
No. 3 Fuhua Road, Futian 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, Room
4005, 40/F International Chamber of Commerce Tower， No. 3 Fuhua Road,
Futian 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: 445200000034656
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
Increase/decrease of the end of reporting
At the end of this
At the end of last year period compared with the period-end of
reporting period
the last year (%)
Total assets 552,723,733.25 586,050,810.45 -5.69
Owners’ equity (or shareholders’ equity) 303,727,165.13 308,161,044.95 -1.44
Share capital 318,600,000.00 318,600,000.00 0
Net asset per share attributable to 0.97 -2.06
0.95
shareholders of the Company
The same period of last Increase/decrease during the report period
The report period
year compared with that of the last year (%)
Operating revenue 46,761,330.11 79,628,557.04 -41.28
Operating profit -1,447,888.63 -6,610,032.77 -78.10
Total profit -3,245,754.32 -7,362,420.31 -55.91
Net profit -4,433,879.82 -11,339,502.78 -60.90
Net profit after deducting non-recurring -14,295,604.90 -10,586,307.45 58.12
gains and losses
Basic earnings per share -0.01 -0.04 -75.00
Diluted earnings per share -0.01 -0.04 -75.00
Net return on equity -1.46% -3.35% -1.89
Net cash flow from operating activities 21,934,225.27 40,248,096.62 -45.50
Net cash flow from operating activities per
0.07 0.13 -46.15
share
(II) Items of non-recurring gains and losses
Unit: RMB Yuan
Specific item Amount
Gains and losses from disposal of non-current assets 6,886,749.94
Gains and losses from changes in fair value of transactional financial assets -92,647.52
Investment income generated from disposal of transactional financial assets 108,547.06
Reversal of provision for impairment on accounts receivable that make provision for
3,298,325.50
impairment test individually
Other non-operating income and expenses other than the above items -624,311.14
Subtotal 9,576,663.84
Income tax -285,219.60
Minority shareholders’ gains and losses 158.36
Total 9,861,725.08
(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 indices
ROE (%) EPS (RMB Yuan/share)
Weighted
Fully diluted Basic EPS Diluted EPS
average
Net profit attributable to owners of parent company -1.46 -1.45 -0.01 -0.01
Net profit attributable to owners of parent company after deducting
-4.71 -4.67 -0.04 -0.04
non-recurring gains and losses
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 15,114
Percentage
Nature of Total number of Non-tradable Shares pledged or
Name of shareholders of
shareholders shares held shares held frozen
shareholding
Puning Shenghengchang Trade Corporate
36.99% 117,855,000 117,855,000 Pledged
Development Co., Ltd shares
Corporate
Shenzhen Risheng Investment Co., Ltd. 10.68% 34,020,000 34,020,000 Pledged
shares
Corporate
Shantou Lianhua Industrial Co., Ltd. 3.81% 12,150,000 12,150,000 Pledged
shares
Su Youhe B share 1.88% 6,001,663 0 Unknown
Qin Yuyan B share 0.59% 1,870,000 0 Unknown
Zheng Suxian B share 0.54% 1,721,118 0 Unknown
Xu Hai B share 0.48% 1,515,200 0 Unknown
LUO DONG HUI B share 0.45% 1,441,200 0 Unknown
NGAI KWOK PAN (Wei Guobin) B share 0.36% 1,145,816 0 Unknown
Taifook Securities Company
B share 0.34% 1,087,459 0 Unknown
Limited-Account Client
Particulars about shares held by the top ten shareholders not subject to trading moratorium
Name of shareholder Number of tradable shares held Type of share
Su Youhe 6,001,663 B share
Qin Yuyan 1,870,000 B share
Zheng Suxian 1,721,118 B share
Xu Hai 1,515,200 B share
LUO DONG HUI 1,441,200 B share
NGAI KWOK PAN (Wei Guobin) 1,145,816 B share
Taifook Securities Company
1,087,459 B share
Limited-Account Client
Ke Zhongfeng 762,200 B share
Duan Dejin 732,100 B share
Chen Zhenqi 701,800 B share
Explanation on associated relationship There exists associated relationship among Puning Shenghengchang Trade Development
among the aforesaid shareholders or Co., Ltd, Shenzhen Risheng Investment Co., Ltd. and Shantou Lianhua Industrial Co., Ltd..
acting-in-concert Other associated relationship is unknown.
Note: Shenzhen Risheng Investment Co., Ltd. was changed the name as Shenzhen
Risheng Chuangyuan Assets Management Co., Ltd. on 14 Jul. 2011.
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
For the reporting period, the Company achieved operating revenues of RMB 46.76
million, down 41.28% from RMB 79.63 million in the same period of last year;
operating costs of RMB 37.68 million, down 33.79% from RMB 56.90 million in the
same period of last year; operating expenses of RMB 4.36 million, down 33.27% from
RMB 6.53 million in the same period of last year; operating profit of RMB -1.45
million, representing a loss reduction of 78.10% when compared with RMB -6.61
million in the same period of last year; and net profit attributable to the Company of
RMB -4.43 million, representing a loss reduction of 60.90% when compared with RMB
-11.34 million in the same period of last year. The aforesaid year-on-year changes of
operating revenues, operating costs, operating expenses, operating profit and net profit
attributable to owners of the Company were mainly due to: (1) The real estate business
had not yet generated earnings. In order to ensure real estate development, the
Company focused its limited resources on the real estate business and scaled down its
garment export business. As a result, operating revenues, costs and expenses for the
reporting period all experienced sharp drops. (2) The sale of the controlled
subsidiary—Shenzhen Missk Fashion Co., Ltd.—in the reporting period brought
investment gains for the Company, which reduced the loss.
Monetary funds stood at RMB 4.52 million at the end of the reporting period, down
85.00% when compared with the opening amount of RMB 30.10 million, which was
mainly because the Company repaid some bank loans in the reporting period. Accounts
receivable stood at RMB 39.09 million at the end of the reporting period, down 35.27%
when compared with the opening amount of RMB 60.38 million, which was mainly
because the Company put in more effort to collect mature loans. Other payables stood
at RMB 48.91 million at the end of the reporting period, up 41.40% when compared
with the opening amount of RMB 34.59 million, which was mainly because the
Company borrowed RMB 18.50 million from related parties.
During the reporting period, the Company input an approximate total amount of RMB
40 million for the Puning “Shangdi Central” project. It continued to go all out for the
project, allocating as many as its limited resources to the project. Meanwhile, it also
continued to peel off non-performing assets, optimize its industrial structure and asset
quality, and strengthen collection of receivables. With great support from shareholders,
despite a macro financial strain, the Company managed to execute on schedule the
“Agreement of Interest Deduction and Exemption” signed with the Shenzhen branch of
China Construction Bank Co., Ltd., repaying loan principals and interest of RMB 39
million in total.
II. Business review for the reporting period
(I) General performance
Unit: RMB Yuan
Items Current period Same period of last year Increase/decrease
Operating revenues 46,761,330.11 79,628,557.04 -41.28%
Operating profit -1,447,888.63 -6,610,032.77 -78.10%
Net profit attributable to shareholders of the -4,433,879.82 -11,339,502.78 -60.90%
Company
1. Operating revenues decreased considerably from a year earlier, which was because
the Company scaled down its export business.
2. Operating profit and net profit attributable to shareholders of the Company both
registered significant loss reduction as compared with the same period of last year,
which was because the sale of the controlled subsidiary—Shenzhen Missk Fashion Co.,
Ltd.—in the reporting period brought investment gains for the Company.
(II) Main businesses classified according to industries
Unit: RMB Yuan
Items Operating revenue Operating cost Gross profit rate
Overseas sales of garments 43,281,396.53 37,670,146.99 12.96
Domestic sales of garments 5,597,382.04 2,183,390.40 60.99
Sub-total 48,878,778.57 39,853,537.39 18.46
Internal purchase and sales -2,977,448.46 -2,977,448.46 ——
offsetting
Total 45,901,330.11 36,876,088.93 19.66
(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. Under
the circumstances of tight macro capital, especially the controlling policies on real
estate sector, the Company temporarily has no direct or indirect financing channels.
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. 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.
3. The Board of Directors has noticed that the controlling result appears and the
controlling scope will further expand with the elaboration and implementation of
national controlling measures on housing price. Therefore, the Company will accelerate
the development of real estate and take effective measures to counter any new changes.
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
Currently, the main business scope of the Company is garments production and real
estate development, the reasons of the loss reduction in the net profit incurred in the
period from the year-begin to the end of the next report period are as follows: (1) Real
estate projects developed by the Company are still in the development phase and they
could not be completed and settled within the year 2011, and the profits of garments
production can’t turn the Company to be profit; (2) RMB 6.5 million of investment
income was gained from the sales of Shenzhen Missk Fashion Co., Ltd. during the report
period; (3) The debts reorganization with China Construction Bank hasn’t been finished,
so the deducted interest cann’t be recorded into current gains and losses temporarily.
The net profit for the period from Jan. to Sep. 2011 is estimated to stand at RMB -9
million, representing a loss reduction about RMB 5.61 million from the net profit of
RMB -14.61 million 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 2010 annual financial report
Asia (Group) Accounting Firm issued an unqualified audit report with pinpointed
matters for the 2010Annual Financial Report of the Company.
The said pinpointed matters were stated as, “We warn the users of financial statements
to pay attention to the content of Notes to the Financial Statements X (10), which is in
the year 2010, net profit attributable to owners of the parent company stood at RMB
-41,187,000 and at RMB -42,204,000 after deducting non-recurring gains and losses. In
2010, the main business scope of the Company was transformed from garments to both
garments and real estate development. The real estate projects have been started but not
pre-sold, 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 6.72 million has been achieved as compared with
the loss about RMB 11.72 million in the same period of last year. As is shown, the loss
is decreasing. The real estate projects in Puning currently developed by the Company
are on smooth progress with about RMB 40 million being input in the projects
accumulatively during the first half year of 2011, thus the construction of the projects
can be implemented as schedule basically. Meanwhile, the target of national macro
control on real estate indicates that the demands in real estate market are large in cities
like Puning. 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 future work, the Company will make corporate governance as an important basic
work to improve the Company’s competitiveness, and continuously improve the
Company’s modern enterprise system.
II. The Company did not distribute profit or transfer public reserves to share capital in
2010
The Company will not distribute profit or transfer public reserves to share capital in the
first half year of 2011.
III. No significant lawsuit or arbitration occurred in the report period or in previous
period lasting to the report period.
IV. Particulars about securities investment
Initial Number of Proportion in
Short form of Book value at Profits and gains in
No. Type of stock Stock code investment shares held at total securities
stock period-end report period
amount (Yuan) period-end investment at
(unit: share) period-end
(%)
1 Stock 600135 Lucky film 5,704,737.52 358,600 5,612,090.00 100.00% -92647.52
Other securities investment held at the period-end 0.00 - 0.00 0.00% 0.00
Profits or losses of securities sold in the report period - - - - 108.547.06
Total 5,704,737.52 - 5,612,090.00 100% 15,899.54
Explanations for particulars about securities investment: With purpose of promoting the
use efficiency of idle capital, securities investment of the Company is in accordance
with management authorities and all procedure as well as decision approval of
conducting securities investment. While securities investment of the Company is of a
small amount, low profitability that has a little impact on business performance of the
reporting period.
V. No significant assets acquisition, sales or enterprise merger occurred in the report
period or in the previous period lasting to report period.
VI. Significant related transaction in the report period
1. Sales of Shenzhen Missk Fashion Co., Ltd.
The Company signed the Agreement on Equity Transfer and Debts Reorganization with
its director Ms. Chen Xuewen on 28 Apr. 2011 in Shenzhen, selling 86% equities of
Shenzhen Missk Fashion Co., Ltd. legally held by the Company at the price of RMB
1.00. Meanwhile, Ms. Chen Xuewen paid RMB 17,284,086.34 of arrearage to the
Company’s wholly owned subsidiary—Puning Tianhe Garment Manufacturing Factory
Co., Ltd. on behalf of Shenzhen Missk Fashion Co., Ltd. before the sign of the
agreement.
On 30 Nov. 2010, the audited carrying amount of the net assets of Shenzhen Missk
Fashion Co., Ltd. stood at RMB -5,279,700, and the assessed net assets of Shenzhen
Missk Fashion Co., Ltd. stood at RMB -852,400; while on 31 Dec. 2010, the audited
carrying amount of the net assets of Shenzhen Missk Fashion Co., Ltd. stood at RMB
-5,664,400. And the audit report and assessment report were the reference for fixing the
price.
Due to the heavy burden on repayment of bank loans in recent years, the Company fell
into tight capital status, which had significantly affected the routine operation of
Shenzhen Missk Fashion Co., Ltd.. What’s more, due to the increasing competitiveness
on brand garments, Shenzhen Missk Fashion Co., Ltd. kept losing in recent years with
shrinking sales outlets. In light of the Company’s actual situation, the Company had no
more funds to input on Shenzhen Missk Fashion Co., Ltd., the Company sold Shenzhen
Missk Fashion Co., Ltd. after making decision.
On one hand, such transaction favored the Company to reduce losses and recover the
arrearage of RMB 17.28 million from Shenzhen Missk Fashion Co., Ltd., on the other
hand, it helped the Company centralize current limited resources to make the
Company’s real estate business more professional, refined and strong, thus helped the
Company’s business scope to realize the transformation from garment production to
real estate development as soon as possible. After the primary estimation by the
Company’s finance department, such transaction would make about RMB 6.5 million
of investment income for the Company in 2011. After the complete of such transaction,
Shenzhen Missk Fashion Co., Ltd. wouldn’t be included into the Company’s
consolidated financial statements, thus it wouldn’t generate any related transaction with
the Company.
The transaction was reviewed and approved at the 2nd Session of the 5th Board of
Directors in 2011 and the Shareholders’ General Meeting for Y2010, whose transfer
procedure has been finished.
2. In order to support the Company’s development, Ms. Chen Xuewen, the Company’s
actual controller and person acting-in-concert, and Shenzhen Risheng Investment Co.,
Ltd. provided RMB 4 million and RMB 14.50 million respectively to the Company
during 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
(Hereinafter refer to as “Shenzhen Branch”) signed Agreement on Interest Deduction,
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 9,385,055.36 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.
Up to the end of report period, the Company had repaid four of the above borrowings as
schedule, Shenzhen Branch recognized the deducted interest of RMB 24,712,710.05
for the Company in accordance the repayment situation.
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) External guarantee made by the Company in the reporting period
As reviewed and approved by the 8th Session in 2010 of the 5th Board of Directors in
Nov. 2010 held by the Company, the Company was approved to provide mortgaged
guarantee for Huizhou Polyway Opto-electronic Co., Ltd. to apply a loan of RMB 28
million from Huizhou Branch of Shanghai Pudong Development Bank by its legally
owned house property in Puning City (Number of property ownership certificate:
Yue-Fang-Di-Zheng-Zi No.C3929364). The guaranteed amount was the amount of the
principal claim mortgaged and guaranteed, namely RMB 28 million. The balance of the
principal claim should not be more than RMB 32 million during the occurring period of
the claim. The guaranteed period was 3 years, starting from the date when the
independent contract (loan contract) took effect. Huizhou Polyway Opto-electronic Co.,
Ltd. would provide counter guarantee by RMB 25 million and its legally-owned
production equipment. For details, please refer to public notices of the Company
published in Securities Times and Ta Kung Pao dated 23 Nov. 2010. (Serial number of
the public notices: 2010-025)
Huizhou Polyway Opto-electronic Co., Ltd. repaid RMB 4.5 million in advance in Jul.
2011, the Company reduced its counter-guarantee amount with the same amount.
There’s no evidence showing that the Company might undertake guarantee liabilities
due to the default in loan by the guaranteed party.
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 other
related parties.
The Company had no external guarantee during the report period.
The Company’s external guarantee occurred in previous period and lasted to the report
period help the Company to provide mortgaged guarantee for Huizhou Polyway
Opto-electronic Co., Ltd. to apply a loan of RMB 28 million from Huizhou Branch of
Shanghai Pudong Development Bank by its legally owned house property in Puning
City by self-owned house property. Huizhou Polyway Opto-electronic Co., Ltd.
provided counter guarantee by RMB 25 million and its legally-owned production
equipment. Huizhou Polyway Opto-electronic Co., Ltd. repaid RMB 4.5 million in
advance in Jul. 2011, the Company reduced its counter-guarantee amount with the same
amount.
There’s no illegal event of external guarantee of the Company, no guarantee for
controlling shareholder and other related parties, and no violation against the Criterion
on Standardizing Several Issues about Capital Flow between Listed Companies and
Related Parties and External Guarantees of Listed Companies (Zheng-Jian-Fa [2003]
No. 56) and the Criterion on Standardizing External Guarantee Behaviors of Listed
Companies (Zheng-Jian-Fa [2005] No. 120). There’s no evidence showing that the
Company might undertake guarantee liabilities due to the default in loan by the
guaranteed party.
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 Main discussion and materials provided by
Reception place Reception way Visitor
time the Company
21 Feb. 2011 Office of the Board Inquiring about basic situation of the
By telephone Shareholder
of Directors Company
25 Feb. 2011 Office of the Board Inquiring about basic situation of the
By telephone Shareholder
of Directors Company
8 Mar. 2011 Office of the Board Inquiring about basic situation of the
By telephone Shareholder
of Directors Company
10 Mar. 2011 Office of the Board Inquiring about basic situation of the
By telephone Shareholder
of Directors Company
29 Mar. 2011 Office of the Board Inquiring about basic situation of the
By telephone Shareholder
of Directors Company
31 Mar. 2011 Office of the Board Inquiring about basic situation of the
By telephone Shareholder
of Directors Company
6 Apr. 2011 Office of the Board Inquiring about basic situation of the
By telephone Shareholder
of Directors Company
6 Apr. 2011 Office of the Board Inquiring about debts reorganization
By telephone Shareholder
of Directors situation with Shenzhen Branch
18 Apr. 2011 Office of the Board Inquiring about basic situation of the
By telephone Shareholder
of Directors Company
13 May 2011 Office of the Board Inquiring about basic situation of the
By telephone Shareholder
of Directors Company
23 May 2011 Office of the Board Inquiring about basic situation of the
By telephone Shareholder
of Directors Company
13 Jun. 2011 Office of the Board Inquiring about basic situation of the
By telephone Shareholder
of Directors Company
Section VII Financial Report (Un-audited)
I. Financial Statements (attached behind)
II. Notes to Financial Statements (attached behind)
Section VIII Documents Available for Reference
I. Text of Interim Report 2011 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
4 Aug. 2011
Financial statements
Balance Sheet
Prepared by Guangdong Rieys (Group) Company Ltd. 30 Jun. 2011 Unit: RMB Yuan
Closing balance Opening balance
Items
Consolidation The Company Consolidation The Company
Current Assets:
Monetary funds 4,515,752.81 2,682,025.61 30,095,398.06 28,150,078.47
Settlement reserves
Intra-group lendings
Transactional financial assets 5,612,090.00 2,804,480.00
Notes receivable
Accounts receivable 39,087,593.01 60,384,107.71
Accounts paid in advance 61,434,895.66 968,244.00 69,492,604.59 338,244.00
Premiums receivable
Reinsurance premiums
receivable
Receivable reinsurance contract
reserves
Interest receivable
Dividend receivable
Other accounts receivable 24,047,955.09 121,858,120.22 27,781,691.68 106,997,618.63
Financial assets purchased under
agreements to resell
Inventories 236,923,419.99 205,006,377.50
Non-current assets due within 1
5,000,000.00 5,000,000.00
year
Other current assets
Total current assets 371,621,706.56 128,312,869.83 397,760,179.54 140,485,941.10
Non-current assets:
Loans by mandate and advances
granted
Available-for-sale financial
assets
Held-to-maturity investments
Long-term accounts receivable
Long-term equity investment 243,312,508.68 243,312,509.68
Investing property
Fixed assets 106,769,718.16 100,807,478.55 110,872,936.68 103,288,925.43
Construction in progress
Engineering materials 54,526.00 54,526.00 54,526.00 54,526.00
Disposal of fixed assets
Production biological assets
Oil-gas assets
Intangible assets 65,689,405.53 65,689,405.53 66,441,172.05 66,441,172.05
R&D expense
Goodwill
Long-term deferred expenses
Deferred income tax assets 7,768,297.00 2,326,388.27 10,056,556.18 5,048,816.11
Other non-current assets 820,080.00 865,440.00
Total of non-current assets 181,102,026.69 412,190,307.03 188,290,630.91 418,145,949.27
Total assets 552,723,733.25 540,503,176.86 586,050,810.45 558,631,890.37
Current liabilities:
Short-term borrowings 114,499,960.00 99,499,960.00 158,500,000.00 143,500,000.00
Borrowings from Central Bank
Customer bank deposits and due
to banks and other financial
institutions
Intra-group borrowings
Transactional financial
liabilities
Notes payable
Accounts payable 1,777,341.59 19,442.64 5,208,298.06 19,442.64
Accounts received in advance 125,104.24 39,821.24
Financial assets sold for
repurchase
Handling charges and
commissions payable
Employee’s compensation
1,038,881.23 169,494.93 1,316,693.31 163,554.90
payable
Tax payable 3,070,676.93 636,003.44 6,660,913.34 1,460,207.15
Interest payable 75,054,358.10 67,880,933.07 67,636,166.85 61,952,339.22
Dividend payable
Other accounts payable 48,912,426.02 158,329,925.32 34,590,357.22 122,403,842.79
Reinsurance premiums payable
Insurance contract reserves
Payables for acting trading of
securities
Payables for acting underwriting
of securities
Non-current liabilities due
within 1 year
Other current liabilities 99,671.66
Total current liabilities 244,478,748.11 326,535,759.40 274,051,921.68 329,499,386.70
Non-current liabilities:
Long-term borrowings
Bonds payable
Long-term payables
Specific payables
Estimated liabilities
Deferred income tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities 244,478,748.11 326,535,759.40 274,051,921.68 329,499,386.70
Owners’ equity (or shareholders’
equity)
Paid-up capital (or share capital) 318,600,000.00 318,600,000.00 318,600,000.00 318,600,000.00
Capital reserves 52,129,496.58 52,129,496.58 52,129,496.58 52,129,496.58
Less: Treasury stock
Specific reserves
Surplus reserves 86,036,260.20 86,036,260.20 86,036,260.20 86,036,260.20
Provisions for general risks
Retained profits -153,038,591.65 -242,798,339.32 -148,604,711.83 -227,633,253.11
Foreign exchange difference
Total equity attributable to owners
303,727,165.13 213,967,417.46 308,161,044.95 229,132,503.67
of the Company
Minority interests 4,517,820.01 3,837,843.82
Total owners’ equity 308,244,985.14 213,967,417.46 311,998,888.77 229,132,503.67
Total liabilities and owners’ equity 552,723,733.25 540,503,176.86 586,050,810.45 558,631,890.37
Income Statement
Prepared by Guangdong Rieys (Group) Company Ltd. Jan.- Jun. 2011 Unit: RMB Yuan
Reporting period Same period of last year
Items
Consolidation The Company Consolidation The Company
I. Total operating revenues 46,761,330.11 860,000.00 79,628,557.04 8,823,130.70
Including: Sales income 46,761,330.11 860,000.00 79,628,557.04 8,823,130.70
Interest income
Premium income
Handling charge and
commission income
II. Total operating cost 56,285,422.77 12,658,120.77 86,238,589.81 26,560,217.95
Including: Cost of sales 37,676,616.91 800,527.98 56,902,691.96 8,261,093.28
Interest expenses
Handling charge and
commission expenses
Surrenders
Net claims paid
Net amount withdrawn for
the insurance contract reserve
Expenditure on policy
dividends
Reinsurance premium
Taxes and associate
51,215.21 58,049.75
charges
Selling and distribution
4,362,334.90 80,000.00 6,538,427.31 86,111.28
expenses
Administrative expenses 11,963,129.37 5,292,367.60 14,330,786.24 7,773,965.87
Financial expenses 9,416,432.67 6,763,717.48 13,225,200.36 11,026,145.09
Asset impairment loss -7,184,306.29 -278,492.29 -4,816,565.81 -587,097.57
Add: Gain/(loss) from change in
-92,647.52 -61,863.00
fair value (“-” means loss)
Gain/(loss) from investment
8,168,851.55 69,647.12
(“-” means loss)
Including: share of profits in
associates and joint ventures
Foreign exchange gains (“-”
means loss)
III. Business profit (“-” means
-1,447,888.63 -11,790,336.65 -6,610,032.77 -17,737,087.25
loss)
Add: non-operating income 72,669.46 20,195.45 58,912.39 16,218.01
Less: non-operating expense 1,870,535.15 672,517.17 811,299.93 781,395.40
Including: loss from non-current
asset disposal
IV. Total profit (“-” means loss) -3,245,754.32 -12,442,658.37 -7,362,420.31 -18,502,264.64
Less: Income tax expense 1,744,300.21 2,722,427.84 4,360,295.57 146,774.39
V. Net profit (“-” means loss) -4,990,054.53 -15,165,086.21 -11,722,715.88 -18,649,039.03
Attributable to owners of the
-4,433,879.82 -15,165,086.21 -11,339,502.78 -18,649,039.03
Company
Minority shareholders’
-556,174.71 -383,213.10
income
VI. Earnings per share
(I) basic earnings per share -0.01 -0.05 -0.04 -0.06
(II) diluted earnings per share -0.01 -0.05 -0.04 -0.06
Ⅶ. Other comprehensive incomes
Ⅷ. Total comprehensive incomes -4,990,054.53 -15,165,086.21 -11,722,715.88 -18,649,039.03
Attributable to owners of the
-4,433,879.82 -15,165,086.21 -11,339,502.78 -18,649,039.03
Company
Attributable to minority
-556,174.71 -383,213.10
shareholders
For any business combination under the same control that occurred in the reporting
period, the combined party realized zero net profit before the combination.
Cash Flow Statement
Prepared by Guangdong Rieys (Group) Company Ltd. Jan.- Jun. 2011 Unit: RMB Yuan
Reporting period Same period of last year
Items
Consolidation The Company Consolidation The Company
I. Cash flows from operating
activities:
Cash received from sale of
commodities and rendering of 67,771,192.12 26,000.00 63,775,418.69 18,175,347.80
service
Net increase of deposits from
customers and dues from banks
Net increase of loans from the
central bank
Net increase of funds borrowed
from other financial institutions
Cash received from premium of
original insurance contracts
Net cash received from
reinsurance business
Net increase of deposits of
policy holders and investment
fund
Net increase of disposal of
tradable financial assets
Cash received from interest,
handling charges and commissions
Net increase of intra-group
borrowings
Net increase of funds in
repurchase business
Tax refunds received 3,186,428.37 7,107,735.16
Other cash received relating to
49,006,525.69 19,993,386.44 77,564,525.41 50,806,436.58
operating activities
Subtotal of cash inflows from
119,964,146.18 20,019,386.44 148,447,679.26 68,981,784.38
operating activities
Cash paid for goods and services 64,949,089.65 48,850,254.47 4,064,128.79
Net increase of customer
lendings and advances
Net increase of funds deposited
in the central bank and amount due
from banks
Cash for paying claims of the
original insurance contracts
Cash for paying interest,
handling charges and commissions
Cash for paying policy
dividends
Cash paid to and for employees 8,417,833.35 604,983.20 12,872,850.17 1,447,760.61
Various taxes paid 2,339,987.17 863,525.80 5,222,764.97 3,200,184.38
Other cash payment relating to
22,323,010.74 781,866.54 41,253,713.03 28,489,276.12
operating activities
Subtotal of cash outflows from
98,029,920.91 2,250,375.54 108,199,582.64 37,201,349.90
operating activities
Net cash flows from operating
21,934,225.27 17,769,010.90 40,248,096.62 31,780,434.48
activities
II. Cash flows from investing
activities:
Cash received from withdrawal
5,000,000.00 5,000,000.00 2,000,000.00 2,000,000.00
of investments
Cash received from return on
investments
Net cash received from disposal
of fixed assets, intangible assets 52,000.00 52,000.00 2,600.00
and other long-term assets
Net cash received from disposal
of subsidiaries or other business 1.00 1.00
units
Other cash received relating to
108,547.06 69,647.12
investing activities
Subtotal of cash inflows
5,160,548.06 5,121,648.12 2,002,600.00 2,000,000.00
from investing activities
Cash paid to acquire fixed
assets, intangible assets and other 1,922,931.00 630,000.00 4,228,920.71 3,818,240.63
long-term assets
Cash paid for investment 5,733,379.63 2,884,671.88
Net increase of pledged loans
Net cash paid to acquire
subsidiaries and other business
units
Other cash payments relating to
174,067.95
investing activities
Subtotal of cash outflows from
7,830,378.58 3,514,671.88 4,228,920.71 3,818,240.63
investing activities
Net cash flows from investing
-2,669,830.52 1,606,976.24 -2,226,320.71 -1,818,240.63
activities
III. Cash Flows from Financing
Activities:
Cash received from capital
contributions
Including: Cash received from
minority shareholder investments
by subsidiaries
Cash received from borrowings
Cash received from issuance of
bonds
Other cash received relating to
financing activities
Subtotal of cash inflows from
financing activities
Repayment of borrowings 44,000,040.00 44,000,040.00 28,583,227.30 22,765,595.39
Cash paid for interest expenses
and distribution of dividends or 844,000.00 844,000.00 1,004,468.57 152,501.00
profit
Including: dividends or profit
paid by subsidiaries to minority
shareholders
Other cash payments relating
to financing activities
Sub-total of cash outflows from
44,844,040.00 44,844,040.00 29,587,695.87 22,918,096.39
financing activities
Net cash flows from financing
-44,844,040.00 -44,844,040.00 -29,587,695.87 -22,918,096.39
activities
IV. Effect of foreign exchange rate
changes on cash and cash
equivalents
V. Net increase in cash and cash
-25,579,645.25 -25,468,052.86 8,434,080.04 7,044,097.46
equivalents
Add: Opening balance of cash
30,095,398.06 28,150,078.47 2,168,571.06 647,412.49
and cash equivalents
VI. Closing balance of cash and
4,515,752.81 2,682,025.61 10,602,651.10 7,691,509.95
cash equivalents
Consolidated Statement of Changes in Owners’ Equity
Prepared by Guangdong Rieys (Group) Company Ltd. For the first half year of 2011 Unit: RMB Yuan
Amount for the reporting period Amount for the previous year
Equity attributable to owners of the Company Equity attributable to owners of the Company
Paid-up Minorit Paid-up Minorit
Total Total
Items capital Less: Specifi Genera y capital Less: Specifi Genera y
Capital Surplus Retaine owners’ Capital Surplus Retaine owners’
(or treasur c l risk Others interest (or treasur c l risk Others interest
reserve reserve d profit equity reserve reserve d profit equity
share y stock reserve reserve s share y stock reserve reserve s
capital) capital)
318,60 -148,60 311,99 318,60 -107,41 355,37
I. Balance at the end of the 52,129, 86,036, 3,837,8 52,129, 86,036, 6,024,2
0,000.0 4,711.8 8,888.7 0,000.0 7,698.7 2,287.2
previous year 496.58 260.20 43.82 496.58 260.20 29.17
0 3 7 0 2 3
Add: change of accounting
policy
Correction of errors in
previous periods
Other
318,60 -148,60 311,99 318,60 -107,41 355,37
II. Balance at the beginning of 52,129, 86,036, 3,837,8 52,129, 86,036, 6,024,2
0,000.0 4,711.8 8,888.7 0,000.0 7,698.7 2,287.2
the year 496.58 260.20 43.82 496.58 260.20 29.17
0 3 7 0 2 3
III. Increase/ decrease of
-4,433, 679,97 -3,753, -41,187 -2,186, -43,373
amount in the year (“-” means
879.82 6.19 903.63 ,013.11 385.35 ,398.46
decrease)
-4,433, -556,17 -4,990, -41,187 -2,186, -43,373
(I) Net profit
879.82 4.71 054.53 ,013.11 385.35 ,398.46
(II) Other comprehensive
incomes
-4,433, -556,17 -4,990, -41,187 -2,186, -43,373
Subtotal of (I) and (II)
879.82 4.71 054.53 ,013.11 385.35 ,398.46
(III) Capital paid in and
reduced by owners
1. Capital paid in by
owners
2. Amounts of
share-based payments
recognized in owners’ equity
3. Others
(IV) Profit distribution
1. Appropriations to
surplus reserves
2. Appropriations to
general risk provisions
3. Appropriations to
owners (or shareholders)
4. Other
(V) Internal carry-forward
of owners’ equity
1. New increase of capital
(or share capital) from capital
public reserves
2. New increase of capital
(or share capital) from surplus
reserves
3. Surplus reserves for
making up losses
4. Other
(Ⅵ) Specific reserve
1. Withdrawn for the
period
2. Used in the period
1,236,1 1,236,1
(Ⅶ) Other
50.90 50.90
318,60 -153,03 308,24 318,60 -148,60 311,99
52,129, 86,036, 4,517,8 52,129, 86,036, 3,837,8
IV. Closing balance 0,000.0 8,591.6 4,985.1 0,000.0 4,711.8 8,888.7
496.58 260.20 20.01 496.58 260.20 43.82
0 5 4 0 3 7
Statement of Change in Owners’ Equity of the Company
Prepared by Guangdong Rieys (Group) Company Ltd. For the first half year of 2011 Unit: RMB Yuan
Amount for the reporting period Amount for the previous year
Paid-up Paid-up
Less: General Total Less: General Total
Items capital Capital Specific Surplus Retained capital Capital Specific Surplus Retained
treasury risk owners’ treasury risk owners’
(or share reserve reserve reserve profit (or share reserve reserve reserve profit
stock reserve equity stock reserve equity
capital) capital)
I. Balance at the end of the 318,600,0 52,129,49 86,036,26 -227,633, 229,132,5 318,600,0 52,129,49 86,036,26 -179,949, 276,816,6
previous year 00.00 6.58 0.20 253.11 03.67 00.00 6.58 0.20 154.38 02.40
Add: change of accounting
policy
Correction of errors in
previous periods
Other
II. Balance at the beginning of 318,600,0 52,129,49 86,036,26 -227,633, 229,132,5 318,600,0 52,129,49 86,036,26 -179,949, 276,816,6
the year 00.00 6.58 0.20 253.11 03.67 00.00 6.58 0.20 154.38 02.40
III. Increase/ decrease of
-15,165,0 -15,165,0 -47,684,0 -47,684,0
amount in the year (“-” means
86.21 86.21 98.73 98.73
decrease)
-15,165,0 -15,165,0 -47,684,0 -47,684,0
(I) Net profit
86.21 86.21 98.73 98.73
(II) Other comprehensive
incomes
-15,165,0 -15,165,0 -47,684,0 -47,684,0
Subtotal of (I) and (II)
86.21 86.21 98.73 98.73
(III) Capital paid in and
reduced by owners
1. Capital paid in by
owners
2. Amounts of
share-based payments
recognized in owners’ equity
3. Others
(IV) Profit distribution
1. Appropriations to
surplus reserves
2. Appropriations to
general risk provisions
3. Appropriations to
owners (or shareholders)
4. Other
(V) Internal carry-forward
of owners’ equity
1. New increase of capital
(or share capital) from capital
public reserves
2. New increase of capital
(or share capital) from surplus
reserves
3. Surplus reserves for
making up losses
4. Other
(Ⅵ) Specific reserve
1. Withdrawn for the
period
2. Used in the period
(Ⅶ) Other
318,600,0 52,129,49 86,036,26 -242,798, 213,967,4 318,600,0 52,129,49 86,036,26 -227,633, 229,132,5
IV. Closing balance
00.00 6.58 0.20 339.32 17.46 00.00 6.58 0.20 253.11 03.67
English Translation for Reference Only
GUANGDONG RIEYS GROUP COMPANY LTD
For the Six Months Ended 30 June 2011
Notes to the Financial Statements
(English Translation for Reference Only)
I. General information
Guangdong Rieys Group Company Ltd. (hereinafter referred to as “the Company”) is a listed
company established by five enterprises including Puning Haicheng Industrial Co., Ltd (In January
28, 2010 this company was renamed as Puning Shenghengchang Trade Development Co., Ltd.), an
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 RMB
80,000,000 when established, which was divided into 80,000,000 shares of RMB1.00 each.
In March 1999, with 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 Securities Regulatory Commission on
September 29, 2000. The registered capital of the Company increased to RMB 177,000,000 after
issuance of Stock B, which was 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 was divided into 318,600,000 shares of RMB1.00 each.
As at December 31, 2010, 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 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 errors
(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 preparation basis, important accounting policies and
English Translation for Reference Only
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. The difference
between the fair value of its assets paid and the book value thereof is accrued to current profit or loss.
Purchase date refers to the date that the purchasers actually gain the control of the purchased 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
English Translation for Reference Only
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 beard 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 foreign
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.
English Translation for Reference Only
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 occurs. 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 classifies 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 period or
a shorter period applicable.
Difference between the amount received and book value of the investment is charged to investment
income upon disposal.
If the Company sells or re-classifies a large amount of held to maturity investments prior to maturity
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(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.)
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
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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:
①The book value of the transferred financial asset;
②The 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 derecognized 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:
①Book value of the derecognized portion;
②The sum of the consideration of the derecognized portion and the accumulated changes in fair
value previously recognized in the owners’ equity related to the derecognized 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) Derecognized financial liabilities
If the existing obligations of financial liabilities have been discharged in whole or in part, then the
Company will derecognize 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 of
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
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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:
Appropriation proportion of
Age
receivables (%)
Within 1 year 2%
1 to 2 years 10%
2 to 3 years 50%
Over 3 years 80%
(11) Inventory
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
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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
1. Confirmation of initial investment cost
(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
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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 to 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.
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
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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
(1) 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.
(2) For other long-term equity investments, in case the calculation results of receivable amounts
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
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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:
(1) It is probable that economic benefits associated with the assets will flow to the enterprise; and
(2) 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 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.
(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).
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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, provision 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, provision 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:
Estimated useful life Annual depreciation rate
Category Estimated net residual value rate (%)
(year) (%)
Buildings and
35 5% 2.71%
constructions
Machinery
10 5% 9.50%
equipment
Transportatio
8 5% 11.88%
n equipment
Office
equipment 5 5% 19.00%
and others
(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 the 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;
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(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 assets
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
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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.
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
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progress, intangibles, etc shall not be reversed once recognized.
(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 by 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
English Translation for Reference Only
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.
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
English Translation for Reference Only
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 transferred 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 unrealized finance income. For
unrealized 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 lessee
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 current reporting period.
III. Taxation
(1) Main type of tax and tax rate of the Company
Type of tax Tax rate Taxable basis
English Translation for Reference Only
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 Missk Fashion
Co., Ltd. adopts 3% VAT rate applicable to small-sized taxpayer (business enterprise).
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 1 Jan. 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 1 Jan. 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 – Consolidated
Financial Statements issued in Feb. 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
Balance of
Actual net
Registered investment investment
Place of Scope of Shareholdings Voting Consolidated
Name Type Nature capital (10 as at period in
Registration business (%) (%) or not
thousand) end(10 subsidiaries
thousand) in
substance
English Translation for Reference Only
Shenzhen Investment
Rieys Co., and import
Shenzhen Trading 5000 4500 90 90 Yes
Industrial Co., Ltd. & export
Ltd. trading
Production
Puning Tianhe and sales
Garment of clothes
Co.,
Manufacturing Puning Manufacture 6510(HKD) and 6510(HKD) 100 100 Yes
Ltd.
Factory Co., knitting
Ltd. colorized
cloth
2. Subsidiaries obtained through business consolidation not under common control
Balance of
net
Actual
Registered investment
Place of Scope of investment Shareholdings Voting Consolidated
Name Type Nature capital (10 in
Registration business as at (%) (%) or not
thousand) subsidiaries
period end
in
substance
Tianrui (HK)
Co.,
Trading Co., Hong Kong Trading 1(USD) Trading 1(USD) 100 100 Yes
Ltd.
Ltd.
Production
Shenzhen and sales of
Missk Co., clothes,
Shenzhen Manufacture 1200 752 86 86 No
Fashion Co., Ltd. sewing
Ltd. products,
etc.
Property
Puning
development
Hengda Real
Co., Property (operate
Estate Puning 2600 14660 100 100 Yes
Ltd. development with valid
Development
qualification
Co., Ltd.
certificate)
3. Minority shareholders’ equity and gains & losses of minority shareholders
Balance of the owner's
equity of parent company
Minority Gains & losses
after deducting the share of Method to obtain
Name of subsidiaries shareholders’ of minority
current losses of minority subsidiary
equity shareholders
shareholders over the share
of owner’s equity enjoyed
English Translation for Reference Only
by such minority
shareholders in the
subsidiary in the period
beginning
Shenzhen Rieys Industrial Co., Ltd. 4,517,820.01 -37,044.39 Invest to establish
Shenzhen Missk Fashion Co., Ltd. -519,130.32 M&P
(2) Subjects newly included in current scope of consolidation and subjects no longer included in
current scope of consolidation
1. Subsidiaries, subjects with special purposes and business entities which controlling right is
formed by entrusted operation or lease newly included in current scope of consolidation
Naught
2. Subsidiaries, subjects with special purposes and business entities which controlling right is
formed by entrusted operation or lease no longer included in current scope of consolidation
Net assets at disposed Net profit from year beginning
Name Remark
date to disposed date
Shenzhen Missk Fashion Co., Ltd. -9,372,445.92 -3,708,073.70 Transfer of equity
3. Business combination not under common control occurred over the current period
Naught
4. Subsidiaries reduced by sale of equity without controlling right over the current period
Subsidiaries Disposed date Recognition of gains or losses
Shenzhen Missk Fashion Co., Ltd. 30 Jun. 2011 The combination of net profits from Jan. to Jun.
V. Notes to the items of consolidated financial statement
(1) Monetary funds
Closing balance Opening balance
Item
Foreign Exchange Equivalent to Foreign Exchange
Equivalent to RMB
currency rate RMB currency rate
Cash
RMB 1,705,140.58 1.0000 1,705,140.58 1,026,712.49 1.00000 1,026,712.49
USD 1.00 6.4716 6.47 1.00 6.62270 6.62
HKD 168.70 0.8316 140.29 3.70 0.85093 3.15
Subtotal 1,705,287.34 1,026,722.26
Bank
deposits
RMB 2,603,051.35 1.0000 2,603,051.35 29,018,669.34 1.00000 29,018,669.34
USD 12,883.32 6.4716 83,375.70 625.31 6.62270 4,141.23
English Translation for Reference Only
HKD 144,488.03 0.8316 120,159.15 53,900.11 0.85093 45,865.23
Subtotal 2,806,586.20 29,068,675.80
Other
currency
funds
RMB 3,879.27 1.0000 3,879.27
Subtotal 3,879.27
Total 4,515,752.81 30,095,398.06
Note: The number of monetary funds at period-end is less than the period-begin by
RMB25,579,645.25, representing a change ratio of 85％, the reasons for the change is due to the
return of the loans owed to China Construction Bank.
(2) Accounts receivable
1. Disclosure of accounts receivable by category
Closing balance Opening balance
Category Book balance Provision for bad debts Book balance Provision for bad debts
Percent Percent Percent Percent
Amount Amount Amount Amount
(%) (%) (%) (%)
Accounts
receivable
with
5,586,456.42 9.26 5,586,456.42 26.33 8,937,873.33 10.47 8,937,873.33 35.75
significant
individual
amount
Accounts
receivable
with
insignificant
individual
amount but in 54,330,317.75 90.10 15,242,724.74 71.86 76,061,720.64 89.08 15,677,612.93 62.71
high risk
portfolio after
grouping by
credit risk
characteristics
Other
accounts
383,972.25 0.64 383,972.25 1.81 383,972.25 0.45 383,972.25 1.54
receivable not
significant
Total 60,300,746.42 100.00 21,213,153.41 100.00 85,383,566.22 100.00 24,999,458.51 100.00
2. Provision for bad debts of accounts receivable with significant individual amount or with
English Translation for Reference Only
insignificant individual amount but tested for impairment separately at year end
(1) Accounts receivable with significant individual amount
Provision
Content of accounts receivable Book balance Bad debts Reasons
ratio
Victoria International(USA) INC 5,586,456.42 5,586,456.42 100% * Note
Note: On 30 Jun. 2011, the payment receivable by the Company was RMB 3,151,386.00,
accounting for 35.26% of the balance of 2010. Because the Company’s core customer named
Victoria International (USA) INC had applied for bankrupt thus significantly affected the operation
of the Company, after the analysis of assessing the possibility of their bad debts, the amount of
provision for bad debts was 100% with the wariness principle.
(2)Accounts receivable with insignificant individual amount but in high risk portfolio after
grouping by credit risk characteristics
Closing balance Opening balance
Age Book balance Provision for Book balance Provision for
Amount % bad debts Amount % bad debts
Within 1
38,867,080.69 71.54 777,341.62 60,598,396.46 79.67 1,212,221.10
year
1-2 years 0.00 87.12 0.00 8.71
2-3 years 1,285,564.47 2.36 642,782.24 1,285,564.47 1.69 642,782.24
Over 3
14,177,672.59 26.10 13,822,600.88 14,177,672.59 18.64 13,822,600.88
years
Total 54,330,317.75 100.00 15,242,724.74 76,061,720.64 100.00 15,677,612.93
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
Relationship Percent in total
Name of unit with the Amount Age accounts
Company receivable
HONOURLINK Customer 30,392,005.58 Within 1 year 50.40
Victoria International(USA) INC. Customer 5,586,456.42 2-3 years 9.26
Brendwood International Corp. Customer 4,703,319.82 Within 1 year 7.80
Over 3 years Customer 4,224,304.63 Over 3 years 7.01
Hongkong Jinhua Trading Company Customer 2,544,982.60 Over 3 years 4.22
Jinjing International Co., Ltd. 47,451,069.05 78.69%
5. Accounts receivable at period end is less than period beginning by RMB 21,296,514.70,
representing a change ratio of 35.27%, the reason for the change is: reinforce the recovery of the due
payment for goods.
(3) Other receivables
1. Disclosure of other receivables by category
English Translation for Reference Only
Closing balance Opening balance
Category Book balance Provision for bad debts Book balance Provision for bad debts
Amount % Amount % Amount % Amount %
Other
receivable
s with
significant
individual
amount
Other
receivable
s with
insignifica
nt
individual
amount but
29,029,773.9 4,981,818.8 36,456,798.1 8,675,106.4
in high risk 76.33 35.63 78.34 46.26
1 2 1 3
portfolio
after
grouping
by credit
risk
characteris
tics
Other
accounts
9,001,255.4 10,077,092.4 10,077,092.
receivable 9,001,255.47 23.67 64.37 21.66 53.74
7 5 45
not
significant
38,031,029.3 100.0 13,983,074. 46,533,890.5 100.0 18,752,198.
Total 100.00 100.00
8 0 29 6 0 88
2. Other receivables with insignificant individual amount but in high risk portfolio after
grouping by credit risk characteristics
Closing balance Opening balance
Age Book balance Provision for Book balance Provision for
Amount % bad debts Amount % bad debts
Within 1
16,301,076.09 56.15 326,022.43 12,832,749.51 35.20% 251,282.54
year
1-2 years 6,114,357.81 21.06 611,435.79 11,883,507.88 32.60% 1,127,985.71
2-3 years 4,157,038.09 14.32 2,078,519.06 6,988,647.98 19.17% 3,494,323.99
English Translation for Reference Only
Over 3
2,457,301.92 8.47 1,965,841.54 4,751,892.74 13.03% 3,801,514.19
years
Total 29,029,773.91 76.33 4,981,818.82 36,456,798.11 100.00% 8,675,106.43
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
Percent
in total
Relationship with the
Name of unit Amount Age other
Company
receiva
ble
1,170,000. 1-2
Puning Zhongxinglian Textile Co., Ltd. Supplier 3.08
00 years
1,098,000. Within
Puning Rieys Paper Industrial Co., Ltd.. The leasor of factory 2.29
00 1 year
STRICKWELT INTERNATIONAL TRADING 1,000,000. Over 3
Supplier 2.63
(SHANGHAI) CO., LTD. 00 years
Guangzhou Panyu Tanzhou Zhenyu Textile & Supplier 800,000.0 1-2
2.10
Dying Co., Ltd. 0 years
Supplier 800,000.0 Over 3
Suning Banhe Fiber facsimile fabric Co., Ltd. 2.10
0 years
4,868,000.
Total 12.80
00
(4) Prepayment
1. Aging analysis
Closing balance Opening balance
Age
Amount % Amount %
Within 1 year 60,955,695.66 99.22 66,013,404.59 94.99
1-2 years 479,200.00 0.78 3,479,200.00 5.01
2-3 years
Over 3 years
Total 61,434,895.66 100.00 69,492,604.59 100.00
2. Top 5 units in prepayment
Relationship with Pending
Name of unit Amount Year
the Company reasons
In the period
Guangsha Construction Group Co.,
Builder 41,892,329.96 2011 of construction
Ltd. (Shenzhen Branch)
contract
English Translation for Reference Only
execution
In the period
of construction
Shantou Yatai Construction Co., Ltd. Supplier 4,371,541.00 2010
contract
execution
In the period
Puning Xin Xu Textile Co.,Ltd. Builder 3,129,848.95 2011 of contract
execution
In the period
Guangdong New Changan
of design
Architecture Design & Research Co., Design unit 2,010,000.00 2010
contract
Ltd.
execution
In the period
Puning Shenglilai Sewing Machine
Supplier 1,717,106.00 2010 of contract
Co., Ltd.
execution
Total 53,120,825.91
3. During the reporting period, there was no prepayment due from shareholders who hold 5%
or more of the voting rights of the Company.
(5) Inventories and provisions for impairment in value of inventory
1. Classification of inventory
Closing balance Opening balance
Items
Book balance Provision for impairment Book balance Provision for impairment
Raw materials 6,938,576.58 723,540.76 2,351,174.96 723,540.76
Goods in stock 2,144,223.07 773,977.35 10,321,352.30 1,581,074.43
Products in progress 716,215.98 1,741,202.54
Turnover materials
Production cost
Materials under
1,930,548.40
entrusted processing
Goods delivered 1,056,036.71 1,444,057.01
Package materials
Low value consumables
Developed Product in progress 227,565,885.76 189,522,657.48
Products to be developed
Total 238,420,938.10 1,497,518.11 207,310,992.69 2,304,615.19
English Translation for Reference Only
2. Provision for impairment in value of inventory
Decrease at current
Book balance Provision at period Book balance at
Category
at period-begin current period Other period-end
Reversal
decrease
Raw materials 723,540.76 723,540.76
Goods in stock 1,581,074.43 807,097.08 773,977.35
Products in production
Turnover materials
Production cost
Goods delivered
Package materials
Low cost and short lived articles
Total 2,304,615.19 807,097.08 1,497,518.11
Note: For other decrease in the current provision for impairment in value of inventory, it is
caused by that the Company transferred its subsidiaries to others.
(6) Non-current assets due within 1 year
Item Content or nature Closing amount Opening amount
Payment for equity
Zhao Guohao transfer (received by 0.00 5,000,000.00
installment)
Total 0.00 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 December 31, 2009 the second phase of RMB2 million hasn’t been
received yet, transferred to other receivables for show; On March 3, 2010, the Company received
the second phase of equity transfer payment RMB 2 million from Zhao Guohao paid by Dong
Jianlin on behalf of Zhao Guohao, which was the account due on 25 Dec. 2009. As to 31 Dec. 2010.
Equity transfer payment RMB 1 million from Zhao Guohao was paid by Cui Wanmei on behalf of
Zhao Guohao on 29 Jan. 2011, and other equity transfer payment RMB 4 million from Zhao Guohao
was paid by Pingding Jinyuan International Hotel Co., Ltd. on behalf of Zhao Guohao on 29 Mar.
2011. And the equity transfer payment has been completely recovered up to 30 Jun. 2011.
(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
English Translation for Reference Only
Buildings and constructions 131,096,751.38 131,096,751.38
Machinery equipment 48,569,792.29 37,760,312.10 10,809,480.19
Transportation equipment 12,805,798.10 1,207,991.00 6,981,490.00 7,032,299.10
Office equipment and others 9,753,859.91 283,181.33 6,233,902.07 3,803,139.17
Total 202,226,201.68 1,491,172.33 50,975,704.17 152,741,669.84
Note: (1) Original cost of fixed assets disposed in the current period is RMB 48,853,726.80;
(2) Original cost of fixed assets was reduced by RMB 2,121,977.37 due to the sales of
subsidiaries in current period.
（3）Original cost of fixed assets under mortgage or guarantee at the period end is RMB
103,533,605.29, please see note 8 (1) for details.
2. Accumulated depreciation
Category Opening amount Increase this period Decrease this period Closing amount
Buildings and constructions 29,057,891.11 1,902,316.14 30,960,207.25
Machinery equipment 41,700,053.74 519,486.36 33,936,261.51 8,283,278.59
Transportation equipment 9,397,487.01 309,748.66 6,590,223.69 3,117,011.98
Office equipment and others 8,044,750.06 811,933.41 5,245,229.61 3,611,453.86
Total 88,200,181.92 3,543,484.57 45.771.714.81 45,971,951.68
3. Provision for impairment losses on fixed assets
Category Opening amount Increase this period Decrease this period Closing amount
Buildings and constructions
Machinery equipment 2,685,168.88 2,685,168.88
Transportation equipment 274,475.00 274,475.00
Office equipment and others 193,439.20 193,439.20
Total 3,153,083.08 3,153,083.08
4. Carrying amount of fixed assets
Category Opening amount Increase this period Decrease this period Closing amount
Buildings and constructions 99,353,691.39 -1,902,316.14 97,451,375.25
Machinery equipment 6,595,263.55 -519,486.36 1,138,881.71 4,936,895.48
Transportation equipment 3,214,871.89 898,242.34 116,791.31 3,996,322.92
Office equipment and others 1,709,109.85 -528,752.08 795,233.26 385,124.51
Total 110,872,936.68 -2,052,312.24 2,050,906.28 106,769,718.16
English Translation for Reference Only
5. Operating lease of fixed assets
Original book Accumulated
Category Net book value
value depreciation
Buildings and constructions 43,664,187.20 7,628,579.01 36,035,608.19
Machinery equipment
Transportation equipment
Office equipment and others
Total 43,664,187.20 7,628,579.01 36,035,608.19
Note: Please see Note 10 (6) for the details of operating lease of fixed assets
Fixed assets as at period end is less than period beginning by RMB 49,484,531.84,
representing a change ratio of 24.47%. The reason for the change is the disposal of scrapped fixed
assets.
(8) Project materials
Opening amount Closing amount
Increase this Decrease
Category Book Provision for Book Provision for
period this period
balance impairment balance impairment
Gravel 54,526.00 54,526.00
Total 54,526.00 54,526.00
(9) Intangible assets
1. Original cost of intangible assets
Original cost at Original cost at
Item
period beginning Increase this period Decrease this period 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 RMB
33,659,416.00, of which an original cost of RMB 13,863,200.00 is used as a mortgage or guarantee
for the loan of RMB 40 million from China Everbright Bank, Guangzhou Branch, the maturity date
is September 27, 2009. Original cost of RMB19,796,216.00 of intangible assets is for RMB 25
million loan from Huizhou Polyway Opto-electronic Co., Ltd.. Please see Note 6(4)2 and Note 8(1)
for details.
(2) The lease situation of land use right is detailed in Note 10(6).
2. Accumulated amortization
Items Opening amount Amortization this period Decrease this period Closing amount
Land use right 8,744,771.95 751,766.52 9,496,538.47
Computer software 373,115.00 373,115.00
Total 9,117,886.95 9,869,653.47
3. Carrying amount of intangible assets
English Translation for Reference Only
Opening Increase this Decrease this
Items Closing amount
amount period period
Land use right 66,441,172.05 -751,766.52 65,689,405.53
Computer software
Total 66,441,172.05 -751,766.52 65,689,405.53
Note: (1) As of 30 June 2011, the Company has not obtained the relevant certificate of land use right
for the land of 298.56 mu. The Company had signed a “Contact on land occupancy for construction
project” with a local economic association located in Zhenchen Valley Junfu area of Puning on
December 31, 2003 to occupy the land. The Company has paid related land use compensation
amounted to RMB 23,526,500 according to the contact 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 Construction Co., Ltd. signed a
Construction Contract for construction of the land leveling and sewage channels, the contract cost is
RMB 18 million, and the project has been completed and accepted and included in intangible assets.
(10) Deferred income tax assets
1. Recognized deferred income tax assets
Closing
Items Opening amount Increase this period Decrease this period
amount
Provision for
impairment of 10,056,556.18 2,288,259.18 7,768,297.00
assets
Initial
expenditure
Deductible loss
Subtotal 10,056,556.18 2,288,259.18 7,768,297.00
2. Unrecognized deferred income tax assets
Items Closing amount Opening amount
Deductible temporary difference 921,765.31 2,245,782.74
Total 921,765.31 2,245,782.74
3. Temporary differences corresponding to assets or liabilities causing temporary differences
Item Amount of temporary differences
Loss remediable
Provision for impairment 31,073,188.00
Other
Total 31,073,188.00
(11) Details of provision for asset impairment
English Translation for Reference Only
Increas Decrease this period
Opening book Closing book
Items e this
balance Reversal Written off balance
period
1. Provision for bad 43,751,657.3 7,184,306.2 1,371,123.4 35.196.227.7
debts 9 9 0 0
Of which: Accounts 24,999,458.5 3,757,198.0 21,213,153.4
29,107.10
receivable 1 0 1
Other 18,752,198.8 3,427,108.2 1,342,016.3 13,983,074.2
receivables 8 9 0 9
Prepayment
2. Provisions for
impairment in value of 2,304,615.19 807,097.08 1,497,518.11
inventory
3. Provision for
3,153,083.0
impairment losses on 3,153,083.08
8
fixed assets
49,209,355.6 7,184,306.2 5,331,303.5 36,693,745.8
Total
6 9 6 1
(12) Short-term loan
1. Short-term loan
Items Closing balance Opening balance
Credit loan
Pledged loan
34,799.960.00 39,300,000.00
Mortgaged loan
39,000,000.00 78,000,000.00
Secured loan
40,700,000.00 41,200,000.00
Total 114,499,960.00 158,500,000.00
Note: Please see Note 6(4) for details on relevant pledge, mortgage and security.
2. Expired but unpaid short-term loans:
Remark
(repaid
Expected after
Interest Overdue
Unit Amount Purpose repay statement
rate reason
date date should
be
specified)
Puning Association of Borrow the
Financial
Country Credit Union 5,000,000.00 8.49600% new to pay
difficulty
Liusha West Union the old
Puning Association of 15,000,000.00 10.80000% Borrow the Financial
English Translation for Reference Only
Country Credit Union new to pay difficulty
Liusha West Union the old
Puning Association of Borrow the
Assets
Country Credit Union 6,000,000.00 11.20500% new to pay
restructuring
Liusha West Union the old
Puning Association of Borrow the
Financial
Country Credit Union 24,400,000.00 12.53880% new to pay
difficulty
Liusha West Union the old
Construction Bank of Borrow the
Financial The end
China, Shenzhen 39,000,000.00 10.20000% new to pay
difficulty of 2011
Branch the old
China Everbright Borrow the
Financial
Bank, Guangzhou 25,099,960.00 12.32550% new to pay
difficulty
Branch the old
Total 114,499,960.00
Note: (1) As of 30 June 2011, all loans of the Company listed above are overdue.
(2) On 20 April, 2010, the Company and Shenzhen Branch of China Construction Bank signed and
Agreement on Reduction or Remission of Interest. Please see Note 10(2) for details.
(3) As of the closing date of the financial report, the overdue loans above haven’t been claimed by
the bank for payment.
(13) Accounts payable
Closing balance Opening balance
Items
Amount ％ Amount ％
Within 1 year 1,472,779.61 82.86 4,161,074.57 79.89
1-2 years 106,768.40 6.01 342,713.86 6.58
2-3 years 73,236.83 4.12 99,540.13 1.91
Over 3 years 124,556.75 7.01 640,969.50 11.62
Total 1,777,341.59 100.00 5,208,298.06 100.00
1. There is no accounts payable due from shareholders who has more than 5% (including 5%) voting
shares of the Company in period end balance.
2. There is no accounts payable due to related parties in period end balance.
3. Accounts payable at year end decrease by RMB 3,430,956.47 compared with year beginning,
representing a decrease percentage of 65.87%, the reason is: repayment of part debt this period.
(14) Advances from customers
Closing balance Opening balance
Aging
Amount ％ Amount ％
English Translation for Reference Only
Within 1 year 85,283.00 68.17
1-2 years
2-3 years 17,532.84 14.01 17,532.84 44.03
Over 3 years 22,288.40 17.82 22,288.40 55.97
Total 125,104.24 100.00 39,821.24 100.00
1. There is no advance from customers due from shareholder who has more than 5% (including 5%)
voting shares of the Company in period end balance.
2. There is no advance from customers due to related parties in year end balance.
(15) Other payable
Items Closing balance Opening balance
Within 1 year 45,107,436.66 32,215,019.52
1-2 years 1,001,221.92 968,592.87
2-3 years 97,409.83 1,076,510.53
Over 3 years 2,706,357.61 330,234.30
Total 48,912,426.02 34,590,357.22
1. For details of the closing balance of payables to the related parties, please refer to VI(4)3.
2. Other payables at year end decrease RMB 14,322,068.80 than year beginning, representing a
charge ratio of 41.40%, the reason is: received RMB 18.5 million of loan proceeds from related
parties.
(16) Employee benefits payable
Opening Decrease this period Closing
Increase this
Item book Payment this book
period Other decrease
balance period balance
1. Salaries and
wages, bonus,
1,201,520.92 7,618,770.24 7,541,944.52 350,000.00 928,346.64
allowance and
subsidies
2. Employee
115,172.39 574,096.03 578,733.83 110,534.59
welfare
3. Social
259,464.30 259,464.30
insurance
4. Housing
37,690.70 37,690.70
welfare fund
5. Union welfare
fund and
employee
education fund
Total 1,316,693.31 8,490,021.27 8,417,833.35 350,000.00 1,038,881.23
English Translation for Reference Only
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.
Other decrease under “Salaries and wages, bonus, allowance and subsidies” was salaries and wages
payable to subsidies decreases due to transfer of subsidies in current period.
(17) Taxes and surcharges payable
Applied statutory
Items Closing balance Opening balance
tax rate
VAT
-347,635.21 -975,055.42 17%
Business Tax
119,024.09 119,024.09 5%
City Construction &
176,164.43 188,703.79 5%、3%
education surcharges
Enterprise Income Tax
2,789,799.22 5,901,831.96 25%
Individual income tax
128,889.30 146,812.57
Real estate tax 136,707.71 725,471.92 1.20%
Stamp tax 41,999.43 42,227.93
Land use tax 22,770.00 507,136.50 RMB6/sq.m., 9/sq.m.
Other 2,957.96 4,760.00
Total 3,070,676.93 6,660,913.34
(18) Interest 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 75,054,358.10 67,636,166.85
Total 75,054,358.10 67,636,166.85
Note: Interest payable is loan interest overdue to financial institutions, the year end amount increase
RMB 7,418,191.25 than the year beginning, representing an increase ratio of 10.97%, the reason for
the change is: the unpaid interest of period end overdue loans increase.
(2) Of the above interest payable, RMB 24,712,710.05 has received written confirmation of
reduction or remission by Construction Bank of China. However, only for the Company repay the
remaining RMB 39 million loans, on 30 Sep. 2011 and 31 Dec. 2011, can the Company receive
actual reduction or remission then.
(3) Please see Note 5(13) for overdue interest of the Company.
(19) Share capital
English Translation for Reference Only
Increase(+) decrease(－)
Share
capital
Opening New by Closing
Item Percent Bonus Percent
amount shares transfer Other Subtotal amount
shares
issue of
capital
reserve
I. Unlisted
shares in 164,025,000 51.48% 164,025,000 51.48%
circulation
1.
Sponsor’s 164,025,000 51.48% 164,025,000 51.48%
shares
Including:
shares
held by the
State
Shares
held by
domestic 164,025,000 51.48% 164,025,000 51.48%
legal
person
Shares
held by
foreign
legal
person
2. Raised
legal
person
shares
3.
Employee
shares
4.
Preferred
stock or
other
II. Listed
shares in 154,575,000 48.52% 154,575,000 48.52%
circulation
1. RMB
English Translation for Reference Only
ordinary
shares
2.
Domestic
listed 154,575,000 48.52% 154,575,000 48.52%
foreign
shares
3.
Overseas
listed
foreign
shares
4. Other
III. Total
318,600,000 100.00% 318,600,000 100.00%
shares
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 10.86% 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).
(20) Capital reserve
Opening Increase this Decrease this Closing
Item
amount period period 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
(21) Surplus reserve
Opening Increase this Decrease this Closing
Item
amount period period amount
Statutory Surplus Reserves 49,036,260.20 49,036,260.20
English Translation for Reference Only
Discretionary surplus
37,000,000.00 37,000,000.00
reserves
Total 86,036,260.20 86,036,260.20
(22) Retained profit
Withdraw or
Item Amount
distribution ratio
Undistributed profit at the end of previous year
-148,604,711.83
before adjustment
Total undistributed profit at beginning of
adjustment year (add +, less-)
Adjusted undistributed profit at year beginning -148,604,711.83
Increase： Net profit attributable to owner of
-4,433,879.82
parent company this year
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 -153,038,591.65
(23) Operating revenue and operating cost
1. Operating revenue
Item Current period Previous period
Income from main operations 45,901,330.11 78,794,557.04
Other operation income 860,000.00 834,000.00
Cost of main operations 36,876,088.93 56,102,163.98
Other operation cost 800.527.98 800,527.98
2. Main operations (by industry)
Current period Previous period
Industry Operating Operating
Operating cost Operating cost
revenue revenue
Industry 40,213,136.18 34,688,558.44 71,934,344.91 55,368,648.13
Commerce 8,665,642.39 5,164,978.95 20,757,886.74 14,631,190.46
Total 48,878,778.57 39,853,537.39 92,692,231.65 69,999,838.59
English Translation for Reference Only
Internal offset and
-2,977,448.46 -2,977,448.46 13,897,674.61 13,897,674.61
deduction
Total 45,901,330.11 36,876,088.93 78,794,557.04 56,102,163.98
3. Main operations (by region)
Current period Previous year
Region Operating Operating
Operating cost Operating cost
revenue revenue
Export sales of
43,307,396.53 37,670,146.99 72,348,209.67 55,862,559.96
clothes
Domestic sales of
5,571,382.04 2,183,390.40 20,344,021.98 14,137,278.63
clothes
Subtotal 48,878,778.57 39,853,537.39 92,692,231.65 69,999,838.59
Internal offset and
-2,977,448.46 -2,977,448.46 13,897,674.61 13,897,674.61
deduction
Total 45,901,330.11 36,876,088.93 78,794,557.04 56,102,163.98
4. The total sales to Top 5 customers of the Company amounted to RMB 41,385,267.24, accounting
for 90.11% of total revenue of the Company this year.
Percent in total operating
Name of customer Operating revenue
revenue of the Company (%)
HONOURLINK 17,986,482.38 39.16
KEENZONE LIMITED 19,214,256.60 41.84
Brendwood International Corp` 3,068,260.35 6.68
COCO PARK 740,700.00 1.61
Vanguard 375,567.91 0.82
Total 41,385,267.24 90.11
(24) Operating revenue and surcharges
Item Current period Previous period Accounting standard
Urban construction and
34,958.44 13,130.36 7%、5%
maintenance tax
Education expenses and
15,468.59 39,391.02 3%
surcharges
Others 788.18 5,528.37
Total 51,215.21 58,049.75
(25) Financial expenses
Items Current period Previous period
English Translation for Reference Only
Interest expenses 8,262,191.25 12,189,951.49
Less: Interest income 21,904.17 38,127.33
Exchange loss 1,087,258.12 940,694.28
Less: Exchange gain
Other 88,887.47 132,681.92
Total 9,416,432.67 13,225,200.36
Note: Financial expenses down by RMB 3,808,767.69 than that of last year, the decrease percentage
is 28.8%, for the reason of the loan interest decreased as the Company repaid loan.
(26) Investment income
Items Current period Previous period
Long-term equity investment income recognized with
cost method
Long-term equity investment income recognized with
equity method
Investment income generated from disposal of
8,060,304.49 1,847,417.00
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
108,547.06
financial assets
Investment income generated from investment held to
maturity
Other
Total 8,168,851.55 1,847,417.00
(27) Impairment loss on assets
Items Current period Previous period
1. Loss on bad debts -7,184,306.29 -4,816,565.81
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
English Translation for Reference Only
6. Impairment loss on investment property
7. Impairment loss on fixed assets
8. Other
Total -7,184,306.29 2,878,043.76
(28) Non-operating revenue
Items Current period Previous period
1. Total gain on disposal of
non-current assets
Of which: gain on disposal of
fixed assets
Gain on disposal of
intangible assets
2. Gain on debt restructuring
3. Profits of non-monetary
assets exchanged
4. Donations
5. Government grants 32,674.00 38,714.00
6. Other 39,995.46 20,198.39
Total 72,669.46 58,912.39
(29) Non-operating expenses
Items Current period Previous period
1. Total loss on disposal of non-current
1,173,554.55 23,744.29
assets
Of which: loss on disposal of fixed assets 1,173,554.55 23,744.29
Loss on disposal of intangible
assets
2. Loss on debt restructuring
3. Loss of non-monetary assets
exchanged
4. Donation expenses 670,000.00 510,250.00
5. Settlement loss
6. Surcharge expenditures 26,897.15 277,305.64
7. Other 83.45
Total 1,870,535.15 811,299.93
(30) Income tax expenses
English Translation for Reference Only
Items Current period Previous period
Income tax for current period calculated by tax
2,488,515.06
law and relevant regulations
Deferred tax adjustment 1,744,300.21 1,871,780.51
Total 1,744,300.21 4,360,295.57
(31) Calculation of ROE, basic earnings per share and diluted earnings per share
Weighted average EPS
Profit of the reporting period
ROE Basic EPS Diluted EPS
Net profit attributable to
ordinary shareholders of the -0.0145 -0.01 -0.01
Company
Net profit attributable to
ordinary shareholders of the
-0.0467 -0.04 -0.04
Company after deducting
non-recurring gain or loss
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
English Translation for Reference Only
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
English Translation for Reference Only
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.
(3) In the reporting period, if the company realizes the unlisted 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
(32) Notes to cash flow statement
1. Other cash received relevant to operating activities
Item Amount
Other loans received 40,449,086.34
Interest income received 21,904.17
Other 8,535,535.18
Total 49,006,525.69
2. Other cash paid relevant to operating activities
Item Amount
Other current payments paid 9,827,965.48
English Translation for Reference Only
Audit and other intermediary fees paid 4,394,840.30
Fees relevant to operating activities paid 8,100,204.96
Total 22,323,010.74
(33) 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 -4,990,054.53 -11,722,715.88
Add: Provision for impairment of assets -7,184,306.29 -4,816,565.81
Depreciation of fixed assets, of oil-gas assets, of
3,543,484.57 5,122,599.30
productive biological assets
Amortization of intangible assets 751,766.52 751,766.52
Amortization of long-term deferred expense 45,360.00
Losses on disposal of property, plant and equipment,
-8,060,304.49 23,744.29
intangible assets and other long-term assets (gains: negative)
Loss on retirement of fixed assets (gains: negative) 1,173,554.55
Losses from variation of fair value (gains: negative) 92,647.52
Financial cost (gains: negative) 8,262,191.25 12,189,951.49
Investment loss (gains: negative) -108,547.06
Decrease in deferred income tax assets (gains: negative) 1,744,300.21 1,871,780.51
Increase in deferred income tax liabilities (decrease:
negative)
Decrease in inventory (gains: negative) -42,277,264.96 1,938,485.01
Decrease in accounts receivable from operating
33,368,885.72 39,500,066.02
activities (gains: negative)
Increase in payables from operating activities (decrease:
35,572,512.26 -4,611,014.83
negative)
Other
Net cash flows generated from operating activities 21,934,225.27 40,248,096.62
II. Investing and financing activities that do not involving
cash receipts and payment:
English Translation for Reference Only
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 4,515,752.81 10,602,651.10
Less: Opening balance of cash 30,095,398.06 2,168,571.06
Closing balance of cash equivalents
Less: Opening balance of cash equivalents
Net increase in cash and cash equivalents -25,579,645.25 8,434,080.04
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 1.00
2. Cash and cash equivalents received for disposal of
1.00
subsidiaries and other business entities
Less: cash and cash equivalents held by subsidiaries and
174,067.95
other business entities
3. Net cash received for disposal of subsidiaries and other
1.00
business entities
4. Net assets of subsidiaries disposed -9,372,445.92
English Translation for Reference Only
Current assets 17,331,307.57
Non-current assets 1,860,083.59
Current liabilities 28,563,837.08
Non-current liabilities
3. Composition of cash and cash equivalents
Items This period Last period
1. Cash 4,515,752.81 10,602,651.10
Of which: Cash in hand 1,705,287.34 3,348,570.81
Bank deposit available to pay at any time 2,806,586.20 7,254,080.29
Other money funds available to pay at any time 3,879.27
2. Cash equivalents
Of which： Bonds maturing within 3 months
3. Ending balance of cash and cash equivalents 4,515,752.81 10,602,651.10
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
Propo
rtion
Propor
of
tions
paren
of
t
parent
comp
compa Ultimate
Legal Busine Register any’s
Relations Registere ny’s controller Organizatio
Name Type represe ss ed share
hip d address voting of the n Code
ntative Nature Capital holdi
right to Company
ng to
the
the
Compa
Com
pany ny（%）
（%）
Puning Parent limited No. 212, Chen Tradin 36.99 36.99 Chen
9800 74122232-1
Shenghengc company liability Build 46, Yuyi g % % Hongchen
English Translation for Reference Only
hang Trade Qiao g
Developme Guan
nt Co., Ltd. Village,
Liu Sha
North
Street,
Puning
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., Shareholder holding 10.68% stake of the Company,
Ltd. affiliate controlled under Chen Hongcheng’s family
Shareholder holding 3.81% stake of the Company, affiliate
Shantou Lianhua Industrial Co., Ltd.
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
Vice-Board chairman of the Company, relative of Cheng
Ding Lihong
Hongcheng
(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
Maturity has been
Loan
Guarantee Secured party Bank issuing loan date of fully
balance
guarantee performed
or not
Puning Shenghengchang Guangdong Puning Association Oct. 25,
2440 No
Trade Development Co., Rieys (Group) of Country Credit 2009
English Translation for Reference Only
Ltd. Company Union Liusha West
Limited Union
Shenzhen Missk Fashion
Co., Ltd., Dongguan Jinjing
Textile Co., Ltd., Puning
Shenghengchang Trade
Guangdong
Development Co., Ltd., Construction Bank
Rieys (Group) Jan. 21,
Shenzhen Rieys Industrial of China, Shenzhen 3900 No
Company 2008
Co., Ltd., Puning Tianhe Branch
Limited
Garment Manufacturing
Factory Co., Ltd., Puning
Rieys Paper Industrial Co.,
Ltd.
Chen Hongcheng, Chen
Xuewen, Ding Lihong,
Dongguan Jinjing Textile
Co., Ltd., Puning
Shenghengchang Trade
Development Co., Ltd.,
Guangdong
Puning Tianhe Garment China Everbright
Rieys (Group) Sep. 27,
Manufacturing Factory Co., Bank, Guangzhou 2501 No
Company 2009
Ltd., Shantou Lianhua Branch
Limited
Industrial Co., Ltd.,
Shenzhen Rieys Industrial
Co., Ltd., Shenzhen Rishen
Investment Co., Ltd.,
Shanghai Hong Yi Property
Limited
Puning Tianhe
Puning Association
Puning Shenghengchang Garment
of Country Credit Jan. 5,
Trade Development Co., Manufacturing 1000 No
Union Liusha West 2010
Ltd. Factory Co.,
Union
Ltd.
Puning Tianhe
Puning Association
Puning Shenghengchang Garment
of Country Credit Apr. 10,
Trade Development Co., Manufacturing 500 No
Union Liusha West 2010
Ltd. Factory Co.,
Union
Ltd.
*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
English Translation for Reference Only
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. Transactions related to equity transfer of subsidiaries
On 28 Apr. 2011, the Company signed the agreement on equity transfer with Chen Xuewen to
transfer 86% equity of Shenzhen Missk Fashion Co., Ltd. (hereinafter referred to as Shenzhen
Missk) at the price of RMB 1.00 as stipulated in the agreement. Thereafter, Chen Xuewen would
pay all the loans owed to Puning Tianhe Garment Manufacturing Factory Co., Ltd. for Shenzhen
Missk Fashion Co., Ltd. The transfer fee of RMB 1.00 and the loans have been received, and the
procedures of alternating industrial and commercial registration have been accomplished.
Transferred Date of Transfer Income arising Accounts
Book net assets
company sale price form the transfer recovered
Shenzhen
Missk
2011-6-30 -9,372,445.92 1.00 8,060,304.49 17,284,086.34
Fashion
Co., Ltd.
4. Accounts receivable and payable among related parties
Closing amount Opening amount
Name of project
(RMB10 thousand) (RMB10 thousand)
Other payables:
Chen Xuewen 400.00
Shenzhen Rishen Investment Co., Ltd. 1450.00
VII. Contingencies
No contingencies of the Company 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 1, 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) 2 for details.
4. The Company mortgaged its legal owned real estate (with the property ownership “YFDZ-Zi No.
C3929364) which located at Puning City to apply RMB 28 million borrowing from Huizhou Branch
of Shanghai Pudong Development Bank for Poly Opto-electronic Co., Ltd Huizhou. The Company
and Poly Opto-electronic Co., Ltd Huizhou made agreement contract of counter-guarantee. Poly
Opto-electronic Co., Ltd Huizhou provided RMB 25 million as condition of counter-guarantee and
the Company shall shoulder the loan interest of the amount (RMB 25 million).
The original carrying value of the fixed assets and intangible assets mentioned in the aforesaid 1-4
points was RMB 137,193,021.29.
English Translation for Reference Only
IX. Other significant events
(1) Particulars on extension of overdue bank loan of Construction Bank of China and
repayment after the expiration
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
RMB 96.8 million and interest will be postponed. The Company shall repay the entire loan principal
according to the following periods, before December 31, 2010 repay the loan principal of RMB 18.8
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 the entire 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 the entire loan principal owed by the Company is settled, CBC
Shenzhen will promptly handle the collateral cancellation procedures for collateral objects.
The Company has repaid loan of RMB 39 million in accordance with “Interest Waiver Agreement”
this period. Total amount the Company repaid the CBC Shenzhen was RMB 39 million.
(2) Leased assets
Types of leased out assets of the Company are as following:
Types of assets leased out under operating
Closing book value Opening book value
leases
Buildings 36,035,608.19 36,658,134.73
Land use rights 17,849,587.81 18,047,550.01
Total 53,885,196.00 54,705,684.74
On August 7, 2009, the Company and Puning Rieys Paper Industrial Co., Ltd. signed "Asset for
Debt Agreement", Rieys Paper transferred the land use rights of the land "Pu Fu Guo Yong (2006)
No. Te 01371" and the property ownership "YFDZ-Zi C3929364" to the Company for the
satisfaction of its debts RMB56.82 million to the Company.
In September 2009, the two parties signed a lease contract, leased the above settled assets to Rieys
Paper for a period of two years from September 1, 2009 to August 31, 2011, the monthly rent was
RMB139,000 and the annual rent was RMB1.668 million, and 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.
English Translation for Reference Only
X. Post-balance-sheet events
Huizhou Polyway Opto-electronic Co., Ltd. returned the short-term loan of RMB 4.5 million to
Huizhou Branch of Shanghai Pudong Development Bank. The Company returned the counter
guarantee fund of RMB 4.5 million to Huizhou Polyway Opto-electronic Co., Ltd. For details about
guarantees for Huizhou Polyway Opto-electronic Co., Ltd., please refer to Note VIII (1) 4.
XI. Notes to financial statements of parent company
(1) Accounts receivable
1. Constitution of accounts receivable
Closing balance Opening balance
Provision for bad Provision for bad
Book balance Book balance
Category debts debts
Proporti Proporti Proporti Proporti
Amount on Amount on Amount on Amount on
(%) (%) (%) (%)
Accounts
receivable
with
significant
individual
amount
Accounts
receivable
with
insignifican
t individual
in high risk
4,224,304. 4,224,304. 4,224,304. 4,224,304.
portfolio 91.67 91.67 91.67 91.67
63 63 63 63
after
grouping
by credit
risk
characterist
ics
Other
accounts
383,972.2 383,972.2 383,972.2 383,972.2
receivable 8.33 8.33 8.33 8.33
5 5 5 5
not
significant
4,608,276. 4,608,276. 4,608,276. 4,608,276.
Total 100.00 100.00 100.00 100.00
88 88 88 88
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
English Translation for Reference Only
Content of accounts Provision
Book balance Bad debts Reasons
receivable ratio
Long-term credit, the
Beijing Capital Airport 21,713.00 21,713.00 100% balance is
controversial
Long-term credit, the
Ningbo Industrial and
26,354.45 26,354.45 100% balance is
Commercial Bureau
controversial
Long-term credit, the
Guangzhou Chen Shunqin 335,904.80 335,904.80 100% balance is
controversial
Total 383,972.25 383,972.25
3. Accounts receivable with insignificant individual in high risk portfolio after grouping by credit
risk characteristics:
Closing balance Opening balance
Aging Book balance Provision for Book balance Provision for
Amount Proportion bad debts Amount Proportion bad debts
Within
1 year
1-2
years
2-3
years
Over 3
4,224,304.63 100% 4,224,304.63 4,224,304.63 100% 4,224,304.63
years
Total 4,224,304.63 100% 4,224,304.63 4,224,304.63 100% 4,224,304.63
4. Top 5 units in outstanding amount of accounts receivable
Relationship
Proportion in total
Name of unit with the Amount Aging
accounts receivable
Company
Hongkong Jinhua Trading
Client 4,224,304.63 Over 3 years 91.67%
Company
Guangzhou Chen Shunqin Client 335,904.80 Over 3 years 7.29%
Ningbo Industrial and
Client 26,354.45 Over 3 years 0.57%
Commercial Bureau
Beijing Capital Airport Client 21,713.00 Over 3 years 0.47%
(2) Other receivables
English Translation for Reference Only
1. Constitution of other receivables
Closing balance Opening balance
Provision for bad Provision for bad
Book balance Book balance
debts debts
Category Prop
Propor Propor Propo
ortio
Amount tion Amount tion Amount rtion Amount
n
(%) (%) (%)
(%)
Other
receivable
s with 119,107,832. 104,161,293.
94.17 93.08
significant 00 16
individual
amount
Other
receivable
s with
insignifica
nt
individual
in high risk 1,151,694.0 1,430,186.3
3,901,982.24 3.08 24.85 4,266,511.79 3.81 29.10
portfolio 3 2
after
grouping
by credit
risk
characteris
tics
Other
accounts
3,483,719.1 3,483,719.1
receivable 3,483,719.16 2.75 75.15 3,483,719.16 3.11 70.90
6 6
not
significant
126,493,533. 100.0 4,635,413.1 100.0 111,911,524. 100.0 4,913,905.4 100.0
Total
40 0 9 0 11 0 8 0
2. Provision for bad debts of other receivables with significant individual amount or with
insignificant individual amount but tested for impairment separately:
Provision
Content of other receivables Book balance Bad debts Reasons
ratio
Shenzhen Zhao Tong
500,000.00 500,000.00 100.00%
Investment Co., Ltd.
Lin Jialin 300,000.00 300,000.00 100.00%
English Translation for Reference Only
Puning Weililai Textile Co., Ltd 41,463.01 41,463.01 100.00%
Shenzhen Youtianda Industry
105.00 105.00 100.00%
CO., Ltd.
Export tax rebates receivable 2,331,608.20 2,331,608.20 100.00%
Changsha Hat Factory 10,542.95 10,542.95 100.00%
Shenzhen Jin Ming Ren
Information Consulting 200,000.00 200,000.00 100.00%
Company
Zong Tongquan 100,000.00 100,000.00 100.00%
Total 3,483,719.16 3,483,719.16 100.00%
3. Other receivables with insignificant individual in high risk portfolio after grouping by credit risk
characteristics
Closing balance Opening balance
Aging Book balance Book balance Provision
Provision for
Proportion Proportion for bad
Amount bad debts Amount
(%) (%) debts
Within 1
2,174,152.66 55.75 43,483.05 1,657,012.00 38.84 33,140.24
year
1-2 years 23,846.86 0.61 2,384.69 403,846.86 9.46 40,384.69
2-3 years 857,866.33 21.96 428,933.17 1,459,136.53 34.20 679,768.27
Over 3
846,116.40 21.68 676,893.12 746,516.40 17.50 676,893.12
years
1,430,186.
Total 3,901,982.22 100.00 1,151,694.03 4,266,511.79 100.00
32
4. Top 5 in outstanding amount of other receivables in period end
Proportion in total
Relationship with
Name of unit Amount Aging other receivable
the Company
(%)
Tianrui (HK) Trading Co., Ltd. Subsidiary 64,927,561.08 Over 3 years 51.32%
Puning Hengda Real Estate Within 1
Subsidiary 54,180,270.92 42.83%
Development Co., Ltd. year
Puning Rieys Paper Industrial Co., Within 1
Lessee of plant land 1,098,000.00 0.87%
Ltd. year
Guangdong Zongzhen Investment Within 1
Client 700,000.00 0.57%
Co., Ltd. year
Shenzhen Zhao Tong Investment Within 1
Client 600,000.00 0.47%
Co., Ltd. year
English Translation for Reference Only
Total 121,505,832.00 96.06%
(3) Long-term equity investments
Vot
ing
Stake
Au in Differe
Balance at year in the
dit Change (increase the nce
Investee Initial investment beginning Balance at year end inves
met or decrease) inv stateme
tee
hod este nt
(%)
e
(%)
Shenzhe
Cos
n Rieys
t
Industri 45,000,000.00 45,000,000.00 45,000,000.00 90 90
met
al Co.,
hod
Ltd.
Puning
Tianhe
Cos Subsidi
Garment
t ary
Manufa 51,712,500.42 51,712,500.42 51,712,500.42 75 100
met holds
cturing
hod 25%
Factory
Co., Ltd.
Tianrui Cos
(HK) t
8.26 8.26 8.26 100 100
Trading met
Co., Ltd. hod
Puning
Hengda
Cos
Real
t
Estate 146,600,000.00 146,600,000.00 146,600,000.00 100 100
met
Develop
hod
ment
Co., Ltd.
(4) Operating revenue and operating cost
Item Amount of this period Amount of previous period
Operating revenue 860,000.00 8,823,130.70
Operating cost 800,527.98 8,261,093.28
Operating profit 59,472.02 562,037.42
English Translation for Reference Only
Note: Operating revenue of the Company was mainly made up of rental of Puning Rieys Paper
Industrial Co., Ltd. Operating revenue of this period decreased by RMB 7,963,130.70 over previous
period with a variation rate of 90.25％, which was because the parent Company hasn’t engaged in
entity production and operation, and transferred to the mode of group management.
(5) Investment income
Amount of previous
Name of investee Amount of this period
period
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
69,647.12
financial assets
Investment income generated from investment held to
maturity
Investment income generated from financial assets
available for sale
Other
Total 69,647.12
Explanation: for detailed information of investment income, please refer to Note X (1) (2).
(6) Supplementary information for cash flow statement
Amount of previous
Supplementary information Amount of this period
period
1. Reconciliation of net profit to net cash flows generated
from operating activities
Net profit -15,165,086.21 -18,649,039.03
Add: Provision for impairment of assets -278,492.29 -587,097.57
Depreciation of fixed assets, of oil-gas assets, of
2,429,446.88 4,099,850.31
productive biological assets
Amortization of intangible assets 751,766.52 751,766.52
English Translation for Reference Only
Amortization of long-term deferred expense
Losses on disposal of property, plant and equipment,
intangible assets and other long-term assets (gains: negative)
Loss on retirement of fixed assets (gains: negative)
Losses from variation of fair value (gains: negative) 61,863.00
Financial cost (gains: negative) 6,772,593.85 11,059,055.45
Investment loss (gains: negative) -69,647.12
Decrease in deferred income tax assets (gains: negative) 2,722,427.84 146,774.39
Increase in deferred income tax liabilities (decrease:
negative)
Decrease in inventory (gains: negative) 3,883,538.99
Decrease in accounts receivable from operating activities
-14,563,680.42 39,549,709.01
(gains: negative)
Increase in payables from operating activities (decrease:
35,107,818.85 -8,474,123.59
negative)
Other
Net cash flows generated from operating activities 17,769,010.90 31,780,434.48
II. Investing and financing activities that do not involving
cash receipts and payment:
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
2,682,025.61 7,691,509.95
Closing balance of cash
28,150,078.47 647,412.49
Less: Opening balance of cash
Closing balance of cash equivalents
Less: Opening balance of cash equivalents
-25,468,052.86 7,044,197.46
Net increase in cash and cash equivalents
XII. Supplementary information
English Translation for Reference Only
(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
6,886,749.94
parts made the provision for asset impairment;
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 quantities;
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 by 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 15,899.54
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
3,298,325.50
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
English Translation for Reference Only
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
-624,311.14
items;
21. Other profit or loss items meet the definition of non-recurring gains
and losses.
Subtotal 9,576,663.84
Income tax expense should be deducted from aforementioned
-285,219.60
non-recurring gains and losses
Profit or loss of minority shareholders in consolidated financial statement 158.36
Total 9,861,725.08
(2) Return on net assets and earnings per share
Weighted EPS
Profit in reporting period average return on
net assets Basic EPS Diluted EPS
Net profit attributable to common
-0.0145 -0.01 -0.01
shareholders of the Company
Net profit attributable to common
shareholders of the Company after
-0.0467 -0.04 -0.04
deducting non-recurring gains and
losses
(3) The anomalies in the Company’s financial statements and the reasons
Variation Variation
Item Remark
amount rate
Monetary capital -25,579,645.25 -85.00% Return of bank loans
Transactional New investment in stocks in this reporting
5,612,090.00
assets period
Accounts
-21,296,514.70 -35.27% Decreased sales in export business
receivable
Short-term loans -44,000,040.00 -27.76% Return of some loans in this period
Accounts payable -3,430,956.47 65.87% Return of goods payment
Other payables 14,222,397.14 41.00% Borrowing of capital from related parties
Operating
-32,867,226.93 -41,28% Decreased sales in export business
revenue
Operating cost -19,226,075.05 -33.79% Decreased sales in export business
Assets
-2,367,740.48 49.16% Decrease of losses on bad debt.
impairment loss
English Translation for Reference Only
Investment Gains on subsidiary transfer and stock
8,168,851.55
income investments
XIII. Approval and disclosure of financial statements
The financial statements have been approved by the Board to disclose on 4 Aug. 2011.
[The understanding on this English text of the Report should be subject to the Chinese text.]
Guangdong Rieys Group Company Ltd.
4 Aug. 2011
