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公司公告

ST雷伊B:2012年半年度报告(英文版)2012-08-14  

						                      GUANGDONG RIEYS GROUP COMPANY LTD.

                                         SEMI-ANNUAL REPORT 2012

                                                  I. Important Notes
The Board of Directors, the Supervisory Committee, directors, supervisors and senior executives of Guangdong
Rieys Group Company Ltd. (hereinafter referred to as “the Company”) warrant that this report does not contain
any false information, misleading statement or material omission and will take individual and/or joint liabilities
for the factuality, accuracy and completeness of this report.
All other directors than the following ones attended in person the board session for reviewing the semi-annual
report.
                                                                   Reason for not attending the
       Name of director                      Office title                                                   Name of proxy
                                                                        session in person
Chen Honghai                      Director                       For the reason of his work       shujianlong
dinglihong                        Director                       For the reason of his work       liuyong
chenxuewen                        Director                       For the reason of his work       caishaohe
The company principal, the person-in-charge of the accounting work and the chief of the accounting division
(head of accounting) hereby ensure that the financial report enclosed in this report is factual and complete.
English translation for reference only. Should there be any discrepancy between the two versions, the Chinese
version shall prevail.


                                                 II. Company Profile

(I)Basic information

A-share code                     000168                                B-share code                 200168
A-share abbreviation                                                   B-share abbreviation         ST Rieys B
Stock exchange listed with       Shenzhen Stock Exchange
Legal Chinese name of the
                                 广东雷伊(集团)股份有限公司
Company
Abbr. of the legal Chinese
                                 雷伊
name of the Company
Legal English name of the
                                 GUANGDONG RIEYS GROUP COMPANY LTD
Company
Abbr. of the legal English
                                 Rieys
name of the Company
Legal representative of the
                                 Chen Hongcheng
Company
Registered address               Meixin Industrial Park of Jun Bu Town, Puning, Guangdong
Postal code for the registered
                                 515300
address
                                 Room 4003-4008, 40/F International Chamber of Commerce Tower, No. 3 Fuhua Road, Futian
Office address
                                 District, Shenzhen
Postal code for the office
                                 518001
address
Internet website of the
                                 http://www.rieys.com
Company
Email address                    rieys@live.cn




                                                                                                                            1
(II)For contact

                                                          Company Secretary                      Securities Affairs Representative
Name                                           Xu Wei                                       No one for now
                                               Room 4003-4008, 40/F International Room 4003-4008, 40/F International
Contact address                                Chamber of Commerce Tower, No. 3 Chamber of Commerce Tower, No. 3
                                               Fuhua Road, Futian District, Shenzhen Fuhua Road, Futian District, Shenzhen
Tel.                                           0755-82250045                                0755-82250045
Fax                                            0755-82251182                                0755-82251182
E-mail                                         xw@200168.com                                xw@200168.com


(III)About information disclosure and where the semi-annual report is placed

Newspapers designated by the Company for
                                         Securities Times, Hongkong Ta Kung Pao
information disclosure
Internet website designated by CSRC for
                                                http://www.cninfo.com.cn
disclosing the semi-annual report
                                                Room 4003-4008, 40/F International Chamber of Commerce Tower, No. 3 Fuhua
Where the semi-annual report is placed
                                                Road, Futian District, Shenzhen



                              III. Financial and Business Highlights
(I)Major accounting data and financial indexes
Any retrospective adjustment in previous financial statements?
□Yes √No □ Inapplicable
Major accounting data
          Major accounting data                Reporting period (Jan.-Jun.)    Same period of last year      Increase/decrease (%)
Gross operating revenues (RMB Yuan)                           7,617,917.19                  46,761,330.11                     -83.71%
Operating profit (RMB Yuan)                                 -14,191,827.75                  -1,447,888.63                     880.17%
Total profit (RMB Yuan)                                     -14,248,606.05                  -3,245,754.32                     338.99%
Net profit attributable to shareholders of
                                                            -13,570,192.44                  -4,433,879.82                     206.56%
the Company (RMB Yuan)
Net profit attributable to shareholders of
the Company after deducting non-recurring                   -13,521,248.24                 -14,295,604.90                      -5.42%
gains and losses (RMB Yuan)
Net cash flow from operating activities
                                                             12,681,286.44                 21,934,225.27                      -42.18%
(RMB Yuan)
                                                   As at the end of this
                                                                               As at the end of last year    Increase/decrease (%)
                                                    reporting period
Total assets (RMB Yuan)                                     585,528,029.93                537,999,020.83                        8.83%
Owners’ equity attributable to shareholders
                                                            315,975,884.98                329,546,077.42                       -4.12%
of the Company (RMB Yuan)
Share capital (share)                                       318,600,000.00                318,600,000.00                             0%
Major financial indexes
          Major financial indexes              Reporting period (Jan.-Jun.)    Same period of last year      Increase/decrease (%)
Basic EPS (RMB Yuan/share)                                             -0.04                         -0.01                       300%
Diluted EPS (RMB Yuan/share)                                           -0.04                         -0.01                       300%
Basic EPS after deducting non-recurring
                                                                       -0.04                         -0.04                           0%
gains and losses (RMB Yuan/share)
Fully diluted ROE(%)                                              -4.29%                         -1.46%                      -2.83%




                                                                                                                                          2
Weighted average ROE(%)                                             -4.2%                            -1.45%                       -2.75%
Fully diluted ROE after deducting
                                                                    -4.28%                             -4.17%                       -0.11%
non-recurring gains and losses(%)
Weighted average ROE after deducting
                                                                    -4.19%                             -4.67%                        0.48%
non-recurring gains and losses(%)
Net cash flow per share from operating
                                                                     0.0398                            0.0688                      -42.15%
activities (RMB Yuan/share)
                                                   As at the end of this
                                                                                As at the end of last year        Increase/decrease (%)
                                                    reporting period
Net assets per share attributable to
shareholders of the Company (RMB                                       0.99                              1.03                       -3.88%
Yuan/share)
 Liability/asset ratio(%)                                      45%                          38%                          7%
Notes to major accounting data and financial indexes before the end of this reporting period (please write an adjustment note if
there’s any retrospective adjustment)


(II)Accounting data differences under the domestic and overseas accounting standards

1. Net profit and net asset differences between financial reports disclosed according to the international and
Chinese accounting standards respectively

□Applicable √Inapplicable

2. Net profit and net asset differences between financial reports disclosed according to the overseas and
Chinese accounting standards respectively

□Applicable √Inapplicable

3. Specific items involving significant difference

                                                                                                                Involved provisions of
   Items involving significant
                                        Amount (RMB Yuan)                  Reason for the difference         international and/or overseas
           difference
                                                                                                                 accounting standards


4. Notes to accounting data differences under the domestic and overseas accounting standards


(III)Items of non-recurring gains and losses
√Applicable □Inapplicable

                              Items                                Amount (RMB Yuan)                               Notes
Gains and losses on disposal of non-current assets
Tax rebate, reduction or exemption due to un-authorized
approval or the lack of formal approval documents
Government grants recognized in the current year, except
for those acquired in the ordinary course of business or
granted at certain quotas or amounts according to the
country’s unified standards
Capital occupation fees received from non-financial
enterprises that are included in current gains and losses
Gains generated when the investment costs of the
Company’s acquiring subsidiaries, associates and joint
ventures are less than the fair value of identifiable net assets
in the investees attributable to the Company in the



                                                                                                                                             3
acquisition of the investments
Exchange gains and losses of non-monetary assets
Gains and losses through entrusting others to invest or
manage assets
Various asset impairment provisions due to acts of God such
as natural disasters
Gains and losses on debt restructuring
Enterprise reorganization expenses, such as expenses on
employee settlement and integration
Gains and losses on the parts exceeding the fair value when
prices of transactions become unfair
Net current gains and losses from the period-begin to the
combination date of subsidiaries due to business
combinations under the same control
Gains and losses on contingent matters which are irrelevant
to the normal operation of the Company
Gains and losses on fair value changes of transactional
financial assets and liabilities, and investment gains on
disposal of transactional financial assets and liabilities and
available-for-sale financial assets, except for the effective
hedging business related to the Company’s normal operation
Reversal of impairment provisions for accounts receivable
which are separately tested for impairment signs
Gains and losses on entrustment loans from external parties
Gains and losses on fair value changes of investing
properties for which the fair value method is adopted for
subsequent measurement
Current gain and loss effect due to a just-for-once
adjustment to current gains and losses according to
requirements of taxation and accounting laws and
regulations
Custodian fee income from entrusted operations with the
Company
Other non-operating incomes and expenses besides the
                                                                                -56,778.30
items above
Other gain and loss items that meet the definition of
non-recurring gains and losses
Gains and losses on fair value changes of transactional
                                                                                   3,404.00
financial assets held
Income tax                                                                        -4,512.09
Net profit                                                                      -48,862.21
Minority shareholder income                                                           81.99
Total                                                                           -48,944.20                                          --
Explanation given by the Company to “other gain and loss items that meet the definition of non-recurring gains and losses” and when
it recognizes a non-recurring gain and loss item as a recurring one according to the nature and features of its ordinary business

                                  Amount involved (RMB
             Item                                                                               Notes
                                          Yuan)




                                                                                                                                         4
    IV. Changes in Share Capital and Particulars about Shareholders

(I)Changes in share capital
1. Statement of changes of shares
□Applicable √Inapplicable


2. Changes of shares subject to trading moratorium


□Applicable √Inapplicable

(II)Issuance and listing of securities
1. Securities issues in the previous three years
□Applicable √Inapplicable
2. Changes of the Company’s share number and structure, as well as the corresponding changes in its
asset-liability structure
□Applicable √Inapplicable
3. Existing employee shares
□Applicable √Inapplicable

(III)Shareholders and actual controller
1. Total number of shareholders at the end of the reporting period
The Company had 14312 shareholders in total at the end of the reporting period.


2. Shareholding of the top ten shareholders


Particulars about shares held by the top ten shareholders holding tradable shares
√Applicable □Inapplicable

Total number of shareholders                                                                                                 14312
Particulars about shares held by the top ten shareholders
                                                        Shareholdin                     Number of       Pledged or frozen shares
  Name of shareholder (full          Nature of                       Total shares held
                                                        g percentage                   non-tradable    Status of     Number of
           name)                    shareholder                      at the period-end
                                                            (%)                         shares held     shares        shares
PUNING
                     Domestic
SHENGHENGCHANG                                                                         117,855,000.0
                     non-state-owned                        36.99% 117,855,000.00
TRADE    DEVELOPMENT                                                                               0
                     corporation
CO., LTD
SHENZHEN    RISHENG Domestic
CHUANGYUAN     ASSET non-state-owned                        10.68%     34,020,000.00 34,020,000.00
MANAGEMENT CO., LTD. corporation
                      Domestic
SHANTOU       LIANHUA
                      non-state-owned                         3.81%    12,150,000.00 12,150,000.00
INDUSTRIAL CO., LTD.
                      corporation
                                Domestic      natural
SU YOUHE                                                      4.54%     7,023,955.00            0.00
                                person
SHANGHAI HONG KONG
INTERNATIONAL                   Foreign corporation           1.31%     2,026,069.00            0.00
SECURITIES LIMITED




                                                                                                                                     5
                                Domestic      natural
ZHENG SUXIAN                                                1.04%      1,600,000.00              0.00
                                person
                                Domestic      natural
LUO DONG HUI                                                0.93%      1,441,200.00              0.00
                                person
                                Domestic      natural
XU HAI                                                      0.87%      1,350,400.00              0.00
                                person
                                Domestic      natural
NGAI KWOK PAN                                               0.74%      1,145,816.00              0.00
                                person
                                Domestic      natural
CAI HANCHUAN                                                0.68%      1,046,135.00              0.00
                                person


Particulars about shares held by the top ten shareholders holding tradable shares
√Applicable □Inapplicable
                                                    Number of tradable shares                 Type and number of shares
               Name of shareholder
                                                             held                      Type                   Number
SU YOUHE                                                            7,023,955.00      B-shares                       7,023,955.00
SHANGHAI HONG KONG
                                                                    2,026,069.00      B-shares                       2,026,069.00
INTERNATIONAL SECURITIES LIMITED
ZHENG SUXIAN                                                        1,600,000.00      B-shares                       1,600,000.00
LUO DONG HUI                                                        1,441,200.00      B-shares                       1,441,200.00
XU HAI                                                              1,350,400.00      B-shares                       1,350,400.00
NGAI KWOK PAN                                                       1,145,816.00      B-shares                       1,145,816.00
CAI HANCHUAN                                                        1,046,135.00      B-shares                       1,046,135.00
CHEN JIANSHENG                                                      1,017,797.00      B-shares                       1,017,797.00
GU KUNYI                                                              969,440.00      B-shares                            969,440.00
KE ZHONGFENG                                                          828,800.00      B-shares                            828,800.00
                                              There existed related-party relationship among Puning Shenghengchang Trade
Explanation on associated relationship or/and
                                              Development Co., Ltd., Shenzhen Risheng Chuangyuan Asset Management Co.,
persons acting in concert among the
                                              Ltd. and Shantou Lianhua Industrial Co., Ltd.. Whether there existed
above-mentioned shareholders
                                              related-party relationship among other shareholders is unknown.


3. Controlling shareholder and actual controller
(1)Change of the controlling shareholder and actual controller
□Applicable √Inapplicable
(2)Particulars about the controlling shareholder and actual controller
Is there a new actual controller?
□ Yes √ No □ Inapplicable

Name of the actual controller                                       Chen Hongcheng
Type of the actual controller                                  Individual
Notes: Chen Hongcheng, the actual controller, born in 1958, with bachelor degree. Now he is the standing commissar of political
consultative conference of Puning, the special commissar of political consultative conference of Guangdong Province, Vice Chairman
of Costume Association of Guangdong Province and Vice Chairman of Costume Association of Shenzhen City, as well as the director
of Puning Shenghengchang Trade Development Co., Ltd. for a term. He has ever been the deputy of the National People’s Congress
of Jieyang City and Guangdong Province.


(3)Illustration on the relationship between the Company and its actual controller.




                                                                                                                                       6
                         Chen Hongcheng                 Chen Honghai

                       70%                                         30%

                         Puning Shenghengchang Trade Development
                                        Co., Ltd.

                                                       36.99%

                                      The Company
(4)The actual controller controls the Company via trust or other ways of asset management.
□Applicable √Inapplicable
4. Other corporate shareholders with a shareholding over 10%
√Applicable □Inapplicable

                                                                                                              Registere
                                          Legal          Incorporated     Main operating business or
    Name of corporate shareholder                                                                             d capital Currency
                                      representative         date          management activities
                                                                                                               (’0000)
                                                                        Invest and initiate industries (the
                                                                        detailed project till further
                                                                        declared); domestic commerce,
                                                                        material supply and marketing
                                                                        industry (excluding monopoly
                                                                        commodities);           investment
Shenzhen Risheng Chuangyuan Asset
                                    Ma Chanying         8 Sept. 2000    consultation and information             25,00 CNY
Management Co., Ltd.
                                                                        consultation (excluding projects
                                                                        limited      by      laws      and
                                                                        administration         regulations;
                                                                        certification shall be gained for
                                                                        the above mentioned limited
                                                                        projects).
                 Notes
(IV)Convertible corporate bonds
□Applicable √Inapplicable



                   V. Directors, Supervisors and Senior Management




                                                                                                                                   7
(I)Shareholding changes of directors, supervisors and senior management

                                                                                                                                                                                             Receive
                                                                                               Number of       Number of                                                                     payment
                                                                                                                                                Of which:        Number of
                                               Beginning     Ending date       Number of        shares          shares         Number of                                                         from
                                                                                                                                                number of    stock options Reason for
   Name        Office term     Gender   Age    date of the   of the office shares held at increased in decreased in shares held at                                                         shareholder
                                                                                                                                                restricted        held at         change
                                               office term      term       period-begin        reporting       reporting       period-end                                                  units or other
                                                                                                                                            shares held          period-end
                                                                                                period          period                                                                     related-party
                                                                                                                                                                                           units or not?

Chen
              Chairman       Male       54    28 Dec. 2009 27 Dec. 2012 0                  0               0               0                0                                 0            No
Hongcheng

              Vice
Ding Lihong                  Male       41    28 Dec. 2009 27 Dec. 2012                    0               0               0                                 0                0            Yes
              chairman

Chen                                                                       0               0               0               0                0                0                0
              Director       Male       57    28 Dec. 2009 27 Dec. 2012                                                                                                                    Yes
Honghai

Chen                                                                       0               0               0               0                0                0                0
              Director       Female     32    28 Dec. 2009 27 Dec. 2012                                                                                                                    Yes
Xuewen

              Independent                                                  0               0               0               0                0                0                0
Liu Yong                     Male       35    28 Dec. 2009 27 Dec. 2012                                                                                                                    No
              director

              Independent                                                  0               0               0               0                0                0                0
Su Jianlong                  Male       48    28 Dec. 2009 27 Dec. 2012                                                                                                                    No
              director

              Independent                                                  0               0               0               0                0                0                0
Cai Shaohe                   Male       51    28 Dec. 2009 27 Dec. 2012                                                                                                                    No
              director

              Chairman of                                                  0               0               0               0                0                0                0
Yan Mingfei the              Male       44    28 Dec. 2009 27 Dec. 2012                                                                                                                    No
              Supervisory


                                                                                                                                                                                                           8
              Committee

Huang                                                                                 0             0   0   0   0   0   0
              Supervisor      Female            46       28 Dec. 2009 27 Dec. 2012                                          No
Yanfang

                                                         30 Sept.                     0             0   0   0   0   0   0
Li Ning       Supervisor      Male              43                     27 Dec. 2012                                         No
                                                         2011

Zhou Yuhua CFO                Male              44       28 Nov. 2011 27 Dec. 2012 0                0   0   0   0   0   0   No

              Company                                                                 0             0   0   0   0   0   0
Xu Wei                        Male              35       11 Dec. 2009 27 Dec. 2012                                          No
              secretary

    Total           --               --          --             --           --       0             0   0   0   0   0   0        --

Equity incentives granted to directors, supervisors and senior management during the reporting period
□Applicable √Inapplicable




                                                                                                                                      9
(II)Post-holding particulars
Post-holding in shareholders units
√Applicable □Inapplicable
 Name of the
                                                                     Position in
person holding                                                                                                       Receives payment
                                                                         the     Beginning date     Ending date of
any post in any             Name of the shareholder unit                                                           from the shareholder
                                                                     shareholder of office term      office term
  shareholder                                                                                                              unit?
                                                                         unit
      unit
                   Puning           Shenghengchang         Trade
Chen Honghai                                                        Director                                         Yes
                   Development Co., Ltd.

                   Shenzhen Risheng Chuangyuan Asset
Ding Lihong                                                         Director                                         Yes
                   Management Co., Ltd.

                   Shenzhen Risheng Chuangyuan Asset
Chen Xuewen                                                         Director                                         Yes
                   Management Co., Ltd.

Notes to
post-holding in
shareholder
units

Post-holding in other units
√Applicable □Inapplicable

Name of the
person holding                                                       Position in   Beginning date   Ending date of    Receives payment
                                   Name of other unit
any post in                                                          other unit    of office term    office term       from other unit?

other units

                   Shenzhen         Pinghai    Certified   Public
Liu Yong                                                            Partner                                          Yes
                   Accountants

                   Shenzhen China Energy Conservation and Chairman of
Su Jianlong                                                                                                          Yes
                   Environmental Protection Co., Ltd.               the Board

                                                                    Superintende
Cai Shaohe         Chenghai Auditor’ Firm                                                                           Yes
                                                                    nt

Notes to
post-holding in
other units


(III)Remuneration for directors, supervisors and senior management

Decision-making
                                  In accordance with the Articles of Association, the remuneration of the directors and supervisors are
procedure         for       the
                                  determined by the Shareholders’ General Meeting of the Company; while the remuneration of the senior
remuneration of directors,
                                  management are determined by the Shareholders’ General Meeting, the Board of Directors and relevant
supervisors   and       senior
                                  remuneration systems.
management
Basis for determining the In accordance with the proposal on Formulation of Remuneration of Senior Executives examined and
remuneration of directors, passed at the 1st Session of the 2nd Board of Director for Year 2002 and Proposal on Adjusting Allowance


                                                                                                                                          10
supervisors      and    senior of Directors, Independent Director and Supervisors examined and passed at 2007 Annual Shareholder’
management                    General Meeting, directors and independent directors of the Company drew their annual allowance of
                              RMB 50,000 (tax included) respectively from the Company; supervisors of the Company received the
                              annual allowance of RMB 15,000 (tax included) respectively. The Company reimbursed the reasonable
                              charges according to the actual situation which independent directors attended the Board sessions,
                              shareholders’ general meetings or exercise their functions and powers in accordance with the relevant
                              laws and regulations and Articles of Association.

Actual payment of the
remuneration of directors,
                              Paid monthly.
supervisors and senior
management


(IV)Change of directors, supervisors and senior management

   Name                Position        Way of change       Date of change                     Reason for change




(V)Employees

Number of on-job employees                                                                      156.00
Number of retired employees for whom the Company shall bear
                                                                                                 0.00
expenses
                                                           Function structure
                           Type of function                                              Number of personnel
Production                                                                                       72.00

Sale                                                                                             14.00

Technical                                                                                        30.00

Financial                                                                                        12.00

Administration                                                                                   28.00

                                                           Level of education
                          Level of education                                             Number of personnel
Master degree                                                                                    2.00

University                                                                                       33.00

Junior college                                                                                   40.00

High school and below                                                                            81.00



                                  VI. Report of the Board of Directors
(I)Discussion and analysis by the management
For the reporting period, the Company achieved operating revenue of RMB 7.62 million, down
83.71% as compared with RMB 46.76 million at the same period of last year; operating profit of
RMB -14.19 million, up 880.17% over RMB -1.45 million from a year earlier; and net profit

                                                                                                                                  11
attributable to the Company of RMB -13.57 million, up 206.06% over RMB -4.43 million at the
same period of last year. The operating revenue, operating cost, operating expense, operating profit
and net profit attributable to owners of the Company changed over last year mainly because the
Company was going to shift to single real estate business, so the Company continued to cut down
the garment business in the reporting period and focused on real estate development with its
resources; however, although the real estate projects have been put on advance sale, but they
haven’t reached settlement yet.
The closing balance of monetary funds was RMB 4.39 million, up 174.42% over the opening
balance of RMB 1.60 million, which was mainly due to the increase of income from advance sale of
real estate projects. The closing balance of accounts receivable was RMB 8.51 million, down
39.04% over the opening balance of RMB 13.97 million, which was mainly because the Company
collected back some garment payments. The closing balance of accounts payable was RMB 8.43
million, down 21.63% over the opening balance of RMB 10.75 million, which was mainly because
the Company paid for some credit purchases. The closing balance of other payables was RMB 6.35
million, down 90.10% over the opening balance of RMB 64.12 million, which was mainly because
the Company repaid borrowings of RMB 48.41 million to related parties. The closing balance of
accounts received in advance was RMB 141 million, up 880.06% over the opening balance of RMB
14.39 million, which was mainly due to the increase of income from advance sale of real estate
projects.
During the reporting period, the Company continued to work on development of the Shangdi
Central Project in Puning and the project went on well. Some houses were expected to be available
for hand-over by the end of 2012 and the corresponding sales income would be recognized. At the
same time, the Company proactively talked with the lending banks so as to deal with the overdue
loans properly. For the reporting period, the Company accumulatively repaid loan principals and
interest of RMB 9.50 million to the Guangzhou branch of Everbright Bank. These overdue loans
were expected to come to a settlement by the end of the year.
Is the Company’s actual business performance 20% lower or higher than any earning forecast or business plan for the report period
which has been publicly disclosed earlier?
□Applicable □No √Inapplicable


1. Main business lines and their operating results

(1)Main business lines classified by industries and products

                                                                                                                   Unit: RMB Yuan
                                                                            Increase/decrease                   Increase/decrease
                                                                                              Increase/decrease
                                                                               of operating                       of gross profit
                                                                                              of operating cost
                       Operating                          Gross profit rate       revenue                         rate compared
 Industry/product                      Operating cost                                           compared with
                        revenue                                 (%)           compared with                       with the same
                                                                                               the same period
                                                                             the same period                     period last year
                                                                                                 last year (%)
                                                                               last year (%)                            (%)
Industries

Manufacture              7617917.19          5242728.04             31.18             -81.06             -84.89              11.42

Trade

Products


                                                                                                                                     12
Garments                 7617917.19           5242728.04              31.18             -81.06             -84.89             11.42


(2)Main business lines classified by regions

                                                                                                                     Unit: RMB Yuan
                                                                                            Increase/decrease compared with the same
                   Region                                  Operating revenue
                                                                                                       period last year (%)

Garments for export                                                            2815199.68                                    -93.49


Garments for domestic sale                                                     4802717.51                                    -14.20


Subtotal                                                                       7617917.19                                    -84.41


Internal counteraction of purchase and sale                                                                                 -100.00


Total                                                                          7617917.19                                    -83.40



(3)Reasons for any significant change in main business and its structure

□Applicable √Inapplicable


(4)Reasons of significant changes in profitability of main business (gross profit rate) compared with that
in the last year

□Applicable √Inapplicable


(5)Analysis on reasons of significant changes in profit breakdown compared with the last year

□Applicable √Inapplicable


(6)Business nature, main products/services and net profit of joint ventures contributing over 10% to the
Company’s net profit

□Applicable √Inapplicable


(7)Problems and difficulties in operation

1. 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.
2. 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 not any direct or indirect financing channel.
Therefore, the Company will take effective measures to expand the financing channels.
3. The foundation of the real estate business lies in its land resource reserves available for constant development. Although the
Company has actively expanded its projects over the past few years, the Company has no other land reserves except the Shangdi

                                                                                                                                   13
Central in Puning. Therefore, the Company will accelerate to explore projects so as to complete the subsequent land reserves in the
next half year of 2012..


2. Internal control rules relevant to the measurement of fair value

□Applicable √Inapplicable


3. Foreign-currency financial assets and liabilities held

□Applicable √Inapplicable


(II)Investments

1. General utilization of the raised funds

□Applicable √Inapplicable




                                                                                                                                14
2. Projects promised to be invested with raised funds
□Applicable √Inapplicable




                                                        15
3. Change of projects invested with raised funds

□Applicable √Inapplicable


4. Significant projects invested with non-raised funds

□Applicable √Inapplicable


(III)Revision of the Board of Directors’ business plan for the second half of the year

□Applicable √Inapplicable


(IV)Business performance estimate for Jan.-Sept. 2012

Warnings of estimated possible losses or major changes of the accumulative net profit achieved during the period from the
beginning of the year to the end of the next report period compared with the same period of last year, as well as the reasons
√Applicable □Inapplicable
Business performance forecast: Loss
Type of the business performance forecast data
√Exact number □Interval number

                                From the year-begin to the end Same period of
                                                                                                      +/-(%)
                                   of the next reporting period      last year

Estimated cumulative net                                          loss:
                                loss:about 2000wanyuan                          □ --√ Up □ Down    92.12%
profit (RMB Ten thousand)                                         1041wanyuan

Basic EPS (RMB Yuan/share) loss:about0.06yuan                    loss:0.02yuan □ -- √Up □ Down    200%

Notes to the business
performance forecast


(V)Explanation of the Board of Directors on “Non-standard Auditing Report” issued
by the CPA firm for the report period

□Applicable √Inapplicable


(VI)Explanation of the Board of Directors on changes and solutions of the issues
involved in the “Non-standard Auditing Report” issued by the CPA firm for last year

√Applicable □Inapplicable

ASIA (Group) Accounting Firm issued an unqualified audit report with pinpointed matters for the 2011
Annual Financial Report of the Company. The said pinpointed matters were stated as, “In the year 2011,
the net profit attributable to owners of the Company stood at RMB 21,385,000 and at RMB -18,335,500
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, and it planned to withdraw from
the garment industry step by step. Despite a series of improvement measures taken by the Company, there
still existed uncertainty about the going-concern ability of the Company.
                                                                                                                            16
The Board of Directors believes that the recent loss of the Company is mainly due to the fact that the real
estate projects that the Company has obtained advance sale permits for have not been completed and
reached settlement, and that the Company is cutting down the garment business step by step in order to
ensure resources for real estate projects. According to the Company’s estimation, some of its real estate
projects will be completed and reach settlement to generate gains by the end of the year. During the
reporting period, the Company continued to enhance development and sale of its real estate projects and
reached a strategic cooperation agreement with China Construction Bank. At the same time, it proactively
and properly dealt with the overdue loans with other banks. Upon adjustments of recent years, the quality
of the Company’s business and assets has improved greatly and the Company has now great ability for
sustained operation.

(VII)State the discussion results of the Board of Directors on the reasons and
influence of the Company’s accounting policy and estimate alterations or significant
accounting error correction

□Applicable √Inapplicable


(VIII)Formulation and execution of the Company’s cash dividend policy

In order to standardize the dividends distribution of the Company and advance it to establish scientific, sustainable and stable
dividends distribution system, the 3rd Session of the 5th Board of Directors of the Company reviewed and approved the
revision of partial articles about profits distribution policies in the original Articles of Association in accordance with the
Circular on Further Implementing Regulations for Dividends Distribution of Listed Companies (Guang-Dong-Zheng-Jian
[2012] No. 91) issued by Guangdong CSRC and Circular on Further Implementing Issues about Cash Dividends Distribution
of Listed Companies issued by CSRC, which make detailed regulations on principle, detailed policies, review procedures of
profits distribution policies, and changes in profits distribution policies as well as using principles of retained profits, etc..


(IX)Pre-plan for profit distribution or turning capital reserve into share capital

□Applicable √Inapplicable

(X)The accumulative retained profit as at the end of 2011 is a positive number but the
Company has not put forward a cash dividend pre-plan.
□Applicable √Inapplicable


(XI)Other matters that need to be disclosed

(XII)The Company’s liabilities, credit changes and future cash arrangements for
debt-clearing (Only listed companies with convertible corporate bonds are required to
fill the table below.)

□Applicable √Inapplicable




                                                                                                                                     17
                              VII. Significant Events

(I)Corporate governance

In accordance with the Code of Corporate Governance of Listed Companies and other
relevant regulations issued by CSRC, the Company constructs and gradually perfects the
governance structures of Shareholders’ General Meeting, Board of Directors and Supervisory
Committee, and the actual situation on corporate governance of the Company is basically in
line with the requirements of Code of Corporate Governance of Listed Companies and other
regulations.
In the future, the Company will make corporate governance as an important basic work to
enhance its competitiveness, and constantly perfect its modern enterprise system.

(II)Execution of the plans for profit distribution, turning capital reserve into share
capital or new share issuance which had been made in the previous period and were
carried out in the report period

□Applicable √Inapplicable




                                                                                         18
(III) Significant litigations and arbitrations

□Applicable √Inapplicable
The Company was not involved in any significant lawsuit or arbitration during the reporting period.




                                                                                                      19
(IV) Bankruptcy or reorganization events

□Applicable √Inapplicable


(V) Holding equity of other listed companies and joint financial enterprises

1. Securities investment

√Applicable □Inapplicable

                                                                                                                Proportion in
                                                                               Number of
                                                                Initial                          Closing          the total      Gain/loss in
                                                                              shares held at
    Serial   Variety of       Code of           Abbr. of      investment                         carrying         closing        the reporting
                                                                                   the
     No.     securities       securities       securities       amount                            amount         securities      period (RMB
                                                                               period-end
                                                              (RMB Yuan)                        (RMB Yuan)       investment         Yuan)
                                                                                 (Share)
                                                                                                                amount (%)

                                                Huazhi
1              Stock           000607                            20239.00                3700      15984.00               100%        3404.00
                                                Holding

Other securities investments held at the period-end                    0.00         --                   0.00               0%            0.00

Gain/loss on selling securities in the reporting period           --                --              --               --                   0.00

Total                                                            20239.00           --             15984.00 100%                      3404.00

Disclosure date of the board announcement of securities
investment approval

Disclosure date of the general meeting announcement of
securities investment approval

Notes to securities investment:
For the purpose of increasing the utilization efficiency of idle funds, the Company made decisions and approved
securities investments according to specified management power and procedures at all tiers. Profit from these
investments was limited because the investment amounts were small, so it would not have major impact on the
business performance of the Company for the reporting period.

2. Holding equity of other listed companies

□Applicable √Inapplicable
Notes to holding equity of other listed companies:




3. Holding equity of non-listed financial enterprises

□Applicable √Inapplicable
Notes to holding equity of non-listed financial enterprises




                                                                                                                                             20
4. Trading stocks of other listed companies

□Applicable √Inapplicable
Notes to trading stocks of other listed companies:




(VI) Assets transaction events




                                                     21
1. Purchase of assets

□Applicable √Inapplicable
Notes to purchase of assets:




2. Sale of assets

□Applicable √Inapplicable
Notes to sale of assets:




3. Exchange of assets

□Applicable √Inapplicable
Notes to exchange of assets




                               22
4. Business combination

□Applicable √Inapplicable


5. Progress of these events after the publication of the assets reorganization report or public notices on the
purchases or sales of assets, as well as the influences of these events on the operation results and financial
status of the Company in the reporting period

□Applicable √Inapplicable


(VII) Explanation on shareholding increase scheme during the reporting period proposed or
implemented by the principal shareholders and act-in-concert persons

□Applicable √Inapplicable


(VIII) Implementation situation and influence of equity incentive plan of the Company

□Applicable √Inapplicable


(IX) Significant related-party transactions




                                                                                                           23
1. Related-party transactions relevant to routine operation

□Applicable √Inapplicable


2. Related-party transactions regarding purchase and sale of assets

□Applicable √Inapplicable


3. Significant related-party transitions with joint investments

□Applicable √Inapplicable


4. Significant credits and liabilities with related parties

□Applicable √Inapplicable
Capital occupation during the reporting period and debt-clearing progress
□Applicable √Inapplicable
The accountability plan forward by the Board of Directors when the Company had not completed collecting the capital occupied for non-operating purposes by the end of the reporting period
□Applicable √Inapplicable




                                                                                                                                                                                             24
5. Other significant related-party transactions

Naught


(X) Significant contracts and execution

1. The trust, contract and lease whose profits reaching more than 10% (including 10%) of the total profits
of the Company in the reporting period

(1) Status of trust

□Applicable √Inapplicable


(2) Status of contracting

□Applicable √Inapplicable


(3) Status of leasing

□Applicable √Inapplicable


2. Guarantees provided by the Company

□Applicable √Inapplicable




                                                                                                        25
3. Entrusted financial management

□Applicable √Inapplicable




                                    26
4. Performance of significant contracts relevant to routine operation

 □Applicable √Inapplicable


5. Other significant contracts

□Applicable √Inapplicable


(XI) Explanation on issuing corporate bonds

□Applicable √Inapplicable


(XII) Performance of commitments

1. Commitments made by the Company or shareholders holding over 5% of the Company’s shares in the
reporting period, or such commitments carried down into the reporting period

□Applicable √Inapplicable


2. The Company’s assets or projects exist profitable prediction and the reporting period is in such
prediction period, it states the profits from the assets or projects reaching original prediction and relevant
reasons

□Applicable √Inapplicable


(XIII) Items of other comprehensive income

                                                                                                         Unit: RMB Yuan

                                  Items                                     Jan.-Jun. 2012          Jan.-Jun. 2011

1. Profits/(losses) from available-for-sale financial assets                                 0.00                    0.00

Less: Effects on income tax generating from available-for-sale
                                                                                             0.00                    0.00
financial assets
Net amount transferred into profit and loss in the current period that
                                                                                             0.00                    0.00
recognized into other comprehensive income in prior period

Subtotal                                                                                     0.00                    0.00

2. Interests in the investee entities’ other comprehensive income as per
                                                                                             0.00                    0.00
equity method
Less: Effects on income tax generating from the interests in the
                                                                                             0.00                    0.00
investee entities’ other comprehensive income as per equity method
Net amount transferred into profit and loss in the current period that
                                                                                             0.00                    0.00
recognized into other comprehensive income in prior period

Subtotal                                                                                     0.00                    0.00



                                                                                                                       27
3. Profits/(losses) from cash flow hedging instrument                                             0.00                           0.00

Less: Effects on income tax generating from cash flow hedging
                                                                                                  0.00                           0.00
instrument
Net amount transferred into profit and loss in the current period that
                                                                                                  0.00                           0.00
recognized into other comprehensive income in prior period
The adjustment value that is the converted initial recognition amount of
                                                                                                  0.00                           0.00
arbitrage project

Subtotal                                                                                          0.00                           0.00

4. Converted amount of foreign currency financial statements                                      0.00                           0.00

Less: Net value of disposal of oversea operations that recognized into
                                                                                                  0.00                           0.00
current profit and loss

Subtotal                                                                                          0.00                           0.00

5. Other                                                                                          0.00                           0.00

Less: Effects on income tax generating from the others that included
                                                                                                  0.00                           0.00
into other comprehensive income
Net amount transferred into profit and loss in the current period that
                                                                                                  0.00                           0.00
recognized into other comprehensive income in prior period

Subtotal                                                                                          0.00                           0.00

Total                                                                                             0.00                           0.00


(XIV) Particulars about researches, visits and interviews received in this reporting period

                                                                                                            Main discussion and
  Time of reception        Place of reception    Way of reception       Visitor type       Visitor       materials provided by the
                                                                                                                    Company

                                                                                                         Debt reorganization
4 Jan. 2012               Company Office        By phone            Individual         Investor
                                                                                                         progress

                                                                                                         Debt reorganization
5 Jan. 2012               Company Office        By phone            Individual         Investor
                                                                                                         progress

                                                                                                         Is the Company able to
15 Mar. 2012              Company Office        By phone            Individual         Investor
                                                                                                         get rid of “ST” this year?

                                                                                                         Time for annual report
13 Apr. 2012              Company Office        By phone            Individual         Investor
                                                                                                         disclosure

                                                                                                         The Company’s operation
18 May 2012               Company Office        By phone            Individual         Investor
                                                                                                         status


(XV) Particulars about engagement and disengagement of CPAs firm

Has this semi-annual report been audited?
□ Yes √ No □ Inapplicable
Has the CPAs firm been changed?

                                                                                                                                        28
 □ Yes √ No □ Inapplicable


 (XVI) Particulars about punishment and rectification order received by the Company, its
 directors, supervisors, senior executives, shareholders, actual controller and acquirer

 □Applicable √Inapplicable


 (XVII) Explanation on other significant events

 □Applicable √Inapplicable


 (XVIII) Particulars about significant changes in the profitability, asset status and credit status
 of the Company’s convertible bonds guarantor

 (Only listed companies which issue convertible corporate bonds are required to fill the form below.)
 □Applicable √Inapplicable


 (XIX) Index for information disclosure

                                                                                                   Internet website for disclosing
                                         Newspapers for disclosing
              Event                                                          Publishing date       information and the searching
                                        information and relevant page
                                                                                                             approach

Announcement on the Procedure                                                                  http://www.cninfo.com.cn/informatio
                                       Securities Times, Ta Kung Pao 6 Jan. 2012
of Debt Restructuring                                                                          n/companyinfo.html

Announcement on the Correction
                                                                                               http://www.cninfo.com.cn/informatio
of     Business        Performance Securities Times, Ta Kung Pao 6 Jan. 2012
                                                                                               n/companyinfo.html
Forecast

Announcement      on      Canceling                                                            http://www.cninfo.com.cn/informatio
                                       Securities Times, Ta Kung Pao 11 Jan. 2012
Hypothecation of Stocks                                                                        n/companyinfo.html

Announcement         on     Signing                                                            http://www.cninfo.com.cn/informatio
                                       Securities Times, Ta Kung Pao 10 Mar. 2012
Strategic Cooperation Contract                                                                 n/companyinfo.html

Announcement on Resolutions of
                                                                                               http://www.cninfo.com.cn/informatio
the First Session of the Fifth Securities Times, Ta Kung Pao 31 Mar. 2012
                                                                                               n/companyinfo.html
Board of Directors

Preliminary Earnings Estimate                                                                  http://www.cninfo.com.cn/informatio
                                       Securities Times, Ta Kung Pao 14 Apr. 2012
for 2011                                                                                       n/companyinfo.html

Business Performance Forecast                                                                  http://www.cninfo.com.cn/informatio
                                       Securities Times, Ta Kung Pao 14 Apr. 2012
for the First Quarterly of 2012                                                                n/companyinfo.html

Independent       Opinions        of                                                           http://www.cninfo.com.cn/informatio
                                       Only published on the internet   18 Apr. 2012
Independent Directors                                                                          n/companyinfo.html

Work Report of Independent                                                                     http://www.cninfo.com.cn/informatio
                                       Only published on the internet   18 Apr. 2012
Directors (by Liu Yong, Su                                                                     n/companyinfo.html


                                                                                                                                     29
Jianlong and Cai Shaohe)

Self-appraisal Report of Internal                                                            http://www.cninfo.com.cn/informatio
                                             Only published on the internet   18 Apr. 2012
Control for 2011                                                                             n/companyinfo.html

                                                                                             http://www.cninfo.com.cn/informatio
Summary of Annual Report 2011 Securities Times, Ta Kung Pao 18 Apr. 2012
                                                                                             n/companyinfo.html

Specific Notes on Unqualified
                                                                                             http://www.cninfo.com.cn/informatio
Opinions on Auditors’ Report for Only published on the internet              18 Apr. 2012
                                                                                             n/companyinfo.html
Annual Financial Statement 2011

Announcement          on          Putting
                                                                                             http://www.cninfo.com.cn/informatio
Forward Publishing the First Securities Times, Ta Kung Pao 18 Apr. 2012
                                                                                             n/companyinfo.html
Quarterly Report of 2012

Registration and Management
                                                                                             http://www.cninfo.com.cn/informatio
System for Persons with Inside Only published on the internet                 18 Apr. 2012
                                                                                             n/companyinfo.html
Information

Specific   Notes      on        Auditors’
                                                                                             http://www.cninfo.com.cn/informatio
Report        with         Unqualified Only published on the internet         18 Apr. 2012
                                                                                             n/companyinfo.html
Opinions

Specific   Notes       on         Capital
Occupation       by        Controlling                                                       http://www.cninfo.com.cn/informatio
                                             Only published on the internet   18 Apr. 2012
Shareholders and Other Related                                                               n/companyinfo.html
Parties

Interim Business Performance                                                                 http://www.cninfo.com.cn/informatio
                                             Securities Times, Ta Kung Pao 18 Apr. 2012
Forecast 2012                                                                                n/companyinfo.html

                                                                                             http://www.cninfo.com.cn/informatio
Annual Auditors’ Report 2011                Only published on the internet   18 Apr. 2012
                                                                                             n/companyinfo.html

                                                                                             http://www.cninfo.com.cn/informatio
Annual Report 2011                           Securities Times                 18 Apr. 2012
                                                                                             n/companyinfo.html

Annual Report 2011 (English                                                                  http://www.cninfo.com.cn/informatio
                                             Ta Kung Pao                      18 Apr. 2012
Version)                                                                                     n/companyinfo.html

Full Text of the First Quarterly                                                             http://www.cninfo.com.cn/informatio
                                             Securities Times                 18 Apr. 2012
Report 2012                                                                                  n/companyinfo.html

Abstract of the First Quarterly                                                              http://www.cninfo.com.cn/informatio
                                             Securities Times                 18 Apr. 2012
Report 2012                                                                                  n/companyinfo.html

Full Text of the First Quarterly                                                             http://www.cninfo.com.cn/informatio
                                             Ta Kung Pao                      18 Apr. 2012
Report (English Version)                                                                     n/companyinfo.html

Announcement               of         the
Resolutions      of   the         Second                                                     http://www.cninfo.com.cn/informatio
                                             Securities Times, Ta Kung Pao 18 Apr. 2012
Session of the Fifth Board of                                                                n/companyinfo.html
Directors 2012




                                                                                                                               30
Announcement                    of        the
Resolutions of the First Session                                                                http://www.cninfo.com.cn/informatio
                                                Securities Times, Ta Kung Pao 18 Apr. 2012
of      the        Fifth        Supervisory                                                     n/companyinfo.html
Committee 2012

Work System for Secretary to the                                                                http://www.cninfo.com.cn/informatio
                                                Only published on the internet   18 Apr. 2012
Board of Directors                                                                              n/companyinfo.html

Notice        on     Convening           2011
Annual Shareholders’ General                                                                   http://www.cninfo.com.cn/informatio
                                                Securities Times, Ta Kung Pao 18 Apr. 2012
Meeting        by     the        Board     of                                                   n/companyinfo.html
Directors

Announcement               on        Abnormal                                                   http://www.cninfo.com.cn/informatio
                                                Securities Times, Ta Kung Pao 25 Apr. 2012
Fluctuations of Stock Price                                                                     n/companyinfo.html

Announcement               on        Abnormal                                                   http://www.cninfo.com.cn/informatio
                                                Securities Times, Ta Kung Pao 4 May 2012
Fluctuations of Stock Price                                                                     n/companyinfo.html

                                                                                                http://www.cninfo.com.cn/informatio
Articles of Association                         Only published on the internet   11 May 2012
                                                                                                n/companyinfo.html

Legal     Opinions              on     Annual                                                   http://www.cninfo.com.cn/informatio
                                                Only published on the internet   11 May 2012
Shareholders’ General Meeting                                                                  n/companyinfo.html

Announcement on Resolutions of
                                                                                                http://www.cninfo.com.cn/informatio
Annual Shareholders’ General Securities Times, Ta Kung Pao 11 May 2012
                                                                                                n/companyinfo.html
Meeting 2011

Management                 System          on                                                   http://www.cninfo.com.cn/informatio
                                                Only published on the internet   27 Jun. 2012
Dividends                                                                                       n/companyinfo.html

The Shareholders’ Return Plan of
the Company for the Next. Three Only published on the internet                   27 Jun. 2012   27 Jun. 2012
Years (From 2012 to 2014)

Announcement on Resolutions of
                                                                                                http://www.cninfo.com.cn/informatio
the Third Session of the Fifth Securities Times, Ta Kung Pao 27 Jun. 2012
                                                                                                n/companyinfo.html
Board of Directors 2012

Announcement on Resolutions of
                                                                                                http://www.cninfo.com.cn/informatio
the Forth Session of the Fifth Securities Times, Ta Kung Pao 28 Jul. 2012
                                                                                                n/companyinfo.html
Board of Directors 2012

Notice on Convening the First
Special Shareholders’ General                                                                  http://www.cninfo.com.cn/informatio
                                                Securities Times, Ta Kung Pao 28 Jul. 2012
Meeting 2012 by the Board of                                                                    n/companyinfo.html
Directors

                                                                                                http://www.cninfo.com.cn/informatio
Announcement on Suspension                      Securities Times, Ta Kung Pao 31 Jul. 2012
                                                                                                n/companyinfo.html

Announcement on Suspension                                                                      http://www.cninfo.com.cn/informatio
                                                Securities Times, Ta Kung Pao 7 Aug. 2012
for Preparing Significant Matters                                                               n/companyinfo.html


                                                                                                                                  31
                                             VIII. Financial Report
(I) Auditor’s report
Has this semi-annual report been audited?
□ Yes √ No □ Inapplicable


(II) Financial statements

Consolidated statements or not?
√Yes □No □ Inapplicable
The monetary unit in the financial statements of the financial report is RMB Yuan if not specified otherwise.
Monetary unit of notes to financial statements: RMB Yuan

1. Consolidated balance sheet
Prepared by Guangdong Rieys Group Company Ltd.
                                                                                                                   Unit: RMB Yuan

                  Item                   Note                   30 Jun. 2012                             31 Dec. 2011

Current Assets:

   Monetary funds                                                              4,392,797.84                             1,600,749.63

   Settlement reserves

   Intra-group lendings

   Transactional financial assets                                                15,984.00                                12,580.00

   Notes receivable

   Accounts receivable                                                         8,514,217.76                         13,966,563.54

   Accounts paid in advance                                                 86,047,152.76                           75,651,517.03

   Premiums receivable

   Reinsurance premiums receivable

   Receivable reinsurance contract
reserves

   Interest receivable

   Dividend receivable

   Other accounts receivable                                                16,650,325.96                           26,986,296.29

   Financial assets purchased under
agreements to resell

   Inventories                                                             341,218,663.08                          289,509,255.07

   Non-current assets due within 1
year

   Other current assets



                                                                                                                                  32
Total current assets                           456,839,141.40    407726961.56

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

     Investing property

     Fixed assets                               90,412,640.98    92,277,519.10

     Construction in progress

     Engineering materials                          54,526.00        54,526.00

     Disposal of fixed assets

     Production biological assets

     Oil-gas assets

     Intangible assets                          28,056,771.45    28,393,365.57

     R&D expense

     Goodwill

     Long-term deferred expenses

     Deferred income tax assets                  9,537,830.10     8,919,528.60

     Other non-current assets                     627,120.00       627,120.00

Total of non-current assets                    128,688,888.53   130,272,059.27

Total assets                                   585,528,029.93   537,999,020.83

Current liabilities:

     Short-term borrowings                      64,199,960.00    73,699,960.00

     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                            8,428,601.72    10,754,430.15

     Accounts received in advance              141,061,418.59    14,393,199.24

     Financial      assets       sold   for


                                                                            33
repurchase

  Handling           charges        and
commissions payable

  Employee’s              compensation
                                             669,654.17       769,812.94
payable

  Tax payable                               4,330,635.87     4,404,960.44

  Interest payable                         40,081,175.19    35,818,609.17

  Dividend payable

  Other accounts payable                    6,345,103.48    64,116,263.43

  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

Total current liabilities                 265,116,549.02   203,957,235.37

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                         265,116,549.02   203,957,235.37

Owners’ equity (or shareholders’
equity)

  Paid-up capital (or share capital)      318,600,000.00   318,600,000.00

  Capital reserves                         52,129,496.58    52,129,496.58

  Less: Treasury stock

  Specific reserves

  Surplus reserves                         86,036,260.20    86,036,260.20


                                                                       34
  Provisions for general risks

  Retained profits                                      -140,789,871.80                        -127,219,679.36

  Foreign exchange difference

Total equity attributable to owners
                                                         315,975,884.98                         329,546,077.42
of the Company

Minority interests                                            4,435,595.93                          4,495,708.04

Total owners’ (or shareholders’)
                                                         320,411,480.91                         334,041,785.46
equity

Total liabilities and owners’ (or
                                                         585,528,029.93                         537,999,020.83
shareholders’) equity


Legal representative: Chen Hongcheng              Person-in-charge of the accounting work: Zhou Yuhua


Chief of the accounting division:


2. Balance sheet of the Company

                                                                                                Unit: RMB Yuan

                  Item                  Note   30 Jun. 2012                          31 Dec. 2011

Current Assets:

  Monetary funds                                               707,181.42                           1,338,922.68

  Transactional financial assets                                15,984.00                               12,580.00

  Notes receivable

  Accounts receivable

  Accounts paid in advance

  Interest receivable

   Dividend receivable

  Other accounts receivable                              122,010,425.16                         139,930,122.27

  Inventories

  Non-current assets due within 1
year

  Other current assets

Total current assets                                     122,733,590.58                         141,281,624.95

Non-current assets:

  Available-for-sale financial assets

  Held-to-maturity investments

  Long-term accounts receivable



                                                                                                               35
  Long-term equity investment             243,312,508.68   243,312,508.68

  Investing property

  Fixed assets                             85,362,959.96    87,099,643.70

  Construction in progress

  Engineering materials                        54,526.00        54,526.00

  Disposal of fixed assets

  Production biological assets

  Oil-gas assets

  Intangible assets                        28,056,771.45    28,393,365.57

  R&D expense

  Goodwill

  Long-term deferred expenses

  Deferred income tax assets                2,424,916.73     2,390,839.13

  Other non-current assets

Total of non-current assets               359,211,682.82   361,250,883.08

Total assets                              481,945,273.40   502,532,508.03

Current liabilities:

  Short-term borrowings                    49,199,960.00    58,699,960.00

  Transactional financial liabilities

  Notes payable

  Accounts payable                             19,442.64        19,442.64

  Accounts received in advance

  Employee’s              compensation
                                             177,099.53       160,277.69
payable

  Tax payable                                648,374.91      1,476,139.73

  Interest payable                         31,491,507.59    28,205,955.32

  Dividend payable

  Other accounts payable                  168,002,243.10   173,882,257.74

  Non-current liabilities due within
1 year

  Other current liabilities

Total current liabilities                 249,538,627.77   262,444,033.12

Non-current liabilities:

  Long-term borrowings

  Bonds payable


                                                                       36
  Long-term payables

  Specific payables

  Estimated liabilities

  Deferred income tax liabilities

  Other non-current liabilities

Total non-current liabilities

Total liabilities                                           249,538,627.77                  262,444,033.12

Owners’ equity (or shareholders’
equity)

  Paid-up capital (or share capital)                        318,600,000.00                  318,600,000.00

  Capital reserves                                           52,129,496.58                   52,129,496.58

  Less: Treasury stock

  Specific reserves

  Surplus reserves                                           86,036,260.20                   86,036,260.20

  Retained profits

  Foreign exchange difference                               -224,359,111.15                -216,677,281.87

Total owners’ (or shareholders’)
equity

Total liabilities and owners’ (or
                                                            232,406,645.63                  240,088,474.91
shareholders’) equity

Current Assets:                                             481,945,273.40                  502,532,508.03


3 Consolidated income statement

                                                                                            Unit: RMB Yuan

                    Item                  Note   Jan.-Jun. 2012                  Jan.-Jun. 2011

I. Total operating revenues                                       7,617,917.19                46,761,330.11

Including: Sales income                                           7,617,917.19                46,761,330.11

          Interest income

          Premium income

          Handling         charge   and
commission income

II. Total operating cost                                     21,813,148.94                   56,285,422.77

Including: Cost of sales                                          5,242,728.04               37,676,616.91

          Interest expenses

          Handling         charge   and


                                                                                                         37
commission expenses

          Surrenders

          Net claims paid

          Net amount withdrawn for
the insurance contract reserve

          Expenditure        on    policy
dividends

          Reinsurance premium

          Taxes and associate charges                                      51,215.21

          Selling    and      distribution
                                                     757,544.50          4,362,334.90
expenses

          Administrative expenses                   9,118,311.22        11,963,129.37

          Financial expenses                       4,228,100.01          9,416,432.67

          Asset impairment loss                    2,466,465.17         -7,184,306.29

Add: Gain/(loss) from change in fair
                                                       3,404.00            -92,647.52
value (“-” means loss)

        Gain/(loss) from investment
                                                                         8,168,851.55
(“-” means loss)

Including:     share    of    profits   in
associates and joint ventures

Foreign exchange gains (“-” means
loss)

III. Business profit (“-” means loss)           -14,191,827.75        -1,447,888.63

        Add: non-operating income                      1,401.20            72,669.46

        Less: non-operating expense                   58,179.50          1,870,535.15

Including: loss from non-current
asset disposal

IV. Total profit (“-” means loss)               -14,248,606.05        -3,245,754.32

        Less: Income tax expense                    -618,301.50          1,744,300.21

V. Net profit (“-” means loss)                  -13,630,304.55        -4,990,054.53

        Including: Net profit achieved
by combined parties before the
combinations

        Attributable to owners of the
                                                  -13,570,192.44        -4,433,879.82
Company

        Minority shareholders’ income                -60,112.11          -556,174.71

VI. Earnings per share                       --                    --


                                                                                   38
     (I) Basic earnings per share                                                     -0.04                                     -0.01

     (II) Diluted earnings per share                                                  -0.04                                     -0.01

Ⅶ. Other comprehensive incomes

Ⅷ. Total comprehensive incomes                                            -13,630,304.55                             -4,990,054.53

     Attributable to owners of the
                                                                           -13,570,192.44                             -4,433,879.82
Company

     Attributable        to   minority
                                                                                 -60,112.11                              -556,174.71
shareholders

Where business mergers under the same control occurred in this report period, the net profit achieved by the merged parties before
the business mergers was RMB0.


Legal representative: Chen Hongcheng                               Person-in-charge of the accounting work: Zhou Yuhua


Chief of the accounting division:


4. Income statement of the Company

                                                                                                                    Unit: RMB Yuan

                  Item                   Note                 Jan.-Jun. 2012                            Jan.-Jun. 2011

I. Total sales                                                                                                            860,000.00

Less: cost of sales                                                                                                       800,527.98

Business taxes and surcharges

Distribution expenses                                                                                                      80,000.00

Administrative expenses                                                        4,249,607.81                              5,292,367.60

Financial costs                                                                3,293,889.61                              6,763,717.48

Impairment loss                                                                 136,310.38                               -278,492.29

Add: gain/(loss) from change in fair
                                                                                  3,404.00                                 -61,863.00
value (“-” means loss)

Gain/(loss) from investment (“-”
                                                                                                                           69,647.12
means loss)

Including: income form investment
on associates and joint ventures

II. Business profit (“-” means loss)                                      -7,676,403.80                           -11,790,336.65

Add: non-business income                                                            496.92                                 20,195.45

Less: non-business expense                                                       40,000.00                                672,517.17

Including: loss from non-current
asset disposal

III. Total profit (“-” means loss)                                        -7,715,906.88                           -12,442,658.37



                                                                                                                                     39
Less: income tax expense                                                   -34,077.60                      2,722,427.84

IV. Net profit     (“-” means loss)                                    -7,681,829.28                    -15,165,086.21

V. Earnings per share                                          --                                --

(I) Basic earnings per share                                                     -0.02                             -0.05

(II) Diluted earnings per share                                                  -0.02                             -0.05

VI. Other comprehensive income

VII. Total comprehensive income                                          -7,681,829.28                    -15,165,086.21


5. Consolidated cash flow statement

                                                                                                      Unit: RMB Yuan

                      Item                         Jan.-Jun. 2012                        Jan.-Jun. 2011

I. Cash flows from operating activities:

  Cash       received        from    sale     of
                                                                    140,845,788.66                        67,771,192.12
commodities and rendering of 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                                                3,000,000.00                         3,186,428.37

  Other cash received relating to
                                                                      8,071,501.00                        49,006,525.69
operating activities


                                                                                                                      40
Subtotal of cash inflows from operating
                                                 151,917,289.66   119,964,146.18
activities

  Cash paid for goods and services                68,389,373.16    64,949,089.65

  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                   3,853,324.47     8,417,833.35

  Various taxes paid                               1,656,666.51     2,339,987.17

  Other cash payment relating to
                                                  65,336,639.08    22,323,010.74
operating activities

Subtotal     of    cash    outflows       from
                                                 139,236,003.22    98,029,920.91
operating activities

Net cash flows from operating activities          12,681,286.44    21,934,225.27

II. Cash flows from investing activities:

  Cash received from withdrawal of
                                                                    5,000,000.00
investments

  Cash       received     from   return    on
investments

  Net cash received from disposal of
fixed assets, intangible assets and other           143,130.00        52,000.00
long-term assets

  Net cash received from disposal of
                                                                            1.00
subsidiaries or other business units

     Other cash received relating to
                                                                     108,547.06
investing activities

         Subtotal of cash inflows from
                                                    143,130.00      5,160,548.06
investing activities

  Cash paid to acquire fixed assets,
intangible assets and other long-term               532,368.23      1,922,931.00
assets

  Cash paid for investment                                          5,733,379.63



                                                                              41
   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
                                                      532,368.23     7,830,378.58
investing activities

Net cash flows from investing activities             -389,238.23     -2,669,830.52

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                      9,500,000.00    44,000,040.00

       Cash paid for interest expenses and
                                                                       844,000.00
distribution of dividends or profit

        Including: dividends or profit paid
by subsidiaries to minority shareholders

        Other cash payments relating to
financing activities

Sub-total       of     cash    outflows    from
                                                    9,500,000.00    44,844,040.00
financing activities

Net cash flows from financing activities            -9,500,000.00   -44,844,040.00

IV. Effect of foreign exchange rate
changes on cash and cash equivalents

V. Net increase in cash and cash
                                                    2,792,048.21    -25,579,645.25
equivalents

        Add: Opening balance of cash and
                                                    1,600,749.63    30,095,398.06
cash equivalents



                                                                                42
VI. Closing balance of cash and cash
                                                                    4,392,797.84                     4,515,752.81
equivalents


6. Cash flow statement of the Company

                                                                                                Unit: RMB Yuan

                    Item                          Jan.-Jun. 2012                   Jan.-Jun. 2011

I. Cash flows from operating activities:

  Cash       received      from    sale      of
                                                                                                       26,000.00
commodities and rendering of service

  Tax refunds received

  Other cash received relating to
                                                                   19,581,502.09                    19,993,386.44
operating activities

Subtotal of cash inflows from operating
                                                                   19,581,502.09                    20,019,386.44
activities

  Cash paid for goods and services

  Cash paid to and for employees                                     782,113.11                       604,983.20

  Various taxes paid                                                 845,890.48                       863,525.80

  Other cash payment relating to
                                                                    9,085,239.76                      781,866.54
operating activities

Subtotal     of    cash    outflows        from
                                                                   10,713,243.35                     2,250,375.54
operating activities

Net cash flows from operating activities                            8,868,258.74                    17,769,010.90

II. Cash flows from investing activities:

  Cash received from retraction of
                                                                                                     5,000,000.00
investments

  Cash       received     from    return    on
investments

  Net cash received from disposal of
fixed assets, intangible assets and other                                                              52,000.00
long-term assets

  Net cash received from disposal of
                                                                                                             1.00
subsidiaries or other business units

     Other cash received relating to
                                                                                                       69,647.12
investing activities

        Subtotal of cash inflows from
                                                                                                     5,121,648.12
investing activities

  Cash paid to acquire fixed assets,                                                                  630,000.00



                                                                                                               43
intangible assets and other long-term
assets

   Cash paid for investment                                          2,884,671.88

   Net cash paid to acquire subsidiaries
and other business units

   Other cash payments relating to
investing activities

Subtotal        of     cash   outflows     from
                                                                     3,514,671.88
investing activities

Net cash flows from investing activities                             1,606,976.24

III.     Cash        Flows    from    Financing
Activities:

       Cash      received      from       capital
contributions

       Cash received from borrowings

       Cash received from bonds issued

       Other cash received relating to
financing activities

Subtotal of cash inflows from financing
activities

       Repayment of borrowings                      9,500,000.00    44,000,040.00

       Cash paid for interest expenses and
                                                                       844,000.00
distribution of dividends or profit

        Other cash payments relating to
financing activities

Sub-total       of     cash    outflows    from
                                                    9,500,000.00    44,844,040.00
financing activities

Net cash flows from financing activities            -9,500,000.00   -44,844,040.00

IV. Effect of foreign exchange rate
changes on cash and cash equivalents

V. Net increase in cash and cash
                                                     -631,741.26    -25,468,052.86
equivalents

        Add: Opening balance of cash and
                                                    1,338,922.68    28,150,078.47
cash equivalents

VI. Closing balance of cash and cash
                                                      707,181.42     2,682,025.61
equivalents




                                                                                44
7. Consolidated statement of changes in owners’ equity

Reporting period
                                                                                                                                   Unit: RMB Yuan

                                                                                      Reporting period

                                                          Equity attributable to owners of the Company

                                           Paid-up
                                                                                                                                           Total
                 Item                      capital                                                                          Minority
                                                                 Less:                        General
                                                      Capital              Specific Surplus             Retaine                           owners’
                                             (or                treasury                       risk                Others    interests
                                                      reserve              reserve reserve              d profit                           equity
                                            share                stock                        reserve
                                           capital)

I. Balance at the end of the 318,600 52,129,4                                      86,036,              -127,21             4,495,708 334,041,78
previous year                              ,000.00      96.58                      260.20               9,679.36            .04          5.46

   Add: change of accounting
policy

   Correction         of     errors   in
previous periods

   Other

II. Balance at the beginning of 318,600 52,129,4                                    86,036,             -127219             4,495,708 334,041,78
the year                                   ,000.00      96.58                        260.20              679.36                    .04          5.46

III.      Increase/        decrease   of
                                                                                                        -13,570,             -60,112.1 -13,630,30
amount in the year (“-” means
                                                                                                         192.44                      1          4.55
decrease)

                                                                                                        -13,570,             -60,112.1 -13,630,30
   (I) Net profit
                                                                                                         192.44                      1          4.55

   (II)     Other     comprehensive
incomes

                                                                                                        -13,570,             -60,112.1 -13,630,30
   Subtotal of (I) and (II)
                                                                                                         192.44                      1          4.55

   (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


                                                                                                                                                     45
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 52,129,4                         86,036,             -140,78             4,435,595 320,411,48
IV. Closing balance
                                        ,000.00     96.58                        260.20             9,871.80                   .93          0.91

Last year
                                                                                                                               Unit: RMB Yuan

                                                                                     Last year

                                                      Equity attributable to owners of the Company

                                       Paid-up
                                                                                                                                       Total
                Item                                                                                                    Minority
                                       capital               Less:                        General
                                                  Capital              Specific Surplus             Retaine                           owners’
                                         (or                treasury                       risk                Others    interests
                                                  reserve              reserve reserve              d profit                           equity
                                        share                stock                        reserve
                                       capital)

I. Balance at the end of the 318,600 52,129,4                                  86,036,              -148,60             3,837,843 311,998,88
previous year                          ,000       96.58                        260.20               4,711.83            .82          8.77

  Add:                 retrospective
adjustments due to business
combinations under the same



                                                                                                                                                 46
control

   Add: change of accounting
policy

   Correction         of     errors   in
previous periods

   Other

II. Balance at the beginning of 318,600 52,129,4             86,036,   -148,60    3,837,843 311,998,88
the year                                   ,000.00   96.58   260.20    4,711.83         .82        8.77

III.      Increase/        decrease   of
                                                                       21,385,0   657,864.2 22,042,896
amount in the year (“-” means
                                                                         32.47           2           .69
decrease)

                                                                       21,385,0   -578,286. 20,806,745
   (I) Net profit
                                                                         32.47          68           .79

   (II)     Other     comprehensive
incomes

                                                                       21,385,0
   Subtotal of (I) and (II)
                                                                         32.47

   (III) Capital paid in and                                                      1,236,150 1,236,150.
reduced by owners                                                                       .90          90

       1. Capital paid in by                                                      1,312,142 1,312,142.
owners                                                                                  .43          43

       2. Amounts of share-based
payments            recognized        in
owners’ equity

                                                                                  -75,991.5
       3. Others                                                                              -75,991.53
                                                                                         3

   (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


                                                                                                       47
     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 52,129,4                          86,036,           -127,21             4,495,708 334,041,78
IV. Closing balance
                                        ,000.00        96.58                     260.20           9,679.36                      .04            5.46


8. Statement of changes in owners’ equity of the Company

Reporting period
                                                                                                                                Unit: RMB Yuan

                                                                                   Reporting period

                                            Paid-up
                                                                       Less:                                General                         Total
                Item                    capital (or       Capital                Specific    Surplus                   Retained
                                                                      treasury                               risk                      owners’
                                             share        reserve                 reserve     reserve                   profit
                                                                       stock                                reserve                     equity
                                            capital)

I. Balance at the end of the 318,600,00 52,129,496                                          86,036,260                -216,677,2 240088474
previous year                           0               .58                                 .20                       81.87           .91

  Add: change of accounting
policy

  Correction       of   errors     in
previous periods

  Other

II. Balance at the beginning of 318,600,00 52,129,496                                       86,036,260                -216,677,2 240,088,47
the year                                         0.00           .58                                   .20                     81.87            4.91

III. Increase/ decrease of amount                                                                                     -7,681,829. -7,681,829.
in the year (“-” means decrease)                                                                                               28                 28

                                                                                                                      -7,681,829. -7,681,829.
  (I) Net profit
                                                                                                                                 28                 28

  (II)     Other    comprehensive
incomes

  Subtotal of (I) and (II)                                                                                            -7,681,829. -7,681,829.


                                                                                                                                                     48
                                                                                                                          28            28

  (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

                                         318,600,00 52,129,496                          86,036,260             -224,359,1 232,406,64
IV. Closing balance
                                               0.00         .58                                .20                  11.15           5.63

Last year
                                                                                                                      Unit: RMB Yuan

                                                                                  Last year
                 Item                     Paid-up      Capital     Less:     Specific    Surplus     General   Retained         Total
                                         capital (or   reserve    treasury   reserve     reserve      risk       profit        owners’


                                                                                                                                          49
                                                 share                  stock                reserve                     equity
                                                capital)

I. Balance at the end of the 318,600,00 52,129,495                              86,036,260             -227,633,2 229,132,50
previous year                               0               .58                 .20                    53.11           3.67

  Add: change of accounting
policy

  Correction         of      errors    in
previous periods

  Other

II. Balance at the beginning of 318,600,00 52,129,496                           86,036,260             -227,633,2 229,132,50
the year                                             0.00         .58                  .20                     53.11          3.67

III. Increase/ decrease of amount                                                                      10,955,971 10,955,971
in the year (“-” means decrease)                                                                               .24           .24

                                                                                                       10,955,971 10,955,971
  (I) Net profit
                                                                                                                 .24           .24

  (II)     Other      comprehensive
incomes

                                                                                                       10,955,971 10,955,971
  Subtotal of (I) and (II)
                                                                                                                 .24           .20

  (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



                                                                                                                                  50
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

                                       318,600,00 52,129,496   86,036,260   -216,677,2 240,088,47
IV. Closing balance
                                             0.00        .58          .20       81.87        4.91




                                                                                               51
                 GUANGDONG RIEYS GROUP COMPANY LTD

                               For the Six Months Ended 30 June 2012

                                   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, 2011, 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
development and operation of real estates 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 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


                                                                                                                   52
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 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


                                                                                                                    53
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.
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.



                                                                                                                     54
(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 (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


                                                                                                                        55
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 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.


                                                                                                                       56
(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 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:
Age                                                                                   Appropriation proportion of


                                                                                                                     57
                                                                                           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 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


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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 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


                                                                                                                     59
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 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


                                                                                                                     60
book value, the corresponding impairment loss should be confirmed.

(14) Fixed assets
1. Recognition standard of fixed assets
Fixed assets are tangible assets that are held for use in the production or supply of services, for rental to others, or for
administrative purposes; they have useful lives over one fiscal year. And they shall be recognized only when both of
the following conditions are satisfied:
(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).
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.


                                                                                                                         61
Estimated useful life and annual depreciation rate of fixed assets by categories are as follows:
    Category         Estimated useful life (year)       Estimated net residual value rate (%)    Annual depreciation rate (%)
Buildings      and
                                                35                                          5%                          2.71%
constructions
Machinery
                                                10                                          5%                          9.50%
equipment
Transportation
                                                    8                                       5%                         11.88%
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;
(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

                                                                                                                            62
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 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:


                                                                                                                        63
      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 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


                                                                                                                      64
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 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


                                                                                                                     65
government, but not include the capital invested by government as a business owner. Government grants are
classified to government grants related to assets and government grants related to income.
      Government grants will be recognized upon meeting both of the following two conditions:
      (1) The company can meet the conditions attached to government grants;
      (2) The company can receive government grants.
      Government grants related to assets are recognized as deferred income and are averagely distributed in the life
of relevant assets, and recorded to current profit or loss. Government grants related to income are handled under the
following circumstances:
      (1) If such grants are used to compensate for relevant costs and losses of the company during later periods, they
will be recognized as deferred income and recorded to current profit or loss upon recognizing related costs;
      (2) If such grants are used to compensate for relevant costs and losses occurred of the company, they will be
directly through current profit or loss.
      (22) Deferred income tax assets / deferred income tax liabilities
      Corporate income tax will be calculated by liability method of the balance sheet.
      The company’s tax base will be determined upon the company obtains the assets or liabilities; on the balance
sheet date, take the balance sheet as the basis, and if the book value of related assets or liabilities are different to the
tax bases provided by tax laws, it will calculate and confirm the deferred income tax assets or deferred income tax
liabilities occurred in accordance with the provisions of tax laws, which effect will be included in current income tax
expense.
      The company is subject to the limit of the amount of taxable income likely to be used to offset temporary
difference, thus confirms the deferred income tax asset produced by the deductible temporary difference.
      In addition to the cases specified under income guidelines that no need to confirm the deferred income tax
liabilities, the company should recognize related deferred income tax liabilities for all taxable temporary
differences.
      (23) Operating lease and finance lease
      If the terms of the lease will be 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


                                                                                                                         66
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


 VAT                                                      17%                  Revenue of product

 Business tax                                              5%                  Rental income

Enterprise income tax                                       25%                 Taxable income
      1. 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.
      2. 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




                                                                                                                     67
                                                                                                      Balance of

                                                                                        Actual            net

                            Place of                    Registered                    investment      investment    Shareholding     Votin
                   Typ                                                   Scope of                                                             Consolidate
       Name                Registratio      Nature      capital (10                   as at period        in              s            g
                    e                                                    business                                                               d or not
                                n                       thousand)                       end(10        subsidiarie        (%)          (%)

                                                                                      thousand)          s in

                                                                                                      substance

                                                                        Investmen
Shenzhen
                                                                           t and
Rieys              Co.,
                            Shenzhen        Trading        5000         import &         4500                            90            90           Yes
Industrial Co.,    Ltd.
                                                                          export
Ltd.
                                                                          trading

                                                                        Productio

Puning Tianhe                                                          n and sales

Garment                                                                 of clothes
                   Co.,                   Manufactur   6510(HKD                       6510(HKD
Manufacturin                 Puning                                         and                                          100          100           Yes
                   Ltd.                        e             )                             )
g Factory Co.,                                                           knitting

Ltd.                                                                    colorized

                                                                           cloth


         2. Subsidiaries obtained through business consolidation not under common control
                                                                                                     Balance of

                                                                                                         net
                                                                                        Actual
                                                       Registered                                    investment
                  Typ       Place of                                    Scope of      investment                    Shareholdings    Voting   Consolidated
    Name                                   Nature      capital (10                                       in
                   e      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.


                                                                      Property
Puning
                                                                      development
Hengda Real
                  Co.,                   Property                     (operate
Estate                    Puning                         2600                             14660                                100     100    Yes
                  Ltd.                   development                  with valid
Developmen
                                                                      qualification
t Co., Ltd.
                                                                      certificate)


         3. Minority shareholders’ equity and gains & losses of minority shareholders




                                                                                                                                                          68
                                                                                                Balance of the owner's equity of

                                                                                                parent company after deducting

                                                                                                  the share of current losses of
                                                                          Gains & losses of
                                                      Minority                                   minority shareholders over the      Method to obtain
             Name of subsidiaries                                             minority
                                                shareholders’ equity                           share of owner’s equity enjoyed         subsidiary
                                                                            shareholders
                                                                                                by such minority shareholders in

                                                                                                  the subsidiary in the period

                                                                                                            beginning

Shenzhen Rieys Industrial Co., Ltd.                      4,435,595.93            -60,112.10                                          Invest to establish


(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
Naught
      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
Naught
      V. Notes to the items of consolidated financial statement
     (1) Monetary funds
                                       Closing balance                                                        Opening balance
   Item
                                         Exchange           Equivalent to                                      Exchange
                 Foreign currency                                                  Foreign currency                                Equivalent to RMB
                                           rate                RMB                                               rate
Cash

 RMB                    994,916.36           1.0000              994,916.36                   126,305.73            1.0000             126,305.73

 USD                            1.00         6.3249                       6.32                       1.00           6.3009                              6.30

 HKD                         168.70         0.81522                     137.53                    168.70            0.8107                            136.77

Subtotal                                                         995,060.21                                                                    126,448.80

Bank
deposits

 RMB                  3,360,616.00           1.0000            3,360,616.00                1446,153.03              1.0000                  1,446,153.03

 USD                           50.38         6.3249                     318.65                     90.87            6.3009                            572.56

 HKD                      42,362.99         0.81522               34,534.66                    31,222.41            0.8107                      25,312.01

Subtotal                                                       3,395,469.31                                                                 1,472,037.60

Other
currency



                                                                                                                                                           69
funds

 RMB                        2,268.32         1.0000             2,268.32                2,263.23        1.0000                      2,263.23

Subtotal                                                        2,268.32                                                            2,263.23

   Total                                                    4,392,797.84                                                       1,600,749.63

Note: The number of monetary funds at period-end is nore than the period-begin by RMB2,792,048.21, representing
a change ratio of 174.42%, the reasons for the change is due to receiving the prepayment of houses.
      (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          significant    10,274,455.72      35.64     10,274,455.72     50.57      10,253,738.28    28.97       10,253,738.28    47.85
individual amount
Accounts      receivable
with        insignificant
individual amount but
in high risk portfolio       18,555,822.44      64.36     10,041,604.68     49.43      25,142,569.43    71.03       11,176,005.89    52.15
after    grouping     by
credit               risk
characteristics
Other          accounts
receivable           not
significant

           Total             28,830,278.16     100.00     20,316,060.40     100.00     35,396,307.71    100.00      21,429,744.17    100.00

2. Provision for bad debts of accounts receivable with significant individual amount or with insignificant individual
amount but tested for impairment separately at year end
(1) Accounts receivable with significant individual amount
                                                                                            Provision
           Content of accounts receivable                Book balance      Bad debts                                    Reasons
                                                                                               ratio

Victoria International(USA) INC                          5,459,821.10      5,459,821.10       100%         * Note

                                                                                                           Estimated to be irrecoverable
Hongkong Jinhua Trading Company                          4,224,304.63      4,224,304.63       100%
                                                                                                           for long age
                                                                                                           Estimated to be irrecoverable
Guangzhou Chen Shunqin                                     335,904.80       335,904.80        100%
                                                                                                           for long age
Shenzhen ITAT International Premier Brand                                                                  Estimated to be irrecoverable
                                                           206,357.74       206,357.74        100%
Membership Store                                                                                           for long age
                                                                                                           Estimated to be irrecoverable
Ningbo Industrial and Commercial Bureau                     26,354.45        26,354.45        100%
                                                                                                           for long age


                                                                                                                                         70
                                                                                                               Estimated to be irrecoverable
Beijing Capital Airport                                       21,713.00        21,713.00         100%
                                                                                                               for long age

                 Total                                   10,274,455.72      10,274,455.72

      Note: 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 bad                Book balance                   Provision for bad

                          Amount                  %                 debts                   Amount                  %                  debts

 Within 1 year               8,203,998.95       44.21                164,079.98             13,506,106.80       53.72                   270,122.14

 1-2 years                    398,455.53         2.15                  39,845.55              397,530.20         1.58                    39,753.02

 2-3 years

 Over 3 years                9,953,367.96       53.64               9,837,679.15            11,238,932.43       44.70              10,866,130.73

 Total                    18,555,822.44         100.00            10,041,604.68             25,142,569.43       100.00             11,176,005.89

     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 with the                                                  Percent in total accounts
              Name of unit                                                      Amount               Age
                                                      Company                                                                receivable

Victoria International(USA) INC.                      Customer                5,459,821.10      Over 3 years                   18.94

Huang Donglai                                         Customer                5,163,378.50     Within 1 year                   17.91

Hongkong Jinhua Trading Company                       Customer                4,224,304.63      Over 3 years                   14.65

Brendwood International Corp.                         Customer                2,854,819.45      Over 3 years                    9.90

Jinjing International Co., Ltd.                       Customer                2,544,982.60      Over 3 years                    8.83

                 Total                                                       20,247,306.28                                     70.23

       (3) Other receivables
      1. Disclosure of other receivables by category

                                                  Closing balance                                            Opening balance

         Category                  Book balance               Provision for bad debts          Book balance              Provision for bad debts

                                  Amount            %            Amount            %         Amount             %           Amount              %

Other receivables with
significant     individual      4,306,435.56                  4,306,435.56      19.00       4,306,435.56       9.52       4,306,435.56         23.59
amount



                                                                                                                                                  71
Other receivables with
insignificant individual
amount but in high risk
                                  34,204,639.36                 17,554,313.40    77.47      40,135,689.92        88.71    13,149,393.63           72.03
portfolio after grouping
by       credit          risk
characteristics
Other                accounts
receivable                not        800,000.00                   800,000.00     3.53             800,000.00      1.77         800,000.00         4.38
significant

             Total                39,311,074.92     100.00      22,660,748.96   100.00      45,242,125.48        100.00   18,255,829.19       100.00

     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 bad                   Book balance                 Provision for bad

                            Amount                   %                debts                  Amount                   %                   debts

 Within 1 year                   9,466,853.10      27.68%              189,337.06           16,485,264.97           41.07%                329,705.30

 1-2 years                       2,957,950.80      8.65%               295,795.08             7,078,773.64          17.64%               1,493,605.37

 2-3 years                       4,900,407.76      14.33%            2,450,203.80             6,951,837.36          17.32%2              3,475,918.68

 Over 3 years                   16,879,427.70      49.34%           14,618,977.38             9,619,813.95          23.97%               7,850,164.28

 Total                          34,204,639.36     100.00%           17,554,313.40           40,135,689.92           100.00%           13,149,393.63

     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
                                  Name of unit                                                             Amount              Age            other
                                                                                     the Company
                                                                                                                                            receivabl
                                                                                                                                                  e
                                                                                                          1,800,200.0
Puning Huafengqiang Trade Co., Ltd.                                                    Supplier                              1-2 years       4.58%
                                                                                                                      0
                                                                                                          1,717,106.0
Puning Shenglilai Sewing Machine Co., Ltd.                                             Supplier                              2-3 years       4.37%
                                                                                                                      0
                                                                                     The leasor of        1,276,000.0        Within 1
Puning Rieys Paper Industrial Co., Ltd..                                                                                                     3.25%
                                                                                        factory                       0        year
                                                                                                          1,170,000.0
Puning Zhongxinglian Textile Co., Ltd.                                                 Supplier                              1-2 years       2.98%
                                                                                                                      0
STRICKWELT INTERNATIONAL TRADING (SHANGHAI) CO.,                                                          1,000,000.0
                                                                                       Supplier                           Over 3 years       2.54%
LTD.                                                                                                                  0

                                      Total                                                               6,963,306.0                        17.71%


                                                                                                                                                      72
                                                                                                            0



     (4) Prepayment
     1. Aging analysis

                                           Closing balance                                           Opening balance
         Age
                                     Amount                            %                         Amount                         %

 Within 1 year                             82,966,568.76             96.42%                          73,641,517.03           97.34%

 1-2 years                                    3,080.584.00           3.58%                            2,010,000.00           2.66%

 2-3 years

 Over 3 years

 Total                                     86,047,152.76             100.00%                         75,651,517.03          100.00%


     2. Top 5 units in prepayment
                                                   Relationship with the
                  Name of unit                                                    Amount             Year              Pending reasons
                                                         Company
                                                                                                                     In the period of
Guangsha Construction Group Co., Ltd.
                                                          Builder               65,094,767.96        2011            construction
(Shenzhen Branch)
                                                                                                                     contract execution
Shenzhen       Pengji    Property   Management                                                                       In the period of
                                                          Supplier                5,000,000.00       2012
Service Co., Ltd.                                                                                                    contract execution
                                                                                                                     In the period of
Hitachi Elevator (China) Co.,Ltd.                         Supplier                4,998,704.00       2011
                                                                                                                     contract execution
                                                                                                                     In the period of
Shenzhen Jinju Fire Fighting Electrical and
                                                          Builder                 2,610,000.00       2011            construction
Mechanical Engineering Co., Ltd.
                                                                                                                     contract execution
                                                                                                                     In the period of
Puning Jinhaohui Trading Co., Ltd.                        Supplier                2,200,000.00       2012
                                                                                                                     contract execution

                        Total                                                   79,903,471.96

     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                             238,604.00                         47,720.80      1,633,596.00                      723,540.76



                                                                                                                                      73
Goods in stock                    1,654,780.91                   651,441.21            913,254.63                 773,977.35

Products in progress                 17,156.52                                       1,245,439.22

Goods delivered                                                                      1,739,916.13

Developed Product in progress   340,007,283.66                                     285,474,567.20

            Total               341,917,825.09                   699,162.01        291,006,773.18                1,497,518.11


     2. Provision for impairment in value of inventory

                                     Book balance at       Provision at         Decrease at current period   Book balance at
      Category
                                      period-begin        current period       Reversal     Other decrease     period-end

Raw materials                             723,540.76                                            675,819.96         47,720.80

Goods in stock                            773,977.35                                            122,536.14        651,441.21

                 Total                   1,497,518.11                                           798,356.10        699,162.01

   Note: For other decrease in the current provision for impairment in value of inventory, it is caused by that the
Company sells the goods in stock.
   (6) Original cost of fixed assets and accumulated depreciation
   1. Original cost of fixed assets
            Category              Opening amount        Increase this period        Decrease this period     Closing amount

Buildings and constructions         119,088,227.16                                                            119,088,227.16
Machinery equipment
                                       2,540,931.00                                                              2,540,931.00
Transportation equipment
                                       6,184,899.10               525,268.23                    793,632.00       5,916,535.33
Office equipment and others
                                       1,392,320.58                  7,100.00                                    1,399,420.58

                Total               129,206,377.84                532,368.23                    793,632.00    128,945,114.07

     Note: (1) Original cost of fixed assets disposed in the current period is RMB 793,632.00;
         (2)Original cost of fixed assets under mortgage or guarantee at the period end is RMB 59,869,418.09,
please see note 8 (1) for details.
     2. Accumulated depreciation
            Category              Opening amount        Increase this period         Decrease this period    Closing amount

Buildings and constructions           32,016,820.06              1,753,976.40                    22,564.26     33,748,232.20

Machinery equipment                    1,703,186.40                 75,918.96                                    1,779,105.36

Transportation equipment               2,676,754.24               320,991.60                    647,936.85       2,349,808.99

Office equipment and others             532,098.04                123,228.50                                      655,326.54

                Total                 36,928,858.74              2,274,115.46                   670,501.11     38,532,473.09


     3. Provision for impairment losses on fixed assets

Naught

                                                                                                                            74
      4. Carrying amount of fixed assets

            Category                     Opening amount               Increase this period      Decrease this period         Closing amount

Buildings and constructions                    87,071,407.10                 -1,753,976.40                  -22,564.26          85,339,994.96

Machinery equipment                               837,744.60                    -75,918.96                                         761,825.64

Transportation equipment                        3,508,144.86                    204,276.63                  145,695.15           3,566,726.34

Office equipment and others                       860,222.54                   -116,128.50                                         744,094.04

                 Total                         92,277,519.10                 -1,741,747.23                  123,130.89          90,412,640.98


     5. Mortgaged or guaranteed fixed assets
                                                                                             Accumulated
                     Category                              Original book value                                           Net book value
                                                                                             depreciation

Buildings and constructions                                           40,281,405.99              14,340,502.55                  25,940,902.44
Machinery equipment
                                                                      19,588,012.10              18,608,611.49                     970,400.61

                         Total                                        59,869,418.09              32,949,114.04                  26,920,304.05

     (7) Project materials
                                        Opening amount                                                               Closing amount
                                                                           Increase this     Decrease
        Category                                      Provision for                                                             Provision for
                                 Book balance                                 period         this period    Book balance
                                                      impairment                                                                 impairment

         Gravel                    54,526.00                                                                     54,526.00

          Total                    54,526.00                                                                     54,526.00

     (8) 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                          33,659,416.00                                                                           33,659,416.00

Computer software                          373,115.00                                                                               373,115.00

         Total                          34,032,531.00                                                                           34,032,531.00

Of which: (1) Original cost of intangible assets 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.
2. Accumulated amortization
         Items                   Opening amount            Amortization this period           Decrease this period           Closing amount

Land use right                       5,266,050.43                             336,594.12                                         5,602,644.55

Computer software                      373,115.00                                                                                   373,115.00

         Total                       5,639,165.43                             336,594.12                                         5,975,759.55

3. Carrying amount of intangible assets
                                                                                                                                             75
                                                                                                 Decrease this
                   Items                     Opening amount                                                            Closing amount
                                                                  Increase this period              period

Land use right                                   28,393,365.57             -336,594.12                                     28,056,771.45

Computer software

                   Total                         28,393,365.57             -336,594.12                                     28,056,771.45

 (9) Deferred income tax assets
1. Recognized deferred income tax assets

         Items                  Opening amount            Increase this period              Decrease this period        Closing amount

Provision for
                                        8,919,528.60                1,127,998.98                        509,697.48          9,537,830.10
impairment of assets

Initial expenditure

Deductible loss

        Subtotal                        8,919,528.60                1,127,998.98                        509,697.48          9,537,830.10

2. Unrecognized deferred income tax assets

                        Items                                 Closing amount                                 Opening amount

Deductible temporary difference                                                          0.00                                          0.00

                        Total                                                            0.00                                          0.00

3. Temporary differences corresponding to assets or liabilities causing temporary differences

                                Item                                                   Amount of temporary differences

     Loss remediable

     Provision for impairment                                                                                        38,151,320.40

                                Total                                                                                38,151,320.40

(10) Details of provision for asset impairment

                                        Opening book      Increase this              Decrease this period                 Closing book
                Items
                                           balance            period             Reversal             Written off            balance


1. Provision for bad debts                39,685,573.36   4,537,367.09           1,246,131.09                               42,976,809.36

Of which: Accounts
                                          21,429,744.17     132,447.32           1,246,131.09                               20,316,060.40
receivable

      Other receivables                   18,255,829.19   4,404,919.77                                                      22,660,748.96

2. Provisions for impairment in
                                           1,497,518.11                                                  798,356.10            699,162.01
value of inventory

                Total                     41,183,091.47   4,537,367.09           1,246,131.09            798,356.10         43,675,971.37

(11) Short-term loan


                                                                                                                                        76
1. Short-term loan
                          Items                                      Closing balance                  Opening balance

Credit loan

Pledged loan                                                                  26,599,960.00                      36,099,960.00

Mortgaged loan

Secured loan                                                                  37,600,000.00                      37,600,000.00

                          Total                                               64,199,960.00                      73,699,960.00
Notes: Please see Note 6(4) for details on relevant pledge, mortgage and security.
2. Expired but unpaid short-term loans:
                                                                                                                      Remark
                                                                                                                   (repaid after
                                                                                    Overdue          Expected
            Unit                  Amount         Interest rate      Purpose                                          statement
                                                                                     reason         repay date
                                                                                                                    date should
                                                                                                                   be specified)
  Puning Association of                                           Borrow the
                                                                                   Financial
  Country Credit Union            5,000,000.00    8.49600%       new to pay the
                                                                                   difficulty
   Liusha West Union                                                  old
  Puning Association of                                           Borrow the
                                                                                   Financial
  Country Credit Union            6,000,000.00    11.20500%      new to pay the
                                                                                   difficulty
   Liusha West Union                                                  old
  Puning Association of                                           Borrow the
                                                                                     Assets
  Country Credit Union        22,600,000.00      10.80000%       new to pay the
                                                                                  restructuring
   Liusha West Union                                                  old
  Puning Association of                                           Borrow the
                                                                                   Financial
  Country Credit Union        15,000,000.00      10.80000%       new to pay the
                                                                                   difficulty
   Liusha West Union                                                  old
                                                                  Borrow the
 China Everbright Bank,                                                            Financial
                              15,599,960.00      12.32550%       new to pay the
  Guangzhou Branch                                                                 difficulty
                                                                      old
            Total             64,199,960.00

Note: (1) The Company paid back the loan principal totaling RMB 9.5 million to China Everbright Bank,
Guangzhou Branch in the reporting period. As of 30 June 2012, the Company remained a loan balance of
RMB15,599,960 in China Everbright Bank, Guangzhou Branch. All loans of the Company are overdue in the
reporting day;
(2) As of 30 June 2012, the Company remained a loan balance of RMB 48.6 million in Puning Association of
Country Credit Union Liusha West Union, all of which are overdue in the reporting day;
(3) As of the closing date of the financial report, the overdue loans above haven’t been sued over by the bank for
payment.
(12) Accounts payable

                                                 Closing balance                                  Opening balance
             Items
                                        Amount                       %                     Amount                     %

Within 1 year                              7,442,813.63            88.30%                       10,191,972.06       94.77%

1-2 years                                   509,258.00             6.04%                          444,281.74         4.13%


                                                                                                                              77
2-3 years                                276,362.51            3.28%                          20,567.65        0.19%

Over 3 years                             200,167.58            2.38%                          97,608.70        0.91%

            Total                      8,428,601.72           100.00%                   10,754,430.15         100.00%
1. There is no accounts payable due to shareholders who has more than 5% (including 5%) voting shares of the
Company in closing balance.
2. There is no accounts payable due to related parties in closing balance.
3. Accounts payable at year-end decrease by RMB 2,325,828.43 compared with period-begin, representing a
decrease of 21.63%, the reason is: Puning Tianhe Garment Manufacturing Factory Co., Ltd. paid back suppliers’
payment for goods.
(13) Advances from customers

                                                Closing balance                             Opening balance
                Aging
                                             Amount                 %                 Amount                     %

Within 1 year                                140,936,314.35        99.91%                   14,353,378.00        99.72%

1-2 years                                         85,283.00         0.06%

2-3 years

Over 3 years                                      39,821.24         0.03%                       39,821.24         0.28%

                Total                        141,061,418.59       100.00%                   14,393,199.24       100.00%
1. There is no advance from customers due to shareholder who has more than 5% (including 5%) voting shares of
the Company in closing balance.
2. There is no advance from customers due to related parties in closing balance.
(14) Other accounts payable

                    Items                              Closing balance                        Opening balance

Within 1 year                                                       4,279,254.98                          62,144,224.59

1-2 years                                                           1,330,000.00                              790,825.00

2-3 years                                                              235,825.00                             850,979.54

Over 3 years                                                           500,023.50                             330,234.30

                    Total                                           6,345,103.48                          64,116,263.43
1. There is no other accounts payable due to shareholder who has more than 5% (including 5%) voting shares of
the Company in closing balance.
2. For closing balance of related parties payment, please see to Note 6 (4)3 for details.
3. Closing balance of other accounts payable decreases RMB 57,771,159.95 than opening balance, with a change
rate of 90.10%, for the reason of paying back capital of related party.
(15) Payroll payable


                                                                                                                       78
                                                                      Decrease in the reporting period        Closing
                                     Opening        Increase this
            Item                                                        Paid in the                            book
                                   book balance        period                            Other decrease
                                                                     reporting period                         balance
1. Salaries and wages,
bonus,    allowance and              665,978.15     2,831,011.06        2,920,097.82                          576,891.39
subsidies
2. Employee welfare                  103,834.79       425,909.88          436,981.89                           92,762.78

3. Social insurance                                   147,051.85          147,051.85

4. Housing welfare fund                                33,116.40           33,116.40
5. Union welfare fund and
employee education fund
            Total                    769,812.94     3,437,089.19        3,537,247.96                          669,654.17
Note: In accordance with social insurance policy specified by local government, the Company has gradually
improved the specific policies and payment standards of social insurance with consideration of practical
conditions of the Company.
(16) Taxes and surcharges payable
                                                                                               Applied statutory
            Items                        Closing balance            Opening balance
                                                                                                   tax rate
VAT                                                258,568.20            -1,055,675.43               17%

Business Tax                                       334,224.09               334,224.09                   5%
City      Construction        &
                                                  -218,821.70               197,012.43             5%、3%
education surcharges
Enterprise Income Tax                             3,635,935.17            3,770,853.31               25%

Individual income tax                              126,540.09               126,311.01

Real estate tax                                    173,187.71               761,246.32               1.20%

Stamp tax                                            -1,914.30                    0.00
                                                                                           RMB 6 yuan/squre meter,
Land use tax                                        22,770.00                262,890.0
                                                                                           RMB 9 yuan/square meter
Embankment protection costs,
                                                       146.61                 8,098.71
etc.
             Total                                4,330,635.87            4,404,960.44
(17) Interest payable

                           Items                                    Closing balance              Opening balance

Short-term loan interest                                                   40,081,175.19                  35,818,609.17

                           Total                                           40,081,175.19                  35,818,609.17
Note: (1) Interest payable is loan interest overdue to financial institutions, the year and amount increase RMB
4,262,566.02 than the year-begin, representing an increase ratio of 11.90%, the reason for the change is: the
unpaid interest of period end overdue loans increase.

                                                                                                                        79
(2) Please see Note 5(13) for overdue interest of the Company.
(18) Share capital

                                                     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
ordinary
shares
2. Domestic
listed foreign   154,575,000    48.52%                                                     154,575,000   48.52%
shares
3. Overseas
listed foreign
shares

                                                                                                             80
4. Other
III. Total
                318,600,000      100.00%                                                      318,600,000    100.00%
shares
(19) Capital reserve

                                                            Increase in        Decrease in current
              Item                   Opening amount                                                  Closing amount
                                                           current period           period
Share capital premium                     52,129,496.58                                               52,129,496.58

              Total                       52,129,496.58                                               52,129,496.58
(20) Surplus reserve

                                                            Increase in        Decrease in current
              Item                   Opening amount                                                  Closing amount
                                                           current period           period

Statutory Surplus Reserves                49,036,260.20                                               49,036,260.20

Discretionary surplus reserves            37,000,000.00                                               37,000,000.00

              Total                       86,036,260.20                                               86,036,260.20
(21) Retained profit

                                                                                                Withdrawal or
                         Item                                        Amount
                                                                                               distribution ratio
Undistributed profit at the end of previous year before
                                                                      -127,219,679.36
adjustment
Total undistributed profit at beginning of adjustment
year (add +, less-)
Adjusted undistributed profit at year beginning                       -127,219,679.36
Increase: Net profit attributable to owner of parent
                                                                        -13,570,192.44
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                                         -140,789,871.80
(22) Operating revenue and operating cost
1. Operating revenue

                  Item                            Occurred in current period          Occurred in previous period

Income from main operations                                       7,617,917.19                        45,901,330.11


                                                                                                                    81
Other operation income                                                                                      860,000.00

Cost of main operations                                           5,242,728.04                           36,876,088.93

Other operation cost                                                                                        800,527.98
2. Main operations (by industry)

                                     Occurred in current period                    Occurred in previous period
          Industry
                              Operating revenue      Operating cost       Operating revenue         Operating cost

Industry                           7,617,917.19            5,242,728.04      40,213,136.18               34,688,558.44

Commerce                                                                         8,665,642.39             5,164,978.95

            Total                  7,617,917.19            5,242,728.04      48,878,778.57               39,853,537.39
Internal offset and
                                                                                 -2,977,448.46           -2,977,448.46
deduction
            Total                  7,617,917.19            5,242,728.04          45,901,330.11           36,876,088.93
3. Main operations (by region)

                                          Current period                                 Previous year
           Region
                              Operating revenue      Operating cost       Operating revenue         Operating cost

Export sales of clothes            2,815,199.68            3,001,269.15      43,281,396.53               37,670,146.99

Domestic sales of
                                   4,802,717.51            2,241,458.89          5,597,382.04             2,183,390.40
clothes
          Subtotal                 7,617,917.19            5,242,728.04      48,878,778.57               39,853,537.39
Internal offset and
                                                                                 -2,977,448.46           -2,977,448.46
deduction
           Total                   7,617,917.19            5,242,728.04          45,901,330.11           36,876,088.93
4. The total sales to Top 5 customers of the Company amounted to RMB 7,617,917.19, accounting for 100% of
total revenue of the Company in current period.

                                                                                   Percent in total operating revenue
             Name of customer                       Operating revenue
                                                                                         of the Company (%)
Huang Donglai                                                     4,554,169.65                   59.78

KEENZONE LIMITED                                                  1,558,329.73                   20.46

HONOURLINK                                                        1,256,869.95                   16.50

Xu Zejia                                                           248,547.86                     3.26

                      Total                                       7,617,917.19                   100.00
(23) Operating revenue and surcharges


                                                                                                                     82
                                    Occurred in current      Occurred in previous
             Item                                                                           Accounting standard
                                          period                      period
Urban    construction      and
                                                                            34,958.44               5%
maintenance tax
Education     expenses     and
                                                                            15,468.59             7%、5%
surcharges
Others                                                                         788.18             3%、2%

             Total                                                          51,215.21
(24) Financial expense

             Item                       Occurred in current period                 Occurred in previous period

 Interest expenses                                        4,262,566.02                                 8,262,191.25

   Less: Interest income                                       2,927.43                                   21,904.17

 Exchange loss                                                                                         1,087,258.12

   Less: Exchange gain                                       54,799.14

 Other                                                       23,260.56                                    88,887.47

             Total                                        4,228,100.01                                 9,416,432.67
Note: Financial expenses down by RMB 5,188,332.66 than that of last year, with a change of 55.10%, for the
reason of the loan interest decreased as the Company repaid loan.
(25) Investment income
                                                                    Occurred in current      Occurred in previous
                            Items
                                                                          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                                                 8,060,304.49
equity investments
Investment income generated from holding of trading
financial assets
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


                                                                                                                    83
(26) Impairment loss on assets
                                                                 Occurred in current        Occurred in previous
                            Items
                                                                          period                   period

1. Loss on bad debts                                                        3,264,821.27             -7,184,306.29

2. Loss on falling price of inventory                                        -798,356.10

3. Impairment loss on financial assets available for sale

4. Impairment loss on investment held to maturity

5. Impairment loss on long-term equity investment

6. Impairment loss on investment property

7. Impairment loss on fixed assets

8. Other

                            Total                                           2,466,465.17             -7,184,306.29

(27) Non-operating revenue

               Items                         Occurred in current period             Occurred in previous period
1. Total gain on disposal of
                                                                     869.85
non-current assets
Of which: gain on disposal of
                                                                     869.85
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

6. Other                                                             531.35                              39,995.46

                Total                                              1,401.20                              72,669.46
(28) Non-operating expenses

                        Items                         Occurred in current period       Occurred in previous period

1. Total loss on disposal of non-current assets                                                       1,173,554.55

Of which: loss on disposal of fixed assets                                                            1,173,554.55

           Loss on disposal of intangible assets



                                                                                                                   84
2. Loss on debt restructuring

3. Loss of non-monetary assets exchanged

4. Donation expenses                                                    40,000.00                      670,000.00

5. Settlement loss

6. Surcharge expenditures                                               18,179.50                       26,897.15

7. Other                                                                                                     83.45

                       Total                                            58,179.50                    1,870,535.15
(29) Income tax expenses

                         Items                           Occurred in current period      Occurred in previous period
Income tax for current period calculated by tax law
and relevant regulations
Deferred income tax adjustment                                           -618,301.50                    1,744,300.21

                         Total                                           -618,301.50                    1,744,300.21

(30) Calculation of ROE, basic earnings per share and diluted earnings per share

                                                                   EPS
Profit of the reporting period         Weighted average ROE
                                                                   Basic EPS                   Diluted EPS
Net profit attributable to ordinary                      -0.0429                       -0.04                 -0.04
shareholders of the Company
Net profit attributable to ordinary
shareholders of the Company after                        -0.0428                       -0.04                 -0.04
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 end of the reporting period; Mj
is the number of months from the next month that equity is decreased to the 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 end of the reporting
period.
     Basic earnings per share

                                                                                                                85
     Basic earnings per share = P0÷S
      S= S0+S1+Si×Mi÷M0– Sj×Mj÷M0-Sk
Where: P0 is net profit attributable to ordinary shareholders of the Company or net profit attributable to ordinary
shareholders of the Company after deducting non-recurring gain or loss; S is weighted average number of
ordinary shares outstanding; S0 is the total number of shares at the beginning of the year; S1 is the number of
increased shares as a result of capitalization of reserves or scrip dividend during the reporting period; Si is the
number of increased shares as a result of new issuance of shares or conversion of debt instruments to stocks
during the reporting period; Sj is the number of reduced shares as a result of stock repurchase; Sk is the number of
consolidated shares in the reporting period; M0 is the number of months of the reporting period; Mi is the number
of accumulative months from the next month that the number of shares is increased to the 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 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 by
which calculate the diluted earnings per share)
Diluted earnings per share = P1/(S0 +S1 +Si×Mi÷M0–Sj×Mj÷M0–Sk+weighted average number of increased
ordinary shares arising from warrants, stock options and convertible debts)
Where: P1 is net profit attributable to ordinary shareholders of the Company or net profit attributable to ordinary
shareholders of the Company after deducting non-recurring gain or loss, and after the consideration of the effects
of dilutive potential ordinary shares, make adjustment according to relevant provisions of “Accounting Standards
of Enterprises”.
In calculating the diluted earnings per share, the Company has taken into consideration the effects of all dilutive
potential ordinary shares on net profit attributable to the Company's common shareholders or net profit
attributable to the Company's common shareholders after deducting non-recurring profit or loss as well as
weighted average number of shares, until the diluted earnings per share reach the lowest amount.
(1) During period from balance sheet date to the date approved to issue the financial report, if the occurred stock
dividend, reserve capitalization, share split or share consolidation impact the number of outstanding ordinary
shares or potential common shares but without influent the amount of owner's equity, it should recalculate the
earnings per share each comparative period at adjusted number of shares.
(2) If business combination under the common control occurred during the reporting period, and the merging
parties issue new shares as the price in the merger date, when calculate basic earnings per share for the reporting
period, such new shares should be treated as outstanding common shares issued at the beginning of merge (weight
average by weight of 1).When calculating of basic earnings per share during the comparison period, such shares
should be treated as outstanding common shares issued at the beginning of comparison period. When calculating
the earnings per share after deducting non-recurring profit or loss at the end of reporting period, the new shares
issued by the merging parties on the merger date will be weighted from the month next to the combined date.
When calculating the earnings per share after deducting non-recurring profit or loss during the comparison period,


                                                                                                                 86
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 the end of the reporting period
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 unlisted 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
(31) Notes to cash flow statement
1. Other cash received relevant to operating activities

                                Item                                                     Amount

Other loans received                                                                                   8,071,501.00

Interest income received

Other

                               Total                                                                   8,071,501.00

2. Other cash paid relevant to operating activities

                                Item                                                     Amount

Other current payments paid                                                                           61,367,357.56

Audit and other intermediary fees paid                                                                   275,000.00

Fees relevant to operating activities paid                                                             3,694,281.52

                               Total                                                                  65,336,639.08

(32) Supplementary information for cash flow statement

                                                                                                                  87
1. Supplementary information for cash flow statement
                                                                 Amount in current      Amount in previous
                  Supplemental information
                                                                     period                 period
1. Reconciliation of net profit to net cash flows generated
 from operating activities
Net profit                                                             -13,630,304.55         -4,990,054.53

Add: Provision for assets impairment                                    2,466,465.17          -7,184,306.29
    Depreciation of fixed assets, of oil-gas assets, of
                                                                        2,517,371.53           3,543,484.57
productive biological assets
     Amortization of intangible assets                                    336,594.12             751,766.52

     Amortization of long-term deferred expense                                                   45,360.00
     Losses on disposal of property, plant and equipment,
                                                                             -869.85          -8,060,304.49
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)                  -3,404.00             92,647.52

     Financial cost (gains: negative)                                   4,262,566.02           8,262,191.25

     Investment loss (gains: negative)                                                          -108,547.06

     Decrease in deferred income tax assets (gains: negative)            -848,574.63           1,744,300.21
    Increase in deferred income tax liabilities (decrease:
negative)
     Decrease in inventory (gains: negative)                           -50,911,052.00        -42,277,264.96
     Decrease in accounts receivable from operating
                                                                        2,095,747.00          33,368,885.72
activities (gains: negative)
     Increase in payables from operating activities (decrease:
                                                                       66,396,747.63          35,572,512.26
negative)
     Other

Net cash flows generated from operating activities                     12,681,286.44          21,934,225.27
2. Significant 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

3.Change on cash and cash equivalents:

                                                                        4,392,797.84           4,515,752.81
  Closing balance of cash
                                                                        1,600,749.63          30,095,398.06
  Less: Opening balance of cash

  Closing balance of cash equivalents

  Less: Opening balance of cash equivalents


                                                                                                         88
                                                                            2,792,048.21          -25,579,645.25
   Net increase in cash and cash equivalents
2. Relevant information on acquiring or disposing subsidiaries and other business entities
                                                                    Amount in current        Amount in previous
                             Items
                                                                        period                   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
                                                                                                            1.00
entities
2. Cash and cash equivalents received from 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 from disposal of subsidiaries and other
                                                                                                            1.00
business entities
4. Net assets of subsidiaries disposed                                                             -9,372,445.92

   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
                                                                      Amount in current      Amount in previous
                               Items
                                                                          period                 period
II. Cash                                                                    4,392,797.84            4,515,752.81

Of which: Cash in hand                                                        995,060.21            1,705,287.34

     Bank deposit available to pay at any time                              3,395,469.31            2,806,586.20

     Other money funds available to pay at any time                              2,268.32               3,879.27



                                                                                                              89
II. Cash equivalents

     Of which: Bonds maturing within 3 months

III. Ending balance of cash and cash equivalents                                     4,392,797.84                  4,515,752.81
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
                                                                                   Proportion Proportions
                                                                                    of parent of parent
                                                        Legal                      company’s company’s Ultimate
               Relatio                Registered               Business Registere                         controller Organizati
   Name                   Type                         represe                    shareholding voting
                nship                  address                  Nature d Capital
                                                       ntative                       to the   right to the of the     on Code
                                                                                                          Company
                                                                                    Company Company
                                                                                     (%)      (%)
  Puning
                                        No. 212,
Shenghengc                             Build 46,         Ma                                                 Chen
               Parent    Limited                                Tradin                                                 741222
hang Trade                            Qiao Guan        Chanyi              9800      36.99%     36.99%     Hongch
               compa
                         liability    Village, Liu                 g                                                    32-1
Developmen       ny                                      ng                                                  eng
                                       Sha North
 t Co., Ltd.                         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
                                                      Shareholder holding 10.68% stake of the Company, affiliate
Shenzhen Rishen Investment Co., Ltd.
                                                      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

                                                                                                                               90
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 has
                                                                                Loan balance    Maturity
                                                                                                               been fully
           Guarantee                Secured party        Bank issuing loan        (RMB10         date of
                                                                                                              performed or
                                                                                 thousand)      guarantee
                                                                                                                   not
                                   Guangdong Rieys     Puning Association of
Puning Shenghengchang Trade                                                                      Oct. 25,
                                   (Group) Company     Country Credit Union        2260                            No
Development Co., Ltd.                                                                             2009
                                       Limited          Liusha West Union
Chen      Hongcheng,      Chen
Xuewen,      Ding      Lihong,
Dongguan Jinjing Textile Co.,
Ltd., Puning Shenghengchang
Trade Development Co., Ltd.,
                                   Guangdong Rieys
Puning     Tianhe     Garment                          China Everbright Bank,                   Sep. 27,
                                   (Group) Company                                 1560                            No
Manufacturing Factory Co., Ltd.,                        Guangzhou Branch                         2009
                                       Limited
Shantou Lianhua Industrial Co.,
Ltd., Shenzhen Rieys Industrial
Co., Ltd., Shenzhen Rishen
Investment Co., Ltd., Shanghai
Hong Yi Property Limited
                                    Puning Tianhe
                                                       Puning Association of
Puning Shenghengchang Trade            Garment
                                                       Country Credit Union        1000        Jan. 5, 2010        No
Development Co., Ltd.               Manufacturing
                                                        Liusha West Union
                                   Factory Co., Ltd.
                                    Puning Tianhe
                                                       Puning Association of
Puning Shenghengchang Trade            Garment                                                  Apr. 10,
                                                       Country Credit Union         500                            No
Development Co., Ltd.               Manufacturing                                                2010
                                                        Liusha West Union
                                   Factory Co., Ltd.
*1 As mentioned in Note 5 (7) (9), the Company took factory dormitory, machinery & equipment and land use
right as collateral, meanwhile Ma Chanying took the two sets of properties in its name as collateral, in order to
obtain the above bank loans for the Company.
3. Accounts receivable and payable among related parties
                                                        Closing amount                            Opening amount
             Name of project
                                                      (RMB10 thousand)                           (RMB10 thousand)
Other payables:
Shenzhen Risheng Chuangyuan               Asset
                                                                                                                 4,840.66
Management Co., Ltd.
Chen Xuewen                                                                                                        863.00

                       Total                                                                                     5,703.66


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


                                                                                                                        91
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.
The original carrying value of the fixed assets and intangible assets mentioned in the aforesaid 1-3 points was
RMB 73,732,618.09, and all of which were overdue.


IX. Post-balance-sheet events
The Company doesn’t have post-balance-sheet events to publish.


X. Notes to financial statements of parent company
(1) Accounts receivable
1. Constitution of accounts receivable

                                                  Closing balance                                              Opening balance


        Category                   Book balance             Provision for bad debts             Book balance              Provision for bad debts

                                             Proportion                     Proportion                     Proportion                   Proportion
                                Amount                       Amount                         Amount                         Amount
                                                (%)                            (%)                            (%)                             (%)
Accounts receivable
with           significant
individual amount
Individually
insignificant
accounts receivable
but     in     high   risk    4,224,304.63     91.67       4,224,304.63       91.67       4,224,304.63       91.67       4,224,304.63        91.67
portfolio             after
grouping by credit
risk characteristics
Other        insignificant
                               383,972.25      8.33          383,972.25       8.33          383,972.25       8.33         383,972.25          8.33
accounts receivable

             Total            4,608,276.88    100.00       4,608,276.88      100.00       4,608,276.88      100.00       4,608,276.88        100.00

2. Provision for bad debts of closing accounts receivable that is of individually significant or insignificant amount
but tested for impairment individually

                                                                      Bad debts
Content of accounts receivable                Book balance                               Provision ratio                Reasons
                                                                       amount
                                                                                                               Long-term credit, the
Beijing Capital Airport                                21,713.00          21,713.00          100%
                                                                                                              balance is controversial
Ningbo Industrial and                                                                                          Long-term credit, the
                                                       26,354.45          26,354.45          100%
Commercial Bureau                                                                                             balance is controversial
                                                                                                               Long-term credit, the
Guangzhou Chen Shunqin                              335,904.80        335,904.80             100%
                                                                                                              balance is controversial


                                                                                                                                        92
               Total                            383,972.25         383,972.25

3. Individually insignificant accounts receivable but 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 years                4,224,304.63          100%          4,224,304.63       4,224,304.63           100%       4,224,304.63

 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%

               Total                                              4,608,276.88                                    100.00%

(2) Other receivables
1. Constitution of other receivables

                                    Closing balance                                             Opening balance


  Category             Book balance               Provision for bad debts           Book balance            Provision for bad debts
                                  Proporti                         Proporti                     Proport                      Propor
                    Amount           on            Amount             on         Amount           ion         Amount          tion
                                    (%)                              (%)                          (%)                         (%)
Other
accounts
receivable
with             120,259,946.67       94.61                                   137,930,803.36       95.20
significant
individual
amount
Other
                   3,035,132.95       2.39        1,284,654.46      25.23        3,147,662.99      2.17      1,148,344.08    23.18
individually

                                                                                                                                   93
insignificant
accounts
receivable
but in high
risk portfolio
after
grouping by
credit    risk
characteristic
s
Added other
insignificant
                      3,806,735.56    3.00      3,806,735.56     74.77          3,806,735.56    2.63    3,806,735.56   76.82
accounts
receivable

    Total           127,101,815.18   100.00     5,091,390.02     100.00     144,885,201.91     100.00   4,955,079.64   100.00

2. Provision for bad debts of closing other accounts receivable that is of individually significant or insignificant
amount but tested for impairment individually
                                                                                           Provision
      Content of other receivables              Book balance          Bad debts                                Reasons
                                                                                             ratio
                                                                                           100.00%
Export tax rebates receivable                    2,331,608.20         2,331,608.20
Shenzhen Zhao Tong Investment Co.,
                                                                                           100.00%
Ltd.                                               500,000.00             500,000.00
Lin Jialin                                                                                 100.00%
                                                   300,000.00             300,000.00
Qi Xing Construction Materials
Distribution Shop, Bao'an District of                                                      100.00%
Shenzhen                                           200,000.00             200,000.00
Shenzhen Jin Ming Ren Information
                                                                                           100.00%
Consulting Company                                 200,000.00             200,000.00
Zong Tongquan                                                                              100.00%
                                                   100,000.00             100,000.00
Chengde Xingye Paper Production
                                                                                           100.00%
Co., Ltd.                                           89,229.41              89,229.41
                                                                                           100.00%
Puning Weililai Textile Co., Ltd                    50,000.00              50,000.00
Changsha Guanyuan Garments Co.,
                                                                                           100.00%
Ltd                                                 12,150.00              12,150.00
Changsha Hat Factory                                                                       100.00%
                                                    10,542.95              10,542.95
                                                                                           100.00%
Cai Weixian                                          9,500.00               9,500.00
                                                                                           100.00%
Chen Hanbiao                                         3,600.00               3,600.00
Shenzhen Youtianda Industry CO.,
                                                                                           100.00%
Ltd.                                                   105.00                105.00
Total                                            3,806,735.56         3,806,735.56         100.00%
3. Individually insignificant other accounts receivable but in high risk portfolio after grouping by credit risk
characteristics:

                                              Closing balance                                   Opening balance
            Aging
                                     Book balance               Provision for            Book balance           Provision for




                                                                                                                            94
                                           Proportion      bad debts                     Proportion     bad debts
                              Amount                                       Amount
                                              (%)                                           (%)

 Within 1 year               617,367.52     20.34%          12,347.35    1,558,717.44     49.52%        31,174.35

 1-2 years                   867,738.96     28.59%          86,773.90      211,732.36        6.73%      21,173.24

 2-3 years                   181,626.56     5.98%           90,813.28       19,246.86        0.61%      9,623.43

 Over 3 years               1,368,399.91    45.09%      1,094,719.93     1,357,966.33     43.14%      1,086,373.06

         Total              3,035,132.95   100.00%      1,284,654.46     3,147,662.99    100.00%      1,148,344.08
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
                                                                                                        (%)
Puning Rieys Paper Industrial                                                       Within 1
                                             Client              1,276,000.00                           1.00
Co., Ltd.                                                                            year
Shenzhen Zhao Tong Investment
                                             Client                 600,000.00   Over 3 years           0.47
Co., Ltd.
                                                                                    Within 1
Huang Donglai                                Client                 300,000.00                          0.24
                                                                                     year
Lin Guilin                                   Client                 300,000.00   Over 3 years           0.24
Shenzhen     Jin    Ming   Ren
                                             Client                 200,000.00   Over 3 years           0.16
Information Consulting Company
                Total                                            2,676,000.00                           2.11


(3) Long-term equity investments
                                                                                   Stake Voting
                                                       Change                                      Differenc
           Audit                                                  Balance at year in the in the
 Investee         Initial investment Opening balance (increase or                                       e
           method                                                      end        investe investee
                                                      decrease)                                    statement
                                                                                   e (%)    (%)
Shenzhen
Rieys       Cost
                      45,000,000.00    45,000,000.00                45,000,000.00 90         90
Industrial method
Co., Ltd.
Puning
Tianhe
Garment                                                                                            Subsidiar
            Cost
Manufact              51,712,500.42    51,712,500.42                51,712,500.42 75        100     y holds
           method
uring                                                                                                 25%
Factory
Co., Ltd.
Tianrui
(HK)        Cost
                                8.26             8.26                         8.26 100      100
Trading method
Co., Ltd.
Puning
Hengda      Cost
                    146,600,000.00 146,600,000.00                  146,600,000.00 100       100
Real       method
Estate


                                                                                                                   95
Developm
ent Co.,
Ltd.
(4) Operating revenue and operating cost

              Items                      Occurred in current period              Occurred in previous period

Operating revenue                                                 0.00                                  860,000.00

Operating cost                                                    0.00                                  800,527.98

Operating profit                                                  0.00                                   59,472.02

Note: Operating revenue of this period decreased by RMB 860,000.00 over previous period, for the reason of the
parent company hasn’t engaged in entity production and operation, and transferred to the mode of group
management.
(5) Investment income

                                                               Occurred in current          Occurred in previous
                      Name of investee
                                                                     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 holding of trading
                                                                                                        120,369.70
financial assets
Investment income generated during the investment return
achieved from investments held to maturity
Investment income generated from holding financial assets
available for sale
Investment income generated from disposal of trading
financial assets
Investment income generated from investment held to
maturity
Investment income generated from financial assets
available for sale

Other

                           Total                                                                        120,369.70

(6) Supplementary information for cash flow statement
                                                                      Amount in current       Amount in previous
                   Supplementary information
                                                                          period                  period
1. Reconciliation of net profit to net cash flows generated
from operating activities:
Net profit                                                                  -7,681,829.28            10,955,971.24


                                                                                                                   96
Add: Provision for impairment of assets                            136,310.38        41,174.16
    Depreciation of fixed assets, of oil-gas assets, of
                                                                  1,751,726.58    4,033,204.64
productive biological assets
    Amortization of intangible assets                              336,594.12       893,606.44

    Amortization of long-term deferred expense
     Losses on disposal of property, plant and equipment,
                                                                                    578,733.69
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)            -3,404.00        7,659.00

    Financial cost (gains: negative)                              3,285,552.27   20,495,371.41

    Investment loss (gains: negative)                                              -120,369.70

    Decrease in deferred income tax assets (gains: negative)     -1,597,704.71    -2,657,976.98
    Increase in deferred income tax liabilities (decrease:
negative)
    Decrease in inventory (gains: negative)
     Decrease in accounts receivable from operating activities
                                                                 19,331,971.00   -32,494,259.64
(gains: negative)
     Increase in payables from operating activities (decrease:
                                                                 -6,690,957.62   51,491,070.32
negative)
    Other                                                                        -43,656,604.10

Net cash flows generated from operating activities                8,868,258.74    9,567,580.48
2. 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

3. Net increase in cash and cash equivalents:

  Closing balance of cash                                          707,181.42     1,338,922.68

  Less: Opening balance of cash                                   1,338,922.68   28,150,078.47

  Closing balance of cash equivalents

  Less: Opening balance of cash equivalents

  Net increase in cash and cash equivalents                        -631,741.26   -26,811,155.79



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XI. Supplementary information
(1) List of current non-recurring gains or losses

          Items of non-recurring gains or losses               Amount                     Remark
 1. Profit or loss from disposal of non-current assets,
 including written-off parts made the provision for asset
 impairment;
 2. 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-begin 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         3,404.00
 investment income from the disposal of trading financial
 assets, trading financial liabilities and financial assets
 available for sale;                                                      There was change on fair value of stocks
 15. Reversal of provision for impairment of receivables
 through individual impairment test
 16. Profit or loss from entrusted external loans;
 17. Profit or loss generated from changes in fair value of
 investment property that using fair value method for
 subsequent measurement;
 18. According to tax, accountancy law and other
 regulations, the effect of one-time adjustment on
 current profit or loss which made on current profit or loss


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according to tax, accountancy law and other regulations;

19. Commission Income obtained from commission
operation;
20. Other non-operating income and expenditure in
                                                                 -56,778.30
addition to the above items;                                                     Various penalty, overdue fine, etc.
21. Other profit or loss items meet the definition of
non-recurring gains and losses.
                         Subtotal                                -53,374.30
Income tax expense should be deducted from
                                                                    -4,512.09
aforementioned non-recurring gains and losses
Profit or loss of minority shareholders in consolidated
                                                                         81.99
financial statement
                          Total                                  -48,944.20

(2) Return on net assets and earnings per share
                                                                                                EPS
                                                  Weighted average
        Profit in reporting period
                                                 return on net assets
                                                                                 Basic EPS                Diluted EPS
Net profit attributable to common
                                                             -0.0330                         -0.02                     -0.02
shareholders of the Company
Net profit attributable to common
shareholders of the Company after                               0.0332                       -0.02                     -0.02
deducting non-recurring gains and losses
(3) The anomalies in the Company’s financial statements and the reasons

         Item              Variation amount        Variation rate                            Remark

Monetary capital                  2,792,048.21         174.42           Recovery of loans and come-and-go money
                                                                        Advance the collection of loans and recovered
Accounts receivable            -5,447,602.21           -39.00
                                                                        overdue loans
Other receivables             -10,335,970.33           -38.30           Advance the collection of come-and-go money

Short-term loans               -9,500,000.00           -12.89           Paid the loan of China Everrbright Bank

Accounts payable               -2,325,828.43           -21.63           Cleared payment for goods

Other payables                -57,771,159.95           -90.10           Paid related parties borrowings

Operating revenue             -39,143,412.92           -83.71           Export sales was reduced

Operating cost                -32,433,888.87           -86.08           Export sales was reduced

Operating expenses             -3,604,790.40           -82.63           Export sales was reduced

Financial expense              -5,188,332.66           -55.10           Paid bank loans and reduced profit expenses

Assets impairment loss            9,646,027.89         -134.27          Reduced bad debts impairment
                                                                        Income generated from transfer of Shenzhen
Investment income              -8,168,851.55           -100.00
                                                                        Missk Fashion Co., Ltd.




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XII. Approval and disclosure of financial statements
The financial statements have been approved by the Board to disclose on 14 Aug. 2012.


             [The understanding on this English text of the Report should be subject to the Chinese text.]

                                                                 Guangdong Rieys Group Company Ltd.
                                                                                   14 Aug. 2012




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