Lu Thai Textile Co., Ltd. Interim Report 2019 LU THAI TEXTILE CO., LTD. INTERIM REPORT 2019 August 2019 1 Lu Thai Textile Co., Ltd. Interim Report 2019 Part I Important Notes, Table of Contents and Definitions The Board of Directors (or the “Board”), the Supervisory Committee as well as the directors, supervisors and senior management of Lu Thai Textile Co., Ltd. (hereinafter referred to as the “Company”) hereby guarantee the factuality, accuracy and completeness of the contents of this Report and its summary, and shall be jointly and severally liable for any misrepresentations, misleading statements or material omissions therein. Liu Zibin, the Company’s legal representative, Zhang Hongmei, the Company’s Chief Accountant, and Zhang Keming, the Company’s Financial Manager hereby guarantee that the financial statements carried in this Report are factual, accurate and complete. All the directors of the Company except for the following attended in person the Board meeting for the review of this Report and its summary. Reason for not attending the Proxy entrusted to attend the Name Office title meeting in person meeting Fujiwara Hidetoshi Director For reason of other work Qin Guiling The Company has described in detail in this Report the possible risks facing it. Please refer to the section headed “Risks Facing the Company and Countermeasures” of “Part IV Operating Performance Discussion and Analysis” of this Report. The Company has no interim dividend plan, either in the form of cash or stock. This Report and its summary have been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese versions shall prevail. 2 Lu Thai Textile Co., Ltd. Interim Report 2019 Table of Contents Interim Report 2019........................................................................................................................... 1 Part I Important Notes, Table of Contents and Definitions ........................................................... 2 Part II Corporate Information and Key Financial Information ................................................... 5 Part III Business Summary ............................................................................................................... 8 Part IV Operating Performance Discussion and Analysis ........................................................... 11 Part V Significant Events ................................................................................................................ 21 Part VI Share Changes and Shareholder Information ................................................................. 33 Part VII Preferred Shares ............................................................................................................... 38 Part VIII Directors, Supervisors and Senior Management.......................................................... 39 Part IX Corporate Bonds ................................................................................................................ 42 Part X Financial Statements ........................................................................................................... 43 Part XI Documents Available for Reference ................................................................................ 158 3 Lu Thai Textile Co., Ltd. Interim Report 2019 Definitions Term Definition Lu Thai Textile Co., Ltd. and its consolidated subsidiaries, except where the The “Company”, “LTTC”, “Issuer” or “we” context otherwise requires The Board of Directors The Board of Directors of Lu Thai Textile Co., Ltd. The Supervisory Committee The Supervisory Committee of Lu Thai Textile Co., Ltd. CSRC The China Securities Regulatory Commission Expressed in the Chinese currency of Renminbi, expressed in tens of thousands RMB, RMB’0,000 of Renminbi The “Company Law” The “Company Law of the People‘s Republic of China” The “Securities Law” The “Securities Law of the People‘s Republic of China” The “Reporting Period” or “Current Period” The period from 1 January 2019 to 30 June 2019 4 Lu Thai Textile Co., Ltd. Interim Report 2019 Part II Corporate Information and Key Financial Information I Corporate Information Stock name LTTC, LTTC-B Stock code 000726, 200726 Changed stock name (if any) N/A Stock exchange for stock Shenzhen Stock Exchange listing Company name in Chinese 鲁泰纺织股份有限公司 Abbr. (if any) 鲁泰纺织 Company name in English (if LU THAI TEXTILE CO.,LTD any) Abbr. (if any) LTTC Legal representative Liu Zibin II Contact Information Board Secretary Securities Representative Name Zhang Keming Zheng Weiyin and Li Kun No. 81, Songling East Road, Zichuan No. 81, Songling East Road, Zichuan Address District, Zibo, Shandong, P.R.China District, Zibo, Shandong, P.R.China Tel. 0533-5277008 0533-5285166 Fax 0533-5418805 0533-5418805 Email address zhangkeming@lttc.com.cn wyzheng@lttc.com.cn,likun@lttc.com.cn III Other Information 1. Contact Information of the Company Indicate by tick mark whether any change occurred to the registered address, office address and their zip codes, website address and email address of the Company in the Reporting Period. □ Applicable √ Not applicable No change occurred to the said information in the Reporting Period, which can be found in the 2018 Annual Report. 5 Lu Thai Textile Co., Ltd. Interim Report 2019 2. Media for Information Disclosure and Place where this Report is Lodged Indicate by tick mark whether any change occurred to the information disclosure media and the place for lodging the Company’s periodic reports in the Reporting Period. □ Applicable √ Not applicable The newspapers designated by the Company for information disclosure, the website designated by the CSRC for disclosing the Company’s periodic reports and the place for lodging such reports did not change in the Reporting Period. The said information can be found in the 2018 Annual Report. IV Key Financial Information Indicate by tick mark whether there is any retrospectively restated datum in the table below. √ Yes □ No Accounting policy changes resulted in the retrospective restatements in the following table. H1 2018 Change (%) H1 2019 Before Restated Restated Operating revenue (RMB) 3,185,448,344.01 3,281,014,155.43 3,280,407,775.82 -2.89% Net profit attributable to the listed 411,446,216.59 377,355,959.02 377,355,959.02 9.03% company’s shareholders (RMB) Net profit attributable to the listed company’s shareholders before 376,816,535.93 366,948,339.88 366,432,917.21 2.83% exceptional gains and losses (RMB) Net cash generated from/used in operating 119,717,062.57 697,784,710.77 697,784,710.77 -82.84% activities (RMB) Basic earnings per share (RMB/share) 0.48 0.41 0.41 17.07% Diluted earnings per share (RMB/share) 0.48 0.41 0.41 17.07% Weighted average return on equity (%) 5.70% 5.13% 5.13% 0.57% 31 December 2018 Change (%) 30 June 2019 Before Restated Restated Total assets (RMB) 11,202,182,466.95 10,537,759,811.84 10,537,759,811.84 6.31% Equity attributable to the listed company’s 7,135,598,465.75 7,146,548,467.86 7,146,548,467.86 -0.15% shareholders (RMB) Reason for change in accounting policy and correction of accounting error: 6 Lu Thai Textile Co., Ltd. Interim Report 2019 V Accounting Data Differences under China’s Accounting Standards for Business Enterprises (CAS) and International Financial Reporting Standards (IFRS) and Foreign Accounting Standards 1. Net Profit and Equity under CAS and IFRS □ Applicable √ Not applicable No such differences for the Reporting Period. 2. Net Profit and Equity Differences under CAS and Foreign Accounting Standards □ Applicable √ Not applicable No such differences for the Reporting Period. XI Exceptional Gains and Losses √ Applicable □ Not applicable Unit: RMB Item H1 2019 Note Gain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) 459,688.66 Government subsidies charged to current profit or loss (exclusive of government subsidies given in the Company’s ordinary course of business at fixed quotas or amounts as per the government’s 32,226,225.91 uniform standards) Gain or loss on fair-value changes in trading and derivative financial assets and liabilities & income from disposal of trading and derivative financial assets and liabilities and investments in 10,663,111.47 other debt obligations (exclusive of the effective portion of hedges that arise in the Company’s ordinary course of business) Non-operating income and expense other than the above 890,331.64 Less: Income tax effects 6,167,989.87 Non-controlling interests effects (net of tax) 3,441,687.15 Total 34,629,680.66 -- Explanation of why the Company reclassifies as recurrent an exceptional gain/loss item defined or listed in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Exceptional Gain/Loss Items: □ Applicable √ Not applicable No such cases for the Reporting Period. 7 Lu Thai Textile Co., Ltd. Interim Report 2019 Part III Business Summary I Principal Activity of the Company in the Reporting Period Is the Company subject to any industry-specific disclosure requirements? No. No changes occurred to the Company’s principal activities, primary products, business models and major growth drivers in the Reporting Period. Lu Thai has always adhered to its mission of “creating wealth, contributing to the society, clothing the world and weaving our way to every corner of the globe”, as well as to its values of “people foremost policy, rigorous scientific attitude, client oriented principle and integrity for win-win outcome” for a long time. It is devoted to improving and expanding its industrial chain, making it a renowned textile and garment business group combing cotton growing, spinning, bleaching and dyeing, neatening, testing, garment making and marketing. Lu Thai produces and sells middle and high-grade yarn-dyed fabric and dyeing fabric for shirts and garment. It continues to renew its service philosophy, explore emerging markets and increase the added value of its products. With natural fabric as its flagship, multi-component functional fiber fabric as its spearhead and wash-and-wear non-ironing technology as its core competency, the Company kept a watchful eye on the latest consumption trend. Great attention was paid to improve its healthy product series so as to satisfy the needs from the diversified and personalized market. Lu Thai has become the world’s largest high-grade yarn dyed fabric producer and a world-class premium shirt provider. It had paved its development pattern featured in going green, low-carbon growth, science and technology and humanism. Its operation performance was always among the top comparing to its peers. 70% of Lu Thai’s products are exported to over 30 countries and regions including America, the EU and Japan, of which more than 70% is under the Company’s own brand. So far, the Company has taken up around 18% of the world market of yarn dyed fabric for medium- and high-end shirts. II Significant Changes in Major Assets 1. Significant Changes in Major Assets Major assets Main reason for significant changes The amount as at 30 June 2019 was RMB460,389,887.15, up 36.52% from the beginning Construction in progress amount, primarily driven by increased construction and equipment investments for Lu Thai Vietnam’s second phase project. 2. Major Assets Overseas √ Applicable □ Not applicable Control As % of the Return Material Asset value Management measures to Company’s Asset Source Location generated impairment (RMB) model protect asset net asset (RMB) risk (yes/no) safety value 8 Lu Thai Textile Co., Ltd. Interim Report 2019 Main Lu Thai management (Hong Incorporat Hong personnel sent Kong) 175,089,652.92 Marketing 4,111,793.66 2.27% No ed Kong by the Textile Co., Company as Ltd. the parent Main Lu Thai management (America) Incorporat personnel sent 13,077,851.06 New York Marketing 385,980.37 0.17% No Textile Co., ed by the Ltd. Company as the parent Main Lu Thai management (Cambodia) Incorporat Svay personnel sent 173,891,030.13 Manufacturing 12,707,516.44 2.25% No Textile Co., ed Rieng by the Ltd. Company as the parent Main Lu Thai management (Burma) Incorporat personnel sent 77,251,276.43 Rangoon Manufacturing 6,435,142.22 1.00% No Textile Co., ed by the Ltd. Company as the parent Main Lu Thai management (Vietnam) Incorporat personnel sent 1,922,677,555.71 Tay Ninh Manufacturing 36,981,264.37 24.89% No Textile Co., ed by the Ltd. Company as the parent Main management Lu An Incorporat Anjiang, personnel sent Garments 168,749,794.48 Manufacturing 765,750.18 2.18% No ed Vietnam by the Co., Ltd. Company as the parent III Core Competitiveness Analysis Is the Company subject to any industry-specific disclosure requirements? No. The comprehensive management ability, research and development ability, technological accumulation and global planning of the 9 Lu Thai Textile Co., Ltd. Interim Report 2019 Company’s whole industry chain are the Company's core competitiveness, which did not change during the Reporting Period. 1. A complete industrial chain and a global network: The Company boasts a complete industrial chain from cotton planting, yarning, dyeing, weaving and post-processing to cloth manufacturing, and thus enjoys the cost advantage brought by complete steps for producing high-end dyed textile. The Company has set up production bases in Cambodia, Burma, Vietnam, etc., a design agency in Italy and a market service agency in America, which helps give full play to its international resources, form a global business network and solidify its internationally leading position as a yarn-dyed fabric maker. 2. The sound comprehensive management capacity and an efficient quality control system: The Company has passed ISO9000 quality management system, ISO14000 environmental management system, OHSAS18000 occupational health safety management system, and SA8000 social accountability management system successively from 1995. Ever since 2007, the Company has also passed WRAP: 1999 global garment production social accountability standard, C-TPAT: 2004 anti-terrorism standard, OE100 and GOTS organic cotton system certification and CNAS national laboratory recognition, to realize the internationalization and standardization of the Company’s management. In order to pursue the operational management of performance excellence and better the Company’s performance and capability, the Company has gradually introduced GB/T19580-2004 -Standards for Performance Excellence Evaluation, created “Great Quality” system and promoted management innovation, to ensure the Company’s business quality. 3. It enjoyed strong R&D capability and high-end technological platform for cooperation. The Company highly valued self-dependent innovation and made full use of various technology platforms, inclusive of the National Enterprise Technical Center, National Talent-in draught Demonstration Base and Shandong Engineering and Technological Research Center. Moreover, Lu Thai also reinforced its technical cooperation with scientific research institutes, colleges and universities, strategic clines and major suppliers. It was committed to cutting-edge technical research, and transformed itself from product development to technical researches step by step. What’s more, the Company also upgraded itself from overcoming key technological difficulties to master technical principles and set up industrial standards. In the past, it only focused on technical innovation, but now, it is exploring new technology on one hand and boosting innovation on the other for better growth. Consequently, the Company pushed forward its development in a green, low-carbon and cyclic manner and strengthened its vitality and growing momentum. Meanwhile, the share of technology to its development was also increased, which could push forward industrial up gradation. 4. It boasted considerate and efficient customer’s service. With customer-oriented principle as its guidance, the Company comprehensively enhanced its quality control so as to persistently provide high standard service and set up an industry-leading brand image, which, in return, could help to win customer’s satisfaction and market recognition. Quality awareness was weaved into every step of the manufacturing process and the impeccable quality traceability ensured product reputation. 5. It attaches importance to customer-specific individualized product design service, following the philosophy of customer satisfaction at the forefront of market demand. 10 Lu Thai Textile Co., Ltd. Interim Report 2019 Part IV Operating Performance Discussion and Analysis I Overview For the Reporting Period, the Company recorded operating revenue of RMB3,185 million, an operating profit of RMB495 million, a net profit attributable to the listed company’s shareholders of RMB411 million and a net profit before exceptional gains and losses of RMB377 million, down 2.89% and up 9.33%, 9.03% and 2.83% respectively from the same period of last year. No changes have occurred to the principal activities, the main profit sources and structure of the Company in this period. During the Reporting Period, the Company continued to steadily promote “Improving Quality and Efficiency” and “Comprehensive Internationalization”, maintaining the sound, stable and sustained development trend; made steady progress in its overseas expansion programme and basically achieved the design expectation; and enhanced market survey for further communication with customers and improved the “manufacturing + design” service ability, which accelerated market extension efficiency. The Company deepened its relationship with customers through proactive measures such as adjustment of product structure, integration of supply chains, design and development connection, brand cooperation and e-commerce platforms and facing new characteristics and new demands of the market, kept improving product design concept and innovating service mode to meet market demand and keep up with the development trends. During the Reporting Period, the Company was honored as “Top 100 Garment Makers 2018” by the China National Garment Association, “Top 100 Private Enterprises with the Highest Brand Value of Shandong Province” and “High-End Brand Builders in the Manufacturing Sector of Shandong Province” by the Shandong Council for Brand Development. During the Reporting Period, the Company continued to persist in R&D investments, making new achievements in the application of new materials, research of new fabrics, key technologies of new product development and research of equipment upgrading by means of organizing science and technology lectures as well as cooperating with prominent domestic colleges. Two key R&D projects included in China’s 13th Five-Year Plan, which are conducted by the Company, have passed the interim examination. As of the end of the Reporting Period, the Company had 379 granted patents and 3 software copyrights; as well as had hosted or participated in the formulation of 50 national and industrial standards. During the Reporting Period, the design work of products targeting western and female consumers, etc. was completed for the autumn and winter of 2020, which consist of 71 series under eight themes. The relevant promotion activities, samples and specific design are underway together with the business department. At the current stage, Lu Thai, with natural fabric as its flagship, multi-component functional fiber fabric as its spearhead, wash-and-wear non-ironing technology as its core competency, the latest consumption trend as its guidance and internationalized industrial manufacturing as its basis, is sparing every effort to attain a global integrated development, so as to ensure its leading position in the yarn-dyed shirt fabric sector. II Core Business Analysis Overview: For the Reporting Period, the Company recorded operating revenue of RMB3,185 million (a 2.89% year-on-year decrease); cost of sales of RMB2,211 million (a 6.35% year-on-year decrease), including selling expense of RMB78 million (a 16.28% year-on-year rise) and administrative expense of RMB191 million (a 17.11% year-on-year increase); research and development expense of RMB162 million (a 0.4% year-on-year drop); and net cash generated from operating activities of RMB120 million (an 82.84% year-on-year drop). 11 Lu Thai Textile Co., Ltd. Interim Report 2019 Year-on-year changes in key financial data: Unit: RMB Change H1 2019 H1 2018 Main reason for change (%) Operating revenue 3,185,448,344.01 3,280,407,775.82 -2.89% Cost of sales 2,210,886,955.53 2,360,836,431.41 -6.35% Selling expense 77,836,942.94 66,941,088.56 16.28% Administrative expense 191,205,597.74 163,274,510.70 17.11% Finance costs 52,554,570.05 30,525,225.31 72.17% Increase in interest expense Income tax expense 74,839,232.29 63,275,514.57 18.28% R&D expense 161,939,039.23 162,596,245.80 -0.40% (1) Increase in cash payments for commodities Net cash generated from/used in and services (mostly raw materials); and (2) 119,717,062.57 697,784,710.77 -82.84% operating activities decrease in cash proceeds from sale of commodities Net cash generated from/used in -346,327,704.43 -423,627,352.67 18.25% investing activities Net cash generated from/used in Increase in the net amount of borrowings 315,262,989.36 -285,883,409.46 210.28% financing activities obtained A year-on-year increase of RMB678 million in net cash generated from financing and Net increase in cash and cash 88,423,644.38 -5,067,323.02 1,844.98% investing activities and a year-on-year decrease equivalents of RMB578 million in net cash generated from operating activities Significant changes to the profit structure or sources of the Company in the Reporting Period: □ Applicable √ Not applicable No such changes in the Reporting Period. Breakdown of core businesses: Unit: RMB YoY change in YoY change in Gross profit YoY change in Operating revenue Cost of sales operating revenue gross profit margin cost of sales (%) (%) margin (%) By operating division Textile and 2,934,448,827.78 2,007,858,829.06 31.58% 0.46% -2.46% 2.05% apparel Cotton 6,856,226.38 6,153,947.34 10.24% -93.22% -93.45% 3.15% Electricity and 99,820,071.53 100,489,871.91 -0.67% -1.91% 1.77% -3.63% 12 Lu Thai Textile Co., Ltd. Interim Report 2019 steam Other 26,265,030.04 23,804,349.14 9.37% -29.08% -33.09% 5.43% By product category Fabric 2,334,195,650.45 1,586,586,777.72 32.03% 0.61% -2.05% 1.85% products Shirts 600,253,177.33 421,272,051.34 29.82% -0.14% -3.98% 2.81% Cotton 6,856,226.38 6,153,947.34 10.24% -93.22% -93.45% 3.15% Electricity and 99,820,071.53 100,489,871.91 -0.67% -1.91% 1.77% -3.63% steam Other 26,265,030.04 23,804,349.14 9.37% -29.08% -33.09% 5.43% By operating segment Hong Kong 193,620,677.72 131,911,865.18 31.87% 4.90% 1.98% 1.95% Japan And 227,171,179.04 157,054,077.28 30.87% 7.17% 3.58% 2.39% South Korea Southeast Asia 853,969,711.97 580,900,368.79 31.98% 12.31% 9.34% 1.85% Europe and 579,841,115.57 400,144,091.29 30.99% 0.38% -3.03% 2.43% America Other 267,533,852.91 182,903,368.26 31.63% -16.55% -18.83% 1.92% Mainland 945,253,618.52 685,393,226.65 27.49% -14.53% -18.07% 3.14% China III Analysis of Non-Core Businesses √ Applicable □ Not applicable Unit: RMB As % of profit Exceptional Amount Source/Reason before tax or recurrent Gains on equity investment, dividends from financial products, Investment income 10,417,475.41 2.10% No forward exchange settlement and gains on delivery of options Losses generated from the variation of fair value of forward Gain/loss on 5,282,600.00 1.07% exchange settlement delivered in the Reporting Period due to No changes in fair value reversal, etc. Asset impairments -1,543,199.38 -0.31% Inventory falling price provision No Non-operating 3,097,024.44 0.62% Income of non-operating compensation, etc No income Non-operating 2,214,356.54 0.45% Non-operating compensation, etc. No expense 13 Lu Thai Textile Co., Ltd. Interim Report 2019 IV Analysis of Assets and Liabilities 1. Material Changes in Asset Composition Unit: RMB 30 June 2019 30 June 2018 Change in Reason for any As % of total As % of total percentage Amount Amount material change assets assets (%) Monetary capital 623,926,353.74 5.57% 671,721,970.36 6.56% -0.99% Accounts 381,453,061.31 3.41% 356,818,963.69 3.49% -0.08% receivable Inventories 2,338,090,631.11 20.87% 2,017,424,627.73 19.71% 1.16% Investment 38,718,468.86 0.35% 23,856,705.69 0.23% 0.12% property Long-term equity 100,637,911.44 0.90% 95,806,134.43 0.94% -0.04% investments Fixed assets 5,729,951,131.93 51.15% 5,359,308,862.06 52.37% -1.22% Construction in 460,389,887.15 4.11% 365,054,086.88 3.57% 0.54% progress Short-term 2,137,653,250.29 19.08% 1,458,058,962.33 14.25% 4.83% borrowings Long-term 0.00% 69,431,359.47 0.68% -0.68% borrowings 2. Assets and Liabilities at Fair Value √ Applicable □ Not applicable Unit: RMB Gain/loss on Cumulative Impairment fair-value fair-value Purchased in Sold in the Beginning allowance for Item changes in the changes the Reporting Reporting Ending amount amount the Reporting Reporting charged to Period Period Period Period equity Financial assets 1. Trading financial assets (exclusive of 91,630,515.95 405,000.00 29,871,000.00 62,164,515.95 derivative financial assets) 14 Lu Thai Textile Co., Ltd. Interim Report 2019 Subtotal of 91,630,515.95 405,000.00 29,871,000.00 62,164,515.95 financial assets Total of the 91,630,515.95 405,000.00 29,871,000.00 62,164,515.95 above Financial 4,877,600.00 4,877,600.00 0.00 liabilities Significant changes to the measurement attributes of the major assets in the Reporting Period: □ Yes √ No 3. Restricted Asset Rights as at the Period-End For details, see Part X. VII. 60. Assets with restricted ownership and using right in this Report. V Investments Made 1. Total Investments Made □ Applicable √ Not applicable 2. Major Equity Investments Made in the Reporting Period □ Applicable √ Not applicable 3. Major Non-Equity Investments Ongoing in the Reporting Period □ Applicable √ Not applicable 4. Financial Investments (1) Securities Investments □ Applicable √ Not applicable No such cases in the Reporting Period. (2) Investments in Derivative Financial Instruments √ Applicable □ Not applicable Unit: RMB'0,000 Relati Relate Type Purchased Impairm Endi Proporti Actual Initial Beginning Sold in the Operat onship d-part of Starting Ending in the ent ng on of gain/los investment investment Reporting or with y derivat date date Reporting provisio inves ending s in the amount amount Period the transac ive Period n (if tmen investm Reporti 15 Lu Thai Textile Co., Ltd. Interim Report 2019 Comp tion any) t ent ng any amo amount Period unt in the Compan y’s ending net assets Forwa rd Comm Non-re exchan 19 June 30 May ercial No 66,365.49 6,512.05 59,853.44 66,365.49 0 0.00% 249.83 lated ge 2018 2019 bank settle ment Foreig Comm n 23 28 Non-re ercial No exchan 3,922.86 March March 1,909.89 2,012.97 3,922.86 0 0.00% -140.28 lated bank ge 2018 2019 option Forwa rd Comm 28 Non-re exchan 31 May ercial No 3,049.7 Septemb 1,610.11 1,439.59 3,049.7 0 0.00% 50.05 lated ge 2019 bank er 2018 transac tions Total 73,338.05 -- -- 10,032.05 63,306 73,338.05 0 0.00% 159.6 Capital source for derivative The Company’s own money investment Lawsuit (if applicable) Naught Disclosure date of board of directors announcement on 27 April 2018 approval of derivative investment (if any) Disclosure date of general meeting of shareholders announcement on approval of derivative investment (if any) Analysis on risks and control The Company conducted derivatives products transaction in order for hedging. And the forward measures of derivative settlement hedging was operated by installments, with the relevant amount not more than the products held in the Reporting planned derivatives products transactions. And all derivatives products transaction was zero-deposit. Period (including but not Meanwhile, the Company had a complete risk control system for sufficient analysis and prevention limited to market risk, of possible risks such as market risk, liquidity risk and credit risk, operation risk and risk of laws 16 Lu Thai Textile Co., Ltd. Interim Report 2019 liquidity risk, credit risk, and regulation. operation risk, law risk, etc.) 1. Market risk: when the international and domestic economic situations change, the corresponding changes in exchange rates and interest rates may have an adverse impact on the financial derivatives transactions of the Company. Precautionary measures to be taken include: the Company chooses risk-controlled financial derivative tools with simple structure and good liquidity to carry out the hedging business, strictly controls the scale of financial derivatives trading by staged operations, and adjusts the strategy according to market changes in a timely manner. 2. Liquidity risk and credit risk: a credit risk arising from failure of the contractually due Company or counterparty in performing the contract due to liquidity or factors other than liquidity. Precautionary measures to be taken include: the Company determines the upper limit of derivatives transaction amounts according to production and operation scale as well as foreign exchange income, and conducts operations by stage according to the budget of future collections and disbursement. The derivative trades are free of guarantee deposit and can still be guaranteed in performance after the contract expires by means of extension and balance settlement etc. to prevent the Company from credit damages due to lack of liquidity. The Company selects financial institutions with strong capability and good reputation as a counterparty and signs standard derivative trading contracts to strictly control credit risk of the counterparty. 3. Operation risk: The derivatives had high specialty and complexity, so imperfect internal operation procedures, staffs and external events would make the Company to undertake risks during the transaction. Risk control measures: The Company promulgated strict authorization and approval system and perfect regulatory mechanism, fixed the operation procedures and approval procedures system to conduct derivative products transaction, implemented strict authorization and post checks and balances system, meanwhile, it improved the overall quality of relevant personnel through strengthening the professional ethics education and business training for them. Besides, it established the System of Reporting the Abnormal Situation Timely so as to ensure to lower the operation risks to the maximum. 4. Risk of laws and regulation: The Company conducted derivatives products transaction in strict accordance with relevant laws and rules. If there were no standard operation procedures and strict approval procedures, it was easy to cause compliant and regulatory risks existing in the validity and feasibility of contract, commitments and other legal documents signed. Risk control measures: The Company carefully studied and mastered laws, regulations and policies relevant to derivative products transaction, formulated internal control rules for the forward settlement hedging business, standardized the operation procedures. And strengthened the compliant examination on derivative products transaction business. The Company conducted derivative transaction business according to the relevant approval procedure, which was in line with relevant laws, regulations, the Company’s Articles of Association, the Management Rules for Derivative Transaction of Lu Thai Textile Co., Ltd., and the Proposal on the Plan of Lu Thai Textile Co., Ltd. for Derivative Transactions approved at the 17th Meeting of the 8th Board of Directors on 25 April 2018, and performed relevant information disclosure responsibilities. Changes of market prices or 1. As of 30 June 2019, the Company has completed the delivery of all financial derivatives without fair values in the Reporting any agreement on financial derivatives. 17 Lu Thai Textile Co., Ltd. Interim Report 2019 Period of the invested 2. January-June in 2019: the amount of all due financial derivatives of the Company converted into derivatives. And the analysis USD is US$108,683,700 which were executed in accordance with agreements with revenues of on the fair value of the RMB1,596,000, among which, gains of RMB2,498,300 was from the delivery of forward foreign derivatives should include the exchange settlement of US$98.2 million; losses of RMB1,402,800 was from the delivery of foreign specific use methods and the exchange options of US$6 million and gains of RMB500,500 was from the delivery of forward relevant assumptions and exchange transactions of US$4,483,700. parameters. Whether significant changes occurred to the Company’s accounting policy and specific accounting principles of No significant changes derivatives in the Reporting Period compared to the previous Reporting Period The Company’s independent directors Zhou Zhiji, Bi Xiuli, Pan Ailing, Wang Xinyu and Qu Dongmei, concerning conducting derivatives business, have issued the following professional advice: We are of the opinion that it will strengthen the Company’s competitiveness to use Specific opinion from derivative transactions with focus on forward settlement and purchase as an effective tool to avoid independent directors on the foreign exchange risks, to strengthen the relevant internal control and to carry out the loss and risk Company’s derivatives prevention measures so as to improve the operation and management. In conducting derivative investment and risk control transactions with focus on forward settlement and purchase, the Company follows a legal approval procedure, has sound relevant institutions and keeps the risks relatively controllable. No harm has been done to the interests of the Company’s shareholders. VI Sale of Major Assets and Equity Interests 1. Sale of Major Assets □ Applicable √ Not applicable No such cases in the Reporting Period. 2. Sale of Major Equity Interests □ Applicable √ Not applicable VII Major Subsidiaries √ Applicable □ Not applicable Major fully/majority-owned subsidiaries and those minority-owned subsidiaries with an over 10% effect on the Company’s net profit: Unit: RMB Relationsh Principal Registered Operating Operating Name ip with the activity Total assets Net assets Net profit capital revenue profit Company 18 Lu Thai Textile Co., Ltd. Interim Report 2019 Lufeng Weaving Subsidiary Fabric 706,160,000.00 1,633,825,665.95 1,371,329,216.86 805,575,459.05 62,548,982.96 52,877,665.09 & Dyeing Co., Ltd. Subsidiaries obtained or disposed in the Reporting Period: □ Applicable √ Not applicable Information about major majority- and minority-owned subsidiaries: Lufeng Weaving & Dyeing Co., Ltd. (hereinafter called “Lufeng Weaving & Dyeing”) is the majority-owned subsidiary of the Company. Registration place: Zibo, Shandong; registered capital: RMB706.160 million. It was authenticated to be high-tech enterprise in October 2014, and authenticated to be high-tech enterprise again for re-evaluation in 2017, mainly manufacturing and selling textile printing and dyeing products and the products of clothing and garments. Its export income accounted for more than 75%. During the Reporting Period, Lufeng Weaving & Dyeing continuously enhanced cost management, promoted R&D and innovation, increased the conversion rate of the scientific production and added value of products. As of 30 June 2019, the operating revenue of RMB805 million and net profit of RMB53 million were achieved by Lufeng Weaving & Dyeing. VIII Structured Bodies Controlled by the Company □ Applicable √ Not applicable IX Performance Forecast for January-September 2019 Warning of possible loss or considerable YoY change in the accumulative net profit made during the period-beginning to the end of the next reporting period, as well as the reasons: □ Applicable √ Not applicable X Risks Facing the Company and Countermeasures Risks that bring adverse impact to company development strategy and business objectives and countermeasures of the Company (1) Impacts generated by the economic environment. At present, the Company is facing the uncertainty of international trade dispute and continuous substantial impact of tariffs. Major economies began to change their monetary policies due to weakening global economic recovery and declining demand growth. What complicates the economic environment is higher domestic liquidity risk and debt defaults of small and medium-sized enterprises. Despite the difficulties, the Company will try to maintain the international market and explore the domestic market to achieve a balanced development of sales business at home and aboard. (2) Fluctuations in raw material prices: the raw cotton used by the Company is long-staple cotton, whose price is affected by many factors such as market supply and demand, climate, policies, exchange rates and quotas. Furthermore, with the development of environmental protection policies, the cost of dyeing auxiliaries also increased. Therefore, besides ensuring the stable supply of long-staple cotton by the subsidiary in Xinjiang, the Company must study the market dynamics to reduce the cost fluctuations due to changes in raw cotton price, and develop with the concept of green and environmental protection to meet environmental protection requirements. (3) Exchange rate changes: at present and in the future, the Company will continue to sell its products mainly in the international market for a long period of time, and US dollars will account for a relatively larger portion in sales revenue. In addition, the main machinery and equipment and some of its raw materials of the Company are also imported. The foreign currencies payment for imports includes US dollar and other currencies. Moreover, the commissioning of the Company's overseas production base and 19 Lu Thai Textile Co., Ltd. Interim Report 2019 subsequent expansion of investment will increase the use of foreign currencies. Therefore, the Company will still be sensitive to the impact of exchange rate changes. In order to reduce adverse influence of exchange rate fluctuation, the Company adopted the following measures: firstly, the Company conducted foreign exchange hedging, using forward FX sales and purchase, forward foreign exchange trading and option portfolios to avoid some risks Secondly, the Company made reasonable arrangement on settlement day and currency structure and conclusion of agreements on fixed foreign exchange rate to avoid exchange rate-related risks. Thirdly, the Company adjusted the Renminbi and foreign-currency liabilities structure to control financial costs. Fourthly, according to the fluctuation trend of exchange rates, the Company properly adjusted imports of raw and auxiliary materials to partially offset the influence of exchange rate fluctuations on the Company. 20 Lu Thai Textile Co., Ltd. Interim Report 2019 Part V Significant Events I Annual and Extraordinary General Meeting Convened during the Reporting Period 1. General Meeting Convened during the Reporting Period Investor Meeting Type Convened date Disclosure date Index to disclosed information participation ratio Announcement of Resolution (No. 2019-012) published on st The 1 Securities Times, China Extraordinary Extraordinary Securities Journal, Shanghai 0.00% 12 March 2019 13 March 2019 General Meeting General Meeting Securities News, and Hong Kong of 2019 Ta Kung Pao and http://www.cninfo.co on 13 March 2019 Announcement of Resolution (No. 2019-027) published on Securities Times, China The 2018 Annual General Securities Journal, Shanghai Annual General 0.00% 23 April 2019 24 April 2019 Meeting Securities News, and Hong Kong Meeting Ta Kung Pao and http://www.cninfo.co on 24 April 2019 Announcement of Resolution (No. 2019-047) published on nd The 2 Securities Times, China Extraordinary Extraordinary Securities Journal, Shanghai 0.00% 10 June 2019 11 June 2019 General Meeting General Meeting Securities News, and Hong Kong of 2019 Ta Kung Pao and http://www.cninfo.co on 10 June 2019 2. Extraordinary General Meeting Convened at Request of Preference Shareholders with Resumed Voting Rights □ Applicable √ Not applicable II Interim Dividend Plan for the Reporting Period □ Applicable √ Not applicable 21 Lu Thai Textile Co., Ltd. Interim Report 2019 The Company has no interim dividend plan. III Commitments of the Company’s Actual Controller, Shareholders, Connected Parties and Acquirer, as well as the Company and Other Commitment Makers, Fulfilled in the Reporting Period or still Ongoing at Period-End □ Applicable √ Not applicable No such cases in the Reporting Period. IV Engagement and Disengagement of CPAs Firm Has the Interim financial report been audited? □Yes √ No This Interim Report is unaudited. V Explanations Given by Board of Directors and Supervisory Committee Regarding “Modified Auditor’s Report” Issued by CPAs Firm for the Reporting Period □ Applicable √ Not applicable VI Explanations Given by Board of Directors Regarding “Modified Auditor’s Report” Issued for Last Year □ Applicable √ Not applicable VII Bankruptcy and Restructuring □ Applicable √ Not applicable No such cases in the Reporting Period. VIII Legal Matters Significant lawsuits or arbitrations: □ Applicable √ Not applicable No such cases in the Reporting Period. Other legal matters: □ Applicable √ Not applicable IX Punishments and Rectifications □ Applicable √ Not applicable No such cases in the Reporting Period. 22 Lu Thai Textile Co., Ltd. Interim Report 2019 X Credit Conditions of the Company as well as its Controlling Shareholder and Actual Controller □ Applicable √ Not applicable XI Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures for Employees □ Applicable √ Not applicable No such cases in the Reporting Period. XII Significant Related-party Transactions 1. Continuing Related-Party Transactions □ Applicable √ Not applicable No such cases in the Reporting Period. 2. Related-Party Transactions Regarding Purchase or Sales of Assets or Equity Interests □ Applicable √ Not applicable No such cases in the Reporting Period. 3. Related Transactions Regarding Joint Investments in Third Parties □ Applicable √ Not applicable No such cases in the Reporting Period. 4. Credits and Liabilities with Related Parties √Applicable □ Not applicable Indicate by tick mark whether there were any credits and liabilities with related parties for non-operating purposes. √ Yes □ No Note: please remember to make a choice regarding above question “whether there were any credits and liabilities with related parties for non-operating purposes”. Liabilities of related parties to account payable Beginning Amount newly Amount Current Ending Relation with Formation balance added in current returned in Interest Related party interest balance(R the Company reason (RMB’0,0 period current period rate (RMB’0,000) MB’0,000) 00) (RMB’0,000) (RMB’0,000) Zibo Lucheng Textile The Company as Currencies 12,152 900 900 4.35% 250.73 12,152 Investment Co., the parent deposit Ltd 23 Lu Thai Textile Co., Ltd. Interim Report 2019 Zibo Lujia Wholly-owned Property Currencies subsidiary of 60 4.35% 1.27 60 Management deposit Lucheng Textile Co., Ltd Zibo Shidanlu Joint-stock Currencies Cosmetics Co., Company of 145 145 4.35% 2.69 deposit Ltd Lucheng Textile Controlling Zibo Taimei Currencies subsidiary of 130 130 4.35% 2.42 Ties Co., Ltd deposit Lucheng Textile Influences from liabilities of parties related on operating results No and financial situations of the Company 5. Other Major Related-Party Transactions □ Applicable √ Not applicable No such cases in the Reporting Period. XIII Particulars about the Non-operating Occupation of Funds by the Controlling Shareholder and Other Related Parties of the Company □ Applicable √ Not applicable No such cases in the Reporting Period. XIV Major Contracts and Execution thereof 1. Entrustment, Contracting and Leases (1) Entrustment □ Applicable √ Not applicable No such cases in the Reporting Period. (2) Contracting □ Applicable √ Not applicable No such cases in the Reporting Period. (3) Leases □ Applicable √ Not applicable 24 Lu Thai Textile Co., Ltd. Interim Report 2019 No such cases in the Reporting Period. 2. Major guarantees √ Applicable □ Not applicable (1) Guarantees Unit: RMB'0,000 Guarantees provided by the Company as the parent for its subsidiaries Actual Disclosure date Guarantee occurrence date Actual Having of the guarantee Line of Type of for a Obligor (date of guarantee Term of guarantee expired line guarantee guarantee related agreement amount or not announcement party or not signing) Five years since Lu Thai Joint-liabil the approval of the (Vietnam) 25 January 2017 10,454.72 20 January 2017 0 No Yes ity board of the Textile Co., Ltd. Company Five years since Lu Thai Joint-liabil the approval of the (Vietnam) 25 January 2017 17,969.05 20 January 2017 14,856.64 No Yes ity board of the Textile Co., Ltd. Company Five years since Lu Thai Joint-liabil the approval of the (Vietnam) 27 October 2017 33,977.84 25 October 2017 14,562.88 No Yes ity board of the Textile Co., Ltd. Company Three years since Lu Thai Joint-liabil the approval of the (Vietnam) 22 August 2018 7,549.52 20 August 2018 3,306.11 No Yes ity board of the Textile Co., Ltd. Company Two years since Lu Thai Joint-liabil the approval of the (Vietnam) 22 August 2018 2,745.28 20 August 2018 0 No Yes ity board of the Textile Co., Ltd. Company Two years since Lu Thai Joint-liabil the approval of the (Vietnam) 29 March 2019 10,312.05 27 March 2019 0 No Yes ity board of the Textile Co., Ltd. Company Lu Thai Two years since Joint-liabil (Vietnam) 29 March 2019 4,124.82 27 March 2019 0 the approval of the No Yes ity Textile Co., Ltd. board of the 25 Lu Thai Textile Co., Ltd. Interim Report 2019 Company Two years since Lu Thai Joint-liabil the approval of the (Vietnam) 29 March 2019 20,624.1 27 March 2019 0 No Yes ity board of the Textile Co., Ltd. Company Two years since Lu Thai Joint-liabil the approval of the (Vietnam) 29 March 2019 20,624.1 27 March 2019 0 No Yes ity board of the Textile Co., Ltd. Company Two years since Lu Thai Joint-liabil the approval of the (Vietnam) 29 March 2019 5,499.76 27 March 2019 0 No Yes ity board of the Textile Co., Ltd. Company Two years since Lu Thai Joint-liabil the approval of the (Vietnam) 29 March 2019 4,124.82 27 March 2019 0 No Yes ity board of the Textile Co., Ltd. Company Three years since Xinjiang Lu Joint-liabil the approval of the Thai Good Yield 14 October 2017 15,000 12 October 2017 0 No Yes ity board of the Cotton Co., Ltd. Company Total approved line for such Total actual amount of guarantees in the Reporting 65,309.65 such guarantees in the 18,966.68 Period (B1) Reporting Period (B2) Total actual balance of Total approved line for such such guarantees at the guarantees at the end of the 153,006.06 32,725.63 end of the Reporting Reporting Period (B3) Period (B4) Guarantees provided between subsidiaries Disclosure Actual Guarante date of the occurrence date Actual Having e for a Line of Type of Obligor guarantee line (date of guarantee Term of guarantee expired or related guarantee guarantee announcemen agreement amount not party or t signing) not Xinjiang Lu Thai 5 November Joint-liabil 20,000 19,900 12 months No Yes Textile Co., Ltd. 2018 ity Total approved line for such Total actual amount of guarantees in the Reporting 0 such guarantees in the 19,900 Period (C1) Reporting Period (C2) Total approved line for such Total actual balance of 20,000 19,900 guarantees at the end of the such guarantees at the 26 Lu Thai Textile Co., Ltd. Interim Report 2019 Reporting Period (C3) end of the Reporting Period (C4) Total guarantee amount (total of the three kinds of guarantees above) Total guarantee line approved in Total actual guarantee the Reporting Period 65,309.65 amount in the Reporting 38,866.68 (A1+B1+C1) Period (A2+B2+C2) Total actual guarantee Total approved guarantee line at balance at the end of the the end of the Reporting Period 173,006.06 52,625.63 Reporting Period (A3+B3+C3) (A4+B4+C4) Total actual guarantee amount (A4+B4+C4) as % of the 7.38% Company’s net assets Of which: Balance of guarantees provided for shareholders, actual controller 0 and their related parties (D) Balance of debt guarantees provided directly or indirectly for 0 obligors with an over 70% debt/asset ratio (E) Amount by which the total guarantee amount exceeds 50% of the 0 Company’s net assets (F) Total of the three amounts above (D+E+F) 0 According to “Agreement on Counter Guarantee” signed on 12 October 2017 between Lu Thai Company and Xinjiang Lu Thai Explanation on possible bearing joint responsibility of liquidation Company, Xinjiang Lu Thai Company, the warrantee Xinjiang due to immature guarantee (if any) Lu Thai Company provided the corresponding amount of counter guarantee for Lu Thai Company. Explanation about external guarantee violating established The Company never provided guarantees for companies except procedure (if any) controlling subsidiaries. Compound guarantees: None (2) Irregularities in Provision of Guarantees □ Applicable √ Not applicable No such cases in the Reporting Period. 3. Other Significant Contracts □ Applicable √ Not applicable No such cases in the Reporting Period. 27 Lu Thai Textile Co., Ltd. Interim Report 2019 XV. Social Responsibilities 1. Significant Environment Protection Indicate by tick mark whether the Company or any of its subsidiaries is identified as a major polluter by the environmental protection authorities. Yes Number Excessi Name of Distribution Discharge Approved Name of Way of of Discharge Total ve major of discharge standards total polluter discharge discharg concentration discharge dischar pollutants outlets implemented discharge e outlets ge Emission Huangjiapu standard of COD is COD is Industrial COD≤150mg/L; water 1495.08t, Lu Thai COD and 296.82t and Continuous Park; East ammonia pollutants in and Textile Co., ammonia 2 ammonia No discharge Zone nitrogen≤10mg/ textile dyeing ammonia Ltd nitrogen nitrogen is Industrial L and finishing nitrogen is 10.98t Park industry: GB 149.51t 4287-2012 Emission standard of COD is COD is Lufeng water 575.985t, COD and Lufeng chief COD≤140mg/L; 147.02t and Weaving & Continuous pollutants in and ammonia 1 discharge ammonia ammonia No Dyeing Co., discharge textile dyeing ammonia nitrogen outlet nitrogen≤4mg/L nitrogen is Ltd. and finishing nitrogen is 3.36t industry: GB 57.6t 4287-2012 Ultra-low emission No. 2 modification January-Jun SO2: list LZJBF e in 2019: SO2 is Zibo Production ≤35mg/m3、 (2016) No 46 SO2 is 354.18t/a, Xinsheng plant of SO2, NQx, Continuous NQx:≤100(50) of Emission 24.8594t, NQx is Thermal 4 Xinsheng No and smoke discharge mg/m3 and standard of NQx is 1011.95t/a Power Co., Thermal smoke:≤10 air pollutants 79.31t and and smoke Ltd. Power (5)mg/m3 of Thermal smoke is is 101.2t/a. Power Plant in 3.34736t. Shandong Province Lu Thai Discharge COD≤50mg/L; Sewage (Vietnam) into the Beside ammonia QCVN40: Sewage 1 discharge is / No Textile Co., ecological sewage plant nitrogen≤ 2011/BTNMT 632,800t Ltd. pond in the 2.0mg/L 28 Lu Thai Textile Co., Ltd. Interim Report 2019 park district after treatment Lu Thai Direct Gas (Vietnam) discharge Beside QCVN19: emission is Exhaust gas 2 / / No Textile Co., after boiler room 2009/BTNMT 111 million Ltd. treatment m3 Construction of pollution prevention equipment and operation condition Lu Thai Textile Co., Ltd. and its majority-owned subsidiary Lufeng Weaving & Dyeing Co., Ltd. strictly implement the "Three Simultaneous" management system for environmental protection in project constructions. The companies are equipped with complete facilities for waste gas and waste water treatment. In 2019, Lu Thai Textile Co., Ltd. and its majority-owned subsidiary Lufeng Weaving & Dyeing Co., Ltd. carried out the waste water treatment system transformation project to improve the treated water quality by systematic and comprehensive reform, further improving the river water quality and local ecological environment. The newly added online monitoring devices for PH in 2019 monitor and detect the pollutants discharge index comprehensively. In 2019, the Company makes great efforts to transform exhaust emission so as to reduce the discharge of atmospheric pollutants, including the comprehensive treatment of VOCs discharged and low-nitrogen combustion of NOx discharged from boilers. Support teams were set up to be responsible for daily operation maintenance and inspection to guarantee the normal operation of facilities. Both the exhaust emission and waste water discharge meet the emission standards. The wholly-owned subsidiary Zibo Xinsheng Thermal Power Co., Ltd. enforces the "Three Simultaneous" management system for environmental protection in extension project construction in accordance with the government requirements, and adopts the "limestone-gypsum method" to reduce emission concentration of sulfur dioxide, the “Low-nitrogen combustion + SNCR” and "SNCR+SCR method" to reduce emission concentration of nitrogen oxides, and the "electric-bag electrostatic precipitator + wet electrostatic precipitator" to reduce soot emission concentration. The overall system works well. The waste water treatment project of the wholly-owned subsidiary Lu Thai (Vietnam) Textile Co., Ltd. is designed to treat 6,500 tons of sewage water daily, among which, sewage plan I is designed to treat 3,000 tons of sewage water daily, and the sewage plant II is designed to treat 3,500 tons of sewage water daily. The Company adopts a comprehensive treatment process of "pre-materialization + A2O biochemistry + post-materialization + ozone oxidation+ active sand filtration " for waste water treatment, and the treated water quality is better than the QCVN 40:2011/BTNMT A-level emission standards stipulated by the Vietnam government. The treated waste water is all discharged to the ecological pond in the park. Treated water quality analysis for the first half year of 2019: The COD (mean value) was 48.41 mg/L, the chrominance (mean value) was 33.37, the ammonia nitrogen (mean value) was 1.68 mg/L, and the total phosphorus (mean value) was 0.118 mg/L. All the parameters met the A-level emission standards set in the "Regulations on Parameters of Industrial Drainage in Vietnam" (QCVN40:2011/BTNMT). Waste water discharge in the whole year met the standards without violation. The total amount of waste water discharged in the first half year of 2019 was 632,800 tons, among which, the chemical oxygen demand (COD) was 30.63 tons, ammonia nitrogen (NH3-N) was 1.06 tons and total phosphorus (TP) was 74.80kg. The Company is equipped with multi-pipe and water film dust-separation devices to process the exhaust gas discharged from boilers of the Company. In the first half year of 2019, all the equipment was in normal operation, and the exhaust gas inspection parameters were lower than the QCVN19:2009/BTNMT emission standards set by Vietnam government. In the first half year of 2019, the total amount of sulfur dioxide emissions was 32.52 tons, and the total amount of nitrogen oxides emissions was 35.81 tons. Project Environmental Impact Assessment and Other Administrative Permission for Environmental Protection In treatment and comprehensive improvement project of PVA waste water at high concentration of Lu Thai Textile in 2019 (I), the main works have been completed and entered the commissioning phase; The treatment and comprehensive improvement project of PVA waste water at high concentration of Lu Thai Textile (II) has completed the acceptance; The technical transformation of 29 Lu Thai Textile Co., Ltd. Interim Report 2019 production line of high-grade greige cloth of Lu Thai Textile has been approved. The project is under construction. The technical transformation project of automatic equipment of Lu Thai Garment has been completed the filing. In its majority-owned subsidiary Lufeng Weaving & Dyeing Co., Ltd., EIA project of technical transformation of high-grade printed fabric production line has completed the acceptance check. The production line of high-grade greige cloth has been accepted; The separation of dyeing wastewater liquid membrane and comprehensive improvement project of sewage station in Lufeng Weaving & Dyeing has entered the commissioning phase. Its wholly-owned subsidiary Zibo Xinsheng Thermal Power Co., Ltd. has obtained Reply of Environmental Protection Department of Shandong Province on Environmental Impact Report of Expansion Project of Zibo Xinsheng Thermal Power Co., Ltd. (LHS [2015] No. 241) as specified. The expansion project (phase II) is under construction. The completion acceptance of environmental protection project for spinning phase I and yarn-dyed park phase I in its wholly-owned subsidiary Lu Thai (Vietnam) Co., Ltd. has been confirmed. EIA report of spinning phase I and yarn-dyed park phase II has been approved and the constructions are under construction. Emergency plan for environmental incidents The head office, factories in eastern district, and factories in western district of Lu Thai Textile Co., Ltd., and its majority-owned subsidiary Lufeng Weaving & Dyeing Co., Ltd. prepared the Emergency Plan for Environmental Incidents, which was filed with Zibo Environmental Protection Bureau Xichuan Branch. The wholly-owned subsidiary Zibo Xinsheng Thermal Power Co., Ltd. has formulated the "Emergency Plan for Environmental Incidents" and filed it with the environmental protection management department. The identification and risk assessment of environmental risk sources, prevention and early warning mechanisms, emergency protection and supervision and management were included in the plan. The wholly-owned subsidiary Lu Thai (Vietnam) Co., Ltd. has prepared emergency plans for different environmental incidents to reduce their impacts. Environmental self-monitoring program In accordance with the requirements of environmental protection authorities, Lu Thai Textile Co., Ltd and its majority-owned subsidiary Lufeng Weaving & Dyeing Co., Ltd. formulates environmental self-testing plan for the following year in December of each year according to the requirements of superior environmental protection administration, and implements the self-monitoring plan to submit data to Zibo Automatic Environmental Monitoring System. The Company invited external qualified agency to detect the sewage and exhaust gas every quarter, and report the examining report to environment inspection department. The wholly-owned subsidiary Zibo Xinsheng Thermal Power Co., Ltd. complies with the requirements of superior environmental protection authorities to meet discharge standards by online real-time monitoring of environmental protection data. The wholly-owned subsidiary Lu Thai (Vietnam) Co., Ltd. installed an automatic sewage sampling device and automatic on-line monitoring device of water qualify for real-time automatic sampling and monitoring of the quality of treated sewage. In addition, the Company invites external qualified testing organizations to carry out inspections on waste water, sludge and exhaust gas every quarter, and provides reports to environmental inspection departments. Other environment information that should be disclosed No Other related environment protection information No 2. Measures Taken for Targeted Poverty Alleviation (1) Plans The Company assumes social responsibilities by carrying out education support and poverty alleviation. The Company helps needy students to continue their studies and impoverished peasants to maintain their basic livelihood. 30 Lu Thai Textile Co., Ltd. Interim Report 2019 (2) Summary of the Related Work Done in the Reporting Period The Company aids needy students and impoverished peasants financially in the areas where majority-owned subsidiaries locate to enable them to continue their studies and maintain their basic livelihood and help them solve some practical difficulties. (3) Results Measurement Indicator Quantity/Progress unit 1. General results —— —— Of which: 1.1 Funds Ten thousand 17 2. Itemized results —— —— 2.1 Out of poverty by industrial development —— —— 2.2 Out of poverty by transferring employment —— —— 2.3 Out of poverty by relocation —— —— 2.4 Out of poverty by education —— —— Of which: 2.4.1 Amount for funding poor students Ten thousand 17 2.4.2 Number of poor students funded Person 56 2.5 Out of poverty by improving health —— —— 2.6 Out of poverty by protecting ecological environment —— —— 2.7 Subsidy for the poorest —— —— 2.8 Social poverty alleviation —— —— 2.9 Other items —— —— Of which: 2.9.1 Number of items a/an 1 2.9.2 Amount of input Ten thousand 5 3. Accolades received (for what and at what level) —— —— (4) Subsequent Plans None XIX Other Significant Events √ Applicable □ Not applicable The Company held its 2nd Extraordinary General Meeting of 2018 on 23 March 2018 and passed Bill to Buy Back Some of the B-shares of the Company. For details, please refer to the relevant announcements on www.cninfo.com.cn published on 24 March 2018 (No.: 2018-013); The Company disclosed Report on the Buyback of Some B-shares of the Company on 16 May 2018 and issued Announcement of Lu Thai Textile Co., Ltd. about the Implementation of Buy-back of Shares on 29 May 2018 that the first buyback shares were disclosed for the first time. As of 22 March 2019 when the repurchase period expired the Company repurchased 31 Lu Thai Textile Co., Ltd. Interim Report 2019 64,480,770 B shares which have been cancelled at Shenzhen Branch of China Securities Depository and Clearing Corporation Limited completely on 4 April 2019. So far the total shares outstanding of the Company are reduced to 858,121,541 shares. For details, please refer to the relevant announcements on www.cninfo.com.cn published on 23 March 2019 and 9 April 2019 (No.: 2019-013; 2019-023). XVII. Significant Events of Subsidiaries □ Applicable √ Not applicable 32 Lu Thai Textile Co., Ltd. Interim Report 2019 Part VI Share Changes and Shareholder Information I. Share Changes 1. Share Changes Unit: share Before Increase/decrease (+/-) After Bon Bonus Percenta New us issue Percenta Number Other Subtotal Number ge (%) issues shar from ge (%) es profit 1. Restricted shares 119,295,819 12.93% 44,079 44,079 119,339,898 13.91% 1.1 Shares held by the 0 state 1.2 Shares held by 0 state-own Legal-person 1.3 Shares held by other 1,063,419 0.12% 44,079 44,079 1,107,498 0.13% domestic investors Among which: shares held 0 by domestic legal person Shares held by domestic 1,063,419 0.12% 44,079 44,079 1,107,498 0.13% natural person 1.4 Oversea shareholdings 118,232,400 12.82% 0 118,232,400 13.78% Among which: shares held 118,232,400 12.82% 0 118,232,400 13.78% by oversea legal person Shares held by oversea 0 natural person 2. Unrestricted shares 803,306,492 87.07% -64,524,849 -64,524,849 738,781,643 86.09% 2.1 RMB ordinary shares 561,105,431 60.82% -28,279 -28,279 561,077,152 65.38% 2.2 Domestically listed 242,201,061 26.25% -64,496,570 -64,496,570 177,704,491 20.71% foreign shares 2.3 Oversea listed foreign 0 shares 2.4 Other 0 3. Total shares 922,602,311 100.00% -64,480,770 -64,480,770 858,121,541 100.00% Reasons for the share changes 33 Lu Thai Textile Co., Ltd. Interim Report 2019 √ Applicable □ Not applicable 1. Some supervisors and senior executives’ shares are locked due to changing the term of office, the “restricted shares-shares held by domestic natural person” increase 44,079 shares. 2. 64,480,770 B-shares repurchased by the Company have been cancelled at Shenzhen Branch of China Securities Depository and Clearing Corporation Limited completely on 4 April 2019 and the total shares of the Company reduce 64,480,770 shares. Approval of share changes: □ Applicable √ Not applicable Transfer of share ownership: □ Applicable √ Not applicable Progress on any share repurchases: □ Applicable √ Not applicable Progress on reducing the repurchased shares by means of centralized bidding: □ Applicable √ Not applicable Effects of share changes on the basic and diluted earnings per share, equity per share attributable to the Company’s ordinary shareholders and other financial indicators of the prior year and the prior accounting period, respectively: □ Applicable √ Not applicable Other information that the Company considers necessary or is required by the securities regulator to be disclosed: □ Applicable √ Not applicable 2. Changes in Restricted Shares □ Applicable √ Not applicable II. Issuance and Listing of Securities □ Applicable √ Not applicable III. Total Number of Shareholders and Their Shareholdings Unit: share Total number of preference shareholders Total number of ordinary 55,045 with resumed voting rights at the period-end 0 shareholders at the period-end (if any) (see Note 8) 5% or greater ordinary shareholders or the top 10 ordinary shareholders Shareholdi Increase/decr Pledged or frozen Nature of Total shares Number of Number of Name of ng ease during shares shareholde held at the restricted shares non-restricted shareholder percentage the Reporting Numbe r period-end held shares held Status (%) Period r Zibo Lucheng Domestic Textile Investment non-state- 16.36% 140,353,583 0 0 140,353,583 Co., Ltd. owned 34 Lu Thai Textile Co., Ltd. Interim Report 2019 legal person Foreign Tailun (Thailand) legal 13.78% 118,232,400 0 118,232,400 0 Textile Co., Ltd. person Hong Kong Foreign Securities Clearing legal 3.03% 25,985,611 -8029937 0 25,985,611 Co. Ltd person Central Huijin State-own Assets Management ed legal 2.37% 20,315,300 0 0 20,315,300 Co., Ltd. person Foreign T.Rowe Price Intl legal 2.32% 19,948,219 0 0 19,948,219 Discovery Fund person Domestic China Securities non-state- Finance Corporation owned 2.13% 18,313,391 0 0 18,313,391 Limited legal person Hong Kong Foreign Monetary legal 2.04% 17,487,884 5852491 0 17,487,884 Authority-self-owne person d funds National Social Security Fund Other 1.34% 11,499,947 -500000 0 11,499,947 Portfolio 103 National Social Security Fund Other 0.93% 7,980,051 7980051 0 7,980,051 Portfolio 413 RBC Emerging Foreign Markets Small Cap legal 0.72% 6,181,462 148400 0 6,181,462 Equity Fund person Strategic investors or general corporations becoming top-ten Naught shareholders due to placing of new shares (if any) (see Note 3) Zibo Lucheng Textile Investment Co., Ltd. is the largest shareholder and the actual controller of the Related or acting-in-concert Company. Tailun (Thailand) Textile Co., Ltd. is the second largest shareholder and the foreign parties among the shareholders sponsor of the Company. All the other shareholders are holding tradable A-shares or B-shares. And above it is unknown whether there is any related party or acting-in-concert party among them. Shareholdings of the top ten non-restricted ordinary shareholders 35 Lu Thai Textile Co., Ltd. Interim Report 2019 Number of non-restricted shares held at the Type of shares Name of shareholder period-end Type Shares RMB ordinary Zibo Lucheng Textile Investment Co., Ltd. 140,353,583 share RMB ordinary Hong Kong Securities Clearing Co. Ltd 25,985,611 share Central Huijin Assets Management Co., RMB ordinary 20,315,300 Ltd. share Domestically T.ROWE PRICE INTL DISCOVERY 19,948,219 listed foreign FUND share China Securities Finance Corporation RMB ordinary 18,313,391 Limited share Hong Kong Monetary Authority-self-owned RMB ordinary 17,487,884 funds share RMB ordinary National Social Security Fund Portfolio 103 11,499,947 share RMB ordinary National Social Security Fund Portfolio 413 7,980,051 share Domestically RBC EMERGING MARKETS SMALL 6,181,462 listed foreign CAP EQUITY FUND share RMB ordinary Basic endowment insurance fund 000801 6,000,356 share Explanation on connected relationship among the top ten shareholders of tradable Zibo Lucheng Textile Investment Co., Ltd. is the largest shareholder and the actual share not subject to trading moratorium, as controller of the Company. Tailun (Thailand) Textile Co., Ltd. is the second largest well as among the top ten shareholders of shareholder and the foreign sponsor of the Company. All the other shareholders are tradable share not subject to trading holding tradable A-shares or B-shares. And it is unknown whether there is any related moratorium and top ten shareholders, or party or acting-in-concert party among them. explanation on acting-in-concert Particular about shareholder participate in the securities lending and borrowing Naught business (if any) (note 4) Indicate by tick mark whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary shareholders of the Company conducted any promissory repo during the Reporting Period. □ Yea √ No No such cases in the Reporting Period. 36 Lu Thai Textile Co., Ltd. Interim Report 2019 IV. Change of the Controlling Shareholder or the Actual Controller Change of the controlling shareholder in the Reporting Period: □ Applicable √ Not applicable No such cases in the Reporting Period. Change of the actual controller during the Reporting Period: □ Applicable √ Not applicable No such cases in the Reporting Period. 37 Lu Thai Textile Co., Ltd. Interim Report 2019 Part VII Preferred Shares □ Applicable √ Not applicable No such cases in the Reporting Period. 38 Lu Thai Textile Co., Ltd. Interim Report 2019 Part VIII Directors, Supervisors, Senior Management and Staff I Change in Shareholdings of Directors, Supervisors and Senior Management √ Applicable □ Not applicable Number of Number of Increase in Decrease Number of granted granted Incum Beginning the in the Ending restricted restricted restricted Name Office title bent/fo shareholdi Current Current shareholdi shares granted shares at the shares at the rmer ng (share) Period Period ng (share) in the Current period-begin period-end (share) (share) Period (share) (share) (share) Chairman and Incum Liu Zibin 148,290 148,290 GM bent Incum Xu Zhinan Vice President bent Fujiwara Incum Director Hidetoshi bent Chen Incum Director Ruimou bent Zeng Incum Director Facheng bent Director, Vice Wang Incum GM, and Chief 146,753 146,753 Fangshui bent Engineer Liu Incum Director Deming bent Director and Qin Incum Secretary of the 126,542 126,542 Guiling bent Board Zhang Director and Incum 92,500 92,500 Hongmei Chief Accountant bent Independent Incum Zhou Zhiji director bent Independent Incum Bi Xiuli Director bent Independent Incum Pan Ailing Director bent Wang Independent Incum 39 Lu Thai Textile Co., Ltd. Interim Report 2019 Xinyu Director bent Qu Independent Incum Dongmei director bent Supervisory Zhang Incum Committee 73,100 73,100 Shougang bent Chairman Incum Liu Zilong Supervisor 10,000 10,000 bent Dong Incum Supervisor 5,000 5,000 Shibing bent Zhang Incum Vice GM 52,150 52,150 Jianxiang bent Wang Vice GM, Product Incum 83,700 83,700 Jiabin Manager bent Zhang Vice GM, GM of Incum 80,300 80,300 Zhanqi Lufeng Company bent Fujiwara Manager of Japan Incum Matsuzaka Office bent Secretary of the Zhang Board and Incum 77,700 77,700 Keming Financial bent Manager Incum Li Wenji CIO 10,000 10,000 bent Lyu Vice GM of Incum 33,750 33,750 Yongchen Lufeng Company bent Yu Energy Business Incum 83,100 83,100 Shouzheng Manager bent GM assistant, Wang Incum Fabric Marketing 22,500 22,500 Changzhao bent Manager Manager of Shang Garments Incum Chenggan 30,000 30,000 Production bent g Department GM of Lu Thai Incum Du Lixin (Vietnam) bent Manager of Incum Guo Heng Business bent 40 Lu Thai Textile Co., Ltd. Interim Report 2019 Management GM assistant and Manager of Incum Zhang Wei Strategy Planning bent Department Independent Forme Xu Jianjun director r Independent Forme Zhao Yao director r Manager of Brand Forme Quan Peng Expanding 27,750 6,900 20,850 r Department Total -- -- 1,103,135 0 6,900 1,096,235 0 0 0 II Change of Directors, Supervisors and Senior Management √ Applicable □ Not applicable Name Office title Type of change Date of change Reason for change Xu Jianjun Independent director Left 12 March 2019 Left for expiration of Zhao Yao Independent director 10 June 2019 Regular change in directors his term Zhou Zhiji Independent director Elected 12 March 2019 Qu Independent director Elected 10 June 2019 Regular change in directors Dongmei Manager of Brand Left for expiration of Quan Peng 10 June 2019 Expanding Department his term 41 Lu Thai Textile Co., Ltd. Interim Report 2019 Part IX Corporate Bonds Are there any corporate bonds publicly offered and listed on the stock exchange, which were undue before the approval date of this Report or were due but could not be redeemed in full? No 42 Lu Thai Textile Co., Ltd. Interim Report 2019 Part X Financial Statements I Independent Auditor’s Report Are these interim financial statements audited by an independent auditor? □Yes √ No They are unaudited by such an auditor. II Financial Statements Currency unit for the financial statements and the notes thereto: RMB 1. Consolidated Balance Sheet Prepared by Lu Thai Textile Co., Ltd. 30 June 2019 Unit: RMB Item 30 June 2019 31 December 2018 Current assets: Monetary capital 623,926,353.74 545,502,709.36 Trading financial assets 31,146,000.00 Financial assets at fair value through profit or loss Derivative financial assets Notes receivable 173,998,375.29 174,657,918.26 Accounts receivable 381,453,061.31 374,607,116.55 Prepayments 327,280,818.43 149,582,616.21 Other receivables 53,404,323.51 63,012,001.10 Including: Interest receivable 972,657.58 Dividends receivable Financial assets purchased under resale agreements Inventories 2,338,090,631.11 2,093,366,992.30 Assets classified as held for sale Current portion of non-current assets 51,253,405.99 Other current assets 65,223,036.27 86,366,454.56 Total current assets 4,045,776,005.65 3,487,095,808.34 43 Lu Thai Textile Co., Ltd. Interim Report 2019 Non-current assets: Investments in debt obligations Available-for-sale financial assets 85,112,000.00 Investments in other debt obligations Held-to-maturity investments Long-term receivables 9,670,420.71 10,693,844.75 Long-term equity investments 100,637,911.44 96,018,463.65 Investments in other equity instruments 12,000,000.00 Other non-current financial assets 31,018,515.95 Investment property 38,718,468.86 22,880,242.95 Fixed assets 5,729,951,131.93 5,748,562,385.35 Construction in progress 460,389,887.15 337,230,646.42 Intangible assets 478,905,610.17 478,689,064.45 R&D expense Goodwill 20,563,803.29 20,613,803.29 Long-term prepaid expense 117,916,664.79 119,126,407.71 Deferred income tax assets 83,350,284.01 88,636,929.06 Other non-current assets 73,283,763.00 43,100,215.87 Total non-current assets 7,156,406,461.30 7,050,664,003.50 Total assets 11,202,182,466.95 10,537,759,811.84 Current liabilities: Short-term borrowings 2,137,653,250.29 1,325,273,780.05 Trading financial liabilities Financial liabilities at fair value through profit or loss 4,877,600.00 Derivative financial liabilities Notes payable 63,954,554.34 502,347.05 Accounts payable 258,962,828.52 353,186,163.90 Advances from customers 96,623,151.61 105,562,378.66 Payroll payable 258,386,596.80 325,998,210.17 Taxes payable 49,456,211.84 43,556,823.75 Other payables 213,970,947.86 215,946,987.68 Including: Interest payable 4,728,481.25 3,068,841.54 Dividends payable 441,113.64 441,113.64 Liabilities directly associated with assets classified as held for sale 44 Lu Thai Textile Co., Ltd. Interim Report 2019 Current portion of non-current liabilities 144,282,763.91 Other current liabilities Total current liabilities 3,223,290,305.17 2,374,904,291.26 Non-current liabilities: Long-term borrowings 170,019,083.89 Long-term payables Long-term payroll payable 86,420,799.53 96,958,178.53 Provisions Deferred income 139,234,253.96 140,183,446.39 Deferred income tax liabilities 27,881,406.51 28,030,096.38 Other non-current liabilities 1,840,000.00 1,840,000.00 Total non-current liabilities 255,376,460.00 437,030,805.19 Total liabilities 3,478,666,765.17 2,811,935,096.45 Owners’ equity: Share capital 858,121,541.00 922,602,311.00 Capital reserves 256,632,428.28 699,493,647.48 Less: Treasury stock 486,922,944.94 Other comprehensive income 72,443,324.62 61,157,013.37 Specific reserve Surplus reserves 1,022,717,451.40 1,022,717,451.40 General reserve Retained earnings 4,925,683,720.45 4,927,500,989.55 Total equity attributable to owners of the Company as the parent 7,135,598,465.75 7,146,548,467.86 Non-controlling interests 587,917,236.03 579,276,247.53 Total owners’ equity 7,723,515,701.78 7,725,824,715.39 Total liabilities and owners’ equity 11,202,182,466.95 10,537,759,811.84 Legal representative: Liu Zibin Chief Accountant: Zhang Hongmei Financial Manager: Zhang Keming 2. Balance Sheet of the Company as the Parent Unit: RMB Item 30 June 2019 31 December 2018 Current assets: Monetary capital 253,467,095.41 191,305,104.80 Trading financial assets 31,146,000.00 45 Lu Thai Textile Co., Ltd. Interim Report 2019 Financial assets at fair value through profit or loss Derivative financial assets Notes receivable 62,119,619.38 91,555,248.34 Accounts receivable 369,665,176.01 316,225,973.28 Financings backed by accounts receivable Prepayments 217,392,254.90 115,020,260.51 Other receivables 555,969,515.96 395,847,213.77 Including: Interest receivable Dividends receivable Inventories 1,311,906,461.89 1,040,433,078.53 Assets classified as held for sale Current portion of non-current assets 51,253,405.99 Other current assets 7,410,828.74 12,671,631.64 Total current assets 2,860,330,358.28 2,163,058,510.87 Non-current assets: Investments in debt obligations Available-for-sale financial assets 73,112,000.00 Investments in other debt obligations Held-to-maturity investments Long-term receivables Long-term equity investments 2,523,253,227.48 2,165,711,579.69 Investments in other equity instruments Other non-current financial assets 31,018,515.95 Investment property 31,766,770.96 14,804,592.72 Fixed assets 2,663,119,201.22 2,731,726,695.28 Construction in progress 76,310,555.47 61,182,771.86 Intangible assets 237,748,353.76 242,204,032.54 R&D expense Goodwill Long-term prepaid expense Deferred income tax assets 46,726,237.53 52,758,961.05 Other non-current assets 30,594,810.94 6,047,443.10 Total non-current assets 5,640,537,673.31 5,347,548,076.24 Total assets 8,500,868,031.59 7,510,606,587.11 46 Lu Thai Textile Co., Ltd. Interim Report 2019 Current liabilities: Short-term borrowings 1,206,050,936.38 622,604,447.52 Trading financial liabilities Financial liabilities at fair value through profit or loss 4,877,600.00 Derivative financial liabilities Notes payable 394,797,353.60 120,000.00 Accounts payable 240,536,449.31 120,021,727.66 Advances from customers 56,085,488.30 49,798,551.14 Payroll payable 190,846,147.50 240,090,943.88 Taxes payable 21,194,320.12 30,914,089.32 Other payables 246,431,412.57 303,672,590.72 Including: Interest payable 4,290,666.39 2,475,549.88 Dividends payable 441,113.64 441,113.64 Liabilities directly associated with assets classified as held for sale Current portion of non-current liabilities Other current liabilities Total current liabilities 2,355,942,107.78 1,372,099,950.24 Non-current liabilities: Long-term borrowings Long-term payables Long-term payroll payable 86,420,799.53 96,958,178.53 Provisions Deferred income 94,086,040.14 94,390,844.09 Deferred income tax liabilities 16,779,630.43 16,699,530.43 Other non-current liabilities Total non-current liabilities 197,286,470.10 208,048,553.05 Total liabilities 2,553,228,577.88 1,580,148,503.29 Owners’ equity: Share capital 858,121,541.00 922,602,311.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 317,206,232.47 759,836,756.57 Less: Treasury stock 486,922,944.94 47 Lu Thai Textile Co., Ltd. Interim Report 2019 Other comprehensive income 520,200.00 Specific reserve Surplus reserves 1,019,608,711.76 1,019,608,711.76 Retained earnings 3,752,702,968.48 3,714,813,049.43 Total owners’ equity 5,947,639,453.71 5,930,458,083.82 Total liabilities and owners’ equity 8,500,868,031.59 7,510,606,587.11 3. Consolidated Income Statement Unit: RMB Item H1 2019 H1 2018 1. Revenue 3,185,448,344.01 3,280,407,775.82 Including: Operating revenue 3,185,448,344.01 3,280,407,775.82 Interest income 2. Costs and expenses 2,737,159,910.26 2,838,643,909.66 Including: Cost of sales 2,210,886,955.53 2,360,836,431.41 Interest expense Taxes and surcharges 42,736,804.77 54,470,407.88 Selling expense 77,836,942.94 66,941,088.56 Administrative expense 191,205,597.74 163,274,510.70 R&D expense 161,939,039.23 162,596,245.80 Finance costs 52,554,570.05 30,525,225.31 Including: Interest expense 47,316,465.76 22,535,312.05 Interest income 4,338,765.10 7,403,493.02 Add: Other income 32,226,225.91 37,142,521.95 Return on investment (“-” for loss) 10,417,475.41 4,646,023.78 Including: Share of profit or loss of joint ventures and 5,083,101.54 -1,730,597.59 associates Income from the derecognition of financial assets at amortized cost (“-” for loss) Foreign exchange gain (“-” for loss) Net gain on exposure hedges (“-” for loss) Gain on changes in fair value (“-” for loss) 5,282,600.00 -28,481,010.00 Credit impairment loss (“-” for loss) -530,951.31 Asset impairment loss (“-” for loss) -1,543,199.38 -2,121,494.84 Asset disposal income (“-” for loss) 513,490.00 -522,286.65 48 Lu Thai Textile Co., Ltd. Interim Report 2019 3. Operating profit (“-” for loss) 494,654,074.38 452,427,620.40 Add: Non-operating income 3,097,024.44 3,007,154.83 Less: Non-operating expense 2,214,356.54 1,994,923.71 4. Profit before tax (“-” for loss) 495,536,742.28 453,439,851.52 Less: Income tax expense 74,839,232.29 63,275,514.57 5. Net profit (“-” for net loss) 420,697,509.99 390,164,336.95 5.1 By operating continuity 5.1.1 Net profit from continuing operations (“-” for net loss) 420,697,509.99 390,164,336.95 5.1.2 Net profit from discontinued operations (“-” for net loss) 5.2 By ownership 5.2.1 Net profit attributable to owners of the Company as the 411,446,216.59 377,355,959.02 parent 5.2.1 Net profit attributable to non-controlling interests 9,251,293.40 12,808,377.93 6. Other comprehensive income, net of tax 11,806,511.25 27,559,653.92 Attributable to owners of the Company as the parent 11,806,511.25 27,559,653.92 6.1 Items that will not be reclassified to profit or loss 6.1.1 Changes caused by remeasurements on defined benefit pension schemes 6.1.2 Other comprehensive income that will not be reclassified to profit or loss under the equity method 6.1.3 Changes in the fair value of investments in other equity instruments 6.1.4 Changes in the fair value of the company’s credit risks 6.1.5 Other 6.2 Items that will be reclassified to profit or loss 11,806,511.25 27,559,653.92 6.2.1 Other comprehensive income that will be reclassified to profit or loss under the equity method 6.2.2 Changes in the fair value of investments in other debt obligations 6.2.3 Gain/Loss on changes in the fair value of 1,020,000.00 available-for-sale financial assets 6.2.4 Other comprehensive income arising from the reclassification of financial assets 6.2.5 Gain/Loss arising from the reclassification of held-to-maturity investments to available-for-sale financial assets 6.2.6 Allowance for credit impairments in investments in other debt obligations 6.2.7 Reserve for cash flow hedges 49 Lu Thai Textile Co., Ltd. Interim Report 2019 6.2.8 Differences arising from the translation of foreign 11,806,511.25 26,539,653.92 currency-denominated financial statements 6.2.9 Other Attributable to non-controlling interests 7. Total comprehensive income 432,504,021.24 417,723,990.87 Attributable to owners of the Company as the parent 423,252,727.84 404,915,612.94 Attributable to non-controlling interests 9,251,293.40 12,808,377.93 8. Earnings per share 8.1 Basic earnings per share 0.48 0.41 8.2 Diluted earnings per share 0.48 0.41 Where business combinations under common control occurred in the current period, the net profit achieved by the acquirees before the combinations was RMB0.00, with the amount for the same period of last year being RMB0.00. Legal representative: Liu Zibin Chief Accountant: Zhang Hongmei Financial Manager: Zhang Keming 4. Income Statement of the Company as the Parent Unit: RMB Item H1 2019 H1 2018 1. Operating revenue 2,488,329,566.37 2,503,788,850.64 Less: Cost of sales 1,847,868,451.77 1,861,404,465.69 Taxes and surcharges 28,685,411.40 40,307,584.75 Selling expense 46,460,101.19 38,315,465.09 Administrative expense 115,345,994.08 99,865,575.84 R&D expense 111,017,731.29 114,901,275.65 Finance costs 12,593,818.90 11,391,279.87 Including: Interest expense 14,948,218.54 5,723,459.78 Interest income 1,707,105.18 3,196,632.70 Add: Other income 20,170,944.34 28,592,746.20 Return on investment (“-” for loss) 156,928,724.90 1,917,402.93 Including: Share of profit or loss of joint ventures and 5,083,101.54 -1,730,597.59 associates Income from the derecognition of financial assets at amortized cost (“-” for loss) Net gain on exposure hedges (“-” for loss) Gain on changes in fair value (“-” for loss) 5,282,600.00 -18,847,500.00 50 Lu Thai Textile Co., Ltd. Interim Report 2019 Credit impairment loss (“-” for loss) -2,533,623.96 Asset impairment loss (“-” for loss) 1,182,154.91 Asset disposal income (“-” for loss) 593,665.89 -9,032,750.08 2. Operating profit (“-” for loss) 506,800,368.91 341,415,257.71 Add: Non-operating income 2,310,510.04 1,865,030.22 Less: Non-operating expense 1,023,788.67 1,119,027.21 3. Profit before tax (“-” for loss) 508,087,090.28 342,161,260.72 Less: Income tax expense 56,933,685.54 56,959,321.51 4. Net profit (“-” for net loss) 451,153,404.74 285,201,939.21 4.1 Net profit from continuing operations (“-” for net loss) 451,153,404.74 285,201,939.21 4.2 Net profit from discontinued operations (“-” for net loss) 5. Other comprehensive income, net of tax 1,020,000.00 5.1 Items that will not be reclassified to profit or loss 5.1.1 Changes caused by remeasurements on defined benefit pension schemes 5.1.2 Other comprehensive income that will not be reclassified to profit or loss under the equity method 5.1.3 Changes in the fair value of investments in other equity instruments 5.1.4 Changes in the fair value of the company’s credit risks 5.1.5 Other 5.2 Items that will be reclassified to profit or loss 1,020,000.00 5.2.1 Other comprehensive income that will be reclassified to profit or loss under the equity method 5.2.2 Changes in the fair value of investments in other debt obligations 5.2.3 Gain/Loss on changes in the fair value of available-for-sale 1,020,000.00 financial assets 5.2.4 Other comprehensive income arising from the reclassification of financial assets 5.2.5 Gain/Loss arising from the reclassification of held-to-maturity investments to available-for-sale financial assets 5.2.6 Allowance for credit impairments in investments in other debt obligations 5.2.7 Reserve for cash flow hedges 5.2.8 Differences arising from the translation of foreign currency-denominated financial statements 5.2.9 Other 51 Lu Thai Textile Co., Ltd. Interim Report 2019 6. Total comprehensive income 451,153,404.74 286,221,939.21 7. Earnings per share 7.1 Basic earnings per share 0.53 0.31 7.2 Diluted earnings per share 0.53 0.31 5. Consolidated Cash Flow Statement Unit: RMB Item H1 2019 H1 2018 1. Cash flows from operating activities: Proceeds from sale of commodities and rendering of services 3,110,163,161.87 3,222,986,999.01 Tax rebates 95,975,203.98 114,081,775.79 Cash generated from other operating activities 46,482,650.58 58,830,516.70 Subtotal of cash generated from operating activities 3,252,621,016.43 3,395,899,291.50 Payments for commodities and services 1,987,264,167.92 1,580,866,513.00 Cash paid to and for employees 882,377,720.86 866,022,073.85 Taxes paid 171,428,644.27 138,363,376.99 Cash used in other operating activities 91,833,420.81 112,862,616.89 Subtotal of cash used in operating activities 3,132,903,953.86 2,698,114,580.73 Net cash generated from/used in operating activities 119,717,062.57 697,784,710.77 2. Cash flows from investing activities: Proceeds from disinvestment 30,000,000.00 Return on investment 2,402,138.74 Net proceeds from the disposal of fixed assets, intangible assets 2,599,510.60 936,526.59 and other long-lived assets Net proceeds from the disposal of subsidiaries and other business units Cash generated from other investing activities 9,836,798.66 13,528,136.07 Subtotal of cash generated from investing activities 44,838,448.00 14,464,662.66 Payments for the acquisition of fixed assets, intangible assets and 336,291,428.03 438,092,015.33 other long-lived assets Payments for investments 50,000,000.00 Net payments for the acquisition of subsidiaries and other business units Cash used in other investing activities 4,874,724.40 Subtotal of cash used in investing activities 391,166,152.43 438,092,015.33 Net cash generated from/used in investing activities -346,327,704.43 -423,627,352.67 52 Lu Thai Textile Co., Ltd. Interim Report 2019 3. Cash flows from financing activities: Capital contributions received 50,000,000.00 500,000.00 Including: Capital contributions by non-controlling interests to 50,000,000.00 500,000.00 subsidiaries Borrowings obtained 2,583,222,673.24 1,554,914,896.37 Cash generated from other financing activities 19,000,000.00 39,317,500.00 Subtotal of cash generated from financing activities 2,652,222,673.24 1,594,732,396.37 Repayments of borrowings 1,801,353,379.40 1,235,496,710.59 Payments for interest and dividends 514,442,200.45 469,601,858.04 Including: Dividends paid by subsidiaries to non-controlling 50,000,000.00 interests Cash used in other financing activities 21,164,104.03 175,517,237.20 Subtotal of cash used in financing activities 2,336,959,683.88 1,880,615,805.83 Net cash generated from/used in financing activities 315,262,989.36 -285,883,409.46 4. Effect of foreign exchange rate changes on cash and cash -228,703.12 6,658,728.34 equivalents 5. Net increase in cash and cash equivalents 88,423,644.38 -5,067,323.02 Add: Cash and cash equivalents, beginning of the period 535,134,772.90 676,639,212.86 6. Cash and cash equivalents, end of the period 623,558,417.28 671,571,889.84 6. Cash Flow Statement of the Company as the Parent Unit: RMB Item H1 2019 H1 2018 1. Cash flows from operating activities: Proceeds from sale of commodities and rendering of services 2,462,659,877.36 2,547,140,430.96 Tax rebates 61,662,415.98 70,272,032.57 Cash generated from other operating activities 21,521,514.73 36,415,607.59 Subtotal of cash generated from operating activities 2,545,843,808.07 2,653,828,071.12 Payments for commodities and services 1,310,008,487.94 1,356,047,613.94 Cash paid to and for employees 584,827,906.35 605,320,730.04 Taxes paid 111,246,694.11 87,174,263.36 Cash used in other operating activities 44,098,655.74 65,254,416.78 Subtotal of cash used in operating activities 2,050,181,744.14 2,113,797,024.12 Net cash generated from/used in operating activities 495,662,063.93 540,031,047.00 2. Cash flows from investing activities: 53 Lu Thai Textile Co., Ltd. Interim Report 2019 Proceeds from disinvestment 30,000,000.00 Return on investment 152,402,138.74 Net proceeds from the disposal of fixed assets, intangible assets 2,577,416.61 71,378,849.40 and other long-lived assets Net proceeds from the disposal of subsidiaries and other business units Cash generated from other investing activities 71,873,773.84 408,047,687.20 Subtotal of cash generated from investing activities 256,853,329.19 479,426,536.60 Payments for the acquisition of fixed assets, intangible assets and 122,593,981.68 75,495,986.86 other long-lived assets Payments for investments 402,922,200.00 350,352,500.00 Net payments for the acquisition of subsidiaries and other business units Cash used in other investing activities 240,578,744.40 329,863,300.00 Subtotal of cash used in investing activities 766,094,926.08 755,711,786.86 Net cash generated from/used in investing activities -509,241,596.89 -276,285,250.26 3. Cash flows from financing activities: Capital contributions received Borrowings obtained 1,694,064,390.96 905,214,428.57 Net proceeds from the issuance of bonds Cash generated from other financing activities 130,000,000.00 173,828,100.00 Subtotal of cash generated from financing activities 1,824,064,390.96 1,079,042,528.57 Repayments of borrowings 1,115,914,126.27 821,108,369.41 Payments for interest and dividends 434,574,114.51 455,588,046.43 Cash used in other financing activities 196,713,504.03 175,517,237.20 Subtotal of cash used in financing activities 1,747,201,744.81 1,452,213,653.04 Net cash generated from/used in financing activities 76,862,646.15 -373,171,124.47 4. Effect of foreign exchange rate changes on cash and cash -1,121,122.58 -2,646,087.14 equivalents 5. Net increase in cash and cash equivalents 62,161,990.61 -112,071,414.87 Add: Cash and cash equivalents, beginning of the period 191,305,104.80 267,809,829.78 6. Cash and cash equivalents, end of the period 253,467,095.41 155,738,414.91 54 Lu Thai Textile Co., Ltd. Interim Report 2019 7. Consolidated Statements of Changes in Owners’ Equity H1 2019 Unit: RMB H1 2019 Equity attributable to owners of the Company as the parent Other equity Item instruments Spec Gen Other Ot Non-controllin Total owners’ Pref Perp Less: Treasury ific eral Share capital Ot Capital reserves comprehensiv Surplus reserves Retained earnings he Subtotal g interests equity erred etual stock reser reser he e income r shar bond ve ve r es s 1. Balances as at the 486,922,944.9 1,022,717,451.4 7,146,548,467.8 579,276,247.5 7,725,824,715.3 922,602,311.00 699,493,647.48 61,157,013.37 4,927,500,989.55 end of the prior year 4 0 6 3 9 Add: Adjustments for changed -520,200.00 15,797,284.81 15,277,084.81 15,277,084.81 accounting policies Adjustments for corrections of previous errors Adjustments for business combinations under common control Other adjustments 2. Balances as at the 486,922,944.9 1,022,717,451.4 7,161,825,552.6 579,276,247.5 7,741,101,800.2 beginning of the 922,602,311.00 699,493,647.48 60,636,813.37 4,943,298,274.36 4 0 7 3 0 year 55 Lu Thai Textile Co., Ltd. Interim Report 2019 3. Increase/ decrease -486,922,944. in the period (“-” for -64,480,770.00 -442,861,219.20 11,806,511.25 -17,614,553.91 -26,227,086.92 8,640,988.50 -17,586,098.42 94 decrease) 3.1 Total comprehensive 11,806,511.25 411,446,216.59 423,252,727.84 9,251,293.40 432,504,021.24 income 3.2 Capital -486,922,944. increased and -64,480,770.00 -442,861,219.20 -20,419,044.26 49,389,695.10 28,970,650.84 94 reduced by owners 3.2.1 Ordinary -486,922,944. shares increased by -64,480,770.00 -442,630,569.04 -20,188,394.10 50,000,000.00 29,811,605.90 94 shareholders 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments included in owners’ equity 3.2.4 Other -230,650.16 -230,650.16 -610,304.90 -840,955.06 3.3 Profit -50,000,000.0 -429,060,770.50 -429,060,770.50 -479,060,770.50 distribution 0 3.3.1 Appropriation to surplus reserves 3.3.2 Appropriation to general reserve 56 Lu Thai Textile Co., Ltd. Interim Report 2019 3.3.3 Appropriation to -50,000,000.0 -429,060,770.50 -429,060,770.50 -479,060,770.50 owners (or 0 shareholders) 3.3.4 Other 3.4 Transfers within owners’ equity 3.4.1 Increase in capital (or share capital) from capital reserves 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit pension schemes transferred to retained earnings 3.4.5 Other comprehensive income transferred to retained earnings 3.4.6 Other 57 Lu Thai Textile Co., Ltd. Interim Report 2019 3.5 Specific reserve 3.5.1 Increase in the period 3.5.2 Used in the period 3.6 Other 4. Balances as at the 1,022,717,451.4 7,135,598,465.7 587,917,236.0 7,723,515,701.7 858,121,541.00 256,632,428.28 72,443,324.62 4,925,683,720.45 end of the period 0 5 3 8 H1 2018 Unit: RMB H1 2018 Equity attributable to owners of the Company as the parent Other equity Item instruments Spec Gen Other Ot Non-controllin Total owners’ Pref Perp Less: Treasury ific eral Share capital g interests equity Ot Capital reserves comprehensiv Surplus reserves Retained earnings he Subtotal erred etual stock reser reser he e income r shar bond ve ve r es s 1. Balances as at the 7,230,942,770.1 544,132,719.6 7,775,075,489.8 922,602,311.00 699,493,593.82 16,810,574.22 962,933,579.06 4,629,102,712.06 end of the prior year 6 4 0 Add: Adjustments for changed accounting policies Adjustments for corrections of previous errors Adjustments for 58 Lu Thai Textile Co., Ltd. Interim Report 2019 business combinations under common control Other adjustments 2. Balances as at the 7,230,942,770.1 544,132,719.6 7,775,075,489.8 beginning of the 922,602,311.00 699,493,593.82 16,810,574.22 962,933,579.06 4,629,102,712.06 6 4 0 year 3. Increase/ decrease 121,952,709.4 in the period (“-” for 53.66 27,559,653.92 -75,988,368.98 -170,381,370.89 13,308,377.93 -157,072,992.96 9 decrease) 3.1 Total comprehensive 27,559,653.92 377,355,959.02 404,915,612.94 12,808,377.93 417,723,990.87 income 3.2 Capital 121,952,709.4 increased and 53.66 -121,952,655.83 500,000.00 -121,452,655.83 9 reduced by owners 3.2.1 Ordinary 121,952,709.4 shares increased by -121,952,709.49 500,000.00 -121,452,709.49 9 shareholders 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments included in owners’ equity 3.2.4 Other 53.66 53.66 53.66 3.3 Profit -453,344,328.00 -453,344,328.00 -453,344,328.00 59 Lu Thai Textile Co., Ltd. Interim Report 2019 distribution 3.3.1 Appropriation to surplus reserves 3.3.2 Appropriation to general reserve 3.3.3 Appropriation to -453,344,328.00 -453,344,328.00 -453,344,328.00 owners (or shareholders) 3.3.4 Other 3.4 Transfers within owners’ equity 3.4.1 Increase in capital (or share capital) from capital reserves 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit pension schemes transferred to 60 Lu Thai Textile Co., Ltd. Interim Report 2019 retained earnings 3.4.5 Other comprehensive income transferred to retained earnings 3.4.6 Other 3.5 Specific reserve 3.5.1 Increase in the period 3.5.2 Used in the period 3.6 Other 4. Balances as at the 121,952,709.4 7,060,561,399.2 557,441,097.5 7,618,002,496.8 922,602,311.00 699,493,647.48 44,370,228.14 962,933,579.06 4,553,114,343.08 end of the period 9 7 7 4 8. Statements of Changes in Owners’ Equity of the Company as the Parent H1 2019 Unit: RMB H1 2019 Other equity instruments Specifi Other Item Less: Treasury c Othe Total owners’ Share capital Preferre Perpetua Capital reserves comprehensive Surplus reserves Retained earnings Other stock reserv r equity d shares l bonds income e 1. Balances as at the end of the prior 922,602,311.00 759,836,756.57 486,922,944.94 520,200.00 1,019,608,711.76 3,714,813,049.43 5,930,458,083.82 year Add: Adjustments for changed -520,200.00 15,797,284.81 15,277,084.81 accounting policies 61 Lu Thai Textile Co., Ltd. Interim Report 2019 Adjustments for corrections of previous errors Other adjustments 2. Balances as at the beginning of 922,602,311.00 759,836,756.57 486,922,944.94 1,019,608,711.76 3,730,610,334.24 5,945,735,168.63 the year 3. Increase/ decrease in the period -64,480,770.00 -442,630,524.10 -486,922,944.94 22,092,634.24 1,904,285.08 (“-” for decrease) 3.1 Total comprehensive income 451,153,404.74 451,153,404.74 3.2 Capital increased and reduced -64,480,770.00 -442,630,524.10 -486,922,944.94 -20,188,349.16 by owners 3.2.1 Ordinary shares increased -64,480,770.00 -442,630,569.04 -486,922,944.94 -20,188,394.10 by shareholders 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments included in owners’ equity 3.2.4 Other 44.94 44.94 3.3 Profit distribution -429,060,770.50 -429,060,770.50 3.3.1 Appropriation to surplus reserves 3.3.2 Appropriation to owners -429,060,770.50 -429,060,770.50 (or shareholders) 3.3.3 Other 3.4 Transfers within owners’ equity 3.4.1 Increase in capital (or share capital) from capital reserves 62 Lu Thai Textile Co., Ltd. Interim Report 2019 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit pension schemes transferred to retained earnings 3.4.5 Other comprehensive income transferred to retained earnings 3.4.6 Other 3.5 Specific reserve 3.5.1 Increase in the period 3.5.2 Used in the period 3.6 Other 4. Balances as at the end of the 858,121,541.00 317,206,232.47 1,019,608,711.76 3,752,702,968.48 5,947,639,453.71 period H1 2018 Unit: RMB H1 2018 Other equity instruments Specifi Other Item Less: Treasury c Othe Total owners’ Share capital Preferre Perpetua Capital reserves comprehensive Surplus reserves Retained earnings Other stock reserv r equity d shares l bonds income e 1. Balances as at the end of the prior 922,602,311.00 759,836,702.91 28,050.00 959,824,839.42 3,630,102,526.37 6,272,394,429.70 year Add: Adjustments for changed accounting policies 63 Lu Thai Textile Co., Ltd. Interim Report 2019 Adjustments for corrections of previous errors Other adjustments 2. Balances as at the beginning of 922,602,311.00 759,836,702.91 28,050.00 959,824,839.42 3,630,102,526.37 6,272,394,429.70 the year 3. Increase/ decrease in the period 53.66 121,952,709.49 1,020,000.00 -168,142,388.79 -289,075,044.62 (“-” for decrease) 3.1 Total comprehensive income 1,020,000.00 285,201,939.21 286,221,939.21 3.2 Capital increased and reduced 53.66 121,952,709.49 -121,952,655.83 by owners 3.2.1 Ordinary shares increased 121,952,709.49 -121,952,709.49 by shareholders 3.2.2 Capital increased by holders of other equity instruments 3.2.3 Share-based payments included in owners’ equity 3.2.4 Other 53.66 53.66 3.3 Profit distribution -453,344,328.00 -453,344,328.00 3.3.1 Appropriation to surplus reserves 3.3.2 Appropriation to owners -453,344,328.00 -453,344,328.00 (or shareholders) 3.3.3 Other 3.4 Transfers within owners’ equity 3.4.1 Increase in capital (or share capital) from capital reserves 64 Lu Thai Textile Co., Ltd. Interim Report 2019 3.4.2 Increase in capital (or share capital) from surplus reserves 3.4.3 Loss offset by surplus reserves 3.4.4 Changes in defined benefit pension schemes transferred to retained earnings 3.4.5 Other comprehensive income transferred to retained earnings 3.4.6 Other 3.5 Specific reserve 3.5.1 Increase in the period 3.5.2 Used in the period 3.6 Other 4. Balances as at the end of the 922,602,311.00 759,836,756.57 121,952,709.49 1,048,050.00 959,824,839.42 3,461,960,137.58 5,983,319,385.08 period 65 Lu Thai Textile Co., Ltd. Interim Report 2019 III. Company Profile Lu Thai Textile Co., Ltd. (hereinafter referred to as the “Company”) is a joint venture invested by Zibo Lucheng Textile Investment Co., Ltd (originally named Zibo Lucheng Textile Co., Ltd, hereinafter referred to as Lucheng Textile) and Thailand Tailun Textile Co., Ltd. On 3 February 1993, the Company is approved by the former Ministry of Foreign Trade and Economy of the State (1993) in WJMZEHZ No. 59 to convert into a joint-stock enterprise. Zibo Administration for Industry and Commerce issued the Company corporate business license with the registration No. of QGLZZZ No. 000066. In July 1997, the Company is approved by the Securities Committee of the Department of the State in the ZWF (1997) No. 47 to issue 80 million shares of domestically listed foreign share( B-shares) at the price of RMB1.00 per share. Upon approved by Shenzhen Stock Exchange with No. (1997) 296 Listing Notice, the Company is listed on the Shenzhen Stock Exchange on 19 August 1997 with B-shares stock code of 200726. On 24 November 2000, approved by ZJGSZ [2000] No.199 by CSRC, the Company increased publication of 50 million shares of general share (A-shares) at the book value of RMB1.00, which are listed on the Shenzhen Stock Exchange on 25 December 2000 with A-shares stock code of 000726 through approval by Shenzhen Stock Exchange with No. (2000) 162 Listing Notice. As approved by 2000 Annual General Meeting in May 2001, the Company carried out the distribution plan that 10 shares of capital public reserve are converted to 3 more shares for each 10 shares. As approved by Resolutions of 2001 Annual General Meeting in June 2002, the Company implemented the distribution plan that 10 shares of capital public reserve are converted 3 more shares for each 10 shares again. As approved by 2002 Annual General Meeting in May 2003, the Company implemented the distribution plan that 10 shares of capital public reserve are 2 more shares for each 10 shares, and inner employees’ shared increased to 40.56 million shares. As examined and approved by ZJGSZ No. [2000] 199 of CSRC, the inner employees’ shares will start circulation 3 years later since listing on the A-share market. On 25 December 2003, the inner employees’ shares reach 3 years since listing on the A-share stock market, and they set out circulation on 26 December 2003. As approved by the Annual General Meeting 2006 held in June 2007, the Company implemented the plan on converting 10 shares to all its shareholders with capital reserves for every 10 shares. After capitalization, the registered capital of the Company was RMB844.8648 million. The Company, in accordance with the official reply on approving Lu Thai Textile Co., Ltd. to issue additional shares (ZJXK [2008] No. 890 document) from CSRC, issued the Renminbi common shares (A shares) amounting to 150 million shares on 8 December 2008. According to the relevant resolution of the 2nd Special Extraordinary General Meeting of 2011, the relevant resolution of the 15th Meeting of the 6th Board of Directors, the Opinion of China Securities Regulatory Commission on the Restricted Share Incentive Plan of Lu Thai Textile Co., Ltd. (Shang-Shi-Bu-Han [2011] No. 206), the Company applied for a registered capital increment of RMB14.09 million, which was contributed by restricted share incentive receivers with monetary funds. In accordance with the resolution of Proposal on Repurchasing and Canceling Partial Restricted Shares already Granted for the Original Incentive Targets not Reaching the Incentive Conditions made at the 23rd Session of the 6th Board of Directors on 13 August 2012, the Company canceling a total of 60,000.00 shares already granted for the original incentive targets not reaching the incentive conditions. According to the second temporary resolution of Proposal on counter purchase of part of the domestic listed foreign share (B share) on 25 June 2012, the Company counter purchase domestic listed foreign share (B share) 48,837,300 shares. According to the Proposal on Repurchase and Cancel Part of Unlocked Restricted Share of the Original Incentive Personnel not Conforming to the Incentive Condition, Proposal on Repurchase and Cancel unlocked Restricted Share in Second Unlocked Period of all the Incentive Personnel reviewed and approved by the 26th Meeting of the 6th Board of Directors on 27 March 2013, the Company repurchase and cancel 4,257,000 shares owned by original people whom to motivate. According to the Proposal on Repurchase and Write-off of Partly of the Original Incentive Targets Not Met with the Incentive Conditions but Granted Restricted Shares approved on the 11 th Meeting of the 7th Board of Directors on 11 June 2014, to execute repurchase and write-off of the whole granted shares of 42,000 shares of the original incentive targets not met with the incentive targets of the Company. As per the Proposal on Buy-back of Some A- and B-shares considered and approved as a resolution at the 1st special meeting of shareholders on 5 August 2015, the Company repurchased 33,156,200 domestically listed foreign shares (B-shares). According to the Agreement about Repurchase of Part of the Company’s B Shares by the Resolutions on the 2nd Extraordinary General Meeting of 2018 on 23 March 2018, the Company repurchased 17.6748 million domestically listed 66 Lu Thai Textile Co., Ltd. Interim Report 2019 foreign shares (B shares). As of 30 June 2019, the registered capital of the Company was RMB858.1215 million. The Company’s registered address: No. 11, Mingbo Road, Hi-tech Development Zone, Zibo, Shandong The Company’s legal representative: Liu Zibin The Company’s business scope includes the production, processing and sales business of cotton yarn, yarn dyed fabrics, shirts, fashion accessories, health underwear and other textile products and their mating products; design, R&D and technology services of the textile and garment products; acquisition and export of products not under exclusive rights or quota licenses; and hotel, guesthouses, catering, conferences, and training services; rental business of the self-owned houses and land; the production and sales of the purified water projects. The Company’s financial statements have been approved for issue by the Board of Directors of the Company on 1 August 2019. There were 16 subsidiaries included into the consolidation scope of the Company from January to June 2019, and for the details, please refer to Notes IX. “Equities among Other Entities”. IV Basis for Preparation of Financial Statements 1. Preparation Basis With the going-concern assumption as the basis and based on transactions and other events that actually occurred, the Group prepared financial statements in accordance with The Accounting Standards for Business Enterprises—Basic Standard issued by the Ministry of Finance with Decree No. 33 and revised with Decree No. 76, the 42 specific accounting standards, the Application Guidance of Accounting Standards for Business Enterprises, the Interpretation of Accounting Standards for Business Enterprises and other regulations issued and revised from 15 February 2006 onwards (hereinafter jointly referred to as “the Accounting Standards for Business Enterprises”, “China Accounting Standards” or “CAS”), as well as the Rules for Preparation Convention of Disclosure of Public Offering Companies No.15 – General Regulations for Financial Reporting (revised in 2014) by China Securities Regulatory Commission. In accordance with relevant provisions of the Accounting Standards for Business Enterprises, the Group adopted the accrual basis in accounting. Except for some financial instruments, the financial statements were based on historical costs for measurement. Non-current asset held for sale was priced according to the lower one between the amount of fair value minus estimated costs and the original book value which complies with the conditions of holding for sale. If impairment occurred on an asset, an impairment reserve was withdrawn accordingly pursuant to relevant requirements. V. Significant Accounting Policies and Estimates Specific accounting policies and accounting estimates indicators: The Company and each subsidiary mainly engage in the production and operation of textile products. The Company and each subsidiary according to the actual production and operation characteristics and the regulations of the relevant ASBE, formulated certain specific accounting policies and accounting estimates of the transactions and events such as recognizing the revenues, and for details, please refer to each description of Notes IV. As for the notes to the important accounting judgment and estimations made by the management level, please refer to Notes V. 29 “Other significant accounting policies and estimations”. 1. Statement of Compliance with the Accounting Standards for Business Enterprises The financial statements prepared by the Company are in compliance with in compliance with the Accounting Standards for Business Enterprises, which factually and completely present the Company’s, and the Company’s financial positions as at 30 June 2019, 67 Lu Thai Textile Co., Ltd. Interim Report 2019 business results and cash flows for the January to June of 2019, and other relevant information. In addition, the Company’s and the Company’s financial statements meet the requirements of disclosing financial statements and notes thereto stated in the Rules for Preparation Convention of Disclosure of Public Offering Companies No.15 – General Regulations for Financial Reporting (revised in 2014) by China Securities Regulatory Commission. 2. Fiscal Period The Company’s fiscal periods include fiscal years and fiscal periods shorter than a complete fiscal year. The Company’s fiscal year starts on January 1st and ends on December 31st of every year according to the Gregorian calendar. 3. Operating Cycle Normal operating cycle refers to the period from the Group purchases the assets for processing to realize the cash or cash equivalents. The Group regards 12 months as an operating cycle and regards which as the partition criterion of the mobility of the assets and liabilities. 4. Recording Currency Renminbi (RMB) is regarded as the prevailing currency used in the main economic circumstances of the Company and its domestic subsidiaries. The Company and its domestic subsidiaries adopt RMB as the recording currency. The Company and its overseas subsidiaries confirm to adopt HK Dollar and US Dollar as the recording currency according their major economic environment of the operating. When preparing the financial statements for the Reporting Period, the Company adopted RMB as the recording currency. 5. Accounting Treatment for Business Combinations under the Common Control and Not under the Common Control Business combinations, it is refer to two or more separate enterprises merge to form a reporting entity transactions or events. Business combination is divided into under the same control and those non under the same control. (1) Business combinations under the same control A business combination under the same control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or the same parties both before and after the business combination and on which the control is not temporary. In a business combination under the same control, the party which obtains control of other combining enterprise(s) on the combining date is the combining party, the other combining enterprise(s) is (are) the combined party. The “combining date” refers to the date on which the combining party actually obtains control on the combined party. The assets and liabilities that the combining party obtains in a business combination shall be measured on the basis of their carrying amount in the combined party on the combining date. As for the balance between the carrying amount of the net assets obtained by the combining party and the carrying amount of the consideration paid by it (or the total par value of the shares issued), the additional paid-in capital (share premium) shall be adjusted. If the additional paid-in capital (share premium) is not sufficient to be offset, the retained earnings shall be adjusted. The direct cost for the business combination of the combining party shall be recorded into the profits and losses at the current period. (2) Business combinations not under the same control A business combination not under the same control is a business combination in which the combining enterprises are not ultimately controlled by the same party or the same parties both before and after the business combination. In a business combination not under the same control, the party which obtains the control on other combining enterprise(s) on the purchase date is the acquirer, and other combining enterprise(s) is (are) the acquiree. 68 Lu Thai Textile Co., Ltd. Interim Report 2019 For a business combination not under the same control, the combination costs shall include the fair values, on the acquisition date, of the assets paid, the liabilities incurred or assumed and the equity securities issued by the acquirer in exchange for the control on the acquiree, the expenses for audit, legal services and assessment, and other administrative expenses, which are recorded into the profits and losses in the current period. The trading expenses for the equity securities or debt securities issued by the acquirer as the combination consideration shall be recorded into the amount of initial measurement of the equity securities or debt securities. The involved contingent consideration shall be recorded into the combination costs at its fair value on the acquiring date. Where new or further evidences emerge, within 12 months since the acquiring date, against the existing circumstances on the acquiring date and the contingent consideration thus needs to be adjusted, the combined goodwill shall be adjusted accordingly. The combination costs of the acquirer and the identifiable net assets obtained by it in the combination shall be measured according to their fair values at the acquiring date. The acquirer shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as business reputation. Where the combination costs are less than the fair value of the identifiable net assets it obtains from the acquiree, the acquirer shall re-examine the measurement of the fair values of the identifiable assets, liabilities and contingent liabilities it obtains from the acquiree as well as the combination costs. If, after the reexamination, the combination costs are still less than the fair value of the identifiable net assets it obtains from the acquiree, the acquirer shall record the balance into the profits and losses of the current period. As for the deductible temporary differences the acquirer obtains from the acquiree which are not recognized into deferred income tax liabilities due to their not meeting the recognition standards, if new or further information shows that the relevant situation has existed on the acquiring date and the economic benefits brought by the deductible temporary differences the acquirer obtains from the acquiree on the acquiring date can be realized, they shall be recognized into deferred income tax assets and the relevant goodwill shall be reduced. Where the goodwill is not sufficient to be offset, the difference shall be recognized into the profits and losses in the current period. In other circumstances than the above, where the deductible temporary differences are recognized into deferred income tax assets on the acquiring date, they shall be recorded into the profits and losses in the current period. In a business combination not under same control realized by two or more transactions of exchange, according to about the 5 th Notice about the Treasury Issuing the Accounting Standards for Enterprises (Finance accounting) [2012] No. 19 Criterion about the “package deal” (see Notes V. 6 (2)), Whether the deals are “package deal” or not, belong to the “package deal”, see the previous paragraphs described in this section and Notes V. 14 “Long term equity investment transaction” and conduct accounting treatment, those not belong to the "package deal" distinguish between the individual financial statements and the consolidated financial statements and conduct relevant accounting treatment. In the individual financial statements, the sum of the book value and new investment cost of the Company holds in the acquiree before the acquiring date shall be considered as initial cost of the investment. Other related comprehensive gains in relation to the equity interests that the Company holds in the acquiree before the acquiring date shall be treated on the same basis as the acquiree directly disposes the related assets or liabilities when disposing the investment (that is, except for the corresponding share in the changes in the net liabilities or assets with a defined benefit plan measured at the equity method arising from the acquiree’s re-measurement, the others shall be transferred into current investment gains). In the Company’s consolidated financial statements, as for the equity interests that the Company holds in the acquiree before the acquiring date, they shall be re-measured according to their fair values at the acquiring date; the positive difference between their fair values and carrying amounts shall be recorded into the investment gains for the period including the acquiring date. Other related comprehensive gains in relation to the equity interests that the Company holds in the acquiree before the acquiring date shall be treated on the same basis as the acquiree directly disposes the related assets or liabilities when disposing the investment (that is, except for the corresponding share in the changes in the net liabilities or assets with a defined benefit plan measured at the equity method arising from the acquiree’s re-measurement, the others shall be transferred into current investment gains on the acquiring date). 69 Lu Thai Textile Co., Ltd. Interim Report 2019 6. Preparation of the Consolidated Financial Statements (1) Principle for determining the consolidation scope The consolidation scope for financial statements is determined on the basis of control. The term “control” is the power of the Company upon an investee, with which it can take part in relevant activities of the investee to obtain variable returns and is able to influence the amount of returns. The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. A subsidiary is an enterprise or entity controlled by the Company. If any changes in the relevant facts or situations result in any changes in the elements involved in the aforesaid definition of “control”, the Company shall carry out a reassessment. (2) Methods for preparing the consolidated financial statements Subsidiaries are fully consolidated from the date on which the Company obtains control on their net assets and operation decision-making and are de-consolidated from the date when such control ceases. As for a disposed subsidiary, its operating results and cash flows before the disposal date has been appropriately included in the consolidated income statement and cash flow statement; and as for subsidiaries disposed in the current period, the opening items in the consolidated balance sheet are not adjusted. For a subsidiary acquired in a business combination not under the same control, its operating results and cash flows after the acquiring date have been appropriately included in the consolidated income statement and cash flow statement, and the opening items and comparative items in the consolidated financial statements are not adjusted. For a subsidiary acquired in a business combination under the same control or a combined party obtained in a takeover, its operating results and cash flows from the beginning of the Reporting Period of the combination to the combination date have been appropriately included in the consolidated income statement and cash flow statement, and the comparative items in the consolidated financial statements are adjusted at the same time. The financial statements of subsidiaries are adjusted in accordance with the accounting policies and accounting period of the Company during the preparation of the consolidated financial statements, where the accounting policies and the accounting periods are inconsistent between the Company and subsidiaries. For a subsidiary acquired from a business combination not under the same control, the individual financial statements of the subsidiary are adjusted based on the fair value of the identifiable net assets at the acquisition date. All significant inter-group balances, transactions and unrealized profits are offset in the consolidated financial statements. The portion of a subsidiary’s shareholders’ equity and the portion of a subsidiary’s net profits and losses for the period not held by the Company are recognized as minority interests and minority shareholder profits and losses respectively and presented separately under shareholders’ equity and net profits in the consolidation financial statements. The portion of a subsidiary’s net profits and losses for the period that belong to minority interests is presented as the item of “minority shareholder profits and losses” under the bigger item of net profits in the consolidated financial statements. Where the loss of a subsidiary shared by minority shareholders exceeds the portion enjoyed by minority shareholders in the subsidiary’s opening owners’ equity, minority interests are offset. Where the Company losses control on its original subsidiaries due to disposal of some equity investments or other reasons, the residual equity interests are re-measured according to the fair value on the date when such control ceases. The summation of the consideration obtained from the disposal of equity interests and the fair value of the residual equity interests, minus the portion in the original subsidiary’s net assets measured on a continuous basis from the acquisition date that is enjoyable by the Company according to the original shareholding percentage in the subsidiary, is recorded in investment gains for the period when the Company’s control on the subsidiary ceases. Other comprehensive incomes in relation to the equity investment in the original subsidiary are treated on the same accounting basis as the acquiree directly disposes the relevant assets or liabilities (that is, except for the changes in the net liabilities or assets with a defined benefit plan resulted from re-measurement of the original subsidiary, the rest shall all be transferred into current investment gains) when such control ceases. And subsequent measurement is conducted on the residual equity interests according to the No. 2 Accounting Standard for Business Enterprises —Long-term Equity Investments or the No. 22 Accounting Standard for Business Enterprises—Recognition and Measurement of Financial Instruments. For details, see Notes V. 14 “Long Term Equity Investment” or Notes V. 9 “Financial Instruments”. 70 Lu Thai Textile Co., Ltd. Interim Report 2019 Where the Company losses control on its original subsidiaries due to step by step disposal of equity investments through multiple transactions, it need to distinguish the Group losses control on its subsidiaries due to disposal of equity investments whether belongs to a package deal. All the transaction terms, conditions and economic impact of the disposal of subsidiaries’ equity investment are in accordance with one or more of the following conditions, which usually indicate the multiple transactions, should be considered as a package deal for accounting treatment. ① These deals are at the same time or under the condition of considering the influence of each other to concluded; ② These transactions only be as a whole can achieve a complete business result; ③ The occurrence of a deal depends on at least one other transactions;④ A deal alone is not economical, it is economical with other trading together. Those not belong to a package deal, each of them a deal depends on circumstances respectively conduct accounting treatment in accordance with the applicable principles of “part disposal of subsidiaries of a long-term equity investment under the condition of not losing control on its subsidiaries” (see Notes V. 14. (2) ④ in this section) and “Where the Company losses control on its original subsidiaries due to disposal of some equity investments or other reasons” (see the front paragraph) relevant transactions of the Company losses control on its subsidiaries due to disposal of equity investments belonging to a package deal, considered as a transaction and conduct accounting treatment. However, Before losing control, every disposal cost and corresponding net assets balance of subsidiary of disposal investment are confirmed as other comprehensive income in consolidated financial statements, which together transferred into the current profits and losses in the loss of control, when the Company losing control on its subsidiary. 7. Confirmation Standard for Cash and Cash Equivalent The term “cash” refers to cash on hand and deposits that are available for payment at any time. The term “cash equivalents” refers to short-term (within 3 months from the purchase date) and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. 8. Foreign Currency Businesses and Translation of Foreign Currency Financial Statements (1) Accounting treatments for translation of foreign currency transactions As for a foreign currency transaction, the Company shall convert the amount in a foreign currency into amount in its bookkeeping base at the spot exchange rate (usually referring to the central parity rate announced by the People’s Bank of China, the same below) of the transaction date, while as for such transactions as foreign exchange or involving in foreign exchange, the Company shall converted into amount in the bookkeeping base currency at actual exchange rate the transaction is occurred. (2) Accounting treatments for translation of foreign currency monetary items and non-monetary items On the balance sheet date, the foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date. The exchange difference arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange rate at the time of initial recognition or prior to the balance sheet date shall be recorded in the profits and losses in the current period, excluding the following situations: ① the exchange difference arising from foreign currency loans related to acquisition of fixed assets shall be treated at the principle of capitalization of borrowing costs; ② the exchange difference arising from the hedging instruments used for effective hedging of net overseas operation investments shall be recorded into other comprehensive incomes, and shall be recognized into current gains and losses when the net investments are disposed; and ③ the exchange difference arising from change in the book balance of foreign currency monetary items available for sale except the amortized costs shall be recorded into other comprehensive gains and losses. For the preparation for consolidated financial statement involved in foreign operations, if there are items of foreign currency monetary of net investment in foreign operations in essence, then the balance of exchange generated by changes in exchange rate shall included into other comprehensive income; when disposing foreign operations, it shall be converted into the disposal of the current profits and losses. A foreign currency non-monetary item measured at the historical costs shall still be translated at the spot exchange rate on the 71 Lu Thai Textile Co., Ltd. Interim Report 2019 transaction date. Where the foreign non-monetary items measured at the fair value shall be converted into amount in its bookkeeping base currency at spot exchange rate, the exchange gains and losses arising thereof shall be treated as change in fair value, and recorded into the current period gains and losses or as other comprehensive incomes. (3) Translation of foreign currency financial statements When it involves overseas business in preparing the consolidated financial statement, for the translation difference of foreign currency monetary items of net investment in overseas business arising from the change in exchange rate, it shall be recorded into the item of “difference of foreign currency financial statement translation” under the owners’ equity; and be recorded into disposal gains and losses at current period when disposing overseas business. The foreign currency financial statement of overseas business should be translated in to RMB financial statement by the following methods: The asset and liability items in the balance sheets shall be translated at a spot exchange rate on the balance sheet date. Among the owner’s equity items, except for the items as “undistributed profits”, other items shall be translated at the spot exchange rate at the time when they are incurred. The income and expense items in the profit statements shall be translated at the spot exchange rate of the transaction date. The undistributed profits at year-begin is the undistributed profits at the end of last year after the translation; undistributed profits at year-end shall be listed as various distribution items after the translation; after the translation, the balance between assets and the sum of liabilities and owners’ equities shall be recorded into other comprehensive gains and losses as difference of foreign currency translation. Where an enterprise disposes of an overseas business without the control right, it shall shift the differences, which is presented under the items of the owner’s equities in the balance sheet and which arises from the translation of foreign currency financial statements relating to this overseas business, into the disposal profits and losses of the current period by all or proportion of the disposed overseas business. Foreign cash flow shall be translated at the spot exchange rate of the date of cash flow incurred. The influence of exchange rate on the cash flow shall be adjustment item and individually listed in the cash flow statement. And the opening balance and the actual balance of last year shall be listed at the amounts after translation of foreign currency financial statement in last year. Where the control of the Company over an overseas operation ceases due to disposal of all or some of the Company’s owner’s equity in the overseas operation or other reasons, the foreign-currency statement translation difference belonging to the parent company’s owner’s equity in relation to the overseas operation which is stated under the shareholders’ equity in the balance sheet shall be all restated as gains and losses of the disposal period. Where the Company’s equity in an overseas operation decreases due to disposal of some equity investment or other reasons but the Company still has control over the overseas operation, the foreign-currency statement translation difference in relation to the disposed part of the overseas operation shall be recorded into minority interests instead of current gains and losses. If what’s disposed is some equity in an overseas associated enterprise or joint venture, the foreign-currency statement translation difference related to the overseas operation shall be recorded into the gains and losses of the current period of the disposal according to the disposal ratio. 9. Financial Instruments The Company recognizes a financial asset or liability when it becomes a party of the relevant financial instrument contract. (1) Classification, recognition and measurement of financial assets The Company classifies the financial assets into financial assets measured at amortized cost, financial assets measured by the fair value and the changes recorded in other comprehensive income and financial assets at fair value through profit or loss based on the business model for financial assets management and characteristics of contractual cash flow of financial assets. Financial assets initially recognized shall be measured at their fair values. For financial assets measured at their fair values and of which the variation is recorded into the profit or loss of the current period, the transaction expenses thereof shall be directly included into the current profit or loss; for other financial assets, the transaction expenses thereof shall be included into the initially recognized amount. ①Financial assets measured by the amortized cost 72 Lu Thai Textile Co., Ltd. Interim Report 2019 The business mode of the Company to manage the financial assets targets at collecting the contractual cash flow, that is, the cash flow generated in the specific date is the payment of the interest based on the principal and outstanding principal amount. This kind of financial assets of the Company shall be subsequently measured based on the amortized cost and effective interest method, and the gains or losses arising from the amortization, impairment shall be included into current profit and loss. ②Financial assets measured at the fair value with its changes included into other comprehensive income Business mode for managing financial assets of the Company takes contract cash flow collected as target and selling as target. The Company calculates such financial assets as per fair value whose change is included into corresponding comprehensive income, but impairment loss or gain, exchange gain or loss and interest income calculated as per actual interest rate method are included into the current profit and loss. Furthermore, the Company designates partial non-tradable equity vehicle investment as the financial asset measured with fair value whose change is included into other comprehensive income. The Company includes the related dividend income of such financial assets into the current profit and loss with the change in fair value included into other comprehensive income. At the time of derecognition of such financial assets, accumulated gain or loss included into other comprehensive income before will be shifted to retained earnings from other comprehensive incomes but not included into the current profit and loss. ③Financial assets at fair value through profit or loss The Company classifies financial assets except for above-mentioned financial assets measured with amortized cost and financial assets measured with fair value whose change is included into other comprehensive income into financial assets at fair value through profit or loss (2) Classification, recognition and measurement of financial liabilities The Group’s financial liabilities are, on initial recognition, classified into financial liabilities at fair value through profit or loss and financial liabilities measured with amortized cost. ①Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include trading financial liabilities which are subsequently measured at fair value and the changes of fair value are recorded into the current profit or loss. When the liabilities are derecognized, the difference between their fair values and their initial recorded amount was recognized as investment income and at the same time the gains and losses of fair value shall be adjusted. ②Financial liabilities with amortized cost Financial liabilities with amortized cost shall be subsequently measured at the amortized cost. And gains or losses generated from derecognition or amortization shall be recorded into the current profit or loss. (3) Recognition basis and measurement of financial assets transfer A financial asset when one of the following conditions is met will be derecognized: ①the rights to receive cash flows from the asset have expired; ②the enterprise has transferred its rights to receive cash flows from the asset to a third party under a pass-through arrangement; or ③the enterprise has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, (a). the carrying amount of the financial asset transferred; and (b) the sum of the consideration received from the transfer and any cumulative gain or loss that had been recognized in other comprehensive income, is recognized in profit or loss. If a part of the transferred financial asset qualifies for derecognition, the carrying amount of the transferred financial asset is allocated between the part that continues to be recognized and the part that is derecognized, based on the relative fair value of those parts. The difference between (a) the carrying amount allocated to the part derecognized; and (b) the sum of the consideration received for the part derecognized and any cumulative gain or loss allocated to the part derecognized which has been previously recognized in other comprehensive income, is recognized in profit or loss. If the Company endorses the financial assets sold by right of recourse and holding financial assets, it needs to confirm that whether almost all risks and remuneration in the ownership of financial assets have been transferred or not. Where an enterprise has 73 Lu Thai Textile Co., Ltd. Interim Report 2019 transferred nearly all of the risks and rewards related to the ownership of the financial asset to the transferee, it shall stop recognizing the financial asset; If it retained nearly all of the risks and rewards related to the ownership of the financial asset, it shall not stop recognizing the financial asset. If the Company does not transfer or retain nearly all of the risks and rewards related to the ownership of the financial asset, then it continuously judges that whether the Company retain the control of the assets, and conducts accounting treatment according to the principles described in former paragraphs. (4) De-recognition of financial liabilities Only when the prevailing obligations of a financial liability are relieved in all or in part may the recognition of the financial liability be terminated in all or partly. Where the Company (debtor) enters into an agreement with a creditor so as to substitute the existing financial liabilities by way of any new financial liability, and if the contractual stipulations regarding the new financial liability is substantially different from that regarding the existing financial liability, it terminates the recognition of the existing financial liability, and at the same time recognizes the new financial liability. Where the recognition of a financial liability is totally or partially terminated, the enterprise concerned shall include into the profits and losses of the current period for the gap between the book value which has been terminated from recognition and the considerations it has paid (including the non-cash assets it has transferred out and the new financial liabilities it has assumed) (5) Determination of financial assets and liabilities’ fair value For a financial instrument which has an active market, the Company uses quoted price in the active market to establish its fair value. For a financial instrument which does not have an active market, the Company establishes fair value by using a valuation technique. In valuation, the Company adopts applicable valuation techniques supported by sufficient utilizable data and other information in current circumstances, selects input values consistent with asset or liability characteristics considered in relevant asset or liability transactions of market participators and prioritizes the applying relevant observable input values. Unobservable input values shall not be applied unless relevant observable input values are not accessible or feasible. (6) Impairment of financial assets The Company estimates the expected credit loss of financial assets measured at the amortized cost and those measured at fair value and whose changes are included in other comprehensive income (debt instruments) based on expected credit loss. The measurement of expected credit loss depends on whether the credit risk of financial assets has increased significantly since the initial confirmation. In case of d significant increase, the Company measures its loss provisions according to the amount equivalent to the expected credit loss of the financial instrument during its entire life; otherwise, the Company measures its loss provisions according to the amount equivalent to the expected credit loss of the financial instrument in the next 12 months, and the increased or reversed amount of loss provisions resulting therefrom shall be included in profits and losses of the current period as impairment losses or gains. 10. Notes Receivable All notes receivable settled of the Company are bank’s acceptance bill and L/C. Based on the credit risk characteristics of notes receivable and comprehensive evaluation of their credit risk characteristics, the Company does not withdraw credit impairment losses for notes receivable. 11. Accounts Receivable The accounts receivable of the Company include accounts receivable, long-term receivables and other receivables. The Company measures its credit loss according to the amount of estimated credit loss in the duration of the Company, and the increased or reversed amount of credit loss resulting therefrom shall be recorded as loss of credit impairment in the current profit and loss. The withdrawal method is as follows: (1) Accounts Receivable with Significant Single Amount for Which the Bad Debt Provision is Made Individually Where there is objective evidence indicating credit impairment in an account receivable, the Company shall make provisions for bad debts and confirm the expected credit loss. 74 Lu Thai Textile Co., Ltd. Interim Report 2019 (2) Accounts Receivable Which the Bad Debt Provision is Withdrawn by Credit Risk Characteristics Name of portfolios Withdrawal method Risk portfolio Expected credit losses The Company grouped accounts receivable into risk portfolios according to similar credit risk characteristics (account age), and compiled a comparative table of the age of accounts receivable and the expected credit loss rate in the duration of the Company combining the current conditions and the forecast of future economic situation to calculate the expected credit loss rate. Refer to the table details as follows: Aging Expected credit loss rate (%) Within 1 year 5 (including 1 year) 1-2 years 10 2-3 years 20 Over 3 years 30 12. Inventory Is the Company subject to any disclosure requirements for special industries? No. (1) Classification Inventories mainly include raw materials, work-in-progress, product processed on entrustment, consumptive biological assets and stock products etc. (2) Valuation method of inventories acquiring and issuing Inventories shall be measured at actual cost when acquired, and the cost of the inventories including the procurement cost, processing cost and other costs. Grey yarn, dyed yarn, and plus material shall be measured at first-in first-out method when acquired and delivered; other inventories shall be measured as per the weighted average method (3) Basis for determining net realizable value of inventories and provision methods for decline in value of inventories Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion, the estimated costs necessary to make the sale and relevant taxes. Net realizable value is determined on the basis of clear evidence obtained, and takes into consideration the purpose of holding inventories and effect of post balance sheet events. At the balance sheet date, inventories are measured at the lower of the cost and net realizable value. If the net realizable value is below the cost of inventories, a provision for decline in value of inventories is made. The provision for inventories decline in value is determined by the difference of the cost of individual item less its realizable value. After the provision for decline in value of inventories is made, if the circumstances that previously caused inventories to be written down below cost no longer exist so that the net realizable value of inventories is higher than their cost, the original provision for decline in value is reversed and the reversal is included in profit or loss for the period. (4) The perpetual inventory system is maintained for stock system. (5) Amortization method of the low-value consumption goods and packing articles For the low-value consumption goods, should be amortized by one-off amortization method when consuming; and for the packing articles, should be amortized by one-off amortization method when consuming. 75 Lu Thai Textile Co., Ltd. Interim Report 2019 13. Assets Held for Sale The Company classifies an asset into held-for-sale when its book value is mainly recovered by selling (including the exchanges of non-monetary assets with commercial substance) instead of a non-current asset or disposal group. Specific standards are simultaneously satisfying the following conditions: A asset or disposal group can be sold immediately under current conditions based on the practice of selling such assets or disposal groups in similar transactions; the Company has already made a resolution on sale plan and obtained a confirmed purchase commitment; and the sale is expected to will be completed within one year. A disposal group refers to a group of assets that are disposed of together as a whole by sale or other means in a transaction and the liabilities directly related to these assets transferred in the transaction. Where the asset group or combination of asset groups to which a disposal group belongs apportions the goodwill acquired in the business combination in accordance with the "Accounting Standards for Enterprises No. 8 - Asset Impairment", the disposal group shall include the goodwill allocated to it. When the Company initially measures or re-measures on the balance sheet date the non-current assets and disposal groups classified as held-for-sale, If the book value is higher than the fair value minus the net amount of the sale costs, the book value will be written down to the net amount of fair value minus the sale costs, and the amount written down will be recognized as impairment loss of assets and included in the current profit and loss, and provision for impairment of held-for-sale assets will be made at the same time. For the confirmed amount of impairment loss of assets of the disposal groups held for sale, the book value of goodwill of the disposal groups will be offset first, and then the book value of various non-current assets applicable to the measurement of Accounting Standards for Business Enterprises No. 42 - Non-current Assets and Disposal Groups Held for Sale and Termination of Operations (hereinafter referred to as “Held for sale standards”) in the disposal groups will be offset according to the proportions. If the net amount that the fair value of the disposal groups held for sale on the follow-up balance sheet date minus the sale costs increases, the previous written-down amount will be restored, and reversed to the asset impairment loss confirmed after the assets being classified as held-for-sale. The reversed amount will be included in the current profit or loss. And its book value shall be increased proportionately to the proportion of the book value of various non-current assets measured by the disposal group in addition to goodwill applicable to the measurement of held-for-sale norms; The book value of deducted goodwill and the non-current assets applicable to the measurement of held-for-sale norms will not be reversed if the asset impairment loss is recognized before it is classified as held for sale. Non-current assets held for sale or non-current assets in the disposal group are not subject to depreciation or amortization. Interest and other expenses of liabilities in the disposal group held for sale will be confirmed as before. When a non-current asset or disposal group ceases be classified as held-for-sale or a non-current asset is removed out from the held-for-sale disposal group due to failure in meeting the classification conditions for the category of held-for-sale, it will be measured by one of the followings whichever is lower: (1) The book value before being classified as held for sale will be adjusted according to the depreciation, amortization or impairment that would have been recognized under the assumption that it was not classified as held for sale; (2) The recoverable amount. 14. Long-term Equity Investments The long-term equity investments of this part refer to the long-term equity investments that the Company has control, joint control or significant influence over the investees. Joint control, refers to the control jointly owned according to the relevant agreement on an arrangement by the Company and the relevant activities of the arrangement should be decided only after the participants which share the control right make consensus. Significant influence refers to the power of the Company which could anticipate in the finance and the operation polices of the investees, but could not control or jointly control the formulation of the policies with the other parties. (1) Recognition of investment costs As for long-term equity investments acquired by enterprise merger, if the merger is under the same control, the share of the book value of the owner’s equity of the merged enterprise, on the date of merger, is regarded as the initial cost of the long-term equity 76 Lu Thai Textile Co., Ltd. Interim Report 2019 investment. The difference between the initial cost of the long-term equity investment and the payment in cash, non-cash assets transferred as well as the book value of the debts borne by the merging party shall offset against the capital reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. If the consideration of the merging enterprise is that it issues equity securities, it shall, on the date of merger, regard the share of the book value of the shareholder's equity of the merged enterprise on the consolidated financial statement of the ultimate control party as the initial cost of the long-term equity investment. The total face value of the stocks issued shall be regarded as the capital stock, while the difference between the initial cost of the long-term equity investment and total face value of the shares issued shall offset against the capital reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. For the long-term investment required from the business combination under different control, the initial investment cost regarded as long-term equity investment on the purchasing date according to the combination cost, the combination costs shall be the sum of the fair values of the assets paid, the liabilities incurred or assumed and the equity securities issued by the Company. The commission fees for audit, law services, assessment and consultancy services and other relevant expenses occurred in the business combination by the combining party or the purchase party shall be recorded into current profits and losses upon their occurrence. Besides the long-term equity investments formed by business combination, the other long-term equity investments shall be initially measured by cost, the cost is fixed in accordance with the ways of gaining, such as actual cash payment paid by the Company, the fair value of equity securities issued by the Company, the agreed value of the investment contract or agreement, the fair value or original carrying amount of exchanged assets from non-monetary assets exchange transaction, the fair value of the long-term equity investments, etc. The expenses, taxes and other necessary expenditures directly related with gaining the long-term equity investments shall also be recorded into investment cost. (2) Subsequent measurement and recognition of gains or losses A long-term equity investment where the investing enterprise has joint control (except for which forms into common operators) or significant influence over the investors should be measured by equity method. Moreover, long-term equity investment adopting the cost method in the financial statements, and which the Company has control on invested entity. ① Long-term equity investment measured by adopting cost method The price of a long-term equity investment measured by adopting the cost method shall be included at its initial investment cost and append as well as withdraw the cost of investing and adjusting the long-term equity investment. The return on investment at current period shall be recognized in accordance with the cash dividend or profit announced to distribute by the invested entity, except the announced but not distributed cash dividend or profit included in the actual payment or consideration upon gaining the investment. ② Long-term equity investment measured by adopting equity method If the initial cost of a long-term equity investment is more than the Company's attributable share of the fair value of the invested entity's identifiable net assets for investment, the initial cost of the long-term equity investment may not be adjusted. If the initial cost of a long-term equity investment is less than the Company's attributable share of the fair value of the invested entity's identifiable net assets for the investment, the difference shall be included in the current profits and losses and the cost of the long-term equity investment shall be adjusted simultaneously. When measured by adopting equity method, respectively recognize investment income and other comprehensive income according to the net gains and losses as well as the portion of other comprehensive income which should be enjoyed or be shared, and at the same time adjust the book value of the long-term equity investment; corresponding reduce the book value of the long-term equity investment according to profits which be declared to distribute by the investees or the portion of the calculation of cash dividends which should be enjoyed; for the other changes except for the net gains and losses, other comprehensive income and the owners’ equity except for the profits distribution of the investees, should adjust the book value of the long-term equity investment as well as include in the capital reserve. The investing enterprise shall, on the ground of the fair value of all identifiable assets of the invested entity when it obtains the investment, recognize the attributable share of the net profits and losses of the invested entity after it adjusts the net profits of the invested entity. If the accounting policies adopted by the investees are not accord with that of the 77 Lu Thai Textile Co., Ltd. Interim Report 2019 Company, should be adjusted according to the accounting policies of the Company and the financial statement of the investees during the accounting period and according which to recognize the investment income as well as other comprehensive income. For the transaction happened between the Company and associated enterprises as well as joint ventures, if the assets launched or sold not form into business, the portion of the unrealized gains and losses of the internal transaction, which belongs to the Company according to the calculation of the enjoyed proportion, should recognize the investment gains and losses on the basis. But the losses of the unrealized internal transaction happened between the Company and the investees which belongs to the impairment losses of the transferred assets, should not be neutralized. The Company shall recognize the net losses of the invested enterprise until the book value of the long-term equity investment and other long-term rights and interests which substantially form the net investment made to the invested entity are reduced to zero. However, if the Company has the obligation to undertake extra losses, it shall be recognized as the estimated liabilities in accordance with the estimated duties and then recorded into investment losses at current period. If the invested entity realizes any net profits later, the Company shall, after the amount of its attributable share of profits offsets against its attributable share of the un-recognized losses, resume recognizing its attributable share of profits. For the long-term equity investment held by the Company before the first execution of the new accounting criterion on January 1, 2007 of the associated enterprises and joint ventures, if there is debit difference of the equity investment related to the investment, should be included in the current gains and losses according to the amount of the straight-line amortization during the original remained period. ③ Acquiring shares of minority interest In the preparation for the financial statements, the balance existed between the long-term equity investment increased by acquiring shares of minority interest and the attributable net assets on the subsidiary calculated by the increased shares held since the purchase date (or combination date), the capital reserves shall be adjusted, if the capital reserves are not sufficient to offset, the retained profits shall be adjusted. ④ Disposal of long-term equity investment In the preparation of financial statements, the Company disposed part of the long-term equity investment on subsidiaries without losing its controlling right on them, the balance between the disposed price and attributable net assets of subsidiaries by disposing the long-term equity investment shall be recorded into owners’ equity; where the Company losses the controlling right by disposing part of long-term equity investment on such subsidiaries, it shall treated in accordance with the relevant accounting policies in Notes IV. 5. (2) “Method on preparation of combined financial statements”. For other ways on disposal of long-term equity investment, the balance between the book value of the disposed equity and its actual payment gained shall be recorded into current profits and losses. For the long-term equity investment measured by adopting equity method, if the remained equity after disposal still adopts the equity method for measurement, the other comprehensive income originally recorded into owners’ equity should adopt the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees according to the corresponding proportion. The owners’ equity recognized owning to the changes of the other owners’ equity except for the net gains and losses, other comprehensive income and the profits distribution of the investees, should be transferred into the current gains and losses according to the proportion. For the long-term equity investment which adopts the cost method of measurement, if the remained equity still adopt the cost method, the other comprehensive income recognized owning to adopting the equity method for measurement or the recognition and measurement standards of financial instrument before acquiring the control of the investees, should adopt the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees and should be carried forward into the current gains and losses according to the proportion; the changes of the other owners’ equity except for the net gains and losses, other comprehensive income and the profits distribution among the net assets of the investees which recognized by adopting the equity method for measurement, should be carried forward into the current gains and losses according to the proportion. 78 Lu Thai Textile Co., Ltd. Interim Report 2019 15. Investment Real Estate Measurement model of investment real estate Costing method measurement Depreciation or amortization method The investment real estate refers to the real estate gaining the rent or capital appreciation or both. It includes rented land use right, holding land use right to be transferred after the appreciation and rented building, etc. The investment real estate is measured initially according to the cost. The subsequent expenses related with the investment real estate shall be calculated into the cost of investment real estate if the economic benefit related with the asset may flow in and the cost may be measured reliably. Other subsequent expenses shall be calculated in the current profits and losses at the occurrence. The Company adopts the cost mode to conduct the subsequent measurement on the investment real estate, depreciates or amortizes according to the policy consistent with the house building or land use right. The devaluation test method and devaluation provision method for the investment real estate can be seen in Notes V. 21 “Long-term Asset Devaluation”. When the self-use real estate or stock is converted to the investment real estate or the investment real estate is converted to the self-use real estate, the book value before the conversion shall be the entry value after the conversion. When the investment real estate is disposed, or out of usage permanently, and it is expected not to get the economic benefit from the disposal, the confirmation on the investment real estate shall be terminated. The disposal income for the sales, transferring, scrap or damage of the investment real estate deducing the book value and related tax shall be calculated in the current profits and losses. 16. Fixed Assets (1) Conditions for Recognition The term “fixed assets” refers to the tangible assets that simultaneously possess the features as follows: (a) they are held for the sake of producing commodities, rendering labor service, renting or business management; and (b) their useful life is in excess of one fiscal year. The fixed assets are only recognized when the relevant economic benefits probably flow in the Company and its cost could be reliable measured. The fixed assets should take the initial measurement according to the cost and at the same time consider the influences of the factors of the estimated discard expenses. (2) Depreciation Methods Category of fixed assets Method Useful life Salvage value Annual deprecation Average method of Housing and building 5-30 0-10 3.00-20.00 useful life Average method of Machinery equipments 10-18 0-10 5.00-10.00 useful life Average method of Transportation vehicle 5 0-10 18.00-20.00 useful life Electronic equipments Average method of 5 0-10 18.00-20.00 and others useful life 79 Lu Thai Textile Co., Ltd. Interim Report 2019 (3) Recognition Basis, pricing and depreciation method of fixed assets by finance lease The “finance lease” shall refer to a lease that has transferred in substance all the risks and rewards related to the ownership of an asset. Its ownership may or may not eventually be transferred. The fixed assets by finance lease shall adopt the same depreciation policy for self-owned fixed assets. If it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when the lease term expires, the leased asset shall be fully depreciated over its useful life. If it is not reasonable to be certain that the lessee will obtain the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully depreciated over the shorter one of the lease term or its useful life. 17. Construction in Progress Construction in process is measured at actual cost. Actual cost comprises construction costs, borrowing costs that are eligible for capitalization before the fixed assets being ready for their intended us and other relevant costs. Construction in process is transferred to fixed assets when the assets are ready for their intended use. See the details of the impairment test method of the impairment provision withdrawal method of the construction in progress to Notes V. 21 “Long-term assets impairment”. 18. Borrowing Costs Borrowing costs include interest on borrowings, amortization of discounts or premiums, ancillary expenses and exchange differences arising from foreign currency borrowings. The capitalization of borrowing costs, which can be directly attributable to asset acquisition or construction, starts when asset expenditure or borrowing cost are generated, or the asset acquisition or construction is launched to enable the asset to meet the predefined conditions for use or sale, and ends when the acquired or constructed asset conforming to capitalization conditions meet the predefined conditions for use or sale. The other borrowing costs are recognized as expenses in the current period. The actual interest expenses incurred in the current period of specific borrowings shall be capitalized by subtracting the interest income earned by the bank from unused borrowing funds or investment income gained from temporary investment. For general borrowings, the amount to be capitalized shall be determined based on the weighted average of total asset expenditure exceeding the specific borrowing multiplied by the capitalization rate of general borrowings. The capitalization rate is determined based on the weighted average interest rate of general borrowings. During the capitalization period, the foreign exchange differences on foreign currency specific borrowings shall be capitalized. The exchange differences on foreign currency general borrowings shall be included in the current profits and losses. Assets eligible for capitalization refer to assets such as fixed assets, investment real estate and inventory that require a considerable amount of time for acquisition or construction to be ready for use or sale. If the acquisition or construction process of the assets eligible for capitalization is stopped unexpectedly for more than 3 months, the capitalization of borrowing costs shall be suspended until the asset acquisition or construction resumes. 19. Biological Assets (1) Consumptive biological assets Consumptive biological assets refer to the biological assets held for sale or to be harvested as agricultural products in future, including crops, vegetables under growing, timber production forest and domestic animals for sale. The consumptive biological assets shall be measured based on cost. All costs for planting, creating, cultivating or raising of consumptive biological assets shall be the necessary expenses directly added to such assets that accrued before harvest, including any loan that satisfies capitalization conditions. Subsequent expenses for keeping and feeding the consumptive biological assets after the harvest should be recognized as the losses and gains of the current period. 80 Lu Thai Textile Co., Ltd. Interim Report 2019 Upon harvest or sale, the cost of consumptive biological assets shall be based on its book value through weighted average. On the date of Balance Sheet, the consumptive biological assets shall be measured with lower of cost and net realizable value, and the method for confirming the reserve for inventory price drop shall be adopted to confirm the reserve for price drop of consumptive biological assets. If the impacts of depreciation disappear, the depreciation amount shall be recovered, and the reserve for price drop originally accrued shall be reversed. Such amount reversed shall be recognized as loss and gain for the current period. If consumptive biological assets change its usage to be as productive biological assets, the cost after such change shall be confirmed based on the book value when the usage is changed. If consumptive biological assets are changed as public biological assets, depreciation shall be taken into consideration pursuant to Corporate Accounting Rules No. 8 – Assets Depreciation. When depreciation occur, accrued the depreciation reserve first and then confirm based on the book value after such accrual. (2) Productive living assets Productive living assets refer to agricultural products produced, and biological assets held for labor provision or lease, including economic forest, firewood forest, productive animals and labor animals. The Productive living assets shall be measured based on cost. All costs for creating or fostering Productive living assets shall be the necessary expenses directly added to such assets that accrued before it reaches expected production purpose, including any loan that satisfies capitalization conditions. The Company shall withdraw the depreciation of the productive biological assets by adopting the straight-line method since the second month of its useful life. Useful life, expected net salvage value and annual depreciation rate of each Productive living assets are as below: Category Useful life (Year) Expected net salvage value Annual deprecation (%) (%) Livestock 5 5% 19 The Company shall review the service life, expected net residuals and depreciation method of the productive living assets at least by the end of the year. In case of any change, it shall be deemed as accounting estimate change. The difference between proceedings from disposal (sale, loss, death or damage) of the productive living assets deducted by book value and related tax shall be recognized as loss and gain for the current period. The Company shall check on the date of Balance Sheet whether there is a depreciation sign for the productive living assets. If yes, estimate the recoverable amount. Such recoverable amount shall be estimated based on single asset item. If it is difficult, the recoverable amount of the portfolio shall be confirmed based on the portfolio such assets belong to. If the recoverable amount of the assets is lower than book value, reserve for asset depreciation shall be accrued based on such difference, and recognized as loss and gain for the current period. The above assets impairment losses once be recognized should not be reversed during the accounting periods afterwards. If the productive living assets changed the usage as the consumptive biological assets, the cost after the change should be recognized as the book value when changing the usage; of the productive living assets changed the usage as non-profit living assets, should be recognized according to the book value after the withdrawal of the impairment provision in accord with the regulation of No. 8 of ASBE - Assets Impairment for considering whether there was impairment and should withdraw the impairment provision in ahead of it. 20. Intangible Assets (1) Pricing Method, Useful Life and Impairment Test The term “intangible asset” refers to the identifiable non-monetary assets possessed or controlled by enterprises which have no physical shape. The intangible assets shall be initially measured according to its cost. The costs related with the intangible assets, if the economic 81 Lu Thai Textile Co., Ltd. Interim Report 2019 benefits related to intangible assets are likely to flow into the enterprise and the cost of intangible assets can be measured reliably, shall be recorded into the costs of intangible assets; otherwise, it shall be recorded into current profits and losses upon the occurrence. The use right of land gained is usually measured as intangible assets. For the self-developed and constructed factories and other constructions, the related expenditures on use right of land and construction costs shall be respectively measured as intangible assets and fixed assets. For the purchased houses and buildings, the related payment shall be distributed into the payment for use right of land and the payment for buildings, if it is difficult to be distributed, the whole payment shall be treated as fixed assets. For intangible assets with a finite service life, from the time when it is available for use, the cost after deducting the sum of the expected salvage value and the accumulated impairment provision shall be amortized by straight line method during the service life. While the intangible assets without certain service life shall not be amortized. At the end of period, the Company shall check the service life and amortization method of intangible assets with finite service life, if there is any change, it shall be regarded as a change of the accounting estimates. Besides, the Company shall check the service life of intangible assets without certain service life, if there is any evidence showing that the period of intangible assets to bring the economic benefits to the enterprise can be prospected, it shall be estimated the service life and amortized in accordance with the amortization policies for intangible assets with finite service life. For details of impairment testing method and provision-making method for intangible assets, see Notes V. 21 “Long-term assets impairment”. (2) Accounting Policy for Internal Research and Development Expenditures The expenditures for internal research and development projects of an enterprise shall be classified into research expenditures and development expenditures. The research expenditures shall be recorded into the profit or loss for the current period. The development expenditures shall be confirmed as intangible assets when they satisfy the following conditions simultaneously, and shall be recorded into profit or loss for the current period when they don’t satisfy the following conditions. ① It is feasible technically to finish intangible assets for use or sale; ② It is intended to finish and use or sell the intangible assets; ③ The usefulness of methods for intangible assets to generate economic benefits shall be proved, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the intangible assets itself or the intangible assets will be used internally; ④ It is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of sufficient technologies, financial resources and other resources; ⑤ The development expenditures of the intangible assets can be reliably measured. As for expenses that can’t be identified as research expenditures or development expenditures, the occurred R & D expenses shall be all included in current profits and losses. 21. Impairment of Long-term Assets For non-current financial Assets of fixed Assets, projects under construction, intangible Assets with limited service life, investing real estate with cost model, long-term equity investment of subsidiaries, cooperative enterprises and joint ventures, the Company should judge whether decrease in value exists on the date of balance sheet. Recoverable amounts should be tested for decrease in value if it exists. Other intangible Assets of reputation and uncertain service life and other non-accessible intangible assets should be tested for decrease in value no matter whether it exists. If the recoverable amount is less than book value in impairment test results, the provision for impairment of differences should include in impairment loss. Recoverable amounts would be the higher of net value of asset fair value deducting disposal charges or present value of predicted cash flow. Asset fair value should be determined according to negotiated sales price of fair trade. If no sales agreement exists but with asset active market, fair value should be determined according to the Buyer’s price of the asset. If no 82 Lu Thai Textile Co., Ltd. Interim Report 2019 sales agreement or asset active market exists, asset fair value could be acquired on the basis of best information available. Disposal expenses include legal fees, taxes, cartage or other direct expenses of merchantable Assets related to asset disposal. Present value of predicted asset cash flow should be determined by the proper discount rate according to Assets in service and predicted cash flow of final disposal. Asset depreciation reserves should be calculated on the basis of single Assets. If it is difficult to predict the recoverable amounts for single Assets, recoverable amounts should be determined according to the belonging asset group. Asset group is the minimum asset combination producing cash flow independently. In impairment test, book value of the business reputation in financial report should be shared to beneficial asset group and asset group combination in collaboration of business merger. It is shown in the test that if recoverable amounts of shared business reputation asset group or asset group combination are lower than book value, it should determine the impairment loss. Impairment loss amount should firstly be deducted and shared to the book value of business reputation of asset group or asset group combination, then deduct book value of all assets according to proportions of other book value of above assets in asset group or asset group combination except business reputation. After the asset impairment loss is determined, recoverable value amounts would not be returned in future. 22. Long-term Deferred Expenses Long-term deferred expenses refer to general expenses with the apportioned period over one year (one year excluded) that have occurred but attributable to the current and future periods. The long-term deferred expenses mainly including land contract fees, land rental fees and house rental fees, and etc. And the long-term deferred expense shall be amortized by the straight-line method averagely within the benefit period. 23. Payroll (1) Accounting Treatment of Short-term Compensation The payroll of the Company mainly includes: short-term employees compensation, welfare after departure, demission welfare, and the welfare of other long-term staffs, of which: Short-term compensation mainly including salary, bonus, allowances and subsidies, employee services and benefits, medical insurance premiums, birth insurance premium, industrial injury insurance premium, housing fund, labor union expenditure and personnel education fund, non-monetary benefits etc. The short-term compensation actually happened during the accounting period when the active staff offering the service for the Company should be recognized as liabilities and is included in the current gains and losses or relevant assets cost. Of which the non-monetary benefits should be measured according to the fair value. (2) Accounting Treatment of the Welfare after Departure Welfare after demission mainly includes basic endowment insurance and unemployment insurance and welfare plans after demission include setting drawing plan. Where the setting drawing plan is adopted, the corresponding payable and deposit amount should be included into the relevant assets cost or the current gains and losses when happen. (3) Accounting Treatment of the Demission Welfare The Company relieves the labor relation with the employees before the due date of the labor contacts or puts forward the advice of providing the compensation for urging the employees volunteered to receive the downsizing and when the Company could not unilaterally withdraw the demission welfare owning to the relieving plan of the labor relation or the downsizing advice, should confirm the liabilities of the employees’ salary from the demission welfare on the earlier day between the cost confirmed by the Company and the cost related to the reorganization of the payment of the demission welfare and includes which in the current gains and losses. But as for the demission welfare be estimated that could not be completed paid within 12 months after the end of the annual Reporting Period, should be handled according to the other long-term employee’s salary. (4) Accounting Treatment of the Welfare of Other Long-term Staffs 83 Lu Thai Textile Co., Ltd. Interim Report 2019 The internal retire plan of the employees should be handled by adopting the same principles of the above demission welfare. The Company includes the salary and the paid social insurance charges planed to pay by the personnel retreated inside during the period from the date when ceased the services to the normal retire date in the current gains and losses (demission welfare) when met with the recognition conditions of the estimated liabilities. The other long-term welfare that the Company offers to the staffs, if met with the setting drawing plan, should be accounting disposed according to the setting drawing plan, while the rest should be disposed according to the setting revenue plan. 24. Revenue Is the Company subject to any disclosure requirements for special industries? No. Has implemented the new revenue standard or not □ Applicable √ Not applicable (1) Selling products No revenue from selling goods may be recognized unless the following conditions are met simultaneously: the significant risks and rewards of ownership of the goods have been transferred to the buyer by the enterprise; the enterprise retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; the relevant amount of revenue can be measured in a reliable way; the relevant economic benefits may flow into the enterprise; and the relevant costs incurred or to be incurred can be measured in a reliable way. As for the revenues from the domestic sales products, the Company deliveries the products to the buyers according to the contracts agreement, and the revenues amount of the products sales had been confirmed with the goods payment had been withdrawn or had received the receipt voucher of which the relevant economic benefits probably flow into the enterprise as well as the relevant costs of the products could be reliable measured when being confirming as the revenues. As for the revenues from the export sales products, the Company executes the customs declaration and the products departure according to the contracts agreement, and the Company had acquired the bill of lading with the revenues amount of the products sale had been confirmed and the goods payment had been withdrawn or had had received the receipt voucher of which the relevant economic benefits probably flow into the enterprise as well as the relevant costs of the products could be reliable measured when being confirming as the revenues. (2) Providing labor services If the Company can reliably estimate the outcome of a transaction concerning the labor services it provides, it shall recognize the revenue from providing services employing the percentage-of-completion method on the date of the balance sheet. The completed proportion of a transaction concerning the providing of labor services shall be decided by the proportion of the labor service already provided to the total labor service to provide. The outcome of a transaction concerning the providing of labor services can be measured in a reliable way, means that the following conditions shall be met simultaneously: ① The amount of revenue can be measured in a reliable way; ② The relevant economic benefits are likely to flow into the enterprise; ③ The schedule of completion under the transaction can be confirmed in a reliable way; and ④ The costs incurred or to be incurred in the transaction can be measured in a reliable way. If the outcome of a transaction concerning the providing of labor services can’t be measured in a reliable way, the revenue from the providing of labor services shall be recognized in accordance with the amount of the cost of labor services incurred and expected to be compensated, and make the cost of labor services incurred as the current expenses. If it is predicted that the cost of labor services incurred couldn’t be compensated, thus no revenue shall be recognized. Where a contract or agreement signed between Company and other enterprises concerns selling goods and providing of labor services, if the part of sale of goods and the part of providing labor services can be distinguished from each other and can be measured 84 Lu Thai Textile Co., Ltd. Interim Report 2019 respectively, the part of sale of goods and the part of providing labor services shall be treated respectively. If the part of selling goods and the part of providing labor services can’t be distinguished from each other, or if the part of sale of goods and the part of providing labor services can be distinguished from each other but can’t be measured respectively, both parts shall be conducted as selling goods. (3) Royalty revenue In accordance with relevant contract or agreement, the amount of royalty revenue should be recognized as revenue on accrual basis. (4) Interest revenue The amount of interest revenue should be measured and confirmed in accordance with the length of time for which the Company’s monetary fund is used by others and the agreed interest rate. 25. Government Subsidies The government subsidy refers to the Company gets the monetary and non-monetary assets for free from the government, excluding the capital that the government invests as the investor who enjoys the corresponding owner’s equity. It can be divided into the asset-related government subsidy and income-related government subsidy. The Company defines the obtained government subsidy for the acquisition and construction or forming the long-term asset in other ways as the asset-related government subsidy; other government subsidies are defined as the income-related government subsidy. If the government document does not clearly prescribe the subsidy object, the following ways shall be adopted to divide the subsidy into the income-related government subsidy and asset-related government subsidy: (1) The government document clears the specific project for the subsidy, it shall divide according to the relative ratio of asset expenditure amount and entry cost expenditure amount to be formed in the budget of specific project, review according to the division ratio at each balance sheet date, and change when necessary; (2) The government document only makes the general expression on the usage without indicated specific project, it shall be the income-related government subsidy. If the government subsidy is monetary asset, it shall be measured according to the received or receivable amount. If the government subsidy is non-monetary asset, it shall be measured according to the fair value; it the fair value can’t be got reliably, it shall be measured according to the nominal amount. The government subsidy measured according to the nominal amount shall be calculated in the current profits and losses directly. The Company usually confirms and measures the government subsidy according to the received amount when receiving actually. However, the financial support fund which can be received complying with the related conditions prescribed in the financial support policy indicated by the conclusive evidence shall be measured according to the receivable amount. The following conditions shall be met for the government subsidy measured by the receivable amount: (1) The receivable subsidy amount has been confirmed by the authorized government department, or it can be measured reasonably according to the officially released provisions related with the financial fund management method, and it is expected there is no major uncertainty for the amount; (2) It is based on the financial support project and financial fund management method actively opened released officially by the local financial department and according to the provision in Government Information Disclosure Provisions, the management method shall be universal (any enterprise complying with the prescribed condition can apply) rather than for the specific enterprise; (3) The related subsidy approval document has clearly promised the appropriate term, and the appropriation of the amount shall have the corresponding financial budget for the guarantee, therefore, it can ensure to receive within the prescribed term reasonably. The asset-related government subsidy shall be confirmed as the deferred income, and it shall be calculated into the current profits and losses by stages in reasonable and systematic way within the service life of related asset. The income-related government subsidy to compensate the related expense and loss later shall be confirmed as the deferred income, and it shall be calculated in the current profits and losses during the period to confirm the related costs or losses; the occurred related costs or losses for compensation shall be calculated in the current profits and losses directly. For government subsidy including the asset-related government subsidy and the income-related government subsidy at one time, accounting treatment shall be conducted respectively to distinguish the different parts; if it is difficult to distinguish, then it shall be 85 Lu Thai Textile Co., Ltd. Interim Report 2019 classified into the income-related government subsidy Government subsidies related to routine activities of the Company shall be calculated into other income or offset related costs according to the essence of economic business; government subsidies that have nothing to do with routine activities shall calculated into non-operating income. When the confirmed government subsidy needs to be returned and there is the related deferred income balance, the related deferred income book balance shall be deducted, and the surpassing part shall be calculated into the current profits and losses; If in other situations, it shall be calculated in the current profits and losses directly. 26. Deferred Income Tax Assets/Deferred Income Tax Liabilities (1) Income tax of the current period On the balance sheet date, for the current income tax liabilities (or assets) of the current period as well as the part formed during the previous period, should be measured by the income tax of the estimated payable (returnable) amount which be calculated according to the regulations of the tax law. The amount of the income tax payable which is based by the calculation of the current income tax expenses, are according to the result measured from the corresponding adjustment of the pre-tax accounting profit of this Reporting Period which in accord to the relevant regulations of the tax law. (2) Deferred income tax assets and deferred income tax liabilities The difference between the book value of certain assets and liabilities and their tax assessment basis, as well as the temporary difference occurs from the difference between the book value of the items which not be recognized as assets and liabilities but could confirm their tax assessment basis according to the regulations of the tax law, the deferred income tax assets and the deferred income tax liabilities should be recognized by adopting liabilities law of the balance sheet. No deferred tax liability is recognized for a temporary difference arising from the initial recognition of goodwill, the initial recognition of assets or liabilities due to a transaction other than a business combination, which affects neither accounting profit nor taxable profit (or deductible loss). Besides, no deferred tax assets is recognized for the taxable temporary differences related to the investments of subsidiary companies, associated enterprises and joint enterprises, and the investing enterprise can control the time of the reverse of temporary differences as well as the temporary differences are unlikely to be reversed in the excepted future. Otherwise, the Group should recognize the deferred income tax liabilities arising from other taxable temporary difference. No deferred taxable assets should be recognized for the deductible temporary difference of initial recognition of assets and liabilities arising from the transaction which is not business combination, the accounting profits will not be affected, nor will the taxable amount or deductible loss be affected at the time of transaction. Besides, no deferred taxable assets should be recognized for the deductible temporary difference related to the investments of the subsidiary companies, associated enterprises and joint enterprises, which are not likely to be reversed in the expected future or is not likely to acquire any amount of taxable income tax that may be used for making up such deductible temporary differences. Otherwise, the Company shall recognize the deferred income tax assets arising from a deductible temporary difference basing on the extent of the amount of the taxable income that is likely to be acquired to make up such deductible temporary differences For any deductible loss or tax deduction that can be carried forward to the next year, the corresponding deferred income tax asset shall be determined to the extent that the amount of future taxable income to be offset by the deductible loss or tax deduction to be likely obtained. On the balance sheet date, the deferred income tax assets and the deferred income tax liabilities shall be measured at the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled. The book value of deferred income tax assets shall be reviewed at each balance sheet date. If it is unlikely to obtain sufficient taxable income to offset against the benefit of the deferred income tax asset, the book value of the deferred income tax assets shall be written down. Any such write-down should be subsequently reversed where it becomes probable that sufficient taxable income will be available. 86 Lu Thai Textile Co., Ltd. Interim Report 2019 (3) Income tax expenses Income tax expenses include current income tax and deferred income tax. The rest current income tax and the deferred income tax expenses or revenue should be included into current gains and losses except for the current income tax and the deferred income tax related to the transaction and events that be confirmed as other comprehensive income or be directly included in the shareholders’ equity which should be included in other comprehensive income or shareholders’ equity as well as the book value for adjusting the goodwill of the deferred income tax occurs from the business combination. (4) Offset of income tax The current income tax assets and liabilities of the Company should be listed by the written-off net amount which intend to executes the net amount settlement as well as the assets acquiring and liabilities liquidation at the same time while owns the legal rights of settling the net amount. The deferred income tax assets and liabilities of the Company should be listed as written-off net amount when having the legal rights of settling the current income tax assets and liabilities by net amount and the deferred income tax and liabilities is relevant to the income tax which be collected from the same taxpaying bodies by the same tax collection and administration department or is relevant to the different taxpaying bodies but during each period which there is significant reverse of the deferred income assets and liabilities in the future and among which the involved taxpaying bodies intend to settle the current income tax and liabilities by net amount or are at the same time acquire the asset as well as liquidate the liabilities. 27. Lease (1) Accounting Treatment of Operating Lease (1) Business of operating leases recorded by the Group as the lessee The rent expenses from operating leases shall be recorded by the lessee in the relevant asset costs or the profits and losses of the current period by using the straight-line method over each period of the lease term. The initial direct costs shall be recognized as the profits and losses of the current period. The contingent rents shall be recorded into the profits and losses of the current period in which they actually arise. (2) Business of operating leases recorded by the Group as the lessor The rent incomes from operating leases shall be recognized as the profits and losses of the current period by using the straight-line method over each period of the lease term. The initial direct costs of great amount shall be capitalized when incurred, and be recorded into current profits and losses in accordance with the same basis for recognition of rent incomes over the whole lease term. The initial direct costs of small amount shall be recorded into current profits and losses when incurred. The contingent rents shall be recorded into the profits and losses of the current period in which they actually arise. (2) Accounting Treatments of Financial Lease (1) Business of finance leases recorded by the Company as the lessee On the lease beginning date, the Company shall record the lower one of the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entering value in an account, recognize the amount of the minimum lease payments as the entering value in an account of long-term account payable, and treat the balance between the recorded amount of the leased asset and the long-term account payable as unrecognized financing charges. Besides, the initial direct costs directly attributable to the leased item incurred during the process of lease negotiating and signing the leasing agreement shall be recorded in the asset value of the current period. The balance through deducting unrecognized financing charges from the minimum lease payments shall be respectively stated in long-term liabilities and long-term liabilities due within 1 year. Unrecognized financing charges shall be adopted by the effective interest rate method in the lease term, so as to calculate and recognize current financing charges. The contingent rents shall be recorded into the profits and losses of the current period in which 87 Lu Thai Textile Co., Ltd. Interim Report 2019 they actually arise. (2) Business of finance leases recorded by the Company as the lessor On the beginning date of the lease term, the Company shall recognize the sum of the minimum lease receipts on the lease beginning date and the initial direct costs as the entering value in an account of the financing lease values receivable, and record the unguaranteed residual value at the same time. The balance between the sum of the minimum lease receipts, the initial direct costs and the unguaranteed residual value and the sum of their present values shall be recognized as unrealized financing income. The balance through deducting unrealized financing incomes from the finance lease accounts receivable shall be respectively stated in long-term claims and long-term claims due within 1 year. Unrecognized financing incomes shall be adopted by the effective interest rate method in the lease term, so as to calculate and recognize current financing revenues. The contingent rents shall be recorded into the profits and losses of the current period in which they actually arise. 28. Repurchase of Shares No gains or losses shall be recognized when the consideration and transaction fees paid in share repurchases reduce the shareholders’ equity and the Company’s shares are repurchased, transferred or cancelled. Transfer of treasury stocks shall be included into the capital reserves according to the difference between the actually received amount and the book value of the treasury stocks. If the capital reserves are insufficient for adjustment, the surplus reserves and retained profits shall be adjusted accordingly. For cancellation of treasury stocks, the share capital shall be reduced according to the par value and number of shares cancelled and the capital reserves shall be adjusted according to the difference between the book value of the treasury stocks and the par value. If the capital reserves are insufficient for adjustment, the surplus reserves and retained profits shall be adjusted accordingly. 29. Other Significant Accounting Policies and Estimates Due to the internal uncertainty of operating activities, the Company needs to make judgments, estimates and assumptions for carrying amounts of statement items that can’t be measured accurately during the process of applying accounting policies. Such judgments, estimates and assumptions are made on the basis of the past experience of Company’s management staffs and on the consideration of other relevant factors. Such judgments, estimates and assumptions have effect on reporting amount of incomes, expense, assets and liabilities, as well as disclosure of contingent liabilities on the balance sheet date. However, the uncertainty of such estimates may results in major adjustments of carrying amounts of assets or liabilities that will be influenced in future. The Company shall have a check on the aforesaid judgments, estimates and assumptions at fixed intervals on the basis of sustainable operation. As for the change in accounting estimates that only effects on the current period of the change, the affected amount thereof shall be recognized at current period of the change. As for accounting estimates that effects on both the current period of the change and future periods, the affected amount thereof shall be recognized at current period of the change and future periods. On balance sheet date, major fields requiring judgments, estimates and assumptions on amounts of financial statement items by the Company are as follows: (1) Classification of leases In line with rules in Accounting Standards for Enterprises No. 21 – Leases, the Company classifies leases into operating leases and finance leases. Upon the classification, the management staffs need to make analysis and judgments on whether to essentially transfer all risks and remuneration relating to the ownership of leased-out assets to the lessee, or whether the Company has essentially undertaken all risks and remuneration relating to the ownership of leased-in assets. (2) Inventory depreciation reserves The Company shall calculate whichever is lower between the cost and realizable net value in light of inventory accounting policies. 88 Lu Thai Textile Co., Ltd. Interim Report 2019 As for inventories of which the cost is higher than the realizable net value and inventories which are obsolete and unsalable inventory depreciation reserves shall be withdrawn. Impairment of inventories to realizable net value is based on the assessment of the marketing of inventories and realizable net value thereof. Identification of inventory impairment requires well-established evidences by management staffs, as well as judgments and estimates based on consideration of the purpose of holding inventories and other factors such as events occurring after the date of balance sheet. The difference between actual outcomes and originally estimated outcomes, which will influence the carrying amount of inventories and inventory depreciation reserves in the estimated period of the change, shall be withdrawn or reversed. (3) Fair values of financial instruments As for financial instruments not existing in active trading market, the Company shall determine their fair values by all kinds of assessment methods, which include model analysis of discounted cash flow and etc. During the assessment, the Company needs to assess for respects such as future cash flows, credit risks, market volatility, correlation, and choose appropriate discount rate. Such related assumptions have uncertainty, of which the change will effect on fair values of financial instruments. (4) Impairment provisions of non-financial non-current assets The Company shall judge whether there is sign of impairment of non-current assets other than financial assets on balance sheet date. Intangible assets with uncertain service lives, besides being conducted with annual impairment test every year, have to accept impairment tests when there is sign of impairment. Other non-current assets except for financial assets have to accept impairment tests when there is sign indicating the carrying amount thereof is unrecoverable. When the carrying amounts of the asset or group assets are higher than the recoverable amounts, namely whichever is higher between the net amount through deducting disposal charges from the fair value and the present value of the estimated future cash flow, impairment occurs. The net amount of the fair value of an asset minus the disposal expenses shall be determined in light of the amount of the basis of the price as stipulated in the sales agreement or the observable market price in the fair transaction minus the incremental cost directly subject to the disposal of the asset. When estimating present value of future cash flows, it is necessary to make significant judgments on characters of the asset or asset group, such as output, sales price, related operating costs, and discount used to calculate the present value. When estimating recoverable amount, the Company shall adopt all relevant materials that can be required, including estimates relating to output, sales price and relevant operating costs judged by rational and supportable assumptions. The Company tests whether there is impairment of good will at least for every year, which requires itself to estimate the present value of the future cash flow of group assets or combination of group assets. When estimating the present value of the future cash flow, the Company needs to estimate the cash flow arising from future group assets or combination of group assets, and at the same time choose appropriate discount rate to determine the present value of the future cash flow. (5) Depreciation and amortization Upon consideration on the salvage value of investment real estates, fixed assets and intangible assets, the Company shall withdraw depreciation and amortization by straight-line method over their service lives. The Company checks on service lives at fixed intervals, so as to determine the amounts of depreciation expenses and amortization expenses at each period. Service lives are confirmed in accordance with the past experience on similar assets of the Company, along with renewed technology of expectation. If any significant change occurred to previous estimated, depreciation expenses and amortization expenses will be adjusted in future period. (6) Deferred income tax assets In a limit providing large possibility of offset losses from sufficient taxable profits, the Group shall recognize deferred income tax assets in line with all unused tax losses, which requires management staffs of the Group to estimate the time when future taxable profits occurs and the amount thereof by applying plenty of judgments and combining tax planning strategies, so as to determine the amount of the recognizable deferred income tax assets. (7) Income taxes There’s certain uncertainty of disposal and calculation of taxes of partial transactions in normal operating activities. It is uncertain 89 Lu Thai Textile Co., Ltd. Interim Report 2019 whether some pre-taxed items can set aside the approvals by tax authorities or not. If there are differences between the ultimate recognition outcomes and the originally estimated amounts of such tax issues, then such differences shall effect on the current income tax and deferred income tax during the ultimate recognition period. (8) Measurement of fair value Some of assets and liabilities in financial statement of the Company are measured by fair value. When estimating the fair value of an asset or liability, the Company adopts the available and observable market data. During the process of confirming the fair value of various assets and liabilities, relevant information of the adopted valuation technique and input value was disclosure in Note XI. 30. Changes in Main Accounting Policies and Estimates (1) Significant Changes in Accounting Policies √ Applicable □ Not applicable Contents of changes in accounting policies and reasons thereof Approval procedures Note (1) In 2017, the Ministry of Finance revised and issued the Accounting Standards for Business Enterprises No. 22-Recognition and Measurement of Financial Instruments, Accounting Standards for Business Enterprises No. 23-Transfer of Financial Assets, Accounting Standards for Business Enterprises No. 24-Hedge Accounting and Accounting Standards for Business Enterprises No. 37-Presentation of Financial Instruments, and required all enterprises listed domestically to implement the accounting standards related to new financial instruments. The Company starts to carry out above accounting standards since 1 January 2019. (2) On 15 June 2018, the Ministry of Finance issued the Notice on Revising and Issuing the Format of 2018 Financial Statements of General Enterprises (CK[2018]No. The Proposal on Changes in Parts 15) in which the format of financial statements of general enterprises was revised, and of Accounting Policies of the required governed enterprises to perform since the start date stipulated in this Company has been reviewed and document. approved on the 24th Meeting of th (3) In 2015, the Company set up the two wholly-owned subsidiaries Lu Thai Vietnam the 8 Board of Directors. and Lu An Garments in Vietnam. The recording currency of both two subsidiaries is DONG during the period from respective establishment date to 31 December 2018. The sales export of the two subsidiaries was mainly settled in USD. 86.48% of sales revenue of Lu Thai Vietnam in 2018 was settled in USD and all sales revenue of Lu An Garments were settled in USD. In accordance with provisions of No. 200/2014TT-BTC Accounting Systems for Business Enterprises issued by the Ministry of Finance of Vietnam, the two subsidiaries satisfied the condition taking USD as the recording currency, thus, their recording currencies have been changed into USD since 1 January 2019. The Company needs to make corresponding adjustments to related parts of accounting policies in line with above provisions of accounting systems. (2) Significant Changes in Accounting Estimates □ Applicable √ Not applicable 90 Lu Thai Textile Co., Ltd. Interim Report 2019 (3) Adjustments to the Financial Statements at the Beginning of the First Execution Year of any New Standards Governing Financial Instruments, Revenue or Leases √ Applicable □ Not applicable Consolidated Balance Sheet Unit: RMB Item 31 December 2018 1 January 2019 Adjusted Current assets: Monetary capital 545,502,709.36 545,502,709.36 Settlement reserve Interbank loans granted Trading financial assets 60,612,000.00 60,612,000.00 Financial assets at fair value through profit or loss Derivative financial assets Notes receivable 174,657,918.26 174,657,918.26 Accounts receivable 374,607,116.55 374,607,116.55 Financing backed by accounts receivable Prepayments 149,582,616.21 149,582,616.21 Premiums receivable Reinsurance receivables Receivable reinsurance contract reserve Other receivables 63,012,001.10 63,012,001.10 Including: Interest receivable Dividends receivable Financial assets purchased under resale agreements Inventories 2,093,366,992.30 2,093,366,992.30 Contract assets Assets classified as held for sale Current portion of non-current assets Other current assets 86,366,454.56 86,366,454.56 91 Lu Thai Textile Co., Ltd. Interim Report 2019 Total current assets 3,487,095,808.34 3,547,707,808.34 60,612,000.00 Non-current assets: Loans and advances to customers Investments in debt obligations Available-for-sale financial 85,112,000.00 -85,112,000.00 assets Investments in other debt obligations Held-to-maturity investments Long-term receivables 10,693,844.75 10,693,844.75 Long-term equity 96,018,463.65 95,554,809.90 -463,653.75 investments Investments in other equity 12,000,000.00 12,000,000.00 instruments Other non-current financial 31,018,515.95 31,018,515.95 assets Investment property 22,880,242.95 22,880,242.95 Fixed assets 5,748,562,385.35 5,748,562,385.35 Construction in progress 337,230,646.42 337,230,646.42 Productive living assets Oil and gas assets Right-of-use assets Intangible assets 478,689,064.45 478,689,064.45 R&D expense Goodwill 20,613,803.29 20,613,803.29 Long-term prepaid 119,126,407.71 119,126,407.71 expense Deferred income tax assets 88,636,929.06 85,859,151.67 -2,777,777.39 Other non-current assets 43,100,215.87 43,100,215.87 Total non-current assets 7,050,664,003.50 7,005,329,088.31 -45,334,915.19 Total assets 10,537,759,811.84 10,553,036,896.65 15,277,084.81 Current liabilities: Short-term borrowings 1,325,273,780.05 1,325,273,780.05 Borrowings from central 92 Lu Thai Textile Co., Ltd. Interim Report 2019 bank Interbank loans obtained Trading financial liabilities Financial liabilities at fair 4,877,600.00 -4,877,600.00 value through profit or loss Derivative financial 4,877,600.00 4,877,600.00 liabilities Notes payable 502,347.05 502,347.05 Accounts payable 353,186,163.90 353,186,163.90 Advances from customers 105,562,378.66 105,562,378.66 Financial assets sold under repurchase agreements Customer deposits and interbank deposits Payables for acting trading of securities Payables for underwriting of securities Payroll payable 325,998,210.17 325,998,210.17 Taxes payable 43,556,823.75 43,556,823.75 Other payables 215,946,987.68 215,946,987.68 Including: Interest 3,068,841.54 3,068,841.54 payable Dividends 441,113.64 441,113.64 payable Handling charges and commissions payable Reinsurance payables Contract liabilities Liabilities directly associated with assets classified as held for sale Current portion of non-current liabilities Other current liabilities Total current liabilities 2,374,904,291.26 2,374,904,291.26 Non-current liabilities: Insurance contract reserve 93 Lu Thai Textile Co., Ltd. Interim Report 2019 Long-term borrowings 170,019,083.89 170,019,083.89 Bonds payable Including: Preferred shares Perpetual bonds Lease liabilities Long-term payables Long-term payroll payable 96,958,178.53 96,958,178.53 Provisions Deferred income 140,183,446.39 140,183,446.39 Deferred income tax 28,030,096.38 28,030,096.38 liabilities Other non-current 1,840,000.00 1,840,000.00 liabilities Total non-current liabilities 437,030,805.19 437,030,805.19 Total liabilities 2,811,935,096.45 2,811,935,096.45 Owners’ equity: Share capital 922,602,311.00 922,602,311.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 699,493,647.48 699,493,647.48 Less: Treasury stock 486,922,944.94 486,922,944.94 Other comprehensive 61,157,013.37 60,636,813.37 -520,200.00 income Specific reserve Surplus reserves 1,022,717,451.40 1,022,717,451.40 General reserve Retained earnings 4,927,500,989.55 4,943,298,274.36 15,797,284.81 Total equity attributable to owners of the Company as 7,146,548,467.86 7,161,825,552.67 15,277,084.81 the parent Non-controlling interests 579,276,247.53 579,276,247.53 Total owners’ equity 7,725,824,715.39 7,741,101,800.20 15,277,084.81 Total liabilities and owners’ 10,537,759,811.84 10,553,036,896.65 15,277,084.81 94 Lu Thai Textile Co., Ltd. Interim Report 2019 equity Note for adjustment: In 2017, Ministry of Finance respectively revised and issued the Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments, the Accounting Standards for Business Enterprises No. 23 – Transfer of Financial Assets, the Accounting Standards for Business Enterprises No. 24 – Hedging Accounting, and the Accounting Standards for Business Enterprises No. 37 – Presentation of Financial Instruments (hereinafter jointly referred to as “new standards governing financial instruments”), which required that enterprises listed domestically shall implement it from 1 January 2019. According to the standards, enterprises shall, on implementation date of the standards, classify and measure financial instruments according to regulations, and adjustment is not needed if the involved previous comparative data of financial statements is different from the data under the “new standards governing financial instruments. For the balance between the original carrying value of financial instruments and the new carrying value on implementation date of the standards, the amount of the items on 1 January 2019 in financial statements shall be adjusted, such as earned earnings, other comprehensive income. The Company began to implement the new standards governing financial instruments from 1 January 2019. According to Notes of Revising and Printing the Format of 2018 General Enterprises Financial Statement issued by the Ministry of Finance, the Company shall reclassify the original financial assets (liabilities) into trading financial assets, investments in other equity instruments, other non-current financial assets, and derivative financial liabilities. For details about the influenced items and amounts, see the above adjusted financial statements. Balance Sheet of the Company as the Parent Unit: RMB Item 31 December 2018 1 January 2019 Adjusted Current assets: Monetary capital 191,305,104.80 191,305,104.80 Trading financial assets 60,612,000.00 60,612,000.00 Financial assets at fair value through profit or loss Derivative financial assets Notes receivable 91,555,248.34 91,555,248.34 Accounts receivable 316,225,973.28 316,225,973.28 Financings backed by accounts receivable Prepayments 115,020,260.51 115,020,260.51 Other receivables 395,847,213.77 395,847,213.77 Including: Interest receivable Dividends receivable Inventories 1,040,433,078.53 1,040,433,078.53 Contract assets Assets classified as held 95 Lu Thai Textile Co., Ltd. Interim Report 2019 for sale Current portion of non-current assets Other current assets 12,671,631.64 12,671,631.64 Total current assets 2,163,058,510.87 2,223,670,510.87 60,612,000.00 Non-current assets: Investments in debt obligations Available-for-sale financial 73,112,000.00 -73,112,000.00 assets Investments in other debt obligations Held-to-maturity investments Long-term receivables Long-term equity 2,165,711,579.69 2,165,247,925.94 -463,653.75 investments Investments in other equity instruments Other non-current financial 31,018,515.95 31,018,515.95 assets Investment property 14,804,592.72 14,804,592.72 Fixed assets 2,731,726,695.28 2,731,726,695.28 Construction in progress 61,182,771.86 61,182,771.86 Productive living assets Oil and gas assets Right-of-use assets Intangible assets 242,204,032.54 242,204,032.54 R&D expense Goodwill Long-term prepaid expense Deferred income tax assets 52,758,961.05 49,981,183.66 -2,777,777.39 Other non-current assets 6,047,443.10 6,047,443.10 Total non-current assets 5,347,548,076.24 5,302,213,161.05 -45,334,915.19 Total assets 7,510,606,587.11 7,525,883,671.92 15,277,084.81 Current liabilities: 96 Lu Thai Textile Co., Ltd. Interim Report 2019 Short-term borrowings 622,604,447.52 622,604,447.52 Trading financial liabilities Financial liabilities at fair 4,877,600.00 -4,877,600.00 value through profit or loss Derivative financial 4,877,600.00 4,877,600.00 liabilities Notes payable 120,000.00 120,000.00 Accounts payable 120,021,727.66 120,021,727.66 Advances from customers 49,798,551.14 49,798,551.14 Contract liabilities Payroll payable 240,090,943.88 240,090,943.88 Taxes payable 30,914,089.32 30,914,089.32 Other payables 303,672,590.72 303,672,590.72 Including: Interest 2,475,549.88 2,475,549.88 payable Dividends 441,113.64 441,113.64 payable Liabilities directly associated with assets classified as held for sale Current portion of non-current liabilities Other current liabilities Total current liabilities 1,372,099,950.24 1,372,099,950.24 Non-current liabilities: Long-term borrowings Bonds payable Including: Preferred shares Perpetual bonds Long-term payables Long-term payroll payable Provisions 96,958,178.53 96,958,178.53 Deferred income Deferred income tax 94,390,844.09 94,390,844.09 liabilities Other non-current 16,699,530.43 16,699,530.43 97 Lu Thai Textile Co., Ltd. Interim Report 2019 liabilities Total non-current liabilities Total liabilities 208,048,553.05 208,048,553.05 Owners’ equity: 1,580,148,503.29 1,580,148,503.29 Share capital Other equity instruments 922,602,311.00 922,602,311.00 Including: Preferred shares Perpetual bonds Capital reserves Less: Treasury stock 759,836,756.57 759,836,756.57 Other comprehensive 486,922,944.94 486,922,944.94 income Specific reserve 520,200.00 -520,200.00 Surplus reserves General reserve 1,019,608,711.76 1,019,608,711.76 Retained earnings 3,714,813,049.43 3,730,610,334.24 15,797,284.81 Total owners’ equity 5,930,458,083.82 5,945,735,168.63 15,277,084.81 Total liabilities and owners’ 7,510,606,587.11 7,525,883,671.92 15,277,084.81 equity Note for adjustment: In 2017, Ministry of Finance respectively revised and issued the Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments, the Accounting Standards for Business Enterprises No. 23 – Transfer of Financial Assets, the Accounting Standards for Business Enterprises No. 24 – Hedging Accounting, and the Accounting Standards for Business Enterprises No. 37 – Presentation of Financial Instruments (hereinafter jointly referred to as “new standards governing financial instruments”), which required that enterprises listed domestically shall implement it from 1 January 2019. According to the standards, enterprises shall, on implementation date of the standards, classify and measure financial instruments according to regulations, and adjustment is not needed if the involved previous comparative data of financial statements is different from the data under the “new standards governing financial instruments. For the balance between the original carrying value of financial instruments and the new carrying value on implementation date of the standards, the amount of the items on 1 January 2019 in financial statements shall be adjusted, such as earned earnings, other comprehensive income. The Company began to implement the new standards governing financial instruments from 1 January 2019. According to Notes of Revising and Printing the Format of 2018 General Enterprises Financial Statement issued by the Ministry of Finance, the Company shall reclassify the original financial assets (liabilities) into trading financial assets, other non-current financial assets, and derivative financial liabilities. For details about the influenced items and amounts, see the above adjusted financial statements. 98 Lu Thai Textile Co., Ltd. Interim Report 2019 (4) Retroactive Adjustments to Comparative Data of Prior Years when First Execution of any New Standards Governing Financial Instruments or Leases □ Applicable √ Not applicable VI. Taxation 1. Main Taxes and Tax Rate Category of taxes Tax basis Tax rate Calculated the output tax at 16%, 13%, 10%, 9%, 6%, 5%, 3%, and 0% 16%, 13%, 10%, 9%, 6%, 5%, 3%, VAT of taxable income and paid the VAT by the amount after deducting the 0% deductible withholding VAT at current period. Urban maintenance and Paid at 7%, 5%, 1% of the circulating tax actually paid 7%, 5%, 1% construction tax Enterprise income Paid at 25%, 16.5% and 15%, and 0% of taxable income respectively, for 25%, 16.5%, 15%, 0% tax details, see the table below. Notes of the disclosure situation of the taxpaying bodies with different enterprises income tax rate Taxpayer Income tax rate The Company 15% Lufeng Weaving & Dyeing Co., Ltd. (hereinafter refer to as “Lufeng 15% Weaving & Dyeing”) Lu Thai (Hong Kong) Textile Co., Ltd. (hereinafter refer to as “Lu Thai 16.50% Hong Kong”) Xinjiang Lu Thai Harvest Cotton Co., Ltd. (“Xinjiang Lu Thai”) 25% Zibo Luqun Textile Co., Ltd. (hereinafter refer to as “Luqun Textile”) 25% Zibo Xinsheng Power Co., Ltd. hereinafter refer to as “Xinsheng 25% Power”) Shanghai Lu Thai Textile & Garments Co., Ltd. (hereinafter referred to 25% as “Shanghai Lu Thai”) Beijing Lu Thai Youxian Electronic Commerce Co., Ltd. (hereinafter 25% referred to as “Beijing Youxian”) Shanghai Zhinuo Textile New Materials Co., Ltd. (hereinafter referred 25% to as “Shanghai Zhinuo”) Shandong Lulian New Materials Co., Ltd. (hereinafter refer to as 25% “Lulian New Materials”) Shandong Lulian New Materials Co., Ltd. (hereinafter referred to as 25% “ Lulian New Materials”) 99 Lu Thai Textile Co., Ltd. Interim Report 2019 Xinjiang Lu Thai Textile Co., Ltd. (hereinafter referred to as “Xinjiang 15% Textile”) Lu Thai (Cambodia) Textile Co., Ltd. (hereinafter referred to as “Lu 0% Thai Cambodia”) Lu Thai (Burma) Textile Co., Ltd. (hereinafter referred to as “Lu Thai 0% Burma”) Lu Thai (Vietnam) Textile Co., Ltd. (hereinafter referred to as “Lu Thai 0% Vietnam”) Lu Thai (Tan Chau) Textile Co., Ltd. (hereinafter referred to as “Lu 0% Thai Tan Chau”) Lu An Garments Co., Ltd. (hereinafter referred to as “Lu An Garments” 0% Lu Thai (America) Textile Co., Ltd. (hereinafter referred to as “Lu Thai Refer to 2. Tax Preference presented as follows for details America” 2. Tax Preference According to the "On the Recognition of 2078 Enterprises as High-tech Enterprises for 2017 such as WeihaiTuozhan Fiber Co., Ltd." (LK Zi[2018 ] No. 37) issued Department of Science and Technology of Shandong Province, Shandong Provincial Finance Department, State Administration of Taxation of Shandong Province and Local Taxation Bureau of Shandong Province, the Company and the holding subsidiary Lufeng Weaving and Dyeing Co., Ltd. were identified as high-tech enterprises. Pursuant to Article 28 of the "Law of the PRC on Enterprise Income Tax” and the No. 23 Announcement revised and published by the State Administration of Taxation in 2018, namely “Management of Preferential Policy on Corporate Income Tax” and the “Measures for the Administration of the Recognition of Hi-tech Enterprises” GKFH [2016] No. 195 revised and published by the Ministry of Science and Technology, Ministry of Finance and State Administration of Taxation, the Company and the holding subsidiary Lufeng Weaving and Dyeing Co., Ltd. enjoy a corporate income tax rate of 15%. According to the "Notice of the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation on Tax Policy Issues concerning Further Implementing the Western China Development Strategy " (CS[2011] No. 58), Xinjiang Textile Co., Ltd., the subsidiary of Lu Thai in Xinjiang, enjoys a preferential corporate income tax rate of 15%. Lu Thai (Hong Kong) Textile Co., Ltd. (hereinafter refers as Lu Thai (Hong Kong) Textile), the wholly-owned subsidiary company of the Company, was incorporated in Hong Kong SAR, whose profit tax shall be paid at tax rate of 16.5%. The wholly own subsidiary Lu Thai Cambodia, according to the Lu Thai Cambodia Profits tax free approval issued by Investment Committee of Cambodia, Lu Thai Cambodia enjoys tax preference of tax free on corporate income tax of 3 (3 years start-up period) + 3 (3 years tax holiday)+1 (1 year grace period). If profit during the 3 year start-up period then turn into 3 years tax holiday, after grace period, enterprise income tax rate was of 20%. The wholly own subsidiary Lu Thai Burma, according to the Burma’s Special Economic Zone Law issued by Pyidaungsu Hluttaw, Lu Thai Burma enjoys tax preference on corporate income tax of 7 (7 years tax holiday) + 5 (5 years tax revenues drop by half) + 5 (re-invest the profits within 1 year and continues to enjoy the half tax revenues 5 years afterwards). After grace period, enterprise income tax rate was of 25%. The wholly-owned subsidiary Lu Thai (Vietnam) Textile Co., Ltd. shall enjoy the preference of enterprise income tax at 3 years’ starting term + 4 years’ duty-free term + 9 years’ half-tax term according to the investment license issued by Vietnamese Fudong Industrial Zone Management Committee, and it will enter into 4 years’ duty-free term if it is profitable within 3 years’ starting term. The Company shall enjoy 10% of the preference tax rate within 15 years since the tax year to get the first production and operation income, and the enterprise income tax rate shall be 20% after the preference term ends. 100 Lu Thai Textile Co., Ltd. Interim Report 2019 The wholly-owned subsidiary Lu Thai Tan Chau of Lu Thai Vietnam shall enjoy the preference of enterprise income tax at 3 years’ starting term + 4 years’ duty-free term + 9 years’ half-tax term according to the investment license issued by Vietnamese Tay Ninh Investment Planning Department, and it will enter into 4 years’ duty-free term if it is profitable within 3 years’ starting term. The Company shall enjoy 10% of the preference tax rate within 15 years since the tax year to get the first production and operation income, and the enterprise income tax rate shall be 20% after the preference term ends. The wholly-owned subsidiary Lu An Garments Co., Ltd. shall enjoy the preference of enterprise income tax at 3 years’ starting term + 2 years’ duty-free term + 4 years’ half-tax term according to the investment license issued by Vietnamese Anjiang Province Economic Zone Management Committee, and it will enter into duty-free term if the profitability is realized at any year within 3 years’ starting term. The Company shall enjoy 17% of the preference tax rate within 10 years since the tax year to get the first production and operation income, and the enterprise income tax rate shall be 20% after the preference term ends. Lu Thai America, the wholly-owned subsidiary of the Company registered in New York, America, was imposed the federal enterprise income tax at progressive tax rate in excess of specific amount of 15%-39%, and imposed the New York Enterprise income tax at the rate of 6.5%. The income tax rate shall be 6.5% when the sales income in New York was below US$1 million, while 8.85% when above US$1 million. According to Announcement No. 2 of 2019 published the State Administration of Taxation(SAT), wholly-owned subsidiaries of the Company Shanghai Lu Thai, Shanghai Zhinuo and Beijing Lu Thai Youxian enjoy income tax reduction and exemption for small-scale and low-profit enterprises. From 1 January 2019 to 31 December 2021, the portion of annual taxable income within RMB1 million of the subsidiaries shall be included in taxable income by reduction of 25%; for the portion exceeding RMB1 million but within RMB3 million, it shall be included in taxable income by reduction of 25% based on the enterprise income tax rate of 20%. VII. Notes to Major Items in the Consolidated Financial Statements of the Company 1. Monetary Capital Unit: RMB Item Ending balance Beginning balance Cash on hand 10,330,609.69 9,087,924.86 Bank deposits 613,227,807.59 526,046,848.04 Other monetary capital 367,936.46 10,367,936.46 Total 623,926,353.74 545,502,709.36 Of which: total amount deposited oversees 153,331,870.26 92,173,384.32 Other notes As of 30 June 2019, the monetary capital with restricted ownership of the Company was RMB367,936.46 (31 December 2018: RMB10,367,936.46), among which, RMB295,288.20 was used as guarantee deposit for L/C by the Company’s sub-subsidiary Xinjiang Textile and RMB72,648.26 was used as guarantee deposit for L/G by the Company’s subsidiary Lufeng Weaving & Dyeing. 2. Trading Financial Assets Unit: RMB Item Ending balance Beginning balance Financial assets at fair value through profit or loss 31,146,000.00 60,612,000.00 101 Lu Thai Textile Co., Ltd. Interim Report 2019 Including: Trading financial assets 31,146,000.00 60,612,000.00 Total 31,146,000.00 60,612,000.00 Other notes 3. Notes Receivable (1) Notes Receivable Listed by Category Unit: RMB Item Ending balance Beginning balance Bank acceptance bill 40,719,317.59 72,215,993.39 L/C 133,279,057.70 102,441,924.87 Total 173,998,375.29 174,657,918.26 Notes of the basis of recognizing the group: Please refer to the relevant information of disclosure of bad debt provision of other accounts receivable if adopting the general mode of expected credit loss to withdraw bad debt provision of notes receivable. □ Applicable √ Not applicable (2) Notes Receivable which Had Endorsed by the Company or Had Discounted and Had not Due on the Balance Sheet Date at the Period-end Unit: RMB Amount of recognition termination at Amount of not terminated Item the period-end recognition at the period-end Bank acceptance bill 160,849,728.60 Total 160,849,728.60 4. Accounts Receivable (1) Accounts Receivable Disclosed by Category Unit: RMB Ending balance Beginning balance Carrying amount Bad debt provision Carrying amount Bad debt provision Category Withdra Withdr Carrying Proporti wal Proporti awal Carrying value Amount Amount value Amount Amount on proportio on propor n tion 102 Lu Thai Textile Co., Ltd. Interim Report 2019 Of which: Accounts receivable withdrawal of bad 401,632,651.5 20,179,590. 381,453,061.3 394,430,830 19,823,714. 374,607,116.5 100.00% 5.02% 100.00% 5.03% debt provision by the 2 21 1 .86 31 5 group Of which: Accounts receivable withdrawal of bad 401,632,651.5 20,179,590. 381,453,061.3 394,430,830 19,823,714. 374,607,116.5 debt provision by 100.00% 5.02% 100.00% 5.03% 2 21 1 .86 31 5 credit risks characteristics 401,632,651.5 20,179,590. 381,453,061.3 394,430,830 19,823,714. 374,607,116.5 Total 100.00% 5.02% 100.00% 5.03% 2 21 1 .86 31 5 Withdrawal of bad debt provision: Accounts receivable withdrawal of bad debt provision by credit risks characteristics Unit: RMB Ending balance Item Carrying amount Bad debt provision Withdrawal provision Accounts receivable withdrawal of bad debt provision 401,632,651.52 20,179,590.21 5.02% by credit risks characteristics Disclosure by age Unit: RMB Age Ending balance Within 1 year (including 1 year) 401,092,349.62 1 to 2 years 141,075.43 2 to 3 years 89,027.55 Over 3 years 310,198.92 Total 401,632,651.52 (2) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period: Unit: RMB Changes in the current period Category Beginning balance Ending balance Withdrawal Withdrawal Withdrawal Bad debt provision for accounts 19,823,714.31 1,065,950.68 710,074.78 20,179,590.21 receivable Total 19,823,714.31 1,065,950.68 710,074.78 20,179,590.21 103 Lu Thai Textile Co., Ltd. Interim Report 2019 (3) Particulars of the Actual Verification of Accounts Receivable during the Reporting Period Unit: RMB Item Amount Accounts receivable actually verified 710,074.78 (4) Top 5 Accounts Receivable in Ending Balance Collected according to the Arrears Party The total top 5 accounts receivable in ending balance collected according to the arrears party for the Company was RMB115,365,596.34, accounting for 28.72% of the total ending balance of accounts receivable, and the total ending balance of bad debt provision correspondingly withdrawn was RMB5,768,279.82. 5. Prepayment (1) Prepayment Listed by Aging Analysis Unit: RMB Ending balance Beginning balance Aging Amount Proportion Amount Proportion Within 1 year 327,272,499.39 100.00% 149,436,553.91 99.90% 1 to 2 years 10,838.26 0.01% 2 to 3 years 8,319.04 0.00% 8,319.04 0.01% Over 3 years 126,905.00 0.08% Total 327,280,818.43 -- 149,582,616.21 -- Notes of the reasons of the prepayment ages over 1 year with significant amount but failed settled in time: None (2) Top 5 of the Ending Balance of the Prepayments Collected according to the Prepayment Target The total top 5 of the ending balance of the prepayments collected according to the prepayment target for the Company was RMB277,207,635.73, accounting for 84.70% of total ending balance of prepayments. 6. Other Receivables Unit: RMB Item Ending balance Beginning balance Interest receivable 972,657.58 104 Lu Thai Textile Co., Ltd. Interim Report 2019 Other receivables 52,431,665.93 63,012,001.10 Total 53,404,323.51 63,012,001.10 (1) Interest Receivable 1) Category of Interest Receivable Unit: RMB Item Ending balance Beginning balance Fixed time deposits 972,657.58 Total 972,657.58 (2) Other Receivables 1) Other Receivables Classified by Account Nature Unit: RMB Nature Ending carrying amount Beginning carrying amount Export taxes refund 19,462,152.98 25,988,374.88 Advance payment 27,542,443.46 30,975,850.53 Cash pledge & Margin 7,006,988.12 6,227,752.93 Borrowings and petty cash 2,591,549.18 3,232,785.56 Other 915,905.78 2,272,245.31 Total 57,519,039.52 68,697,009.21 2) Withdrawal of Bad Debt Provision Unit: RMB First stage Second stage Third stage Expected loss in the Expected loss in the Bad debt provision Expected credit loss of Total duration (credit impairment duration (credit impairment the next 12 months not occurred) occurred) Balance of 1 January 2019 5,092,570.88 592,437.23 5,685,008.11 Balance of 1 January 2019 in —— —— —— —— the current period Withdrawal of the current -597,634.52 -597,634.52 period Balance of 30 June 2019 4,494,936.36 592,437.23 5,087,373.59 Changes of carrying amount with significant amount changes in loss provision in the current period □ Applicable √ Not applicable List by Aging Analysis Unit: RMB 105 Lu Thai Textile Co., Ltd. Interim Report 2019 Aging Ending balance Within 1 year (including 1 year) 48,719,076.28 1to 2 years 1,436,382.82 2 to 3 years 2,344,861.53 Over 3 years 5,018,718.89 Total 57,519,039.52 3) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period: Unit: RMB Changes in the current period Category Beginning balance Ending balance Withdrawal Reversal or recovery Bad debt provision for 5,685,008.11 -597,634.52 5,087,373.59 other receivables Total 5,685,008.11 -597,634.52 5,087,373.59 4 ) Particulars of the Actual Verification of Accounts Receivable during the Reporting Period Unit: RMB Item Amount Accounts receivable actually verified 0.00 5) Top 5 of the Ending Balance of the Other Receivables Collected according to the Arrears Party Unit: RMB Proportion to ending Ending balance Name of the entity Nature Ending balance Aging balance of other of bad debt receivables% provision Export taxes refund Export taxes refund 19,462,152.98 Within 1 year 33.83% 973,107.65 receivable Advance money receivable of the Advance 8,143,803.43 Within 1 year 14.16% 407,190.17 fundraising houses Advances for agricultural Advance 4,140,053.29 Within 1 year 7.20% 207,002.66 machinery Cash deposit for salary of Cash deposit for salary migrant workers in Within 1 year; over of migrant workers for 3,472,120.10 6.04% 886,686.03 Zichuan district of Zibo 3 years construction work city Bureau of Housing and Urban-Rural Development Refund of wall Within 1 year; over 1,495,857.16 2.60% 280,125.36 in Zichuan district of Zibo modification 3 years city 106 Lu Thai Textile Co., Ltd. Interim Report 2019 Total -- 36,713,986.96 -- 63.83% 2,754,111.87 7. Inventory Whether the Company has executed the new income standards □ Yes √ No (1) Category of Inventories Unit: RMB Ending balance Beginning balance Item Falling price Falling price Carrying amount Carrying value Carrying amount Carrying value reserves reserves Raw materials 1,046,230,286.41 0.00 1,046,230,286.41 768,264,219.42 2,069,324.65 766,194,894.77 Goods in process 498,963,577.52 498,963,577.52 568,371,033.96 568,371,033.96 Inventory goods 815,759,425.79 43,863,760.34 771,895,665.45 798,090,300.29 64,960,183.31 733,130,116.98 Consumptive 1,446,825.64 237,414.18 1,209,411.46 1,352,241.24 266,680.61 1,085,560.63 living assets Assigned processing 19,791,690.27 19,791,690.27 24,585,385.96 24,585,385.96 products Total 2,382,191,805.63 44,101,174.52 2,338,090,631.11 2,160,663,180.87 67,296,188.57 2,093,366,992.30 Whether the Company need satisfy relevant disclosure requirements stated in SZSE Industrial Information Disclosure Guidance No.4---Listed Company Specialized in Seed Industry and Planting Businesses or not? No (2) Falling Price Reserves of Inventories Unit: RMB Increase Decrease Beginning Item Reverse or Ending balance balance Withdrawal Other Other write-off Raw materials 2,069,324.65 2,069,324.65 0.00 Inventory goods 64,960,183.31 1,543,199.38 22,639,622.35 43,863,760.34 Consumptive 266,680.61 29,266.43 237,414.18 living assets Total 67,296,188.57 1,543,199.38 24,738,213.43 44,101,174.52 107 Lu Thai Textile Co., Ltd. Interim Report 2019 (3) The Withdrawal Basis for Inventory Falling Price Reserves and Reasons for Write-back or Write-off during the Reporting Period Item Specific basis of withdrawal of Reasons for write-back Reasons for write-off inventory falling price reserves The lower one between cost of each Disposed in the Reporting Period Raw materials item of inventory and its realizable net value The lower one between cost of each Sold in the Reporting Period Inventory goods item of inventory and its realizable net value The lower one between cost of each Sold in the Reporting Period Consumptive item of inventory and its realizable living assets net value Notes: ① The inventory falling price reserves shall be made based on the balance of inventory cost and the realizable net value regarding the former is higher than the latter, which is caused by the quality problem of some raw materials, the gray yarn and dyed yarn in finished products, by the long stock age of some shirts and fabric and by the decrease of market price of the consumptive living asset Hu sheep at the end of the Reporting Period. ② The subsidiary of the Company-Xinjiang Lu Thai Textile-obtained the short-term borrowing of RMB299,000,000.00 from the bank taking the inventories with the carrying value of RMB255,913,268.92 as a pledge. 8. Non-current Assets Due within 1 Year Unit: RMB Item Ending balance Beginning balance Equity investment due within 1 year 51,253,405.99 Total 51,253,405.99 9. Other Current Assets Whether the Company has executed the new income standards □ Yes √ No Unit: RMB Item Ending balance Beginning balance VAT input tax to be deducted 58,479,595.74 69,931,124.83 Prepaid income tax to be deducted 6,743,440.53 4,820,039.66 B-share repurchase account 11,615,290.07 Total 65,223,036.27 86,366,454.56 Other notes: 108 Lu Thai Textile Co., Ltd. Interim Report 2019 10. Long-term Receivables (1) List of Long-term Receivables Unit: RMB Ending balance Beginning balance Interval of Item Carrying Bad debt Carrying Carrying Carrying Carrying value discount rate amount provision amount value amount Financing lease 650,000.00 650,000.00 650,000.00 650,000.00 15.37% accounts Of which: unrealized 66,001.90 66,001.90 105,603.04 105,603.04 financing income Long-term advances 9,611,679.27 591,258.56 9,020,420.71 10,572,468.16 528,623.41 10,043,844.75 receivable Total 10,261,679.27 591,258.56 9,670,420.71 11,222,468.16 528,623.41 10,693,844.75 -- Bad Debt Provision First stage Second stage Third stage Expected loss in the duration Expected loss in the Bad Debt Provision Expected credit loss of Total (credit impairment not duration (credit impairment the next 12 months occurred) occurred) Balance of 1 January 2019 528,623.41 528,623.41 Balance of 1 January 2019 in —— —— —— —— the current period --Transfer to Second stage -- Transfer to Third stage -- Reverse to Second stage -- Reverse to Third stage Withdrawal of the current 62,635.15 62,635.15 period Reversal of the current period Write-offs of the current period Verification of the current period Other changes Balance of 30 June 2019 591,258.56 591,258.56 109 Lu Thai Textile Co., Ltd. Interim Report 2019 Changes of carrying amount with significant amount changes in loss provision in the current period □ Applicable √ Not applicable 11. Long-term Equity Investment Unit: RMB Increase/decrease Withd Ending Addi rawal balance Red Gains and Adjustmen Cash tiona Chang of of Beginning uced losses t of other bonus or Investee l es of depre Ending balance depreci balance inve recognized comprehe profits Other inve other ciatio ation stme under the nsive announced stme equity n reserve nt equity method income to issue nt reserv s es II. Associated enterprises Ningbo Mei shan Bonded Poer Area Haohong Equity Investment Partnership 95,554,809.90 5,083,101.54 100,637,911.44 (L.P) (hereinafter referred to as “Haohong Investment”) Subtotal 95,554,809.90 5,083,101.54 100,637,911.44 Total 95,554,809.90 5,083,101.54 100,637,911.44 Other notes 12. Other Equity Instrument Investment Unit: RMB Item Ending balance Beginning balance Shandong Hongqiao Power Co., Ltd. 12,000,000.00 12,000,000.00 Total 12,000,000.00 12,000,000.00 110 Lu Thai Textile Co., Ltd. Interim Report 2019 13. Other Non-current Financial Assets Unit: RMB Item Ending balance Beginning balance Yantai Rongchang Pharmacy Co., Ltd. 31,018,515.95 31,018,515.95 Total 31,018,515.95 31,018,515.95 14. Investment Property (1) Investment Property Adopting the Cost Measurement Mode √ Applicable □ Not applicable Unit: RMB Construction in Item Houses and buildings Land use right Total progress I. Original carrying value 1. Beginning balance 32,399,982.40 32,399,982.40 2. Increased amount of the period 21,149,343.04 21,149,343.04 (1) Outsourcing (2)Transfer from inventory\fixed 21,149,343.04 21,149,343.04 assets\construction in progress (3) Enterprise combination increase 3. Decreased amount of the period 1,003,063.00 1,003,063.00 (1) Disposal (2) Other transfer 1,003,063.00 1,003,063.00 4. Ending balance 52,546,262.44 52,546,262.44 II. Accumulative depreciation and accumulative amortization 1. Beginning balance 9,519,739.45 9,519,739.45 2. Increased amount of the period 4,420,898.71 4,420,898.71 (1) Withdrawal or amortization 599,921.59 599,921.59 (2) Transfer from accumulative 3,820,977.12 3,820,977.12 depreciation of fixed assets 3. Decreased amount of the period 112,844.58 112,844.58 (1) Disposal (2) Other transfer 112,844.58 112,844.58 4. Ending balance 13,827,793.58 13,827,793.58 111 Lu Thai Textile Co., Ltd. Interim Report 2019 III. Depreciation reserves 1. Beginning balance 2. Increased amount of the period (1) Withdrawal 3. Decreased amount of the period (1) Disposal (2) Other transfer 4. Ending balance IV. Carrying value 1. Ending carrying value 38,718,468.86 38,718,468.86 2. Beginning carrying value 22,880,242.95 22,880,242.95 15. Fixed Assets Unit: RMB Item Ending balance Beginning balance Fixed assets 5,729,951,131.93 5,748,562,385.35 Total 5,729,951,131.93 5,748,562,385.35 (1) List of Fixed Assets Unit: RMB Electronic Houses and Machinery Transportation Item equipment and Total buildings equipment equipment others I. Original carrying value 1. Beginning balance 3,251,285,811.62 6,567,263,906.52 63,692,200.59 125,565,020.71 10,007,806,939.44 2. Increased amount of the 35,098,684.89 193,352,685.57 2,129,219.80 2,674,113.23 233,254,703.49 period (1) Purchase 2,952,811.67 98,261,725.84 2,025,255.17 2,665,184.54 105,904,977.22 (2) Transfer from 30,548,510.07 91,728,021.21 122,276,531.28 construction in progress (3) Enterprise combination increase (4) Other 1,597,363.15 3,362,938.52 103,964.63 8,928.69 5,073,194.99 3. Decreased amount of the 33,418,502.68 889,202.53 197,832.66 1,266,933.26 35,772,471.13 period 112 Lu Thai Textile Co., Ltd. Interim Report 2019 (1) Disposal or Scrap 1,002,066.89 889,202.53 197,832.66 1,266,933.26 3,356,035.34 (2) Transferred into 21,182,119.54 21,182,119.54 investment property (3) Transferred into 11,234,316.25 11,234,316.25 construction in progress (4) Other 4. Ending balance 3,252,965,993.83 6,759,727,389.56 65,623,587.73 126,972,200.68 10,205,289,171.80 II. Accumulative depreciation 1. Beginning balance 959,511,665.02 3,129,855,046.37 41,145,799.39 86,048,051.87 4,216,560,562.65 2. Increased amount of the 55,942,394.39 159,683,083.77 2,652,806.16 7,847,292.25 226,125,576.57 period (1) Withdrawal 55,942,394.39 159,683,083.77 2,652,806.16 7,847,292.25 226,125,576.57 3. Decreased amount of the 7,851,140.84 791,015.03 187,941.03 1,199,359.61 10,029,456.51 period (1) Disposal or Scrap 334,727.30 791,015.03 187,941.03 1,199,359.61 2,513,042.97 (2) Transferred into 3,820,977.12 3,820,977.12 investment property (3) Transferred into 3,695,436.42 3,695,436.42 construction in progress 4. Ending balance 1,007,602,918.57 3,288,747,115.11 43,610,664.52 92,695,984.51 4,432,656,682.71 III. Depreciation reserves 1. Beginning balance 2,893,416.89 39,649,126.64 24,803.69 116,644.22 42,683,991.44 2. Increased amount of the period (1) Withdrawal 3. Decreased amount of the 2,634.28 2,634.28 period (1) Disposal or Scrap 2,634.28 2,634.28 4. Ending balance 2,893,416.89 39,646,492.36 24,803.69 116,644.22 42,681,357.16 IV. Carrying value 1. Ending carrying value 2,242,469,658.37 3,431,333,782.09 21,988,119.52 34,159,571.95 5,729,951,131.93 2. Beginning carrying value 2,288,880,729.71 3,397,759,733.51 22,521,597.51 39,400,324.62 5,748,562,385.35 (2) Fixed Assets Leased out by Operation Lease Unit: RMB Item Ending carrying value 113 Lu Thai Textile Co., Ltd. Interim Report 2019 Houses and buildings 1,056,074.64 (3) Fixed Assets Failed to Accomplish Certification of Property Unit: RMB Item Carrying value Reason Ongoing inspection, surveying, verification to application Weaving and yarn dying workshop 99,676,229.15 procedures by Housing authorities Employee’s dormitory building of Ongoing inspection, surveying, verification to application 40,781,736.31 eastern area of industrial park procedures by Housing authorities Ongoing inspection, surveying, verification to application Spinning Fourth factory workshop 88,063,762.49 procedures by Housing authorities Ongoing inspection, surveying, verification to application Employee’s dormitory building of procedures by Housing authorities for some assets and 119,623,003.67 western area of industrial park uncompleted inspection by relevant authorities for some other assets Eastern sample plant 29,327,157.36 Uncompleted inspection by relevant authorities Lufeng weaving dye workshop 129,348,595.84 Ongoing registration of premises permit by real estate exchange Xinjiang construction project of Ongoing verification to application procedures by Bureau of 100,000-spindle spinning production 67,813,878.46 Land Resources line 16. Construction in Progress Unit: RMB Item Ending balance Beginning balance Construction in progress 257,965,534.19 244,493,960.75 Engineering materials 202,424,352.96 92,736,685.67 Total 460,389,887.15 337,230,646.42 (1) List of Construction in Progress Unit: RMB Ending balance Beginning balance Depreciati Depreciati Item Carrying Carrying amount on Carrying value on Carrying value amount reserves reserves Renovation project for exhibition 2,683,566.26 2,683,566.26 24,788,720.86 24,788,720.86 hall and office building 114 Lu Thai Textile Co., Ltd. Interim Report 2019 Renovation project for international business center and creative 9,491,723.70 9,491,723.70 experience center Phase II of Eastern Dyed-yarn 270,225.14 270,225.14 Automatic Library Reform project of Xinsheng 13,975,666.21 13,975,666.21 12,145,265.65 12,145,265.65 Thermal Power Expansion project of Xinsheng 18,860,515.84 18,860,515.84 73,512,524.40 73,512,524.40 Thermal Power (Phase II) Heat supply engineering of 10,470,515.13 10,470,515.13 9,025,279.89 9,025,279.89 Xinsheng Thermal Power Lu Thai (Vietnam) project 23,786,203.77 23,786,203.77 12,414,796.74 12,414,796.74 Spinning Phase II of Lu Thai 10,334,473.83 10,334,473.83 3,908,174.87 3,908,174.87 (Vietnam) project Yarn Dye Phase II of Lu Thai 105,226,627.88 105,226,627.88 83,880,726.83 83,880,726.83 (Vietnam) project Project of Lu An Garments 2,600,417.15 2,600,417.15 4,140,135.90 4,140,135.90 Yarn Dye of Lu Thai Tan Chau 37,030,681.68 37,030,681.68 project Phase I of Functional Fabric 2,503,277.46 2,503,277.46 Intelligent Ecological Park project Other retails projects 20,731,640.14 20,731,640.14 20,678,335.61 20,678,335.61 Total 257,965,534.19 0.00 257,965,534.19 244,493,960.75 0.00 244,493,960.75 (2) Changes in Significant Construction in Progress during the Reporting Period Unit: RMB Of Capita Proportion which: lizatio of Accumu amount n rate Other accumulat lated Capi of of Transferred decrea ed Job amount tal Beginning Increased Ending capitaliz interes Item Budget in fixed sed investment sche of reso balance amount balance ed ts for assets amoun in dule interest urce interests the t constructi capitaliz s for the Report ons to ation Reportin ing budget g Period Period Renovation 27,100,000. 24,788,720. 5,011,070. 27,116,225. 2,683,566.2 Othe project for 95.00% 95% 00 86 65 25 6 r exhibition hall 115 Lu Thai Textile Co., Ltd. Interim Report 2019 and office building Renovation project for international 8,500,000.0 9,491,723. 9,491,723.7 Othe business center 23.00% 23% 0 70 0 r and creative experience center Phase II of Othe Eastern r 1,600,000.0 270,225.1 Dyed-yarn 270,225.14 17.00% 17% 0 4 Automatic Library Reform project Othe 20,000,000. 12,145,265. 1,830,400. 13,975,666. of Xinsheng 0.00 94.00% 94% r 00 65 56 21 Thermal Power Expansion Othe project of r 97,950,000. 73,512,524. 33,611,29 88,263,299. 18,860,515. Xinsheng 92.00% 92% 00 40 1.18 74 84 Thermal Power (Phase II) Heat supply Othe engineering of 32,670,000. 9,025,279.8 1,445,235. 10,470,515. r 0.00 50.00% 50% Xinsheng 00 9 24 13 Thermal Power Lu Thai Othe 242,282,300 12,414,796. 11,371,40 23,786,203. (Vietnam) 0.00 99.00% 99% r .00 74 7.03 77 project Spinning Phase Othe II of Lu Thai 52,750,000. 3,908,174.8 6,426,298. 10,334,473. r 0.00 96.00% 96% (Vietnam) 00 7 96 83 project Yarn Dye Phase Othe II of Lu Thai 110,300,000 83,880,726. 21,345,90 105,226,627 r 0.00 95.00% 95% (Vietnam) .00 83 1.05 .88 project Project of Lu An 93,035,700. 4,140,135.9 1,918,639. 3,458,357.8 2,600,417.1 Othe 99.00% 99% Garments 00 0 08 3 5 r Yarn Dye of Lu 109,995,200 37,030,68 37,030,681. Othe 0.00 0.00 34.00% 34% Thai Tan Chau .00 1.68 68 r 116 Lu Thai Textile Co., Ltd. Interim Report 2019 project Phase I of Othe Functional r Fabric 158,065,400 2,503,277. 2,503,277.4 0.00 0.00 2.00% 2% Intelligent .00 46 6 Ecological Park project Other retails 20,678,335. 3,491,952. 3,438,648.4 20,731,640. Othe projects 61 99 6 14 r 954,248,600 244,493,960 135,748,1 122,276,531 257,965,534 Total -- -- -- .00 .75 04.72 .28 .19 (3) Engineering Materials Unit: RMB Ending balance Beginning balance Depreciati Item Carrying Carrying amount Carrying value Carrying amount on Carrying value amount reserves Specific materials Specific equipment 202,424,352.96 202,424,352.96 92,736,685.67 92,736,685.67 Total 202,424,352.96 202,424,352.96 92,736,685.67 92,736,685.67 Other notes: 17. Intangible Assets (1) List of Intangible Assets Unit: RMB Software use Item Land use right Patent right Brand use right Total right I. Original carrying value 1. Beginning balance 580,757,501.63 1,985,176.47 9,710,689.79 300,000.00 592,753,367.89 2. Increased amount of the 8,997,749.14 1,184,552.59 10,182,301.73 period (1) Purchase 8,997,749.14 1,184,552.59 10,182,301.73 (2) Internal R&D (3) Business combination increase 117 Lu Thai Textile Co., Ltd. Interim Report 2019 3. Decreased amount of the period (1) Disposal 4. Ending balance 589,755,250.77 1,985,176.47 10,895,242.38 300,000.00 602,935,669.62 II. Accumulated amortization 1. Beginning balance 106,250,709.40 1,621,227.72 6,072,366.32 120,000.00 114,064,303.44 2. Increased amount of the period 7,847,326.45 114,258.84 2,004,170.72 9,965,756.01 (1) Withdrawal 7,847,326.45 114,258.84 2,004,170.72 9,965,756.01 3. Decreased amount of the period (1) Disposal 4. Ending balance 114,098,035.85 1,735,486.56 8,076,537.04 120,000.00 124,030,059.45 III. Depreciation reserves 1. Beginning balance 2. Increased amount of the period (1) Withdrawal 3. Decreased amount of the period (1) Disposal 4. Ending balance IV. Carrying value 1. Ending carrying value 475,657,214.92 249,689.91 2,818,705.34 180,000.00 478,905,610.17 2. Beginning carrying value 474,506,792.23 363,948.75 3,638,323.47 180,000.00 478,689,064.45 The proportion of intangible assets formed from the internal R&D of the Company at the Period-end to the ending balance of intangible assets was 0.00. 18. R&D Expense Increase Decrease Beginning Ending Item Recognized as Transferred into the balance Internal R&D expense Other balance intangible assets current profit or loss R&D of 161,939,039.23 161,939,039.23 products Total 161,939,039.23 161,939,039.23 118 Lu Thai Textile Co., Ltd. Interim Report 2019 19. Goodwill (1) Original Carrying Value of Goodwill Unit: RMB Name of the invested units or events Increase Decrease Beginning balance Ending balance generating goodwill Business combination Disposal Xinsheng Power 20,563,803.29 20,563,803.29 Helijie 50,000.00 50,000.00 Total 20,613,803.29 50,000.00 20,563,803.29 (2) Impairment Provision for Goodwill Refer to Note V-21 for details of the test method of goodwill impairment. 20. Long-term Prepaid Expense Unit: RMB Amortization Other decreased Item Beginning balance Increased amount amount of the Ending balance amount period Land contracting fee of 25,607,423.92 543,109.50 25,064,314.42 Xinjiang Luthai Decoration fee of Xinjiang 672,679.41 81,067.98 591,611.43 Lu Thai Land rent of overseas 92,846,304.38 393,170.13 978,735.57 92,260,738.94 subsidiaries Housing rent of overseas 0.00 subsidiaries Total 119,126,407.71 393,170.13 1,602,913.05 117,916,664.79 21. Deferred Income Tax Assets/Deferred Income Tax Liabilities (1) Deferred Income Tax Assets that Had not Been Set-off Unit: RMB Ending balance Beginning balance Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax difference assets difference assets Provision for impairment of assets 99,166,519.42 17,549,279.45 126,694,466.74 20,904,717.95 119 Lu Thai Textile Co., Ltd. Interim Report 2019 Unrealized profit of internal 145,987,556.90 17,900,842.79 130,892,601.80 16,151,715.20 transactions One-time listed decoration 4,140,492.30 1,035,123.08 4,140,492.30 1,035,123.08 expenses Payroll payable 122,397,245.35 18,458,763.12 122,397,245.35 18,458,763.12 Deferred income 139,234,253.96 22,286,791.36 140,183,446.39 22,457,708.11 Changes in fair value of trading 4,877,600.00 731,640.00 financial liabilities Changes in fair value of financial 24,264,084.05 3,639,612.61 24,264,084.05 3,639,612.61 assets Deductible loss 16,532,477.30 2,479,871.60 16,532,477.30 2,479,871.60 合计 551,722,629.28 83,350,284.01 569,982,413.93 85,859,151.67 (2) Deferred Income Tax Liabilities Had not Been Off-set Unit: RMB Ending balance Beginning balance Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax difference liabilities difference liabilities Depreciation of fixed assets 162,078,958.68 25,849,404.39 162,016,488.25 25,838,853.38 Unrealized profit of internal 12,400,680.83 1,860,102.12 13,996,286.66 2,099,443.00 transactions Changes in fair value of 1,146,000.00 171,900.00 612,000.00 91,800.00 available-for-sale financial assets Total 175,625,639.51 27,881,406.51 176,624,774.91 28,030,096.38 (3) List of Unrecognized Deferred Income Tax Assets Unit: RMB Item Ending balance Beginning balance Deductible temporary difference 13,474,234.62 9,323,059.10 Deducible losses 26,305,825.71 26,603,299.43 Total 39,780,060.33 35,926,358.53 (4) Deductible Losses of Unrecognized Deferred Income Tax Assets will Due in the Following Years Unit: RMB Years Ending balance Beginning balance Notes 120 Lu Thai Textile Co., Ltd. Interim Report 2019 Y2019 451,833.98 451,833.98 Y2020 15,662,840.17 18,170,464.10 Y2021 4,250,703.45 4,250,703.45 Y2022 3,730,297.90 3,730,297.90 Y2024 2,210,150.21 Total 26,305,825.71 26,603,299.43 -- 22. Other Non-current Assets Whether the Company has executed the new income standards □ Yes √ No Unit: RMB Item Ending balance Beginning balance Prepayment for equipment 15,287,122.02 17,275,143.10 Prepayment for land 25,400,000.00 1,996,937.00 Prepayment for rental fees of land 32,596,640.98 23,828,135.77 Total 73,283,763.00 43,100,215.87 23. Short-term Borrowings (1) Category of Short-term Borrowings Unit: RMB Item Ending balance Beginning balance Mortgage borrowings 299,000,000.00 450,000,000.00 Guaranteed borrowings 177,211,407.19 250,108,063.34 Credit borrowings 1,661,441,843.10 625,165,716.71 Total 2,137,653,250.29 1,325,273,780.05 Notes of short-term borrowings category: For details of category and amount for each assets mortgaged for mortgage borrowings, please refer to Note VII-7 and 60. 24. Derivative Financial Liabilities Unit: RMB Item Ending balance Beginning balance Derivative financial liabilities 0.00 4,877,600.00 Total 4,877,600.00 121 Lu Thai Textile Co., Ltd. Interim Report 2019 25. Notes Payable Unit: RMB Item Ending balance Beginning balance Trade acceptance 475,192.04 502,347.05 Bank acceptance bill 63,479,362.30 0.00 Total 63,954,554.34 502,347.05 The total overdue but unpaid notes payable at the period-end were RMB63,954,554.34. 26. Accounts Payable (1) List of Accounts Payable Unit: RMB Item Ending balance Beginning balance Purchase of goods 151,900,644.66 237,111,166.13 Engineering equipment 98,761,927.10 106,527,421.37 Other 8,300,256.76 9,547,576.40 Total 258,962,828.52 353,186,163.90 27. Advances from Customers Whether the Company has executed the new income standards □ Yes √ No (1) List of Advances from Customers Unit: RMB Item Ending balance Beginning balance Advances of goods 96,623,151.61 105,562,378.66 Total 96,623,151.61 105,562,378.66 28. Payroll Payable (1) List of Payroll Payable Unit: RMB Item Beginning balance Increase Decrease Ending balance I. Short-term salary 325,972,145.10 849,638,696.25 917,224,915.18 258,385,926.17 122 Lu Thai Textile Co., Ltd. Interim Report 2019 II. Post-employment 26,065.07 86,343,306.24 86,368,700.68 670.63 benefit-defined contribution plans III. Termination benefits 0.00 1,912,961.26 1,912,961.26 Total 325,998,210.17 937,894,963.75 1,005,506,577.12 258,386,596.80 (2) List of Short-term Salary Unit: RMB Item Beginning balance Increase Decrease Ending balance 1.Salary, bonus, allowance, 268,788,698.76 765,144,129.27 836,694,701.85 197,238,126.18 subsidy 2. Employee welfare 0.00 24,422,914.84 24,422,914.84 3. Social insurance 37,292.13 40,552,737.70 40,571,570.28 18,459.55 Of which: Medical insurance 29,466.69 32,303,724.29 32,320,755.92 12,435.06 premiums Work-related 6,291.48 4,064,483.57 4,064,791.20 5,983.85 injury insurance Maternity 1,533.96 4,184,529.84 4,186,023.16 40.64 insurance 4. Housing fund 0.00 7,939,107.30 7,939,107.30 5.Labor union budget and 57,146,154.21 11,579,807.14 7,596,620.91 61,129,340.44 employee education budget Total 325,972,145.10 849,638,696.25 917,224,915.18 258,385,926.17 (3) List of Defined Contribution Plans Unit: RMB Item Beginning balance Increase Decrease Ending balance 1. Basic pension benefits 25,019.49 82,804,948.82 82,829,324.78 643.53 2. Unemployment insurance 1,045.58 3,538,357.42 3,539,375.90 27.10 Total 26,065.07 86,343,306.24 86,368,700.68 670.63 Other notes: The Company, in line with the requirement, participate the endowment insurance, unemployment insurance scheme and so on, according to the scheme, the Company monthly pay to the scheme in line with 16% and 0.7% of the endowment insurance base, except the monthly payment, the Company no longer shoulder the further payment obligation, the relevant expense occurred was recorded into current profits and losses or related assets costs. 123 Lu Thai Textile Co., Ltd. Interim Report 2019 29. Taxes Payable Unit: RMB Item Ending balance Beginning balance VAT 22,920,170.57 4,057,605.21 Corporate income tax 12,400,123.09 18,491,849.09 Personal income tax 1,449,390.70 1,279,197.68 Urban maintenance and construction tax 2,463,740.52 5,509,392.03 Stamp tax 333,741.30 187,822.50 Property tax 4,403,240.67 4,684,717.85 Land use tax 2,324,707.70 4,215,720.49 Education surcharge 1,616,023.08 2,381,414.25 Local education surcharge 1,077,348.69 1,587,021.34 Local water conservancy facility 163,140.72 394,952.66 construction fund Resource tax 114,460.00 154,200.00 Environmental protection tax 190,124.80 612,930.65 Total 49,456,211.84 43,556,823.75 30. Other Payables Unit: RMB Item Ending balance Beginning balance Interest payable 4,728,481.25 3,068,841.54 Dividends payable 441,113.64 441,113.64 Other payables 208,801,352.97 212,437,032.50 Total 213,970,947.86 215,946,987.68 (1) Interest Payable Unit: RMB Item Ending balance Beginning balance Interest payable of short-term borrowings 4,728,481.25 3,068,841.54 Total 4,728,481.25 3,068,841.54 (2) Dividends Payable Unit: RMB 124 Lu Thai Textile Co., Ltd. Interim Report 2019 Item Ending balance Beginning balance Dividends payable to individual 441,113.64 441,113.64 shareholders by the Company Total 441,113.64 441,113.64 Other notes, including significant dividends payable unpaid for over one year, the unpaid reason shall be disclosed: The dividends payable unpaid for over one year were cash dividends of previous year not received by individual shareholders yet. (3) Other Payables 1) Other Payables Listed by Nature Unit: RMB Item Ending balance Beginning balance Deposits and cash deposits etc. 22,166,727.74 19,035,286.49 Collecting payment on behalf of others 16,032,165.86 18,288,047.56 Intercourse funds 160,010,348.59 165,655,961.20 Other 10,592,110.78 9,457,737.25 Total 208,801,352.97 212,437,032.50 2) Significant Other Payables Aging over One Year Unit: RMB Item Ending balance Unpaid/Un-carry-over reason Cotton and Linen Company 11,925,000.00 Received deposit of sale contract Total 11,925,000.00 -- 31. Current Portion of Non-current Liabilities Unit: RMB Item Ending balance Beginning balance Current portion of long-term borrowings 144,282,763.91 Total 144,282,763.91 32. Long-term Borrowings (1) Category of Long-term Borrowings Unit: RMB Item Ending balance Beginning balance Guarantee loan 144,282,763.91 170,019,083.89 Less: current portion of long-term -144,282,763.91 125 Lu Thai Textile Co., Ltd. Interim Report 2019 borrowings (Notes VII-31) Total 170,019,083.89 33. Long-term Payroll Payable (1) List of Long-term Payroll Payable Unit: RMB Item Ending balance Beginning balance III. Other long-term welfare 86,420,799.53 96,958,178.53 Total 86,420,799.53 96,958,178.53 34. Deferred Income Unit: RMB Reason for Item Beginning balance Increase Decrease Ending balance formation Government Government 140,077,843.35 4,177,400.00 5,086,991.29 139,168,252.06 subsidies subsidies Unrealized financing 105,603.04 39,601.14 66,001.90 Finance lease incomes Total 140,183,446.39 4,177,400.00 5,126,592.43 139,234,253.96 -- Item involving government subsidies: Unit: RMB Amount Amount Amount recorded into recorded into Othe offset cost Related to Beginning Amount of non-operating other income r Item in the Ending balance assets/related balance newly subsidy income in the in the chan Reporting income Reporting Reporting ges Period Period Period Related to Land 57,872,611.45 677,125.92 57,195,485.53 assets Related to Equipment 61,790,767.51 877,400.00 2,407,142.82 60,261,024.69 assets Production Related to 558,000.08 66,499.98 491,500.10 living assets assets Overseas Related to 500,000.00 500,000.00 investment assets R&D 5,262,000.00 3,300,000.00 8,562,000.00 Related to 126 Lu Thai Textile Co., Ltd. Interim Report 2019 income Public housing Related to 1,237,942.13 24,115.74 1,213,826.39 subsidy assets Subsidy for improvement Related to and 12,856,522.18 1,912,106.83 10,944,415.35 income transformation of green land Total 140,077,843.35 4,177,400.00 5,086,991.29 139,168,252.06 Other notes: 35. Other Non-current Liabilities Whether the Company has executed the new income standards □ Yes √ No Unit: RMB Item Ending balance Beginning balance Other 1,840,000.00 1,840,000.00 Total 1,840,000.00 1,840,000.00 36. Share Capital Unit: RMB Increase/decrease(+/-) Beginning New shares Bonus issue Ending balance balance Bonus share Other Subtotal issued from profit The sum of 922,602,311.00 -64,480,770.00 -64,480,770.00 858,121,541.00 shares 37. Capital Reserves Unit: RMB Item Beginning balance Increase Decrease Ending balance Capital premium (premium on stock) 640,470,910.34 442,861,264.14 197,609,646.20 Other capital reserves 59,022,737.14 44.94 59,022,782.08 Total 699,493,647.48 44.94 442,861,264.14 256,632,428.28 127 Lu Thai Textile Co., Ltd. Interim Report 2019 38. Treasury Shares Unit: RMB Item Beginning balance Increase Decrease Ending balance Shares of the Company acquired for 486,922,944.94 20,188,394.10 507,111,339.04 decrease in registered capital Total 486,922,944.94 20,188,394.10 507,111,339.04 39. Other Comprehensive Income Unit: RMB Reporting Period Less: recorded Less: in other recorded Attri compreh in other buta ensive comprehe ble income nsive to Less: Attributable to in prior income in non- Beginning Income before Incom owners of the Item period prior contr Ending balance balance taxation in the e tax Company as and period and ollin Current Period expen the parent transferre transferred g se after tax d in in retained inter profit or profits in ests loss in the after the Current tax Current Period Period II. Other comprehensive income that may subsequently be 60,636,813.37 11,806,511.25 11,806,511.25 72,443,324.62 reclassified to profit or loss Differences arising from translation of foreign 60,636,813.37 11,806,511.25 11,806,511.25 72,443,324.62 currency-denominated financial statements Total of other comprehensive 60,636,813.37 11,806,511.25 11,806,511.25 72,443,324.62 income Other notes, including the adjustment of the effective gain/loss on cash flow hedges to the initial recognized amount: 40. Surplus Reserves Unit: RMB 128 Lu Thai Textile Co., Ltd. Interim Report 2019 Item Beginning balance Increase Decrease Ending balance Statutory surplus reserves 1,019,375,878.82 1,019,375,878.82 Discretional surplus reserves 3,341,572.58 3,341,572.58 Total 1,022,717,451.40 1,022,717,451.40 Notes, including changes and reason of change: In accordance with provisions of Articles of Association and Corporate Law, the Company withdrew 10% of net profits as the statutory surplus reserves. 41. Retained Earnings Unit: RMB Item Reporting Period Same period of last year Beginning balance of retained earnings before 4,927,500,989.55 4,629,102,712.06 adjustments Total beginning retained earnings before 15,797,284.81 adjustment (+ for increase, - for decrease)) Total beginning retained earnings after adjustment 4,943,298,274.36 4,629,102,712.06 Add: Net profit attributable to owners of the 411,446,216.59 811,526,477.83 Company as the parent Less: Withdrawal of statutory surplus reserves 59,783,872.34 Dividend of ordinary shares payable 429,060,770.50 453,344,328.00 Ending retained earnings 4,925,683,720.45 4,927,500,989.55 List of adjustment of beginning retained earnings: (1) RMB15,797,284.81 beginning retained earnings was affected by retrospective adjustment conducted according to the Accounting Standards for Business Enterprises and relevant new regulations. (2) RMB0.00 beginning retained earnings was affected by changes in accounting policies. (3) RMB0.00 beginning retained earnings was affected by correction of significant accounting errors. (4) RMB0.00 beginning retained earnings was affected by changes in combination scope arising from same control. (5) RMB0.00 beginning retained earnings was affected totally by other adjustments. 42. Operating Revenue and Cost of Sales Unit: RMB Reporting Period Same period of last year Item Operating revenue Cost of sales Operating revenue Cost of sales Main operations 3,067,390,155.73 2,138,306,997.45 3,161,001,569.72 2,286,826,556.57 Other operations 118,058,188.28 72,579,958.08 119,406,206.10 74,009,874.84 129 Lu Thai Textile Co., Ltd. Interim Report 2019 Total 3,185,448,344.01 2,210,886,955.53 3,280,407,775.82 2,360,836,431.41 Whether the Company has executed the new income standards □ Yes √ No Other notes 43. Taxes and Surtaxes Unit: RMB Item Reporting Period Same period of last year Urban maintenance and construction tax 12,942,977.77 17,451,386.91 Education Surcharge 6,280,555.02 7,605,633.12 Property tax 273,812.00 220,654.00 Land use tax 10,445,304.80 10,374,539.75 Vehicle and vessel usage tax 4,971,821.88 9,379,056.90 Stamp duty 67,558.06 75,652.02 Local education surcharge 1,974,918.20 1,989,710.41 Local water conservancy facility 4,186,251.77 5,070,422.01 construction fund Urban maintenance and construction tax 906,978.57 1,262,384.77 Environmental protection tax 686,626.70 1,040,967.99 Total 42,736,804.77 54,470,407.88 Other notes: For details of specific payment standard for each taxes and surtaxes, please refer to Note VI Taxation 44. Selling Expense Unit: RMB Item Reporting Period Same period of last year Salary 20,574,080.44 19,297,126.63 Transport fees 23,619,036.59 20,928,650.85 Advertising expense 842,219.72 5,420,732.63 Port surcharge 6,962,843.36 6,170,035.18 Depreciation charge 2,590,789.92 2,532,810.28 Business travel charges 2,276,163.13 1,629,252.55 Rental charges 352,005.53 556,033.51 Sales service charge 9,324,787.65 820,971.59 Other 11,295,016.60 9,585,475.34 130 Lu Thai Textile Co., Ltd. Interim Report 2019 Total 77,836,942.94 66,941,088.56 45. Administrative Expense Unit: RMB Item Reporting Period Same period of last year Salary 70,734,616.39 49,380,053.99 Depreciation charge 16,165,351.08 13,579,871.22 Warehouse funding 18,689,030.12 14,923,489.16 Travel expense 9,626,697.87 8,855,345.37 Rental charges 7,783,345.21 8,383,823.95 Labor-union expenditure 7,253,250.66 8,029,634.53 Employee education budget 4,917,654.51 5,642,213.54 Amortization of intangible assets 6,659,983.58 5,669,585.44 Transport fees 3,978,013.51 3,049,340.29 Other 45,397,654.81 45,761,153.21 Total 191,205,597.74 163,274,510.70 46. R&D Expense Unit: RMB Item Reporting Period Same period of last year Salary 81,442,048.22 86,027,684.32 Materials 61,389,843.36 59,527,384.78 Depreciation 5,495,504.06 4,787,846.11 Other 13,611,643.59 12,253,330.59 Total 161,939,039.23 162,596,245.80 47. Finance Costs Unit: RMB Item Reporting Period Same period of last year Interest expense 47,316,465.76 22,535,312.05 Less: Interest income 4,338,765.10 7,403,493.02 Less: Amount of capitalized interest Foreign exchange gains or losses 4,695,399.57 11,511,469.36 Other 4,881,469.82 3,881,936.92 131 Lu Thai Textile Co., Ltd. Interim Report 2019 Total 52,554,570.05 30,525,225.31 48. Other Income Unit: RMB Sources Reporting Period Same period of last year Government subsidies 32,226,225.91 37,142,521.95 Total 32,226,225.91 37,142,521.95 49. Investment Income Unit: RMB Item Reporting Period Same period of last year Long-term equity investment income 5,083,101.54 -1,730,597.59 accounted by equity method Investment income from disposal of financial -46,137.60 assets at fair value through profit or loss Investment income of trading financial assets 1,382,405.99 during holding period Investment income from disposal of trading 3,998,105.48 6,376,621.37 financial assets Total 10,417,475.41 4,646,023.78 50. Gain on Changes in Fair Value Unit: RMB Sources Reporting Period Same period of last year Trading financial assets 405,000.00 Transactional financial liabilities 4,877,600.00 -28,481,010.00 Total 5,282,600.00 -28,481,010.00 51. Credit Impairment Loss Unit: RMB Item Reporting Period Same period of last year Bad debt loss of other receivables 597,634.52 Bad debt loss of long-term receivables -62,635.15 Bad debt loss of accounts receivable -1,065,950.68 132 Lu Thai Textile Co., Ltd. Interim Report 2019 Total -530,951.31 52. Asset Impairment Loss Whether the Company has executed the new income standards □ Yes √ No Unit: RMB Item Reporting Period Same period of last year I. Bad debt loss -2,221,300.66 II. Inventory falling price loss -1,543,199.38 99,805.82 Total -1,543,199.38 -2,121,494.84 53. Asset Disposal Income Unit: RMB Sources Reporting Period Same period of last year Fixed asset disposal income 513,490.00 -522,286.65 54. Non-operating Income Unit: RMB Amount recorded in the current Item Reporting Period Same period of last year non-recurring profit or loss Gains from damage and scrap 16,961.25 12,598.97 16,961.25 of non-current assets Other 3,080,063.19 2,994,555.86 3,080,063.19 Total 3,097,024.44 3,007,154.83 3,097,024.44 55. Non-operating Expense Unit: RMB Amount recorded in the current Item Reporting Period Same period of last year non-recurring profit or loss Donations 102,676.14 7,246.70 102,676.14 Losses from damage and scrap 24,624.99 1,094,026.64 24,624.99 of non-current assets Other 2,087,055.41 893,650.37 2,087,055.41 Total 2,214,356.54 1,994,923.71 2,214,356.54 133 Lu Thai Textile Co., Ltd. Interim Report 2019 56. Income Tax Expense (1) List of Income Tax Expense Unit: RMB Item Reporting Period Same period of last year Current income tax expense 72,479,054.50 63,894,098.11 Deferred income tax expense 2,360,177.79 -618,583.54 Total 74,839,232.29 63,275,514.57 (2) Adjustment Process of Accounting Profit and Income Tax Expense Unit: RMB Item Reporting Period Profit before taxation 495,536,742.28 Current income tax expense accounted at statutory/applicable tax 76,149,895.40 rate Influence of applying different tax rates by subsidiaries -1,773,914.98 Influence of non-taxable income 463,251.87 Income tax expense 74,839,232.29 57. Cash Flow Statement (1) Cash Generated from Other Operating Activities Unit: RMB Item Reporting Period Same period of last year Government subsidies 31,316,634.62 38,328,491.16 Claim income 2,085,818.06 1,639,520.19 Recovery of employee borrowings, petty 10,419,971.60 7,332,632.94 cash and deposit Collection for employees 1,888,073.17 2,811,301.35 Other 772,153.13 8,718,571.06 Total 46,482,650.58 58,830,516.70 Cash Used in Other Operating Activities Unit: RMB Item Reporting Period Same period of last year 134 Lu Thai Textile Co., Ltd. Interim Report 2019 Freight and miscellaneous charges 27,584,811.06 30,263,702.56 Rental charges 10,519,175.31 5,121,075.62 Advertising expense 1,918,696.01 361,478.56 Business travel charges 11,411,011.08 17,701,778.95 Insurance 6,869,594.27 9,043,863.69 Audit advisory announcement fee 2,301,944.65 4,654,078.64 Decoration & repair expenses 82,537.34 1,092,271.20 Donation 22,546.59 207,152.51 Pre-payment 5,086,731.48 967,632.15 Payment of employee borrowings, petty 11,643,401.71 9,938,512.86 cash and deposit Other 14,392,971.31 33,511,070.15 Total 91,833,420.81 112,862,616.89 (3) Cash Generated from Other Investing Activities Unit: RMB Item Reporting Period Same period of last year Interest income 3,366,107.52 7,141,264.70 Income from forward foreign exchange 6,470,691.14 6,274,421.37 Sale of securities Option cost 112,450.00 Total 9,836,798.66 13,528,136.07 (4) Cash Used in Other Investing Activities Unit: RMB Item Reporting Period Same period of last year forward settlement exchange loss 4,874,724.40 0.00 Payment of deposit for the L/C of 0.00 equipment purchase Total 4,874,724.40 (5) Cash Generated from Other Financing Activities Unit: RMB 135 Lu Thai Textile Co., Ltd. Interim Report 2019 Item Reporting Period Same period of last year Return of loan guarantees 10,000,000.00 17,200,000.00 Recovery of intercourse accounts 9,000,000.00 21,300,000.00 Government subsidies related to assets 817,500.00 Total 19,000,000.00 39,317,500.00 (6) Cash Used in Other Financing Activities Unit: RMB Item Reporting Period Same period of last year Payment of the B-share buy-back amount 8,573,104.03 175,517,237.20 Payment of intercourse accounts 11,750,000.00 Acquisition of minority shareholders’ 841,000.00 equity of subsidiaries Total 21,164,104.03 175,517,237.20 58. Supplemental Information for Cash Flow Statement (1) Supplemental Information for Cash Flow Statement Unit: RMB Supplemental information Reporting Period Same period of last year 1. Reconciliation of net profit to net cash flows generated from operating -- -- activities Net profit 420,697,509.99 390,164,336.95 Add: Provision for impairment of assets 2,074,150.69 2,121,494.84 Depreciation of fixed assets, oil-gas assets, and productive living assets 226,725,498.16 204,806,245.97 Amortization of intangible assets 9,965,756.01 8,762,435.07 Amortization of long-term prepaid expense 1,602,913.05 1,573,450.85 Losses from disposal of fixed assets, intangible assets and other long-lived -513,490.00 522,286.65 assets (gains: negative) Losses from scrap of fixed assets (gains: negative) 7,663.74 1,081,427.67 Losses from changes in fair value (gains: negative) -5,282,600.00 28,481,010.00 Finance costs (gains: negative) 47,673,100.23 29,182,177.28 Investment loss (gains: negative) -10,417,475.41 -4,646,023.78 Decrease in deferred income tax assets (gains: negative) 2,508,867.66 -618,583.54 Increase in deferred income tax liabilities -148,689.87 207,835.87 136 Lu Thai Textile Co., Ltd. Interim Report 2019 (“-” means decrease) Decrease in inventory (gains: negative) -221,528,624.76 103,831,822.46 Decrease in accounts receivable generated from operating activities (gains: -174,035,167.80 -10,014,110.37 negative) Increase in accounts payable used in operating activities (decrease: -179,612,349.12 -56,853,595.15 negative) Other -817,500.00 Net cash generated from/used in operating activities 119,717,062.57 697,784,710.77 2. Significant investing and financing activities without involvement of -- -- cash receipts and payments 3. Net increase/decrease of cash and cash equivalent: -- -- Ending balance of cash 623,558,417.28 671,571,889.84 Less: beginning balance of cash 535,134,772.90 676,639,212.86 Net increase in cash and cash equivalents 88,423,644.38 -5,067,323.02 (2) Cash and Cash Equivalents Unit: RMB Item Ending balance Beginning balance I. Cash 623,558,417.28 535,134,772.90 Including: Cash on hand 10,330,609.69 9,087,924.86 Bank deposit on demand 613,227,807.59 526,046,848.04 III. Ending balance of cash and cash 623,558,417.28 535,134,772.90 equivalents Other notes: 59. Assets with Restricted Ownership or Right to Use Unit: RMB Item Ending carrying value Reason for restriction Monetary capital 367,936.46 Cash deposit for L/G Inventory 255,913,268.92 Mortgaged for short-term borrowings Total 256,281,205.38 -- 60. Foreign Currency Monetary Items (1) Foreign Currency Monetary Items Unit: RMB 137 Lu Thai Textile Co., Ltd. Interim Report 2019 Ending foreign currency Ending balance converted to Item Exchange rate balance RMB Monetary capital -- -- Of which: USD 56,059,601.32 6.8747 385,413,571.13 EUR 340,366.86 7.8170 2,660,647.74 HKD 12,602,313.98 0.8797 11,086,255.60 JPY 19,037,425.00 0.0638 1,214,587.71 KHR 166,654,000.00 0.0017 281,145.30 GBP 4,890.26 8.7113 42,600.52 CHF 83,706.92 7.0388 589,196.27 MMK 372,712,597.87 0.0045 1,691,369.77 Dong 187,133,620,846.00 0.000295 55,151,719.16 Accounts receivable -- -- Of which: USD 49,641,282.94 6.8747 341,268,927.83 EUR HKD 2,359,417.94 0.8797 2,075,579.96 Dong 28,012,243,808.00 0.000295 8,263,611.92 Long-term borrowings -- -- Of which: USD EUR HKD Notes receivable: Of which: USD 19,386,890.73 6.8747 133,279,057.70 Other receivables: Of which: USD 119,012.24 6.8747 818,173.45 HKD 176,099.00 0.8797 154,914.29 JPY 1,395,040.00 0.0638 89,003.55 EUR 14,900.00 7.8170 116,473.30 GBP 5,500.00 8.7113 47,912.15 MMK 1,100,000.00 0.0045 4,991.80 Dong 3,960,169,897.16 0.000295 1,168,250.12 THB 90,000.00 0.2234 20,106.00 SEK 4,000.00 0.7413 2,965.20 Accounts payable: 138 Lu Thai Textile Co., Ltd. Interim Report 2019 Of which: USD 7,344,664.60 6.8747 50,492,365.73 JPY 63,617,639.84 0.0638 4,058,805.42 EUR 232,471.26 7.8170 1,817,227.84 MMK 32,518,917.00 0.0045 147,570.85 Dong 17,687,649,147.08 0.000295 5,217,856.50 Other payables: Of which: USD 96,280.00 6.8747 661,896.12 HKD 15,453,832.54 0.8797 13,594,736.49 Dong 314,954,542.00 0.000295 92,911.59 Short-term borrowings: Of which: USD 154,005,393.52 6.8747 1,058,740,878.83 Dong 33,348,817,526.00 0.000295 9,837,901.17 Current portion of long-term borrowings : Of which: USD 20,987,499.66 6.8747 144,282,763.91 Other notes: (2) Notes to Overseas Entities Including: for Significant Oversea Entities, Main Operating Place, Recording Currency and Selection Basis Shall Be Disclosed; if there Are Changes in Recording Currency, Relevant Reasons Shall Be Disclosed. √ Applicable □ Not applicable The operating places of Company’s subsidiaries Lu Thai( Hong Kong), Lu Thai(Cambodia), Lu Thai(Burma), Lu Thai(America), and Lu Thai(Vietnam), and Lu An Garment Co., Ltd. were Hong Kong, Cambodia, Burma, America, Vietnam and Vietnam, and the recording currency respectively was HKD, USD, USD, USD, USD and USD. 61. Government Subsidy (1) Basic Information on Government Subsidy Unit: RMB Amount recorded in the Category Amount Listed items current profit or loss Subsidies for transferring Xinjiang cotton yarn to 1,034,400.00 Other income 1,034,400.00 warehouses out of Xinjiang Subsidy for export credit insurance premium 127,700.00 Other income 127,700.00 Return of service charge for withholding and 131,712.26 Other income 131,712.26 remitting tax 139 Lu Thai Textile Co., Ltd. Interim Report 2019 Government subsidy for award in single champion 2,000,000.00 Other income 2,000,000.00 demonstration enterprise Local financial support for contributions 500,000.00 Other income 500,000.00 Electricity fee subsidy 646,950.00 Other income 646,950.00 Industry fund for quality and efficiency 100,000.00 Other income 100,000.00 improvement and energy conservation Social insurance subsidy of preferential policy for 112,900.00 Other income 112,900.00 strengthening local enterprise development R&D subsidy for preferential policy for 4,780,600.00 Other income 4,780,600.00 strengthening local enterprise development Special fund for energy conservation and 300,000.00 Other income 300,000.00 consumption reduction Special fund for development and innovation in 400,000.00 Other income 400,000.00 science and technology Government subsidy for innovation award in 300,000.00 Other income 300,000.00 science and technology conference Special fund for integration of “information 100,000.00 Other income 100,000.00 technology and industrialization” Subsidies for transferring cotton yarn to 2,262,912.65 Other income 2,262,912.65 warehouses Subsidy for enterprise management and 84,000.00 Other income 84,000.00 consultation Special fund for enterprise management and 200,000.00 Other income 200,000.00 consultation Support fund for leading talent 300,000.00 Other income 300,000.00 Science and technology award in Shandong 300,000.00 Other income 300,000.00 Province Subsidy for purchase of equipments 1,229,500.00 Other income 1,229,500.00 Social insurance subsidy 1,057,011.68 Other income 1,057,011.68 Deductible of input VAT on production and 13,377.37 Other income 13,377.37 consumer services Provincial industry fund for quality and efficiency 1,000,000.00 Other income 1,000,000.00 improvement and energy conservation Subsidy for municipal-level industrial design 100,000.00 Other income 100,000.00 center Fund of municipal-level talents introduce major 300,000.00 Other income 300,000.00 project Subsidy fund for leading persons (innovation in 2,000,000.00 Other income 2,000,000.00 140 Lu Thai Textile Co., Ltd. Interim Report 2019 traditional industries) of Mount Tai industry Subsidy for leading talent of Mount Tai industry 50,000.00 Other income 50,000.00 Support fund of effective application in leading 100,000.00 Other income 100,000.00 persons program of Mount Tai industry Fund for leading persons of Mount Tai 20,000.00 Other income 20,000.00 Special government subsidy for development of 25,400.00 Other income 25,400.00 foreign trade and commerce Subsidy for stabilizing posts 5,905,352.00 Other income 5,905,352.00 Social insurance for employing people with job 31,718.66 Other income 31,718.66 hunting difficulties Matching subsidy fund for support of gifted and 200,000.00 Other income 200,000.00 talented persons Central special fund for development of foreign 780,000.00 Other income 780,000.00 trade and commerce Central special credit insurance subsidy for 285,700.00 Other income 285,700.00 development of foreign trade and commerce Central special exhibition subsidy for 228,000.00 Other income 228,000.00 development of foreign trade and commerce Subsidy for patent 122,000.00 Other income 122,000.00 Subsidy for leading talent of chief technician in 10,000.00 Other income 10,000.00 Zibo Subsidy for equipments in top 30 industry project 382,400.00 Deferred income Subsidy fund for leading persons project of Mount 2,900,000.00 Deferred income Tai industry Subsidy fund for support of gifted and talented 400,000.00 Deferred income persons of Zibo City Subsidy for equipments of 30 strong industrial 495,000.00 Deferred income counties project Total 31,316,634.62 27,139,234.62 (2) Return of Government Subsidy □ Applicable √ Not applicable VIII. Changes of Consolidation Scope 1. Other Shandong Lulian New Materials Co., Ltd. (hereinafter refer to as “Lulian New Materials”) and Lu Thai (Tan Chau) Textile Co., Ltd. 141 Lu Thai Textile Co., Ltd. Interim Report 2019 (hereinafter refer to as “Lu Thai Tan Chau”) were incorporated as a subsidiary and a sub-subsidiary of the Company respectively during the Reporting Period. IX. Equity in Other Entities 1. Equity in Subsidiary (1) Subsidiaries Main operating Registration Nature of Holding percentage (%) Name Way of gaining place place business Directly Indirectly Wholesale and Luthai (Hong Kong) Hong Kong Hong Kong 100.00% Set-up retail industry Wholesale and Shanghai Luthai Shanghai Shanghai 100.00% Set-up retail industry Manufacturing Set-up Lulian New Materials Zibo Zibo 75.00% industry Wholesale and Set-up Shanghai Zhinuo Shanghai Shanghai 100.00% retail industry Manufacturing Business combination not Xinjiang Luthai Xinjiang Xinjiang 59.92% industry under the same control Lufeng Weaving & Manufacturing Zibo Zibo 75.00% Set-up Dyeing industry Manufacturing Luqun Textile Zibo Zibo 100.00% Set-up industry Manufacturing Business combination not Xinsheng Power Zibo Zibo 100.00% industry under the same control Xinjiang Textile Manufacturing Xinjiang Xinjiang 59.92% Set-up (sub-subsidiary) industry Wholesale and Beijing Youxian Beijing Beijing 100.00% Set-up retail industry Manufacturing Lu Thai (Cambodia) Cambodia Cambodia 100.00% Set-up industry Manufacturing Lu Thai (Burma) Burma Burma 100.00% Set-up industry Wholesale and Lu Thai (America) America America 100.00% Set-up retail industry Manufacturing Lu Thai (Vietnam) Vietnam Vietnam 100.00% Set-up industry 142 Lu Thai Textile Co., Ltd. Interim Report 2019 Lu Thai Tan Chau Manufacturing Vietnam Vietnam 100.00% Set-up (sub-subsidiary) industry Manufacturing Lu An Garments Vietnam Vietnam 100.00% Set-up industry (2) Significant Non-wholly-owned Subsidiary Unit: RMB Shareholding proportion The profit or loss Declaring dividends Balance of Name of non-controlling attributable to the distributed to non-controlling interests interests non-controlling interests non-controlling interests at the period-end Xinjiang Luthai 40.08% -4,676,260.97 195,960,043.78 Lufeng Weaving & 25.00% 13,939,054.37 50,000,000.00 341,968,692.25 Dyeing (3) The Main Financial Information of Significant Not Wholly-owned Subsidiary Unit: RMB Ending balance Name Non-current Non-current Current assets Total assets Current liabilities Total liabilities assets liability Xinjiang 393,133,252.63 553,241,390.51 946,374,643.14 433,309,416.90 4,653,818.92 437,963,235.82 Luthai Lufeng Weaving & 798,971,361.50 834,854,304.45 1,633,825,665.95 229,786,770.43 32,709,678.66 262,496,449.09 Dyeing Beginning balance Name Non-current Current assets Non-current assets Total assets Current liabilities Total liabilities liability Xinjiang 577,801,870.44 569,395,421.71 1,147,197,292.15 628,672,392.36 4,814,373.04 633,486,765.40 Luthai Lufeng Weaving & 908,054,381.50 820,360,513.63 1,728,414,895.13 176,914,108.80 33,049,234.56 209,963,343.36 Dyeing Unit: RMB Reporting Period Name Cash flows from operating Operating revenue Net profit Total comprehensive income activities Xinjiang 314,368,667.80 -5,299,119.43 -5,299,119.43 30,794,222.48 143 Lu Thai Textile Co., Ltd. Interim Report 2019 Luthai Lufeng Weaving & 805,575,459.05 52,877,665.09 52,877,665.09 106,151,171.66 Dyeing Same period of last year Name Cash flows from operating Operating revenue Net profit Total comprehensive income activities Xinjiang 342,127,462.81 3,505,617.21 3,505,617.21 96,172,947.55 Luthai Lufeng Weaving & 793,449,942.60 28,734,401.92 28,734,401.92 16,773,852.80 Dyeing 2. Equity in Joint Ventures or Associated Enterprises (1) Significant Joint Ventures or Associated Enterprises Holding percentage (%) Accounting treatment of the Main operating Registration Nature of Name investment to joint venture or place place business Directly Indirectly associated enterprise Haohong Equity Ningbo Ningbo 33.33% Equity method Investment investment (2) Main Financial Information of Significant Joint Ventures Unit: RMB Beginning balance/The Same period of last Ending balance/Reporting Period year Current assets 14,291,970.20 100,703,096.38 Non-current assets 287,801,958.52 186,140,002.64 Total assets 302,093,928.72 286,843,099.02 Current liabilities 150,000.00 150,000.00 Total liabilities 150,000.00 150,000.00 Equity attributable to shareholders of the 301,943,928.72 286,693,099.02 Company as the parent Net assets shares calculated at the 100,637,911.44 95,554,809.90 shareholding proportion Carrying value of investment to associated 100,637,911.44 95,554,809.90 enterprises 144 Lu Thai Textile Co., Ltd. Interim Report 2019 Net profit 15,250,829.70 -5,192,312.01 Total comprehensive income 15,250,829.70 -5,192,312.01 X. The Risk Related to Financial Instruments Main financial instruments of the Company included: Loans, accounts receivable, accounts payable, etc., all the details of the financial instruments, see related projects of “Section VII”. The risk associated with these financial instruments, as well as the Company’s risk management policy to reduce these risks which were described below. The Company's management managed and supervised these risks to ensure that the above risk was controlled in a limited scope. The Company use sensitivity analysis technology to analyze the reasonable of risk variables, influence of probable changes to the current profits and Stockholders' equity. Because rarely any risk variables change in isolation, and the correlation between variables for the eventual impact of the change of a risk variables will have a significant effect, thus, the aforesaid content was processing under the assumption of the change of each variable was conducted independently. (I) Risk management objectives and policies The goals of Company engaged in the risk management is to achieve the proper balance between the risks and benefits, reduced the negative impact to the Company operating performance risk to a minimum, maximized the profits of shareholders and other equity investors. Based on the risk management goal, the basic strategy of the Company's risk management is determine and analyze the various risks faced by the Company, set up the bottom line of risk and conducted appropriate risk management, and timely supervised various risks in a reliable way and controlled the risk within the range of limit. 1. Market Risk (1) Foreign exchange risk Foreign exchange risk is referred to the risk incurred due to loss of changes in exchange rate. Foreign exchange risk is referred to the risk incurred due to loss of changes in exchange rate. The Company’s foreign exchange risk was mainly related to USD, HKD and EUR, excepting the Company’s several subsidiaries purchase and sale, in USD, HKD and Dong, the other main business settled by RMB. On 30 December 2018, in addition to the following assets or liabilities in statement was USD, HKD and EUR, the Company’s assets or liabilities was RMB balance. The foreign exchange risk incurred by assets and liabilities of foreign balance may have impact to the operation results of the Company. Item Period-end Period-beginning Cash and cash equivalents 458,131,093.20 216,061,990.69 Notes receivable 133,279,057.70 102,441,924.87 Account receivable 351,608,119.71 306,659,681.14 Other receivables 2,422,789.86 1,687,612.64 Accounts payable 61,733,826.33 39,150,734.53 Other payables 14,349,544.19 1,622,838.36 Short-term borrowings 1,068,578,780.00 690,273,780.05 Current portion of long-term 144,282,763.91 borrowings Long-term borrowings 170,019,083.89 (2) Interest rate risk The risk of cash flow changes of financial instruments due to change of interest rate mainly was related bank loan (for details, refer to Note VII-23 and 32). Sensitive analysis of interest rate risk: 145 Lu Thai Textile Co., Ltd. Interim Report 2019 Influence of interest increasing 100 BP to current profits and losses and equity of shareholders before tax was followed: Change Reporting Period Same period of last year Influence to the profits Influence to equity of Influence to the profits Influence to equity of shareholders shareholders Increase 100 BP -8,018,035.88 -6,795,539.51 -3,208,984.32 -1,891,755.11 Decrease 100 BP 8,018,035.88 6,795,539.51 3,208,984.32 1,891,755.11 2. Credit Risk On 30 June 2019, maximum credit risk what may lead to the financial losses was the other party of the contract failed to fulfill the obligations and causes loss of the Company’s financial assets, which including: book value of financial assets recognized in consolidated balance sheet. In order to reduce the credit risk, the Company established a special team be responsible for the determination of credit limit to conduct credit approval, and perform other supervising procedures to ensure that taking necessary measures to recycle expired claims. In addition, the Company at each balance sheet date, review every single receivables recycling situation, to ensure that the money unable to recycle withdrawn provision for bad debt fully. Thus, the Company management believed that have assume the credit risk the Company shouldered had been greatly reduced. The Company's working capital was in bank with higher credit rating, so credit risk of working capital was low. 3. Liquidity Risk When manage liquidity risk, the Company keep administrators deemed sufficient cash and cash equivalents and supervised it to meet the need of the operation of the Company and reduce the influence of cash flow volatility. The Company management supervised the usage of bank loan and ensured to comply with the loan agreement. In the end of Reporting Period, the Company held cash and bank deposit of RMB624 million. In recent two years, the average of net cash flow of operation activities was RMB1.25 billion. The Company believed that the liquidity risk was insignificant. XI. The Disclosure of Fair Value 1. Ending Fair Value of Assets and Liabilities at Fair Value Unit: RMB Ending fair value Item Fair value measurement Fair value measurement Fair value measurement Total items at level 1 items at level 2 items at level 3 I. Consistent fair value -- -- -- -- measurement 1.Financial assets at fair value 62,164,515.95 62,164,515.95 through profit or loss (1) Debt instrument investment 31,146,000.00 31,146,000.00 (2) Equity instrument 31,018,515.95 31,018,515.95 investment The total amount of assets consistently measured at fair 0.00 62,164,515.95 62,164,515.95 value 146 Lu Thai Textile Co., Ltd. Interim Report 2019 The total amount of assets inconsistently measured at fair -- -- -- -- value 2. Market Price Recognition Basis for Consistent and Inconsistent Fair Value Measurement Items at Level 1 The fair value of financial liabilities at level 1 was determined in accordance with the quotation of future foreign exchange of the bank on 30 June 2019. 3. Valuation Technique Adopted and Nature and Amount Determination of Important Parameters for Consistent and Inconsistent Fair Value Measurement Items at Level 2 For the fund and equity investment without active markets in trading financial assets, the fair value was determined in accordance with the evaluation on the balance sheet date provided by the asset manager and appraisal value of assessment agency to the investment company. XII. Related Party and Related-party Transactions 1. Information Related to the Company as the Parent of the Company Proportion of share held by the Proportion of voting rights Registratio Registered Name Nature of business Company as the parent against owned by the Company as the n place capital the Company (%) parent against the Company (%) Zibo Lucheng Textile, chemistry and RMB63.26 Textile Zibo 16.36% 16.36% investment million Investment Co., Ltd. Notes: information on the Company as the parent The final controllers of the Company are Mr. Liu Zibin and Mr. Liu Deming. 2. Subsidiaries of the Company Refer to Note IX-1. Equity in Subsidiaries. 3. Information on the Joint Ventures and Associated Enterprises of the Company Refer to Note IX-2. Equity in Joint Ventures or Associated Enterprises for Details of Significant Joint Ventures or Associated Enterprises of the Company. 147 Lu Thai Textile Co., Ltd. Interim Report 2019 4. Information on Other Related Parties Name Relationship with the Company Zibo Stanluian Cosmetics Co., Ltd. (hereinafter called Joint-stock company of the Company as the parent “Stanluian”) Zibo Taimei Ties Co., Ltd. (hereinafter called Taimei Ties) Majority-owned subsidiary of the Company as the parent Zibo Limin Purified Water Co., Ltd. (hereinafter called Limin Wholly-owned subsidiary of the Company as the parent Purified Water) Zibo Luqun Land Co., Ltd (hereinafter called Luqun Land) Wholly-owned subsidiary of the Company as the parent Zibo Lurui Fine Chemical Co., Ltd. (hereinafter referred to as Wholly-owned subsidiary of the Company as the parent Lurui Chemical) Zibo Lujia Property Management Co. , Ltd. (hereinafter referred Wholly-owned subsidiary of the Company as the parent to as Lujia Property) Hong Kong Tung Hoi International Company Limited Wholly-owned subsidiary of the Company as the parent (hereinafter called Tung Hoi International) Zibo Stanluian Cosmetics Co., Ltd. (hereinafter called Wholly-owned subsidiary of the Company as the parent “Stanluian”) Other notes 5. List of Connected Transactions (1) Information on Acquisition of Goods and Reception of Labor Service Information on acquisition of goods and reception of labor service Unit: RMB Reporting The approval trade Whether exceed Same period of Related party Content Period credit trade credit or not last year Zibo Lucheng Towels, socks, oils, supermarket retail, Textile welfare, electronics, computer 6,177,619.85 7,210,000.00 No 6,462,966.30 Investment equipment, computer supplies, paper Co., Ltd. cores, boot etc. Limin Purified No Sewage treatment, materials 11,140,353.11 13,300,000.00 12,624,335.83 Water Chengshun No Gas 22,728,978.86 27,000,000.00 15,016,102.73 Petrochemical Lurui Fine No Auxiliaries 57,285,041.23 69,000,000.00 53,067,182.08 Chemical Information of sales of goods and provision of labor service Unit: RMB 148 Lu Thai Textile Co., Ltd. Interim Report 2019 Related party Content Reporting Period Same period of last year Lucheng Sales of materials, electricity, running 56,265.15 62,734.54 Textile water, draught water, gas, LED light etc. Lucheng Sales of grey yarn, dyed yarn, garment 252,090.27 205,267.94 Textile etc. Stanluian Sales of materials, electricity, and running 6,926.79 Company water Limin Purified Sales of materials, garment, LED light 865,399.14 72,279.13 Water etc. Lurui Fine Sales of garment, LED light, shell fabric, 155,742.15 88,729.05 Chemical yarn, water&electricity, lunch components Lujia Property Sales of recycled water and materials etc. 45,794.67 35,871.66 (2) Information on Related-party Lease The Company was lessor: Unit: RMB The lease income confirmed in The lease income confirmed in Name of lessee Category of leased assets the Reporting Period the Same period of last year Zibo Lucheng Textile Houses and buildings 36,108.00 48,965.14 Investment Co., Ltd. Lurui Fine Chemical Houses and buildings 4,091.82 4,091.82 The Company was lessee: Unit: RMB The lease fee confirmed in the The lease fee confirmed in the Name of lessor Category of leased assets Reporting Period Same period of last year Zibo Lucheng Textile Rent of land 1,807,428.60 1,807,428.60 Investment Co., Ltd. Zibo Lucheng Textile Rent of gas station 250,857.12 250,857.12 Investment Co., Ltd. Zibo Lucheng Textile Rent of land and buildings 5,511,114.30 5,748,600.80 Investment Co., Ltd. Luqun Property Rent of land and buildings 697,142.82 697,142.82 Notes (3) Information on Inter-bank Lending of Capital of Related Parties Unit: RMB Related party Amount Start date End date Note 149 Lu Thai Textile Co., Ltd. Interim Report 2019 Borrowing Zibo Lucheng Borrowed by the Company’s 9,000,000.00 8 April 2019 31 December 2019 Textile Investment subsidiaries Xinsheng Power 6. Accounts Receivable and Payable of Related Party (1) Accounts Payable Unit: RMB Item Related party Ending carrying amount Beginning carrying amount Accounts payable Lurui Fine Chemical 1,839,807.21 0.00 Zibo Lucheng Textile Other payables 121,520,000.00 127,139,981.30 Investment Co., Ltd. Other payables Lujia Property 600,000.00 646,472.50 Other payables Stanluian Company 1,537,779.37 Other payables Taimei Ties 1,420,277.49 XIII. Commitments and Contingency 1. Significant Commitments Significant commitments on Balance Sheet Date Capital commitments Item Ending balance (RMB’0,000) Beginning balance (RMB’0,000) Commitments signed but hasn’t been recognized in financial statements -- Commitment on constructing and 20,965.65 4528.59 purchasing long-lived assets Total 20,965.65 4528.59 2. Contingency (1) In Despite of no Significant Contingency to Disclose, the Company Shall Also Make Relevant Statements There was no significant contingency in the Company to disclose. 150 Lu Thai Textile Co., Ltd. Interim Report 2019 XIV. Notes of Main Items in the Financial Statements of the Company as the Parent 1. Accounts Receivable (1) Accounts Receivable Disclosed by Category Unit: RMB Ending balance Beginning balance Carrying amount Bad debt provision Carrying amount Bad debt provision Category Withdr Withdr Carrying Carrying Proporti awal Proporti awal Amount Amount value Amount Amount value on propor on propor tion tion Of which: Accounts receivable withdrawal of bad 389,210,047 19,544,871. 369,665,176 332,953,633 16,727,660. 316,225,973 100.00% 5.02% 100.00% 5.02% debt provision by .23 22 .01 .50 22 .28 the group Of which: Accounts receivable withdrawal of bad 389,210,047 19,544,871. 369,665,176 332,953,633 16,727,660. 316,225,973 debt provision of by 100.00% 5.02% 100.00% 5.02% .23 22 .01 .50 22 .28 credit risks characteristics 389,210,047 19,544,871. 369,665,176 332,953,633 16,727,660. 316,225,973 Total 100.00% 5.02% 100.00% 5.02% .23 22 .01 .50 22 .28 Bad debt provisions established on the group basis: Accounts receivable of which bad debt provisions are established by credit risk characteristics Unit: RMB Ending balance Item Bad debt Carrying amount Bad debt provision provision ratio Accounts receivable of which bad debt provisions are 389,210,047.23 19,544,871.22 5.02% established by credit risk Total 389,210,047.23 19,544,871.22 -- Please refer to the relevant information of disclosure of bad debt provision of other accounts receivable if adopting the general mode of expected credit loss to withdraw bad debt provision of notes receivable. □ Applicable √ Not applicable List by Aging Analysis 151 Lu Thai Textile Co., Ltd. Interim Report 2019 Unit: RMB Aging Ending balance Within 1 year (including 1 year) 388,811,793.55 1 to 2 years 63,890.76 2 to 3 years 24,164.00 Over 3 years 310,198.92 Total 389,210,047.23 (2) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period Bad debt provision withdrawn, reversed or recovered in the Reporting Period: Unit: RMB Changes in the current period Category Beginning balance Ending balance Withdrawal Reversal or recovery Write-off Bad debt provision 16,727,660.22 2,837,798.47 20,587.47 19,544,871.22 Total 16,727,660.22 2,837,798.47 20,587.47 19,544,871.22 (3) Particulars of the Actual Verification of Accounts Receivable during the Reporting Period Unit: RMB Item Amount verified Accounts receivable actually verified 20,587.47 (4) Top 5 Accounts Receivable in Ending Balance Collected according to the Arrears Party The total top 5 accounts receivable in ending balance collected according to the arrears party for the Company was RMB93,127,293.09, accounting for 23.93% of total ending balance of accounts receivable, and the total accounts receivable correspondingly withdrawn was RMB4,656,364.65. 2. Other Receivables Unit: RMB Item Ending balance Beginning balance Other receivables 555,969,515.96 395,847,213.77 Total 555,969,515.96 395,847,213.77 (1) Other Receivables 1) Other Receivables Classified by Account Nature Unit: RMB 152 Lu Thai Textile Co., Ltd. Interim Report 2019 Nature Ending carrying amount Beginning carrying amount Intercourse funds 528,177,166.18 358,031,837.54 Export rebates 14,358,034.64 22,505,284.46 Payment on behalf 9,931,697.40 13,005,358.64 Guarantee deposit and cash deposit 3,542,120.21 3,221,373.64 Borrowings and petty cash 1,971,342.94 1,774,825.33 Other 445,867.85 69,421.93 Total 558,426,229.22 398,608,101.54 2) Withdrawal of Bad Debt Provision Unit: RMB First stage Second stage Third stage Expected loss in the duration Expected loss in the Bad debt provision Expected credit loss of Total (credit impairment not duration (credit the next 12 months occurred) impairment occurred) Balance of 1 January 2019 2,760,887.77 2,760,887.77 Balance of 1 January 2019 in —— —— —— —— the current period Withdrawal of the current -304,174.51 -304,174.51 period Balance of 30 June 2019 2,456,713.26 2,456,713.26 Changes of carrying amount with significant amount changes in loss provision in the current period □ Applicable √ Not applicable List by Aging Analysis Unit: RMB Aging Ending balance Within 1 year (including 1 year) 24,976,875.42 1 to 2 years 736,675.11 2 to 3 years 2,264,517.79 Over 3 years 2,270,994.72 Total 30,249,063.04 3) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period: Unit: RMB Changes in the current period Category Beginning balance Ending balance Withdrawal Reversal or recovery Bad debt provision 2,760,887.77 -304,174.51 2,456,713.26 153 Lu Thai Textile Co., Ltd. Interim Report 2019 Total 2,760,887.77 -304,174.51 2,456,713.26 4) Particulars of Other Receivables with Actual Verification Unit: RMB Item Amount Accounts receivable actually verified 0.00 5) Top 5 of the Ending Balance of Other Receivables Collected according to the Arrears Party Unit: RMB Proportion to total ending balance of Ending balance of Name of the entity Nature Ending balance Aging other accounts bad debt provision receivable Within 1 Lu Thai (Vietnam) Intercourse funds 441,878,476.51 79.13% year Within 1 Lu An Garments Intercourse funds 86,298,689.67 15.45% year Refund of tax for export Within 1 Export rebates 14,358,034.64 2.57% 717,901.73 receivable year Accounts receivable of Advance money for the advance money for the social security undertake by Within 1 social security undertake 7,635,619.56 1.37% 381,780.98 the individual of the year by the individual of the employee employee Cash deposit for salary of Cash deposit for salary of migrant workers in Over 3 migrant workers for 1,458,593.50 0.26% 437,578.05 Zichuan district of Zibo years construction work city Total -- 551,629,413.88 -- 98.78% 1,537,260.76 3. Long-term Equity Investment Unit: RMB Ending balance Beginning balance Item Depreciation Depreciation Carrying amount Carrying value Carrying amount Carrying value reserve reserve Investment to 2,422,615,316.04 2,422,615,316.04 2,069,693,116.04 2,069,693,116.04 subsidiaries Investment to joint ventures and associated 100,637,911.44 100,637,911.44 95,554,809.90 95,554,809.90 enterprises 154 Lu Thai Textile Co., Ltd. Interim Report 2019 Total 2,523,253,227.48 2,523,253,227.48 2,165,247,925.94 2,165,247,925.94 (1) Investment to Subsidiaries Unit: RMB Depreciation reserve Ending balance of Investee Beginning balance Increase Decrease Ending balance withdrawn depreciation reserve Xinjiang Luthai 147,303,034.16 147,303,034.16 Xinsheng Power 176,340,737.93 176,340,737.93 Lufeng Weaving 529,620,000.00 529,620,000.00 & Dyeing Luqun Textile 171,784,550.00 171,784,550.00 Luthai (Hong 128,771,800.00 128,771,800.00 Kong) Shanghai Luthai 20,000,000.00 20,000,000.00 Lu Thai 108,242,335.38 108,242,335.38 (Cambodia) Lu Thai 10,209,050.00 10,209,050.00 (America) Lu Thai 62,337,238.57 62,337,238.57 (Burma) Beijing Youxian 18,000,000.00 841,000.00 18,841,000.00 Lu Thai 632,855,310.00 202,081,200.00 834,936,510.00 (Vietnam) Lu An Garments 64,229,060.00 64,229,060.00 Lulian New 150,000,000.00 150,000,000.00 Materials Total 2,069,693,116.04 352,922,200.00 2,422,615,316.04 (2) Investment to Joint Ventures and Associated Enterprises Unit: RMB Increase/decrease Ending Gains and Adjustm Withdr Cash balance Additi Redu losses ent of Change awal Beginning bonus or of Investee onal ced recognized other s of of Ending balance balance profits Other depreciati invest invest under the compreh other impair announce on ment ment equity ensive equity ment d to issue reserve method income provisi 155 Lu Thai Textile Co., Ltd. Interim Report 2019 on II. Associated enterprises Haohong Investme 95,554,809.90 5,083,101.54 100,637,911.44 nt Subtotal 95,554,809.90 5,083,101.54 100,637,911.44 Total 95,554,809.90 5,083,101.54 100,637,911.44 4. Operating Revenue and Cost of Sales Unit: RMB Reporting Period Same period of last year Item Operating revenue Cost of sales Operating revenue Cost of sales Main operations 2,354,610,227.06 1,732,468,733.73 2,360,871,867.81 1,740,109,055.52 Other operations 133,719,339.31 115,399,718.04 142,916,982.83 121,295,410.17 Total 2,488,329,566.37 1,847,868,451.77 2,503,788,850.64 1,861,404,465.69 Whether the Company has executed the new income standards □ Yes √ No Other notes: 5. Investment Income Unit: RMB Item Reporting Period Same period of last year Long-term equity investment income 150,000,000.00 accounted by cost method Long-term equity investment income 5,083,101.54 -1,730,597.59 accounted by equity method Investment income of trading financial assets 1,382,405.99 during holding period Investment income from disposal of trading 463,217.37 3,648,000.52 financial assets Total 156,928,724.90 1,917,402.93 XV. Supplementary Materials 1. Items and Amounts of Non-recurring Profit or Loss √ Applicable □ Not applicable 156 Lu Thai Textile Co., Ltd. Interim Report 2019 Unit: RMB Item Amount Note Gains/losses from the disposal of non-current assets 459,688.66 Government grants recognized in the current period, except for those acquired in the ordinary course of business or granted at certain quotas or amounts according to the 32,226,225.91 government’s unified standards Gain/loss from change of fair value of trading financial assets and liabilities, and derivative financial assets and liabilities, and investment gains from disposal of trading 10,663,111.47 financial assets and liabilities, derivative financial assets and liabilities, and other equity investment, other than valid hedging related to the Company’s common businesses Other non-operating income and expense other than the above 890,331.64 Less: Income tax effects 6,167,989.87 Non-controlling interests effects 3,441,687.15 Total 34,629,680.66 -- Explain the reasons if the Company classifies an item as an non-recurring gain/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Non-recurring Gains and Losses, or classifies any extraordinary gain/loss item mentioned in the said explanatory announcement as a recurrent gain/loss item. □ Applicable √Not applicable 2. Return on Equity and Earnings Per Share EPS (Yuan/share) Profit as of Reporting Period Weighted average ROE (%) EPS-basic EPS-basic Net profit attributable to ordinary 5.70% 0.48 0.48 shareholders of the Company Net profit attributable to ordinary shareholders of the Company after 5.22% 0.44 0.44 deduction of non-recurring profit or loss 157 Lu Thai Textile Co., Ltd. Interim Report 2019 Part XI Documents Available for Reference 1. The financial statements signed and stamped by the Company’s legal representative, Chief Accountant and Financial Manager; 2. The originals of all the Company’s announcements and documents disclosed to the public during the Reporting Period on Securities Times, Shanghai Securities News, China Securities Journal and Ta Kung Pao. Chairman of the Board: Liu Zibin Lu Thai Textile Co., Ltd. 3 August 2019 158