LU THAI TEXTILE CO., LTD.INTERIM REPORT 2019
August 2019
Part I Important Notes, Table of Contents and DefinitionsThe 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 ofthis Report and its summary, and shall be jointly and severally liable for anymisrepresentations, misleading statements or material omissions therein.Liu Zibin, the Company’s legal representative, Zhang Hongmei, the Company’s ChiefAccountant, and Zhang Keming, the Company’s Financial Manager hereby guarantee thatthe 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 Boardmeeting for the review of this Report and its summary.
| Name | Office title | Reason for not attending the meeting in person | Proxy entrusted to attend the 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 tothe section headed “Risks Facing the Company and Countermeasures” of “Part IV OperatingPerformance 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 therebe any discrepancies or misunderstandings between the two versions, the Chinese versionsshall prevail.
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
Definitions
| Term | Definition |
| The “Company”, “LTTC”, “Issuer” or “we” | Lu Thai Textile Co., Ltd. and its consolidated subsidiaries, except where the 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 |
| RMB, RMB’0,000 | Expressed in the Chinese currency of Renminbi, expressed in tens of thousands 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 |
Part II Corporate Information and Key Financial InformationI Corporate Information
| Stock name | LTTC, LTTC-B | Stock code | 000726, 200726 |
| Changed stock name (if any) | N/A | ||
| Stock exchange for stock listing | Shenzhen Stock Exchange | ||
| 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 any) | LU THAI TEXTILE CO.，LTD | ||
| Abbr. (if any) | LTTC | ||
| Legal representative | Liu Zibin | ||
II Contact Information
| Board Secretary | Securities Representative | |
| Name | Zhang Keming | Zheng Weiyin and Li Kun |
| Address | No. 81, Songling East Road, Zichuan District, Zibo, Shandong, P.R.China | No. 81, Songling East Road, Zichuan 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 andemail 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.
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’speriodic 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 theCompany’s periodic reports and the place for lodging such reports did not change in the Reporting Period. The said information canbe 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 2019 | H1 2018 | Change (%) | ||
| 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 company’s shareholders (RMB) | 411,446,216.59 | 377,355,959.02 | 377,355,959.02 | 9.03% |
| Net profit attributable to the listed company’s shareholders before exceptional gains and losses (RMB) | 376,816,535.93 | 366,948,339.88 | 366,432,917.21 | 2.83% |
| Net cash generated from/used in operating activities (RMB) | 119,717,062.57 | 697,784,710.77 | 697,784,710.77 | -82.84% |
| 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% |
| 30 June 2019 | 31 December 2018 | Change (%) | ||
| 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 shareholders (RMB) | 7,135,598,465.75 | 7,146,548,467.86 | 7,146,548,467.86 | -0.15% |
Reason for change in accounting policy and correction of accounting error:
V Accounting Data Differences under China’s Accounting Standards for Business Enterprises(CAS) and International Financial Reporting Standards (IFRS) and Foreign AccountingStandards
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 uniform standards) | 32,226,225.91 | |
| 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 other debt obligations (exclusive of the effective portion of hedges that arise in the Company’s ordinary course of business) | 10,663,111.47 | |
| 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 ExplanatoryAnnouncement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Exceptional Gain/LossItems:
□ Applicable √ Not applicable
No such cases for the Reporting Period.
Part III Business SummaryI Principal Activity of the Company in the Reporting PeriodIs 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 theReporting Period.Lu Thai has always adhered to its mission of “creating wealth, contributing to the society, clothing the world and weaving our way toevery corner of the globe”, as well as to its values of “people foremost policy, rigorous scientific attitude, client oriented principleand integrity for win-win outcome” for a long time. It is devoted to improving and expanding its industrial chain, making it arenowned textile and garment business group combing cotton growing, spinning, bleaching and dyeing, neatening, testing, garmentmaking 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 naturalfabric as its flagship, multi-component functional fiber fabric as its spearhead and wash-and-wear non-ironing technology as its corecompetency, the Company kept a watchful eye on the latest consumption trend. Great attention was paid to improve its healthyproduct series so as to satisfy the needs from the diversified and personalized market. Lu Thai has become the world’s largesthigh-grade yarn dyed fabric producer and a world-class premium shirt provider. It had paved its development pattern featured ingoing green, low-carbon growth, science and technology and humanism. Its operation performance was always among the topcomparing to its peers. 70% of Lu Thai’s products are exported to over 30 countries and regions including America, the EU andJapan, of which more than 70% is under the Company’s own brand. So far, the Company has taken up around 18% of the worldmarket 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 |
| Construction in progress | The amount as at 30 June 2019 was RMB460,389,887.15, up 36.52% from the beginning amount, primarily driven by increased construction and equipment investments for Lu Thai Vietnam’s second phase project. |
2. Major Assets Overseas
√ Applicable □ Not applicable
| Asset | Source | Asset value (RMB) | Location | Management model | Control measures to protect asset safety | Return generated (RMB) | As % of the Company’s net asset value | Material impairment risk (yes/no) |
| Lu Thai (Hong Kong) Textile Co., Ltd. | Incorporated | 175,089,652.92 | Hong Kong | Marketing | Main management personnel sent by the Company as the parent | 4,111,793.66 | 2.27% | No |
| Lu Thai (America) Textile Co., Ltd. | Incorporated | 13,077,851.06 | New York | Marketing | Main management personnel sent by the Company as the parent | 385,980.37 | 0.17% | No |
| Lu Thai (Cambodia) Textile Co., Ltd. | Incorporated | 173,891,030.13 | Svay Rieng | Manufacturing | Main management personnel sent by the Company as the parent | 12,707,516.44 | 2.25% | No |
| Lu Thai (Burma) Textile Co., Ltd. | Incorporated | 77,251,276.43 | Rangoon | Manufacturing | Main management personnel sent by the Company as the parent | 6,435,142.22 | 1.00% | No |
| Lu Thai (Vietnam) Textile Co., Ltd. | Incorporated | 1,922,677,555.71 | Tay Ninh | Manufacturing | Main management personnel sent by the Company as the parent | 36,981,264.37 | 24.89% | No |
| Lu An Garments Co., Ltd. | Incorporated | 168,749,794.48 | Anjiang, Vietnam | Manufacturing | Main management personnel sent by the Company as the parent | 765,750.18 | 2.18% | No |
III Core Competitiveness AnalysisIs 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
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 forproducing high-end dyed textile. The Company has set up production bases in Cambodia, Burma, Vietnam, etc., a design agency inItaly and a market service agency in America, which helps give full play to its international resources, form a global businessnetwork 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 ISO9000quality management system, ISO14000 environmental management system, OHSAS18000 occupational health safety managementsystem, and SA8000 social accountability management system successively from 1995. Ever since 2007, the Company has alsopassed WRAP: 1999 global garment production social accountability standard, C-TPAT: 2004 anti-terrorism standard, OE100 andGOTS organic cotton system certification and CNAS national laboratory recognition, to realize the internationalization andstandardization of the Company’s management. In order to pursue the operational management of performance excellence and betterthe Company’s performance and capability, the Company has gradually introduced GB/T19580-2004 -Standards for PerformanceExcellence Evaluation, created “Great Quality” system and promoted management innovation, to ensure the Company’s businessquality.
3. It enjoyed strong R&D capability and high-end technological platform for cooperation. The Company highly valuedself-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 Thaialso reinforced its technical cooperation with scientific research institutes, colleges and universities, strategic clines and majorsuppliers. It was committed to cutting-edge technical research, and transformed itself from product development to technicalresearches step by step. What’s more, the Company also upgraded itself from overcoming key technological difficulties to mastertechnical principles and set up industrial standards. In the past, it only focused on technical innovation, but now, it is exploring newtechnology on one hand and boosting innovation on the other for better growth. Consequently, the Company pushed forward itsdevelopment in a green, low-carbon and cyclic manner and strengthened its vitality and growing momentum. Meanwhile, the shareof 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 Companycomprehensively enhanced its quality control so as to persistently provide high standard service and set up an industry-leading brandimage, which, in return, could help to win customer’s satisfaction and market recognition. Quality awareness was weaved into everystep 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 customersatisfaction at the forefront of market demand.
Part IV Operating Performance Discussion and AnalysisI OverviewFor the Reporting Period, the Company recorded operating revenue of RMB3,185 million, an operating profit of RMB495 million, anet profit attributable to the listed company’s shareholders of RMB411 million and a net profit before exceptional gains and losses ofRMB377 million, down 2.89% and up 9.33%, 9.03% and 2.83% respectively from the same period of last year. No changes haveoccurred 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 “ComprehensiveInternationalization”, maintaining the sound, stable and sustained development trend; made steady progress in its overseas expansionprogramme and basically achieved the design expectation; and enhanced market survey for further communication with customersand improved the “manufacturing + design” service ability, which accelerated market extension efficiency. The Company deepenedits 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 demandsof the market, kept improving product design concept and innovating service mode to meet market demand and keep up with thedevelopment trends. During the Reporting Period, the Company was honored as “Top 100 Garment Makers 2018” by the ChinaNational Garment Association, “Top 100 Private Enterprises with the Highest Brand Value of Shandong Province” and “High-EndBrand 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 ofnew materials, research of new fabrics, key technologies of new product development and research of equipment upgrading by meansof organizing science and technology lectures as well as cooperating with prominent domestic colleges. Two key R&D projectsincluded in China’s 13th Five-Year Plan, which are conducted by the Company, have passed the interim examination. As of the endof the Reporting Period, the Company had 379 granted patents and 3 software copyrights; as well as had hosted or participated in theformulation of 50 national and industrial standards.During the Reporting Period, the design work of products targeting western and female consumers, etc. was completed for theautumn and winter of 2020, which consist of 71 series under eight themes. The relevant promotion activities, samples and specificdesign 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 internationalizedindustrial manufacturing as its basis, is sparing every effort to attain a global integrated development, so as to ensure its leadingposition 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 ofsales of RMB2,211 million (a 6.35% year-on-year decrease), including selling expense of RMB78 million (a 16.28% year-on-yearrise) and administrative expense of RMB191 million (a 17.11% year-on-year increase); research and development expense ofRMB162 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).
Year-on-year changes in key financial data:
Unit: RMB
| H1 2019 | H1 2018 | Change (%) | 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% | |
| Net cash generated from/used in operating activities | 119,717,062.57 | 697,784,710.77 | -82.84% | (1) Increase in cash payments for commodities and services (mostly raw materials); and (2) decrease in cash proceeds from sale of commodities |
| Net cash generated from/used in investing activities | -346,327,704.43 | -423,627,352.67 | 18.25% | |
| Net cash generated from/used in financing activities | 315,262,989.36 | -285,883,409.46 | 210.28% | Increase in the net amount of borrowings obtained |
| Net increase in cash and cash equivalents | 88,423,644.38 | -5,067,323.02 | 1,844.98% | A year-on-year increase of RMB678 million in net cash generated from financing and investing activities and a year-on-year decrease 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
| Operating revenue | Cost of sales | Gross profit margin | YoY change in operating revenue (%) | YoY change in cost of sales (%) | YoY change in gross profit margin (%) | |
| By operating division | ||||||
| Textile and apparel | 2,934,448,827.78 | 2,007,858,829.06 | 31.58% | 0.46% | -2.46% | 2.05% |
| 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 product category | ||||||
| Fabric products | 2,334,195,650.45 | 1,586,586,777.72 | 32.03% | 0.61% | -2.05% | 1.85% |
| 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 steam | 99,820,071.53 | 100,489,871.91 | -0.67% | -1.91% | 1.77% | -3.63% |
| 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 South Korea | 227,171,179.04 | 157,054,077.28 | 30.87% | 7.17% | 3.58% | 2.39% |
| Southeast Asia | 853,969,711.97 | 580,900,368.79 | 31.98% | 12.31% | 9.34% | 1.85% |
| Europe and America | 579,841,115.57 | 400,144,091.29 | 30.99% | 0.38% | -3.03% | 2.43% |
| Other | 267,533,852.91 | 182,903,368.26 | 31.63% | -16.55% | -18.83% | 1.92% |
| Mainland China | 945,253,618.52 | 685,393,226.65 | 27.49% | -14.53% | -18.07% | 3.14% |
III Analysis of Non-Core Businesses
√ Applicable □ Not applicable
Unit: RMB
| Amount | As % of profit before tax | Source/Reason | Exceptional or recurrent | |
| Investment income | 10,417,475.41 | 2.10% | Gains on equity investment, dividends from financial products, forward exchange settlement and gains on delivery of options | No |
| Gain/loss on changes in fair value | 5,282,600.00 | 1.07% | Losses generated from the variation of fair value of forward exchange settlement delivered in the Reporting Period due to reversal, etc. | No |
| Asset impairments | -1,543,199.38 | -0.31% | Inventory falling price provision | No |
| Non-operating income | 3,097,024.44 | 0.62% | Income of non-operating compensation, etc | No |
| Non-operating expense | 2,214,356.54 | 0.45% | Non-operating compensation, etc. | No |
IV Analysis of Assets and Liabilities
1. Material Changes in Asset Composition
Unit: RMB
| 30 June 2019 | 30 June 2018 | Change in percentage (%) | Reason for any material change | |||
| Amount | As % of total assets | Amount | As % of total assets | |||
| Monetary capital | 623,926,353.74 | 5.57% | 671,721,970.36 | 6.56% | -0.99% | |
| Accounts receivable | 381,453,061.31 | 3.41% | 356,818,963.69 | 3.49% | -0.08% | |
| Inventories | 2,338,090,631.11 | 20.87% | 2,017,424,627.73 | 19.71% | 1.16% | |
| Investment property | 38,718,468.86 | 0.35% | 23,856,705.69 | 0.23% | 0.12% | |
| Long-term equity investments | 100,637,911.44 | 0.90% | 95,806,134.43 | 0.94% | -0.04% | |
| Fixed assets | 5,729,951,131.93 | 51.15% | 5,359,308,862.06 | 52.37% | -1.22% | |
| Construction in progress | 460,389,887.15 | 4.11% | 365,054,086.88 | 3.57% | 0.54% | |
| Short-term borrowings | 2,137,653,250.29 | 19.08% | 1,458,058,962.33 | 14.25% | 4.83% | |
| Long-term borrowings | 0.00% | 69,431,359.47 | 0.68% | -0.68% | ||
2. Assets and Liabilities at Fair Value
√ Applicable □ Not applicable
Unit: RMB
| Item | Beginning amount | Gain/loss on fair-value changes in the Reporting Period | Cumulative fair-value changes charged to equity | Impairment allowance for the Reporting Period | Purchased in the Reporting Period | Sold in the Reporting Period | Ending amount |
| Financial assets | |||||||
| 1. Trading financial assets (exclusive of derivative financial assets) | 91,630,515.95 | 405,000.00 | 29,871,000.00 | 62,164,515.95 | |||
| Subtotal of financial assets | 91,630,515.95 | 405,000.00 | 29,871,000.00 | 62,164,515.95 | |||
| Total of the above | 91,630,515.95 | 405,000.00 | 29,871,000.00 | 62,164,515.95 | |||
| Financial liabilities | 4,877,600.00 | 4,877,600.00 | 0.00 |
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
| Operator | Relationship with the | Related-party transac | Type of derivative | Initial investment amount | Starting date | Ending date | Beginning investment amount | Purchased in the Reporting Period | Sold in the Reporting Period | Impairment provision (if | Ending investmen | Proportion of ending investm | Actual gain/loss in the Reporti |
| Company | tion | any) | t amount | ent amount in the Company’s ending net assets | ng Period | ||||||||
| Commercial bank | Non-related | No | Forward exchange settlement | 66,365.49 | 19 June 2018 | 30 May 2019 | 6,512.05 | 59,853.44 | 66,365.49 | 0 | 0.00% | 249.83 | |
| Commercial bank | Non-related | No | Foreign exchange option | 3,922.86 | 23 March 2018 | 28 March 2019 | 1,909.89 | 2,012.97 | 3,922.86 | 0 | 0.00% | -140.28 | |
| Commercial bank | Non-related | No | Forward exchange transactions | 3,049.7 | 28 September 2018 | 31 May 2019 | 1,610.11 | 1,439.59 | 3,049.7 | 0 | 0.00% | 50.05 | |
| Total | 73,338.05 | -- | -- | 10,032.05 | 63,306 | 73,338.05 | 0 | 0.00% | 159.6 | ||||
| Capital source for derivative investment | The Company’s own money | ||||||||||||
| Lawsuit (if applicable) | Naught | ||||||||||||
| Disclosure date of board of directors announcement on approval of derivative investment (if any) | 27 April 2018 | ||||||||||||
| Disclosure date of general meeting of shareholders announcement on approval of derivative investment (if any) | |||||||||||||
| Analysis on risks and control measures of derivative products held in the Reporting Period (including but not limited to market risk, | The Company conducted derivatives products transaction in order for hedging. And the forward settlement hedging was operated by installments, with the relevant amount not more than the planned derivatives products transactions. And all derivatives products transaction was zero-deposit. Meanwhile, the Company had a complete risk control system for sufficient analysis and prevention of possible risks such as market risk, liquidity risk and credit risk, operation risk and risk of laws | ||||||||||||
| liquidity risk, credit risk, operation risk, law risk, etc.) | and regulation. 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 fair values in the Reporting | 1. As of 30 June 2019, the Company has completed the delivery of all financial derivatives without any agreement on financial derivatives. |
| Period of the invested derivatives. And the analysis on the fair value of the derivatives should include the specific use methods and the relevant assumptions and parameters. | 2. January-June in 2019: the amount of all due financial derivatives of the Company converted into USD is US$108,683,700 which were executed in accordance with agreements with revenues of RMB1,596,000, among which, gains of RMB2,498,300 was from the delivery of forward foreign exchange settlement of US$98.2 million; losses of RMB1,402,800 was from the delivery of foreign exchange options of US$6 million and gains of RMB500,500 was from the delivery of forward exchange transactions of US$4,483,700. |
| Whether significant changes occurred to the Company’s accounting policy and specific accounting principles of derivatives in the Reporting Period compared to the previous Reporting Period | No significant changes |
| Specific opinion from independent directors on the Company’s derivatives investment and risk control | The Company’s independent directors Zhou Zhiji, Bi Xiuli, Pan Ailing, Wang Xinyu and Qu Dongmei, concerning conducting derivatives business, have issued the following professional advice: We are of the opinion that it will strengthen the Company’s competitiveness to use derivative transactions with focus on forward settlement and purchase as an effective tool to avoid foreign exchange risks, to strengthen the relevant internal control and to carry out the loss and risk prevention measures so as to improve the operation and management. In conducting derivative transactions with focus on forward settlement and purchase, the Company follows a legal approval procedure, has sound relevant institutions and keeps the risks relatively controllable. No harm has been done to the interests of the Company’s shareholders. |
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
| Name | Relationship with the Company | Principal activity | Registered capital | Total assets | Net assets | Operating revenue | Operating profit | Net profit |
| Lufeng Weaving & Dyeing Co., Ltd. | 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 |
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 theCompany. Registration place: Zibo, Shandong; registered capital: RMB706.160 million. It was authenticated to be high-techenterprise in October 2014, and authenticated to be high-tech enterprise again for re-evaluation in 2017, mainly manufacturing andselling textile printing and dyeing products and the products of clothing and garments. Its export income accounted for more than75%. During the Reporting Period, Lufeng Weaving & Dyeing continuously enhanced cost management, promoted R&D andinnovation, increased the conversion rate of the scientific production and added value of products. As of 30 June 2019, the operatingrevenue 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 2019Warning of possible loss or considerable YoY change in the accumulative net profit made during the period-beginning to the end ofthe 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 disputeand continuous substantial impact of tariffs. Major economies began to change their monetary policies due to weakening globaleconomic recovery and declining demand growth. What complicates the economic environment is higher domestic liquidity risk anddebt defaults of small and medium-sized enterprises. Despite the difficulties, the Company will try to maintain the international marketand 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 manyfactors such as market supply and demand, climate, policies, exchange rates and quotas. Furthermore, with the development ofenvironmental protection policies, the cost of dyeing auxiliaries also increased. Therefore, besides ensuring the stable supply oflong-staple cotton by the subsidiary in Xinjiang, the Company must study the market dynamics to reduce the cost fluctuations due tochanges in raw cotton price, and develop with the concept of green and environmental protection to meet environmental protectionrequirements.
(3) Exchange rate changes: at present and in the future, the Company will continue to sell its products mainly in the internationalmarket for a long period of time, and US dollars will account for a relatively larger portion in sales revenue. In addition, the mainmachinery and equipment and some of its raw materials of the Company are also imported. The foreign currencies payment forimports includes US dollar and other currencies. Moreover, the commissioning of the Company's overseas production base and
subsequent expansion of investment will increase the use of foreign currencies. Therefore, the Company will still be sensitive to theimpact of exchange rate changes.In order to reduce adverse influence of exchange rate fluctuation, the Company adopted the following measures: firstly, the Companyconducted foreign exchange hedging, using forward FX sales and purchase, forward foreign exchange trading and option portfoliosto avoid some risks Secondly, the Company made reasonable arrangement on settlement day and currency structure and conclusionof agreements on fixed foreign exchange rate to avoid exchange rate-related risks. Thirdly, the Company adjusted the Renminbi andforeign-currency liabilities structure to control financial costs. Fourthly, according to the fluctuation trend of exchange rates, theCompany properly adjusted imports of raw and auxiliary materials to partially offset the influence of exchange rate fluctuations onthe Company.
Part V Significant EventsI Annual and Extraordinary General Meeting Convened during the Reporting Period
1. General Meeting Convened during the Reporting Period
| Meeting | Type | Investor participation ratio | Convened date | Disclosure date | Index to disclosed information |
| The 1st Extraordinary General Meeting of 2019 | Extraordinary General Meeting | 0.00% | 12 March 2019 | 13 March 2019 | Announcement of Resolution (No. 2019-012) published on Securities Times, China Securities Journal, Shanghai Securities News, and Hong Kong Ta Kung Pao and http://www.cninfo.co on 13 March 2019 |
| The 2018 Annual General Meeting | Annual General Meeting | 0.00% | 23 April 2019 | 24 April 2019 | Announcement of Resolution (No. 2019-027) published on Securities Times, China Securities Journal, Shanghai Securities News, and Hong Kong Ta Kung Pao and http://www.cninfo.co on 24 April 2019 |
| The 2nd Extraordinary General Meeting of 2019 | Extraordinary General Meeting | 0.00% | 10 June 2019 | 11 June 2019 | Announcement of Resolution (No. 2019-047) published on Securities Times, China Securities Journal, Shanghai Securities News, and Hong Kong Ta Kung Pao and http://www.cninfo.co on 10 June 2019 |
2. Extraordinary General Meeting Convened at Request of Preference Shareholders with Resumed VotingRights
□ Applicable √ Not applicable
II Interim Dividend Plan for the Reporting Period
□ Applicable √ Not applicable
The Company has no interim dividend plan.III Commitments of the Company’s Actual Controller, Shareholders, Connected Parties andAcquirer, as well as the Company and Other Commitment Makers, Fulfilled in the ReportingPeriod or still Ongoing at Period-End
□ Applicable √ Not applicable
No such cases in the Reporting Period.IV Engagement and Disengagement of CPAs FirmHas 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” Issuedfor Last Year
□ Applicable √ Not applicable
VII Bankruptcy and Restructuring
□ Applicable √ Not applicable
No such cases in the Reporting Period.
VIII Legal MattersSignificant 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.
X Credit Conditions of the Company as well as its Controlling Shareholder and ActualController
□ Applicable √ Not applicable
XI Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures forEmployees
□ 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 partiesfor non-operating purposes”.Liabilities of related parties to account payable
| Related party | Relation with the Company | Formation reason | Beginning balance (RMB’0,000) | Amount newly added in current period (RMB’0,000) | Amount returned in current period (RMB’0,000) | Interest rate | Current interest (RMB’0,000) | Ending balance(RMB’0,000) |
| Zibo Lucheng Textile Investment Co., Ltd | The Company as the parent | Currencies deposit | 12,152 | 900 | 900 | 4.35% | 250.73 | 12,152 |
| Zibo Lujia Property Management Co., Ltd | Wholly-owned subsidiary of Lucheng Textile | Currencies deposit | 60 | 4.35% | 1.27 | 60 | ||
| Zibo Shidanlu Cosmetics Co., Ltd | Joint-stock Company of Lucheng Textile | Currencies deposit | 145 | 145 | 4.35% | 2.69 | ||
| Zibo Taimei Ties Co., Ltd | Controlling subsidiary of Lucheng Textile | Currencies deposit | 130 | 130 | 4.35% | 2.42 | ||
| Influences from liabilities of parties related on operating results and financial situations of the Company | No | |||||||
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 ControllingShareholder 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
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 | ||||||||
| Obligor | Disclosure date of the guarantee line announcement | Line of guarantee | Actual occurrence date (date of agreement signing) | Actual guarantee amount | Type of guarantee | Term of guarantee | Having expired or not | Guarantee for a related party or not |
| Lu Thai (Vietnam) Textile Co., Ltd. | 25 January 2017 | 10,454.72 | 20 January 2017 | 0 | Joint-liability | Five years since the approval of the board of the Company | No | Yes |
| Lu Thai (Vietnam) Textile Co., Ltd. | 25 January 2017 | 17,969.05 | 20 January 2017 | 14,856.64 | Joint-liability | Five years since the approval of the board of the Company | No | Yes |
| Lu Thai (Vietnam) Textile Co., Ltd. | 27 October 2017 | 33,977.84 | 25 October 2017 | 14,562.88 | Joint-liability | Five years since the approval of the board of the Company | No | Yes |
| Lu Thai (Vietnam) Textile Co., Ltd. | 22 August 2018 | 7,549.52 | 20 August 2018 | 3,306.11 | Joint-liability | Three years since the approval of the board of the Company | No | Yes |
| Lu Thai (Vietnam) Textile Co., Ltd. | 22 August 2018 | 2,745.28 | 20 August 2018 | 0 | Joint-liability | Two years since the approval of the board of the Company | No | Yes |
| Lu Thai (Vietnam) Textile Co., Ltd. | 29 March 2019 | 10,312.05 | 27 March 2019 | 0 | Joint-liability | Two years since the approval of the board of the Company | No | Yes |
| Lu Thai (Vietnam) Textile Co., Ltd. | 29 March 2019 | 4,124.82 | 27 March 2019 | 0 | Joint-liability | Two years since the approval of the board of the | No | Yes |
| Company | ||||||||||
| Lu Thai (Vietnam) Textile Co., Ltd. | 29 March 2019 | 20,624.1 | 27 March 2019 | 0 | Joint-liability | Two years since the approval of the board of the Company | No | Yes | ||
| Lu Thai (Vietnam) Textile Co., Ltd. | 29 March 2019 | 20,624.1 | 27 March 2019 | 0 | Joint-liability | Two years since the approval of the board of the Company | No | Yes | ||
| Lu Thai (Vietnam) Textile Co., Ltd. | 29 March 2019 | 5,499.76 | 27 March 2019 | 0 | Joint-liability | Two years since the approval of the board of the Company | No | Yes | ||
| Lu Thai (Vietnam) Textile Co., Ltd. | 29 March 2019 | 4,124.82 | 27 March 2019 | 0 | Joint-liability | Two years since the approval of the board of the Company | No | Yes | ||
| Xinjiang Lu Thai Good Yield Cotton Co., Ltd. | 14 October 2017 | 15,000 | 12 October 2017 | 0 | Joint-liability | Three years since the approval of the board of the Company | No | Yes | ||
| Total approved line for such guarantees in the Reporting Period (B1) | 65,309.65 | Total actual amount of such guarantees in the Reporting Period (B2) | 18,966.68 | |||||||
| Total approved line for such guarantees at the end of the Reporting Period (B3) | 153,006.06 | Total actual balance of such guarantees at the end of the Reporting Period (B4) | 32,725.63 | |||||||
| Guarantees provided between subsidiaries | ||||||||||
| Obligor | Disclosure date of the guarantee line announcement | Line of guarantee | Actual occurrence date (date of agreement signing) | Actual guarantee amount | Type of guarantee | Term of guarantee | Having expired or not | Guarantee for a related party or not | ||
| Xinjiang Lu Thai Textile Co., Ltd. | 20,000 | 5 November 2018 | 19,900 | Joint-liability | 12 months | No | Yes | |||
| Total approved line for such guarantees in the Reporting Period (C1) | 0 | Total actual amount of such guarantees in the Reporting Period (C2) | 19,900 | |||||||
| Total approved line for such guarantees at the end of the | 20,000 | Total actual balance of such guarantees at the | 19,900 | |||||||
| 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 the Reporting Period (A1+B1+C1) | 65,309.65 | Total actual guarantee amount in the Reporting Period (A2+B2+C2) | 38,866.68 | ||
| Total approved guarantee line at the end of the Reporting Period (A3+B3+C3) | 173,006.06 | Total actual guarantee balance at the end of the Reporting Period (A4+B4+C4) | 52,625.63 | ||
| Total actual guarantee amount (A4+B4+C4) as % of the Company’s net assets | 7.38% | ||||
| Of which: | |||||
| Balance of guarantees provided for shareholders, actual controller and their related parties (D) | 0 | ||||
| Balance of debt guarantees provided directly or indirectly for obligors with an over 70% debt/asset ratio (E) | 0 | ||||
| Amount by which the total guarantee amount exceeds 50% of the Company’s net assets (F) | 0 | ||||
| Total of the three amounts above (D+E+F) | 0 | ||||
| Explanation on possible bearing joint responsibility of liquidation due to immature guarantee (if any) | According to “Agreement on Counter Guarantee” signed on 12 October 2017 between Lu Thai Company and Xinjiang Lu Thai Company, Xinjiang Lu Thai Company, the warrantee Xinjiang Lu Thai Company provided the corresponding amount of counter guarantee for Lu Thai Company. | ||||
| Explanation about external guarantee violating established procedure (if any) | The Company never provided guarantees for companies except 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.
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 protectionauthorities.Yes
| Name of polluter | Name of major pollutants | Way of discharge | Number of discharge outlets | Distribution of discharge outlets | Discharge concentration | Discharge standards implemented | Total discharge | Approved total discharge | Excessive discharge |
| Lu Thai Textile Co., Ltd | COD and ammonia nitrogen | Continuous discharge | 2 | Huangjiapu Industrial Park; East Zone Industrial Park | COD≤150mg/L; ammonia nitrogen≤10mg/L | Emission standard of water pollutants in textile dyeing and finishing industry: GB 4287-2012 | COD is 296.82t and ammonia nitrogen is 10.98t | COD is 1495.08t, and ammonia nitrogen is 149.51t | No |
| Lufeng Weaving & Dyeing Co., Ltd. | COD and ammonia nitrogen | Continuous discharge | 1 | Lufeng chief discharge outlet | COD≤140mg/L; ammonia nitrogen≤4mg/L | Emission standard of water pollutants in textile dyeing and finishing industry: GB 4287-2012 | COD is 147.02t and ammonia nitrogen is 3.36t | COD is 575.985t, and ammonia nitrogen is 57.6t | No |
| Zibo Xinsheng Thermal Power Co., Ltd. | SO2, NQx, and smoke | Continuous discharge | 4 | Production plant of Xinsheng Thermal Power | SO2：≤35mg/m3、NQx：≤100(50) mg/m3 and smoke:≤10 (5)mg/m3 | Ultra-low emission No. 2 modification list LZJBF (2016) No 46 of Emission standard of air pollutants of Thermal Power Plant in Shandong Province | January-June in 2019: SO2 is 24.8594t, NQx is 79.31t and smoke is 3.34736t. | SO2 is 354.18t/a, NQx is 1011.95t/a and smoke is 101.2t/a. | No |
| Lu Thai (Vietnam) Textile Co., Ltd. | Sewage | Discharge into the ecological pond in the | 1 | Beside sewage plant | COD≤50mg/L; ammonia nitrogen≤ 2.0mg/L | QCVN40：2011/BTNMT | Sewage discharge is 632,800t | / | No |
| park district after treatment | |||||||||
| Lu Thai (Vietnam) Textile Co., Ltd. | Exhaust gas | Direct discharge after treatment | 2 | Beside boiler room | / | QCVN19：2009/BTNMT | Gas emission is 111 million m3 | / | No |
Construction of pollution prevention equipment and operation conditionLu Thai Textile Co., Ltd. and its majority-owned subsidiary Lufeng Weaving & Dyeing Co., Ltd. strictly implement the "ThreeSimultaneous" management system for environmental protection in project constructions. The companies are equipped with completefacilities for waste gas and waste water treatment. In 2019, Lu Thai Textile Co., Ltd. and its majority-owned subsidiary LufengWeaving & Dyeing Co., Ltd. carried out the waste water treatment system transformation project to improve the treated water qualityby systematic and comprehensive reform, further improving the river water quality and local ecological environment. The newlyadded online monitoring devices for PH in 2019 monitor and detect the pollutants discharge index comprehensively. In 2019, theCompany makes great efforts to transform exhaust emission so as to reduce the discharge of atmospheric pollutants, including thecomprehensive treatment of VOCs discharged and low-nitrogen combustion of NOx discharged from boilers. Support teams were setup to be responsible for daily operation maintenance and inspection to guarantee the normal operation of facilities. Both the exhaustemission and waste water discharge meet the emission standards.The wholly-owned subsidiary Zibo Xinsheng Thermal Power Co., Ltd. enforces the "Three Simultaneous" management system forenvironmental 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 + wetelectrostatic 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 tonsof sewage water daily, among which, sewage plan I is designed to treat 3,000 tons of sewage water daily, and the sewage plant II isdesigned 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 waterquality is better than the QCVN 40:2011/BTNMT A-level emission standards stipulated by the Vietnam government. The treatedwaste water is all discharged to the ecological pond in the park. Treated water quality analysis for the first half year of 2019: TheCOD (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 "Regulationson Parameters of Industrial Drainage in Vietnam" (QCVN40:2011/BTNMT). Waste water discharge in the whole year met thestandards 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 dischargedfrom boilers of the Company. In the first half year of 2019, all the equipment was in normal operation, and the exhaust gas inspectionparameters 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 ProtectionIn treatment and comprehensive improvement project of PVA waste water at high concentration of Lu Thai Textile in 2019 (I), themain works have been completed and entered the commissioning phase; The treatment and comprehensive improvement project ofPVA waste water at high concentration of Lu Thai Textile (II) has completed the acceptance; The technical transformation of
production line of high-grade greige cloth of Lu Thai Textile has been approved. The project is under construction. The technicaltransformation project of automatic equipment of Lu Thai Garment has been completed the filing. In its majority-owned subsidiaryLufeng Weaving & Dyeing Co., Ltd., EIA project of technical transformation of high-grade printed fabric production line hascompleted the acceptance check. The production line of high-grade greige cloth has been accepted; The separation of dyeingwastewater liquid membrane and comprehensive improvement project of sewage station in Lufeng Weaving & Dyeing has enteredthe commissioning phase. Its wholly-owned subsidiary Zibo Xinsheng Thermal Power Co., Ltd. has obtained Reply of EnvironmentalProtection Department of Shandong Province on Environmental Impact Report of Expansion Project of Zibo Xinsheng ThermalPower Co., Ltd. (LHS [2015] No. 241) as specified. The expansion project (phase II) is under construction. The completionacceptance of environmental protection project for spinning phase I and yarn-dyed park phase I in its wholly-owned subsidiary LuThai (Vietnam) Co., Ltd. has been confirmed. EIA report of spinning phase I and yarn-dyed park phase II has been approved and theconstructions are under construction.Emergency plan for environmental incidentsThe head office, factories in eastern district, and factories in western district of Lu Thai Textile Co., Ltd., and its majority-ownedsubsidiary Lufeng Weaving & Dyeing Co., Ltd. prepared the Emergency Plan for Environmental Incidents, which was filed withZibo Environmental Protection Bureau Xichuan Branch. The wholly-owned subsidiary Zibo Xinsheng Thermal Power Co., Ltd. hasformulated 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, emergencyprotection 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 programIn accordance with the requirements of environmental protection authorities, Lu Thai Textile Co., Ltd and its majority-ownedsubsidiary Lufeng Weaving & Dyeing Co., Ltd. formulates environmental self-testing plan for the following year in December ofeach year according to the requirements of superior environmental protection administration, and implements the self-monitoringplan to submit data to Zibo Automatic Environmental Monitoring System. The Company invited external qualified agency to detectthe sewage and exhaust gas every quarter, and report the examining report to environment inspection department. The wholly-ownedsubsidiary Zibo Xinsheng Thermal Power Co., Ltd. complies with the requirements of superior environmental protection authoritiesto 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 forreal-time automatic sampling and monitoring of the quality of treated sewage. In addition, the Company invites external qualifiedtesting organizations to carry out inspections on waste water, sludge and exhaust gas every quarter, and provides reports toenvironmental inspection departments.Other environment information that should be disclosedNoOther related environment protection informationNo
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 needystudents to continue their studies and impoverished peasants to maintain their basic livelihood.
(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 toenable them to continue their studies and maintain their basic livelihood and help them solve some practical difficulties.
(3) Results
| Indicator | Measurement unit | Quantity/Progress |
| 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 2
ndExtraordinary General Meeting of 2018 on 23 March 2018 and passed Bill to Buy Back Some of theB-shares of the Company. For details, please refer to the relevant announcements on www.cninfo.com.cn published on 24 March2018 (No.: 2018-013); The Company disclosed Report on the Buyback of Some B-shares of the Company on 16 May 2018 and issuedAnnouncement of Lu Thai Textile Co., Ltd. about the Implementation of Buy-back of Shares on 29 May 2018 that the first buybackshares were disclosed for the first time. As of 22 March 2019 when the repurchase period expired the Company repurchased
64,480,770 B shares which have been cancelled at Shenzhen Branch of China Securities Depository and Clearing CorporationLimited completely on 4 April 2019. So far the total shares outstanding of the Company are reduced to 858,121,541 shares. Fordetails, 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
Part VI Share Changes and Shareholder InformationI. Share Changes
1. Share Changes
Unit: share
| Before | Increase/decrease (+/-) | After | |||||||
| Number | Percentage (%) | New issues | Bonus shares | Bonus issue from profit | Other | Subtotal | Number | Percentage (%) | |
| 1. Restricted shares | 119,295,819 | 12.93% | 44,079 | 44,079 | 119,339,898 | 13.91% | |||
| 1.1 Shares held by the state | 0 | ||||||||
| 1.2 Shares held by state-own Legal-person | 0 | ||||||||
| 1.3 Shares held by other domestic investors | 1,063,419 | 0.12% | 44,079 | 44,079 | 1,107,498 | 0.13% | |||
| Among which: shares held by domestic legal person | 0 | ||||||||
| Shares held by domestic natural person | 1,063,419 | 0.12% | 44,079 | 44,079 | 1,107,498 | 0.13% | |||
| 1.4 Oversea shareholdings | 118,232,400 | 12.82% | 0 | 118,232,400 | 13.78% | ||||
| Among which: shares held by oversea legal person | 118,232,400 | 12.82% | 0 | 118,232,400 | 13.78% | ||||
| Shares held by oversea natural person | 0 | ||||||||
| 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 foreign shares | 242,201,061 | 26.25% | -64,496,570 | -64,496,570 | 177,704,491 | 20.71% | |||
| 2.3 Oversea listed foreign shares | 0 | ||||||||
| 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
√ Applicable □ Not applicable
1. Some supervisors and senior executives’ shares are locked due to changing the term of office, the “restricted shares-shares held bydomestic 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 andClearing 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 ordinaryshareholders 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 ordinary shareholders at the period-end | 55,045 | Total number of preference shareholders with resumed voting rights at the period-end (if any) (see Note 8) | 0 | |||||||
| 5% or greater ordinary shareholders or the top 10 ordinary shareholders | ||||||||||
| Name of shareholder | Nature of shareholder | Shareholding percentage (%) | Total shares held at the period-end | Increase/decrease during the Reporting Period | Number of restricted shares held | Number of non-restricted shares held | Pledged or frozen shares | |||
| Status | Number | |||||||||
| Zibo Lucheng Textile Investment Co., Ltd. | Domestic non-state-owned | 16.36% | 140,353,583 | 0 | 0 | 140,353,583 | ||||
| legal person | ||||||||
| Tailun (Thailand) Textile Co., Ltd. | Foreign legal person | 13.78% | 118,232,400 | 0 | 118,232,400 | 0 | ||
| Hong Kong Securities Clearing Co. Ltd | Foreign legal person | 3.03% | 25,985,611 | -8029937 | 0 | 25,985,611 | ||
| Central Huijin Assets Management Co., Ltd. | State-owned legal person | 2.37% | 20,315,300 | 0 | 0 | 20,315,300 | ||
| T.Rowe Price Intl Discovery Fund | Foreign legal person | 2.32% | 19,948,219 | 0 | 0 | 19,948,219 | ||
| China Securities Finance Corporation Limited | Domestic non-state-owned legal person | 2.13% | 18,313,391 | 0 | 0 | 18,313,391 | ||
| Hong Kong Monetary Authority-self-owned funds | Foreign legal person | 2.04% | 17,487,884 | 5852491 | 0 | 17,487,884 | ||
| National Social Security Fund Portfolio 103 | Other | 1.34% | 11,499,947 | -500000 | 0 | 11,499,947 | ||
| National Social Security Fund Portfolio 413 | Other | 0.93% | 7,980,051 | 7980051 | 0 | 7,980,051 | ||
| RBC Emerging Markets Small Cap Equity Fund | Foreign legal person | 0.72% | 6,181,462 | 148400 | 0 | 6,181,462 | ||
| Strategic investors or general corporations becoming top-ten shareholders due to placing of new shares (if any) (see Note 3) | Naught | |||||||
| Related or acting-in-concert parties among the shareholders above | Zibo Lucheng Textile Investment Co., Ltd. is the largest shareholder and the actual controller of the Company. Tailun (Thailand) Textile Co., Ltd. is the second largest shareholder and the foreign sponsor of the Company. All the other shareholders are holding tradable A-shares or B-shares. And 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 | ||||||||
| Name of shareholder | Number of non-restricted shares held at the period-end | Type of shares | |
| Type | Shares | ||
| Zibo Lucheng Textile Investment Co., Ltd. | 140,353,583 | RMB ordinary share | |
| Hong Kong Securities Clearing Co. Ltd | 25,985,611 | RMB ordinary share | |
| Central Huijin Assets Management Co., Ltd. | 20,315,300 | RMB ordinary share | |
| T.ROWE PRICE INTL DISCOVERY FUND | 19,948,219 | Domestically listed foreign share | |
| China Securities Finance Corporation Limited | 18,313,391 | RMB ordinary share | |
| Hong Kong Monetary Authority-self-owned funds | 17,487,884 | RMB ordinary share | |
| National Social Security Fund Portfolio 103 | 11,499,947 | RMB ordinary share | |
| National Social Security Fund Portfolio 413 | 7,980,051 | RMB ordinary share | |
| RBC EMERGING MARKETS SMALL CAP EQUITY FUND | 6,181,462 | Domestically listed foreign share | |
| Basic endowment insurance fund 000801 | 6,000,356 | RMB ordinary share | |
| Explanation on connected relationship among the top ten shareholders of tradable share not subject to trading moratorium, as well as among the top ten shareholders of tradable share not subject to trading moratorium and top ten shareholders, or explanation on acting-in-concert | Zibo Lucheng Textile Investment Co., Ltd. is the largest shareholder and the actual controller of the Company. Tailun (Thailand) Textile Co., Ltd. is the second largest shareholder and the foreign sponsor of the Company. All the other shareholders are holding tradable A-shares or B-shares. And it is unknown whether there is any related party or acting-in-concert party among them. | ||
| Particular about shareholder participate in the securities lending and borrowing business (if any) (note 4) | Naught | ||
Indicate by tick mark whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary shareholders of theCompany conducted any promissory repo during the Reporting Period.
□ Yea √ No
No such cases in the Reporting Period.
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.
Part VII Preferred Shares
□ Applicable √ Not applicable
No such cases in the Reporting Period.
Part VIII Directors, Supervisors, Senior Management and Staff
I Change in Shareholdings of Directors, Supervisors and Senior Management
√ Applicable □ Not applicable
| Name | Office title | Incumbent/former | Beginning shareholding (share) | Increase in the Current Period (share) | Decrease in the Current Period (share) | Ending shareholding (share) | Number of granted restricted shares at the period-begin (share) | Number of restricted shares granted in the Current Period (share) | Number of granted restricted shares at the period-end (share) |
| Liu Zibin | Chairman and GM | Incumbent | 148,290 | 148,290 | |||||
| Xu Zhinan | Vice President | Incumbent | |||||||
| Fujiwara Hidetoshi | Director | Incumbent | |||||||
| Chen Ruimou | Director | Incumbent | |||||||
| Zeng Facheng | Director | Incumbent | |||||||
| Wang Fangshui | Director, Vice GM, and Chief Engineer | Incumbent | 146,753 | 146,753 | |||||
| Liu Deming | Director | Incumbent | |||||||
| Qin Guiling | Director and Secretary of the Board | Incumbent | 126,542 | 126,542 | |||||
| Zhang Hongmei | Director and Chief Accountant | Incumbent | 92,500 | 92,500 | |||||
| Zhou Zhiji | Independent director | Incumbent | |||||||
| Bi Xiuli | Independent Director | Incumbent | |||||||
| Pan Ailing | Independent Director | Incumbent | |||||||
| Wang | Independent | Incum |
| Xinyu | Director | bent | |||||||
| Qu Dongmei | Independent director | Incumbent | |||||||
| Zhang Shougang | Supervisory Committee Chairman | Incumbent | 73,100 | 73,100 | |||||
| Liu Zilong | Supervisor | Incumbent | 10,000 | 10,000 | |||||
| Dong Shibing | Supervisor | Incumbent | 5,000 | 5,000 | |||||
| Zhang Jianxiang | Vice GM | Incumbent | 52,150 | 52,150 | |||||
| Wang Jiabin | Vice GM, Product Manager | Incumbent | 83,700 | 83,700 | |||||
| Zhang Zhanqi | Vice GM, GM of Lufeng Company | Incumbent | 80,300 | 80,300 | |||||
| Fujiwara Matsuzaka | Manager of Japan Office | Incumbent | |||||||
| Zhang Keming | Secretary of the Board and Financial Manager | Incumbent | 77,700 | 77,700 | |||||
| Li Wenji | CIO | Incumbent | 10,000 | 10,000 | |||||
| Lyu Yongchen | Vice GM of Lufeng Company | Incumbent | 33,750 | 33,750 | |||||
| Yu Shouzheng | Energy Business Manager | Incumbent | 83,100 | 83,100 | |||||
| Wang Changzhao | GM assistant, Fabric Marketing Manager | Incumbent | 22,500 | 22,500 | |||||
| Shang Chenggang | Manager of Garments Production Department | Incumbent | 30,000 | 30,000 | |||||
| Du Lixin | GM of Lu Thai (Vietnam) | Incumbent | |||||||
| Guo Heng | Manager of Business | Incumbent |
| Management | |||||||||
| Zhang Wei | GM assistant and Manager of Strategy Planning Department | Incumbent | |||||||
| Xu Jianjun | Independent director | Former | |||||||
| Zhao Yao | Independent director | Former | |||||||
| Quan Peng | Manager of Brand Expanding Department | Former | 27,750 | 6,900 | 20,850 | ||||
| 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 | |
| Zhao Yao | Independent director | Left for expiration of his term | 10 June 2019 | Regular change in directors |
| Zhou Zhiji | Independent director | Elected | 12 March 2019 | |
| Qu Dongmei | Independent director | Elected | 10 June 2019 | Regular change in directors |
| Quan Peng | Manager of Brand Expanding Department | Left for expiration of his term | 10 June 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 thisReport or were due but could not be redeemed in full?No
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 StatementsCurrency 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 |
| 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 |
| 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 HongmeiFinancial 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 |
| 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 |
| 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 |
| 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 associates | 5,083,101.54 | -1,730,597.59 |
| 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 |
| 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 parent | 411,446,216.59 | 377,355,959.02 |
| 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 available-for-sale financial assets | 1,020,000.00 | |
| 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 |
| 6.2.8 Differences arising from the translation of foreign currency-denominated financial statements | 11,806,511.25 | 26,539,653.92 |
| 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 beforethe combinations was RMB0.00, with the amount for the same period of last year being RMB0.00.Legal representative: Liu Zibin Chief Accountant: Zhang HongmeiFinancial 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 associates | 5,083,101.54 | -1,730,597.59 |
| 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 |
| 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 financial assets | 1,020,000.00 | |
| 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 |
| 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 and other long-lived assets | 2,599,510.60 | 936,526.59 |
| 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 other long-lived assets | 336,291,428.03 | 438,092,015.33 |
| 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 |
| 3. Cash flows from financing activities: | ||
| Capital contributions received | 50,000,000.00 | 500,000.00 |
| Including: Capital contributions by non-controlling interests to subsidiaries | 50,000,000.00 | 500,000.00 |
| 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 interests | 50,000,000.00 | |
| 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 equivalents | -228,703.12 | 6,658,728.34 |
| 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: |
| Proceeds from disinvestment | 30,000,000.00 | |
| Return on investment | 152,402,138.74 | |
| Net proceeds from the disposal of fixed assets, intangible assets and other long-lived assets | 2,577,416.61 | 71,378,849.40 |
| 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 other long-lived assets | 122,593,981.68 | 75,495,986.86 |
| 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 equivalents | -1,121,122.58 | -2,646,087.14 |
| 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 |
7. Consolidated Statements of Changes in Owners’ Equity
H1 2019
Unit: RMB
| Item | H1 2019 | ||||||||||||||
| Equity attributable to owners of the Company as the parent | Non-controlling interests | Total owners’ equity | |||||||||||||
| Share capital | Other equity instruments | Capital reserves | Less: Treasury stock | Other comprehensive income | Specific reserve | Surplus reserves | General reserve | Retained earnings | Other | Subtotal | |||||
| Preferred shares | Perpetual bonds | Other | |||||||||||||
| 1. Balances as at the end of the prior year | 922,602,311.00 | 699,493,647.48 | 486,922,944.94 | 61,157,013.37 | 1,022,717,451.40 | 4,927,500,989.55 | 7,146,548,467.86 | 579,276,247.53 | 7,725,824,715.39 | ||||||
| Add: Adjustments for changed accounting policies | -520,200.00 | 15,797,284.81 | 15,277,084.81 | 15,277,084.81 | |||||||||||
| Adjustments for corrections of previous errors | |||||||||||||||
| Adjustments for business combinations under common control | |||||||||||||||
| Other adjustments | |||||||||||||||
| 2. Balances as at the beginning of the year | 922,602,311.00 | 699,493,647.48 | 486,922,944.94 | 60,636,813.37 | 1,022,717,451.40 | 4,943,298,274.36 | 7,161,825,552.67 | 579,276,247.53 | 7,741,101,800.20 | ||||||
| 3. Increase/ decrease in the period (“-” for decrease) | -64,480,770.00 | -442,861,219.20 | -486,922,944.94 | 11,806,511.25 | -17,614,553.91 | -26,227,086.92 | 8,640,988.50 | -17,586,098.42 | |||||||
| 3.1 Total comprehensive income | 11,806,511.25 | 411,446,216.59 | 423,252,727.84 | 9,251,293.40 | 432,504,021.24 | ||||||||||
| 3.2 Capital increased and reduced by owners | -64,480,770.00 | -442,861,219.20 | -486,922,944.94 | -20,419,044.26 | 49,389,695.10 | 28,970,650.84 | |||||||||
| 3.2.1 Ordinary shares increased by shareholders | -64,480,770.00 | -442,630,569.04 | -486,922,944.94 | -20,188,394.10 | 50,000,000.00 | 29,811,605.90 | |||||||||
| 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 distribution | -429,060,770.50 | -429,060,770.50 | -50,000,000.00 | -479,060,770.50 | |||||||||||
| 3.3.1 Appropriation to surplus reserves | |||||||||||||||
| 3.3.2 Appropriation to general reserve |
| 3.3.3 Appropriation to owners (or shareholders) | -429,060,770.50 | -429,060,770.50 | -50,000,000.00 | -479,060,770.50 | |||||||||||
| 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 |
| 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 period | 858,121,541.00 | 256,632,428.28 | 72,443,324.62 | 1,022,717,451.40 | 4,925,683,720.45 | 7,135,598,465.75 | 587,917,236.03 | 7,723,515,701.78 |
H1 2018
Unit: RMB
| Item | H1 2018 | ||||||||||||||
| Equity attributable to owners of the Company as the parent | Non-controlling interests | Total owners’ equity | |||||||||||||
| Share capital | Other equity instruments | Capital reserves | Less: Treasury stock | Other comprehensive income | Specific reserve | Surplus reserves | General reserve | Retained earnings | Other | Subtotal | |||||
| Preferred shares | Perpetual bonds | Other | |||||||||||||
| 1. Balances as at the end of the prior year | 922,602,311.00 | 699,493,593.82 | 16,810,574.22 | 962,933,579.06 | 4,629,102,712.06 | 7,230,942,770.16 | 544,132,719.64 | 7,775,075,489.80 | |||||||
| Add: Adjustments for changed accounting policies | |||||||||||||||
| Adjustments for corrections of previous errors | |||||||||||||||
| Adjustments for | |||||||||||||||
| business combinations under common control | |||||||||||||||
| Other adjustments | |||||||||||||||
| 2. Balances as at the beginning of the year | 922,602,311.00 | 699,493,593.82 | 16,810,574.22 | 962,933,579.06 | 4,629,102,712.06 | 7,230,942,770.16 | 544,132,719.64 | 7,775,075,489.80 | |||||||
| 3. Increase/ decrease in the period (“-” for decrease) | 53.66 | 121,952,709.49 | 27,559,653.92 | -75,988,368.98 | -170,381,370.89 | 13,308,377.93 | -157,072,992.96 | ||||||||
| 3.1 Total comprehensive income | 27,559,653.92 | 377,355,959.02 | 404,915,612.94 | 12,808,377.93 | 417,723,990.87 | ||||||||||
| 3.2 Capital increased and reduced by owners | 53.66 | 121,952,709.49 | -121,952,655.83 | 500,000.00 | -121,452,655.83 | ||||||||||
| 3.2.1 Ordinary shares increased by shareholders | 121,952,709.49 | -121,952,709.49 | 500,000.00 | -121,452,709.49 | |||||||||||
| 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 |
| distribution | |||||||||||||||
| 3.3.1 Appropriation to surplus reserves | |||||||||||||||
| 3.3.2 Appropriation to general reserve | |||||||||||||||
| 3.3.3 Appropriation to owners (or shareholders) | -453,344,328.00 | -453,344,328.00 | -453,344,328.00 | ||||||||||||
| 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 | |||||||||||||||
| 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 period | 922,602,311.00 | 699,493,647.48 | 121,952,709.49 | 44,370,228.14 | 962,933,579.06 | 4,553,114,343.08 | 7,060,561,399.27 | 557,441,097.57 | 7,618,002,496.84 |
8. Statements of Changes in Owners’ Equity of the Company as the Parent
H1 2019
Unit: RMB
| Item | H1 2019 | |||||||||||
| Share capital | Other equity instruments | Capital reserves | Less: Treasury stock | Other comprehensive income | Specific reserve | Surplus reserves | Retained earnings | Other | Total owners’ equity | |||
| Preferred shares | Perpetual bonds | Other | ||||||||||
| 1. Balances as at the end of the prior year | 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 | |||||
| Add: Adjustments for changed accounting policies | -520,200.00 | 15,797,284.81 | 15,277,084.81 | |||||||||
| Adjustments for corrections of previous errors | ||||||||||||
| Other adjustments | ||||||||||||
| 2. Balances as at the beginning of the year | 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 | ||||||
| 3. Increase/ decrease in the period (“-” for decrease) | -64,480,770.00 | -442,630,524.10 | -486,922,944.94 | 22,092,634.24 | 1,904,285.08 | |||||||
| 3.1 Total comprehensive income | 451,153,404.74 | 451,153,404.74 | ||||||||||
| 3.2 Capital increased and reduced by owners | -64,480,770.00 | -442,630,524.10 | -486,922,944.94 | -20,188,349.16 | ||||||||
| 3.2.1 Ordinary shares increased by shareholders | -64,480,770.00 | -442,630,569.04 | -486,922,944.94 | -20,188,394.10 | ||||||||
| 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 (or shareholders) | -429,060,770.50 | -429,060,770.50 | ||||||||||
| 3.3.3 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 | ||||||||||||
| 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 period | 858,121,541.00 | 317,206,232.47 | 1,019,608,711.76 | 3,752,702,968.48 | 5,947,639,453.71 |
H1 2018
Unit: RMB
| Item | H1 2018 | |||||||||||
| Share capital | Other equity instruments | Capital reserves | Less: Treasury stock | Other comprehensive income | Specific reserve | Surplus reserves | Retained earnings | Other | Total owners’ equity | |||
| Preferred shares | Perpetual bonds | Other | ||||||||||
| 1. Balances as at the end of the prior year | 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 | ||||||
| Add: Adjustments for changed accounting policies | ||||||||||||
| Adjustments for corrections of previous errors | ||||||||||||
| Other adjustments | ||||||||||||
| 2. Balances as at the beginning of the year | 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 | ||||||
| 3. Increase/ decrease in the period (“-” for decrease) | 53.66 | 121,952,709.49 | 1,020,000.00 | -168,142,388.79 | -289,075,044.62 | |||||||
| 3.1 Total comprehensive income | 1,020,000.00 | 285,201,939.21 | 286,221,939.21 | |||||||||
| 3.2 Capital increased and reduced by owners | 53.66 | 121,952,709.49 | -121,952,655.83 | |||||||||
| 3.2.1 Ordinary shares increased by shareholders | 121,952,709.49 | -121,952,709.49 | ||||||||||
| 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 (or shareholders) | -453,344,328.00 | -453,344,328.00 | ||||||||||
| 3.3.3 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 | ||||||||||||
| 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 period | 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 |
III. Company Profile
Lu Thai Textile Co., Ltd. (hereinafter referred to as the “Company”) is a joint venture invested by Zibo Lucheng Textile InvestmentCo., Ltd (originally named Zibo Lucheng Textile Co., Ltd, hereinafter referred to as Lucheng Textile) and Thailand Tailun TextileCo., 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 Companycorporate business license with the registration No. of QGLZZZ No. 000066. In July 1997, the Company is approved by theSecurities Committee of the Department of the State in the ZWF (1997) No. 47 to issue 80 million shares of domestically listedforeign share( B-shares) at the price of RMB1.00 per share. Upon approved by Shenzhen Stock Exchange with No. (1997) 296Listing Notice, the Company is listed on the Shenzhen Stock Exchange on 19 August 1997 with B-shares stock code of 200726. On24 November 2000, approved by ZJGSZ [2000] No.199 by CSRC, the Company increased publication of 50 million shares ofgeneral share (A-shares) at the book value of RMB1.00, which are listed on the Shenzhen Stock Exchange on 25 December 2000with A-shares stock code of 000726 through approval by Shenzhen Stock Exchange with No. (2000) 162 Listing Notice. Asapproved by 2000 Annual General Meeting in May 2001, the Company carried out the distribution plan that 10 shares of capitalpublic reserve are converted to 3 more shares for each 10 shares. As approved by Resolutions of 2001 Annual General Meeting inJune 2002, the Company implemented the distribution plan that 10 shares of capital public reserve are converted 3 more shares foreach 10 shares again. As approved by 2002 Annual General Meeting in May 2003, the Company implemented the distribution planthat 10 shares of capital public reserve are 2 more shares for each 10 shares, and inner employees’ shared increased to 40.56 millionshares. As examined and approved by ZJGSZ No. [2000] 199 of CSRC, the inner employees’ shares will start circulation 3 yearslater since listing on the A-share market. On 25 December 2003, the inner employees’ shares reach 3 years since listing on theA-share stock market, and they set out circulation on 26 December 2003. As approved by the Annual General Meeting 2006 held inJune 2007, the Company implemented the plan on converting 10 shares to all its shareholders with capital reserves for every 10shares. After capitalization, the registered capital of the Company was RMB844.8648 million. The Company, in accordance with theofficial reply on approving Lu Thai Textile Co., Ltd. to issue additional shares (ZJXK [2008] No. 890 document) from CSRC, issuedthe Renminbi common shares (A shares) amounting to 150 million shares on 8 December 2008. According to the relevant resolutionof the 2
nd Special Extraordinary General Meeting of 2011, the relevant resolution of the 15
th
Meeting of the 6
thBoard 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 wascontributed by restricted share incentive receivers with monetary funds. In accordance with the resolution of Proposal onRepurchasing and Canceling Partial Restricted Shares already Granted for the Original Incentive Targets not Reaching the IncentiveConditions made at the 23
rd
Session of the 6
thBoard of Directors on 13 August 2012, the Company canceling a total of 60,000.00shares already granted for the original incentive targets not reaching the incentive conditions. According to the second temporaryresolution of Proposal on counter purchase of part of the domestic listed foreign share (B share) on 25 June 2012, the Companycounter purchase domestic listed foreign share (B share) 48,837,300 shares. According to the Proposal on Repurchase and CancelPart of Unlocked Restricted Share of the Original Incentive Personnel not Conforming to the Incentive Condition, Proposal onRepurchase and Cancel unlocked Restricted Share in Second Unlocked Period of all the Incentive Personnel reviewed and approvedby the 26
th Meeting of the 6
thBoard of Directors on 27 March 2013, the Company repurchase and cancel 4,257,000 shares owned byoriginal people whom to motivate. According to the Proposal on Repurchase and Write-off of Partly of the Original Incentive TargetsNot Met with the Incentive Conditions but Granted Restricted Shares approved on the 11
th Meeting of the 7
thBoard of Directors on11 June 2014, to execute repurchase and write-off of the whole granted shares of 42,000 shares of the original incentive targets notmet with the incentive targets of the Company. As per the Proposal on Buy-back of Some A- and B-shares considered and approvedas a resolution at the 1
stspecial meeting of shareholders on 5 August 2015, the Company repurchased 33,156,200 domestically listedforeign shares (B-shares). According to the Agreement about Repurchase of Part of the Company’s B Shares by the Resolutions onthe 2
nd
Extraordinary General Meeting of 2018 on 23 March 2018, the Company repurchased 17.6748 million domestically listed
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, ShandongThe Company’s legal representative: Liu ZibinThe 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 ofthe 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 salesof 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 Groupprepared financial statements in accordance with The Accounting Standards for Business Enterprises—Basic Standard issued by theMinistry of Finance with Decree No. 33 and revised with Decree No. 76, the 42 specific accounting standards, the ApplicationGuidance of Accounting Standards for Business Enterprises, the Interpretation of Accounting Standards for Business Enterprises andother regulations issued and revised from 15 February 2006 onwards (hereinafter jointly referred to as “the Accounting Standards forBusiness Enterprises”, “China Accounting Standards” or “CAS”), as well as the Rules for Preparation Convention of Disclosure ofPublic Offering Companies No.15 – General Regulations for Financial Reporting (revised in 2014) by China Securities RegulatoryCommission.In accordance with relevant provisions of the Accounting Standards for Business Enterprises, the Group adopted the accrual basis inaccounting. 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 theoriginal book value which complies with the conditions of holding for sale. If impairment occurred on an asset, an impairmentreserve 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 eachsubsidiary according to the actual production and operation characteristics and the regulations of the relevant ASBE, formulatedcertain specific accounting policies and accounting estimates of the transactions and events such as recognizing the revenues, and fordetails, please refer to each description of Notes IV. As for the notes to the important accounting judgment and estimations made bythe management level, please refer to Notes V. 29 “Other significant accounting policies and estimations”.
1. Statement of Compliance with the Accounting Standards for Business EnterprisesThe financial statements prepared by the Company are in compliance with in compliance with the Accounting Standards for BusinessEnterprises, which factually and completely present the Company’s, and the Company’s financial positions as at 30 June 2019,
business results and cash flows for the January to June of 2019, and other relevant information. In addition, the Company’s and theCompany’s financial statements meet the requirements of disclosing financial statements and notes thereto stated in the Rules forPreparation Convention of Disclosure of Public Offering Companies No.15 – General Regulations for Financial Reporting (revised in2014) 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 yearstarts on January 1
st and ends on December 31
stof 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 andliabilities.
4. Recording Currency
Renminbi (RMB) is regarded as the prevailing currency used in the main economic circumstances of the Company and its domesticsubsidiaries. The Company and its domestic subsidiaries adopt RMB as the recording currency. The Company and its overseassubsidiaries confirm to adopt HK Dollar and US Dollar as the recording currency according their major economic environment of theoperating. 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 theCommon 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 ultimatelycontrolled by the same party or the same parties both before and after the business combination and on which the control is nottemporary. In a business combination under the same control, the party which obtains control of other combining enterprise(s) on thecombining date is the combining party, the other combining enterprise(s) is (are) the combined party. The “combining date” refers tothe 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 carryingamount in the combined party on the combining date. As for the balance between the carrying amount of the net assets obtained bythe combining party and the carrying amount of the consideration paid by it (or the total par value of the shares issued), the additionalpaid-in capital (share premium) shall be adjusted. If the additional paid-in capital (share premium) is not sufficient to be offset, theretained 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 ultimatelycontrolled by the same party or the same parties both before and after the business combination. In a business combination not underthe same control, the party which obtains the control on other combining enterprise(s) on the purchase date is the acquirer, and othercombining enterprise(s) is (are) the acquiree.
For a business combination not under the same control, the combination costs shall include the fair values, on the acquisition date, ofthe assets paid, the liabilities incurred or assumed and the equity securities issued by the acquirer in exchange for the control on theacquiree, the expenses for audit, legal services and assessment, and other administrative expenses, which are recorded into the profitsand losses in the current period. The trading expenses for the equity securities or debt securities issued by the acquirer as thecombination consideration shall be recorded into the amount of initial measurement of the equity securities or debt securities. Theinvolved contingent consideration shall be recorded into the combination costs at its fair value on the acquiring date. Where new orfurther evidences emerge, within 12 months since the acquiring date, against the existing circumstances on the acquiring date and thecontingent consideration thus needs to be adjusted, the combined goodwill shall be adjusted accordingly. The combination costs ofthe acquirer and the identifiable net assets obtained by it in the combination shall be measured according to their fair values at theacquiring date. The acquirer shall recognize the positive balance between the combination costs and the fair value of the identifiablenet assets it obtains from the acquiree as business reputation. Where the combination costs are less than the fair value of theidentifiable net assets it obtains from the acquiree, the acquirer shall re-examine the measurement of the fair values of the identifiableassets, 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 shallrecord 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 taxliabilities due to their not meeting the recognition standards, if new or further information shows that the relevant situation hasexisted on the acquiring date and the economic benefits brought by the deductible temporary differences the acquirer obtains fromthe acquiree on the acquiring date can be realized, they shall be recognized into deferred income tax assets and the relevant goodwillshall be reduced. Where the goodwill is not sufficient to be offset, the difference shall be recognized into the profits and losses in thecurrent period. In other circumstances than the above, where the deductible temporary differences are recognized into deferredincome 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
Noticeabout 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 previousparagraphs 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 financialstatements 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 acquireebefore the acquiring date shall be considered as initial cost of the investment. Other related comprehensive gains in relation to theequity interests that the Company holds in the acquiree before the acquiring date shall be treated on the same basis as the acquireedirectly disposes the related assets or liabilities when disposing the investment (that is, except for the corresponding share in thechanges in the net liabilities or assets with a defined benefit plan measured at the equity method arising from the acquiree’sre-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 theacquiring date, they shall be re-measured according to their fair values at the acquiring date; the positive difference between their fairvalues and carrying amounts shall be recorded into the investment gains for the period including the acquiring date. Other relatedcomprehensive gains in relation to the equity interests that the Company holds in the acquiree before the acquiring date shall betreated 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 equitymethod arising from the acquiree’s re-measurement, the others shall be transferred into current investment gains on the acquiringdate).
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 theCompany upon an investee, with which it can take part in relevant activities of the investee to obtain variable returns and is able toinfluence the amount of returns. The consolidated financial statements comprise the financial statements of the Company and itssubsidiaries. 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 operationdecision-making and are de-consolidated from the date when such control ceases. As for a disposed subsidiary, its operating resultsand cash flows before the disposal date has been appropriately included in the consolidated income statement and cash flowstatement; 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 theacquiring date have been appropriately included in the consolidated income statement and cash flow statement, and the opening itemsand comparative items in the consolidated financial statements are not adjusted. For a subsidiary acquired in a business combinationunder the same control or a combined party obtained in a takeover, its operating results and cash flows from the beginning of theReporting Period of the combination to the combination date have been appropriately included in the consolidated income statementand 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 theCompany during the preparation of the consolidated financial statements, where the accounting policies and the accounting periodsare inconsistent between the Company and subsidiaries. For a subsidiary acquired from a business combination not under the samecontrol, the individual financial statements of the subsidiary are adjusted based on the fair value of the identifiable net assets at theacquisition 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 bythe Company are recognized as minority interests and minority shareholder profits and losses respectively and presented separatelyunder shareholders’ equity and net profits in the consolidation financial statements. The portion of a subsidiary’s net profits andlosses for the period that belong to minority interests is presented as the item of “minority shareholder profits and losses” under thebigger item of net profits in the consolidated financial statements. Where the loss of a subsidiary shared by minority shareholdersexceeds 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, theresidual equity interests are re-measured according to the fair value on the date when such control ceases. The summation of theconsideration obtained from the disposal of equity interests and the fair value of the residual equity interests, minus the portion in theoriginal subsidiary’s net assets measured on a continuous basis from the acquisition date that is enjoyable by the Company accordingto the original shareholding percentage in the subsidiary, is recorded in investment gains for the period when the Company’s controlon the subsidiary ceases. Other comprehensive incomes in relation to the equity investment in the original subsidiary are treated onthe same accounting basis as the acquiree directly disposes the relevant assets or liabilities (that is, except for the changes in the netliabilities or assets with a defined benefit plan resulted from re-measurement of the original subsidiary, the rest shall all be transferredinto current investment gains) when such control ceases. And subsequent measurement is conducted on the residual equity interestsaccording to the No. 2 Accounting Standard for Business Enterprises —Long-term Equity Investments or the No. 22 AccountingStandard for Business Enterprises—Recognition and Measurement of Financial Instruments. For details, see Notes V. 14 “LongTerm Equity Investment” or Notes V. 9 “Financial Instruments”.
Where the Company losses control on its original subsidiaries due to step by step disposal of equity investments through multipletransactions, it need to distinguish the Group losses control on its subsidiaries due to disposal of equity investments whether belongsto a package deal. All the transaction terms, conditions and economic impact of the disposal of subsidiaries’ equity investment are inaccordance with one or more of the following conditions, which usually indicate the multiple transactions, should be considered as apackage deal for accounting treatment. ① These deals are at the same time or under the condition of considering the influence ofeach other to concluded; ② These transactions only be as a whole can achieve a complete business result; ③ The occurrence of adeal 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 inaccordance with the applicable principles of “part disposal of subsidiaries of a long-term equity investment under the condition of notlosing control on its subsidiaries” (see Notes V. 14. (2) ④ in this section) and “Where the Company losses control on its originalsubsidiaries due to disposal of some equity investments or other reasons” (see the front paragraph) relevant transactions of theCompany losses control on its subsidiaries due to disposal of equity investments belonging to a package deal, considered as atransaction and conduct accounting treatment. However, Before losing control, every disposal cost and corresponding net assetsbalance 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 itssubsidiary.
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 toshort-term (within 3 months from the purchase date) and highly liquid investments that are readily convertible to known amounts ofcash 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 bookkeepingbase 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 shallconverted 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 itemsOn 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 exchangerate 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 fixedassets shall be treated at the principle of capitalization of borrowing costs; ② the exchange difference arising from the hedginginstruments 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 arisingfrom change in the book balance of foreign currency monetary items available for sale except the amortized costs shall be recordedinto other comprehensive gains and losses.For the preparation for consolidated financial statement involved in foreign operations, if there are items of foreign currencymonetary of net investment in foreign operations in essence, then the balance of exchange generated by changes in exchange rateshall included into other comprehensive income; when disposing foreign operations, it shall be converted into the disposal of thecurrent 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
transaction date. Where the foreign non-monetary items measured at the fair value shall be converted into amount in its bookkeepingbase currency at spot exchange rate, the exchange gains and losses arising thereof shall be treated as change in fair value, andrecorded 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 foreigncurrency monetary items of net investment in overseas business arising from the change in exchange rate, it shall be recorded into theitem of “difference of foreign currency financial statement translation” under the owners’ equity; and be recorded into disposal gainsand 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 followingmethods: 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 exchangerate at the time when they are incurred. The income and expense items in the profit statements shall be translated at the spot exchangerate of the transaction date. The undistributed profits at year-begin is the undistributed profits at the end of last year after thetranslation; undistributed profits at year-end shall be listed as various distribution items after the translation; after the translation, thebalance between assets and the sum of liabilities and owners’ equities shall be recorded into other comprehensive gains and losses asdifference of foreign currency translation. Where an enterprise disposes of an overseas business without the control right, it shall shiftthe differences, which is presented under the items of the owner’s equities in the balance sheet and which arises from the translationof foreign currency financial statements relating to this overseas business, into the disposal profits and losses of the current period byall 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 onthe 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 currencyfinancial 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 equityin the overseas operation or other reasons, the foreign-currency statement translation difference belonging to the parent company’sowner’s equity in relation to the overseas operation which is stated under the shareholders’ equity in the balance sheet shall be allrestated 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 theCompany still has control over the overseas operation, the foreign-currency statement translation difference in relation to thedisposed part of the overseas operation shall be recorded into minority interests instead of current gains and losses. If what’s disposedis some equity in an overseas associated enterprise or joint venture, the foreign-currency statement translation difference related tothe 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 fairvalue and the changes recorded in other comprehensive income and financial assets at fair value through profit or loss based on thebusiness model for financial assets management and characteristics of contractual cash flow of financial assets. Financial assetsinitially recognized shall be measured at their fair values. For financial assets measured at their fair values and of which the variationis recorded into the profit or loss of the current period, the transaction expenses thereof shall be directly included into the currentprofit 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
The business mode of the Company to manage the financial assets targets at collecting the contractual cash flow, that is, the cashflow generated in the specific date is the payment of the interest based on the principal and outstanding principal amount. This kindof financial assets of the Company shall be subsequently measured based on the amortized cost and effective interest method, and thegains 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 incomeBusiness mode for managing financial assets of the Company takes contract cash flow collected as target and selling as target. TheCompany calculates such financial assets as per fair value whose change is included into corresponding comprehensive income, butimpairment loss or gain, exchange gain or loss and interest income calculated as per actual interest rate method are included into thecurrent profit and loss. Furthermore, the Company designates partial non-tradable equity vehicle investment as the financial assetmeasured with fair value whose change is included into other comprehensive income. The Company includes the related dividendincome of such financial assets into the current profit and loss with the change in fair value included into other comprehensiveincome. At the time of derecognition of such financial assets, accumulated gain or loss included into other comprehensive incomebefore 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 financialassets measured with fair value whose change is included into other comprehensive income into financial assets at fair value throughprofit 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 andfinancial 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 fairvalue and the changes of fair value are recorded into the current profit or loss. When the liabilities are derecognized, the differencebetween their fair values and their initial recorded amount was recognized as investment income and at the same time the gains andlosses 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 fromderecognition 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 risksand rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but hastransferred 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 assettransferred; and (b) the sum of the consideration received from the transfer and any cumulative gain or loss that had been recognizedin 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 isderecognized, based on the relative fair value of those parts. The difference between (a) the carrying amount allocated to the partderecognized; and (b) the sum of the consideration received for the part derecognized and any cumulative gain or loss allocated to thepart 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 whetheralmost all risks and remuneration in the ownership of financial assets have been transferred or not. Where an enterprise has
transferred nearly all of the risks and rewards related to the ownership of the financial asset to the transferee, it shall stop recognizingthe financial asset； If it retained nearly all of the risks and rewards related to the ownership of the financial asset, it shall not stoprecognizing the financial asset. If the Company does not transfer or retain nearly all of the risks and rewards related to the ownershipof the financial asset, then it continuously judges that whether the Company retain the control of the assets, and conducts accountingtreatment 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 liabilitybe terminated in all or partly. Where the Company (debtor) enters into an agreement with a creditor so as to substitute the existingfinancial liabilities by way of any new financial liability, and if the contractual stipulations regarding the new financial liability issubstantially different from that regarding the existing financial liability, it terminates the recognition of the existing financialliability, and at the same time recognizes the new financial liability. Where the recognition of a financial liability is totally orpartially terminated, the enterprise concerned shall include into the profits and losses of the current period for the gap between thebook value which has been terminated from recognition and the considerations it has paid (including the non-cash assets it hastransferred 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 incurrent circumstances, selects input values consistent with asset or liability characteristics considered in relevant asset or liabilitytransactions of market participators and prioritizes the applying relevant observable input values. Unobservable input values shall notbe 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 valueand whose changes are included in other comprehensive income (debt instruments) based on expected credit loss. The measurementof 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 creditloss of the financial instrument during its entire life; otherwise, the Company measures its loss provisions according to the amountequivalent to the expected credit loss of the financial instrument in the next 12 months, and the increased or reversed amount of lossprovisions 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 notesreceivable and comprehensive evaluation of their credit risk characteristics, the Company does not withdraw credit impairment lossesfor notes receivable.
11. Accounts Receivable
The accounts receivable of the Company include accounts receivable, long-term receivables and other receivables. The Companymeasures its credit loss according to the amount of estimated credit loss in the duration of the Company, and the increased orreversed amount of credit loss resulting therefrom shall be recorded as loss of credit impairment in the current profit and loss. Thewithdrawal method is as follows:
(1) Accounts Receivable with Significant Single Amount for Which the Bad Debt Provision is Made IndividuallyWhere there is objective evidence indicating credit impairment in an account receivable, the Company shall make provisions for baddebts and confirm the expected credit loss.
(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), andcompiled a comparative table of the age of accounts receivable and the expected credit loss rate in the duration of the Companycombining the current conditions and the forecast of future economic situation to calculate the expected credit loss rate. Refer to thetable details as follows:
| Aging | Expected credit loss rate (%) |
| Within 1 year (including 1 year) | 5 |
| 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 andstock 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, processingcost and other costs. Grey yarn, dyed yarn, and plus material shall be measured at first-in first-out method when acquired anddelivered; 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 inventoriesNet realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion, theestimated costs necessary to make the sale and relevant taxes. Net realizable value is determined on the basis of clear evidenceobtained, 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 isbelow the cost of inventories, a provision for decline in value of inventories is made. The provision for inventories decline in value isdetermined 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 writtendown below cost no longer exist so that the net realizable value of inventories is higher than their cost, the original provision fordecline 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 packingarticles, should be amortized by one-off amortization method when consuming.
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 ofnon-monetary assets with commercial substance) instead of a non-current asset or disposal group. Specific standards aresimultaneously satisfying the following conditions: A asset or disposal group can be sold immediately under current conditions basedon the practice of selling such assets or disposal groups in similar transactions; the Company has already made a resolution on saleplan and obtained a confirmed purchase commitment; and the sale is expected to will be completed within one year. A disposal grouprefers to a group of assets that are disposed of together as a whole by sale or other means in a transaction and the liabilities directlyrelated to these assets transferred in the transaction. Where the asset group or combination of asset groups to which a disposal groupbelongs apportions the goodwill acquired in the business combination in accordance with the "Accounting Standards for EnterprisesNo. 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 classifiedas 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 writtendown to the net amount of fair value minus the sale costs, and the amount written down will be recognized as impairment loss ofassets 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 disposalgroups will be offset first, and then the book value of various non-current assets applicable to the measurement of AccountingStandards 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 netamount that the fair value of the disposal groups held for sale on the follow-up balance sheet date minus the sale costs increases, theprevious written-down amount will be restored, and reversed to the asset impairment loss confirmed after the assets being classifiedas held-for-sale. The reversed amount will be included in the current profit or loss. And its book value shall be increasedproportionately to the proportion of the book value of various non-current assets measured by the disposal group in addition togoodwill applicable to the measurement of held-for-sale norms; The book value of deducted goodwill and the non-current assetsapplicable to the measurement of held-for-sale norms will not be reversed if the asset impairment loss is recognized before it isclassified 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. Interestand 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 theheld-for-sale disposal group due to failure in meeting the classification conditions for the category of held-for-sale, it will bemeasured by one of the followings whichever is lower: (1) The book value before being classified as held for sale will be adjustedaccording to the depreciation, amortization or impairment that would have been recognized under the assumption that it was notclassified 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 orsignificant influence over the investees.Joint control, refers to the control jointly owned according to the relevant agreement on an arrangement by the Company and therelevant 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 theinvestees, 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 bookvalue 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
investment. The difference between the initial cost of the long-term equity investment and the payment in cash, non-cash assetstransferred as well as the book value of the debts borne by the merging party shall offset against the capital reserve. If the capitalreserve is insufficient to dilute, the retained earnings shall be adjusted. If the consideration of the merging enterprise is that it issuesequity securities, it shall, on the date of merger, regard the share of the book value of the shareholder's equity of the mergedenterprise 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 thelong-term equity investment and total face value of the shares issued shall offset against the capital reserve. If the capital reserve isinsufficient 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 aslong-term equity investment on the purchasing date according to the combination cost, the combination costs shall be the sum of thefair 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 thebusiness combination by the combining party or the purchase party shall be recorded into current profits and losses upon theiroccurrence.Besides the long-term equity investments formed by business combination, the other long-term equity investments shall be initiallymeasured by cost, the cost is fixed in accordance with the ways of gaining, such as actual cash payment paid by the Company, thefair value of equity securities issued by the Company, the agreed value of the investment contract or agreement, the fair value ororiginal carrying amount of exchanged assets from non-monetary assets exchange transaction, the fair value of the long-term equityinvestments, etc. The expenses, taxes and other necessary expenditures directly related with gaining the long-term equity investmentsshall 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) orsignificant influence over the investors should be measured by equity method. Moreover, long-term equity investment adopting thecost 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 andappend as well as withdraw the cost of investing and adjusting the long-term equity investment. The return on investment at currentperiod shall be recognized in accordance with the cash dividend or profit announced to distribute by the invested entity, except theannounced 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 investedentity's identifiable net assets for investment, the initial cost of the long-term equity investment may not be adjusted. If the initial costof a long-term equity investment is less than the Company's attributable share of the fair value of the invested entity's identifiable netassets for the investment, the difference shall be included in the current profits and losses and the cost of the long-term equityinvestment shall be adjusted simultaneously.When measured by adopting equity method, respectively recognize investment income and other comprehensive income according tothe net gains and losses as well as the portion of other comprehensive income which should be enjoyed or be shared, and at the sametime adjust the book value of the long-term equity investment; corresponding reduce the book value of the long-term equityinvestment according to profits which be declared to distribute by the investees or the portion of the calculation of cash dividendswhich 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 asinclude in the capital reserve. The investing enterprise shall, on the ground of the fair value of all identifiable assets of the investedentity when it obtains the investment, recognize the attributable share of the net profits and losses of the invested entity after itadjusts the net profits of the invested entity. If the accounting policies adopted by the investees are not accord with that of the
Company, should be adjusted according to the accounting policies of the Company and the financial statement of the investees duringthe accounting period and according which to recognize the investment income as well as other comprehensive income. For thetransaction happened between the Company and associated enterprises as well as joint ventures, if the assets launched or sold notform into business, the portion of the unrealized gains and losses of the internal transaction, which belongs to the Company accordingto the calculation of the enjoyed proportion, should recognize the investment gains and losses on the basis. But the losses of theunrealized internal transaction happened between the Company and the investees which belongs to the impairment losses of thetransferred 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 andother 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 accordancewith 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 originalremained 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 acquiringshares of minority interest and the attributable net assets on the subsidiary calculated by the increased shares held since the purchasedate (or combination date), the capital reserves shall be adjusted, if the capital reserves are not sufficient to offset, the retained profitsshall 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 withoutlosing its controlling right on them, the balance between the disposed price and attributable net assets of subsidiaries by disposing thelong-term equity investment shall be recorded into owners’ equity; where the Company losses the controlling right by disposing partof 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 actualpayment 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 equitymethod for measurement, the other comprehensive income originally recorded into owners’ equity should adopt the same basis of theaccounting 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, othercomprehensive income and the profits distribution of the investees, should be transferred into the current gains and losses accordingto 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 andmeasurement standards of financial instrument before acquiring the control of the investees, should adopt the same basis of theaccounting disposal of the relevant assets or liabilities directly disposed by the investees and should be carried forward into thecurrent gains and losses according to the proportion; the changes of the other owners’ equity except for the net gains and losses, othercomprehensive income and the profits distribution among the net assets of the investees which recognized by adopting the equitymethod for measurement, should be carried forward into the current gains and losses according to the proportion.
15. Investment Real Estate
Measurement model of investment real estateCosting method measurementDepreciation or amortization methodThe 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 estateshall be calculated into the cost of investment real estate if the economic benefit related with the asset may flow in and the cost maybe 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 amortizesaccording 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-termAsset Devaluation”.When the self-use real estate or stock is converted to the investment real estate or the investment real estate is converted to theself-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 thedisposal, the confirmation on the investment real estate shall be terminated. The disposal income for the sales, transferring, scrap ordamage 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 sakeof producing commodities, rendering labor service, renting or business management; and (b) their useful life is in excess of one fiscalyear. The fixed assets are only recognized when the relevant economic benefits probably flow in the Company and its cost could bereliable measured. The fixed assets should take the initial measurement according to the cost and at the same time consider theinfluences of the factors of the estimated discard expenses.
(2) Depreciation Methods
| Category of fixed assets | Method | Useful life | Salvage value | Annual deprecation |
| Housing and building | Average method of useful life | 5-30 | 0-10 | 3.00-20.00 |
| Machinery equipments | Average method of useful life | 10-18 | 0-10 | 5.00-10.00 |
| Transportation vehicle | Average method of useful life | 5 | 0-10 | 18.00-20.00 |
| Electronic equipments and others | Average method of useful life | 5 | 0-10 | 18.00-20.00 |
(3) Recognition Basis, pricing and depreciation method of fixed assets by finance leaseThe “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 forself-owned fixed assets. If it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when the leaseterm expires, the leased asset shall be fully depreciated over its useful life. If it is not reasonable to be certain that the lessee willobtain the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully depreciated over the shorter oneof 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 forcapitalization before the fixed assets being ready for their intended us and other relevant costs. Construction in process is transferredto fixed assets when the assets are ready for their intended use. See the details of the impairment test method of the impairmentprovision 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 differencesarising from foreign currency borrowings. The capitalization of borrowing costs, which can be directly attributable to assetacquisition or construction, starts when asset expenditure or borrowing cost are generated, or the asset acquisition or construction islaunched to enable the asset to meet the predefined conditions for use or sale, and ends when the acquired or constructed assetconforming to capitalization conditions meet the predefined conditions for use or sale. The other borrowing costs are recognized asexpenses in the current period.The actual interest expenses incurred in the current period of specific borrowings shall be capitalized by subtracting the interestincome earned by the bank from unused borrowing funds or investment income gained from temporary investment. For generalborrowings, the amount to be capitalized shall be determined based on the weighted average of total asset expenditure exceeding thespecific borrowing multiplied by the capitalization rate of general borrowings. The capitalization rate is determined based on theweighted average interest rate of general borrowings.During the capitalization period, the foreign exchange differences on foreign currency specific borrowings shall be capitalized. Theexchange 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 considerableamount 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, thecapitalization 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 biologicalassets shall be measured based on cost. All costs for planting, creating, cultivating or raising of consumptive biological assets shall bethe necessary expenses directly added to such assets that accrued before harvest, including any loan that satisfies capitalizationconditions. Subsequent expenses for keeping and feeding the consumptive biological assets after the harvest should be recognized asthe losses and gains of the current period.
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, andthe method for confirming the reserve for inventory price drop shall be adopted to confirm the reserve for price drop of consumptivebiological assets. If the impacts of depreciation disappear, the depreciation amount shall be recovered, and the reserve for price droporiginally 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 confirmedbased 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. Whendepreciation 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, includingeconomic 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 accruedbefore 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 thesecond month of its useful life. Useful life, expected net salvage value and annual depreciation rate of each Productive living assetsare 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 bythe 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 bookvalue 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, therecoverable amount of the portfolio shall be confirmed based on the portfolio such assets belong to. If the recoverable amount of theassets is lower than book value, reserve for asset depreciation shall be accrued based on such difference, and recognized as loss andgain 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 recognizedas the book value when changing the usage; of the productive living assets changed the usage as non-profit living assets, should berecognized according to the book value after the withdrawal of the impairment provision in accord with the regulation of No. 8 ofASBE - Assets Impairment for considering whether there was impairment and should withdraw the impairment provision in ahead ofit.
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 nophysical shape.The intangible assets shall be initially measured according to its cost. The costs related with the intangible assets, if the economic
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 otherconstructions, the related expenditures on use right of land and construction costs shall be respectively measured as intangible assetsand fixed assets. For the purchased houses and buildings, the related payment shall be distributed into the payment for use right ofland 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 theexpected 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, ifthere is any change, it shall be regarded as a change of the accounting estimates. Besides, the Company shall check the service life ofintangible assets without certain service life, if there is any evidence showing that the period of intangible assets to bring theeconomic benefits to the enterprise can be prospected, it shall be estimated the service life and amortized in accordance with theamortization 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 assetsimpairment”.
(2) Accounting Policy for Internal Research and Development ExpendituresThe expenditures for internal research and development projects of an enterprise shall be classified into research expenditures anddevelopment 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, andshall 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 thatthere is a potential market for the products manufactured by applying the intangible assets or there is a potential market for theintangible 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 ofsufficient 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 beall 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, investingreal estate with cost model, long-term equity investment of subsidiaries, cooperative enterprises and joint ventures, the Companyshould judge whether decrease in value exists on the date of balance sheet. Recoverable amounts should be tested for decrease invalue if it exists. Other intangible Assets of reputation and uncertain service life and other non-accessible intangible assets should betested 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 shouldinclude in impairment loss. Recoverable amounts would be the higher of net value of asset fair value deducting disposal charges orpresent value of predicted cash flow. Asset fair value should be determined according to negotiated sales price of fair trade. If nosales agreement exists but with asset active market, fair value should be determined according to the Buyer’s price of the asset. If no
sales agreement or asset active market exists, asset fair value could be acquired on the basis of best information available. Disposalexpenses include legal fees, taxes, cartage or other direct expenses of merchantable Assets related to asset disposal. Present value ofpredicted asset cash flow should be determined by the proper discount rate according to Assets in service and predicted cash flow offinal disposal. Asset depreciation reserves should be calculated on the basis of single Assets. If it is difficult to predict therecoverable amounts for single Assets, recoverable amounts should be determined according to the belonging asset group. Assetgroup 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 assetgroup combination in collaboration of business merger. It is shown in the test that if recoverable amounts of shared businessreputation asset group or asset group combination are lower than book value, it should determine the impairment loss. Impairmentloss 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 groupcombination 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 haveoccurred but attributable to the current and future periods. The long-term deferred expenses mainly including land contract fees, landrental fees and house rental fees, and etc. And the long-term deferred expense shall be amortized by the straight-line methodaveragely 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, andthe welfare of other long-term staffs, of which:
Short-term compensation mainly including salary, bonus, allowances and subsidies, employee services and benefits, medicalinsurance premiums, birth insurance premium, industrial injury insurance premium, housing fund, labor union expenditure andpersonnel education fund, non-monetary benefits etc. The short-term compensation actually happened during the accounting periodwhen the active staff offering the service for the Company should be recognized as liabilities and is included in the current gains andlosses 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 demissioninclude setting drawing plan. Where the setting drawing plan is adopted, the corresponding payable and deposit amount should beincluded 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 ofproviding the compensation for urging the employees volunteered to receive the downsizing and when the Company could notunilaterally withdraw the demission welfare owning to the relieving plan of the labor relation or the downsizing advice, shouldconfirm the liabilities of the employees’ salary from the demission welfare on the earlier day between the cost confirmed by theCompany and the cost related to the reorganization of the payment of the demission welfare and includes which in the current gainsand losses. But as for the demission welfare be estimated that could not be completed paid within 12 months after the end of theannual 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
The internal retire plan of the employees should be handled by adopting the same principles of the above demission welfare. TheCompany includes the salary and the paid social insurance charges planed to pay by the personnel retreated inside during the periodfrom the date when ceased the services to the normal retire date in the current gains and losses (demission welfare) when met withthe 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 accountingdisposed 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 andrewards of ownership of the goods have been transferred to the buyer by the enterprise; the enterprise retains neither continuousmanagement right that usually keeps relation with the ownership nor effective control over the sold goods; the relevant amount ofrevenue can be measured in a reliable way; the relevant economic benefits may flow into the enterprise; and the relevant costsincurred 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 contractsagreement, and the revenues amount of the products sales had been confirmed with the goods payment had been withdrawn or hadreceived the receipt voucher of which the relevant economic benefits probably flow into the enterprise as well as the relevant costs ofthe 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 departureaccording to the contracts agreement, and the Company had acquired the bill of lading with the revenues amount of the products salehad been confirmed and the goods payment had been withdrawn or had had received the receipt voucher of which the relevanteconomic benefits probably flow into the enterprise as well as the relevant costs of the products could be reliable measured whenbeing 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 therevenue from providing services employing the percentage-of-completion method on the date of the balance sheet. The completedproportion of a transaction concerning the providing of labor services shall be decided by the proportion of the labor service alreadyprovided 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 followingconditions shall be met simultaneously: ① The amount of revenue can be measured in a reliable way; ② The relevant economicbenefits are likely to flow into the enterprise; ③ The schedule of completion under the transaction can be confirmed in a reliableway; 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 theproviding of labor services shall be recognized in accordance with the amount of the cost of labor services incurred and expected tobe compensated, and make the cost of labor services incurred as the current expenses. If it is predicted that the cost of labor servicesincurred 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
respectively, the part of sale of goods and the part of providing labor services shall be treated respectively. If the part of selling goodsand 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 providinglabor services can be distinguished from each other but can’t be measured respectively, both parts shall be conducted as sellinggoods.
(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’smonetary 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, excludingthe capital that the government invests as the investor who enjoys the corresponding owner’s equity. It can be divided into theasset-related government subsidy and income-related government subsidy. The Company defines the obtained government subsidyfor the acquisition and construction or forming the long-term asset in other ways as the asset-related government subsidy; othergovernment subsidies are defined as the income-related government subsidy. If the government document does not clearly prescribethe subsidy object, the following ways shall be adopted to divide the subsidy into the income-related government subsidy andasset-related government subsidy: (1) The government document clears the specific project for the subsidy, it shall divide accordingto 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 onlymakes the general expression on the usage without indicated specific project, it shall be the income-related government subsidy. Ifthe government subsidy is monetary asset, it shall be measured according to the received or receivable amount. If the governmentsubsidy is non-monetary asset, it shall be measured according to the fair value; it the fair value can’t be got reliably, it shall bemeasured according to the nominal amount. The government subsidy measured according to the nominal amount shall be calculatedin 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 supportpolicy indicated by the conclusive evidence shall be measured according to the receivable amount. The following conditions shall bemet for the government subsidy measured by the receivable amount: (1) The receivable subsidy amount has been confirmed by theauthorized government department, or it can be measured reasonably according to the officially released provisions related with thefinancial fund management method, and it is expected there is no major uncertainty for the amount; (2) It is based on the financialsupport project and financial fund management method actively opened released officially by the local financial department andaccording to the provision in Government Information Disclosure Provisions, the management method shall be universal (anyenterprise complying with the prescribed condition can apply) rather than for the specific enterprise; (3) The related subsidy approvaldocument has clearly promised the appropriate term, and the appropriation of the amount shall have the corresponding financialbudget 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 andlosses by stages in reasonable and systematic way within the service life of related asset. The income-related government subsidy tocompensate the related expense and loss later shall be confirmed as the deferred income, and it shall be calculated in the currentprofits and losses during the period to confirm the related costs or losses; the occurred related costs or losses for compensation shallbe 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
classified into the income-related government subsidyGovernment subsidies related to routine activities of the Company shall be calculated into other income or offset related costsaccording to the essence of economic business; government subsidies that have nothing to do with routine activities shall calculatedinto non-operating income.When the confirmed government subsidy needs to be returned and there is the related deferred income balance, the related deferredincome book balance shall be deducted, and the surpassing part shall be calculated into the current profits and losses; If in othersituations, 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 theprevious period, should be measured by the income tax of the estimated payable (returnable) amount which be calculated accordingto the regulations of the tax law. The amount of the income tax payable which is based by the calculation of the current income taxexpenses, are according to the result measured from the corresponding adjustment of the pre-tax accounting profit of this ReportingPeriod 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 temporarydifference occurs from the difference between the book value of the items which not be recognized as assets and liabilities but couldconfirm their tax assessment basis according to the regulations of the tax law, the deferred income tax assets and the deferred incometax 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 initialrecognition of assets or liabilities due to a transaction other than a business combination, which affects neither accounting profit nortaxable profit (or deductible loss). Besides, no deferred tax assets is recognized for the taxable temporary differences related to theinvestments of subsidiary companies, associated enterprises and joint enterprises, and the investing enterprise can control the time ofthe 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 liabilitiesarising from the transaction which is not business combination, the accounting profits will not be affected, nor will the taxableamount or deductible loss be affected at the time of transaction. Besides, no deferred taxable assets should be recognized for thedeductible 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 beused for making up such deductible temporary differences. Otherwise, the Company shall recognize the deferred income tax assetsarising from a deductible temporary difference basing on the extent of the amount of the taxable income that is likely to be acquiredto make up such deductible temporary differencesFor any deductible loss or tax deduction that can be carried forward to the next year, the corresponding deferred income tax assetshall be determined to the extent that the amount of future taxable income to be offset by the deductible loss or tax deduction to belikely obtained.On the balance sheet date, the deferred income tax assets and the deferred income tax liabilities shall be measured at the tax rateapplicable 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 taxableincome to offset against the benefit of the deferred income tax asset, the book value of the deferred income tax assets shall be writtendown. Any such write-down should be subsequently reversed where it becomes probable that sufficient taxable income will beavailable.
(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 exceptfor the current income tax and the deferred income tax related to the transaction and events that be confirmed as other comprehensiveincome 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 executesthe net amount settlement as well as the assets acquiring and liabilities liquidation at the same time while owns the legal rights ofsettling 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 rightsof settling the current income tax assets and liabilities by net amount and the deferred income tax and liabilities is relevant to theincome tax which be collected from the same taxpaying bodies by the same tax collection and administration department or isrelevant to the different taxpaying bodies but during each period which there is significant reverse of the deferred income assets andliabilities in the future and among which the involved taxpaying bodies intend to settle the current income tax and liabilities by netamount 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 thecurrent period by using the straight-line method over each period of the lease term. The initial direct costs shall be recognized as theprofits and losses of the current period. The contingent rents shall be recorded into the profits and losses of the current period inwhich 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-linemethod over each period of the lease term. The initial direct costs of great amount shall be capitalized when incurred, and berecorded 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 berecorded 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 theminimum lease payments on the lease beginning date as the entering value in an account, recognize the amount of the minimum leasepayments as the entering value in an account of long-term account payable, and treat the balance between the recorded amount of theleased asset and the long-term account payable as unrecognized financing charges. Besides, the initial direct costs directlyattributable to the leased item incurred during the process of lease negotiating and signing the leasing agreement shall be recorded inthe asset value of the current period. The balance through deducting unrecognized financing charges from the minimum leasepayments 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 andrecognize current financing charges. The contingent rents shall be recorded into the profits and losses of the current period in which
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 beginningdate and the initial direct costs as the entering value in an account of the financing lease values receivable, and record theunguaranteed residual value at the same time. The balance between the sum of the minimum lease receipts, the initial direct costs andthe unguaranteed residual value and the sum of their present values shall be recognized as unrealized financing income. The balancethrough deducting unrealized financing incomes from the finance lease accounts receivable shall be respectively stated in long-termclaims 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 andrecognize current financing revenues. The contingent rents shall be recorded into the profits and losses of the current period in whichthey 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 receivedamount and the book value of the treasury stocks. If the capital reserves are insufficient for adjustment, the surplus reserves andretained profits shall be adjusted accordingly. For cancellation of treasury stocks, the share capital shall be reduced according to thepar value and number of shares cancelled and the capital reserves shall be adjusted according to the difference between the bookvalue of the treasury stocks and the par value. If the capital reserves are insufficient for adjustment, the surplus reserves and retainedprofits 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 carryingamounts 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 ofother relevant factors. Such judgments, estimates and assumptions have effect on reporting amount of incomes, expense, assets andliabilities, as well as disclosure of contingent liabilities on the balance sheet date. However, the uncertainty of such estimates mayresults 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 sustainableoperation. As for the change in accounting estimates that only effects on the current period of the change, the affected amount thereofshall be recognized at current period of the change. As for accounting estimates that effects on both the current period of the changeand 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 theCompany 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 andfinance leases. Upon the classification, the management staffs need to make analysis and judgments on whether to essentially transferall risks and remuneration relating to the ownership of leased-out assets to the lessee, or whether the Company has essentiallyundertaken 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.
As for inventories of which the cost is higher than the realizable net value and inventories which are obsolete and unsalable inventorydepreciation reserves shall be withdrawn. Impairment of inventories to realizable net value is based on the assessment of themarketing of inventories and realizable net value thereof. Identification of inventory impairment requires well-established evidencesby management staffs, as well as judgments and estimates based on consideration of the purpose of holding inventories and otherfactors such as events occurring after the date of balance sheet. The difference between actual outcomes and originally estimatedoutcomes, which will influence the carrying amount of inventories and inventory depreciation reserves in the estimated period of thechange, 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 ofassessment methods, which include model analysis of discounted cash flow and etc. During the assessment, the Company needs toassess for respects such as future cash flows, credit risks, market volatility, correlation, and choose appropriate discount rate. Suchrelated 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 acceptimpairment tests when there is sign of impairment. Other non-current assets except for financial assets have to accept impairmenttests 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 betweenthe 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 theprice as stipulated in the sales agreement or the observable market price in the fair transaction minus the incremental cost directlysubject 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 assetgroup, such as output, sales price, related operating costs, and discount used to calculate the present value. When estimatingrecoverable amount, the Company shall adopt all relevant materials that can be required, including estimates relating to output, salesprice 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 presentvalue of the future cash flow of group assets or combination of group assets. When estimating the present value of the future cashflow, the Company needs to estimate the cash flow arising from future group assets or combination of group assets, and at the sametime 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 withdrawdepreciation 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 inaccordance with the past experience on similar assets of the Company, along with renewed technology of expectation. If anysignificant 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 taxassets in line with all unused tax losses, which requires management staffs of the Group to estimate the time when future taxableprofits occurs and the amount thereof by applying plenty of judgments and combining tax planning strategies, so as to determine theamount 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
whether some pre-taxed items can set aside the approvals by tax authorities or not. If there are differences between the ultimaterecognition outcomes and the originally estimated amounts of such tax issues, then such differences shall effect on the currentincome 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 anasset or liability, the Company adopts the available and observable market data. During the process of confirming the fair value ofvarious 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. 15) in which the format of financial statements of general enterprises was revised, and required governed enterprises to perform since the start date stipulated in this document. (3) In 2015, the Company set up the two wholly-owned subsidiaries Lu Thai Vietnam 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. | The Proposal on Changes in Parts of Accounting Policies of the Company has been reviewed and approved on the 24th Meeting of the 8th Board of Directors. |
(2) Significant Changes in Accounting Estimates
□ Applicable √ Not applicable
(3) Adjustments to the Financial Statements at the Beginning of the First Execution Year of any NewStandards 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 |
| 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 assets | 85,112,000.00 | -85,112,000.00 | |
| Investments in other debt obligations | |||
| Held-to-maturity investments | |||
| Long-term receivables | 10,693,844.75 | 10,693,844.75 | |
| Long-term equity investments | 96,018,463.65 | 95,554,809.90 | -463,653.75 |
| Investments in other equity instruments | 12,000,000.00 | 12,000,000.00 | |
| Other non-current financial assets | 31,018,515.95 | 31,018,515.95 | |
| 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 expense | 119,126,407.71 | 119,126,407.71 | |
| 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 |
| bank | |||
| Interbank loans obtained | |||
| Trading financial liabilities | |||
| Financial liabilities at fair value through profit or loss | 4,877,600.00 | -4,877,600.00 | |
| Derivative financial liabilities | 4,877,600.00 | 4,877,600.00 | |
| 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 payable | 3,068,841.54 | 3,068,841.54 | |
| Dividends payable | 441,113.64 | 441,113.64 | |
| 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 |
| 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 liabilities | 28,030,096.38 | 28,030,096.38 | |
| Other non-current liabilities | 1,840,000.00 | 1,840,000.00 | |
| 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 income | 61,157,013.37 | 60,636,813.37 | -520,200.00 |
| 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 the parent | 7,146,548,467.86 | 7,161,825,552.67 | 15,277,084.81 |
| 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 |
Note for adjustment:
In 2017, Ministry of Finance respectively revised and issued the Accounting Standards for Business Enterprises No. 22 - Recognitionand 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 BusinessEnterprises No. 37 – Presentation of Financial Instruments (hereinafter jointly referred to as “new standards governing financialinstruments”), 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, andadjustment is not needed if the involved previous comparative data of financial statements is different from the data under the “newstandards governing financial instruments. For the balance between the original carrying value of financial instruments and the newcarrying value on implementation date of the standards, the amount of the items on 1 January 2019 in financial statements shall beadjusted, 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 ofRevising and Printing the Format of 2018 General Enterprises Financial Statement issued by the Ministry of Finance, the Companyshall reclassify the original financial assets (liabilities) into trading financial assets, investments in other equity instruments, othernon-current financial assets, and derivative financial liabilities. For details about the influenced items and amounts, see the aboveadjusted financial statements.
Balance Sheet of the Company as the Parent
Unit: RMB
equityItem
| 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 |
| 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 assets | 73,112,000.00 | -73,112,000.00 | |
| Investments in other debt obligations | |||
| Held-to-maturity investments | |||
| Long-term receivables | |||
| Long-term equity investments | 2,165,711,579.69 | 2,165,247,925.94 | -463,653.75 |
| Investments in other equity instruments | |||
| Other non-current financial assets | 31,018,515.95 | 31,018,515.95 | |
| 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: |
| Short-term borrowings | 622,604,447.52 | 622,604,447.52 | |
| Trading financial liabilities | |||
| Financial liabilities at fair value through profit or loss | 4,877,600.00 | -4,877,600.00 | |
| Derivative financial liabilities | 4,877,600.00 | 4,877,600.00 | |
| 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 payable | 2,475,549.88 | 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 | 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 liabilities | 94,390,844.09 | 94,390,844.09 | |
| Other non-current | 16,699,530.43 | 16,699,530.43 |
| 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 income | 486,922,944.94 | 486,922,944.94 | |
| 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’ equity | 7,510,606,587.11 | 7,525,883,671.92 | 15,277,084.81 |
Note for adjustment:
In 2017, Ministry of Finance respectively revised and issued the Accounting Standards for Business Enterprises No. 22 - Recognitionand 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 BusinessEnterprises No. 37 – Presentation of Financial Instruments (hereinafter jointly referred to as “new standards governing financialinstruments”), 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, andadjustment is not needed if the involved previous comparative data of financial statements is different from the data under the “newstandards governing financial instruments. For the balance between the original carrying value of financial instruments and the newcarrying value on implementation date of the standards, the amount of the items on 1 January 2019 in financial statements shall beadjusted, 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 ofRevising and Printing the Format of 2018 General Enterprises Financial Statement issued by the Ministry of Finance, the Companyshall reclassify the original financial assets (liabilities) into trading financial assets, other non-current financial assets, and derivativefinancial liabilities. For details about the influenced items and amounts, see the above adjusted financial statements.
(4) Retroactive Adjustments to Comparative Data of Prior Years when First Execution of any NewStandards Governing Financial Instruments or Leases
□ Applicable √ Not applicable
VI. Taxation
1. Main Taxes and Tax Rate
| Category of taxes | Tax basis | Tax rate |
| VAT | Calculated the output tax at 16%, 13%, 10%, 9%, 6%, 5%, 3%, and 0% of taxable income and paid the VAT by the amount after deducting the deductible withholding VAT at current period. | 16%, 13%, 10%, 9%, 6%, 5%, 3%, 0% |
| Urban maintenance and construction tax | Paid at 7%, 5%, 1% of the circulating tax actually paid | 7%, 5%, 1% |
| Enterprise income tax | Paid at 25%, 16.5% and 15%, and 0% of taxable income respectively, for details, see the table below. | 25%, 16.5%, 15%, 0% |
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 Weaving & Dyeing”) | 15% |
| Lu Thai (Hong Kong) Textile Co., Ltd. (hereinafter refer to as “Lu Thai Hong Kong”) | 16.50% |
| 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 Power”) | 25% |
| Shanghai Lu Thai Textile & Garments Co., Ltd. (hereinafter referred to as “Shanghai Lu Thai”) | 25% |
| Beijing Lu Thai Youxian Electronic Commerce Co., Ltd. (hereinafter referred to as “Beijing Youxian”) | 25% |
| Shanghai Zhinuo Textile New Materials Co., Ltd. (hereinafter referred to as “Shanghai Zhinuo”) | 25% |
| Shandong Lulian New Materials Co., Ltd. (hereinafter refer to as “Lulian New Materials”) | 25% |
| Shandong Lulian New Materials Co., Ltd. (hereinafter referred to as “ Lulian New Materials”) | 25% |
| Xinjiang Lu Thai Textile Co., Ltd. (hereinafter referred to as “Xinjiang Textile”) | 15% |
| Lu Thai (Cambodia) Textile Co., Ltd. (hereinafter referred to as “Lu Thai Cambodia”) | 0% |
| Lu Thai (Burma) Textile Co., Ltd. (hereinafter referred to as “Lu Thai Burma”) | 0% |
| Lu Thai (Vietnam) Textile Co., Ltd. (hereinafter referred to as “Lu Thai Vietnam”) | 0% |
| Lu Thai (Tan Chau) Textile Co., Ltd. (hereinafter referred to as “Lu Thai Tan Chau”) | 0% |
| 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 America” | Refer to 2. Tax Preference presented as follows for details |
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 FinanceDepartment, State Administration of Taxation of Shandong Province and Local Taxation Bureau of Shandong Province, theCompany and the holding subsidiary Lufeng Weaving and Dyeing Co., Ltd. were identified as high-tech enterprises. Pursuant toArticle 28 of the "Law of the PRC on Enterprise Income Tax” and the No. 23 Announcement revised and published by the StateAdministration of Taxation in 2018, namely “Management of Preferential Policy on Corporate Income Tax” and the “Measures forthe Administration of the Recognition of Hi-tech Enterprises” GKFH [2016] No. 195 revised and published by the Ministry ofScience and Technology, Ministry of Finance and State Administration of Taxation, the Company and the holding subsidiary LufengWeaving 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 ofTaxation 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 companyof 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 InvestmentCommittee 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, aftergrace 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, enterpriseincome 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 FudongIndustrial 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 operationincome, and the enterprise income tax rate shall be 20% after the preference term ends.
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 NinhInvestment Planning Department, and it will enter into 4 years’ duty-free term if it is profitable within 3 years’ starting term. TheCompany shall enjoy 10% of the preference tax rate within 15 years since the tax year to get the first production and operationincome, 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 ProvinceEconomic Zone Management Committee, and it will enter into duty-free term if the profitability is realized at any year within 3years’ starting term. The Company shall enjoy 17% of the preference tax rate within 10 years since the tax year to get the firstproduction 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 federalenterprise income tax at progressive tax rate in excess of specific amount of 15%-39%, and imposed the New York Enterpriseincome 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 theCompany Shanghai Lu Thai, Shanghai Zhinuo and Beijing Lu Thai Youxian enjoy income tax reduction and exemption forsmall-scale and low-profit enterprises. From 1 January 2019 to 31 December 2021, the portion of annual taxable income withinRMB1 million of the subsidiaries shall be included in taxable income by reduction of 25%; for the portion exceeding RMB1 millionbut 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 notesAs 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-subsidiaryXinjiang 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 |
| 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 modeof 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 theBalance Sheet Date at the Period-end
Unit: RMB
| Item | Amount of recognition termination at the period-end | Amount of not terminated 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
| Category | Ending balance | Beginning balance | ||||||||
| Carrying amount | Bad debt provision | Carrying value | Carrying amount | Bad debt provision | Carrying value | |||||
| Amount | Proportion | Amount | Withdrawal proportion | Amount | Proportion | Amount | Withdrawal proportion | |||
| Of which: | ||||||||||
| Accounts receivable withdrawal of bad debt provision by the group | 401,632,651.52 | 100.00% | 20,179,590.21 | 5.02% | 381,453,061.31 | 394,430,830.86 | 100.00% | 19,823,714.31 | 5.03% | 374,607,116.55 |
| Of which: | ||||||||||
| Accounts receivable withdrawal of bad debt provision by credit risks characteristics | 401,632,651.52 | 100.00% | 20,179,590.21 | 5.02% | 381,453,061.31 | 394,430,830.86 | 100.00% | 19,823,714.31 | 5.03% | 374,607,116.55 |
| Total | 401,632,651.52 | 100.00% | 20,179,590.21 | 5.02% | 381,453,061.31 | 394,430,830.86 | 100.00% | 19,823,714.31 | 5.03% | 374,607,116.55 |
Withdrawal of bad debt provision: Accounts receivable withdrawal of bad debt provision by credit risks characteristics
Unit: RMB
| Item | Ending balance | ||
| Carrying amount | Bad debt provision | Withdrawal provision | |
| Accounts receivable withdrawal of bad debt provision by credit risks characteristics | 401,632,651.52 | 20,179,590.21 | 5.02% |
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 PeriodBad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period:
Unit: RMB
| Category | Beginning balance | Changes in the current period | Ending balance | ||
| Withdrawal | Withdrawal | Withdrawal | |||
| Bad debt provision for accounts receivable | 19,823,714.31 | 1,065,950.68 | 710,074.78 | 20,179,590.21 | |
| Total | 19,823,714.31 | 1,065,950.68 | 710,074.78 | 20,179,590.21 | |
(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 PartyThe total top 5 accounts receivable in ending balance collected according to the arrears party for theCompany was RMB115,365,596.34, accounting for 28.72% of the total ending balance of accountsreceivable, and the total ending balance of bad debt provision correspondingly withdrawn wasRMB5,768,279.82.
5. Prepayment
(1) Prepayment Listed by Aging Analysis
Unit: RMB
| Aging | Ending balance | Beginning balance | ||
| 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 wasRMB277,207,635.73, 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 |
| 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
| Bad debt provision | First stage | Second stage | Third stage | Total |
| Expected credit loss of the next 12 months | Expected loss in the duration (credit impairment not occurred) | Expected loss in the duration (credit impairment 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 period | -597,634.52 | -597,634.52 | ||
| 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
| 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
| Category | Beginning balance | Changes in the current period | Ending balance | |
| Withdrawal | Reversal or recovery | |||
| Bad debt provision for other receivables | 5,685,008.11 | -597,634.52 | 5,087,373.59 | |
| 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
| Name of the entity | Nature | Ending balance | Aging | Proportion to ending balance of other receivables% | Ending balance of bad debt provision |
| Export taxes refund receivable | Export taxes refund | 19,462,152.98 | Within 1 year | 33.83% | 973,107.65 |
| Advance money receivable of the fundraising houses | Advance | 8,143,803.43 | Within 1 year | 14.16% | 407,190.17 |
| Advances for agricultural machinery | Advance | 4,140,053.29 | Within 1 year | 7.20% | 207,002.66 |
| Cash deposit for salary of migrant workers in Zichuan district of Zibo city | Cash deposit for salary of migrant workers for construction work | 3,472,120.10 | Within 1 year; over 3 years | 6.04% | 886,686.03 |
| Bureau of Housing and Urban-Rural Development in Zichuan district of Zibo city | Refund of wall modification | 1,495,857.16 | Within 1 year; over 3 years | 2.60% | 280,125.36 |
| 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
| Item | Ending balance | Beginning balance | ||||
| Carrying amount | Falling price reserves | Carrying value | Carrying amount | Falling price reserves | Carrying value | |
| 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 living assets | 1,446,825.64 | 237,414.18 | 1,209,411.46 | 1,352,241.24 | 266,680.61 | 1,085,560.63 |
| Assigned processing products | 19,791,690.27 | 19,791,690.27 | 24,585,385.96 | 24,585,385.96 | ||
| 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 GuidanceNo.4---Listed Company Specialized in Seed Industry and Planting Businesses or not?No
(2) Falling Price Reserves of Inventories
Unit: RMB
| Item | Beginning balance | Increase | Decrease | Ending balance | ||
| Withdrawal | Other | Reverse or write-off | Other | |||
| 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 living assets | 266,680.61 | 29,266.43 | 237,414.18 | |||
| Total | 67,296,188.57 | 1,543,199.38 | 24,738,213.43 | 44,101,174.52 | ||
(3) The Withdrawal Basis for Inventory Falling Price Reserves and Reasons for Write-back or Write-offduring the Reporting Period
| Item | Specific basis of withdrawal of inventory falling price reserves | Reasons for write-back | Reasons for write-off |
| Raw materials | The lower one between cost of each item of inventory and its realizable net value | Disposed in the Reporting Period |
| Inventory goods | The lower one between cost of each item of inventory and its realizable net value | Sold in the Reporting Period | |
| Consumptive living assets | The lower one between cost of each item of inventory and its realizable net value | Sold in the Reporting Period |
Notes:
① The inventory falling price reserves shall be made based on the balance of inventory cost and the realizable net value regardingthe former is higher than the latter, which is caused by the quality problem of some raw materials, the gray yarn and dyed yarn infinished products, by the long stock age of some shirts and fabric and by the decrease of market price of the consumptive living assetHu sheep at the end of the Reporting Period.
② The subsidiary of the Company-Xinjiang Lu Thai Textile-obtained the short-term borrowing of RMB299,000,000.00from 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:
10. Long-term Receivables
(1) List of Long-term Receivables
Unit: RMB
| Item | Ending balance | Beginning balance | Interval of discount rate | ||||
| Carrying amount | Bad debt provision | Carrying value | Carrying amount | Carrying value | Carrying amount | ||
| Financing lease accounts | 650,000.00 | 650,000.00 | 650,000.00 | 650,000.00 | 15.37% | ||
| Of which: unrealized financing income | 66,001.90 | 66,001.90 | 105,603.04 | 105,603.04 | |||
| Long-term advances receivable | 9,611,679.27 | 591,258.56 | 9,020,420.71 | 10,572,468.16 | 528,623.41 | 10,043,844.75 | |
| 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
| Bad Debt Provision | First stage | Second stage | Third stage | Total |
| Expected credit loss of the next 12 months | Expected loss in the duration (credit impairment not occurred) | Expected loss in the duration (credit impairment 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 period | 62,635.15 | 62,635.15 | ||
| 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 |
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
| Investee | Beginning balance | Increase/decrease | Ending balance | Ending balance of depreciation reserves | |||||||
| Additional investment | Reduced investment | Gains and losses recognized under the equity method | Adjustment of other comprehensive income | Changes of other equity | Cash bonus or profits announced to issue | Withdrawal of depreciation reserves | Other | ||||
| II. Associated enterprises | |||||||||||
| Ningbo Mei shan Bonded Poer Area Haohong Equity Investment Partnership (L.P) (hereinafter referred to as “Haohong Investment”) | 95,554,809.90 | 5,083,101.54 | 100,637,911.44 | ||||||||
| 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 |
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
| Item | Houses and buildings | Land use right | Construction in progress | Total |
| 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 assets\construction in progress | 21,149,343.04 | 21,149,343.04 | ||
| (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 depreciation of fixed assets | 3,820,977.12 | 3,820,977.12 | ||
| 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 |
| 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
| Item | Houses and buildings | Machinery equipment | Transportation equipment | Electronic equipment and others | Total |
| 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 period | 35,098,684.89 | 193,352,685.57 | 2,129,219.80 | 2,674,113.23 | 233,254,703.49 |
| (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 construction in progress | 30,548,510.07 | 91,728,021.21 | 122,276,531.28 | ||
| (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 period | 33,418,502.68 | 889,202.53 | 197,832.66 | 1,266,933.26 | 35,772,471.13 |
| (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 investment property | 21,182,119.54 | 21,182,119.54 | |||
| (3) Transferred into construction in progress | 11,234,316.25 | 11,234,316.25 | |||
| (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 period | 55,942,394.39 | 159,683,083.77 | 2,652,806.16 | 7,847,292.25 | 226,125,576.57 |
| (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 period | 7,851,140.84 | 791,015.03 | 187,941.03 | 1,199,359.61 | 10,029,456.51 |
| (1) Disposal or Scrap | 334,727.30 | 791,015.03 | 187,941.03 | 1,199,359.61 | 2,513,042.97 |
| (2) Transferred into investment property | 3,820,977.12 | 3,820,977.12 | |||
| (3) Transferred into construction in progress | 3,695,436.42 | 3,695,436.42 | |||
| 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 period | 2,634.28 | 2,634.28 | |||
| (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 |
| Houses and buildings | 1,056,074.64 |
(3) Fixed Assets Failed to Accomplish Certification of Property
Unit: RMB
| Item | Carrying value | Reason |
| Weaving and yarn dying workshop | 99,676,229.15 | Ongoing inspection, surveying, verification to application procedures by Housing authorities |
| Employee’s dormitory building of eastern area of industrial park | 40,781,736.31 | Ongoing inspection, surveying, verification to application procedures by Housing authorities |
| Spinning Fourth factory workshop | 88,063,762.49 | Ongoing inspection, surveying, verification to application procedures by Housing authorities |
| Employee’s dormitory building of western area of industrial park | 119,623,003.67 | Ongoing inspection, surveying, verification to application procedures by Housing authorities for some assets and 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 100,000-spindle spinning production line | 67,813,878.46 | Ongoing verification to application procedures by Bureau of Land Resources |
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
| Item | Ending balance | Beginning balance | ||||
| Carrying amount | Depreciation reserves | Carrying value | Carrying amount | Depreciation reserves | Carrying value | |
| Renovation project for exhibition hall and office building | 2,683,566.26 | 2,683,566.26 | 24,788,720.86 | 24,788,720.86 | ||
| Renovation project for international business center and creative experience center | 9,491,723.70 | 9,491,723.70 | ||||
| Phase II of Eastern Dyed-yarn Automatic Library | 270,225.14 | 270,225.14 | ||||
| Reform project of Xinsheng Thermal Power | 13,975,666.21 | 13,975,666.21 | 12,145,265.65 | 12,145,265.65 | ||
| Expansion project of Xinsheng Thermal Power (Phase II) | 18,860,515.84 | 18,860,515.84 | 73,512,524.40 | 73,512,524.40 | ||
| Heat supply engineering of Xinsheng Thermal Power | 10,470,515.13 | 10,470,515.13 | 9,025,279.89 | 9,025,279.89 | ||
| 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 (Vietnam) project | 10,334,473.83 | 10,334,473.83 | 3,908,174.87 | 3,908,174.87 | ||
| Yarn Dye Phase II of Lu Thai (Vietnam) project | 105,226,627.88 | 105,226,627.88 | 83,880,726.83 | 83,880,726.83 | ||
| 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 project | 37,030,681.68 | 37,030,681.68 | ||||
| Phase I of Functional Fabric Intelligent Ecological Park project | 2,503,277.46 | 2,503,277.46 | ||||
| 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
| Item | Budget | Beginning balance | Increased amount | Transferred in fixed assets | Other decreased amount | Ending balance | Proportion of accumulated investment in constructions to budget | Job schedule | Accumulated amount of interest capitalization | Of which: amount of capitalized interests for the Reporting Period | Capitalization rate of interests for the Reporting Period | Capital resources |
| Renovation project for exhibition hall | 27,100,000.00 | 24,788,720.86 | 5,011,070.65 | 27,116,225.25 | 2,683,566.26 | 95.00% | 95% | Other |
| and office building | ||||||||||||
| Renovation project for international business center and creative experience center | 8,500,000.00 | 9,491,723.70 | 9,491,723.70 | 23.00% | 23% | Other | ||||||
| Phase II of Eastern Dyed-yarn Automatic Library | 1,600,000.00 | 270,225.14 | 270,225.14 | 17.00% | 17% | Other | ||||||
| Reform project of Xinsheng Thermal Power | 20,000,000.00 | 12,145,265.65 | 1,830,400.56 | 0.00 | 13,975,666.21 | 94.00% | 94% | Other | ||||
| Expansion project of Xinsheng Thermal Power (Phase II) | 97,950,000.00 | 73,512,524.40 | 33,611,291.18 | 88,263,299.74 | 18,860,515.84 | 92.00% | 92% | Other | ||||
| Heat supply engineering of Xinsheng Thermal Power | 32,670,000.00 | 9,025,279.89 | 1,445,235.24 | 0.00 | 10,470,515.13 | 50.00% | 50% | Other | ||||
| Lu Thai (Vietnam) project | 242,282,300.00 | 12,414,796.74 | 11,371,407.03 | 0.00 | 23,786,203.77 | 99.00% | 99% | Other | ||||
| Spinning Phase II of Lu Thai (Vietnam) project | 52,750,000.00 | 3,908,174.87 | 6,426,298.96 | 0.00 | 10,334,473.83 | 96.00% | 96% | Other | ||||
| Yarn Dye Phase II of Lu Thai (Vietnam) project | 110,300,000.00 | 83,880,726.83 | 21,345,901.05 | 0.00 | 105,226,627.88 | 95.00% | 95% | Other | ||||
| Project of Lu An Garments | 93,035,700.00 | 4,140,135.90 | 1,918,639.08 | 3,458,357.83 | 2,600,417.15 | 99.00% | 99% | Other | ||||
| Yarn Dye of Lu Thai Tan Chau | 109,995,200.00 | 0.00 | 37,030,681.68 | 0.00 | 37,030,681.68 | 34.00% | 34% | Other |
| project | ||||||||||||
| Phase I of Functional Fabric Intelligent Ecological Park project | 158,065,400.00 | 0.00 | 2,503,277.46 | 0.00 | 2,503,277.46 | 2.00% | 2% | Other | ||||
| Other retails projects | 20,678,335.61 | 3,491,952.99 | 3,438,648.46 | 20,731,640.14 | Other | |||||||
| Total | 954,248,600.00 | 244,493,960.75 | 135,748,104.72 | 122,276,531.28 | 257,965,534.19 | -- | -- | -- |
(3) Engineering Materials
Unit: RMB
| Item | Ending balance | Beginning balance | ||||
| Carrying amount | Carrying amount | Carrying value | Carrying amount | Depreciation reserves | Carrying value | |
| 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
| Item | Land use right | Patent right | Software use right | Brand use right | Total |
| 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 period | 8,997,749.14 | 1,184,552.59 | 10,182,301.73 | ||
| (1) Purchase | 8,997,749.14 | 1,184,552.59 | 10,182,301.73 | ||
| (2) Internal R&D | |||||
| (3) Business combination increase |
| 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 ofintangible assets was 0.00.
18. R&D Expense
| Item | Beginning balance | Increase | Decrease | Ending balance | ||
| Internal R&D expense | Other | Recognized as intangible assets | Transferred into the current profit or loss | |||
| R&D of products | 161,939,039.23 | 161,939,039.23 | ||||
| Total | 161,939,039.23 | 161,939,039.23 | ||||
19. Goodwill
(1) Original Carrying Value of Goodwill
Unit: RMB
| Name of the invested units or events generating goodwill | Beginning balance | Increase | Decrease | Ending balance |
| 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
| Item | Beginning balance | Increased amount | Amortization amount of the period | Other decreased amount | Ending balance |
| Land contracting fee of Xinjiang Luthai | 25,607,423.92 | 543,109.50 | 25,064,314.42 | ||
| Decoration fee of Xinjiang Lu Thai | 672,679.41 | 81,067.98 | 591,611.43 | ||
| Land rent of overseas subsidiaries | 92,846,304.38 | 393,170.13 | 978,735.57 | 92,260,738.94 | |
| Housing rent of overseas subsidiaries | 0.00 | ||||
| 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
| Item | Ending balance | Beginning balance | ||
| Deductible temporary difference | Deferred income tax assets | Deductible temporary difference | Deferred income tax assets | |
| Provision for impairment of assets | 99,166,519.42 | 17,549,279.45 | 126,694,466.74 | 20,904,717.95 |
| Unrealized profit of internal transactions | 145,987,556.90 | 17,900,842.79 | 130,892,601.80 | 16,151,715.20 |
| One-time listed decoration expenses | 4,140,492.30 | 1,035,123.08 | 4,140,492.30 | 1,035,123.08 |
| 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 financial liabilities | 4,877,600.00 | 731,640.00 | ||
| Changes in fair value of financial assets | 24,264,084.05 | 3,639,612.61 | 24,264,084.05 | 3,639,612.61 |
| 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
| Item | Ending balance | Beginning balance | ||
| Deductible temporary difference | Deferred income tax liabilities | Deductible temporary difference | Deferred income tax 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 transactions | 12,400,680.83 | 1,860,102.12 | 13,996,286.66 | 2,099,443.00 |
| Changes in fair value of available-for-sale financial assets | 1,146,000.00 | 171,900.00 | 612,000.00 | 91,800.00 |
| 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 |
| 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 |
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 |
| II. Post-employment benefit-defined contribution plans | 26,065.07 | 86,343,306.24 | 86,368,700.68 | 670.63 |
| 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, subsidy | 268,788,698.76 | 765,144,129.27 | 836,694,701.85 | 197,238,126.18 |
| 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 premiums | 29,466.69 | 32,303,724.29 | 32,320,755.92 | 12,435.06 |
| Work-related injury insurance | 6,291.48 | 4,064,483.57 | 4,064,791.20 | 5,983.85 |
| Maternity insurance | 1,533.96 | 4,184,529.84 | 4,186,023.16 | 40.64 |
| 4. Housing fund | 0.00 | 7,939,107.30 | 7,939,107.30 | |
| 5.Labor union budget and employee education budget | 57,146,154.21 | 11,579,807.14 | 7,596,620.91 | 61,129,340.44 |
| 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 wasrecorded into current profits and losses or related assets costs.
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 construction fund | 163,140.72 | 394,952.66 |
| 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
| Item | Ending balance | Beginning balance |
| Dividends payable to individual shareholders by the Company | 441,113.64 | 441,113.64 |
| 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 |
| 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
| Item | Beginning balance | Increase | Decrease | Ending balance | Reason for formation |
| Government subsidies | 140,077,843.35 | 4,177,400.00 | 5,086,991.29 | 139,168,252.06 | Government subsidies |
| Unrealized financing incomes | 105,603.04 | 39,601.14 | 66,001.90 | Finance lease | |
| Total | 140,183,446.39 | 4,177,400.00 | 5,126,592.43 | 139,234,253.96 | -- |
Item involving government subsidies:
Unit: RMB
| Item | Beginning balance | Amount of newly subsidy | Amount recorded into non-operating income in the Reporting Period | Amount recorded into other income in the Reporting Period | Amount offset cost in the Reporting Period | Other changes | Ending balance | Related to assets/related income |
| Land | 57,872,611.45 | 677,125.92 | 57,195,485.53 | Related to assets | ||||
| Equipment | 61,790,767.51 | 877,400.00 | 2,407,142.82 | 60,261,024.69 | Related to assets | |||
| Production living assets | 558,000.08 | 66,499.98 | 491,500.10 | Related to assets | ||||
| Overseas investment | 500,000.00 | 500,000.00 | Related to assets | |||||
| R&D | 5,262,000.00 | 3,300,000.00 | 8,562,000.00 | Related to |
| income | ||||||||
| Public housing subsidy | 1,237,942.13 | 24,115.74 | 1,213,826.39 | Related to assets | ||||
| Subsidy for improvement and transformation of green land | 12,856,522.18 | 1,912,106.83 | 10,944,415.35 | Related to income | ||||
| 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
| Beginning balance | Increase/decrease（+/-） | Ending balance | |||||
| New shares issued | Bonus share | Bonus issue from profit | Other | Subtotal | |||
| The sum of shares | 922,602,311.00 | -64,480,770.00 | -64,480,770.00 | 858,121,541.00 | |||
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 |
38. Treasury Shares
Unit: RMB
| Item | Beginning balance | Increase | Decrease | Ending balance |
| Shares of the Company acquired for decrease in registered capital | 486,922,944.94 | 20,188,394.10 | 507,111,339.04 | |
| Total | 486,922,944.94 | 20,188,394.10 | 507,111,339.04 |
39. Other Comprehensive Income
Unit: RMB
| Item | Beginning balance | Reporting Period | Ending balance | |||||
| Income before taxation in the Current Period | Less: recorded in other comprehensive income in prior period and transferred in profit or loss in the Current Period | Less: recorded in other comprehensive income in prior period and transferred in retained profits in the Current Period | Less: Income tax expense | Attributable to owners of the Company as the parent after tax | Attributable to non-controlling interests after tax | |||
| II. Other comprehensive income that may subsequently be reclassified to profit or loss | 60,636,813.37 | 11,806,511.25 | 11,806,511.25 | 72,443,324.62 | ||||
| Differences arising from translation of foreign currency-denominated financial statements | 60,636,813.37 | 11,806,511.25 | 11,806,511.25 | 72,443,324.62 | ||||
| Total of other comprehensive income | 60,636,813.37 | 11,806,511.25 | 11,806,511.25 | 72,443,324.62 | ||||
Other notes, including the adjustment of the effective gain/loss on cash flow hedges to the initial recognized amount:
40. Surplus Reserves
Unit: RMB
| 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 thestatutory surplus reserves.
41. Retained Earnings
Unit: RMB
| Item | Reporting Period | Same period of last year |
| Beginning balance of retained earnings before adjustments | 4,927,500,989.55 | 4,629,102,712.06 |
| Total beginning retained earnings before adjustment (+ for increase, - for decrease)） | 15,797,284.81 | |
| Total beginning retained earnings after adjustment | 4,943,298,274.36 | 4,629,102,712.06 |
| Add: Net profit attributable to owners of the Company as the parent | 411,446,216.59 | 811,526,477.83 |
| 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 AccountingStandards 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
| Item | Reporting Period | Same period of last year | ||
| 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 |
| 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 construction fund | 4,186,251.77 | 5,070,422.01 |
| 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 |
| 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 |
| 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 accounted by equity method | 5,083,101.54 | -1,730,597.59 |
| Investment income from disposal of financial assets at fair value through profit or loss | -46,137.60 | |
| Investment income of trading financial assets during holding period | 1,382,405.99 | |
| Investment income from disposal of trading financial assets | 3,998,105.48 | 6,376,621.37 |
| 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 |
| 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
| Item | Reporting Period | Same period of last year | Amount recorded in the current non-recurring profit or loss |
| Gains from damage and scrap of non-current assets | 16,961.25 | 12,598.97 | 16,961.25 |
| 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
| Item | Reporting Period | Same period of last year | Amount recorded in the current non-recurring profit or loss |
| Donations | 102,676.14 | 7,246.70 | 102,676.14 |
| Losses from damage and scrap of non-current assets | 24,624.99 | 1,094,026.64 | 24,624.99 |
| 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 |
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 rate | 76,149,895.40 |
| 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 cash and deposit | 10,419,971.60 | 7,332,632.94 |
| 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 |
| 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 cash and deposit | 11,643,401.71 | 9,938,512.86 |
| 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 equipment purchase | 0.00 | |
| Total | 4,874,724.40 |
(5) Cash Generated from Other Financing Activities
Unit: RMB
| 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’ equity of subsidiaries | 841,000.00 | |
| 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 assets (gains: negative) | -513,490.00 | 522,286.65 |
| 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 |
| (“-” means decrease) | ||
| Decrease in inventory (gains: negative) | -221,528,624.76 | 103,831,822.46 |
| Decrease in accounts receivable generated from operating activities (gains: negative) | -174,035,167.80 | -10,014,110.37 |
| Increase in accounts payable used in operating activities (decrease: negative) | -179,612,349.12 | -56,853,595.15 |
| 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 equivalents | 623,558,417.28 | 535,134,772.90 |
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
| Item | Ending foreign currency balance | Exchange rate | Ending balance converted to 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: |
| 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, RecordingCurrency and Selection Basis Shall Be Disclosed; if there Are Changes in Recording Currency, RelevantReasons 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 therecording currency respectively was HKD, USD, USD, USD, USD and USD.
61. Government Subsidy
(1) Basic Information on Government Subsidy
Unit: RMB
| Category | Amount | Listed items | Amount recorded in the current profit or loss |
| Subsidies for transferring Xinjiang cotton yarn to warehouses out of Xinjiang | 1,034,400.00 | Other income | 1,034,400.00 |
| Subsidy for export credit insurance premium | 127,700.00 | Other income | 127,700.00 |
| Return of service charge for withholding and remitting tax | 131,712.26 | Other income | 131,712.26 |
| Government subsidy for award in single champion demonstration enterprise | 2,000,000.00 | Other income | 2,000,000.00 |
| 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 improvement and energy conservation | 100,000.00 | Other income | 100,000.00 |
| Social insurance subsidy of preferential policy for strengthening local enterprise development | 112,900.00 | Other income | 112,900.00 |
| R&D subsidy for preferential policy for strengthening local enterprise development | 4,780,600.00 | Other income | 4,780,600.00 |
| Special fund for energy conservation and consumption reduction | 300,000.00 | Other income | 300,000.00 |
| Special fund for development and innovation in science and technology | 400,000.00 | Other income | 400,000.00 |
| Government subsidy for innovation award in science and technology conference | 300,000.00 | Other income | 300,000.00 |
| Special fund for integration of “information technology and industrialization” | 100,000.00 | Other income | 100,000.00 |
| Subsidies for transferring cotton yarn to warehouses | 2,262,912.65 | Other income | 2,262,912.65 |
| Subsidy for enterprise management and consultation | 84,000.00 | Other income | 84,000.00 |
| Special fund for enterprise management and consultation | 200,000.00 | Other income | 200,000.00 |
| Support fund for leading talent | 300,000.00 | Other income | 300,000.00 |
| Science and technology award in Shandong Province | 300,000.00 | Other income | 300,000.00 |
| 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 consumer services | 13,377.37 | Other income | 13,377.37 |
| Provincial industry fund for quality and efficiency improvement and energy conservation | 1,000,000.00 | Other income | 1,000,000.00 |
| Subsidy for municipal-level industrial design center | 100,000.00 | Other income | 100,000.00 |
| Fund of municipal-level talents introduce major project | 300,000.00 | Other income | 300,000.00 |
| Subsidy fund for leading persons (innovation in | 2,000,000.00 | Other income | 2,000,000.00 |
| 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 persons program of Mount Tai industry | 100,000.00 | Other income | 100,000.00 |
| Fund for leading persons of Mount Tai | 20,000.00 | Other income | 20,000.00 |
| Special government subsidy for development of foreign trade and commerce | 25,400.00 | Other income | 25,400.00 |
| Subsidy for stabilizing posts | 5,905,352.00 | Other income | 5,905,352.00 |
| Social insurance for employing people with job hunting difficulties | 31,718.66 | Other income | 31,718.66 |
| Matching subsidy fund for support of gifted and talented persons | 200,000.00 | Other income | 200,000.00 |
| Central special fund for development of foreign trade and commerce | 780,000.00 | Other income | 780,000.00 |
| Central special credit insurance subsidy for development of foreign trade and commerce | 285,700.00 | Other income | 285,700.00 |
| Central special exhibition subsidy for development of foreign trade and commerce | 228,000.00 | Other income | 228,000.00 |
| Subsidy for patent | 122,000.00 | Other income | 122,000.00 |
| Subsidy for leading talent of chief technician in Zibo | 10,000.00 | Other income | 10,000.00 |
| Subsidy for equipments in top 30 industry project | 382,400.00 | Deferred income | |
| Subsidy fund for leading persons project of Mount Tai industry | 2,900,000.00 | Deferred income | |
| Subsidy fund for support of gifted and talented persons of Zibo City | 400,000.00 | Deferred income | |
| Subsidy for equipments of 30 strong industrial counties project | 495,000.00 | Deferred income | |
| 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.
(hereinafter refer to as “Lu Thai Tan Chau”) were incorporated as a subsidiary and a sub-subsidiary of the Company respectivelyduring the Reporting Period.IX. Equity in Other Entities
1. Equity in Subsidiary
(1) Subsidiaries
| Name | Main operating place | Registration place | Nature of business | Holding percentage (%) | Way of gaining | |
| Directly | Indirectly | |||||
| Luthai (Hong Kong) | Hong Kong | Hong Kong | Wholesale and retail industry | 100.00% | Set-up | |
| Shanghai Luthai | Shanghai | Shanghai | Wholesale and retail industry | 100.00% | Set-up | |
| Lulian New Materials | Zibo | Zibo | Manufacturing industry | 75.00% | Set-up | |
| Shanghai Zhinuo | Shanghai | Shanghai | Wholesale and retail industry | 100.00% | Set-up | |
| Xinjiang Luthai | Xinjiang | Xinjiang | Manufacturing industry | 59.92% | Business combination not under the same control | |
| Lufeng Weaving & Dyeing | Zibo | Zibo | Manufacturing industry | 75.00% | Set-up | |
| Luqun Textile | Zibo | Zibo | Manufacturing industry | 100.00% | Set-up | |
| Xinsheng Power | Zibo | Zibo | Manufacturing industry | 100.00% | Business combination not under the same control | |
| Xinjiang Textile (sub-subsidiary) | Xinjiang | Xinjiang | Manufacturing industry | 59.92% | Set-up | |
| Beijing Youxian | Beijing | Beijing | Wholesale and retail industry | 100.00% | Set-up | |
| Lu Thai (Cambodia) | Cambodia | Cambodia | Manufacturing industry | 100.00% | Set-up | |
| Lu Thai (Burma) | Burma | Burma | Manufacturing industry | 100.00% | Set-up | |
| Lu Thai (America) | America | America | Wholesale and retail industry | 100.00% | Set-up | |
| Lu Thai (Vietnam) | Vietnam | Vietnam | Manufacturing industry | 100.00% | Set-up | |
| Lu Thai Tan Chau (sub-subsidiary) | Vietnam | Vietnam | Manufacturing industry | 100.00% | Set-up | |
| Lu An Garments | Vietnam | Vietnam | Manufacturing industry | 100.00% | Set-up |
(2) Significant Non-wholly-owned Subsidiary
Unit: RMB
| Name | Shareholding proportion of non-controlling interests | The profit or loss attributable to the non-controlling interests | Declaring dividends distributed to non-controlling interests | Balance of non-controlling interests at the period-end |
| Xinjiang Luthai | 40.08% | -4,676,260.97 | 195,960,043.78 | |
| Lufeng Weaving & Dyeing | 25.00% | 13,939,054.37 | 50,000,000.00 | 341,968,692.25 |
(3) The Main Financial Information of Significant Not Wholly-owned Subsidiary
Unit: RMB
| Name | Ending balance | ||||||
| Current assets | Non-current assets | Total assets | Current liabilities | Non-current liability | Total liabilities | ||
| Xinjiang Luthai | 393,133,252.63 | 553,241,390.51 | 946,374,643.14 | 433,309,416.90 | 4,653,818.92 | 437,963,235.82 | |
| Lufeng Weaving & Dyeing | 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 | |
| Name | Beginning balance | ||||||
| Current assets | Non-current assets | Total assets | Current liabilities | Non-current liability | Total liabilities | ||
| Xinjiang Luthai | 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 | |
| Lufeng Weaving & Dyeing | 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 | |
Unit: RMB
| Name | Reporting Period | |||
| Operating revenue | Net profit | Total comprehensive income | Cash flows from operating activities | |
| Xinjiang | 314,368,667.80 | -5,299,119.43 | -5,299,119.43 | 30,794,222.48 |
| Luthai | ||||
| Lufeng Weaving & Dyeing | 805,575,459.05 | 52,877,665.09 | 52,877,665.09 | 106,151,171.66 |
| Name | Same period of last year | |||
| Operating revenue | Net profit | Total comprehensive income | Cash flows from operating activities | |
| Xinjiang Luthai | 342,127,462.81 | 3,505,617.21 | 3,505,617.21 | 96,172,947.55 |
| Lufeng Weaving & Dyeing | 793,449,942.60 | 28,734,401.92 | 28,734,401.92 | 16,773,852.80 |
2. Equity in Joint Ventures or Associated Enterprises
(1) Significant Joint Ventures or Associated Enterprises
| Name | Main operating place | Registration place | Nature of business | Holding percentage (%) | Accounting treatment of the investment to joint venture or associated enterprise | |
| Directly | Indirectly | |||||
| Haohong Investment | Ningbo | Ningbo | Equity investment | 33.33% | Equity method | |
(2) Main Financial Information of Significant Joint Ventures
Unit: RMB
| Ending balance/Reporting Period | Beginning balance/The Same period of last 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 Company as the parent | 301,943,928.72 | 286,693,099.02 |
| Net assets shares calculated at the shareholding proportion | 100,637,911.44 | 95,554,809.90 |
| Carrying value of investment to associated enterprises | 100,637,911.44 | 95,554,809.90 |
| 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 InstrumentsMain financial instruments of the Company included: Loans, accounts receivable, accounts payable, etc., all the details of thefinancial instruments, see related projects of “Section VII”. The risk associated with these financial instruments, as well as theCompany’s risk management policy to reduce these risks which were described below. The Company's management managed andsupervised 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 thecurrent profits and Stockholders' equity. Because rarely any risk variables change in isolation, and the correlation between variablesfor the eventual impact of the change of a risk variables will have a significant effect, thus, the aforesaid content was processingunder the assumption of the change of each variable was conducted independently.(I) Risk management objectives and policiesThe goals of Company engaged in the risk management is to achieve the proper balance between the risks and benefits, reduced thenegative impact to the Company operating performance risk to a minimum, maximized the profits of shareholders and other equityinvestors. Based on the risk management goal, the basic strategy of the Company's risk management is determine and analyze thevarious risks faced by the Company, set up the bottom line of risk and conducted appropriate risk management, and timelysupervised 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 tothe risk incurred due to loss of changes in exchange rate. The Company’s foreign exchange risk was mainly related to USD, HKDand EUR, excepting the Company’s several subsidiaries purchase and sale, in USD, HKD and Dong, the other main business settledby RMB. On 30 December 2018, in addition to the following assets or liabilities in statement was USD, HKD and EUR, theCompany’s assets or liabilities was RMB balance. The foreign exchange risk incurred by assets and liabilities of foreign balance mayhave 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 borrowings | 144,282,763.91 | |
| 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 toNote VII-23 and 32).Sensitive analysis of interest rate risk:
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 shareholders | Influence to the profits | Influence to equity of 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 theobligations and causes loss of the Company’s financial assets, which including: book value of financial assets recognized inconsolidated balance sheet.In order to reduce the credit risk, the Company established a special team be responsible for the determination of credit limit toconduct 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 moneyunable to recycle withdrawn provision for bad debt fully. Thus, the Company management believed that have assume the credit riskthe 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 meetthe need of the operation of the Company and reduce the influence of cash flow volatility. The Company management supervised theusage 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 netcash 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
| Item | Ending fair value | |||
| Fair value measurement items at level 1 | Fair value measurement items at level 2 | Fair value measurement items at level 3 | Total | |
| I. Consistent fair value measurement | -- | -- | -- | -- |
| 1.Financial assets at fair value through profit or loss | 62,164,515.95 | 62,164,515.95 | ||
| (1) Debt instrument investment | 31,146,000.00 | 31,146,000.00 | ||
| (2) Equity instrument investment | 31,018,515.95 | 31,018,515.95 | ||
| The total amount of assets consistently measured at fair value | 0.00 | 62,164,515.95 | 62,164,515.95 | |
| 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
The fair value of financial liabilities at level 1 was determined in accordance with the quotation of future foreign exchange of thebank on 30 June 2019.
3. Valuation Technique Adopted and Nature and Amount Determination of Important Parameters forConsistent 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 accordancewith the evaluation on the balance sheet date provided by the asset manager and appraisal value of assessment agency to theinvestment company.
XII. Related Party and Related-party Transactions
1. Information Related to the Company as the Parent of the Company
| Name | Registration place | Nature of business | Registered capital | Proportion of share held by the Company as the parent against the Company (%) | Proportion of voting rights owned by the Company as the parent against the Company (%) |
| Zibo Lucheng Textile Investment Co., Ltd. | Zibo | Textile, chemistry and investment | RMB63.26 million | 16.36% | 16.36% |
Notes: information on the Company as the parentThe 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 CompanyRefer to Note IX-2. Equity in Joint Ventures or Associated Enterprises for Details of Significant Joint Ventures or AssociatedEnterprises of the Company.
4. Information on Other Related Parties
| Name | Relationship with the Company |
| Zibo Stanluian Cosmetics Co., Ltd. (hereinafter called “Stanluian”) | Joint-stock company of the Company as the parent |
| 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 Purified Water) | Wholly-owned subsidiary of the Company as the parent |
| 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 Lurui Chemical) | Wholly-owned subsidiary of the Company as the parent |
| Zibo Lujia Property Management Co. , Ltd. (hereinafter referred to as Lujia Property) | Wholly-owned subsidiary of the Company as the parent |
| Hong Kong Tung Hoi International Company Limited (hereinafter called Tung Hoi International) | Wholly-owned subsidiary of the Company as the parent |
| Zibo Stanluian Cosmetics Co., Ltd. (hereinafter called “Stanluian”) | Wholly-owned subsidiary of the Company as the parent |
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
| Related party | Content | Reporting Period | The approval trade credit | Whether exceed trade credit or not | Same period of last year |
| Zibo Lucheng Textile Investment Co., Ltd. | Towels, socks, oils, supermarket retail, welfare, electronics, computer equipment, computer supplies, paper cores, boot etc. | 6,177,619.85 | 7,210,000.00 | No | 6,462,966.30 |
| Limin Purified Water | Sewage treatment, materials | 11,140,353.11 | 13,300,000.00 | No | 12,624,335.83 |
| Chengshun Petrochemical | Gas | 22,728,978.86 | 27,000,000.00 | No | 15,016,102.73 |
| Lurui Fine Chemical | Auxiliaries | 57,285,041.23 | 69,000,000.00 | No | 53,067,182.08 |
Information of sales of goods and provision of labor service
Unit: RMB
| Related party | Content | Reporting Period | Same period of last year |
| Lucheng Textile | Sales of materials, electricity, running water, draught water, gas, LED light etc. | 56,265.15 | 62,734.54 |
| Lucheng Textile | Sales of grey yarn, dyed yarn, garment etc. | 252,090.27 | 205,267.94 |
| Stanluian Company | Sales of materials, electricity, and running water | 6,926.79 | |
| Limin Purified Water | Sales of materials, garment, LED light etc. | 865,399.14 | 72,279.13 |
| Lurui Fine Chemical | Sales of garment, LED light, shell fabric, yarn, water&electricity, lunch components | 155,742.15 | 88,729.05 |
| 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
| Name of lessee | Category of leased assets | The lease income confirmed in the Reporting Period | The lease income confirmed in the Same period of last year |
| Zibo Lucheng Textile Investment Co., Ltd. | Houses and buildings | 36,108.00 | 48,965.14 |
| Lurui Fine Chemical | Houses and buildings | 4,091.82 | 4,091.82 |
The Company was lessee:
Unit: RMB
| Name of lessor | Category of leased assets | The lease fee confirmed in the Reporting Period | The lease fee confirmed in the Same period of last year |
| Zibo Lucheng Textile Investment Co., Ltd. | Rent of land | 1,807,428.60 | 1,807,428.60 |
| Zibo Lucheng Textile Investment Co., Ltd. | Rent of gas station | 250,857.12 | 250,857.12 |
| Zibo Lucheng Textile Investment Co., Ltd. | Rent of land and buildings | 5,511,114.30 | 5,748,600.80 |
| 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 |
| Borrowing | ||||
| Zibo Lucheng Textile Investment | 9,000,000.00 | 8 April 2019 | 31 December 2019 | Borrowed by the Company’s 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 |
| Other payables | Zibo Lucheng Textile Investment Co., Ltd. | 121,520,000.00 | 127,139,981.30 |
| 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 DateCapital 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 purchasing long-lived assets | 20,965.65 | 4528.59 |
| Total | 20,965.65 | 4528.59 |
2. Contingency
(1) In Despite of no Significant Contingency to Disclose, the Company Shall Also Make RelevantStatements
There was no significant contingency in the Company to disclose.
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
| Category | Ending balance | Beginning balance | ||||||||
| Carrying amount | Bad debt provision | Carrying value | Carrying amount | Bad debt provision | Carrying value | |||||
| Amount | Proportion | Amount | Withdrawal proportion | Amount | Proportion | Amount | Withdrawal proportion | |||
| Of which: | ||||||||||
| Accounts receivable withdrawal of bad debt provision by the group | 389,210,047.23 | 100.00% | 19,544,871.22 | 5.02% | 369,665,176.01 | 332,953,633.50 | 100.00% | 16,727,660.22 | 5.02% | 316,225,973.28 |
| Of which: | ||||||||||
| Accounts receivable withdrawal of bad debt provision of by credit risks characteristics | 389,210,047.23 | 100.00% | 19,544,871.22 | 5.02% | 369,665,176.01 | 332,953,633.50 | 100.00% | 16,727,660.22 | 5.02% | 316,225,973.28 |
| Total | 389,210,047.23 | 100.00% | 19,544,871.22 | 5.02% | 369,665,176.01 | 332,953,633.50 | 100.00% | 16,727,660.22 | 5.02% | 316,225,973.28 |
Bad debt provisions established on the group basis: Accounts receivable of which bad debt provisions are established by credit riskcharacteristics
Unit: RMB
| Item | Ending balance | ||
| Carrying amount | Bad debt provision | Bad debt provision ratio | |
| Accounts receivable of which bad debt provisions are established by credit risk | 389,210,047.23 | 19,544,871.22 | 5.02% |
| 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 modeof expected credit loss to withdraw bad debt provision of notes receivable.
□ Applicable √ Not applicable
List by Aging Analysis
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 PeriodBad debt provision withdrawn, reversed or recovered in the Reporting Period:
Unit: RMB
| Category | Beginning balance | Changes in the current period | 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 wasRMB93,127,293.09, accounting for 23.93% of total ending balance of accounts receivable, and the total accounts receivablecorrespondingly 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
| 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
| Bad debt provision | First stage | Second stage | Third stage | Total |
| Expected credit loss of the next 12 months | Expected loss in the duration (credit impairment not occurred) | Expected loss in the duration (credit 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 period | -304,174.51 | -304,174.51 | ||
| 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
| Category | Beginning balance | Changes in the current period | Ending balance | |
| Withdrawal | Reversal or recovery | |||
| Bad debt provision | 2,760,887.77 | -304,174.51 | 2,456,713.26 | |
| 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
| Name of the entity | Nature | Ending balance | Aging | Proportion to total ending balance of other accounts receivable | Ending balance of bad debt provision |
| Lu Thai (Vietnam) | Intercourse funds | 441,878,476.51 | Within 1 year | 79.13% | |
| Lu An Garments | Intercourse funds | 86,298,689.67 | Within 1 year | 15.45% | |
| Refund of tax for export receivable | Export rebates | 14,358,034.64 | Within 1 year | 2.57% | 717,901.73 |
| Accounts receivable of advance money for the social security undertake by the individual of the employee | Advance money for the social security undertake by the individual of the employee | 7,635,619.56 | Within 1 year | 1.37% | 381,780.98 |
| Cash deposit for salary of migrant workers in Zichuan district of Zibo city | Cash deposit for salary of migrant workers for construction work | 1,458,593.50 | Over 3 years | 0.26% | 437,578.05 |
| Total | -- | 551,629,413.88 | -- | 98.78% | 1,537,260.76 |
3. Long-term Equity Investment
Unit: RMB
| Item | Ending balance | Beginning balance | ||||
| Carrying amount | Depreciation reserve | Carrying value | Carrying amount | Depreciation reserve | Carrying value | |
| Investment to subsidiaries | 2,422,615,316.04 | 2,422,615,316.04 | 2,069,693,116.04 | 2,069,693,116.04 | ||
| Investment to joint ventures and associated enterprises | 100,637,911.44 | 100,637,911.44 | 95,554,809.90 | 95,554,809.90 | ||
| 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
| Investee | Beginning balance | Increase | Decrease | Ending balance | Depreciation reserve withdrawn | Ending balance of depreciation reserve |
| Xinjiang Luthai | 147,303,034.16 | 147,303,034.16 | ||||
| Xinsheng Power | 176,340,737.93 | 176,340,737.93 | ||||
| Lufeng Weaving & Dyeing | 529,620,000.00 | 529,620,000.00 | ||||
| Luqun Textile | 171,784,550.00 | 171,784,550.00 | ||||
| Luthai (Hong Kong) | 128,771,800.00 | 128,771,800.00 | ||||
| Shanghai Luthai | 20,000,000.00 | 20,000,000.00 | ||||
| Lu Thai (Cambodia) | 108,242,335.38 | 108,242,335.38 | ||||
| Lu Thai (America) | 10,209,050.00 | 10,209,050.00 | ||||
| Lu Thai (Burma) | 62,337,238.57 | 62,337,238.57 | ||||
| Beijing Youxian | 18,000,000.00 | 841,000.00 | 18,841,000.00 | |||
| Lu Thai (Vietnam) | 632,855,310.00 | 202,081,200.00 | 834,936,510.00 | |||
| Lu An Garments | 64,229,060.00 | 64,229,060.00 | ||||
| Lulian New Materials | 150,000,000.00 | 150,000,000.00 | ||||
| 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
| Investee | Beginning balance | Increase/decrease | Ending balance | Ending balance of depreciation reserve | |||||||
| Additional investment | Reduced investment | Gains and losses recognized under the equity method | Adjustment of other comprehensive income | Changes of other equity | Cash bonus or profits announced to issue | Withdrawal of impairment provisi | Other | ||||
| on | |||||||||||
| II. Associated enterprises | |||||||||||
| Haohong Investment | 95,554,809.90 | 5,083,101.54 | 100,637,911.44 | ||||||||
| 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
| Item | Reporting Period | Same period of last year | ||
| 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 accounted by cost method | 150,000,000.00 | |
| Long-term equity investment income accounted by equity method | 5,083,101.54 | -1,730,597.59 |
| Investment income of trading financial assets during holding period | 1,382,405.99 | |
| Investment income from disposal of trading financial assets | 463,217.37 | 3,648,000.52 |
| 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
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 government’s unified standards | 32,226,225.91 | |
| 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 financial assets and liabilities, derivative financial assets and liabilities, and other equity investment, other than valid hedging related to the Company’s common businesses | 10,663,111.47 | |
| 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 ExplanatoryAnnouncement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Non-recurring Gains andLosses, 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
| Profit as of Reporting Period | Weighted average ROE (%) | EPS (Yuan/share) | |
| EPS-basic | EPS-basic | ||
| Net profit attributable to ordinary shareholders of the Company | 5.70% | 0.48 | 0.48 |
| Net profit attributable to ordinary shareholders of the Company after deduction of non-recurring profit or loss | 5.22% | 0.44 | 0.44 |
Part XI Documents Available for Reference
1. The financial statements signed and stamped by the Company’s legal representative, Chief Accountant andFinancial Manager;
2. The originals of all the Company’s announcements and documents disclosed to the public during the ReportingPeriod 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