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鲁泰B:2017年年度报告(英文版) 下载公告
公告日期:2018-04-17
Lu Thai Textile Co., Ltd.                           Annual Report 2017
                            LU THAI TEXTILE CO., LTD.
                              ANNUAL REPORT 2017
                                     April 2018
Lu Thai Textile Co., Ltd.                                                                  Annual Report 2017
               Part I Important Notes, Table of Contents and Definitions
The Board of Directors (or the “Board”), the Supervisory Board as well as the Directors,
Supervisors and senior management of Lu Thai Textile Co., Ltd. (the “Company”) hereby
guarantee the factuality, accuracy and completeness of the contents of this Report, and shall
be jointly and severally liable for any misrepresentations, misleading statements or material
omissions in this Report.
Liu Zibin, the Company’s legal representative, Zhang Hongmei, the Company’s Chief
Accountant, and Zhang Keming, the Company’s Financial Manager hereby guarantee that
the Financial Statements carried in this Report are factual, accurate and complete.
Except for the following Directors, all the other Directors attended in person the Board
meeting for the review of this Report.
                                                         Reason for not attending in
                 Name                    Office title                                              Proxy
                                                                   person
Zeng Facheng                  Director                  For reason of work             Xu Zhinan
Xu Jianjun                    Independent Director      For reason of work             ZhaoYao
Pan Ailing                    Independent Director      For reason of work             Wang Xinyu
Bi Xiuli                      Independent Director      For reason of work             ZhaoYao
The Company has described in detail in this Report the possible risks. Please refer to the
contents about the major risks and countermeasures in “Outlook of the Company’s future
development” in “Part IV Company Performance Discussion and Analysis” of this Report.
Securities Times, Shanghai Securities News, China Securities Journal, Ta Kung Pao (HK) and
www.cninfo.com.cn have been designated by the Company for its information disclosure in 2018.
And all information about the Company shall be subject to what’s disclosed on the aforesaid
media. Investors are kindly reminded to pay attention to investment risks.
Investors are advised to read the full text of this Report carefully and pay attention to the risk
warning and uncertainties stated in Part IV, “Outlook of the Company’s Future
Development”.
The Board has considered and approved the following dividend payout proposal for common
shareholders for the Reporting Period: based on the total shares of 922,602,311, a cash
dividend of RMB5.00 (tax inclusive) per 10 shares would be distributed to all the common
shareholders, with no share dividend.
This Report has been prepared in both Chinese and English. Should there be any
discrepancies or misunderstandings between the two versions, the Chinese version shall
prevail.
Lu Thai Textile Co., Ltd.                                                                                        Annual Report 2017
                                                  Table of Contents
Part I Important Notes, Table of Contents and Definitions ........................................................... 2
Part II Company Profile and Key Financial Information.............................................................. 5
Part III Business Summary ............................................................................................................. 10
Part IV Company Performance Discussion and Analysis ............................................................ 13
Part V Significant Events ................................................................................................................ 32
Part VI Share Changes and Shareholder Information ................................................................. 50
Part VII Preferred Shares ............................................................................................................... 57
Part VIII Directors, Supervisors, Senior Management and Staff................................................ 58
Part IX Corporate Governance ...................................................................................................... 69
Part X Corporate Bonds .................................................................................................................. 79
Part XI Financial Statements .......................................................................................................... 80
Part XII Documents Available for Reference .............................................................................. 207
Lu Thai Textile Co., Ltd.                                                                               Annual Report 2017
                                                    Definitions
                         Term                                                       Definition
                                                 Lu Thai Textile Co., Ltd. and its consolidated subsidiaries, except where the
The “Company”, “Issuer” or “we”
                                                 context otherwise requires
                                                 Lu Thai Textile Co., Ltd. exclusive of subsidiaries, except where the context
Parent, Parent Company
                                                 otherwise requires
The Board of Directors                           The Board of Directors of Lu Thai Textile Co., Ltd.
The Supervisory Board                            The Supervisory Board of Lu Thai Textile Co., Ltd.
CSRC                                             China Securities Regulatory Commission
RMB, RMB’0,000                                  In RMB yuan, in RMB ten thousand yuan
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 January 1, 2017 to December 31, 2017
Lu Thai Textile Co., Ltd.                                                                                  Annual Report 2017
             Part II Company Profile and Key Financial Information
I Corporate Information
Stock name                         Lu Thai A, Lu Thai B                   Stock symbol                000726, 200726
Changed stock name (if any)        N/A
Stock exchange                     Shenzhen Stock Exchange
Company name in Chinese            鲁泰纺织股份有限公司
Abbr.                              鲁泰纺织
Company name in English (if
                                   LU THAI TEXTILE CO., LTD.
any)
Abbr. (if any)                     LTTC
Legal representative               Liu Zibin
Registered address                 No. 11, Mingbo Road, High-tech Industry Development Zone, Zibo, Shandong, P.R.China
Zip code
                                   No. 81, Songling East Road, Zichuan District, Zibo, Shandong, P.R.China; No. 11, Mingbo Road,
Office address
                                   High-tech Industry Development Zone, Zibo, Shandong, P.R.China
Zip code                           255100; 255086
Company website                    www.lttc.com.cn
Email address                      lttc@lttc.com.cn
II Contact Information
                                                             Board Secretary                     Securities Representative
Name                                           Qin Guiling                               Zheng Weiyin and Li Kun
                                               No. 81, Songling East Road, Zichuan No. 81, Songling East Road, Zichuan
Address
                                               District, Zibo, Shandong, P.R.China       District, Zibo, Shandong, P.R.China
Tel.                                           0533-5266188                              0533-5285166
Fax                                            0533-5418805                              0533-5418805
Email address                                  qinguiling@lttc.com.cn                    wyzheng@lttc.com.cn,likun@lttc.com.cn
III Media for Information Disclosure and Place where this Report Is Kept
Newspapers       designated   by    the     Company   for Securities Times, Shanghai Securities News, China Securities Journal and
information disclosure                                    Ta Kung Pao (HK)
Website designated by CSRC for publication of this www.cninfo.com.cn
Lu Thai Textile Co., Ltd.                                                                                       Annual Report 2017
Report
Place where this Report is kept                            The Securities Department of the Company
IV Company Registered Information and Alterations
Unified social credit code                        91370300613281175K
Changes in main business scope of the
                                                  No changes
Company since going public (if any)
Changes of controlling shareholder (if any) No changes
V Other Information
The independent certified public accounting (or “CPA”) firm hired by the Company:
Name                                      Ruihua Certified Public Accountants LLP
                                          5-11F, West Tower, China Overseas Property Plaza, Block No. 7, Compound No. 8, Xibinhe
Office address
                                          Road, Yongdingmen, Dongcheng District, Beijing, P.R.C.
Accountants writing signatures            He Feng and Cui Xiaoli
The independent sponsor hired by the Company to exercise constant supervision over the Company in the Reporting Period:
□ Applicable √ Not applicable
The independent financial advisor hired by the Company to exercise constant supervision over the Company in the Reporting Period:
□ Applicable √ Not applicable
VI Key Financial Information
Indicate by tick mark whether there is any retrospectively restated datum in the table below.
√ Yes □ No
The reasons for the retrospective restatements:
Business mergers under the same control.
                                                                                          2017-over-201
                                                                   2016
                                           2017                                             6 change
                                                          Before          Restated          Restated         Before          Restated
                                       6,409,224,044. 5,981,751,344. 5,990,493,909.                       6,173,322,778. 6,173,322,778.
Sales revenue (RMB)                                                                              6.99%
                                                   97              63                36                               61
Net    income    attributable     to
shareholders     of   the    listed 841,150,934.75 805,446,326.99 808,760,025.91                 4.01% 712,193,243.19 712,193,243.19
company (RMB)
Net    income    attributable     to
                                       780,637,833.47 759,471,125.12 762,785,364.02              2.34% 718,263,125.89 718,263,125.89
shareholders     of   the    listed
Lu Thai Textile Co., Ltd.                                                                                             Annual Report 2017
company before nonrecurring
gains and losses (RMB)
Net cash flows from operating 1,038,035,053. 1,310,765,281. 1,314,732,284.                                     1,027,595,404. 1,027,595,404.
                                                                                                    -21.05%
activities (RMB)                                       43              28                 45                                 34
Basic     earnings       per    share
                                                    0.91              0.85            0.85             7.06%                0.75            0.75
(RMB/share)
Diluted     earnings     per    share
                                                    0.91              0.85            0.85             7.06%                0.75            0.75
(RMB/share)
Weighted average return on
                                                11.87%            11.71%            11.70%             0.17%           10.66%           10.66%
equity (%)
                                                                                                Change of
                                                                                               December 31,
                                         December 31,            December 31, 2016              2017 over            December 31, 2015
                                             2017                                              December 31,
                                                             Before            Restated          Restated          Before          Restated
                                         10,170,624,027 9,407,103,263. 9,464,604,315.                          9,091,170,499. 9,091,170,499.
Total assets (RMB)                                                                                     7.46%
                                                     .75               34                 39                                 22
Equity           attributable      to
                                         7,230,942,770. 6,937,985,729. 6,970,913,125.                          6,837,113,075. 6,837,113,075.
shareholders        of   the    listed                                                                 3.73%
                                                       16              19                 59                                 58
company (RMB)
VII Accounting Data Differences under Chinese Accounting Standards (CAS) and
International Financial Reporting Standards (IFRS) and Foreign Accounting Standards
1. Net Income and Equity Differences under CAS and IFRS
√ Applicable □ Not applicable
                                                                                                                                      Unit: RMB
                                          Net income attributable to shareholders of the       Equity attributable to shareholders of the listed
                                                         listed company                                           company
                                                2017                         2016                 Closing amount            Opening amount
Under CAS                                      841,150,934.75                808,760,025.91         7,230,942,770.16           6,970,913,125.59
Adjustments as per IFRS
Impact on domestic equipment
tax     credit     recognized     as                329,000.00                  725,000.00                                          -329,000.00
deferred income under IFRS
Under IFRS                                     841,479,934.75                809,485,025.91         7,230,942,770.16           6,970,584,125.59
Lu Thai Textile Co., Ltd.                                                                                 Annual Report 2017
2. Net Income and Equity Differences under CAS and Foreign Accounting Standards
□ Applicable √ Not applicable
No such differences for the Reporting Period.
3. Reason for Accounting Data Differences under CAS and Foreign Accounting Standards
□ Applicable √ Not applicable
VIII Key Financial Information by Quarter
                                                                                                                           Unit: RMB
                                                Q1                      Q2                    Q3                      Q4
Sales revenue                             1,273,058,505.40           1,717,401,191.03      1,631,824,401.03       1,786,939,947.51
Net      income    attributable   to
                                            157,994,708.53            235,075,273.02        197,038,648.01          251,042,305.19
shareholders of the listed company
Net      income    attributable   to
shareholders of the listed company
                                            155,049,414.60            230,031,743.85        179,229,437.40          216,327,237.62
before nonrecurring gains and
losses
Net cash flows from operating
                                             -73,576,928.32           416,496,686.62        491,110,150.27          204,005,144.86
activities
Indicate by tick mark whether any of the financial data in the table above or their summations differs materially from what have been
disclosed in the Company’s quarterly or semi-annual reports.
□ Yes √ No
IX Nonrecurring Gains and Losses
√ Applicable □ Not applicable
                                                                                                                           Unit: RMB
                     Item                             2017                   2016              2015                  Note
Gains and losses on disposal of non-current
assets (inclusive of offset allowance for            -1,326,737.85         -8,321,693.49      -4,666,157.56
asset impairments)
Government subsidies charged to current
profit and loss (exclusive of government
subsidies given in the Company’s ordinary
                                                     66,031,583.92        64,121,633.01       43,266,788.43
course of business at fixed quotas or
amounts as per government’s uniform
standards )
Current gains and losses on subsidiaries
                                                      4,145,908.17
acquired through business mergers under
Lu Thai Textile Co., Ltd.                                                                                    Annual Report 2017
same control from period-beginning to
merger dates, net
Gains and losses on changes in fair value of
trading financial assets and liabilities &
investment income from disposal of trading
financial    assets   and    liabilities   and        4,794,598.32         3,212,471.16       -29,145,915.85
available-for-sale financial assets (exclusive
of effective portion of hedges that arise in
the Company’s ordinary course of business)
Non-operating revenue and expense other
                                                      4,638,779.84         3,925,471.62         3,432,535.47
than above
Less: Income tax effects                              8,690,224.28         3,065,544.25        12,302,309.25
    Non-controlling interests effects (net
                                                      9,080,806.84        13,897,676.16         6,654,823.94
of tax)
Total                                               60,513,101.28         45,974,661.89         -6,069,882.70            --
Explanation of why the Company classifies an item as a nonrecurring gain/loss according to the definition in the Explanatory
Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Nonrecurring Gains and
Losses, or reclassifies any nonrecurring gain/loss item listed in the said explanatory announcement as a recurring gain/loss:
□ Applicable √ Not applicable
No such cases for the Reporting Period.
Lu Thai Textile Co., Ltd.                                                                                     Annual Report 2017
                                           Part III Business Summary
I Main Business Scope of the Company in Reporting Period
Is the Company subject to any disclosure requirements for special industries?
No.
Lu Thai, unremittingly taking “creating wealth, contributing to the society, clothing the country and boosting the development of the
world” as its mission, has been practicing the value of “people foremost policy, rigorous scientific attitude, client oriented principle
and integrity for win-win outcome” for a long time. It is devoted to improving and expanding its industrial chain, making it a
renowned textile and garment business group combing cotton breeding, spinning, bleaching and dyeing, neatening, testing, garment
making and marketing. Lu Thai produces and sells middle and high-grade yarn-dyed fabric and dyeing fabric for shirts and garment.
It claimed its fame for its comprehensive management, R&D ability, advanced technology, international development plan and stable
quality. Moreover, it also attaches great importance to improve the added value of its products, explore the emerging market and
renew its service philosophy. With natural fabric as its flagship, multi-component functional fiber fabric as its spearhead and
wash-and-wear non-ironing technology as its core competency, the Company kept a watchful eye on the latest consumption trend.
Great attention was paid to improve its healthy product series so as to satisfy the needs from the diversified and personalized market.
Lu Thai had already become the largest world renowned manufacturer for high-grade yarn dyed fabric and premium-brand shirts. It
had paved its development pattern featured in going green, low-carbon growth, science and technology and humanism. Its operation
performance was always among the top comparing to its peers. 80% of Lu Thai’s products were exported over 30 countries and
regions in the world, including America, EU and Japan. The export percentage for high-grade yarn dyed fabric--a self-owned brand
attained 70% of its export volume, accounting for 18% of the world’s export market.
II Significant Changes in Major Assets
1. Significant Changes in Major Assets
                Major assets                                       Reason for significant changes in the period
                                            Long-term equity investments stood at RMB97,536,732.02 on December 31, 2017, up
                                            100.00% compared to the opening amount, primarily driven by the new investment by
Equity assets
                                            the Parent Company in Ningbo Meishan Bonded Port Area Haohong Equity Investment
                                            Partnership (L.P.) in the Current Period.
                                            Engineering materials stood at RMB56,913,806.06 on December 31, 2017, down 51.41%
Engineering materials                       compared to the opening amount, primarily driven by the decrease in Lu Thai Vietnam’s
                                            equipment to be installed.
2. Major Assets Overseas
√ Applicable □ Not applicable
      Asset        Source          Value        Location       Operating      Measures        Earnings         As a           Major
Lu Thai Textile Co., Ltd.                                                                                   Annual Report 2017
                                                               model        taken to         generated   percentage of impairment
                                                                          ensure asset                        the         risk
                                                                                safety                    Company’s
                                                                                                         net value (%)
                                                                                Main
Lu Thai
                                                                          management
(Hong Kong)                   149,293,602.
               Incorporated                  Hong Kong      Marketing       personnel    1,864,122.58           1.92% None
Textile Co.,
                                                                           sent by the
Ltd.
                                                                            Company
                                                                                Main
Lu Thai
                                                                          management
(America)
               Incorporated 7,467,403.40      New York      Marketing       personnel    -874,210.66            0.10% None
Textile Co.,
                                                                           sent by the
Ltd.
                                                                            Company
                                                                                Main
Lu Thai
                                                                          management
(Cambodia)                    141,093,933.                 Manufacturin
               Incorporated                  Svay Rieng                     personnel    6,960,560.40           1.81% None
Textile Co.,                  46                                 g
                                                                           sent by the
Ltd.
                                                                            Company
                                                                                Main
Lu Thai
                                                                          management
(Burma)                       80,653,559.5                 Manufacturin
               Incorporated                   Rangoon                       personnel    -3,895,125.02          1.04% None
Textile Co.,                  7                                  g
                                                                           sent by the
Ltd.
                                                                            Company
                                                                                Main
Lu Thai
                                                                          management
(Vietnam)                     964,981,422.                 Manufacturin
               Incorporated                   Tay Ninh                      personnel    -3,299,669.64        12.41% None
Textile Co.,                  42                                 g
                                                                           sent by the
Ltd.
                                                                            Company
                                                                                Main
Lu An                                                                     management
                              109,097,323.     Anjiang,    Manufacturin                  -12,333,879.4
Garments       Incorporated                                                 personnel                           1.40% None
                              90               Vietnam           g
Co., Ltd.                                                                  sent by the
                                                                            Company
III Core Competitiveness Analysis
Is the Company subject to any disclosure requirements for special industries?
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,
Lu Thai Textile Co., Ltd.                                                                                    Annual Report 2017
dyeing, weaving and post-processing to cloth manufacturing, and thus enjoys the cost advantage brought by complete steps for
producing high-end dyed textile. The Company has set up production bases in Cambodia, Burma, Vietnam, etc., a design agency in
Italy and a market service agency in America, which helps give full play to its international resources, form a global business
network and solidify its internationally leading position as a yarn-dyed fabric maker.
2. The sound comprehensive management capacity and an efficient quality control system: The Company has passed ISO9000
quality management system, ISO14000 environmental management system, OHSAS18000 occupational health safety management
system, and SA8000 social accountability management system successively from 1995. Ever since 2007, the Company has also
passed WRAP: 1999 global garment production social accountability standard, C-TPAT: 2004 anti-terrorism standard, OE100 and
GOTS organic cotton system certification and CNAS national laboratory recognition, to realize the internationalization and
standardization of the Company’s management. In order to pursue the operational management of performance excellence and better
the Company’s performance and capability, the Company has gradually introduced GB/T19580-2004 -Standards for Performance
Excellence Evaluation, created “Great Quality” system and promoted management innovation, to ensure the Company’s business
quality.
3. It enjoyed strong R&D capability and high-end technological platform for cooperation. The Company highly valued
self-dependent innovation and made full use of various technology platforms, inclusive of the National Enterprise Technical Center,
National Talent-in draught Demonstration Base and Shandong Engineering and Technological Research Center. Moreover, Lu Thai
also reinforced its technical cooperation with scientific research institutes, colleges and universities, strategic clines and major
suppliers. It was committed to cutting-edge technical research, and transformed itself from product development to technical
researches step by step. What’s more, the Company also upgraded itself from overcoming key technological difficulties to master
technical principles and set up industrial standards. In the past, it only focused on technical innovation, but now, it is exploring new
technology on one hand and boosting innovation on the other for better growth. Consequently, the Company pushed forward its
development in a green, low-carbon and cyclic manner and strengthened its vitality and growing momentum. Meanwhile, the share
of technology to its development was also increased, which could push forward industrial up gradation.
4. It boasted considerate and efficient customer’s service. With customer-oriented principle as its guidance, the Company
comprehensively enhanced its quality control so as to persistently provide high standard service and set up an industry-leading brand
image, which, in return, could help to win customer’s satisfaction and market recognition. Quality awareness was weaved into every
step of the manufacturing process and the impeccable quality traceability ensured product reputation. Objective analysis and thinking
in the customer’s perspective was the Company’s service rule, which also helped to win the customers’ trust.
Lu Thai Textile Co., Ltd.                                                                                 Annual Report 2017
              Part IV Company Performance Discussion and Analysis
I Overview
In 2017, the Company continued to push forward its strategies of “Improve Quality and Efficiency” and “Overall
Internationalization”. It kept improving its management capability to ensure a highly efficient production and operation system
through improvements through the system, adoption of an excellent performance-promoted model, great efforts in improving the Lu
Thai Production System (LTPS), and systematic supply chain management. In 2017, the Company established a global management
and control information platform to further promote the integration of “information technology and industrialization” within the
Company. Additionally, it continued to pursue high-tech, stylish and green products, adopt a low-carbon, sustainable development
model, and actively take on social responsibility.
For 2017, the Company recorded sales revenue of RMB6.409 billion, operating income of RMB1.001 billion, net income attributable
to its shareholders of RMB841 million, and net income before non-recurring gains and losses of RMB781 million, up 6.99%, 3.96%,
4.01% and 2.34% respectively compared to 2016. During the Reporting Period, the main business and main profit sources and their
structures of the Company remained unchanged.
During the Reporting Period, the Company built an internationalized management and control information platform for integration
informatization and industrialization. It had successively constructed and implemented a series of information management and
control platforms and system software such as APS advanced planning application, cotton sorting process management system, group
procurement and inventory management information platform and cost management system, customs supervision information
platform and new OA system. The independently developed \" yarn-dyed fabric full process industrial control system V1.0\" with a
multi-network integration, group management and control, multi-language support, remote control and other functions was granted
the computer software copyright. This system can be popularized and applied as a module in yarn-dyed factories. In addition, the
ERP established by the Company can achieve interconnection with the customs information system to establish a customs
supervision information platform for automatic sending of customs declaration data, building a rapid customs clearance capability,
and thus the Company becomes the first pilot enterprise of work order reporting in the textile industry. During the Reporting Period,
the Company was named \"Demonstration Enterprise of Textile Industry on Smart Manufacturing Practice for 2017\" by the China
Textile Engineering Society, and also was named \"Demonstration Enterprise on Manufacturing Item Champion\" by the Ministry of
Industry and Information Technology and China Federation of Industrial Economics.
During the Reporting Period, in terms of R&D and innovation, the Company focused on the overall strategic goal to tackle the
problems of \"bottleneck\" technology. In 2017, 226 technical projects of the Company were initiated, covering areas of spinning,
weaving, dyeing, treatment, garment manufacturing, energy, environmental protection, information and branding, among which, the
projects of \"research and application development of key technologies for yarn and fabric color digitization\" and \"R&D and
industrial application of key technologies for salt-free dyeing of reactive dyes\" won the first prize in scientific and technological
progress granted by the China National Textile And Apparel Council. For new product development, 16 projects were initiated by the
Company, among which the development of 37.5 temperature control products, Lu Thai durable white fabrics, wrinkle-free products
and freon-free waterproof products had all been successfully completed and the Company had received orders of mass production. In
2017, the projects of \"key processing technology of high quality easy-care cotton fabric\" and \"key technology and application of
hygroscopic quick-drying comfortable fabric production\" jointly developed by the Company and Jiangnan University, Donghua
University and other universities were recognized as the \"13th Five-Year\" national key research projects, and both projects had been
launched for implementation. In 2017, the Company was awarded 3 prizes in scientific and technological progress granted by the
China National Textile And Apparel Council, participated in the formulation of 6 national and industrial standards, and was granted
22 licensing patents. Up to now, the Company has successfully developed more than 600 new technologies and new products, among
Lu Thai Textile Co., Ltd.                                                                                  Annual Report 2017
which 46 products have passed the provincial and ministerial level scientific and technological achievements appraisal, including 12
international leading items and 29 international advanced items. Moreover, the Company was granted 49 national, provincial and
ministerial awards, and undertook 17 science and technology projects above provincial and ministerial level and 11 major research
projects of national and provincial level. In addition, the Company was granted 289 licensing patents 1 software copyright, and
hosted or participated in the formulation of 38 national and industrial standards.
During the Reporting Period, in terms of green environmental protection, the Company held the development concept of innovation,
coordination, green, open and sharing. It implemented the basic national policy of resource conservation and environmental
protection, and aimed to increase energy efficiency and develop energy-saving production processes. The Company intended to
accelerate the construction of a resource-saving and environment-friendly society to achieve win-win in economic development and
environmental improvement and provide strong support for ecological civilization establishment. Based on the management model of
\"source governance, process management and control, and end governance\", the Company made great efforts on recovery and
comprehensive utilization of ammonia, alkali and PVA as well as odor and waste gas treatment, greatly improving the surrounding
environmental quality and occupational health and safety of company workplaces. The Company had made chemicals and chemical
substances available for inspection and control, and ensured the traceability of chemical substances in fabric products. It had been
awarded the honorary title of \"Operation Leading Enterprise in Supply Chain Chemical Management Innovation 2020\" granted by
CNTAC-ZDHC.
In 2017, the Company continued to improve its pollution control facilities and upgraded its waste-water treatment facilities to reduce
the total COD emissions by 14.9% year-on-year. The treated water quality was superior to the national Class A emission standards.
Honors such the \"Advanced Energy-saving Enterprise in Shandong\", \"Water Efficiency Leader of Key Water-use Enterprises\" and
\"Industry Leading Unit of The Fourth Low Carbon Shandong\" were granted to the Company. The Company set up a steering group
to be in charge of water-saving management, established a long-term water-saving management mechanism, and carried out
water-use processes and technical improvements to improve utilization efficiency of water resources and reduce water consumption
of unit product. Therefore, the water use indicators and product water consumption indicators of the Company were lower than the
average level of water-saving enterprises.
During the Reporting Period, in terms of innovation management, the Company launched the Lu Thai Production System (LTPS)
and focused on the basic guideline of \"Building new dynamics for economic development with quality improvement\". It levered
potential tapping, quality and efficiency improvement, development difficulties solving, transformation and upgrading by the
implementation of excellent performance and LTPS for the development of new dynamics. In order to solve the seven major
problems on wastes, six pilot plants were established for the three major production systems of yarn-dyed, garment production, and
printing and dyeing, where work plans were determined and implemented focused on quality, delivery, inventory and low cost for
improvement. The Company performed quarterly evaluations of the 39 plants of the Group on the three production systems from the
perspectives of 6S and visual management, TPM management, on-site control indicators and LTPS improvement, and granted
rewards for encouragement. Moreover, the Company continued to carry out company-level management improvement projects by
organizing internal and external experts to establish 149 management projects to further improve management efficiency by the
promotion and development of the projects.
During the Reporting Period, in the promotion of independent design, the Company made full use of domestic and foreign resource
advantage and followed the \"market + design\" concept to carry out targeted fabrics and clothing R&D and design based on the
diversity of customer needs. In 2017, the Industrial Design Center of the Company was recognized as a national industrial design
center by the Ministry of Industry and Information Technology. At the same time, the Company was awarded the \"National Fashion
Research Center for Yarn-dyed Fabrics\" by the China Textile Information Center (TIC) and China Textiles Development Center. As
the only national trend research center for yarn-dyed fabrics, the Company publishes fabric fashion trends for the industry every two
quarters each year. In 2017, the Company won the \"Product Development Contribution Award of China National Textile And
Apparel Council\". The Lu Thai GRFF pure cotton fabric was recommended by the China Cotton Textile Industry Association as the
\"Most Influential Product Brand\" of China's cotton textile industry in 2017. In addition, in the \"2017 China International Fashion
Lu Thai Textile Co., Ltd.                                                                                  Annual Report 2017
Fabric Design Competition\", the design of the Company \"Time Fusion\" won the \"Best Cotton Textile Technology Innovation
Award\" and the design \"Cross the Jungle\" won the \"Best Market Application Award\". The printed fabrics \"Falling Petals\" and \"Blue
Waves\" developed by the holding subsidiary of the Company, Lufeng Weaving & Dyeing, won the \"Best Market Application
Award\" and \"Best Environmental Technology Application Award\". The company design works \"Chalk Coloring\", \"Chess and
Blossom Charm\", \"Lines in the Green Wood\" and \"Essence of Nature\" won the \"Excellent Award for Spring/Summer Chinese
Fashion Fabrics 2018\". The works of the Company \"Secondary Fusion\", \"Dazzling Camouflage\", \"Iron Jungle\" and \"Dream Magic\",
\"Illusions\", \"Dreaming the Operatic Circle\" and \"The Field\" of the holding subsidiary Lufeng Weaving & Dyeing won the
\"Excellence Award for Autumn/Winter Chinese Fashion Fabric 2018/19\".
At the current stage, Lu Thai, with natural fabric as its flagship, multi-component functional fiber fabric as its spearhead,
wash-and-wear non-ironing technology as its core competency, the latest consumption trend as its guidance and internationalized
industrial manufacturing as its basis, is sparing every effort to attain a global integrated development, so as to ensure its leading
position in the yarn-dyed shirt fabric sector.
II Analysis of Main Business
1. Summary
For the Reporting Period, the Company recorded sales revenue of RMB6.409 billion (a 6.99% year-over-year increase); cost of sales
of RMB4.477 billion (an 11.73% year-over-year increase), including selling expense of RMB144 million (a 9.32% year-over-year
drop) and administrative expense of RMB652 million (a 1.49% year-over-year drop); research and development expense of RMB328
million (a 13.31% year-over-year increase); and net cash flows from operating activities of RMB1.038 billion (a 21.05%
year-over-year drop).
2. Revenue and Cost
(1) Breakdown of Sales Revenue
                                                                                                                         Unit: RMB
                                            2017
                                                 As a percentage of                       As a percentage of
                                                                                                                     Change
                            Sales revenue        total sales revenue   Sales revenue      total sales revenue
                                                        (%)                                      (%)
Total                       6,409,224,044.97                   100%    5,990,493,909.36                 100%                  6.99%
By operating division
Textile and Apparel         5,906,736,459.03                  92.16%   5,559,988,040.46                92.81%                 6.24%
Cotton                         35,606,856.03                  0.56%       12,617,667.25                0.21%              182.20%
Electricity and steam        103,870,652.93                   1.62%      111,228,572.38                1.86%                -6.62%
Others                       363,010,076.98                   5.66%     306,659,629.27                 5.12%               18.38%
By product category
Fabric products             4,624,849,307.12                  72.16%   4,342,679,194.97                72.49%                 6.50%
Shirts                      1,281,887,151.91                  20.00%   1,217,308,845.49                20.32%                 5.31%
Lu Thai Textile Co., Ltd.                                                                                    Annual Report 2017
Cotton                         35,606,856.03                0.56%          12,617,667.25                 0.21%                 182.20%
Electricity and steam         103,870,652.93                1.62%         111,228,572.38                 1.86%                  -6.62%
Others                        363,010,076.98                5.66%         306,659,629.27                 5.12%                  18.38%
By operating segment
Hong Kong                     246,434,343.62                3.84%         243,268,777.10                 4.06%                   1.30%
Japan     And    South
                              413,874,632.85                6.46%         367,116,617.59                 6.13%                  12.74%
Korea
Southeast Asia              1,976,448,225.47               30.84%      1,973,589,974.34                 32.95%                   0.14%
Europe and America          1,044,242,539.46               16.29%      1,065,910,735.22                 17.79%                  -2.03%
Others                        376,849,171.78                5.88%         429,694,336.29                 7.17%                 -12.30%
Mainland China              2,351,375,131.79               36.69%      1,910,913,468.82                 31.90%                  23.05%
(2) Operating Division, Product Category or Operating Segment Contributing over 10% of Sales Revenue
or Income
√ Applicable □ Not applicable
Is the Company subject to any disclosure requirements for special industries?
No.
                                                                                                                              Unit: RMB
                                                                                                                     YoY change in
                                                            Gross margin        YoY change in     YoY change in
                        Sales revenue    Cost of sales                                                                   gross margin
                                                             percentage         sales revenue      cost of sales
                                                                                                                         percentage
By operating division
Textile and
                    5,906,736,459.03 4,090,113,368.00               30.76%               6.24%             10.12%               -2.44%
apparel
By product category
Fabric products     4,624,849,307.12 3,170,487,809.95               31.45%               6.50%             10.09%               -2.23%
Shirts              1,281,887,151.91     919,625,558.05             28.26%               5.31%             10.24%               -3.21%
By operating segment
Southeast Asia      1,976,448,225.47 1,355,637,274.13               31.41%               0.14%              3.54%               -2.25%
Europe and
                    1,044,242,539.46     738,077,277.54             29.32%              -2.03%              2.33%               -3.01%
America
China               2,351,375,131.79 1,660,758,668.76               29.37%              23.05%             29.80%               -3.68%
Main business data of the previous year restated according to the changed statistical caliber for the Reporting Period
□ Applicable √ Not applicable
Lu Thai Textile Co., Ltd.                                                                                  Annual Report 2017
(3) Whether Revenue from Physical Sales Is Higher than Service Revenue
√ Yes □ No
 Operating division               Item               Unit                 2017                  2016                 Change
                       Sales volume          (0,000 meters)                  23,921.03             22,035.33                  8.56%
Textile and fabric     Output                (0,000 meters)                  26,614.99             25,185.85                  5.67%
                       Stock                 (0,000 meters)                       2,790              3,286.52              -15.11%
                       Sales volume          (0,000 pieces)                    1,962.29              1,844.13                 6.41%
Textile and apparel    Output                (0,000 pieces)                    1,914.08              1,856.04                 3.13%
                       Stock                 (0,000 pieces)                      105.56                126.66              -16.66%
                       Sales volume          (ton)                             2,110.48                618.91             241.00%
Cotton                 Output                (ton)                           16,737.17             11,013.71                51.97%
                       Stock                 (ton)                             8,092.61              3,760.35              115.21%
                       Sales volume          (000 KWH)                       65,661.68             95,570.01               -31.29%
Electricity            Output                (000 KWH)                      401,967.71            406,457.36                -1.10%
                       Stock                 (000 KWH)
                       Sales volume          (ton)                          307,504.69            318,171.76                -3.35%
Steam                  Output                (ton)                        1,235,609.78          1,235,811.79                -0.02%
                       Stock                 (ton)
Reason for any over 30% YoY movements in the data above
√ Applicable □ Not applicable
1. Sales volume of cotton in 2017 increased by 241.00% as compared with last year, mainly due to the increase of external cotton
sales from related companies of Xinjiang Lu Thai.
Output in 2017 increased 51.97% as compared with last year, mainly because most of the seed cotton purchased by Xinjiang Lu Thai
in 2016 that was in rolling season (2016.9-2017.3) was produced and warehoused in 2017, which was influenced by public inspect of
cotton
Stock in 2017 increased 115.21% as compared with last year, mainly due to the newly added production line of Xinjiang Lu Thai
Textile in 2018, and the increase of inventory to produce cotton yarn.
2. Sales volume of electricity in 2017 decreased 31.29% as compared with last year, mainly due to the decrease of non-related sales
of electricity of Xinsheng Thermal Power.
(4) Execution Progress of Major Signed Sales Contracts in Reporting Period
□ Applicable √ Not applicable
(5) Breakdown of Cost of Sales
By operating division and product category
                                                                                                                         Unit: RMB
Lu Thai Textile Co., Ltd.                                                                                            Annual Report 2017
                                                         2017
    Operating                                                   Percentage of                              Percentage of
                            Item                                                                                               Change
     division                            Cost of sales     total cost of sales      Cost of sales      total cost of sales
                                                                    (%)                                        (%)
Textile and
                    Cost of sales       4,090,113,368.00               91.36% 3,714,143,672.96                    92.69%            10.12%
apparel
Cotton              Cost of sales         32,882,009.84                   0.73%      11,742,505.52                   0.29%         180.03%
Electricity and
                    Cost of sales        110,812,770.78                   2.48%      96,995,072.89                   2.42%          14.25%
steam
Other               Cost of sales        243,239,636.06                   5.43%     184,220,439.28                   4.60%          32.04%
                                                                                                                                  Unit: RMB
                                                         2017
                                                                Percentage of                              Percentage of
 Product category           Item                                                                                               Change
                                         Cost of sales     total cost of sales      Cost of sales      total cost of sales
                                                                    (%)                                        (%)
Fabric products     Cost of sales       3,170,487,809.95               70.82% 2,879,947,896.50                    71.87%            10.09%
Shirts              Cost of sales        919,625,558.05                20.54%       834,195,776.46                20.82%            10.24%
Cotton              Cost of sales         32,882,009.84                   0.73%      11,742,505.52                   0.29%         180.03%
Electricity and
                    Cost of sales        110,812,770.78                   2.48%      96,995,072.89                   2.42%          14.25%
steam
Other               Cost of sales        243,239,636.06                   5.43%     184,220,439.28                   4.60%          32.04%
Note:
                                                                                                                Manufacture
   Product           Period         Raw material     Labor cost           Depreciation        Energy                               Total
                                                                                                                  expenses
                      2017               55.02%            17.51%                 5.41%             13.47%             8.59%        100.00%
    Fabric
                      2016               54.82%            17.01%                 5.22%             12.86%            10.09%        100.00%
                      2017               55.53%            37.50%                 2.16%             0.92%              3.89%        100.00%
    Shirts
                      2016               57.10%            37.24%                 2.07%             0.83%              2.76%        100.00%
(6) Change in Scope of Consolidated Financial Statements for Reporting Period
√ Yes □ No
Chengshun Thermal Power, a subsidiary of Xinsheng Thermal Power, was added into consolidated financial statements.
(7) Major Change in Business Scope or Product or Service Range in Reporting Period
□ Applicable √ Not applicable
Lu Thai Textile Co., Ltd.                                                                                   Annual Report 2017
(8) Main Customers and Suppliers
Main customers:
Total sales to top 5 customers (RMB)                                                                                1,160,240,554.18
Ratio of total sales to top 5 customers to annual total sales
                                                                                                                             18.10%
(%)
Ratio of total sales to top 5 customers to annual total sales
                                                                                                                               0.00%
from the related party (%)
Information about the top 5 customers
Serial No.               Name of customer                           Sales (RMB)               Proportion in annual total sales (%)
1            SBT                                                          341,377,693.23                                       5.33%
2            OLYMP                                                        232,356,968.38                                       3.63%
3            TAL                                                          230,952,151.17                                       3.60%
             CHENFENG (JIANGSU) GARMENT CO.,
4                                                                         177,860,580.60                                       2.78%
             LTD.
5            PVH-PTU                                                      177,693,160.80                                       2.77%
Total                             --                                     1,160,240,554.18                                    18.10%
Other information about the main customers
□ Applicable √ Not applicable
Main suppliers
Total purchases from top 5 suppliers (RMB)                                                                           722,284,106.95
Ratio of total purchases from top 5 suppliers to annual
                                                                                                                             16.88%
total purchases (%)
Ratio of total purchases from top 5 suppliers to annual
                                                                                                                               0.00%
total purchases from related party (%)
Information about the top 5 suppliers
 Serial No.                 Name of supplier                    Purchase amount (RMB)       Proportion in annual total purchases (%)
              ZIBO POWER SUPPLY COMPANY OF
1             STATE GRID SHANDONG ELECTRIC                                187,900,456.31                                       4.39%
              POWER COMPANY
2             ALLENBERG COTTON CO.                                        171,370,321.64                                       4.00%
              AKSU YONGXING COTTON
3                                                                         146,639,967.60                                       3.43%
              INDUSTRY CO., LTD
              JESS SMITH AND SONS COTTON,
4                                                                         126,625,297.40                                       2.96%
              LLC
              XINJIANG PRODUCTION AND
5                                                                          89,748,064.00                                       2.10%
              CONSTRUCTION CORPS COTTON
Lu Thai Textile Co., Ltd.                                                                                  Annual Report 2017
             AND LINEN COMPANY
Total                             --                                     722,284,106.95                                       16.88%
Other information about the main suppliers
□ Applicable √ Not applicable
3. Expense
                                                                                                                          Unit: RMB
                                   2017                  2016                Change                Reason for material change
Selling expenses                  144,061,780.39        158,869,993.22              -9.32%
Administrative expenses           651,530,968.94        661,355,141.82              -1.49%
                                                                                             Increase of exchange losses resulting
Finance costs                      63,342,671.31         20,949,153.10            202.36%
                                                                                              from changes in exchange rate
4. R&D Input
√ Applicable □ Not applicable
With leading the technology development in the industry as the goal, the research staff of the Company work hard in new product
development, new technology promotion and transformation of new technological results to productivity to explore ways for
transforming the business mode, adjusting the structure and extending the industrial chain. These efforts will promote the Company’s
development towards an energy-saving and environment-friendly enterprise and truly achieve the sustainable development.
Particulars about the R&D input
                                               2017                             2016                            Change
Number of R&D personnel                                     1,673                            1,703                            -1.76%
R&D personnel as a percentage
                                                          11.72%                           10.81%                             0.91%
of total employees
R&D expense (RMB)                                  328,403,990.29                  289,826,541.83                             13.31%
R&D expense as a percentage
                                                           5.12%                             4.84%                            0.28%
of sales revenue
Capitalized    R&D   expense
                                                             0.00                               0.00                          0.00%
(RMB)
Capitalized R&D expense as a
percentage of total R&D                                    0.00%                             0.00%                            0.00%
expense
Reason for any significant YoY change in the proportion of R&D expense in sales revenue:
□ Applicable √ Not applicable
Reason for any sharp variation in the percentage of the capitalized R&D expense and rationale
□ Applicable √ Not applicable
5. Cash Flows
                                                                                                                          Unit: RMB
Lu Thai Textile Co., Ltd.                                                                                        Annual Report 2017
                  Item                            2017                                 2016                          Change
Subtotal of cash generated by
                                                      6,543,494,895.58                  6,183,425,459.46                            5.82%
operating activities
Subtotal     of    cash   used    in
                                                      5,505,459,842.15                  4,868,693,175.01                        13.08%
operating activities
Net cash flows from operating
                                                      1,038,035,053.43                  1,314,732,284.45                        -21.05%
activities
Subtotal of cash generated by
                                                        84,563,735.04                      34,625,847.40                       144.22%
investing activities
Subtotal     of    cash   used    in
                                                       828,490,043.09                     914,985,442.61                            -9.45%
investing activities
Net cash flows from investing
                                                      -743,926,308.05                    -880,359,595.21                        15.50%
activities
Subtotal of cash generated by
                                                      2,389,256,879.43                  2,254,527,867.50                            5.98%
financing activities
Subtotal     of    cash   used    in
                                                      2,626,785,842.65                  2,807,150,042.60                            -6.43%
financing activities
Net cash flows from financing
                                                      -237,528,963.22                    -552,622,175.10                        57.02%
activities
Net increase in cash and cash
                                                        17,523,075.19                    -109,710,957.16                       115.97%
equivalents
Main influence factors for any significant YoY changes in the items above
√ Applicable □ Not applicable
During the Reporting Period, cash generated by operating activities was RMB84,563,735.04 with a year on year increase of 144.22%,
mainly due to the recovery and sales of marketable securities; net increase in cash and cash equivalents was RMB17,523,075.19 with
a year on year increase of 115.97%, mainly due to the increase of net cash flows from financing activities, and decrease of payment
of cash for debt and the repurchase of paying B share in the same period of last year.
Reasons for any big difference between the net operating cash flows and the net profits in the Reporting Period
□ Applicable √ Not applicable
III Non-Core Business Analysis
√ Applicable □ Not applicable
                                                                                                                              Unit: RMB
                                                      Percentage of pretax
                                  Amount                                            Source/Reason                Recurring or not
                                                          income (%)
                                                                             Gains on delivery and losses
                                                                             on equity investment of
Investment income                      2,331,330.34                 0.23% financial assets (financial       No
                                                                             liabilities) such as forward
                                                                             exchange settlement
Lu Thai Textile Co., Ltd.                                                                                      Annual Report 2017
                                                                           Inventory falling price
Asset impairments                 37,330,674.24                   3.72% provision, fixed assets          No
                                                                           impairment provision, etc
Non-operating
                                  12,122,767.09                   1.21% Claims for compensations         No
income
Non-operating                                                              Donations, losses on damage
                                   9,022,725.64                   0.90%                                  No
expense                                                                     of non-current assets
IV Analysis of Assets and Liabilities
1. Material Change in Asset Composition
                                                                                                                             Unit: RMB
                         December 31, 2017                 December 31, 2016
                                                                                        Change in
                                       Percentage of                    Percentage of
                                                                                        percentag      Reason for material change
                        Value           total assets      Value          total assets
                                                                                          e (%)
                                           (%)                              (%)
                    693,989,293.3
Monetary funds                                6.82% 667,304,702.34             7.05%      -0.23%
Accounts            334,080,524.0
                                              3.28% 293,129,727.93             3.10%       0.18%
receivable
                    2,100,661,221.                     1,817,542,870.
Inventories                                  20.65%                           19.20%       1.45%
                                  93
Investing real
                    24,563,544.58             0.24% 25,844,090.56              0.27%      -0.03%
estate
Long-term equity
                    97,536,732.02             0.96%                            0.00%       0.96%
investment
                    5,421,295,850.                     5,273,148,708.
Fixed assets                                 53.30%                           55.71%      -2.41%
                                  03
Construction in     157,421,820.6
                                              1.55% 177,075,655.16             1.87%      -0.32%
progress
Short-term          1,135,124,996.
                                             11.16% 873,261,856.02             9.23%       1.93%
borrowings
Long-term
                                              0.00% 135,678,044.89             1.43%      -1.43%
borrowings
2. Assets and Liabilities Measured at Fair Value
√ Applicable □ Not applicable
                                                                                                                             Unit: RMB
Lu Thai Textile Co., Ltd.                                                                                    Annual Report 2017
                                    Gains/losses on
                                                      Cumulative fair Allowance for
                                      fair value                                          Purchased in     Sold in
                      Opening                         value changes impairment for                                      Closing
      Item                            changes in                                           Reporting      Reporting
                      balance                           charged to         Reporting                                    balance
                                      Reporting                                               Period       Period
                                                          equity            Period
                                        Period
Financial assets
1. Financial
assets measured
at fair value of
which changes
are recorded
                             0.00                          33,000.00                      60,000,000.00                60,330,000.0
into current
gains/losses
(excluding
derivative
financial assets)
Subtotal       of
                             0.00                          33,000.00                      60,000,000.00                60,330,000.0
financial assets
Total of above               0.00                          33,000.00                      60,000,000.00                60,330,000.0
Financial
                             0.00                                                                                                 0.00
liabilities
Material change in the measurement attributes of the main assets in the Reporting Period:
□ Yes √ No
3. Restricted Asset Rights as of End of Reporting Period
Xinjiang Lu Thai, the subsidiary of the Company, took book value of RMB248,632,100.00 inventory, RMB4,316,209.51 fixed asset,
and RMB103,162,544.14 land use right as mortgage, and RMB16,000,000.00 certificate of deposit as pledge to obtain the short-term
borrowings from Bank of RMB440,000,000.00.
Monetary fund RMB1,350,080.52 whose ownership was restricted, of which, RMB1,200,000.00 was the deposit to handle the letter
of credit of Xinjiang Lu Thai; RMB150,080.52 was the deposit to handle the letter of guarantee of the Company’s subsidiary of
Lufeng Weaving & Dyeing.
V Investments Made
1. Total Investment Amount
√ Applicable □ Not applicable
   Total investment amount of Reporting            Total investment amount of last year
                                                                                                            Change
                 Period (RMB)                                      (RMB)
                            100,000,000.00                                             0.00                                100.00%
Lu Thai Textile Co., Ltd.                                                                                                   Annual Report 2017
2. Material Equity Investments Made in Reporting Period
√ Applicable □ Not applicable
                                                                                                                                             Unit: RMB
                                                                                            Investm               Return                       Index
           Main                              The
                                                      Source                                     ent                on       Any                   to
          busines              Amoun Compa                                                              Project
                     Way of                             of                  Term of Type of progres               investm legal       Disclos disclose
Investe s scope                  t of        ny’s                  Joint                                 ed
                     investm                          investm               investm investm s as of               ent in    matter ure date        d
    e       of                 investm stake in                 investor                                earning
                       ent                              ent                   ent     ent   balance               Reporti involve (if any) informa
          investe                ent        investe                                                        s
                                                       funds                                    sheet               ng           d             tion (if
                e                             e
                                                                                                date              Period                        any)
Haohon
g                                                               Haojun
Equity                                                          Investm
Invest                                                          ent and
ment                                                            Manage
Partner                                                         ment
          Equity Newly          100,00                Self-ow
ship                                                            Co.,                        Finishe               -2,463,             10/31/2 2017-0
          investm establis 0,000.0 33.33% ned                               3 years Funds                  0.00             No
Enterpr                                                         Ltd in                      d                     267.98              017     44
          ent        hed                0             funds
ise in                                                          Ningbo
Ningbo                                                          Meisha
Meisha                                                          n
n                                                               bonded
bonded                                                          area
area
                                100,00
                                                                                                                  -2,463,
Total           --     --      0,000.0        --        --           --       --       --        --        0.00                  --     --         --
                                                                                                                  267.98
3. Material Non-Equity Investments Ongoing in Reporting Period
□ Applicable √ Not applicable
4. Financial Investments
(1) Securities Investments
□ Applicable √ Not applicable
No such cases during the Reporting Period.
(2) Investments in Derivative Financial Instruments
√ Applicable □ Not applicable
Lu Thai Textile Co., Ltd.                                                                                               Annual Report 2017
                                                                                                                                         RMB’0,000
                                                                                                                                    Proporti
                                                                                                                                     on of
                                                                                                                                    closing
                                                                                                                                               Actua
                                                                                                                                    investm
                                                                                                                                                 l
                     Related- Type of                                                  Amount                Impairm                  ent
                                             Initial                       Opening                Amount                Closing                gain/l
                      party     derivativ                                              purchas                 ent                  amount
Operato                                     investm Beginni Ending investm                        sold in               investm                oss in
           Relation transacti         e                                                 ed in                provisio                in the
       r                                      ent        ng date    date     ent                  Reportin                ent                  Repor
                      on or     investme                                               Reportin               n (if                 Compan
                                            amount                         amount                 g Period              amount                  ting
                       not            nt                                               g Period               any)                    y’s
                                                                                                                                               Perio
                                                                                                                                    closing
                                                                                                                                                 d
                                                                                                                                      net
                                                                                                                                     assets
                                                                                                                                      (%)
                                Forward
Commer
           Non-rel              exchange 110,898. 01/19/2 12/15/2                      110,898. 110,898.                                       419.3
cial                   No                                                          0
             ated               settleme            18 017         017                      18         18
bank
                                      nt
Commer                          foreign
           Non-rel                          139,675. 01/03/2 03/29/2                   139,675. 119,875.
cial                   No       exchange                                           0                                     19,800       2.55% 61.93
             ated                                   82 017         018                      82         82
bank                            option
                                forward
Commer
           Non-rel              exchange                 05/22/2 10/18/2
cial                   No                   9,839.24                               0 9,839.24 9,839.24                          0               -6.57
             ated               transacti                017       017
bank
                                ons
Commer                          foreign
           Non-rel                                       06/20/2 06/30/2
cial                   No       exchange 12,937.1                                  0 12,937.1 12,937.1                          0               4.76
             ated                                        017       017
bank                            swap
                                            273,350.                                   273,350. 253,550.                                       479.4
Total                                                       --       --            0                                     19,800       2.55%
                                                    34                                      34         34
Capital source for derivative
                                            Self-owned funds
investment
Lawsuit (if applicable)                     No
Disclosure date of board
announcement on approval of                 04/28/2017
derivative investment (if any)
Disclosure date of general meeting
announcement on approval of
derivative investment (if any)
Risk analysis and risk control              The Company conducted derivatives products transaction in order for hedging. And it was
measures for derivative products held operated by installments, with the relevant amount not more than the planned derivatives
Lu Thai Textile Co., Ltd.                                                                                       Annual Report 2017
in Reporting Period (including but not products transactions. And all derivatives products transaction was zero-deposit. Meanwhile,
limited to market risk, liquidity risk,    the Company had a complete risk control system for sufficient analysis and prevention of
credit risk, operation risk, legal risk,   possible risks such as market risks, liquidity risk and credit risk, operation risk and risk of
etc.)                                      laws and regulations.
                                           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 derivative transactions 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, formulated the
                                           operation procedures and approval procedures system to conduct derivative products
                                           transaction, established special risk control positions, 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 to
                                           lower the operation risks to the maximum.
                                           4. Risk concerning laws and regulations:
                                           The Company conducted derivatives products transaction in strict accordance with State
                                           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 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 carries out
                                           derivative trading business upon fulfillment of relevant approval procedures, complying
Lu Thai Textile Co., Ltd.                                                                                     Annual Report 2017
                                          with relevant national laws and regulations, the \"Articles of Association\", \"Lu Thai
                                          Derivatives Trading Management System\" and the relevant provisions of the \"Proposal on
                                          the Company's Derivatives Trading Plan\" reviewed and passed at the seventh meeting of the
                                          eighth session of the Board of Directors held on April 26, 2017. Moreover, the Company
                                          fulfilled the relevant information disclosure obligations.
                                          1. As of December 31, 2017, the Company held a total of 5 undue financial derivative
                                          contracts, totaling US$ 32.5 million, all of which were foreign exchange options. The
                                          contract expires at the latest by March 2018. Financial derivatives accounted for 2.55% of
Changes in market prices or fair value
                                          the net assets at the end of the reporting period. 2. From January to December of 2017, the
of invested derivatives in Reporting
                                          mature financial derivatives of the Company amounted to US$ 382.1841 million, generating
Period (fair value analysis should
                                          an income of RMB 4.7946 million, including the expiry long-term foreign exchange
include specific analysis methods as
                                          settlement of US$162.2818 million, which generated an income of RMB4.1934 million. The
well as relevant assumptions and
                                          mature foreign exchange options amounted to US$185.8 million, generating an income of
parameters)
                                          RMB619,300. The long-term foreign exchange sale amounted to US$14.5023 million,
                                          generating a loss of RMB65,700. The mature foreign exchange swap amounted to US$ 19
                                          million, generating an income of RMB 47,600.
Significant changes in the Company’s
accounting policy and specific
accounting principles for derivatives     No significant changes
in Reporting Period when compared
to last period
                                          The Company’s independent directors Xu Jianjun, Zhao Yao, Bi Xiuli, Pan Ailing and Wang
                                          Xinyu, concerning conducting derivatives business, have issued the following professional
                                          advice: We are of the opinion that it will strengthen the Company’s competitiveness to use
Specific opinion from independent         derivative transactions with focus on forward settlement and purchase as an effective tool to
directors on the Company’s               avoid foreign exchange risks, to strengthen the relevant internal control and to carry out the
derivatives investment and risk           loss and risk prevention measures so as to improve the operation and management. In
control                                   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.
5. Use of Funds Raised
□ Applicable √ Not applicable
No such cases in this Reporting Period.
VI Sale of Major Assets and Equity Interests
1. Sale of Major Assets
□ Applicable √ Not applicable
No such cases in this Reporting Period.
Lu Thai Textile Co., Ltd.                                                                                     Annual Report 2017
2. Sale of Major Equity Interests
□ Applicable √ Not applicable
VII Main Controlled and Joint Stock Companies
√ Applicable □ Not applicable
Main subsidiaries and joint stock companies with an over 10% influence on the Company’s net profit
                                                                                                                             Unit: RMB
                Relationship         Main
  Company                           business    Registered                                      Sales       Operating
                   with the                                    Total assets   Net assets                                   Net income
       name                          scope          capital                                   revenue        income
                  Company
Lufeng
Weaving &                                      706,160,000. 1,597,948,86 1,399,594,34 1,664,817,65 118,651,864. 104,083,484.
               Subsidiary         Fabric
Dyeing Co.,                                    00                      3.87           7.43           9.70             43
Ltd.
Subsidiaries obtained or disposed in the Reporting Period
□ Applicable √ Not applicable
Particulars about the main controlled and joint stock companies:
Lufeng Weaving & Dyeing Co., Ltd. (hereinafter called “Lufeng Weaving & Dyeing”) is the holding subsidiary corporation of the
Company. Registration place: Zibo, Shandong; registered capital: RMB 706.160 million. It was authenticated to be high-tech
enterprise in October 2014, and authenticated to be high-tech enterprise again for re-evaluation in 2017, mainly manufacturing and
selling textile printing and dyeing products and the products of clothing and garments. Its export income accounted for more than
75%. During the Reporting Period, market required more and more on the production and environmental protection of printing and
dyeing products. Lufeng Weaving & Dyeing had been further acknowledged in market as an enterprise with normative operation and
the focus on environmental protection and sustainable development. At the same time, the R & D and innovation of Lufeng Weaving
& Dyeing constantly progressed. With the rise of the transfer ratio of scientific and technological achievements, proportion of the
sale of new products with high additional value rose largely. In 2017, operation revenue of Lufeng Weaving & Dyeing was RMB
1.665 billion, increasing for 3.58% comparing with that of the last year. In another aspect, thanks to comprehensive budget
management, costs control and investment in new products R & D, net profit RMB 0.104 billion was achieved in 2017, decreasing
for 24.02% comparing with that of the last year.
VIII Structured Bodies Controlled by the Company
□ Applicable √ Not applicable
IX Outlook for the Future Development of the Company
1. Industry competition and development trend
China's textile industry possesses outstanding advantages in the global textile industry, mainly in terms of capital, technology and
labor efficiency, etc. Although the cost of production factors is increasing, China's textile industry still has an outstanding advantage
in the global competition. At present, the production capacity of yarn-dyed fabrics for high-end shirts in the world is about 800
Lu Thai Textile Co., Ltd.                                                                                     Annual Report 2017
million meters. Pure cotton-dyed fabrics have always been the fabric used for the production of middle and high-end shirts due to
their high color fastness, clear texture, rich colors, comfortableness and good air permeability. In recent years, with the increase of
domestic environmental protection requirements and production costs, and the trend of state transformation and upgrading, some
low-end and small yarn-dyed production capacities gradually quit the market, and production capacities have been concentrated on
large companies, while the demand for yarn-dyed fabrics for shirts is changing to small quantity, variety, diversity, functionality and
leisure.
2. Development strategy of the Company
The Company is a large-scale textile enterprise with a complete industrial chain integrating cotton cultivation, spinning, dyeing,
weaving, post-treatment and garment manufacturing. It is the world's largest production base for yarn-dyed fabrics for shirts,
providing blending of three major series of shirt fabrics of pure cotton and natural fiber, cotton and natural fiber as well as cotton and
functional fiber. In order to maintain the outstanding advantages of the Company in global shirt-dyed fabrics, the Company is
pushing intelligent manufacturing upgrades and integrating domestic and foreign advantageous resources to deepen
internationalization of the Company with regional advantages. The Company combines quality innovation and customer needs, and
innovates the marketing model with advantages of resources in each channel. High-end shirt customization services are provided to
meet various needs of customers. Furthermore, the Company increases investment in innovation to improve R&D and design and
develop new fabrics. The Company holds the concept of low-carbon environmental protection for sustainable economic
development.
3. Business plan (the following description does not constitute any commitment of the Company)
(1) In terms of corporate governance, in order to ensure the healthy, stable and sustainable development of the Company at the
institutional level, the Company will establish an internal control system to improve organizational structure, corporate governance
structure and risk prevention mechanism.
(2) In terms of market development, the Company will follow the business philosophy of \"combining end-customer demand with
R&D, design and sales services\". Based on the stability of existing markets, the Company will adjust operation models, establish
diversified sales models and explore new markets to increase domestic market share and balance the development of domestic and
foreign markets.
(3) In terms of corporate management, with the goal of \"improving quality and increasing efficiency\", the Company will fully
develop the group system and deeply practice the model of excellence performance. Relying on the Lu Thai Production System
(LTPS) and supply chain management, the Company creates a global procurement network to improve the enterprise management
system and company upgrade.
(4) In terms of brand building, the Company focuses on quality to integrate corporate philosophy and culture into brand building with
innovation. Based on customer demand, the Company innovated the marketing model and integrated online and offline channel
resources to push forward the process of brand internationalization and upgrading.
(5) In terms of industrial overall arrangement, in order to maintain the leading position of the Company in the global yarn-dyed
industry, the Company rationally allocates domestic and foreign resources and improves production efficiency while keeping product
quality relying on the advantages of Milan and U.S. companies in market development, design and R&D, customer service and talent
development, and the cost advantages of Southeast Asian production bases.
4. Capital needs, sources and planning
During the reporting period, the new spinning production line with a capacity of 76,000 spindles of the yarn manufacture project
Phase II of Lu Thai (Vietnam) Textile Co., Ltd. has been set up. The drawing plans for production workshops have been completed,
and the construction was started in December 2017. The expansion project of yarn dyed fabric with a capacity of 40 million meters in
Vietnam is in the preparatory stage. With regards to the Vietnam Garment Factory Phase II, the drawing design of production
workshops of the expansion project of high-end shirt manufacturing with a capacity of 3 million pieces was completed, and the
construction started in December 2017. The funds of the above projects were offered by wholly-owned subsidiaries with their
self-owned and self-raised capital.
Lu Thai Textile Co., Ltd.                                                                                    Annual Report 2017
5. Risks that bring adverse impact to company development strategy and business objectives and countermeasures of the Company
(1) Economic environment: the world economy is getting better, but trade protectionism and economic policies of advanced
economies, especially the uncertain risks of monetary policy, pose greater threats to the recovery of the world economy, producing a
certain degree of uncertainty on the market environment that the Company faces. Meanwhile, the new development of China’s
economy shows more characteristics such as speed change, structural adjustment and dynamic changes. The economic trend towards
stability. To cope with these impacts, the Company will work hard to maintain the international market and develop the domestic
market to balance development of domestic and foreign sales.
(2) Fluctuations in raw material prices: the raw cotton used by the Company is long-staple cotton, whose price is affected by many
factors such as market supply and demand, climate, policies, exchange rates and quotas. Furthermore, with the development of
environmental protection policies, the cost of dyeing auxiliaries also increased. Therefore, besides ensuring the stable supply of
long-staple cotton by the subsidiary in Xinjiang, the Company must study the market dynamics to reduce the cost fluctuations due to
changes in raw cotton price, and develop with the concept of green and environmental protection to meet environmental protection
requirements.
(3) Exchange rate changes: at present and in the future, the Company will continue to sell its products mainly in the international
market for a long period of time, and US dollars willaccount for a relatively larger portion in sales revenue. In addition, the main
machinery and equipment and some of its raw materials of the Company are also imported. The foreign currencies payment for
imports includes US dollar and other currencies. Moreover, the commissioning of the Company's overseas production base and
subsequent expansion of investment will increase the use of US dollar. Therefore, the Company will still be sensitive to the impact of
exchange rate changes.
In order to reduce adverse influence of exchange rate fluctuation, the Company adopted the following measures: firstly, the Company
positively conducted foreign exchange hedging, using forward FX sales and purchase, forward foreign exchange trading and option
portfolios to avoid some risks Secondly, the Company made reasonable arrangement on settlement day and currency structure and
conclusion of agreements on fixed foreign exchange rate to avoid exchange rate-related risks. Thirdly, the Company adjusted the
Renminbi and foreign-currency liabilities structure to control financial costs. Fourthly, according to the fluctuation trend of exchange
rates, the Company properly adjusted imports of raw and auxiliary materials to partially offset the influence of exchange rate
fluctuations on the Company.
X Visits Paid to the Company for Purposes of Research, Communication, Interview, etc.
1. In this Reporting Period
√ Applicable □ Not applicable
             Date                      Way of visit                  Type of visitor                Main inquiry information
02/23/2017                          One-on-one meeting                 Institution          About basic information of the Company
03/30/2017                               By phone                      Institution          About basic information of the Company
08/30/2017                               By phone                      Institution          About basic information of the Company
10/27/2017                               By phone                      Institution          About basic information of the Company
Times of visit
Number of visiting institutions
Number of visiting individuals
Number of other visiting entities
Lu Thai Textile Co., Ltd.                             Annual Report 2017
Significant undisclosed information disclosed,
                                                 No
revealed or leaked
Lu Thai Textile Co., Ltd.                                                                                   Annual Report 2017
                                            Part V Significant Events
I Profit Distribution and Converting Capital Reserve into Share Capital for Common
Shareholders
Formulation, execution or adjustments of profit distribution policy, especially cash dividend policy, for common shareholders in this
Reporting Period
□ Applicable √ Not applicable
Profit distribution plans (or preliminary plans) for the common shareholders and plans (or preliminary plans) for turning capital
reserves into share capital for the recent three years (including the Reporting Period)
1. The 2017 annual profit allocation pre-plan reviewed and approved at the 16st Session of the 8th Board of Directors:
Based on the total 922,602,311 shares on December 31, 2017, the Company is to distribute a cash dividend of RMB5.00 for every 10
shares (including tax). The individual income tax for Share A shall be subject to related regulations under CS [2015] No. 101 Notice
on Certain Question about the Differentiated Individual Income Tax Policy for Share Dividend of Listed Companies jointly issued by
Ministry of Finance, SAT, and CSRC; and that for Share B shall be conversed to HKD based on the central parity rate on interbank
exchange market released by the People’s Bank of China on the following day after shareholder’s meeting (for foreign shareholders,
tax is free pursuant to CSZ (1994) No. 020 regulations; and non-residential corporate shareholders is entitled to a 10% reduction of
enterprise income tax according to related regulations under Enterprise Income Tax Law of the People’s Republic of China).
Based on the 922,602,311 shares, the Company should distribute a cash dividend of RMB5.00 per 10 shares. The aforesaid profit
distribution plan is subject to the final approval of the 2017 annual meeting of shareholders.
2. The 2016 annual profit allocation pre-plan reviewed and approved at the 5st Session of the 8th Board of Directors:
Based on the total 922,602,311 shares on December 31, 2016, the Company is to distribute a cash dividend of RMB5.00 for every 10
shares (including tax). The individual income tax for Share A shall be subject to related regulations under CS [2012] No. 85 Notice
on Certain Question about the Implementation of Differentiated Individual Income Tax Policy for Share Dividend of Listed
Companies jointly issued by Ministry of Finance, SAT, and CSRC; and that for Share B shall be conversed to HKD based on the
central parity rate on interbank exchange market released by the People’s Bank of China on the following day after shareholder’s
meeting (for foreign shareholders, tax is free pursuant to CSZ (1994) No. 020 regulations; and non-residential corporate shareholders
is entitled to a 10% reduction of enterprise income tax according to related regulations under Enterprise Income Tax Law of the
People’s Republic of China).
Based on the above distribution plan, the Company actually distributed RMB 461,301,155.50 dividends. Such plan was implemented
in June 2017 after the review and approval on 2016 shareholder’s meeting convened on May12, 2017.
3. The 2015 annual profit allocation pre-plan reviewed and approved at the 31th Session of the 7th Board of Directors:
By December 31 of 2015, (the total shares of 954,407,896as at 31 Dec. 2016 minus the 1,350,600 B-shares repurchased in the year),
the Company is to distribute a cash dividend of RMB5.00 distributed for every 10 shares (including tax). The individual income tax
for Share A was subject to related regulations under CS [2012] No. 85 Notice on Certain Question about the Implementation of
Differentiated Individual Income Tax Policy for Share Dividend of Listed Companies jointly issued by Ministry of Finance, SAT,
and CSRC; and that for Share B shall be conversed to HKD based on the central parity rate on interbank exchange market released
by the People’s Bank of China on the following day after shareholder’s meeting (for foreign shareholders, tax was free pursuant to
CSZ (1994) No. 020 regulations; and non-residential corporate shareholders were entitled to a 10% reduction of enterprise income
tax according to related regulations under Enterprise Income Tax Law of the People’s Republic of China).
In the profit distribution, 24,707,749 repurchased but not yet canceled shares in the special account for repurchased shares on the
Lu Thai Textile Co., Ltd.                                                                                     Annual Report 2017
book closure date were excluded. As such, the Company actually distributed RMB 465,525,373.50 dividends for 2015. The aforesaid
profit distribution plan was implemented in June 2016 after being reviewed and approved by the Shareholders’ General Meeting 2015
held on April 29, 2016.
Cash dividends distributed to the common shareholders in the recent three years (including the Reporting Period)
                                                                                                                               Unit: RMB
                                                   Net profits         Proportion in net
                                                  attributable to      profits attributable
                          Cash dividend (tax   shareholders of the     to shareholders of                             Ratio of cash
                                                                                               Cash dividend in
    Year                                                                                                        dividend in other
                             included)             Company in           the Company in           other forms
                                                                                                                         forms
                                                  consolidated               consolidated
                                                   statements               statements (%)
2017                          461,301,155.50        841,150,934.75                    54.84%                0.00                   0.00%
2016                          461,301,155.50        808,760,025.91                    57.04%                0.00                   0.00%
2015                          465,525,373.50        712,193,243.19                    65.37%                0.00                   0.00%
Indicate by tick mark whether the Company made profit in this Reporting Period and the profit distributable to common shareholders
of the Company was positive, but it did not put forward a proposal for cash dividend distribution to its common shareholders
□ Applicable √ Not applicable
II Proposal for Profit Distribution and Converting Capital Reserve into Share Capital for this
Reporting Period
√ Applicable □ Not applicable
Bonus shares for every 10 shares (share)
Dividend for every 10 shares (RMB) (tax included)                                                                                   5.00
Increased shares for every 10 shares (share)
Total shares as basis for preliminary distribution
plan (share)
Total cash dividends (RMB) (tax included)              461,301,155.50
Distributable profit (RMB)                                                                                               3,630,102,526.37
Percentage of cash dividends in the total profit to 54.84%
be distributed (%)
                                                          Cash dividend policy
Where the Company is at a mature stage of development and has plans for considerable spending, in profit distribution, cash
dividends shall reach at least 40% in the total profit to be distributed.
                  Details about the proposal for profit distribution and converting capital reserve into share capital
1. Based on the total 922,602,311 shares on December 31, 2017, the Company is to distribute a cash dividend of RMB5.00 for
every 10 shares (including tax). The individual income tax for Share A shall be subject to related regulations under CS [2015] No.
101 Notice on Certain Question about the Differentiated Individual Income Tax Policy for Share Dividend of Listed Companies
Lu Thai Textile Co., Ltd.                                                                                       Annual Report 2017
jointly issued by Ministry of Finance, SAT, and CSRC; and that for Share B shall be conversed to HKD based on the central parity
rate on interbank exchange market released by the People’s Bank of China on the following day after shareholder’s meeting (for
foreign shareholders, tax is free pursuant to CSZ (1994) No. 020 regulations; and non-residential corporate shareholders is entitled
to a 10% reduction of enterprise income tax according to related regulations under Enterprise Income Tax Law of the People’s
Republic of China).
2. Implementing above-mentioned distribution plan with RMB461,301,155.50dividend distribution, and the retained profits
RMB3,630,102,526.37 shall be carried forward to the future.
Note: if the equity base in preliminary distribution plan is not for sure, specific circumstances need to be described in the details of
preliminary profit distribution plan; if the system check can’t be passed, please contact staff and supervisor of periodic report timely.
The Company didn’t distribute the cash dividend, and there was no bonus share and no turn from capital reserve to share capital of
2017.
III Fulfillment of Commitments
1. Commitments of the Company’s Actual Controller, Shareholders, Related Parties and Acquirer, as well
as the Company and Other Commitment Makers, Fulfilled in this Reporting Period or Ongoing at the
Period-end
□ Applicable √ Not applicable
No such cases in this Reporting Period.
2. Where there had been an Earnings Forecast for an Asset or Project and this Reporting Period was still
within the Forecast Period, Explain why the Forecast has been Reached for this Reporting Period.
□Applicable √ Not applicable
IV Occupation of the Company’s Funds by the Controlling Shareholder or its Related Parties
for Non-operating Purposes
□ Applicable √ Not applicable
No such cases in this Reporting Period.
V Explanations Given by the Board of Directors, the Supervisory Board and the Independent
Directors (if any) regarding the “Modified Auditor’s Report” Issued by the CPAs Firm for
this Reporting Period
□ Applicable √ Not applicable
VI YoY changes in accounting policies, estimations and methods
√ Applicable □ Not applicable
            Contents and reasons                          Approval procedure                                   Remark
Before May 1, 2017, inventories of the        Approved by the 7th Meeting of the 8th        For it is unpractical to confirm the
Lu Thai Textile Co., Ltd.                                                                                    Annual Report 2017
Company shall be measured at planned           Board of Directors of the Company on       accumulative influences from the changes
cost when acquired. When acquired and          April 26, 2017                             of the accounting policies, according to the
delivered, it shall be measured as per the                                                rules of Accounting Standards for Business
weighted average method. According to                                                     Enterprises - Changes in Accounting
the requirements of refining operation                                                    Policies and Estimates and Correction of
management of the Company, in order to                                                    Errors, the changes in accounting policies
further strengthen the refinement of                                                      adopted prospective application method,
financial accounting, the Company                                                         which was implemented from May 1,
changed the pricing method of acquired                                                    2017.
inventories from planned cost to actual
cost from May 1, 2017, and changed the
pricing of delivered grey yarn, dyed yarn,
and plus material from the weighted
average method to first-in first-out method.
                                                                                          Accounting Standards for Business
                                                                                          Enterprises No. 42—Held-for-sale
                                                                                          Non-current Assets, Disposal Groups and
On April 28, 2017, the Ministry of Finance
                                                                                          Discontinued Operation standardize the
released Accounting Standards for
                                                                                          classification, measurement, and list of
Business Enterprises No.
                                                                                          held-for-sale non-current assets and
42—Held-for-sale Non-current Assets,
                                                                                          disposal group, and the list of termination
Disposal Groups and Discontinued
                                                                                          operation.
Operation (CaiKuai [2017] No. 3), which
                                                                                          According to Notice of the Ministry of
came into force from May 28, 2017.
                                               Approved by the Resolutions on the 16th    Finance on Revision and Issuance of
On December 25, 2017, the Ministry of
                                               Meeting of the 8th Board of Directors of   Format of General Financial Statements of
Finance issued the “Notice on Revision
                                               the Company on April 15, 2018              Enterprises, the Company adjusted the
and Issuance of Format of General
                                                                                          presentation of financial statement. The
Financial Statements of Enterprises”
                                                                                          amount adjusted to “assets disposal
(CaiKuai [2017] No. 30) to revise the
                                                                                          income” in 2017 was RMB1,242,000.54,
format of general finance statements of
                                                                                          and the amount adjusted to “assets disposal
enterprises and apply to financial
                                                                                          income” in 2016 was RMB-6,843,361.94.
statements in 2017 and the subsequent
                                                                                          The changes in accounting policies had no
periods.
                                                                                          significant influences on financial
                                                                                          situations, operating results, and cash
                                                                                          flows of the Company.
On May 10, 2017, the Ministry of Finance
released Circular on Issuance and Revision                                                Government subsidy related to routine
of Accounting Standards for Business                                                      activities happened after January 1, 2017
                                               Approved by the Resolutions on the 9th
Enterprises No. 16—Government Subsidy                                                    shall be calculated into other income;
                                               Meeting of the 8th Board of Directors of
(CaiKuai [2017] No. 15), and revised                                                      government subsidy that has nothing to do
                                               the Company on August 28, 2017
Accounting Standards for Business                                                         with routine activities shall be calculated
Enterprises No. 16—Government Subsidy,                                                   into non-operating income.
which was implemented in the scope of all
Lu Thai Textile Co., Ltd.                                                                                Annual Report 2017
companies who execute accounting
standards for business enterprises from
June 12, 2017.
VII Retroactive Restatement due to Correction of Material Accounting Errors in this
Reporting Period
□ Applicable √ Not applicable
No such cases in this Reporting Period.
VIII YoY Changes in the Scope of the Consolidated Financial Statements
√ Applicable □ Not applicable
Chengshun Thermal Power, a subsidiary of Xinsheng Thermal Power, was added into the consolidated financial statements.
IX Engagement and Disengagement of CPAs Firm
Current CPAs firm
Name of domestic CPAs firm                                         Ruihua Certified Public Accountants (LLP)
Remuneration of domestic CPAs firm (RMB’0,000))                                                                         173.50
Consecutive years of audit services provided by domestic CPAs
firm
Name of certified public accountants from domestic CPAs firm       He Feng, Cui Xiaoli
Consecutive years of audit services provided by certified public
accountants from domestic CPAs firm
Indicate by tick mark whether the CPAs firm was changed in this Reporting Period.
□ Yes √ No
CPAs firm, financial advisor or sponsor engaged for internal control audit
√ Applicable □ Not applicable
On May 12, 2017, the Company held the Annual Meetings of Shareholders for 2016, which reviewed and approved the Proposal on
Engagement of the 2017 Financial Audit and Internal Control Auditor. The Company paid RMB435,000 in total for the internal
control audit.
X Possibility of Listing Suspension or Termination after Disclosure of this Report
□ Applicable √ Not applicable
XI Bankruptcy and Restructuring
□ Applicable √ Not applicable
No such cases in this Reporting Period.
Lu Thai Textile Co., Ltd.                                                                                           Annual Report 2017
XII Significant Litigations and Arbitrations
□ Applicable √ Not applicable
No such cases in this Reporting Period.
XIII Punishments and Rectifications
□ Applicable √ Not applicable
No such cases in this Reporting Period.
XIV Credit Conditions of the Company as well as its Controlling Shareholder and Actual
Controller
□ Applicable √ Not applicable
XV Implementation of any Equity Incentive Plan, Employee Stock Ownership Plan or other
Incentive Measures for Employees
□ Applicable √ Not applicable
No such cases in this Reporting Period.
XVI Significant Related-party Transactions
1. Related-party Transactions Relevant to Routine Operation
□ Applicable √ Not applicable
No such cases in this Reporting Period.
2. Related Transactions Regarding Purchase or Sales of Assets or Equity Interests
√ Applicable □ Not applicable
                                                                                                             Profits
                                                               Book     Estimated
                                                                                                            and losses
                                    Contents                 value of   value of Transferr                                               Index to
            Relation     Type of                                                                Method         of
 Related                                of        Pricing    transferre transferre ed price                                Disclosur disclosed
            with the transactio                                                                   of        transactio
   party                            transactio principle     d assets    d assets   (RMB’0,                                   e date   informati
            Company         n                                                                  settlement       n
                                            n                (RMB’0, (RMB’0,       000)                                                     on
                                                                                                            (RMB’0,
                                                               000)       000)
                                                                                                              000)
Lucheng                             Purchasin                                                                                           For
           Controllin                            Assessed
Textile                             g all                                                                                               details,
           g            Purchasin                 value of                                                                 09/16/201
Investme                            equities                  1,359.75 2,343.04 2,343.04 Cash                          0                see
           sharehold g equity                     net
nt Co.,                             of holding                                                                                          Announc
           er                                     assets
Ltd                                 subsidiary                                                                                          ement on
Lu Thai Textile Co., Ltd.                                                                                      Annual Report 2017
                                   held by                                                                                    Related
                                   controllin                                                                                 Transacti
                                   g                                                                                          ons of
                                   sharehold                                                                                  Lucheng
                                   er                                                                                         Textile
                                                                                                                              Co., Ltd
                                                                                                                              (No.
                                                                                                                              2017-035
                                                                                                                              )
                                                                                                                              disclosed
                                                                                                                              on
                                                                                                                              www.cnin
                                                                                                                              fo.com.cn
Reason for great difference of transferred
 price and book value or assessed value (if No
 any)
Influences on operating results and
                                                No
financial situations of the Company
The achievement of the performance in the
 Reporting Period if related transactions       No
 involved in results appointment
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
Whether existed non-operating credits and liabilities with related parties
√ Yes □ No
Note: please pay attention to choose it from the aboved “whether exists non-operating credits and liabilities with related parties”
Credits of related parties to account receivable
                                             Whether
                                                                Amount     Amount
                                             existed
                                                                 newly   received in
               Relation                occupation Opening      added in
                                                                                                     Current
  Related                   Formation                balance               current                   interest
               with the               of the Funds (RMB’0,00   current              Interest rate              Closing
   party                     reason                                                                (RMB’0,00
               Company                                          period      period                            balance(RM
                                           for          0)                                              0)
                                                              (RMB’0,00                                       B’0,000)
                                                                   0)    (RMB’0,00
                                      non-operati
                                                                              0)
                                      ng purposes
Lu Thai Textile Co., Ltd.                                                                             Annual Report 2017
Influences from credits
 of related parties on
 operating results and
 financial situations of
 the Company
Liabilities of parties related to account payable
                                                               Amount      Amount
                                                 Opening     newly added returned in                  Current
                 Relation with Formation
 Related party                                   balance      in current   current    Interest rate   interest      Closing
                 the Company    reason
                                               (RMB’0,000)     period      period                  (RMB’0,000) balance(RMB
                                                            (RMB’0,000) (RMB’0,000)                               ’0,000)
Lucheng          The Parent       Currencies
                                                     985.47      16,763     11,848.71       4.35%       104.44         5,900
Textile          Company          deposit
                 Wholly-own
Limin Purified ed subsidiary Currencies
                                                          0         700          700        4.35%         3.59
 Water           of Lucheng       deposit
                 Textile
                 Wholly-own
                 ed subsidiary Currencies
Lujia Property                                            0          60                     4.35%         1.94
                 of Lucheng       deposit
                 Textile
                 Wholly-own
Luqun Real       ed subsidiary Currencies
                                                          0         900          900        4.35%         5.03
Estate           of Lucheng       deposit
                 Textile
                 Joint-stock
Shidanlu         Company of Currencies
                                                          0         275          130        4.35%         2.91
Company          Lucheng          deposit
                 Textile
                 Controlling
                 subsidiary of Currencies
Taimei Ties                                               0         500          370        4.35%         7.32
                 Lucheng          deposit
                 Textile
Influences from liabilities of
parties related on operating
                                  No
results and financial
situations of the Company
5. Other Significant Related Transactions
□ Applicable √ Not applicable
Lu Thai Textile Co., Ltd.                                                                                        Annual Report 2017
No such cases in the Reporting Period.
XVII Significant Contracts and Execution
1. Entrustment, Contracting and Leasing
(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) Leasing
□ Applicable √ Not applicable
No such cases in the Reporting Period.
2. Significant Guarantees
□ Applicable √ Not applicable
(1) Guarantees Provided by the Company
                                                                                                                                 RMB’0,000
            Particulars on external guarantee of the Company and its subsidiaries (excluding guarantees for subsidiaries)
                             Date of
                            disclosure                                                                               Whether Whether
                                                      Date of making
                         of relevant                                       Actual                                      the       guarantee
  Name of guarantee                       Guarantee    guarantee (date                   Type of       Guarantee
                         announcem                                       amount of                                  guarantee     ing for
         object                              limit       of signing                     guarantee       period
                             ents on                                     guarantee                                   has been     related
                                                         agreement)
                            guarantee                                                                                fulfilled    parties
                              limit
                                         Particulars about guarantee of the Company for subsidiaries
                             Date of
                                                                                                                     Whether Whether
                            disclosure                Date of making       Actual
                                                                                                                       the       guarantee
  Name of guarantee      of relevant Amount of guarantee (date           amount of       Type of       Guarantee
                                                                                                                    guarantee     ing for
         object         announcem guarantee              of signing      guarantee      guarantee       period
                                                                                                                     has been     related
                             ents on                     agreement)
                                                                                                                     fulfilled    parties
                            guarantee
Lu Thai Textile Co., Ltd.                                                                       Annual Report 2017
                            limit
                                                                                   Five years
                                                                    Guarantee of
                                                                                   since the
Lu Thai (Vietnam)                                                    joint and
                        01/25/2017     6,534.2                                     approval of     No        Yes
Textile Co., Ltd.                                                     several
                                                                                   the board of
                                                                      liability
                                                                                   the Company
                                                                                   Two years
                                                                    Guarantee of
                                                                                   since the
Lu Thai (Vietnam)                                                    joint and
                        01/25/2017    5,227.36             288.75                  approval of     No        Yes
Textile Co., Ltd.                                                     several
                                                                                   the board of
                                                                      liability
                                                                                   the Company
                                                                                   Two years
                                                                    Guarantee of
                                                                                   since the
Lu Thai (Vietnam)                                                    joint and
                        01/25/2017    3,920.52                                     approval of     No        Yes
Textile Co., Ltd.                                                     several
                                                                                   the board of
                                                                      liability
                                                                                   the Company
                                                                                   Two years
                                                                    Guarantee of
                                                                                   since the
Lu An Garments Co.,                                                  joint and
                        01/25/2017   26,790.22             487.64                  approval of     No        Yes
Ltd.                                                                  several
                                                                                   the board of
                                                                      liability
                                                                                   the Company
                                                                                   Five years
                                                                    Guarantee of
                                                                                   since the
Lu Thai (Vietnam)                                                    joint and
                        01/25/2017    19,602.6                                     approval of     No        Yes
Textile Co., Ltd.                                                     several
                                                                                   the board of
                                                                      liability
                                                                                   the Company
                                                                                   Two years
                                                                    Guarantee of
                                                                                   since the
Lu Thai (Vietnam)                                                    joint and
                        01/25/2017     6,534.2                                     approval of     No        Yes
Textile Co., Ltd.                                                     several
                                                                                   the board of
                                                                      liability
                                                                                   the Company
                                                                                   Two years
                                                                    Guarantee of
Lu Thai (Vietnam)                                                                  since the
                                                                     joint and
Textile Co., Ltd./Lu    01/25/2017   17,969.05                                     approval of     No        Yes
                                                                      several
An Garments Co., Ltd.                                                              the board of
                                                                      liability
                                                                                   the Company
                                                                                   Three years
                                                                    Guarantee of
Xinjiang Lu Thai                                                                   since the
                                                                     joint and
Good Yield Cotton       10/14/2017     15,000 10/12/2017                           approval of     No        Yes
                                                                      several
Co., Ltd.                                                                          the board of
                                                                      liability
                                                                                   the Company
Lu Thai Textile Co., Ltd.                                                                                          Annual Report 2017
                                                                                                      Five years
                                                                                                      since the
                                                                                       Guarantee of
                                                                                                      approval of
Lu Thai (Vietnam)                                                                        joint and
                        10/27/2017      67,955.68 10/25/2017                8,880.13                  the              No         Yes
Textile Co., Ltd.                                                                        several
                                                                                                      shareholders’
                                                                                         liability
                                                                                                      meeting of
                                                                                                      Company
                                                                     Total amount of actual
Total amount of approved
                                                                     guarantee for subsidiaries
guarantee for subsidiaries during                       169,533.83                                                                  3,344.2
                                                                     during the Reporting Period
the Reporting Period (B1)
                                                                     (B2)
                                                                     Total amount of actual
Total amount of approved
                                                                     guarantee for subsidiaries at
guarantee for subsidiaries at the                       169,533.83                                                                 9,656.52
                                                                     the end of the Reporting
end of the Reporting Period (B3)
                                                                     Period (B4)
                                         Guarantees provided by subsidiaries for subsidiaries
                         Disclosure
                            date on                                                                                               Guarante
                                                       Actual
                            relevant                                    Actual                                                     e for a
                                       Amount for occurrence date                        Type of        Period of      Executed
   Guaranteed party     announcem                                      guarantee                                                   related
                                       guarantee       (date of                         guarantee       guarantee       or not
                              ent of                                    amount                                                    party or
                                                     agreement)
                         guaranteed                                                                                                 not
                            amount
                                                                                       Guarantee of
Xinjiang Lu Thai                                                                        joint and
                        10/14/2017         30,000 10/12/2017                                          12 months        No         Yes
Textile Co., Ltd.                                                                        several
                                                                                         liability
                                                                     Total actual occurred
Total guarantee line approved for
                                                                     amount of guarantee for the
the subsidiaries during the                                 30,000
                                                                     subsidiaries during the
Reporting Period (C1)
                                                                     Reporting Period (C2)
                                                                     Total actual guarantee
Total guarantee line that has been
                                                                     balance for the subsidiaries
approved for the subsidiaries at the                        30,000
                                                                     at the end of the Reporting
end of the Reporting Period (C3)
                                                                     Period (C4)
            Total guarantee amount provided by the Company (total of the above-mentioned three kinds of guarantees)
                                                                     Total actual occurred
Total guarantee line approved
                                                                     amount of guarantee during
during the Reporting Period                             199,533.83                                                                  3,344.2
                                                                     the Reporting Period
(A1+B1+C1)
                                                                     (A2+B2+C2)
Total guarantee line that has been                      199,533.83 Total actual guarantee                                          9,656.52
Lu Thai Textile Co., Ltd.                                                                                    Annual Report 2017
approved at the end of the                                          balance at the end of the
Reporting Period (A3+B3+C3)                                         Reporting Period
                                                                    (A4+B4+C4)
Proportion of total guarantee amount (A4+B4+C4) to the net
                                                                                                                              1.34%
assets of the Company
Of which:
Amount of guarantee provide for shareholders, actual controller
and related parties (D)
Amount of guarantee provided directly or indirectly for guarantee
objects with asset-liability ratio reaching over 70% (E)
Balance between 50% of net assets and total amount of guarantee
                                                                                                                              30,000
which exceeds 50% of net assets (F)
Sum total of the above three guaranteed amounts (D+E+F)                                                                       30,000
                                                                    According to “Agreement on Counter Guarantee” signed on
                                                                    October 12, 2017 between Lu Thai Company and Xinjiang Lu
Explanations about joint and several liability for repayment in
                                                                    Thai Company, Xinjiang Lu Thai Company, the warrantee
respect of undue guarantee (if any)
                                                                    Xinjiang Lu Thai Company provided the corresponding amount
                                                                    of counter guarantee for Lu Thai Company.
Explanation about external guarantee violating established          The Company never provided guarantees for companies except
procedure (if any)                                                  controlling subsidiaries.
Explanations about guarantees provided with complex methods
(2) Particulars about illegal external guarantee
□ Applicable √ Not applicable
No such cases in the Reporting Period.
3. Entrusted Cash Management
(1) Entrusted Cash Management
√ Applicable □ Not applicable
Overviews of entrusted cash management during the Reporting Period
                                                                                                                          RMB’0,000
    Specific type             Capital resources        Amount incurred             Undue Balance            Overdue amount
Trusted financial
                            Self-owned funds                               5,000                     5,000
products
Others                      Self-owned funds                               6,000                     6,000
Total                                                                     11,000                    11,000
Particulars of entrusted cash management with single significant amount or low security, bad liquidity, and no capital preservation
Lu Thai Textile Co., Ltd.                                                                                                      Annual Report 2017
√ Applicable □ Not applicable
                                                                                                                                               RMB’0,000
                                                                                                                                         Wheth Overv
                                                                                                                                           er     iew of
                                                                                                      Amou Actual
                                                                                                                        Amou             there     the
                                                                                                      nt of recove
                                                                                                                          nt     Wheth     is      item
                                                                       Metho                          actual ry of
                                                                                   Annua Estima                         withdr er go wealth and
                                                                           d of                       profits profits
 Name     Type    Type             Resou                                           l yield     te                        awn throug manag          the
                            Amou            Initial Ended Use of payme                                  or      or
 of the of the   of the            rce of                                           for      profit                     impair      h    ement relate
                             nt              date   Date        fund        nt                        losses losses
trustee trustee product            funds                                           refere     (if                       ment stator entrust         d
                                                                       determ                           in      in
                                                                                    nce      any)                       provis proced ment index
                                                                       ination                        Report Report
                                                                                                                        ion (if ures      plan     for
                                                                                                       ing     ing
                                                                                                                        any)               in     inquiri
                                                                                                      Period Period
                                                                                                                                         future ng (if
                                                                                                                                         or not any)
                                                                       Repay
                                                                       capital
                                                                       with
Zhong Trust      Consta            Self-o                   Miya
                                            9/14/2 09/14/              interes                                                           Not
hang      compa nt          5,000 wned                      Baobe                  7.20%       360           No                  Yes
                                            017     2018               ts                                                                yet
Trust     ny     return            funds                    i
                                                                       when
                                                                       expire
                                                                       d
                                                            Accou
                                                            nt
                                                            receiv
Shang                                                                  Repay
                                                            ables
hai                                                                    capital
                                                            bonds
Gophe                                                                  with
          Fund   Consta            Self-o                   of
r Asset                                     12/18/ 01/18/              interes                                                           Not
          compa nt          3,000 wned                      Guang                  7.60%       228           No                  Yes
Manag                                       2017    2019               ts                                                                yet
          ny     return            funds                    dong
ement                                                                  when
                                                            Cheng
Co.,                                                                   expire
                                                            xing
Ltd                                                                    d
                                                            and
                                                            Jingdo
                                                            ng
Shang                                                       Granti Repay
hai                                                         ng              capi
Gophe Fund       Consta            Self-o                   trust           tal
                                            12/22/ 12/22/                                                                                Not
r Asset compa nt            3,000 wned                      loans           whe 8.50%          255           No                  Yes
                                            2017    2019                                                                                 yet
Manag ny         return            funds                    to              n
ement                                                       Jiexin          expi
Co.,                                                        Financ          red
Lu Thai Textile Co., Ltd.                                                                                     Annual Report 2017
Ltd                                                      e          with
                                                                    ann
                                                                    ual
                                                                    inte
                                                                    rest
                                                                    s
                                                                    pay
                                                                    men
                                                                    t
Total                       11,000   --     --      --        --    --      --       843       0    --         0    --      --     --
Whether there is the case where the principal cannot be recovered at maturity or other case which may cause impairment for
entrusted asset management
□ Applicable √ Not applicable
(2) Entrusted Loans
√ Applicable □ Not applicable
Overviews of entrusted loans during the Reporting Period
                                                                                                                             RMB’0,000
      Total amount incurred               Capital resources                   Undue Balance                    Overdue amount
                                  0 No                                                               0
Particulars of entrusted loans with single significant amount or low security, bad liquidity, and no capital preservation
□ Applicable √ Not applicable
Whether there is the case where the principal cannot be recovered at maturity or other case which may cause impairment for
entrusted loans
□ Applicable √ Not applicable
4. Other Significant Contracts
□ Applicable √ Not applicable
No such cases in this Reporting Period.
XVIII Social Responsibilities
1. Social Responsibilities Taken
The Company has prepared social responsibilities report for 2017, for details, see Social Responsibilities Report disclosed
simultaneously with Annual Report 2017 of the Company.
Lu Thai Textile Co., Ltd.                                                                                    Annual Report 2017
2. Targeted Measures Taken to Help People Lift themselves out of Poverty
(1) Plan for Targeted Measures
No
(2) Outline of Targeted Measures in the Reporting Period
 The Company continued to subsidize the education and poor students in poor areas and continued to carry out the social poverty
alleviation in 2017. The Company will continue to subsidize staff in difficulty and help designated poor villages to solve actual
difficulties for staffs for the year.
(3) Results of Targeted Measures
                        Indicator                    Measurement unit                         Number/Progress
I.       General condition                                ——                                      ——
      Of which: 1. capital                             RMB’0,000                                                               101.1
II.      Itemized investment                              ——                                      ——
      1. Out of poverty by industrial development         ——                                      ——
      2. Out of poverty by transferring employment        ——                                      ——
      3. Out of poverty by relocating                     ——                                      ——
      4. Out of poverty by education                      ——                                      ——
             Of which: 4.3 improve the invested
                                                       RMB’0,000                                                               44.29
amounts n educational resources of poor areas
      5. Out of poverty by improving health               ——                                      ——
      6. Out of poverty by protecting ecological
                                                          ——                                      ——
          environment
      7. Subsidy for the poorest                          ——                                      ——
      8. Social poverty alleviation                       ——                                      ——
             Of which: 8.2 the invested amounts in
                                                       RMB’0,000                                                               37.05
designated poverty alleviation
      9. Other items                                      ——                                      ——
             Of which: 9.2 the invested amounts        RMB’0,000                                                               19.76
III.     Received awards(contents and rank)               ——                                      ——
(4) Subsequent Targeted Measure Plans
No
Lu Thai Textile Co., Ltd.                                                                                            Annual Report 2017
3. Particulars Relevant to Environmental Protection
Is the Company or any of its subsidiaries a heavily polluting business identified by the environmental protection authorities of China?
Yes
               Name of
Name of the      main                                                                   Carried
                                          Number of Distribution        Emission                                      Verified
Company or pollutants         Emission                                                  emission            Total                 Excessive
                                              discharge of discharge concentratio                                         total
       its        and          method                                                 standard of       emission                   emission
                                               outlet       outlet            n                                       emission
subsidiaries characteristi                                                             pollutants
                   cs
                                                                                      Emission
                                                                                      standard of
                                                                                                      COD are       COD are
                                                         Huangjiapu                   water
                                                                       COD≤180m                      804.54 tons 1495.08
                                                          Industrial                  pollutants in
Lu Thai       COD and                                                  g/L; and                       and           tons and
                             Continuous                   Park;                       textile
Textile Co., ammonia                      2                            ammonia                        ammonia       ammonia       No
                             discharge                    East Zone                   dyeing and
Ltd           nitrogen                                                 nitrogen≤5                    nitrogen      nitrogen
                                                          Industrial                  finishing
                                                                       mg/L                           are           are 149.51
                                                          Park                        industry:
                                                                                                      32.53tons     tons
                                                                                      GB
                                                                                      4287-2012
                                                                                      Emission
                                                                                      standard of
                                                                                                      COD are       COD are
                                                                                      water
                                                                       COD≤155m                      321.43 tons 575.985
Lufeng                                                   Lufeng                       pollutants in
              COD and                                                  g/L; and                       and           tons and
Weaving &                    Continuous                  chief                        textile
              ammonia                     1                            ammonia                        ammonia       ammonia       No
Dyeing Co.,                  discharge                   discharge                    dyeing and
              nitrogen                                                 nitrogen≤3.                   nitrogen      nitrogen
Ltd.                                                     outlet                       finishing
                                                                       5mg/L                          are 6.959     are 57.6
                                                                                      industry:
                                                                                                      tons          tons
                                                                                      GB
                                                                                      4287-2012
                                                                                      Ultra-low
                                                                                       emission
                                                                                       No. 2
                                                                                                      SO2 are       SO2 are
                                                                                       modificati
                                                                       SO2:                           36.63 tons    217.84 tons
Zibo                                                     Production                    on list
                                                                       ≤35mg/m3、                    /a and NQx /a and NQx
Xinsheng                                                 plant of                      LZJBF
              SO2, NQx, Continuous                                     NQx: ≤100                     are 302.1     are 622.41
Thermal                                   3              Xinsheng                      (2016) No                                  No
              and smoke      discharge                                 mg/m3 and                      tons /a and tons /a and
Power Co.,                                               Thermal                       46 of
                                                                       smoke: ≤10                    smoke are     smoke are
Ltd.                                                     Power                         Emission
                                                                       mg/m3                          6.515 tons    62.24 tons
                                                                                       standard of
                                                                                                      /a.           /a.
                                                                                       air
                                                                                       pollutants
                                                                                       of Thermal
Lu Thai Textile Co., Ltd.                                                                                      Annual Report 2017
                                                                                Power
                                                                                Plant in
                                                                                Shangdong
                                                                                Province
                             Discharge
Lu Thai                      into sewage
                                                    Beside                     QCVN40:
(Vietnam)                    plant in the                                                   445,000
               Sewage                        1      sewage        /            2011/BTN                    /              No
Textile Co.,                 park district                                                  tons
                                                    plant                      MT
Ltd.                         after
                             treatment
Lu Thai                      Direct
                                                                               QCVN19:
(Vietnam)                    discharge              Beside                                  0.15 billion
               Exhaust gas                   2                    /            2009/BTN                    /              No
Textile Co.,                 after                  boiler room                             m3
                                                                               MT
Ltd.                         teratment
Construction of pollution prevention equipment and operation condition
Lu Thai Textile Co., Ltd. and its holding subsidiary Lufeng Weaving & Dyeing Co., Ltd. strictly implement the \"Three
Simultaneous\" management system for environmental protection in project constructions. The companies are equipped with complete
facilities for waste gas and waste water treatment. In 2017, Lu Thai Textile Co., Ltd. and its holding subsidiary Lufeng Weaving &
Dyeing Co., Ltd. carried out the waste water treatment system transformation project to improve the treated water quality and reduce
the impact on subsequent municipal waste water treatment plants. The river water quality and local ecological environment were
improved. Support teams were set up to be responsible for daily operation maintenance and inspection to guarantee the normal
operation of facilities. Both the exhaust emission and waste water discharge meet the emission standards. The wholly-owned
subsidiary Zibo Xinsheng Thermal Power Co., Ltd. enforces the \"Three Simultaneous\" management system for environmental
protection in extension project construction in accordance with the government requirements, and adopts the \"limestone-gypsum
method\" to reduce emission concentration of sulfur dioxide, the \"SNCR+SCR method\" to reduce emission concentration of nitrogen
oxides, and the \"five-field electrostatic precipitator + wet electrostatic precipitator\" to reduce soot emission concentration. The
overall system works well. The waste water treatment project of the wholly-owned subsidiary Lu Thai (Vietnam) Textile Co., Ltd. is
designed to treat 3,000 tons of sewage water daily, and the project was completed for operation on schedule in 2017. The Company
adopts a comprehensive treatment process of \"pre-materialization + A2O biochemistry + post-materialization + ozone oxidation\" for
waste water treatment, and the treated water quality is better than the QCVN 40:2011/BTNMT A-level emission standards stipulated
by the Vietnam government. The treated waste water is all discharged to the waste water treatment station in the park. Treated water
quality analysis for 2017: The COD (mean value) was 42.35 mg/L, the chrominance (mean value) was 34.57, the ammonia nitrogen
(mean value) was 0.87 mg/L, and the total phosphorus (mean value) was 0.12 mg/L. All the parameters met the A-level emission
standards set in the \"Regulations on Parameters of Industrial Drainage in Vietnam\" (QCVN40:2011/BTNMT). Waste water discharge
in the whole year met the standards without violation. The total amount of waste water discharged in the year was 445,000 tons,
among which, the chemical oxygen demand (COD) was 18.845 tons, ammonia nitrogen (NH3-N) was 387.15 kg and total
phosphorus (TP) was 53.4 kg. The Company is equipped with multi-pipe and water film dust-separation devices to process the
exhaust gas discharged from boilers of the Company. In 2017, all the equipment was in normal operation, and the exhaust gas
inspection parameters were lower than the QCVN19:2009/BTNMT emission standards set by Vietnam government.
Environmental impact assessment of projects and other environmental protection administrative licensing
In 2017, Lu Thai Textile Co., Ltd. completed the acceptance of environmental protection of 3 environmental impact assessment
projects, namely the high-end dyed fabric technical renovation project in the western region, the production line technological
renovation project of high-grade jacquard fabric with an annual output of 1.8 million meters of No. 2 weaving factory and the
Lu Thai Textile Co., Ltd.                                                                                 Annual Report 2017
intelligent dyeing production and energy and water saving technological renovation project. The Company also completed the review
and approval of 2 environmental assessment projects, namely treatment and comprehensive improvement project of PVA waste water
at high concentration of Lu Thai Textile (I) and treatment and comprehensive improvement project of PVA waste water at high
concentration of Lu Thai Textile (II). The environmental protection review and approval of liquid membrane separation of dyeing
waste water and treatment station comprehensive upgrading projects of the holding subsidiary Lufeng Weaving & Dyeing Co., Ltd.
were completed. The wholly-owned subsidiary Zibo Xinsheng Thermal Power Co., Ltd. got the \"Approval of Environmental Impact
Assessment Report of the Environmental Protection Department of Shandong Province on the Extension Project of Zibo Xinsheng
Thermal Power Co., Ltd.\" (LHS [2015] No. 241) in accordance with the regulations, and the first phase of the project was put into
trial operation at the end of 2017. The completion acceptance of the environmental protection project for the spinning and dyeing
zone of the wholly-owned subsidiary Lu Thai (Vietnam) Co., Ltd. has been recognized, and the EIA report for the spinning and
dyeing industrial park Phase II is under application.
Emergency plan for environmental incidents
In 2017, Lu Thai Textile Co., Ltd. prepared the Emergency Plan for Environmental Incidents for the head office and factories in
eastern district, which was filed with Zibo Environmental Protection Bureau Xichuan Branch. The wholly-owned subsidiary Zibo
Xinsheng Thermal Power Co., Ltd. has formulated the \"Emergency Plan for Environmental Incidents\" and filed it with the
environmental protection management department. The identification and risk assessment of environmental risk sources, prevention
and early warning mechanisms, emergency protection and supervision and management were included in the plan. The
wholly-owned subsidiary Lu Thai (Vietnam) Co., Ltd. has prepared emergency plans for different environmental incidents to reduce
their impacts.
Environmental self-monitoring programme
In accordance with the requirements of environmental protection authorities, Lu Thai Textile Co., Ltd. formulates environmental
self-testing plan for the following year in December of each year, and implements the self-monitoring plan to submit data to Zibo
Automatic Environmental Monitoring System. The wholly-owned subsidiary Zibo Xinsheng Thermal Power Co., Ltd. complies with
the requirements of superior environmental protection authorities to meet discharge standards by online real-time monitoring of
environmental protection data. The wholly-owned subsidiary Lu Thai (Vietnam) Co., Ltd. installed an on-line monitoring device for
real-time treated water quality monitoring. In addition, the Company invites external qualified testing organizations to carry out
inspections on waste water, sludge and exhaust gas every quarter, and provides reports to environmental inspection departments.
Other environment information that should be disclosed
No
Other related environment protection information
No
XIX Other Significant Events
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XX Significant Events of Subsidiaries
□ Applicable √ Not applicable
Lu Thai Textile Co., Ltd.                                                                                   Annual Report 2017
                    Part VI Share Changes and Shareholder Information
I Share Changes
1. Share Changes
                                                                                                                             Unit: share
                                        Before                        Increase/decrease (+/-)                          After
                                                                             Increase
                                              Percentag   New      Bonus       from                                          Percentag
                                  Number                                                  Other       Subtotal   Number
                                                e (%)     issues   shares     capital                                          e (%)
                                                                              reserve
                                  119,375,2                                                                      119,079,9
I. Restricted shares                            12.94%                                   -295,296 -295,296                     12.91%
                                        40
3. Shares held by other
                                  1,142,840      0.12%                                   -295,296 -295,296        847,544       0.09%
domestic corporations
Shares held by domestic
                                  1,142,840      0.12%                                   -295,296 -295,296        847,544       0.09%
natural persons
4. Shares held by foreign         118,232,4                                                                      118,232,4
                                                12.82%                                                                         12.82%
investors                               00
Among which: Shares held          118,232,4                                                                      118,232,4
                                                12.82%                                                                         12.82%
by foreign corporations                 00
                                  803,227,0                                                                      803,522,3
                                                87.06%                                    295,296      295,296                 87.09%
II. Non-restricted shares               71
                                  560,822,4                                                                      561,150,4
                                                60.79%                                    327,971      327,971                 60.82%
1. RMB ordinary shares                  60
2. Domestically listed foreign 242,404,6                                                                         242,371,9
                                                26.27%                                    -32,675      -32,675                 26.27%
shares                                  11
                                  922,602,3                                                                      922,602,3
III. Total shares                              100.00%                                            0          0                100.00%
                                        11
Reasons for any share changes:
√ Applicable □ Not applicable
Due to the adjustment of unlock of senior managers’ shares and lock of share increase of Shenzhen branch of China Securities
Depository and Clearing Corporation Limited, 295,296 shares of “limited sales condition shares-domestic natural person holding” of
the Company decreased.
Approval of share changes:
□ Applicable √ Not applicable
Lu Thai Textile Co., Ltd.                                                                                            Annual Report 2017
Transfer of share ownership:
□ Applicable √ Not applicable
Effects of share changes on the basic EPS, diluted EPS, net assets per share attributable to common shareholders of the Company and
other financial indexes of the prior year and the prior period:
□ Applicable √ Not applicable
Other contents that the Company considers necessary or is required by the securities regulatory authorities to disclose:
□ Applicable √ Not applicable
2. Changes in Restricted Shares
√ Applicable □ Not applicable
                                                                                                                                  Unit: share
                                                                                                           Reason for
    Name of             Opening         Unlocked in           Increased in     Closing restricted                          Date of
                                                                                                         lock-up/unlockin
     shareholder      restricted shares Reporting Period Reporting Period               shares                                unlocking
                                                                                                                g
                                                                                                           Locked the       6 months after
Qin Guiling (Lu                                                                                          shareholding of     the departure
                                       0                  0               19,500              19,500
Thai B)                                                                                                     the Senior
                                                                                                           Executives
                                                                                                           Locked the       6 months after
Liu Zilong (Lu                                                                                           shareholding of     the departure
                                       0                  0                9,375                 9,375
Thai B)                                                                                                     the Senior
                                                                                                           Executives
                                                                                                           Locked the       6 months after
Pan Pingli (Lu Thai                                                                                      shareholding of     the departure
                                  19,950                  0                3,800              23,750
B)                                                                                                          the Senior
                                                                                                           Executives
Total                             19,950                  0               32,675              52,625            --                --
II Issuance and Listing of Securities
1. Securities (Excluding Preference Shares) Issued in this Reporting Period
□ Applicable √ Not applicable
2. Changes in Total Shares of the Company and the Shareholder Structure, as well as the Asset and
Liability Structures
Lu Thai Textile Co., Ltd.                                                                                                  Annual Report 2017
□ Applicable √ Not applicable
3. Existing Employee-held Shares
□ Applicable √ Not applicable
III Shareholders and Actual Controller
1. Total Number of Shareholders and their Shareholdings
                                                                                                                                           Unit: share
                                                                                                                    Total number of
                                                                                                                    preference
                                     Total number of
                                                                               Total number of                      shareholders
                                     common
                                                                               preference                           with      resumed
Total number                         shareholders at
                                                                               shareholders with                    voting rights at
of common                            the prior
                            62,667                                  61,943 resumed voting                          0 the           prior
shareholders at                      month-end
                                                                               rights at the                        month-end
the period-end                       before the
                                                                               period-end (if any)                  before          the
                                     disclosure of this
                                                                               (see note 8)                         disclosure of this
                                     Report
                                                                                                                    Report (if any)
                                                                                                                    (see note 8)
                                           5% or greater shareholders or the top 10 shareholders
                                                            Total        Increase/                                  Pledged or frozen shares
                                                                                       Number        Number
                                            Sharehold      shares        decrease
                                                                                          of            of
       Name of              Nature of             ing      held at           during
                                                                                      restricted non-restric
    shareholder         shareholder           percentag      the              this                                  Status             Number
                                                                                        shares       ted shares
                                                 e (%)    period-en Reporting
                                                                                         held          held
                                                             d               Period
Zibo Lucheng                Domestic
                                                          140,353,5                                  140,353,5
Textile Investment    non-state-owned            15.21%                  0
                                                                    83
Co., Ltd.                corporation
Tailun (Thailand)           Foreign                       118,232,4                   118,232,4
                                                 12.82%                  0
Textile Co., Ltd.        corporation                                00
Central Huijin
Assets                  State-owned                       20,315,30                                  20,315,30
                                                  2.20%                  0
Management Co.,          corporation                                 0
Ltd.
T.ROWE PRICE                Foreign                       19,948,21                                  19,948,21
                                                  2.16%                  0
INTL                     corporation                                 9
Lu Thai Textile Co., Ltd.                                                                                         Annual Report 2017
DISCOVERY
FUND
Hong Kong
                            Foreign                    17,826,15                          17,826,15
Securities Clearing                            1.93%                11654438
                           corporation                          5
Co., Ltd
China Securities
                            Domestic
Finance                                                15,679,09                          15,679,09
                       non-state-owned         1.70%                0
Corporation                                                     1
                           corporation
Limited
Bank of China
Limited-Hua’an
                            Domestic
New Silk Road                                          10,990,00                          10,990,00
                       non-state-owned         1.19%                3790000
Theme Equity                                                    0
                           corporation
Securities
Investment Fund
Hong Kong
Monetary                    Foreign
                                               0.91% 8,414,637 4031977                0 8,414,637
Authority-self-own         corporation
ed funds
RBC EMERGING
MARKETS                     Foreign
                                               0.74% 6,785,384 356700                 0 6,785,384
SMALL CAP                  corporation
EQUITY FUND
LYNAS ASIA                  Foreign
                                               0.72% 6,682,153 -5757847               0 6,682,153
FUND                       corporation
Strategic      investors    or    general
corporations       becoming       top-ten
                                            N/A
shareholders due to placing of new
shares (if any) (see Note 3)
                                            Zibo Lucheng Textile Investment Co., Ltd. is the largest shareholder of the Company and
                                            the actual controller. Tailun (Thailand) Textile Co., Ltd. is the second largest shareholder as
Related or acting-in-concert parties
                                            well as sponsor of foreign capital of the Company. All of other shareholders are people
among the shareholders above
                                            holding circulating A share or circulating B share and the Company is not able to confirm
                                            whether there is associated relationship or concerted action among other shareholders.
                                         Shareholdings of the top ten non-restricted shareholders
                                                  Number of non-restricted shares held at the                   Type of shares
            Name of shareholder
                                                                    period-end                             Type              Number
Zibo Lucheng Textile Investment Co.,                                                                   RMB common
                                                                                       140,353,583                            140,353,583
Ltd.                                                                                                       shares
Central Huijin Assets Management                                                          20,315,300 RMB common                20,315,300
Lu Thai Textile Co., Ltd.                                                                                      Annual Report 2017
Co., Ltd.                                                                                                shares
                                                                                                     Domestically
T.ROWE PRICE INTL DISCOVERY
                                                                                      19,948,219     listed foreign          19,948,219
FUND
                                                                                                         shares
Hong Kong Securities Clearing Co.,                                                                  RMB common
                                                                                      17,826,155                             17,826,155
Ltd                                                                                                      shares
China Securities Finance Corporation                                                                RMB common
                                                                                      15,679,091                             15,679,091
Limited                                                                                                  shares
Bank of China Limited-Hua’an New
                                                                                                    RMB common
Silk Road Theme Equity Securities                                                     10,990,000                             10,990,000
                                                                                                         shares
Investment Fund
Hong Kong Monetary                                                                                  RMB common
                                                                                        8,414,637                             8,414,637
Authority-self-owned funds                                                                               shares
                                                                                                     Domestically
RBC EMERGING MARKETS
                                                                                        6,785,384    listed foreign           6,785,384
SMALL CAP EQUITY FUND
                                                                                                         shares
                                                                                                     Domestically
LYNAS ASIA FUND                                                                         6,682,153    listed foreign           6,682,153
                                                                                                         shares
                                                                                                     Domestically
HTHK-MANULIFE CHINA VALUE
                                                                                        5,730,938    listed foreign           5,730,938
FUND
                                                                                                         shares
Explanation about associated
relationship and concerted action         Zibo Lucheng Textile Investment Co., Ltd. is the largest shareholder of the Company and
among the top ten shareholders not        the actual controller. Tailun (Thailand) Textile Co., Ltd. is the second largest shareholder as
subject to trading moratorium as well     well as sponsor of foreign capital of the Company. All of other shareholders are people
as between the top ten shareholders       holding circulating A share or circulating B share and the Company is not able to confirm
not subject to trading moratorium and whether there is associated relationship or concerted action among other shareholders.
the top ten shareholders
Particulars about the top 10 common
shareholders participating in margin      N/A
trading (if any) (Notes 4)
Indicate by tick mark whether any of the top ten common shareholders or the top ten non-restricted common shareholders of the
Company conducted any promissory repo during this Reporting Period.
□ Yea √ No
No such cases in this Reporting Period.
Lu Thai Textile Co., Ltd.                                                                                   Annual Report 2017
2. Information about the Controlling Shareholder
Nature of controlling shareholder: controlled by individual
Type of controlling shareholder: corporation
     Name of controlling          Legal representative
                                                         Date of establishment     Organization code              Business scope
          shareholder             / company principal
                                                                                                         Investment on textile,
Zibo Lucheng Textile                                                                                     electricity and chemical;
                                  Liu Deming             09/25/1998              91370303164200391J
Investment Co., Ltd.                                                                                     purchase, process and sale
                                                                                                         of cotton; retail service etc.
Particulars about shareholding
of controlling shareholders
controlling and holding shares N/A
of other listed companies
during the Reporting Period
Change of the controlling shareholder during this Reporting Period
□ Applicable √ Not applicable
No such cases in this Reporting Period.
3. Information about the Actual Controller
Nature of actual controller: domestic individual
Type of actual controller: individual
                                                                            Whether gain the right of residence in other countries or
    Name of the actual controller                    Nationality
                                                                                                 regions or not
Liu Zibin                                      China                       No
Liu Deming                                     China                       No
                                               Liu Zibin is the Chairman of the Board and GM of Lu Thai Textile Co., Ltd. , Liu
Professions and titles                         Deming is the Chairman of the Board and GM of Zibo Lucheng Textile Investment
                                               Co., Ltd.
Particulars about listed companies with
shares ever held by the actual controller over N/A
the past 10 years
Change of the actual controller during this Reporting Period
□ Applicable √ Not applicable
No such cases in this Reporting Period.
Ownership and control relations between the actual controller and the Company
Lu Thai Textile Co., Ltd.                                                                              Annual Report 2017
                                  Liu Zibin                      Liu Deming
                                           4%                              21%
                                  Zibo Lucheng Textile Investment Co., Ltd.
                    0.02%
                                                                       15.21%
                                           Lu Thai Textile Co., Ltd.
The actual controller controls the Company in the means of entrustment or other means of assets
management
□ Applicable √ Not applicable
4. 10% or Greater Corporate Shareholders
√ Applicable □ Not applicable
                                    Legal representative /       Date of
  Name of corporate shareholder                                                  Registered capital       Business scope
                                     company principal         establishment
                                                                                 600 million baht     600 million baht (Thai)
Tailun (Thailand) Textile Co., Ltd. Xu Zhinan                01/29/1985
                                                                                      (Thai)
5. Limitations on Shareholding Decrease by the Company’s Controlling Shareholder, Actual Controller,
Reorganizer and Other Commitment Makers
□ Applicable √ Not applicable
Lu Thai Textile Co., Ltd.                                            Annual Report 2017
                                         Part VII Preferred Shares
□ Applicable √ Not applicable
No preferred shares in the Reporting Period.
Lu Thai Textile Co., Ltd.                                                                                        Annual Report 2017
    Part VIII Directors, Supervisors, Senior Management and Staff
I Changes in Shareholdings of Directors, Supervisors and Executive Officers
                                                                                                Increase Decrease
                                                                                    Opening                             Other    Closing
                                                                                                 in this   in this
                 Office   Incumben                         Starting       Ending    sharehold                         increase/d sharehold
  Name                                Gender   Age         date of        date of               Reporting Reporting
                  title   t/former                          tenure        tenure       ing                             ecrease     ing
                                                                                                 Period    Period
                                                                                     (share)                           (share)    (share)
                                                                                                 (share)   (share)
            Chairman                                      06/06/200 06/05/201
Liu Zibin                 Current    Male            53                              148,290                                      148,290
                 , GM                                     7
Xu          Vice                                          05/06/200 06/05/201
                          Current    Male
Zhinan      President                                     4
Fujiwara                                                  05/07/199 06/05/201
            Director      Current    Male
Hidetoshi                                                 8
Chen                                                      04/16/200 06/05/201
            Director      Current    Male
Ruimou                                                    0
Zeng                                                      06/06/200 06/05/201
            Director      Current    Male
Facheng                                                   7
            Director
            and Vice
Wang                                                      05/07/199 06/05/201
            GM        and Current    Male            57                              146,753                                      146,753
Fangshui                                                  8
            Chief
            Engineer
Liu                                                       05/12/201 06/09/201
            Director      Current    Male
Deming                                                    7
            Director
Qin         and                                           05/07/199 06/05/201
                          Current    Female          52                              107,042      19,500                          126,542
Guiling     Chairman                                      8
            Secretary
            Director
Zhang       and Chief                                     06/06/201 06/05/201
                          Current    Female          48                               92,500                                       92,500
Hongmei Accounta                                          6
            nt
            Independ
Xu                                                        06/06/201 06/05/201
            ent           Current    Male
Jianjun                                                   3
            Director
            Independ                                      09/19/201 06/05/201
Zhao Yao                  Current    Male
            ent                                           4
Lu Thai Textile Co., Ltd.                                                                   Annual Report 2017
            Director
            Independ
                                                   06/06/201 06/05/201
Bi Xiuli    ent            Current   Female   51
                                                   6        9
            Director
            Independ
Pan                                                06/06/201 06/05/201
            ent            Current   Female   53
Ailing                                             6        9
            Director
            Independ
Wang                                               06/06/201 06/05/201
            ent            Current   Male     51
Xinyu                                              6        9
            Director
            Superviso
Li                                                 09/19/201 06/05/201
            ry Board Current         Male     62                         176,164                          176,164
Tongmin                                            4        9
            Chairman
Liu         Superviso                              06/06/200 06/05/201
                           Current   Male     50                                   10,000                   10,000
Zilong      r                                      7        9
Dong        Superviso                              06/06/200 06/05/201
                           Current   Male     49                           5,000                             5,000
Shibing     r                                      7        9
Zhang                                              06/06/200 06/05/201
            Vice GM Current          Male     50                          52,150                            52,150
Jianxiang                                          7        9
            Vice GM,
Wang                                               06/06/200 06/05/201
            Product        Current   Male     55                          83,700                            83,700
Jiabin                                             7        9
            Manager
            Vice GM,
Zhang       Managem                                06/06/200 06/05/201
                           Current   Male     48                          73,100                            73,100
Shougang ent                                       7        9
            Manager
            Vice GM,
Zhang       GM        of                           06/06/200 06/05/201
                           Current   Male     46                          80,300                            80,300
Zhanqi      Lufeng                                 7        9
            Company
            Manager
Fujiwara of clothes
                                                   12/09/201 06/05/201
Matsuzak marketing Current           Male     45
                                                   4        9
a           departme
            nt
Zhang       Financial                              06/06/200 06/05/201
                           Current   Male     50                          77,700                            77,700
Keming      Manager                                7        9
                                                   06/08/201 06/05/201
Li Wenji CIO               Current   Male     51                          10,000                            10,000
                                                   6        9
Pan         Customs Current          Male     50 06/06/200 06/05/201     130,496    3,800                 134,296
Lu Thai Textile Co., Ltd.                                                                                               Annual Report 2017
Pingli     Manager                                             7
           Vice GM
Lv                                                             06/06/200 06/05/201
           of Lufeng Current        Male                  50                               33,750                                       33,750
Yongchen                                                       7
           Company
Yu         Energy
                                                               06/06/200 06/05/201
Shouzhen Business Current           Male                  50                               83,100                                       83,100
                                                               7
g          Manager
           GM
           assistant,
Wang       manager
                                                               06/06/201 06/05/201
Changzha of fabric      Current     Male                  44                               22,500                                       22,500
                                                               3
o          marketing
           departme
           nt
           Manager
           of brand
Quan       expandin                                            06/06/201 06/05/201
                        Current     Male                  51                               27,750                                       27,750
Peng       g                                                   3
           departme
           nt
           Manager
           of
Shang      garments
                                                               06/06/201 06/05/201
Chenggan productio Current          Male                  45                               30,000                                       30,000
                                                               3
g          n
           departme
           nt
Total           --          --         --            --            --          --       1,380,295     33,300             0         0 1,413,595
II Changes in Directors, Supervisors and Executive Officers
√ Applicable □ Not applicable
    Name             Position             Type                      Date                                   Reason
                                        Appointed and
Liu Deming           Director                                  05/12/2017           Elected as Director of the 8th Board of the Directors.
                                            dismissed
III Brief Biographies
Professional backgrounds, main working experience and current responsibilities in the Company of the incumbent directors,
supervisors and executive officers
1. Mr. Liu Zibin: Director and concurrently General Manager of the Company. He was born in 1965, and achieved Master Degree.
From Oct. 2004 to Jun. 2007, he acted as Chairman of the Board of Zibo Lucheng Textile Investment Co., Ltd, now concurrently was
Chairman of the Board of Xinjiang Lu Thai Good Yield Cotton Co., Ltd., Xinjiang Lu Thai Textile, Lufeng Weaving & Dyeing,
Lu Thai Textile Co., Ltd.                                                                                 Annual Report 2017
Luqun Textile, Xinsheng Thermal Power, Chengshun Thermal Power, Shanghai Li Thai, and Beijing Lu Thai Youxian, and the
President of Lu Thai (America), Director of Lu Thai (Hong Kong).
2. Mr. Xu Zhinan: Vice Chairman of the Board of the Company. He was born in 1930, Thailand Nationality. Since 2004, he has been
acting as Director and Vice Chairman of the Board of the Company, and General Manager of Tailun (Thailand) Textile Co., Ltd.
3. Mr. Fujiwara Hidetoshi: Director of the Company. He was born in 1940, Japanese Nationality. Since 1998, he has been holding
post of Director of Lu Thai Company, and Director of Lufeng Weaving & Dyeing Co., Ltd.
4. Mr. Chen Ruimou: Director of the Company. He was born in 1944, and holder of bachelor degree. From 1998 to now, he has been
Director of the Company.
5. Mr. Zeng Facheng, Director of the Company, was born in 1951, Thailand nationality. He acts as Chairman of the Board of GOLD
MINE GARMENT CO., LTD. and BLOSSOM GARMENT MANUFACTURING (THAILAND) CO., LTD.
6. Mr. Wang Fangshui: Director, Vice General Manager and Chief Engineer of the Company. He was born in 1961, holder of MBA
degree. Since 1998, he has been Director and Chief Engineer of the Company, and concurrently is Director of Xinjiang Lu Thai Good
Yield Cotton Co., Ltd., Lufeng Weaving & Dyeing, Xinjiang Lu Thai Luqun Textile, and the Executive Director of Lu Thai (Burma).
7. Mr. Liu Deming: Director, Assistant of GM of the Company. He was born in 1990, and achieved Master Degree. He is the
Chairman and GM of Zibo Lucheng Textile Investment Co., Ltd, and the supervisor of Beijing Lu Thai Youxian.
8. Ms. Qin Guiling: Director, and Secretary to the Board of the Company. She was born in 1966, holder of MBA degree. Since 1998,
she has been Director and Secretary to the Board of the Company, and Supervisory Board Chairman of Xinjiang Lu Thai.
9. Ms. Zhang Hongmei: Chief Accountant. She was born in 1970; holder of MBA degree and senior accountant. She had served
successively as Chief of cost section of financial department of Lu Thai Textile Co., Ltd., director of the accounting department and
deputy chief accountant. Now she serves as Chief Accountant of the Company. At the same time, she is the director of Luqun Textile,
and supervisor of Beijing Lu Thai Youxian.
10. Mr. Xu Jianjun: Independent Director of the Company, born in 1974, master degree holder. Once took the post of Senior Staff
Member of Head Office of Bank of China, Legal Counsel, lawyer at Beijing Jingtian Gongsheng Law Firm. From August of 2004 up
to now, serves as a partner of Beijing Deheng Law Firm. Now he is taking a post of partner and Deputy Director of Beijing Deheng
Law Firm.
11. Mr. Zhao Yao: Independent Director of the Company, born in 1970, master degree holder, associate professor of accounting,
master tutor and successively acted as member of a council of Accounting Association in Shandong Province, executive member of
the council of Shandong Province Institute of CPAs, member of Shandong Province internal control consultant experts, member of
Shandong Province accounting criterion consultant experts and currently act as Director of Department of Accounting of Shandong
University of Technology.
12. Ms. Bi Xiuli: female, independent director of the Company, born in 1967, master. She worked as a judge of Zibo Intermediate
People's Court from 1990 to 1996, worked as a lawyer of Beijing Jingwei Law Firm from 2002 to 2003, worked as a lawyer of
Beijing King & Capital Law Firm from 2003 to 2004, worked as a partner of Beijing JunZeJun Law Offices from 2004 to 2011 and
works as a partner of Beijing DeHeng Law Offices now.
13. Ms. Pan Ailing: female, independent director of the Company, born in 1965, doctor of economics, postdoctor of financial
management. Now, she works as a professor, doctoral supervisor and academic leader of accounting in School of Management of
Shandong University, the director of investment and financing research center of Shandong University, a member of Shandong
Accounting Society, an executive member of Shandong Research Society of Comparative Management and a visiting professor of
Taiwan Soochow University.
14. Mr. Wang Xinyu: male, independent director of the Company, born in 1967, master, certified public accountant, certified tax
agent and certified public assets estimator. From December 2007 to August 2013, he worked in Zhonglei Accounting Firm as the
vice general manager of Shandong branch. Now he works as the senior partner and director of Shandong branch of Reanda Certified
Public Accountants (special general partnership).
15. Mr. Li Tongmin: male, chairman of board of supervisors of the Company, born in 1956, technical secondary school education.
Lu Thai Textile Co., Ltd.                                                                                 Annual Report 2017
Now he works as chairman of the labor union of the Company. From October 1993 to 2010, he worked as supervisor, vice general
manager and the manager of production department of the Company.
16. Mr. Liu Zilong: Supervisor of the Company. He was born in 1968, holder of MBA degree. From 2002 to present, he was General
Manager of Lu Thai (Hong Kong).
17. Mr. Dong Shibing: Supervisor of the Company. He was born in 1969, graduated from technical secondary school. He ever took
the post of Deputy Director of the General Manager Office of the Company, and now holds post of Manager of Property
Management Company.
18. Mr. Zhang Jianxiang: male, vice general manager of the Company & the executive director of Lu Thai Textile Garment
Engineering Research Institute, born in 1968, Master of Business Administration. He once worked as the manager of quality
management department of the Company and the director of textile finishing factory.
19. Mr. Wang Jiabin: General Manager Assistant and Manager of Production Department of the Company, head of security
checkpoint of production department. He was born in 1963, MBA and once acted as Manager of Dyeing Business Department.
20. Mr. Zhang Shougang: Assistant General Manager, Garment Division Manager of the Company. He was born in 1970, MBA and
senior engineer, once was Director of Weaving Factory, Manager of Weaving Business Department and Manager of Quality Control
Department in the Company.
21. Mr. Zhang Zhanqi: General Manager Assistant and deputy General Manager in Lufeng Weaving & Dyeing of the Company. He
was born in 1972, MBA, once worked as Director of Fabric Finishing Plant and Manager of Quality Control Department.
22. Mr. Fujiwara Matsuzaka: Manager of clothes marketing department of the Company. He was born in 1973 and had acted as
General Manager of International Business Department I of the Company.
23. Mr. Li Wenji: male, CIO & manager of information department of the Company, born in 1967. He once worked as a teacher in
Shandong University of Finance and Economics. From July 2005 to now, he works as the manager of information department of the
Company. In 2016, he was employed as chief information officer of the Company.
24. Mr. Zhang Keming: Manager of Financial Department of the Company. He was born in 1968, MBA and senior accountant. From
2002 to 2006, he held the post of Deputy Manager of Financial Department; from Apr. 2006 to present, he has acted as General
Manager of Financial Department.
25. Mr. Pan Pingli: Customs Manager of the Company. He was born in 1968 and MBA degree holder. He ever acted as General
Manager of International Business Department of the Company.
26. Mr. Lv Yongchen: Deputy General Manager of Lufeng Weaving and Dyeing Co., Ltd. He was born in 1968 and MBA degree
holder. From 2002 to 2010, he acted as Deputy Manager of International Business Department in the Company.
27. Mr. Yu Shouzheng: Energy Business Manager of the Company. He was born in 1968, MBA degree holder and engineer. He once
worked as Director of Dynamic Department in the Company. From 2007 to present, he has acted as Manager of Energy Business
Department in the Company.
28. Mr. Wang Changzhao: GM assistant, manager of fabric marketing department of the Company. He was born in 1974 and had
acted as General Manger Assistant of International Business Department.
29. Mr. Quan Peng: Manager of brand expanding department of the Company. He was born in 1967, MBA degree holder. From 2004
to present, he has acted as Marketing Manager.
30. Mr. Shang Chenggang: manager of garments production department of the Company, born in 1973. He once worked as the vice
director and director of general manager office, the manager of enterprise manager department and the representative of managers.
Posts concurrently held in shareholding entities
√Applicable □Not applicable
    Name of                                                   Posts held in   Start date of                    Whether receiving
                      Name of shareholders’ companies                                          Expiration
   employers                                                 shareholders’      tenure                           subsidies and
Lu Thai Textile Co., Ltd.                                                                                     Annual Report 2017
                                                                companies                          Date of tenure     remuneration in
                                                                                                                          shareholders’
                                                                                                                           companies
Liu Zibin        Zibo Lucheng Textile Investment Co., Ltd. Director              02/26/1999                          No
Xu Zhinan        Tailun (Thailand) Textile Co., Ltd.          Chairman           01/29/1985                          No
                                                              Chairman and
Liu Deming       Zibo Lucheng Textile Investment Co., Ltd.                       02/01/2017                          No
                                                              GM
                 Mr. Liu Zibin is the Director of Zibo Lucheng Textile Investment Co., Ltd., holding 4% equities of Zibo Lucheng
Explanations     Textile Investment Co., Ltd. Basic information of Mr. Liu Zibin: Chinese, no right of residence in other countries
about holding    or regions. Mr. Liu Deming holds the post of Chairman and GM of Zibo Lucheng Textile Investment Co., Ltd.,
posts in         holding 21% equities of Zibo Lucheng Textile Investment Co., Ltd. Basic information of Mr. Liu Deming:
shareholders’   Chinese, no right of residence in other countries or regions. Mr. Xu Zhinan is the sponsor of foreign capital of the
companies        Company, shareholder of Tailun (Thailand) Textile Co., Ltd. and Tailun (Thailand) Textile Co., Ltd. is the second
                 largest shareholder of the Company. Basic information about Mr. Xu Zhinan: Thai.
Posts held concurrently in other entities
√Applicable □Not applicable
                                                                                                                             Whether
                                                                Posts held in                                               receiving
    Name of                                                                        Start date of   Expiration Date
                             Name of other companies            shareholders’                                            subsidies and
   employers                                                                          tenure          of tenure
                                                                 companies                                            remuneration in
                                                                                                                      other companies
                  Xinjiang Lu Thai Good Yield Cotton Co.,
                  Ltd., Xinjiang Lu Thai Textile Co., Ltd.,
                  Lufeng Weaving & Dyeing Co., Ltd. Zibo
                                                                 Chairman,
                  Luqun Textile Co., Ltd., Zibo Xinsheng
                                                                  Director,
                  Thermal Power Co., Ltd., Zibo Chengshun
                                                                Chairman of
Liu Zibin         Thermal Power Co., Ltd., Shanghai Lu Thai                      12/07/2015                          No
                                                                Supervisory
                  Textile Garment Co., Ltd., Beijing Lu Thai
                                                                 Board, and
                  Youxian E-commerce Co., Ltd., Lu Thai
                                                                    GM
                  (America) Textile Co., Ltd. Lu Thai (HK)
                  Textile Co., Ltd, Beijing Sichuang Garment
                  Co., Ltd
                  Xinjiang Lu Thai Good Yield Cotton Co.,
                  Ltd., Xinjiang Lu Thai Textile Co., Ltd.,
Wang Fangshui Lufeng Weaving & Dyeing Co., Ltd. Zibo              Director       06/17/2003                          No
                  Luqun Textile Co., Ltd., Lu Thai (Burma)
                  Textile    Co., Ltd.
                  Beijing Lu Thai Youxian E-commerce Co.,
Liu Deming                                                       Supervisor      08/21/2017                          No
                  Ltd.
                  Xinjiang Lu Thai Good Yield Cotton Co.,       Supervisory
Qin Guiling                                                                      06/17/2003                          No
                  Ltd.                                             Board
Lu Thai Textile Co., Ltd.                                                                                   Annual Report 2017
                                                                   Chairman
                  Zibo Luqun Textile Co., Ltd., Beijing Lu       Director and
Zhang Hongmei                                                                   06/17/2003
                  Thai Youxian E-commerce Co., Ltd.               Supervisor
Xu Jianjun        Beijing Deheng Law Offices                        Partner     08/01/2004                         Yes
                                                                   Associate
Zhao Yao          Shandong University of Technology                             03/01/2001                         Yes
                                                                   Professor
Bi Xiuli          Beijing Deheng Law Offices                        Partner     01/01/2011                         Yes
                  Shandong University School of
Pan Ailing                                                         Professor    07/01/1986                         Yes
                  Management
                  Reanda Certified Public Accountants
Wang Xinyu                                                          Director    08/01/2013                         Yes
                  Shandong Branch
Explanations
about
                  Except independent directors, other companies directors, supervisors, senior executives are holding posts in are all
employment in
                  controlling subsidiaries of the Company.
other
companies
Punishments imposed in the recent three years by the securities regulators on the incumbent directors, supervisors and executive
officers as well as those who left in this Reporting Period
□ Applicable √ Not applicable
IV Remuneration of Directors, Supervisors and Executive Officers
Decision-making procedure, determination basis and actual remuneration payment of directors, supervisors and executive officers
Decision-making             Remuneration committee under the board of directors is responsible for formulating assessment
procedures of               standards of directors and senior executives and conducting assessment; for formulating and reviewing
remuneration of directors, remuneration policy and program of directors and senior executives; it is responsible for the board of
supervisors, senior         directors. The remuneration committee, according to appraisal results of position performance and
executives                  motivation and restriction plan for senior executives, proposes amount of payment and methods of
                            reward for directors and senior executives and submits the above resolutions to the board of directors for
                            ratification after the approval by voting.
Determinate basis of        The Chief Accountant Office, the Corporate Management Department and the HR Department of the
remuneration of directors, Company was responsible for preparations for the decision-making of the Remuneration and Appraisal
supervisors, senior         Committee by providing relevant information of the Company as follows: (I) accomplishment of main
executives                  financial and business objectives; (II) accomplishment of relevant indicators of other listed companies in
                            the sector; (III) work scope and main responsibilities of senior management staff.
                            The remuneration committee appraised directors and senior management staff according to the
                            completion situation of the Company’s performance and the annual appraisal results of senior
                            management staff were put forward according to the performance appraisal results and the senior staff
                            incentive and disciplinary plan. Upon approval by voting, the results were reported to the Board of
                            Directors for approval.
Actual payment of           The number of incumbent directors, supervisors and senior executives is 30, among which there are 30
Lu Thai Textile Co., Ltd.                                                                                   Annual Report 2017
remuneration of directors, persons actually receiving remuneration from the Company. Till December 31, 2017, the total amount of
supervisors, senior              annual payment drawn from the Company by directors, supervisors and senior executives is RMB21.
executives                       8813million (before tax).
Remuneration of directors, supervisors and executive officers in this Reporting Period
                                                                                                                     Unit: RMB'0,000
                                                                                                                    Whether gained
                                                                                                 Total before-tax
                                                                                                                     remuneration
                                                                                                  remuneration
      Name                 Position               Gender           Age         Current/former                       from the related
                                                                                                 gained from the
                                                                                                                     parties of the
                                                                                                    Company
                                                                                                                       Company
                      Chairman and
Liu Zibin                                  Male                            53 Current                       115.7 No
                      GM
Xu Zhinan             Vice President       Male                            88 Current                        36.1 No
Fujiwara
                      Director             Male                            78 Current                      440.98 No
Hidetoshi
Chen Ruimou           Director             Male                            74 Current                        36.1 No
Zeng Facheng          Director             Male                            67 Current                        1.19 No
                      Director and Vice
Wang Fangshui         GM    and      Chief Male                            57 Current                      132.42 No
                      Engineer
Liu Deming            Director             Male                            27 Current                        4.94 No
                      Director and
Qin Guiling           Chairman             Female                          52 Current                      127.62 No
                      Secretary
                      Director and
Zhang Hongmei                              Female                          48 Current                       89.11 No
                      Chief Accountant
                      Independent
Xu Jianjun                                 Male                            44 Current                         4.8 No
                      Director
                      Independent
Zhao Yao                                   Male                            48 Current                         4.8 No
                      Director
                      Independent
Bi Xiuli                                   Female                          51 Current                         4.8 No
                      Director
                      Independent
Pan Ailing                                 Female                          53 Current                         4.8 No
                      Director
                      Independent
Wang Xinyu                                 Male                            51 Current                         4.8 No
                      Director
                      Supervisory
Li Tongmin                                 Male                            62 Current                       128.6 No
                      Board Chairman
Lu Thai Textile Co., Ltd.                                                                      Annual Report 2017
Liu Zilong         Supervisor            Male                             50 Current             63.6 No
Dong Shibing       Supervisor            Male                             49 Current           62.15 No
Zhang Jianxiang Vice GM                  Male                             50 Current           84.69 No
                   Vice           GM,
Wang Jiabin                              Male                             55 Current           87.93 No
                   Product Manager
                   Vice           GM,
Zhang Shougang Management                Male                             48 Current           77.85 No
                   Manager
                   Vice GM, GM of
Zhang Zhanqi                             Male                             46 Current           78.19 No
                   Lufeng Company
                   Manager of
Fujiwara
                   clothes marketing Male                                 45 Current           114.01 No
Matsuzaka
                   department
                   Financial
Zhang Keming                             Male                             50 Current           71.41 No
                   Manager
Li Wenji           CIO                   Male                             51 Current           49.07 No
                   Customs
Pan Pingli                               Male                             50 Current           58.91 No
                   Manager
                   Vice     GM      of
Lv Yongchen                              Male                             50 Current           61.52 No
                   Lufeng Company
                   Energy Business
Yu Shouzheng                             Male                             50 Current           61.18 No
                   Manager
                   GM assistant,
                   manager of fabric
Wang Changzhao                           Male                             44 Current           60.37 No
                   marketing
                   department
                   Manager of brand
Quan Peng          expanding             Male                             51 Current           60.94 No
                   department
                   Manager of
Shang              garments
                                         Male                             45 Current           59.55 No
Chenggang          production
                   department
Equity incentives for directors, supervisors and executive officers in this Reporting Period
□ Applicable √ Not applicable
Lu Thai Textile Co., Ltd.                                                                                  Annual Report 2017
V Employees
1. Number, Functions and Educational Backgrounds of Employees
Number of the serving employees of the parent company
                                                                                                                             14,277
(person)
Number of the serving employees of the major subsidiaries
                                                                                                                             10,926
(person)
Total number of the serving employees (person)                                                                               25,203
Total number of the employees receiving the salary of the
                                                                                                                             25,203
Reporting Period (person)
Number of the left and retired employees that the parent
company and the major subsidiaries should undertake the
expenses (person)
                                                       Component difference
                            Category                                                       Number (person)
Production personnel                                                                                                         18,871
Sales personnel
Technical personnel                                                                                                            5,206
Financial personnel
Administrative personnel
Total                                                                                                                        25,203
                                                      Educational background
                            Category                                                       Number (person)
Doctor
Master
Bachelor                                                                                                                       1,119
College                                                                                                                        6,072
High school and below                                                                                                        17,915
Total                                                                                                                        25,203
2. Employee Remuneration Policy
The Company has formulated a remuneration management system with its principle being “payment according to one’s work and
more pay for more work”. Through post evaluation and through researches of Social salary levels carried out as multi-faceted, as well
as the formulation of the reasonable salary management system, fully demonstrates the internal fairness, self-fairness and external
fairness. It has greatly motivated the employees and enhanced the corporate management.
Lu Thai Textile Co., Ltd.                                                                                 Annual Report 2017
3. Employee Training Plans
Trainings will be carried out according to requirements of the Company’s strategic development planning, improvement of
employees’ capability, performance management, employees’ career planning, etc. The annual training plan is determined by carrying
out researches on training needs. And the training courses fall into three major categories, i.e. management, technical skills and
general knowledge. Through these trainings, the Company will improve the knowledge structure of its employees, improve their job
skills and increase their comprehensive quality to provide excellent human resources for the long-term, sustained and stable
development of the Company.
4. Labor Outsourcing
□ Applicable √ Not applicable
Lu Thai Textile Co., Ltd.                                                                                   Annual Report 2017
                                     Part IX Corporate Governance
I Basic Situation of Corporate Governance
The Company continued to perfect the corporate governance structure, establish and perfect the modern enterprise system and ensure
the efficient and standardized operation of the Company’s Shareholders’ General Meeting, Board of Directors, Board of Supervisors
and Senior Executives strictly according to Company Law, Securities Law and Governing Rules for Listed Company as well as
relevant stipulations and requirements from CSRC. It formed a relationship of clear division of rights and responsibilities, assuming
each own functions and check and balance each other between the management organ, decision-making organ, supervisory organ and
management layer, so as to provide a good internal operational environment for the Company’s standardized and efficient operation.
During the Reporting Period, the Company revised Articles of Lu Thai Textile Co., Ltd. and Authorized Management System of Lu
Thai Textile Co., Ltd. At present, there is no difference between the actual situation of the Company’s corporate governance structure
and the requirements on the corporate governance of CSRC and Shenzhen Stock Exchange.
1. Shareholders and Shareholders’ General Meeting
The Company convened and held the Shareholders’ General Meeting in strict accordance with the stipulation of the Rules of
Procedure for Shareholders’ General Meeting. In 2017, as for the convening conditions of extraordinary general meetings and the
medias of information disclosure, the Company revised part of the regulations of the Articles of Association and Rules of Procedure
of the Shareholders' General Meeting of Lu Thai Textile Co., Ltd. according to the requirements of the Rules of Procedure of the
Shareholders' General Meeting of Listed Companies and Index of Articles of Listed Companies (revised in 2016), which ensured that
the convening conditions were in line with the actual situations of the Company and the information disclosure was timely and
accurate.
2. The relationship between the principal shareholders and the Company
The Company’s principal shareholders acted according to relevant standards without directly or indirectly intervening the Company’s
decision-making and operating activities; the Company was independent with its principal shareholders in business, personnel, assets,
organization, finance, and the Company’s Board of Directors, Supervisory Committee and Internal Organs could completely
independent to operate. There was no situation about annexing the assets or occupation of funds of the Company by principal
shareholders or other events on infringing the interest of the Company and other shareholders.
3. The directors and Board of Directors
The Company nominated and elected directors in strict accordance with the Articles of Association, the structure of the Board of
Directors and the number of independent directors was in compliance with the requirement of laws and regulations. Besides, it
established four special committees such as Strategy Committee, Nomination Committee, Audit Committee and Remuneration &
Appraisal Committee in accordance with the Rules of Procedure for the Board of Directors, and accordingly promulgated the work
rules for the committees. The committees clearly understood their responsibilities and operated well. The directors and independent
directors completely enjoyed the rights stipulated in Company Law and Articles of Association, which ensure the scientific and
impartial decision made by the Board of Directors of the Company. During the Reporting Period, the Company revised the Rules of
Procedure of the Board of Directors of Lu Thai Textile Co., Ltd. according to the actual situation and revised the number of the
Directors, and review permission of Board of Directors to assets disposal, external guarantee for assets pledge, related-party
transactions, and investment plan of derivatives.
4. Supervisors and Supervisory Committee
The Company’s Supervisory Committee and supervisors conscientiously performed their duties by strictly implementing relevant
regulations of Articles of Association and the Rules of Procedure for Supervisory Committee, and conducted effective supervision on
the Company’s finance, the legal and regulatory compliance of directors and senior executive in duty performance. During the
Lu Thai Textile Co., Ltd.                                                                                  Annual Report 2017
Reporting Period, according to Index of Articles of the Listed Companies (revised in 2016), the Company revised the Rules of
Procedure of the Supervisory Board of Lu Thai Textile Co., Ltd combined with the revision of Articles of Association.
5. Information disclosure
In order to ensure the truthfulness, accuracy, completeness and timeliness of company information disclosure, during the reporting
period, the Company made revision on the \"Information Disclosure Management System of Lu Thai Textile Co., Ltd.\" in accordance
with the \"Administrative Measures for the Disclosure of Information of Listed Companies \", \"Stock Listing Rules (Revised in 2014)\"
of Shenzhen Stock Exchange, and \" Standard Operation of Companies Listed on the Main Board (Revised in 2015)\" and other
relevant provisions as well as the \"Notice on Further Improving Investor Protection in the Capital Market of Shandong Province
(LZJF [2017] No. 6 Document)\" issued by the Shandong Securities Regulatory Bureau.
6. Investor relations management
During the reporting period, to maintain good communication with investors, the Company accepted on-site investigations and
consultations of investors through on-site investigations and telephone consultations, and promptly answered questions asked by
investors on the SZSE Easy-IR. During the reporting period, based on actual situation, the Company made revision on the
\"Information Disclosure Management System of Lu Thai Textile Co., Ltd.\" in accordance with the relevant laws, regulations,
normative documents of the \"Stock Listing Rules of Shenzhen Stock Exchange\", \"Guidelines for Relations between Listed
Companies and Investors\", \"Guidelines of the Shenzhen Stock Exchange for the Standard Operation of Listed Companies on the
Main Board\" and the Articles of Associations.
Any significant incompliance with the regulatory documents issued by the CSRC governing the governance of listed companies
□ Yes √ No
No such cases in this Reporting Period.
II Independence of Businesses, Personnel, Asset, Organizations and Finance which are
Separate from the Controlling Shareholder
1. As for the business: the Company completely separates from the controlling shareholders in the business that possesses the entirely
independent production, supply and sales system and the autonomous operating ability.
2. As for the personnel: the Company remains completely independent in the Human Resources aspects such as the labor, the
personnel and the wages with entirely independent self-controlling ability.
3. As for the assets: the Company possesses the entire and independent legal person property right with independent and perfect the
production system, auxiliary production systems and supporting facilities; and possesses the independent ownership of the intangible
assets such as the i Industrial property, trademarks, non-patented technology.
4. As for the institution: the organizations and institutions of the Company are all independent and perfect that there is no any
situation of working with the controlling shareholders.
5. As for the finance: the Company possesses independent financial departments with normative financial accounting system and
financial management system as well as internal control system with independent bank account.
III Horizontal Competition
□ Applicable √ Not applicable
Lu Thai Textile Co., Ltd.                                                                           Annual Report 2017
IV Annual and Special Meetings of Shareholders Convened during this Reporting Period
1. Meetings of Shareholders Convened during this Reporting Period
                                             Proportion of
                                                                                                           Index to the
       Session                  Type          investors'       Convening date     Disclosure date
                                                                                                              disclosed
                                             participation
                                                                                                       Announcement on
                                                                                                       the Resolution of the
                                                                                                       Meeting (No.:
                                                                                                       2017-010) disclosed
                                                                                                       on March 22, 2017
       2017 1st
                            Extraordinary                                                              on Securities Times,
    Extraordinary                                      0.00% 03/21/2017         03/22/2017
                        General Meeting                                                                China Securities
  General Meeting
                                                                                                       Journal, Shanghai
                                                                                                       Securities News, Ta
                                                                                                       Kung Pao, and
                                                                                                       http://www.cninfo.co
                                                                                                       m.cn
                                                                                                       Announcement on
                                                                                                       the Resolution of the
                                                                                                       Meeting (No.:
                                                                                                       2017-023) disclosed
                                                                                                       on May 13, 2017 on
2016 Annual General         Annual General                                                             Securities Times,
                                                       0.00% 05/12/2017         05/13/2017
      Meeting                  Meeting                                                                 China Securities
                                                                                                       Journal, Shanghai
                                                                                                       Securities News, Ta
                                                                                                       Kung Pao, and
                                                                                                       http://www.cninfo.co
                                                                                                       m.cn
                                                                                                       Announcement on
                                                                                                       the Resolution of the
                                                                                                       Meeting (No.:
                                                                                                       2017-030) disclosed
                                                                                                       on August 25, 2017
      2017 2nd
                            Extraordinary                                                              on Securities Times,
    Extraordinary                                      0.00% 08/24/2017         08/25/2017
                        General Meeting                                                                China Securities
  General Meeting
                                                                                                       Journal, Shanghai
                                                                                                       Securities News, Ta
                                                                                                       Kung Pao, and
                                                                                                       http://www.cninfo.co
                                                                                                       m.cn
Lu Thai Textile Co., Ltd.                                                                                              Annual Report 2017
                                                                                                                            Announcement on
                                                                                                                            the Resolution of the
                                                                                                                            Meeting (No.:
                                                                                                                            2017-047) disclosed
                                                                                                                            on November 9,
                rd
       2017 3                                                                                                               2017 on Securities
                            Extraordinary
    Extraordinary                                                 0.00% 11/08/2017                 11/09/2017               Times, China
                          General Meeting
  General Meeting                                                                                                           Securities Journal,
                                                                                                                            Shanghai Securities
                                                                                                                            News, Ta Kung Pao,
                                                                                                                            and
                                                                                                                            http://www.cninfo.co
                                                                                                                            m.cn
2. Special Meetings of Shareholders Convened at the Request of Preference Shareholders with Resumed
Voting Rights
□ Applicable √ Not applicable
V Performance of Independent Directors in this Reporting Period
1. Attendance of Independent Directors in Board Meetings and General Meetings of Shareholders
                     Attendance of independent directors in Board Meetings and General Meetings of Shareholders
                                                                                                                  Absent in
                      Due presence                           Presence in        Presence in                                          Presence
                                         Presence in                                              Absence in          Board
                         in Board                              Board               Board                                              General
   Independent                              Board                                                   Board        Meetings for
                       Meetings in                           Meetings by          Meetings                                         Meetings of
   director name                         Meetings on                                              Meetings            two
                      this Reporting                        telecommunica        through a                                         Shareholders
                                         site (times)                                              (times)       consecutive
                      Period (times)                         tion (times)       proxy (times)                                         (times)
                                                                                                                      times
Xu Jianjun                          10                  1                   8                 1                0 No
Zhao Yao                            10                  2                   8                 0                0 No
Bi Xiuli                            10                  1                   8                 1                0 No
Pan Ailing                          10                  2                   8                 0                0 No
Wang Xinyu                          10                  2                   8                 0                0 No
Notes to non-attendance in Board Meetings in person for two consecutive times
Not applicable.
2. Objections Raised by Independent Directors on Issues of the Company
Indicate by tick mark whether any independent directors raised any objections on issues of the Company.
□ Yes √ No
No such cases in this Reporting Period.
Lu Thai Textile Co., Ltd.                                                                                        Annual Report 2017
3. Other Details about the Performance of Duties by Independent Directors
Indicate by tick mark whether any suggestions from independent directors were adopted by the Company.
√ Yes □ No
Suggestions from independent directors adopted or not adopted by the Company:
The Independent Directors of the Company had not raised any objection to the proposals and other events approved and reviewed by
the Board of the Directors while executed the carefully review on the events needed advices and put forward the professional
suggestion and advice as well as stated 15 independent advices which improved the scientificity and objectivity of the
decision-making that exerted the due role on the supervision mechanism for improving the Company.
VI Performance of Duties by Specialized Committees under the Board during this Reporting
Period
I. Duty fulfillment of Audit Committee under the Board
1. Major work of the 2017 annual report of the Audit Committee:
(1) The Audit Committee had held the 2017 the 1st Meeting of the Audit Committee on the Financial Audit Work in the meeting room
of the Company on November 17, 2017 and the meeting had confirmed the time and arrangement plan of the 2017 annual financial
audit work unanimously with the 2017 Audit Institution Ruihua CPAs (LLP).
(2) On January 27, 2018, the Audit Committee had held the 2nd Meeting of the 2017 Audit Work, which reviewed and submitted the
financial report audited by Ruihua CPAs (LLP) and issued the written advice.
(3) During the audit process, the Company had been maintained the contract and communication with the project leader of Ruihua
CPAs (LLP) by the methods such as the telephones and e-mails and had been urged which to submit the audit report within the
appointed time.
(4) The 3rd Meeting on 2017 Annual Audit and the 2017 Annual Work Conference, were convened by the Committee on April 15,
2018, where the following proposals were approved as resolutions, namely, the audited 2017 Financial Report of the Company, the
Summary Report on the Audit Conducted by Ruihua CPAs (LLP) on the Company’s 2017 Financial Report.
2. Written opinions, summary report of the annual audit, and resolutions of 2017 Work Conference on Annual Report by Audit
Committee
(1) According to the Rules for Audit Committee of the Board Concerning Annual Reports of Lu Thai Textile Co., Ltd., the Audit
Committee shall perform its duties of conducting supervision and checks in the Company’s preparation and disclosure of its annual
reports. The Committee reviewed the 2017 financial and accounting statements prepared by the Company’s Financial Department
before the presence of the registered accountants for the annual audit, and expressed its opinion as follows:
1. The financial and accounting statements were prepared in accordance with the Company’s accounting policy with proper
application of the accounting policy and reasonable accounting estimates, which were in line with the New Accounting Standards for
Business Enterprises, the Accounting System for Business Enterprises, and the relevant regulations issued by the Ministry of Finance
of PRC;
2. The subsidiary statements included in the Company’s consolidated statements were complete in terms of contents, providing an
accurate basis for the statement combination;
3. The Company’s financial statements were found objective, factual and accurate with no major misstatements or information
omission.
4. Since there is still a certain period of time from this review of the financial statements to the formal issuance of the auditor’s report
and the financial statements, the Company’s Financial Department is advised to pay close attention to and carefully handle the
Lu Thai Textile Co., Ltd.                                                                                  Annual Report 2017
matters after the balance sheet date, so as to ensure the fairness, factuality and completeness of the financial statements. The Audit
Committee is of the opinion that the financial and accounting statements are ready to be submitted to the registered accountants for
audit.
(2) Audit Committee’s written opinion on the Company’s financial statements after the preliminary audit opinion was issued by
Ruihua CPAs (LLP):
According to the Rules for Audit Committee of the Board Concerning Annual Reports of Lu Thai Textile Co., Ltd., the Audit
Committee shall perform its duties of conducting supervision and checks in the Company’s preparation and disclosure of its annual
reports. We effectively communicated with the said CPA firm (LLP) at the beginning of the audit. And we once again reviewed the
Company’s 2017 financial and accounting statements following the preliminary audit opinion to the Company’s 2017 financial
statements issued by the CPA firm (LLP), and expressed our opinions as follows:
In accordance with the New Accounting Standards for Business Enterprises and the Company’s relevant financial rules, the financial
statements were prepared in a rational and standardized way, which fairly, factually, accurately and completely presented the
Company’s assets, liabilities, shareholders’ equity and operation results by December 31, 2017.
The Audit Committee is of the opinion that the Company’s 2017 financial and accounting statements preliminarily audited by RSM
China Certified Public Accountants (Special General Partnership) are ready to be submitted to the 16th Session of the 8th Board of the
Directors for review.
(3) Resolutions made at 2017 Annual Work Conference of Audit Committee of the Board
The Audit Committee of the Board of Lu Thai Textile Co., Ltd. held its 2017 Annual Work Conference at Banyang Villa Meeting
Room of the Company on April 15, 2018. Three persons were supposed to attend the meeting, and all three of them were in fact
present at the meeting as well as the Chief Accountant, the Manager Assistant of the Audit Department, the project responsible person
of Lu Thai of Ruihua CPAs attended the meeting. Mr. Zhao Yao, Chairman of the Audit Committee, presided over the meeting, and
Chief Accountant and Chief Auditor of the Audit Department sat in on the meeting. The meeting was convened in accordance with
the Company Law and the Articles of Association of the Company. And the following proposals were passed by vote at the meeting:
I. With 3 favorable votes, 0 negative votes and no abstentions, the 2017 Financial Report of the Company audited by Ruihua CPAs
(LLP) was passed;
II. With 3 favorable votes, 0 negative votes and no abstentions, the Summary Report on the Audit Conducted by Ruihua CPAs (LLP)
on the Company’s 2017 Financial Report was passed;
III. With 3 favorable votes, 0 negative votes and no abstentions, the Company paid RMB1.735 million to the said CPAs firm as fees
for the 2017 annual financial report audit and internal control audit.
IV. With 3 favorable votes, 0 negative votes and no abstentions, the Proposal on Employment of Ruihua CPAs (LLP) as the
Company’s audit agency for 2018 Finance and Internal Control was passed.
The Committee agrees to submit the above-mentioned proposals I and III and IV to the Board of Directors for examination on the
16th Session of the 8th Board of Directors.
II. Duty performance of Remuneration Committee affiliated to the Board of Directors
1. The Remuneration Committee of the Board of Lu Thai Textile Co., Ltd. held the First Conference in 2017 at Banyang Villa
Meeting Room of the Company on March 28, 2017. Five persons were supposed to attend the meeting, and all of them were in fact
present at the meeting. The meeting held by the Company met with the relevant regulations of Company Law and the Articles of
Association of the Company and reviewed and approved the Proposal on the 2016 Appraisal Result of the Senior Executives of Lu
Thai Company by the voting method and agreed to submit the above-mentioned proposal to the Board of Directors for examination
on the 6th Session of the 8th Board of Directors.
2. According to authorization of the 6th Meeting of the 8th Board of Directors of Lu Thai, remuneration committee of board of
directors of Lu Thai Textile Co., Ltd. held the second meeting of 2017 in the meeting room of Panyang Villa Meeting Room of the
Company on May 23, 2017. Five persons should attend the meeting and five persons actually attended the meeting. Among the five
Lu Thai Textile Co., Ltd.                                                                                     Annual Report 2017
persons, Bi Xiuli, Wang Xinyu, Zhao Yao, and Pan Ailing voted in the form of communication. Chief accountant and the secretary of
board of directors also attended the meeting. The meeting accorded with relevant stipulations in Company Law and Articles of
Company. Proposal for Risk Fund Assessment and Release Amount for 2016 weas passed at the meeting in voting form.
III. Duty execution of the strategy committee of board of directors
The Strategy Committee of Board of Directors of Lu Thai Textile Co., Ltd. held the 1st Conference of 2017 in the meeting room of
Panyang Villa Meeting Room of the Company on March 28, 2017. 13 persons should attend the meeting and 13 persons actually
attended the meeting. Chief accountant also attended the meeting. This meeting was hosted by Liu Liu Zibin, the president of
strategy committee. The meeting accorded with relevant stipulations in Company Law and Articles of Association and passed the
following proposals in voting form.
1. Overall Strategic Objectives of Yarn Dyed Fabric of Lu Thai Textile Co., Ltd. for 2017-2019.
2. Overall Strategic Objectives of Shirts Processing of Lu Thai Textile Co., Ltd. for 2017-2019.
3. Brand, R&D, human resources, fabric information, and clothing manufacture information engineering sub-plan.
4. 2018 Annual Operation Plan of Lu Thai Textile Co., Ltd.
IX. Duty performance of nominations committee affiliated to the Board of Directors
1. The Company held the 1st meeting of 2017 of the nominations committee of the 8th Board of Directors on June 8, 2017 according
to the relevant regulations of the Company Law and Articles of Association, with 6 favorable votes, 0 negative votes and no
abstentions, which reviewed and approved the Proposal on Nominating Candidates of the 8th Board of Directors. Mr. Liu Deming
was nominated as the candidate of the director of the 8th Board of Director, and the term of office will expire until June 5, 2019. It
was submitted to the 6th Session of the 8th Board of Directors for approval, and the 6th Session of the 8th Board of Directors reviewed
and approved the proposal.
VII Performance of Duties by the Supervisory Board
Did the Supervisory Board find any risks to the Company during its supervision in this Reporting Period?
□ Yes √ No
The Supervisory Board raised no objections in this Reporting Period.
VIII Appraisal and Incentive for Executive Officers
In the Reporting Period, Remuneration Committee of the Board of Directors appraised operating achievements of the Company for
the year 2016 according to Incentive and Restricted Proposal for Senior Executives of Lu Thai Textile Co., Ltd, and drew up
incentive proposal for senior executives, which will be executed after review and approval by the 6st Session of the 8th Board of
Directors dated March 28, 2017. During the Reporting Period, the Company constantly improved the performance evaluation
mechanism and made the evaluation and incentive of the Senior Executives concerned with the Company’s performances and the
individual working results. According to the overall development strategy and the annual operating target of the Company at the
period-begin, the Company confirms the annual performance comprehensive indication and the management duty of each Senior
Executives, and executes the performance examination and the redemption of the rewards and punishment for the Senior Executives
by the Remuneration and Examination Committee affiliated to the Board of Directors at the year-end. The Company will constantly
improve the evaluation and incentive mechanism that to tightly concern the salary of the Senior Executives with the management
level and the operating performance so that to fully mobilize and inspire the initiative and creativity of them.
Lu Thai Textile Co., Ltd.                                                                                          Annual Report 2017
IX Internal Control
1. Serious Internal Control Defects Found in this Reporting Period
□ Yes √ No
2. Internal Control Self-evaluation Report
Disclosure date of the Self-appraisal
                                                  04/17/2018
Report on Internal Control
                                                  For details, please refer to the Self-appraisal Report on Internal Control of Lu Thai
Disclosure index of     the Self-appraisal
                                                  Textile Co., Ltd. simultaneously disclosed on www.cninfo.com.cn with the 2017
Report on Internal Control
                                                  Annual Report of the Company.
The proportion of      total assets included in
evaluation scope entities in      the
                                                                                                                                      88.41%
Company's total assets of the consolidated
financial statements
The proportion of operation revenue
included in evaluation scope entities in
                                                                                                                                      90.71%
the Company's operation revenue of the
consolidated financial statements
                                                           Defect judging standards
                  Category                                      Financial Report                            Non-Financial Report
                                                  Great defect: malpractices of the Directors,    Great defect: violated the national laws
                                                  Supervisors and Senior Executives; the          and regulations; the decision-making of
                                                  Company revised the published financial         the enterprise was not scientific that led
                                                  report; the CPA founded the current financial to the mistakes of itself; outflow of the
                                                  report occurred significant misstatement        management personnel or the technician
                                                  while during the operating process of the       personnel was serious; frequently
                                                  internal control could not founded the          appeared the negative news from the
                                                  misstatement; the supervision of the Audit      Media; the significant business lacked of
                                                  Committee and the internal audit institution systematic control or the systematic
Qualitative criteria
                                                  of the Company on the internal control was      control was invalid; the result of the
                                                  invalid. Significant defeat: had not abide by internal control assessment which was
                                                  the generally accepted accounting principles the great defect event had not been
                                                  to choose and apply the accounting policies; revised. Significant defeat: violated the
                                                  had not built up the anti-fraud and significant enterprise internal regulations that
                                                  counterbalance mechanism and control            caused rather serious losses; significant
                                                  measures; during the financial report           business lacked of systematic control;
                                                  process, there occurred single or multiple      outflow of the rather important personnel
                                                  defects which not reached the recognition       was serious; the Media reported the
Lu Thai Textile Co., Ltd.                                                                                       Annual Report 2017
                                             standard of the significant defeat but            negative news that caused rather serious
                                             influenced the true and accurate target of the negative influence; rather important
                                             financial report. General defect: other           business lacked of systematic control or
                                             internal control defect which had not             the systematic control was invalid; the
                                             constructed as the great defeat, significant      results of the internal control assessment
                                             defect.                                           which as the significant defect had not
                                                                                               been revised. General defect: other
                                                                                               internal control defect which had not
                                                                                               constructed as the great defeat,
                                                                                               significant defect.
                                                                                               Great defect: the direct financial losses
                                             Great defect: misstatement≥2% of the total
                                                                                               were more than RMB6 million or had
                                             profits amount; misstatement≥0.3% of the
                                                                                               been formally and externally disclosed
                                             total assets amount; misstatement≥0.3% of
                                                                                               and caused negative influences on the
                                             the total operating income;
                                                                                               disclosure of the periodical report of the
                                             misstatement≥0.4% of the total owners’
                                                                                               Company. Significant defect: the direct
                                             equities amount. Significant defect: 1% of
                                                                                               financial losses were of RMB3 million
                                             the total profits amount ≤misstatement<2%
                                                                                               (including RMB3 million)-RMB6
                                             of the total profits amount; 0.15% of the total
                                                                                               million or had been punished by the
                                             assets amount ≤misstatement<0.3% of the
                                                                                               state-owned government sectors while
                                             total assets amount; 0.15% of the total
Quantitative criteria                                                                          not caused negative influences on the
                                             operating amount ≤misstatement<0.3% of
                                                                                               disclosure of the periodical report of the
                                             the total operating amount; 0.2% of the total
                                                                                               Company. General defect: the direct
                                             owners’ equities amount
                                                                                               financial losses were of RMB0.5 million
                                             ≤misstatement<0.4% of the total owners’
                                                                                               (including RMB0.5 million)-RMB 3
                                             equities amount. General defect:
                                                                                               million or had been punished by the
                                             misstatement<1% of the total profits amount;
                                                                                               below-provincial (including the
                                             misstatement<0.15% of the total assets
                                                                                               provincial level) government sectors
                                             amount; misstatement<0.15% of the total
                                                                                               while not caused negative influences on
                                             operating income; misstatement<0.2% of the
                                                                                               the disclosure of the periodical report of
                                             total owners’ equities amount.
                                                                                               the Company.
Number of significant defects of financial
report (piece)
Number of significant defects of non-
financial report (piece)
Number of important defects of financial
report (piece)
Number of important defects of
non-financial report (piece)
X Auditor’s Report on Internal Control
√ Applicable □ Not applicable
Lu Thai Textile Co., Ltd.                                                                                   Annual Report 2017
                                   Audit opinion paragraphs in the Audit Report on Internal Control
IV. Audit opinion of the internal control of the financial report
We believe that the Company has made valid internal control on financial report in all significant aspects on December 31, 2017
according to the Basic Rules for Enterprise Internal Control and other relevant stipulations.
Particulars about Audit Report on
                                       Disclosure
Internal Control
Disclosure date of the Audit Report
                                       04/17/2018
on Internal Control
Disclosure index of the Audit          For details, please refer to the Auditor’s Report on Internal Control on www.cninfo.com.cn at
Report on Internal Control             the same time of disclosing the Company’s 2017Annual Report.
Type of Audit Report on Internal
                                       Unqualified auditor’s report
Control
Whether there is significant defect
                                       No
in non-financial report
Indicate by tick mark whether any modified opinions are expressed by the CPAs firm in its auditor’s report on the Company’s
internal control.
□ Yes √ No
Indicate by tick mark whether the auditor’s report on the Company’s internal control issued by the CPAs firm is consistent with the
self-evaluation report of the Board.
√ Yes □ No
Lu Thai Textile Co., Ltd.                                                                               Annual Report 2017
                                          Part X Corporate Bonds
Are there any corporate bonds publicly offered and listed on the stock exchange, which were undue before the approval date of this
Report or were due but could not be redeemed in full?
No.
Lu Thai Textile Co., Ltd.                                                                                     Annual Report 2017
                                        Part XI Financial Statements
I Independent Auditor’s Report
Type of auditor’s opinion                                          Standard unqualified opinion
Date of signing the auditor’s report                               04/15/2017
Name of the auditor                                                 Ruihua Certified Public Accountants LLP
No. of the auditor’s report                                        RHSZ[2018] No.37040003
Name of CPA                                                         He Feng, Cui Xiaoli
                                                      Text of the Auditor’s Report
To the shareholders of Lu Thai Textile Co., Ltd:
I Opinion
We have audited the financial statements of Lu Thai Textile Co., Ltd. (hereinafter referred to as the “Company”), which comprise the
consolidated and parent company balance sheets as of December 31, 2017, the consolidated and parent company statements of
income, cash flows and changes in owners’ equity for the year then ended, as well as the notes to the financial statements.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated and parent company
financial position of the Company at December 31, 2017, and the consolidated and parent company operating results and cash flows
for the year then ended, in conformity with the Chinese Accounting Standards (CAS).
II Basis for Opinion
We conducted our audits in accordance with the Audit Standards for Chinese Registered Accountants. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for Audit of Financial Statements section of our report. We are
independent of the Company in accordance with the China Code of Ethics for Certified Public Accountants, and we have fulfilled our
other ethical responsibilities in accordance with the said Code of Ethics. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
III Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and
in forming our opinion thereon, and we do not provide a separate opinion on these matters. And key audit matter identified in our
audit is summarized as follows:
(I) Recognition of income
1. Item description
The sales income of Lu Thai Textile Co., Ltd. mainly comes from sales of yarn-dyed fabrics and shirts. The operation income of the
Company in 2017 was RMB 6,409,224,000, of which export income accounted for 65.71%. As stated in \"Note IV 22 Income\" of the
financial statements, for the income from domestic sales, the amount of product sales income is recognized when the products are
delivered to purchaser according to the contract. The income is also recognized when the purchase price has been recovered or the
receipt certificate has been received and the related economic benefits are likely to flow into the Company, and the product-related
costs can be measured in a reliable way. For the income from export sales, the amount of sales income is recognized when products
Lu Thai Textile Co., Ltd.                                                                                      Annual Report 2017
are declared and depart from port according to the contract, and the bill of lading is received. The income is also recognized when the
purchase price has been recovered or the receipt certificate has been received and the related economic benefits are likely to flow into
the Company, and the product-related costs can be measured in a reliable way.
Since income is one of the key performance indicators of Lu Thai Textile Co., Ltd., there is an inherent risk that the management
manipulates income to achieve specific goals or expectations, therefore, we identify income recognition as a key audit item.
2. Audit response
(1) Evaluate and test the rationality of the internal control design related to income recognition and the operation effectiveness.
(2) Understand and assess the rationality of accounting policies related to income recognition by interviews with management and
review of relevant contract terms.
(3) Perform analysis procedures on income and costs, and analyze the rationality of fluctuations in sales volume, unit price and gross
profit of each month and each year.
(4) Check the supporting documents such as sales contracts, delivery receipts, invoices, customs declarations, shipping orders and
receipts.
(5) Confirm the balances of major customers and the amount of transactions, and execute the procedure of customs confirmation of
the amount of export income for the year 2017.
(6) Perform cut-off tests on the income recognized before and after the balance sheet date, check the delivery receipts, customs
declarations, shipping orders and receipts etc. to assess whether the income is recognized within appropriate period.
(II) Depreciation of inventory
1. Item description
As of December 31, 2017, the inventory balance of Lu Thai Textile Co., Ltd. was RMB2,153,891,300.00 and the inventory
depreciation reserve was RMB53,230,100.00. As stated in \"Notes IV 10 Inventory\" and \"Notes VI 7 Inventory\" of the financial
statements, inventories are measured by cost or net realizable value, which is lower. The management determines the net realizable
value of inventories with significant judgments and estimates, and therefore, we identify inventory depreciation as a key audit item.
2. Audit response
(1) Understand the process of provision for inventory depreciation reserves, evaluate and test the internal control related to
preparation for inventory depreciation.
(2) Monitor the inventory and check the inventory condition, check whether the defective and long-lived inventory have been
identified.
(3) Check the inventory age analysis sheet.
(4) Test the calculation table for inventory depreciation preparation to assess the rationality of estimated selling price, and compare
the post-sales price with the estimated selling price.
IV Other Information
The Company’s management is responsible for the other information. The other information comprises all of the information
included in the Company’s 2017 Annual Report other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.
V Responsibilities of Management and Those Charged with Governance for Financial Statements
Lu Thai Textile Co., Ltd.                                                                                       Annual Report 2017
The Company’s management (hereinafter referred to as the “Management”) is responsible for the preparation of the financial
statements that give a fair view in accordance with CAS, and for designing, implementing and maintaining such internal control as
the management determines is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the management is responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
management either intends to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
VI Auditor’s Responsibilities for Audit of Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with CAS will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with CAS, we exercise professional judgment and maintain professional skepticism throughout the
audit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for
our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
(2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances.
(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by the management.
(4) Conclude on the appropriateness of the management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required by CAS to draw
users’ attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Company to cease to continue as a going concern.
(5) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the
Company audit. We remain solely responsible for our audit opinion.
Lu Thai Textile Co., Ltd.                                                                                      Annual Report 2017
We communicate with those charged with governance regarding the planned scope and timing of the audit and significant audit
findings, including any noteworthy deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in
the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our
auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
          Ruihua Certified Public Accountants LLP                                 Chinese CPA (Engagement Partner):
             Beijing  China                                                         Chinese CPA:
                                                                                   April 15, 2018
II Financial Statements
Currency unit for the statements in the notes to the financial statements: RMB
1. Consolidated Balance Sheet
Prepared by Lu Thai Textile Co., Ltd.
                                                          December 31, 2017
                                                                                                                             Unit: RMB
                  Item                                 December 31, 2017                                 December 31, 2016
Current assets:
  Monetary assets                                                       693,989,293.38                                 667,304,702.34
  Settlement reserve
  Interbank loans granted
  Financial assets at fair value through
profit or loss
  Derivative financial assets
  Notes receivable                                                      139,276,742.34                                  84,161,909.91
  Accounts receivable                                                   334,080,524.05                                 293,129,727.93
  Prepayments                                                           146,463,066.38                                 212,488,120.48
  Premiums receivable
  Reinsurance receivables
  Receivable      reinsurance    contract
reserve
Lu Thai Textile Co., Ltd.                                     Annual Report 2017
  Interest receivable                           590,003.07
  Dividends receivable
  Other receivables                          56,182,782.04             46,720,732.97
  Financial assets purchased under
resale agreements
  Inventories                              2,100,661,221.93         1,817,542,870.99
  Assets classified as held for sale
  Current portion of non-current assets
  Other current assets                      118,588,703.34            108,332,246.24
Total current assets                       3,589,832,336.53         3,229,680,310.86
Non-current assets:
  Loans and advances to customers
  Available-for-sale financial assets        84,533,000.00             24,500,000.00
  Held-to-maturity investments
  Long-term receivables                                                 2,310,000.00
  Long-term equity investments               97,536,732.02
  Investment property                        24,563,544.58             25,844,090.56
  Property, plant and equipment            5,421,295,850.03         5,273,148,708.20
  Construction in progress                  157,421,820.68            177,075,655.16
  Construction materials                     56,913,806.06            117,120,463.50
  Proceeds from disposal of property,
plant and equipment
  Productive living assets                                              1,381,292.75
  Oil and gas assets
  Intangible assets                         498,948,301.48            384,253,077.39
  R&D expense
  Goodwill                                   20,613,803.29             20,613,803.29
  Long-term prepaid expense                 107,877,194.52            114,227,364.54
  Deferred income tax assets                 74,697,159.71             63,190,080.76
  Other non-current assets                   36,390,478.85             31,259,468.38
Total non-current assets                   6,580,791,691.22         6,234,924,004.53
Total assets                              10,170,624,027.75         9,464,604,315.39
Current liabilities:
  Short-term borrowings                    1,135,124,996.40           873,261,856.02
  Borrowings from central bank
Lu Thai Textile Co., Ltd.                                            Annual Report 2017
  Customer deposits and deposits from
banks and other financial institutions
  Interbank loans obtained
  Financial liabilities at fair value
through profit or loss
  Derivative financial liabilities
  Notes payable                                      7,301,771.85
  Accounts payable                                 366,265,132.65            257,635,466.41
  Advances from customers                          119,785,945.48             97,929,002.93
  Financial      assets          sold    under
repurchase agreements
  Handling charges and commissions
payable
  Payroll payable                                  316,836,488.95            315,678,103.92
  Taxes payable                                     33,055,090.58             77,775,673.14
  Interest payable                                   1,572,231.86              1,165,730.47
  Dividends payable                                    441,113.64                441,113.64
  Other payables                                   127,090,009.25             79,744,084.66
  Reinsurance payables
  Insurance contract reserve
  Payables     for   acting        trading   of
securities
  Payables for acting underwriting of
securities
  Liabilities directly associated with
assets classified as held for sale
  Current     portion       of     non-current
                                                    62,750,292.49
liabilities
  Other current liabilities
Total current liabilities                         2,170,223,073.15         1,703,631,031.19
Non-current liabilities:
  Long-term borrowings                                                       135,678,044.89
  Bonds payable
     Including: Preferred shares
    Perpetual bonds
  Long-term payables
  Long-term payroll payable                         93,843,473.02             79,122,422.89
  Specific payables
Lu Thai Textile Co., Ltd.                                                              Annual Report 2017
  Provisions
  Deferred income                                        126,737,092.32                         95,990,489.79
  Deferred income tax liabilities                          2,904,899.46                          2,341,089.87
  Other non-current liabilities                            1,840,000.00                          1,840,000.00
Total non-current liabilities                            225,325,464.80                        314,972,047.44
Total liabilities                                      2,395,548,537.95                      2,018,603,078.63
Owners’ equity:
  Share capital                                          922,602,311.00                        922,602,311.00
  Other equity instruments
     Including: Preferred shares
    Perpetual bonds
  Capital reserves                                       699,493,593.82                        761,280,557.83
  Less: Treasury shares
  Other comprehensive income                              16,810,574.22                         53,293,544.89
  Specific reserve
  Surplus reserves                                       962,933,579.06                        891,870,522.68
  General reserve
  Retained earnings                                    4,629,102,712.06                      4,341,866,189.19
Total equity attributable to owners of
                                                       7,230,942,770.16                      6,970,913,125.59
Parent Company
Non-controlling interests                                544,132,719.64                        475,088,111.17
Total owners’ equity                                  7,775,075,489.80                      7,446,001,236.76
Total liabilities and owners’ equity                 10,170,624,027.75                      9,464,604,315.39
Legal representative: Liu Zibin                                           Chief Accountant: Zhang Hongmei
Financial Manager: Zhang Keming
2. Parent Company Balance Sheet
                                                                                                    Unit: RMB
                    Item                   December 31, 2017                    December 31, 2016
Current assets:
  Monetary assets                                        267,809,829.78                        177,016,859.63
  Financial assets at fair value through
profit or loss
  Derivative financial assets
  Notes receivable                                        93,244,480.81                         64,421,665.52
Lu Thai Textile Co., Ltd.                                    Annual Report 2017
  Accounts receivable                      305,903,590.98            297,026,110.33
  Prepayments                               81,471,605.69            139,013,057.80
  Interest receivable                          220,590.38
  Dividends receivable
  Other receivables                        519,788,239.57            340,458,208.20
  Inventories                             1,164,055,145.96         1,086,364,931.72
  Assets classified as held for sale
  Current portion of non-current assets
  Other current assets                      53,657,308.33              1,126,006.88
Total current assets                      2,486,150,791.50         2,105,426,840.08
Non-current assets:
  Available-for-sale financial assets       72,533,000.00             12,500,000.00
  Held-to-maturity investments
  Long-term receivables
  Long-term equity investments            1,816,493,348.06         1,711,021,866.04
  Investment property                       15,536,968.08             14,829,443.58
  Property, plant and equipment           2,811,046,847.91         3,019,132,803.64
  Construction in progress                  25,703,496.87             25,796,329.33
  Construction materials                     1,609,204.75                663,894.82
  Proceeds from disposal of property,
plant and equipment
  Productive living assets
  Oil and gas assets
  Intangible assets                        249,994,817.83            229,433,475.02
  R&D expense
  Goodwill
  Long-term prepaid expense
  Deferred income tax assets                51,474,007.76             62,042,513.61
  Other non-current assets                  27,077,391.31              8,831,098.34
Total non-current assets                  5,071,469,082.57         5,084,251,424.38
Total assets                              7,557,619,874.07         7,189,678,264.46
Current liabilities:
  Short-term borrowings                    622,438,413.87            503,005,010.24
  Financial liabilities at fair value
through profit or loss
Lu Thai Textile Co., Ltd.                                         Annual Report 2017
  Derivative financial liabilities
  Notes payable                                   6,124,239.92
  Accounts payable                              147,883,359.29            158,737,347.81
  Advances from customers                        52,314,250.61             54,552,285.78
  Payroll payable                               240,391,459.47            240,389,712.34
  Taxes payable                                  17,297,415.92             47,790,003.82
  Interest payable                                  973,134.21                646,147.15
  Dividends payable                                 441,113.64                441,113.64
  Other payables                                 22,933,385.28             19,309,386.42
  Liabilities directly associated with
assets classified as held for sale
  Current      portion      of   non-current
liabilities
  Other current liabilities
Total current liabilities                      1,110,796,772.21         1,024,871,007.20
Non-current liabilities:
  Long-term borrowings
  Bonds payable
     Including: Preferred shares
    Perpetual bonds
  Long-term payables
  Long-term payroll payable                      93,843,473.02             79,122,422.89
  Specific payables
  Provisions
  Deferred income                                80,580,249.14             62,691,326.97
  Deferred income tax liabilities                     4,950.00
  Other non-current liabilities
Total non-current liabilities                   174,428,672.16            141,813,749.86
Total liabilities                              1,285,225,444.37         1,166,684,757.06
Owners’ equity:
  Share capital                                 922,602,311.00            922,602,311.00
  Other equity instruments
     Including: Preferred shares
    Perpetual bonds
  Capital reserves                              759,836,702.91            759,793,238.92
Lu Thai Textile Co., Ltd.                                              Annual Report 2017
  Less: Treasury shares
  Other comprehensive income                              28,050.00
  Specific reserve
  Surplus reserves                                   959,824,839.42            888,761,783.04
  Retained earnings                                 3,630,102,526.37          3,451,836,174.44
Total owners’ equity                               6,272,394,429.70          6,022,993,507.40
Total liabilities and owners’ equity               7,557,619,874.07          7,189,678,264.46
3. Consolidated Income Statement
                                                                                    Unit: RMB
                     Item                    2017
1. Operating revenue                                6,409,224,044.97          5,990,493,909.36
  Including: Sales revenue                          6,409,224,044.97          5,990,493,909.36
     Interest revenue
     Premium revenue
     Handling charge and commission
revenue
2. Cost of operating revenue                        5,469,545,482.56          5,023,662,230.26
  Including: Cost of sales                          4,477,047,784.68          4,007,101,690.65
     Interest expense
     Handling charge and commission
expense
     Surrenders
     Net claims paid
     Net amount provided as insurance
contract reserve
     Expenditure on policy dividends
     Reinsurance premium expense
     Taxes and surtaxes                                96,231,603.00            86,527,783.76
     Selling expense                                 144,061,780.39            158,869,993.22
     Administrative expense                          651,530,968.94            661,355,141.82
     Finance costs                                     63,342,671.31            20,949,153.10
     Asset impairment losses                           37,330,674.24            88,858,467.71
Add: Gains on changes in fair value (“-”
                                                                                63,992,131.36
for losses)
  Investment income (“-” for loss)                    2,331,330.34            -60,779,660.20
Lu Thai Textile Co., Ltd.                                               Annual Report 2017
      Including: Share of profit or loss of
                                                        -2,463,267.98
joint ventures and associates
  Foreign exchange gains (“-” for losses)
  Asset disposal income (“-” for loss)                1,242,000.54             -6,843,361.94
  Other income                                         58,099,783.92
3. Operating income (“-” for loss)                 1,001,351,677.21           963,200,788.32
  Add: Non-operating income                            12,122,767.09             73,687,483.32
  Less: Non-operating expense                           9,022,725.64              7,118,710.24
4. Pretax income (“-” for loss)                    1,004,451,718.66         1,029,769,561.40
  Less: Income tax expense                            121,132,609.06            173,382,412.36
5. Net income (“-” for net loss)                    883,319,109.60            856,387,149.04
  5.1 Net income from continuing
                                                      883,319,109.60            856,387,149.04
operations (“-” for net loss)
  5.2 Net income from discontinued
operations (“-” for net loss)
  Attributable to owners of Parent
                                                      841,150,934.75            808,760,025.91
Company
  Attributable        to     non-controlling
                                                       42,168,174.85             47,627,123.13
interests
6. Other comprehensive income, net of
                                                       -36,482,970.67            36,202,772.58
tax
  Attributable to owners of Parent
                                                       -36,482,970.67            36,202,772.58
Company
      6.1   Items     that   will      not     be
reclassified to profit or loss
         6.1.1 Changes in net liabilities or
assets caused by remeasurements on
defined benefit pension schemes
         6.1.2      Share         of         other
comprehensive income of investees that
will not be reclassified to profit or loss
under equity method
      6.2 Items that may subsequently be
                                                       -36,482,970.67            36,202,772.58
reclassified to profit or loss
         6.2.1      Share         of         other
comprehensive income of investees that
will be reclassified to profit or loss under
equity method
         6.2.2 Gains/Losses on changes in
fair value of available-for-sale financial                 28,050.00
assets
Lu Thai Textile Co., Ltd.                                                                                Annual Report 2017
         6.2.3 Gains/Losses arising from
reclassification       of        held-to-maturity
investments to available-for-sale financial
assets
         6.2.4 Effective gains/losses on
cash flow hedges
         6.2.5 Differences arising from
translation                 of           foreign
                                                                      -36,511,020.67                               36,202,772.58
currency-denominated                    financial
statements
         6.2.6 Other
   Attributable        to        non-controlling
interests
7. Total comprehensive income                                        846,836,138.93                               892,589,921.62
   Attributable to owners of Parent
                                                                     804,667,964.08                               844,962,798.49
Company
   Attributable        to        non-controlling
                                                                       42,168,174.85                               47,627,123.13
interests
8. Earnings per share
   8.1 Basic earnings per share                                                 0.91                                          0.85
   8.2 Diluted earnings per share                                               0.91                                          0.85
Where business mergers under the same control occurred in the current period, the net income achieved by the merged parties before
the business mergers was RMB4,145,908.17, with the amount for last year being RMB3,313,698.92.
Legal representative: Liu Zibin                                                           Chief Accountant: Zhang Hongmei
Financial Manager: Zhang Keming
4. Parent Company Income Statement
                                                                                                                       Unit: RMB
                     Item                                   2017
1. Sales revenue                                                   5,146,496,112.54                             5,078,847,567.10
   Less: Cost of sales                                             3,736,059,702.41                             3,604,147,665.88
      Taxes and surtaxes                                              70,180,764.01                                59,722,954.27
      Selling expense                                                 91,517,514.19                                85,012,619.20
      Administrative expense                                         442,784,766.99                               458,281,382.46
      Finance costs                                                   21,229,673.23                                15,651,562.69
      Asset impairment losses                                         12,803,852.07                               104,344,445.08
   Add: Gains on changes in fair value
                                                                                                                   39,527,800.00
(“-” for losses)
Lu Thai Textile Co., Ltd.                                           Annual Report 2017
    Investment income (“-” for loss)          20,371,762.61            21,172,648.92
          Including: Share of profit or loss
                                                    -2,463,267.98
of joint ventures and associates
    Asset disposal income (“-” for
                                                   -14,364,342.23             1,556,063.22
loss)
    Other income                                41,705,496.22
2. Operating income (“-” for loss)               819,632,756.24           813,943,449.66
  Add: Non-operating income                          5,449,927.03            29,667,999.54
  Less: Non-operating expense                        4,693,009.37             2,265,787.24
3. Pretax income (“-” for loss)                  820,389,673.90           841,345,661.96
  Less: Income tax expense                         109,759,110.09           110,212,874.41
4. Net income (“-” for net loss)                 710,630,563.81           731,132,787.55
  4.1 Net income from continuing
                                                   710,630,563.81           731,132,787.55
operations (“-” for net loss)
  4.2 Net income from discontinued
operations (“-” for net loss)
5. Other comprehensive income, net of
                                                        28,050.00
tax
  5.1 Items that will not be reclassified
to profit or loss
    5.1.1 Changes in net liabilities or
assets caused by remeasurements on
defined benefit pension schemes
    5.1.2       Share         of      other
comprehensive income of investees that
will not be reclassified into profit or
loss under equity method
  5.2 Items that may subsequently be
                                                        28,050.00
reclassified to profit or loss
    5.2.1       Share         of      other
comprehensive income of investees that
will be reclassified into profit or loss
under equity method
    5.2.2 Gains/Losses on changes in
fair value of available-for-sale financial              28,050.00
assets
    5.2.3 Gains/Losses arising from
reclassification         of    held-to-maturity
investments         to        available-for-sale
financial assets
    5.2.4 Effective gains/losses on
Lu Thai Textile Co., Ltd.                                                    Annual Report 2017
cash flow hedges
       5.2.5 Differences arising from
translation              of              foreign
currency-denominated                 financial
statements
       5.2.6 Other
6. Total comprehensive income                              710,658,613.81            731,132,787.55
7. Earnings per share
    7.1 Basic earnings per share
    7.2 Diluted earnings per share
5. Consolidated Cash Flow Statement
                                                                                          Unit: RMB
                      Item                         2017
1. Cash generated by or used in
operating activities:
  Proceeds from sale of commodities
                                                          6,219,235,885.20          5,883,566,531.04
and rendering of services
  Net increase in customer deposits and
deposits from banks and other financial
institutions
  Net increase in loans from central
bank
  Net increase in loans from other
financial institutions
  Premiums       received       on   original
insurance contracts
  Net proceeds from reinsurance
  Net      increase     in     deposits     and
investments of policy holders
  Net      increase    in     proceeds     from
disposal of financial assets at fair value
through profit or loss
  Interest,     handling       charges      and
commissions received
  Net increase in interbank loans
obtained
  Net      increase    in     proceeds     from
repurchase transactions
  Tax rebates received                                     219,602,657.95            197,711,424.88
Lu Thai Textile Co., Ltd.                                               Annual Report 2017
  Cash generated by other operating
                                                      104,656,352.43            102,147,503.54
activities
Subtotal of cash generated by operating
                                                     6,543,494,895.58         6,183,425,459.46
activities
  Payments for goods and services                    3,405,465,059.44         2,825,602,104.24
  Net increase in loans and advances to
customers
  Net increase in deposits in central
bank and in interbank loans granted
  Payments for claims on original
insurance contracts
  Interest,     handling           charges     and
commissions paid
  Policy dividends paid
  Cash paid to and for employees                     1,537,319,127.10         1,428,732,145.22
  Taxes paid                                          305,512,465.13            380,705,302.09
  Cash       used      in     other    operating
                                                      257,163,190.48            233,653,623.46
activities
Subtotal of cash used in operating
                                                     5,505,459,842.15         4,868,693,175.01
activities
Net cash flows from operating activities             1,038,035,053.43         1,314,732,284.45
2. Cash generated by or used in
investing activities:
  Proceeds from disinvestments
  Investment income received
  Net    proceeds           from    disposal    of
property,      plant         and      equipment,
                                                        8,757,416.99              2,104,478.61
intangible assets and other long-lived
assets
  Net    proceeds           from    disposal    of
subsidiaries or other business units
  Cash generated by other investing
                                                       75,806,318.05             32,521,368.79
activities
Subtotal of cash generated by investing
                                                       84,563,735.04             34,625,847.40
activities
  Payments for acquisition of property,
plant and equipment, intangible assets                617,226,044.44            873,466,208.61
and other long-lived assets
  Payments for investments                            210,000,000.00
  Net increase in pledged loans granted
  Net payments for acquisition of
Lu Thai Textile Co., Ltd.                                                     Annual Report 2017
subsidiaries and other business units
  Cash       used     in     other     investing
                                                              1,263,998.65             41,519,234.00
activities
Subtotal of cash used in investing
                                                            828,490,043.09            914,985,442.61
activities
Net cash flows from investing activities                   -743,926,308.05           -880,359,595.21
3. Cash generated by or used in
financing activities:
  Capital contributions received                                500,000.00
       Including: Capital contributions by
                                                                500,000.00
non-controlling interests to subsidiaries
  Increase in borrowings                                   2,156,301,279.43          2,215,183,445.08
  Net proceeds from issuance of bonds
  Cash generated by other financing
                                                            232,455,600.00             39,344,422.42
activities
Subtotal of cash generated by financing
                                                           2,389,256,879.43          2,254,527,867.50
activities
  Repayment of borrowings                                  1,924,349,996.85          2,047,960,531.26
  Payments for interest and dividends                       524,005,417.80            497,559,966.43
       Including:     Dividends        paid   by
                                                             12,023,566.38             12,023,566.38
subsidiaries to non-controlling interests
  Cash       used     in     other     financing
                                                            178,430,428.00            261,629,544.91
activities
Subtotal of cash used in financing
                                                           2,626,785,842.65          2,807,150,042.60
activities
Net cash flows from financing activities                   -237,528,963.22           -552,622,175.10
4. Effect of foreign exchange rate
                                                             -39,056,706.97             8,538,528.70
changes on cash and cash equivalents
5. Net increase in cash and cash
                                                             17,523,075.19           -109,710,957.16
equivalents
Add:     Cash       and    cash      equivalents,
                                                            659,116,137.67            768,827,094.83
beginning of the period
6. Cash and cash equivalents, end of the
                                                            676,639,212.86            659,116,137.67
period
6. Parent Company Cash Flow Statement
                                                                                           Unit: RMB
                      Item                          2017
1. Cash generated by or used in
operating activities:
Lu Thai Textile Co., Ltd.                                             Annual Report 2017
  Proceeds from sale of commodities
                                                   5,031,327,920.20         5,092,041,690.19
and rendering of services
  Tax rebates received                              147,979,834.16            151,105,262.23
  Cash generated by other operating
                                                     48,434,983.38             31,468,452.51
activities
Subtotal of cash generated by operating
                                                   5,227,742,737.74         5,274,615,404.93
activities
  Payments for goods and services                  2,835,545,725.67         2,705,013,474.52
  Cash paid to and for employees                   1,101,800,926.25         1,072,276,579.49
  Taxes paid                                        203,201,646.35            185,976,982.65
  Cash       used      in     other    operating
                                                    149,048,367.90            136,946,899.89
activities
Subtotal of cash used in operating
                                                   4,289,596,666.17         4,100,213,936.55
activities
Net cash flows from operating activities            938,146,071.57          1,174,401,468.38
2. Cash generated by or used in
investing activities:
  Proceeds from disinvestments
  Investment income received                         17,976,433.62             55,179,470.68
  Net    proceeds           from   disposal   of
property,      plant         and      equipment,
                                                      3,857,174.49              1,413,254.61
intangible assets and other long-lived
assets
  Net    proceeds           from   disposal   of
subsidiaries or other business units
  Cash generated by other investing
                                                    369,607,376.66              2,931,847.14
activities
Subtotal of cash generated by investing
                                                    391,440,984.77             59,524,572.43
activities
  Payments for acquisition of property,
plant and equipment, intangible assets              158,989,610.94            163,318,218.59
and other long-lived assets
  Payments for investments                          217,934,750.00            137,295,249.67
  Net payments for acquisition of
subsidiaries and other business units
  Cash       used      in     other    investing
                                                    547,733,600.00            346,158,324.00
activities
Subtotal of cash used in investing
                                                    924,657,960.94            646,771,792.26
activities
Net cash flows from investing activities           -533,216,976.17           -587,247,219.83
3. Cash generated by or used in
Lu Thai Textile Co., Ltd.                                                                                             Annual Report 2017
financing activities:
  Capital contributions received
  Increase in borrowings                                                           1,549,844,124.40                              1,498,632,773.04
  Net proceeds from issuance of bonds
  Cash generated by other financing
                                                                                     86,890,400.00
activities
Subtotal of cash generated by financing
                                                                                   1,636,734,524.40                              1,498,632,773.04
activities
  Repayment of borrowings                                                          1,387,780,386.17                              1,543,292,096.38
  Payments for interest and dividends                                               473,154,729.91                                 474,745,698.14
  Cash       used     in     other     financing
                                                                                     69,000,000.00                                 253,629,544.91
activities
Sub-total of cash used in financing
                                                                                   1,929,935,116.08                              2,271,667,339.43
activities
Net cash flows from financing activities                                           -293,200,591.68                                -773,034,566.39
4. Effect of foreign exchange rate
                                                                                     -20,935,533.57                                  1,570,774.33
changes on cash and cash equivalents
5. Net increase in cash and cash
                                                                                     90,792,970.15                                -184,309,543.51
equivalents
Add:     Cash       and     cash     equivalents,
                                                                                    177,016,859.63                                 361,326,403.14
beginning of the period
6. Cash and cash equivalents, end of the
                                                                                    267,809,829.78                                 177,016,859.63
period
7. Consolidated Statements of Changes in Owners’ Equity
2017
                                                                                                                                         Unit: RMB
                                                     Equity attributable to owners of Parent Company
                                        Other equity                                                                             Non-co
                                                                                   Other                             Retaine                  Total
         Item                            instruments                     Less:                                                   ntrollin
                           Share                             Capital               compre Specific Surplus General     d                     owners’
                                     Prefer Perpet                      Treasur                                                     g
                           capital                           reserves              hensive reserve reserves reserve earning                  equity
                                      red    ual     Other              y shares                                                 interests
                                                                                   income                               s
                                     shares bonds
                           922,60                                                                                    4,341,8                 7,446,0
1. Balances as of                                            761,280               53,293,            891,870                    475,088
                           2,311.                                                                                    66,189.                 01,236.
end of prior year                                            ,557.83                544.89            ,522.68                     ,111.17
                               00                                                                                           19
Add: Adjustments
for          changed
accounting
Lu Thai Textile Co., Ltd.                                            Annual Report 2017
policies
     Adjustments for
corrections              of
previous errors
     Adjustments for
business        mergers
under same control
     Other
adjustments
2. Balances as of 922,60                                            4,341,8               7,446,0
                                    761,280    53,293,    891,870              475,088
beginning of the 2,311.                                             66,189.               01,236.
                                    ,557.83     544.89    ,522.68              ,111.17
year                           00                                        19
3.             Increase/
decrease        in      the         -61,786,   -36,482,   71,063,   287,236 69,044, 329,074
period       (“-”     for          964.01     970.67     056.38   ,522.87 608.47 ,253.04
decrease)
     3.1              Total
                                               -36,482,             841,150 42,168, 846,836
comprehensive
                                                970.67              ,934.75 174.85 ,138.93
income
     3.2        Capital
                                    -61,786,                                   38,900, -22,886,
increased               and
                                     964.01                                     000.00 964.01
reduced by owners
       3.2.1
Common shares                                                                  500,000 500,000
increased by                                                                       .00        .00
shareholders
       3.2.2 Capital
increased by
holders of other
equity instruments
       3.2.3
Share-based
payments included
in owners’ equity
                                    -61,786,                                   38,400, -23,386,
       3.2.4 Other
                                     964.01                                     000.00 964.01
                                                                    -553,91               -494,87
 3.3                  Profit                              71,063,              -12,023,
                                                                    4,411.8               4,921.8
distribution                                               056.38               566.38
                                                                          8
       3.3.1
                                                          71,063,   -71,063,
Appropriation            to
                                                           056.38    056.38
surplus reserves
       3.3.2
Lu Thai Textile Co., Ltd.                                                                                           Annual Report 2017
Appropriation        to
general reserve
       3.3.3
                                                                                                                   -482,85                -494,87
Appropriation        to                                                                                                        -12,023,
                                                                                                                   1,355.5                4,921.8
owners              (or                                                                                                         566.38
                                                                                                                          0
shareholders)
       3.3.4 Other
  3.4
Carryforwards
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 Surplus
reserves used to
make up losses
       3.4.4 Other
3.5            Specific
reserve
       3.5.1
Withdrawn for the
period
       3.5.2      Used
during the period
3.6 Other
                          922,60                                                                                   4,629,1                7,775,0
4. Balances as of                                         699,493               16,810,         962,933                        544,132
                          2,311.                                                                                   02,712.                75,489.
end of the period                                         ,593.82                574.22          ,579.06                       ,719.64
                              00                                                                                          06
2016
                                                                                                                                      Unit: RMB
                                                 Equity attributable to owners of Parent Company                               Non-co
                                       Other equity                             Other                                          ntrollin    Total
          Item                                                        Less:                                        Retaine
                          Share         instruments       Capital               compre Specific Surplus General                   g       owners’
                                                                     Treasur                                          d
                          capital                         reserves              hensive reserve reserves reserve               interest equity
                                    Prefer Perpet Other              y shares                                      earnings
                                                                                income                                            s
Lu Thai Textile Co., Ltd.                                                                       Annual Report 2017
                                        red   ual
                                       shares bonds
                              955,75                  1,007,1                                  4,053,0             7,276,5
1. Balances as of                                               11,610, 17,090,      815,648             439,484
                              8,496.                  46,166.                                  79,857.             97,630.
end of prior year                                                721.68 772.31       ,504.28             ,554.42
                                 00                       97                                       70
Add: Adjustments
for            changed
accounting
policies
     Adjustments for
corrections             of
previous errors
     Adjustments for
                                                      7,840,0                        2,777,3   18,996,             29,613,
business        mergers
                                                       00.00                           69.75    327.73             697.48
under same control
     Other
adjustments
2. Balances as of 955,75                              1,014,9                                  4,072,0             7,306,2
                                                                11,610, 17,090,      818,425             439,484
beginning of the 8,496.                               86,166.                                  76,185.             11,327.
                                                                 721.68 772.31       ,874.03             ,554.42
year                             00                       97                                       43
3.             Increase/
                              -33,15                  -253,70
decrease        in     the                                      -11,610, 36,202,     73,444,   269,790 35,603, 139,789
                              6,185.                  5,609.1
period       (“-”     for                                      721.68 772.58        648.65   ,003.76 556.75 ,909.28
                                 00
decrease)
     3.1              Total
                                                                           36,202,             808,760 47,627, 892,589
comprehensive
                                                                           772.58              ,025.91 123.13 ,921.62
income
     3.2        Capital -33,15                        -253,70                                                      -275,25
                                                                -11,610,
increased              and 6,185.                     5,609.1                                                      1,072.4
                                                                 721.68
reduced by owners                00                        4
       3.2.1
                              -33,15                  -253,70                                                      -275,25
Common shares                                                   -11,610,
                              6,185.                  6,278.0                                                      1,741.3
increased by                                                     721.68
                                 00                        5
shareholders
       3.2.2 Capital
increased by
holders of other
equity instruments
       3.2.3
Share-based
payments included
in owners’ equity
       3.2.4 Other                                    668.91                                                       668.91
Lu Thai Textile Co., Ltd.                                         Annual Report 2017
                                                                 -538,97              -477,54
 3.3             Profit                                73,444,              -12,023
                                                                 0,022.1              8,939.8
distribution                                            648.65              ,566.38
                                                                       5
       3.3.1
                                                       73,444,   -73,444,
Appropriation        to
                                                        648.65    648.65
surplus reserves
       3.3.2
Appropriation        to
general reserve
       3.3.3
                                                                 -465,52              -477,54
Appropriation        to                                                     -12,023
                                                                 5,373.5              8,939.8
owners              (or                                                     ,566.38
                                                                       0
shareholders)
       3.3.4 Other
  3.4
Carryforwards
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 Surplus
reserves used to
make up losses
       3.4.4 Other
3.5            Specific
reserve
       3.5.1
Withdrawn for the
period
       3.5.2      Used
during the period
3.6 Other
                          922,60                                 4,341,8              7,446,0
4. Balances as of                  761,280   53,293,   891,870              475,088
                          2,311.                                 66,189.              01,236.
end of the period                  ,557.83   544.89    ,522.68              ,111.17
                             00                                       19
Lu Thai Textile Co., Ltd.                                                                                             Annual Report 2017
8. Parent Company Statements of Changes in Owners’ Equity
2017
                                                                                                                                          Unit: RMB
                                         Other equity instruments                            Other
                                                                                  Less:                                       Retaine       Total
           Item                Share                                  Capital               comprehe Specific     Surplus
                                         Preferre Perpetu                        Treasury                                        d        owners’
                              capital                        Other   reserves                nsive      reserve   reserves
                                         d shares al bonds                        shares                                      earnings     equity
                                                                                             income
                                                                                                                              3,451,8
1. Balances as of 922,602,                                           759,793,2                                    888,761,7               6,022,993
                                                                                                                              36,174.
end of prior year              311.00                                    38.92                                       83.04                  ,507.40
Add: Adjustments
for            changed
accounting
policies
     Adjustments for
corrections             of
previous errors
     Other
adjustments
2. Balances as of                                                                                                             3,451,8
                              922,602,                               759,793,2                                    888,761,7               6,022,993
beginning of the                                                                                                              36,174.
                               311.00                                    38.92                                       83.04                  ,507.40
year
3.             Increase/
decrease        in     the                                                                                        71,063,05 178,266 249,400,9
                                                                     43,463.99              28,050.00
period       (“-”     for                                                                                            6.38 ,351.93          22.30
decrease)
     3.1              Total
                                                                                                                              710,630 710,658,6
comprehensive                                                                               28,050.00
                                                                                                                              ,563.81        13.81
income
     3.2          Capital
increased              and                                           43,463.99                                                            43,463.99
reduced by owners
       3.2.1
Common shares
increased by
shareholders
       3.2.2 Capital
increased by
holders of other
equity instruments
       3.2.3
Lu Thai Textile Co., Ltd.                                     Annual Report 2017
Share-based
payments included
in owners’ equity
      3.2.4 Other                 43,463.99                                     43,463.99
                                                                      -532,36
  3.3           Profit                                    71,063,05             -461,301,
                                                                      4,211.8
distribution                                                   6.38               155.50
      3.3.1
                                                          71,063,05 -71,063,
Appropriation       to
                                                               6.38 056.38
surplus reserves
      3.3.2
                                                                      -461,30
Appropriation       to                                                          -461,301,
                                                                      1,155.5
owners             (or                                                            155.50
shareholders)
      3.3.3 Other
  3.4
Carryforwards
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 Surplus
reserves used to
make up losses
      3.4.4 Other
3.5           Specific
reserve
      3.5.1
Withdrawn for the
period
      3.5.2      Used
during the period
3.6 Other
                                                                      3,630,1
4. Balances as of 922,602,        759,836,7               959,824,8             6,272,394
                                              28,050.00               02,526.
end of the period        311.00      02.91                    39.42               ,429.70
Lu Thai Textile Co., Ltd.                                                                                           Annual Report 2017
2016
                                                                                                                                        Unit: RMB
                                         Other equity instruments                            Other
                                                                                  Less:                                     Retaine       Total
           Item                Share                                  Capital               comprehe Specific   Surplus
                                         Preferre Perpetu                        Treasury                                      d        owners’
                              capital                        Other   reserves                nsive    reserve   reserves
                                         d shares al bonds                        shares                                    earnings     equity
                                                                                             income
                                                                                                                            3,259,3
1. Balances as of 955,758,                                           1,013,498 11,610,72                        815,648,5               6,032,637
                                                                                                                            42,039.
end of prior year              496.00                                  ,848.06       1.68                          04.28                  ,165.81
Add: Adjustments
for            changed
accounting
policies
     Adjustments for
corrections             of
previous errors
     Other
adjustments
2. Balances as of                                                                                                           3,259,3
                              955,758,                               1,013,498 11,610,72                        815,648,5               6,032,637
beginning of the                                                                                                            42,039.
                               496.00                                  ,848.06       1.68                          04.28                  ,165.81
year
3.             Increase/
decrease        in     the -33,156,                                  -253,705, -11,610,7                        73,113,27 192,494 -9,643,65
period       (“-”     for    185.00                                  609.14       21.68                            8.76 ,135.29            8.41
decrease)
     3.1              Total
                                                                                                                            731,132 731,132,7
comprehensive
                                                                                                                            ,787.55        87.55
income
     3.2          Capital
                              -33,156,                               -253,705, -11,610,7                                                -275,251,
increased              and
                               185.00                                  609.14       21.68                                                 072.46
reduced by owners
       3.2.1
Common shares                 -33,156,                               -253,706, -11,610,7                                                -275,251,
increased by                   185.00                                  278.05       21.68                                                 741.37
shareholders
       3.2.2 Capital
increased by
holders of other
equity instruments
       3.2.3
Share-based
payments included
Lu Thai Textile Co., Ltd.                         Annual Report 2017
in owners’ equity
      3.2.4 Other                   668.91                            668.91
                                                          -538,63
  3.3           Profit                        73,113,27             -465,525,
                                                          8,652.2
distribution                                       8.76               373.50
      3.3.1
                                              73,113,27 -73,113,
Appropriation       to
                                                   8.76 278.76
surplus reserves
      3.3.2
                                                          -465,52
Appropriation       to                                              -465,525,
                                                          5,373.5
owners             (or                                                373.50
shareholders)
      3.3.3 Other
  3.4
Carryforwards
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 Surplus
reserves used to
make up losses
      3.4.4 Other
3.5           Specific
reserve
      3.5.1
Withdrawn for the
period
      3.5.2      Used
during the period
3.6 Other
                                                          3,451,8
4. Balances as of 922,602,        759,793,2   888,761,7             6,022,993
                                                          36,174.
end of the period        311.00      38.92       83.04                ,507.40
Lu Thai Textile Co., Ltd.                                                                                 Annual Report 2017
III. Company Profile
Lu Thai Textile Co., Ltd. (hereinafter referred to as the “Company”) is a joint venture established by Zibo Lucheng Textile
Investment Co., Ltd (originally named Zibo Lucheng Textile Co., Ltd, hereinafter referred to as Lucheng Textile) and Thailand Tailun
Textile Co., Ltd. On Feb. 3, 1993, the Company is approved by the former Ministry of Foreign Trade and Economy of the State (1993)
in WJMZEHZ No. 59 to convert into a joint-stock enterprise. Zibo Administration for Industry and Commerce issued the Company
corporate business license with the registration No. of QGLZZZ No. 000066. In July 1997, the Company is approved by the
Securities Committee of the Department of the State in the ZWF (1997) No. 47 to issue 80 million shares of domestically listed
foreign share( B-shares) at the price of RMB 1.00 per share. Upon approved by Shenzhen Stock Exchange with No. (1997) 296
Listing Notice, the Company is listed on the Shenzhen Stock Exchange on August 19, 1997 with B-shares stock code of 200726. On
November 24, 2000, approved by ZJGSZ [2000] No.199 by CSRC, the Company increased publication of 50 million shares of
general share (A-shares) at the book value of RMB 1.00, which are listed on the Shenzhen Stock Exchange on December 25, 2000
with A-shares stock code of 000726 through approval by Shenzhen Stock Exchange with No. (2000) 162 Listing Notice. As approved
by 2000 Shareholders’ General Meeting in May, 2001, the Company carried out the distribution plan that 10 shares of capital public
reserve are converted to 3 more shares for each 10 shares. As approved by Resolutions of 2001 Shareholders’ General Meeting in
June 2002, the Company implemented the distribution plan that 10 shares of capital public reserve are converted 3 more shares for
each 10 shares again. As approved by 2002 Shareholders’ General Meeting in May 2003, the Company implemented the distribution
plan that 10 shares of capital public reserve are 2 more shares for each 10 shares, and inner employees’ shared increased to 40.56
million shares. As examined and approved by ZJGSZ No. [2000] 199 of CSRC, the inner employees’ shares will start circulation 3
years later since listing on the A-share market. On Dec. 25, 2003, the inner employees’ shares reach 3 years since listing on the
A-share stock market, and they set out circulation on Dec.26, 2003. As approved by the Shareholders’ General Meeting 2006 held in
June 2007, the Company implemented the plan on converting 10 shares to all its shareholders with capital reserves for every 10
shares. After capitalization, the registered capital of the Company was RMB 844.8648 million. The Company, in accordance with the
official reply on approving Lu Thai Textile Co., Ltd. to issue additional shares (ZJXK [2008] No. 890 document) from CSRC, issued
the Renminbi common shares (A shares) amounting to 150 million shares on 8 Dec. 2008. According to the relevant resolution of the
2nd Special Shareholders’ General Meeting for 2011, the relevant resolution of the 15th Session of the 6th Board of Directors, the
Opinion of China Securities Regulatory Commission on the Restricted Share Incentive Plan of Lu Thai Textile Co., Ltd.
(Shang-Shi-Bu-Han [2011] No. 206), the Company applied for a registered capital increment of RMB 14.09 million, which was
contributed by restricted share incentive receivers with monetary funds. In accordance with the resolution of Proposal on
Repurchasing and Canceling Partial Restricted Shares already Granted for the Original Incentive Targets not Reaching the Incentive
Conditions made at the 23rd Session of the 6th Board of Directors on 13 Aug. 2012, the Company canceling a total of 60,000.00
shares already granted for the original incentive targets not reaching the incentive conditions. According to the second temporary
resolution of Proposal on counter purchase of part of the domestic listed foreign share (B share) on 25 Jun. 2012, the Company
counter purchase domestic listed foreign share (B share) 48,837,300 shares. According to the Proposal on Repurchase and Cancel
Part of Unlocked Restricted Share of the Original Incentive Personnel not Conforming to the Incentive Condition, Proposal on
Repurchase and Cancel unlocked Restricted Share in Second Unlocked Period of all the Incentive Personnel reviewed and approved
by the 26th meeting of 6th session of the board of the directors on 27 Mar. 2013, the Company repurchase and cancel 4,257,000 shares
owned by original people whom to motivate. According to the Proposal on Repurchase and Write-off of Partly of the Original
Incentive Targets Not Met with the Incentive Conditions but Granted Restricted Shares approved on the 11th Session of the 7th Board
of Directors on 11 Jun. 2014, to execute repurchase and write-off of the whole granted shares of 42,000 shares of the original
incentive targets not met with the incentive targets of the Company. As per the Proposal on Buy-back of Some A- and B-shares
considered and approved as a resolution at the 1st special meeting of shareholders on August 5, 2015, the Company repurchased
33,156,200 domestically listed foreign shares (B-shares). As of December 31, 2017, the registered capital of the Company was
RMB922.6023 million.
Lu Thai Textile Co., Ltd.                                                                                    Annual Report 2017
The Company’s registered address: No. 11, Mingbo Road, Hi-tech Development Zone, Zibo, Shandong
The Company’s legal representative: Liu Zibin
The Company’s business scope includes the production, processing and sales business of cotton yarn, yarn dyed fabrics, shirts,
fashion accessories, health underwear and other textile products and their mating products; design, R&D and technology services of
the textile and garment products; acquisition and export of products not under exclusive rights or quota licenses; and hotel,
guesthouses, catering, conferences, and training services; rental business of the self-owned houses and land; the construction and
management of the purified water projects.
The Company’s financial statements have been approved for issue by the Board of Directors of the Company on April 15, 2018.
There were 16 subsidiaries included into the consolidation scope of the Company in 2017, and for the details, please refer to Notes
IX. “Equities among Other Entities”. There was 1 increased subsidiary in the consolidation scope as compared with last year, and
please refer to Notes VIII. “Changes in Consolidation Scope” for details.
IV Basis for Preparation of Financial Statements
1. Preparation Basis
With the going-concern assumption as the basis and based on transactions and other events that actually occurred, the Group
prepared financial statements in accordance with The Accounting Standards for Business Enterprises—Basic Standard issued by the
Ministry of Finance with Decree No. 33 and revised with Decree No. 76, the 42 specific accounting standards, the Application
Guidance of Accounting Standards for Business Enterprises, the Interpretation of Accounting Standards for Business Enterprises and
other regulations issued and revised from February 15,     2006 onwards (hereinafter jointly referred to as “the Accounting Standards
for Business Enterprises”, “China Accounting Standards” or “CAS”), as well as the Rules for Preparation Convention of Disclosure
of Public Offering Companies No.15 – General Regulations for Financial Reporting (revised in 2014) by China Securities Regulatory
Commission.
In accordance with relevant provisions of the Accounting Standards for Business Enterprises, the Group adopted the accrual basis in
accounting. Except for some financial instruments, the financial statements were based on historical costs for measurement.
Non-current asset held for sale was priced according to the lower one between the amount of fair value minus estimated costs and the
original book value which complies with the conditions of holding for sale. If impairment occurred on an asset, an impairment
reserve was withdrawn accordingly pursuant to relevant requirements.
V Important Accounting Policies and Estimations
Is the Company subject to any disclosure requirements for special industries?
No.
Indication of specific accounting policies and estimations:
The Company and each subsidiary mainly engage in the production and operation of textile products. The Company and each
subsidiary according to the actual production and operation characteristics and the regulations of the relevant ASBE, formulated
certain specific accounting polices and accounting estimates of the transactions and events such as recognizing the revenues, and
please refer to each description of the section for details. As for the notes to the important accounting judgment and estimations made
by the management level, please refer to the 27. “Other important accounting policies and estimations” of the section.
Lu Thai Textile Co., Ltd.                                                                                     Annual Report 2017
1. Statement of Compliance with the Accounting Standards for Business Enterprises
The financial statements prepared by the Company are in compliance with in compliance with the Accounting Standards for Business
Enterprises, which factually and completely present the Company’s, and the Company’s financial positions as at December 31, 2017,
business results and cash flows for the year of 2017 and other relevant information. In addition, the Company’s and the Company’s
financial statements meet the requirements of disclosing financial statements and notes thereto stated in the Rules for Preparation
Convention of Disclosure of Public Offering Companies No.15 – General Regulations for Financial Reporting (revised in 2014) by
China Securities Regulatory Commission.
2. Fiscal Year
The Company’s fiscal periods include fiscal years and fiscal periods shorter than a complete fiscal year. The Company’s fiscal year
starts on 1 Jan. and ends on 31 Dec. of every year according to the Gregorian calendar.
3. Operating Cycle
Normal operating cycle refers to the period from the Group purchases the assets for processing to realize the cash or cash equivalents.
The Group regards 12 months as an operating cycle and regards which as the partition criterion of the mobility of the assets and
liabilities.
4. Recording Currency
Renminbi (RMB) is regarded as the prevailing currency used in the main economic circumstances of the Company and its domestic
subsidiaries. The Company and its domestic subsidiaries adopt RMB as the recording currency. The Company and its overseas
subsidiaries confirm to adopt HK Dollar, US Dollar and Vietnamese Dong as the recording currency according their major economic
environment of the operating. When preparing the financial statements for the Reporting Period, the Company adopted RMB as the
recording currency.
5. Accounting Treatment Methods for Business Combinations under the Same Control or not under the
Same Control
Business combinations, it is refer to two or more separate enterprises merge to form a reporting entity transactions or events.
Business combination is divided into under the same control and those non under the same control.
(1) Business combinations under the same control
A business combination under the same control is a business combination in which all of the combining enterprises are ultimately
controlled by the same party or the same parties both before and after the business combination and on which the control is not
temporary. In a business combination under the same control, the party which obtains control of other combining enterprise(s) on the
combining date is the combining party, the other combining enterprise(s) is (are) the combined party. The “combining date” refers to
the date on which the combining party actually obtains control on the combined party.
The assets and liabilities that the combining party obtains in a business combination shall be measured on the basis of their carrying
amount in the combined party on the combining date. As for the balance between the carrying amount of the net assets obtained by
the combining party and the carrying amount of the consideration paid by it (or the total par value of the shares issued), the additional
paid-in capital (share premium) shall be adjusted. If the additional paid-in capital (share premium) is not sufficient to be offset, the
retained earnings shall be adjusted.
Lu Thai Textile Co., Ltd.                                                                                        Annual Report 2017
The direct cost for the business combination of the combining party shall be recorded into the profits and losses at the current period.
(2) Business combinations not under the same control
A business combination not under the same control is a business combination in which the combining enterprises are not ultimately
controlled by the same party or the same parties both before and after the business combination. In a business combination not under
the same control, the party which obtains the control on other combining enterprise(s) on the purchase date is the acquirer, and other
combining enterprise(s) is (are) the acquiree.
For a business combination not under the same control, the combination costs shall include the fair values, on the acquisition date, of
the assets paid, the liabilities incurred or assumed and the equity securities issued by the acquirer in exchange for the control on the
acquiree, the expenses for audit, legal services and assessment, and other administrative expenses, which are recorded into the profits
and losses in the current period. The trading expenses for the equity securities or debt securities issued by the acquirer as the
combination consideration shall be recorded into the amount of initial measurement of the equity securities or debt securities. The
involved contingent consideration shall be recorded into the combination costs at its fair value on the acquiring date. Where new or
further evidences emerge, within 12 months since the acquiring date, against the existing circumstances on the acquiring date and the
contingent consideration thus needs to be adjusted, the combined goodwill shall be adjusted accordingly. The combination costs of
the acquirer and the identifiable net assets obtained by it in the combination shall be measured according to their fair values at the
acquiring date. The acquirer shall recognize the positive balance between the combination costs and the fair value of the identifiable
net assets it obtains from the acquiree as business reputation. Where the combination costs are less then the fair value of the
identifiable net assets it obtains from the acquiree, the acquirer shall re-examine the measurement of the fair values of the identifiable
assets, liabilities and contingent liabilities it obtains from the acquiree as well as the combination costs. If, after the reexamination,
the combination costs are still less than the fair value of the identifiable net assets it obtains from the acquiree, the acquirer shall
record the balance into the profits and losses of the current period.
As for the deductible temporary differences the acquirer obtains from the acquiree which are not recognized into deferred income tax
liabilities due to their not meeting the recognition standards, if new or further information shows that the relevant situation has
existed on the acquiring date and the economic benefits brought by the deductible temporary differences the acquirer obtains from
the acquiree on the acquiring date can be realized, they shall be recognized into deferred income tax assets and the relevant goodwill
shall be reduced. Where the goodwill is not sufficient to be offset, the difference shall be recognized into the profits and losses in the
current period. In other circumstances than the above, where the deductible temporary differences are recognized into deferred
income tax assets on the acquiring date, they shall be recorded into the profits and losses in the current period.
In a business combination not under same control realized by two or more transactions of exchange, according to about the 5th Notice
about the Treasury Issuing the Accounting Standards for Enterprises (Finance accounting) [2012] No. 19 Criterion about the
“package deal” (see 6 (2) in this section), Whether the deals are “package deal” or not, belong to the “package deal”, see the previous
paragraphs described in this section and 13. “long term equity investment transaction” in this section and conduct accounting
treatment, those not belong to the \"package deal\" distinguish between the individual financial statements and the consolidated
financial statements and conduct relevant accounting treatment.
In the individual financial statements, the sum of the book value and new investment cost of the Company holds in the acquiree
before the acquiring date shall be considered as initial cost of the investment. Other related comprehensive gains in relation to the
equity interests that the Company holds in the acquiree before the acquiring date shall be treated on the same basis as the acquiree
directly disposes the related assets or liabilities when disposing the investment (that is, except for the corresponding share in the
changes in the net liabilities or assets with a defined benefit plan measured at the equity method arising from the acquiree’s
re-measurement, the others shall be transferred into current investment gains).
In the Company’s consolidated financial statements, as for the equity interests that the Company holds in the acquiree before the
acquiring date, they shall be re-measured according to their fair values at the acquiring date; the positive difference between their fair
values and carrying amounts shall be recorded into the investment gains for the period including the acquiring date. Other related
comprehensive gains in relation to the equity interests that the Company holds in the acquiree before the acquiring date shall be
Lu Thai Textile Co., Ltd.                                                                                        Annual Report 2017
treated on the same basis as the acquiree directly disposes the related assets or liabilities when disposing the investment (that is,
except for the corresponding share in the changes in the net liabilities or assets with a defined benefit plan measured at the equity
method arising from the acquiree’s re-measurement, the others shall be transferred into current investment gains on the acquiring
date).
6. Methods for Preparing Consolidated Financial Statements
(1) Principle for determining the consolidation scope
The consolidation scope for financial statements is determined on the basis of control. The term “control” is the power of the
Company upon an investee, with which it can take part in relevant activities of the investee to obtain variable returns and is able to
influence the amount of returns. The consolidated financial statements comprise the financial statements of the Company and its
subsidiaries. A subsidiary is an enterprise or entity controlled by the Company.
Once any changes in the relevant facts or situations resulted in any changes in the elements involved in the aforesaid definition of
“control”, the Company shall carry out a reassessment.
(2) Methods for preparing the consolidated financial statements
Subsidiaries are fully consolidated from the date on which the Company obtains control on their net assets and operation
decision-making and are de-consolidated from the date when such control ceases. As for a disposed subsidiary, its operating results
and cash flows before the disposal date has been appropriately included in the consolidated income statement and cash flow
statement; and as for subsidiaries disposed in the current period, the opening items in the consolidated balance sheet are not adjusted.
For a subsidiary acquired in a business combination not under the same control, its operating results and cash flows after the
acquiring date have been appropriately included in the consolidated income statement and cash flow statement, and the opening items
and comparative items in the consolidated financial statements are not adjusted. For a subsidiary acquired in a business combination
under the same control or a combined party obtained in a takeover, its operating results and cash flows from the beginning of the
Reporting Period of the combination to the combination date have been appropriately included in the consolidated income statement
and cash flow statement, and the comparative items in the consolidated financial statements are adjusted at the same time.
The financial statements of subsidiaries are adjusted in accordance with the accounting policies and accounting period of the
Company during the preparation of the consolidated financial statements, where the accounting policies and the accounting periods
are inconsistent between the Company and subsidiaries. For a subsidiary acquired from a business combination not under the same
control, the individual financial statements of the subsidiary are adjusted based on the fair value of the identifiable net assets at the
acquisition date.
All significant inter-group balances, transactions and unrealized profits are offset in the consolidated financial statements.
The portion of a subsidiary’s shareholders’ equity and the portion of a subsidiary’s net profits and losses for the period not held by the
Company are recognized as minority interests and minority shareholder profits and losses respectively and presented separately under
shareholders’ equity and net profits in the consolidation financial statements. The portion of a subsidiary’s net profits and losses for
the period that belong to minority interests is presented as the item of “minority shareholder profits and losses” under the bigger item
of net profits in the consolidated financial statements. Where the loss of a subsidiary shared by minority shareholders exceeds the
portion enjoyed by minority shareholders in the subsidiary’s opening owners’ equity, minority interests are offset.
Where the Company losses control on its original subsidiaries due to disposal of some equity investments or other reasons, the
residual equity interests are re-measured according to the fair value on the date when such control ceases. The summation of the
consideration obtained from the disposal of equity interests and the fair value of the residual equity interests, minus the portion in the
original subsidiary’s net assets measured on a continuous basis from the acquisition date that is enjoyable by the Company according
to the original shareholding percentage in the subsidiary, is recorded in investment gains for the period when the Company’s control
on the subsidiary ceases. Other comprehensive incomes in relation to the equity investment in the original subsidiary are treated on
Lu Thai Textile Co., Ltd.                                                                                        Annual Report 2017
the same accounting basis as the acquiree directly disposes the relevant assets or liabilities (that is, except for the changes in the net
liabilities or assets with a defined benefit plan resulted from re-measurement of the original subsidiary, the rest shall all be transferred
into current investment gains) when such control ceases. And subsequent measurement is conducted on the residual equity interests
according to the No. 2 Accounting Standard for Business Enterprises —Long-term Equity Investments or the No. 22 Accounting
Standard for Business Enterprises—Recognition and Measurement of Financial Instruments. For details, see 13. “Long Term Equity
Investment” or 9. “Financial Instruments” in this section.
Where the Company losses control on its original subsidiaries due to step by step disposal of equity investments through multiple
transactions, it need to distinguish the Group losses control on its subsidiaries due to disposal of equity investments whether belongs
to a package deal. All the transaction terms, conditions and economic impact of the disposal of subsidiaries’ equity investment are in
accordance with one or more of the following conditions, which usually indicate the multiple transactions, should be considered as a
package deal for accounting treatment. ① These deals are at the same time or under the condition of considering the influence of
each other to concluded; ② These transactions only be as a whole can achieve a complete business result; ③ The occurrence of a
deal depends on at least one other transactions;④ A deal alone is not economical, but it is economical with other trading together.
Those not belong to a package deal, each of them a deal depends on circumstances respectively conduct accounting treatment in
accordance with the applicable principles of “part disposal of subsidiaries of a long-term equity investment under the condition of not
losing control on its subsidiaries” (see 13 (2) ④ in this section) and “Where the Company losses control on its original subsidiaries
due to disposal of some equity investments or other reasons” (see the front paragraph) relevant transactions of the Company losses
control on its subsidiaries due to disposal of equity investments belonging to a package deal, considered as a transaction and conduct
accounting treatment. However, Before losing control, every disposal cost and corresponding net assets balance of subsidiary of
disposal investment are confirmed as other comprehensive income in consolidated financial statements, which together transferred
into the current profits and losses in the lose of control, when the Company losing control on its subsidiary.
7. Recognition Standard for Cash and Cash Equivalents
The term “cash” refers to cash on hand and deposits that are available for payment at any time. The term “cash equivalents” refers to
short-term (within 3 months from the purchase date) and highly liquid investments that are readily convertible to known amounts of
cash and which are subject to an insignificant risk of change in value.
8. Foreign Currency and Accounting Method for Foreign Currency
(1) Accounting treatments for translation of foreign currency transactions
As for a foreign currency transaction, the Company shall convert the amount in a foreign currency into amount in its bookkeeping
base at the spot exchange rate (usually referring to the central parity rate announced by the People’s Bank of China, the same below)
of the transaction date, while as for such transactions as foreign exchange or involving in foreign exchange, the Company shall
converted into amount in the bookkeeping base currency at actual exchange rate the transaction is occurred.
(2) Accounting treatments for translation of foreign currency monetary items and non-monetary items
On the balance sheet date, the foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date.
The exchange difference arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange
rate at the time of initial recognition or prior to the balance sheet date shall be recorded in the profits and losses in the current period,
excluding the following situations: ① the exchange difference arising from foreign currency loans related to acquisition of fixed
assets shall be treated at the principle of capitalization of borrowing costs; ② the exchange difference arising from the hedging
instruments used for effective hedging of net overseas operation investments shall be recorded into other comprehensive incomes,
and shall be recognized into current gains and losses when the net investments are disposed; and ③ the exchange difference arising
from change in the book balance of foreign currency monetary items available for sale except the amortized costs shall be recorded
Lu Thai Textile Co., Ltd.                                                                                         Annual Report 2017
into other comprehensive gains and losses.
For the preparation for consolidated financial statement involved in foreign operations, if there are items of foreign currency
monetary of net investment in foreign operations in essence, then the balance of exchange generated by changes in exchange rate
shall included into other comprehensive income; when disposing foreign operations, it shall be converted into the disposal of the
current profits and losses.
A foreign currency non-monetary item measured at the historical costs shall still be translated at the spot exchange rate on the
transaction date. Where the foreign non-monetary items measured at the fair value shall be converted into amount in its bookkeeping
base currency at spot exchange rate, the exchange gains and losses arising thereof shall be treated as change in fair value, and
recorded into the current period gains and losses or as other comprehensive incomes.
(3) Translation of foreign currency financial statements
When it involves overseas business in preparing the consolidated financial statement, for the translation difference of foreign
currency monetary items of net investment in overseas business arising from the change in exchange rate, it shall be recorded into the
item of “difference of foreign currency financial statement translation” under the owners’ equity; and be recorded into disposal gains
and losses at current period when disposing overseas business.
The foreign currency financial statement of overseas business should be translated in to RMB financial statement by the following
methods: The asset and liability items in the balance sheets shall be translated at a spot exchange rate on the balance sheet date.
Among the owner’s equity items, except for the items as “undistributed profits”, other items shall be translated at the spot exchange
rate at the time when they are incurred. The income and expense items in the profit statements shall be translated at the spot exchange
rate of the transaction date. The undistributed profits at year-begin is the undistributed profits at the end of last year after the
translation; undistributed profits at year-end shall be listed as various distribution items after the translation; after the translation, the
balance between assets and the sum of liabilities and owners’ equities shall be recorded into other comprehensive gains and losses as
difference of foreign currency translation. Where an enterprise disposes of an overseas business without the control right, it shall shift
the differences, which is presented under the items of the owner’s equities in the balance sheet and which arises from the translation
of foreign currency financial statements relating to this overseas business, into the disposal profits and losses of the current period by
all or proportion of the disposed overseas business.
Foreign cash flow shall be translated at the spot exchange rate of the date of cash flow incurred. The influence of exchange rate on
the cash flow shall be adjustment item and individually listed in the cash flow statement.
And the opening balance and the actual balance of last year shall be listed at the amounts after translation of foreign currency
financial statement in last year.
Where the control of the Company over an overseas operation ceases due to disposal of all or some of the Company’s owner’s equity
in the overseas operation or other reasons, the foreign-currency statement translation difference belonging to the parent company’s
owner’s equity in relation to the overseas operation which is stated under the shareholders’ equity in the balance sheet shall be all
restated as gains and losses of the disposal period.
Where the Company’s equity in an overseas operation decreases due to disposal of some equity investment or other reasons but the
Company still has control over the overseas operation, the foreign-currency statement translation difference in relation to the
disposed part of the overseas operation shall be recorded into minority interests instead of current gains and losses. If what’s disposed
is some equity in an overseas associated enterprise or joint venture, the foreign-currency statement translation difference related to
the overseas operation shall be recorded into the gains and losses of the current period of the disposal according to the disposal ratio.
9. Financial Instruments
The Company recognizes a financial asset or liability when it becomes a party of the relevant financial instrument contract. Financial
assets and liabilities are measured at fair value in initial recognition. As for the financial assets and liabilities measured at fair value
Lu Thai Textile Co., Ltd.                                                                                         Annual Report 2017
of which changes are recorded into current gains and losses, the relevant dealing expenses are directly recorded into gains and losses;
and the dealing expenses on other kinds of financial assets and liabilities are included in the amounts initially recognized.
(1) Determination of the fair value of main financial assets and financial liabilities
Fair value refers to the price that a market participant shall receive for selling an asset or shall pay for transferring a liability in an
orderly transaction on the measurement date. As for the financial assets or financial liabilities for which there is an active market, the
quoted prices in the active market shall be used to determine the fair values thereof. The quoted prices in the active market refers to
the prices available from stock exchange, broker’s agencies, guilds, pricing organization and etc., which represent the actual trading
price under equal transaction. Where there is no active market for a financial instrument, the enterprise concerned shall adopt value
appraisal techniques, including the prices adopted by the parties, who are familiar with the condition, in the latest market transaction
upon their own free will, the current fair value obtained by referring to other financial instruments of the same essential nature, the
cash flow capitalization method and the option pricing model, etc., to determine its fair value.
(2) Classification, recognition and measurement of financial assets
The purchase and sale of financial assets under the normal ways shall be recognized and stopped to be recognized respectively at the
price of transaction date. Financial assets shall be classified into the following four categories when they are initially recognized: (a)
the financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the
current period, (b) the investments which will be held to their maturity; (c) loans and the account receivables; and (d) financial assets
available for sale.
① The financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of
the current period
Including transactional financial assets and the financial assets which are designated to be measured at their fair value when they are
initially recognized and of which the variation is recorded into the profits and losses of the current period;
The financial assets meeting any of the following requirements shall be classified as transactional financial assets:A. The purpose to
acquire the said financial assets is mainly for selling them in the near future; B. Forming a part of the identifiable combination of
financial instruments which are managed in a centralized way and for which there are objective evidences proving that the enterprise
may manage the combination by way of short-term profit making in the near future; C. Being a derivative instrument, excluding the
designated derivative instruments which are effective hedging instruments, or derivative instruments to financial guarantee contracts,
and the derivative instruments which are connected with the equity instrument investments for which there is no quoted price in the
active market, whose fair value cannot be reliably measured, and which shall be settled by delivering the said equity instruments.
A transactional financial asset is subsequently measured at the fair value. The gains and losses arising from the fair value changes, as
well as the dividend and interest incomes from the financial asset, are recorded in the gains and losses for the current period.
② Held-to-maturity investment
The term \"held-to-maturity investment\" refers to a non-derivative financial asset with a fixed date of maturity, a fixed or
determinable amount of repo price and which the enterprise holds for a definite purpose or the enterprise is able to hold until its
maturity.
For the held-to-maturity investment adopting actual interest rate method, which is measured at the post-amortization costs, the profits
and losses that arise when such financial assets or financial liabilities are terminated from recognition, or are impaired or amortized,
shall be recorded into the profits and losses of the current period.
The actual interest rate method refers to the method by which the post-amortization costs and the interest incomes of different
installments or interest expenses are calculated in light of the actual interest rates of the financial assets or financial liabilities
(including a set of financial assets or financial liabilities). The actual interest rate refers to the interest rate adopted to cash the future
cash flow of a financial asset or financial liability within the predicted term of existence or within a shorter applicable term into the
current carrying amount of the financial asset or financial liability.
When the actual interest rate is determined, the future cash flow shall be predicted on the basis of taking into account all the
Lu Thai Textile Co., Ltd.                                                                                        Annual Report 2017
contractual provisions concerning the financial asset or financial liability (the future credit losses shall not be taken into account).and
also the various fee charges, trading expenses, premiums or reduced values, etc., which are paid or collected by the parties to a
financial asset or financial liability contract and which form a part of the actual interest rate.
③ Loans and the accounts receivables
Loans and the accounts receivables refer to non-derivative financial assets, which there is no quotation in the active market, with
fixed recovery cost or recognizable. Financial assets that are defined as loans and the accounts receivables by the Company including
notes receivables, accounts receivables, interest receivable, dividends receivable and other receivables etc..
Loans and the accounts receivables are made follow-up measurement on the basis of post-amortization costs employing the effective
interest method. Gains or loss arising from the termination recognition, impairment occurs or amortization shall be recorded into the
profits and losses of the current period.
④ Assets available for sales
Assets available for sales including non-derivative financial asset that has been assigned as assets available for sales on the initial
recognition and financial assets excluded those measured at fair value and of which the variation into profits and losses of the current
period, they are some financial assets, loans and accounts receivables, held-to-maturity investment.
The cost at the period-end of the available-for-sale liabilities instruments should be confirmed according to its amortized cost method,
that is the initially recognized amount which deduct the principal that had been repaid, to plus or minus the accumulative
amortization amount formed by the amortization between the difference of the initially recognized amount and the amount on the due
date that adopted the actual interest rate method, and at the same time deduct the amount after the impairment loss happened. The
cost at the period-end of the available-for-sale liabilities instruments is its initial cost.
Financial assets available-for-trade are subsequently measured at fair value, and gains or losses arising from changes in the fair value
are recognized as other comprehensive income,and be carried forward when the said financial assets stopped recognition, then it
shall be recorded into the profits and losses of the current period. But, the equity instrument investment which neither have quotation
in the active market nor its fair value could not be reliable measured, as well as the derivative financial assets that concern with the
equity instruments and should be settled through handing over to its equity instruments, should take the follow-up measurement
according to the cost.
Interest receive during the holding of assets available for sales and cash dividends with distribution announcement by invested
companies, it shall be recorded into the profits and losses of the current period.
(3) Impairment of financial assets
The Company assesses at the balance sheet date the carrying amount of every financial asset except for the financial assets that
measured by the fair value. If there is objective evidence indicating a financial asset may be impaired, a provision is provided for the
impairment.
The Company carries out a separate impairment test for every financial asset which is individually significant. As for a financial asset
which is individually insignificant, an impairment test is carried out separately or in the financial asset group with similar credit risk.
Where the financial asset (individually significant or insignificant) is found not impaired after the separate impairment test, it is
included in the financial asset group with similar credit risk and tested again on the group basis. Where the impairment loss is
recognized for an individual financial asset, it is not included in the financial asset group with similar credit risk for an impairment
test.
① Impairment on held-to maturity investment, loans and receivables
The financial assets measured by cost or amortized cost write down their carrying value by the estimated present value of future cash
flow. The difference is recorded as impairment loss. If there is objective evidence to indicate the recovery of value of financial assets
after impairment, and it is related with subsequent event after recognition of loss, the impairment loss recorded originally can be
reversed. The carrying value of financial assets after impairment loss reversed shall not exceed the amortized cost of the financial
assets without provisions of impairment loss on the reserving date.
Lu Thai Textile Co., Ltd.                                                                                         Annual Report 2017
② Impairment of available-for-sale financial assets
When it judged that the decrease of fair value of the available-for-sale equity instrument investment is serious and not temporarily
after comprehensive considering relevant factors, it reflected that the available-for-sale equity instrument investment occurred
impairment. Of which, the “serious decline” refers to the accumulative decline range of the fair value over 20%; while the
“non-temporary decline” refers to the consecutive decline time of the fair value over 12 months.
Where an available-for-sale financial asset is impaired, the accumulative losses arising from the decrease of the fair value of the
capital reserve which is directly included are transferred out and recorded in the profits and losses for the current period. The
accumulative losses transferred out are the balance obtained from the initially obtained cost of the said financial asset after deducting
the principals as taken back, the amortized amount, the current fair value and the impairment loss originally recorded in the profits
and losses.
Where the impairment loss has been recognized for an available-for-sale financial asset, if, within the accounting periods thereafter,
there is any objective evidence proving that the value of the said financial asset has been restored and the restoration is objectively
related to the events that occur after the impairment loss was recognized, the originally recognized impairment loss is reversed. The
impairment losses on the available-for-sale equity instrument investments are reversed and recognized as other comprehensive
incomes, and the impairment losses on the available-for-sale liability instruments are reversed and recorded in the profits and losses
for the current period.
The impairment loss incurred to an equity instrument investment for which there is no quoted price in the active market and whose
fair value cannot be reliably measured, or incurred to a derivative financial asset which is connected with the said equity instrument
investment and which must be settled by delivering the said equity investment, is not reversed.
(4) Recognition and measurement of financial asset transfers
Where a financial asset satisfies any of the following requirements, the recognition of it is terminated: ① The contractual rights for
collecting the cash flow of the said financial asset are terminated; ② The said financial asset has been transferred and nearly all of
the risks and rewards related to the ownership of the financial asset to the transferee; or ③ The said financial asset has been
transferred. And the Company has ceased its control on the said financial asset though it neither transfers nor retains nearly all of the
risks and rewards related to the ownership of the financial asset.
Where the Company neither transfers nor retains nearly all of the risks and rewards related to the ownership of a financial asset, and
it does not cease its control on the said financial asset, it recognizes the relevant financial asset and liability accordingly according to
the extent of its continuous involvement in the transferred financial asset. The term \"continuous involvement in the transferred
financial asset\" refers to the risk level that the enterprise faces resulting from the change of the value of the financial asset.
If the transfer of an entire financial asset satisfies the conditions for stopping recognition, the difference between the amounts of the
following 2 items is recorded in the profits and losses of the current period: (1) The book value of the transferred financial asset; and
(2) The sum of consideration received from the transfer, and the accumulative amount of the changes of the fair value originally
recorded in other comprehensive incomes.
If the transfer of partial financial asset satisfies the conditions to stop the recognition, the book value of the transferred financial asset
is apportioned between the portion whose recognition has been stopped and the portion whose recognition has not been stopped
according to their respective relative fair value, and the difference between the amounts of the following 2 items is included into the
profits and losses of the current period: (1) The summation of the consideration received from the transfer and the portion of the
accumulative amount of changes in the fair value originally recorded in other comprehensive incomes which corresponds to the
portion whose recognition has been stopped; and (2) The amortized carrying amounts of the aforesaid amounts.
In respect of the assets using recourse to sell or using endorsement to transfer, the Company needs to determine whether almost all of
the risks and rewards of the financial asset ownership are transferred. If almost all of the risks and rewards of the financial asset
ownership had been transferred to the transferee, derecognize the financial assets. For almost all of the risks and rewards of the
financial asset ownership retained, do not end to recognize the financial assets. For which neither transfer or retain almost all of the
Lu Thai Textile Co., Ltd.                                                                                          Annual Report 2017
risks and rewards of the financial asset ownership, continuously judge whether the Company retain the control of the assets, and
conduct accounting treatment according to the principle of mentioned in the previous paragraphs.
(5) Classification and measurement of financial liabilities
In the initial recognition, financial liabilities are divided into the financial liabilities measured at fair values and whose changes are
recorded in current gains and losses and other financial liabilities. Financial liabilities are initially recognized at their fair values. As
for a financial liability measured at fair value and whose changes are recorded in current gains and losses, the relevant trading
expense is directly recorded in the profits and losses for the current period. As for other financial liabilities, the relevant trading
expenses are recorded in the initially recognized amounts.
① Financial liabilities measured at fair values and whose changes are recorded in current gains and losses
Such financial liabilities are divided into transactional financial liabilities and financial liabilities designated to be measured at fair
values and whose changes are recorded in current gains and losses in the initial recognition under the same conditions where such
financial assets are divided into transactional financial assets and financial assets designated to be measured at fair values and whose
changes are recorded in current gains and losses in the initial recognition.
Financial liabilities measured at fair values and whose changes are recorded in current gains and losses are subsequently measured at
their fair values. Gains or losses arising from the fair value changes, as well as the dividend and interest expenses in relation to the
said financial liabilities, are recorded in the profits and losses for the current period.
② Other financial liabilities
As for a derivative financial liability connected to an equity instrument for which there is not quoted price in an active market and
whose fair value cannot be reliably measured and which must be settled by delivering the equity instrument, it is subsequently
measured on the basis of costs. Other financial liabilities are subsequently measured according to the amortized cost using the actual
interest rate method. Gains or losses arising from de-recognition or amortization of the said financial liabilities is recorded in the
profits and losses for the current period.
(6) De-recognition of financial liabilities
Only when the prevailing obligations of a financial liability are relieved in all or in part may the recognition of the financial liability
be terminated in all or partly. Where the Company (debtor) enters into an agreement with a creditor so as to substitute the existing
financial liabilities by way of any new financial liability, and if the contractual stipulations regarding the new financial liability is
substantially different from that regarding the existing financial liability, it terminates the recognition of the existing financial liability,
and at the same time recognizes the new financial liability.
Where the recognition of a financial liability is totally or partially terminated, the enterprise concerned shall include into the profits
and losses of the current period for the gap between the book value which has been terminated from recognition and the
considerations it has paid (including the non-cash assets it has transferred out and the new financial liabilities it has assumed)
(7) Derivatives and embedded derivatives
Derivative financial instruments include derivatives are initially measured at fair value at the date when the derivative contracts are
entered into and are substantially re-measured at fair value. The resulting gain and loss is recognized in profit or loss.
An embedded derivative is separated from the hybrid instrument, where the hybrid instrument is not designated as a financial asset or
financial liability at fair value though profit or loss, and the treated as a standalone derivative if (a) the economic characteristics and
risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract; and (b) a
separate instrument with the same terms as the embedded derivative would meet the definition of a derivative. If the Company is
unable to measure the embedded derivative separately either at acquisition or at a subsequent balance sheet date, it designates the
entire hybrid instrument as a financial asset or financial liability at fair value through profit or loss.
(8) Offsetting financial assets and financial liabilities
When the Company has a legal right that is currently enforceable to set off the recognized financial assets and financial liabilities,
Lu Thai Textile Co., Ltd.                                                                                        Annual Report 2017
and intends either to settle on a net basis, or to realize the financial asset and settle the financial liability simultaneously, a financial
asset and a financial liability shall be offset and the net amount is presented in the balance sheet. Except for the above circumstances,
financial assets and financial liabilities shall be presented separately in the balance sheet and shall not be offset.
(9) Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.
The Company issues (including refinancing), re-purchases, sells or written-offs the equity instrument as the disposing of the changes
of the equity. The Group not recognized the changes of the fair value of the equity instrument. The transaction expenses related to the
equity transaction would be deducted from the equity.
All types of distribution (excluding stock dividends) made by the Company to holders of equity instruments are deducted from
shareholders’ equity. The Company does not recognize any changes in the fair value of equity instruments.
10. Receivables
(1) Accounts Receivable with Significant Single Amount for which the Bad Debt Provision is Made
Individually
                                                                      Receivables with the amount of RMB 5 million or more than
Judgement basis or monetary standards of provision for bad
                                                                      RMB 5 million should recognize as the receivables with
debts of the individually significant accounts receivable
                                                                      significant single amount.
                                                                      The Company made an independent impairment test on
                                                                      receivables with significant single amounts; the financial assets
                                                                      without impairment by independent impairment test should be
Method of individual provision for bad debts of the individually
                                                                      included in financial assets portfolio with similar credit risk to
significant accounts receivable
                                                                      take the impairment test. Receivables was recognized with
                                                                      impairment should no longer be included in receivables portfolio
                                                                      with similar credit risk to take the impairment test.
(2) Accounts Receivable which the Bad Debt Provision is withdrawn by Credit Risk Characteristics
                         Name of portfolios                                                Bad debt provision method
Aging group                                                           Aging analysis method
In the groups, adopting aging analysis method to withdraw bad debt provision:
√ Applicable □ Not applicable
                                                   Withdrawal proportion for accounts          Withdrawal proportion for other accounts
                     Age
                                                              receivable (%)                                 receivable (%)
Within 1 year (including 1 year)                                                      5.00%                                         5.00%
1-2 years                                                                            10.00%                                        10.00%
2-3 years                                                                            20.00%                                        20.00%
Over 3 years                                                                         30.00%                                        30.00%
In the groups, adopting balance percentage method to withdraw bad debt provision:
□ Applicable √ Not applicable
Lu Thai Textile Co., Ltd.                                                                                       Annual Report 2017
In the groups, adopting other methods to withdraw bad debt provision:
□ Applicable √ Not applicable
(3) Accounts Receivable with an Insignificant Single Amount but for which the Bad Debt Provision is Made
Independently
                                                                      Receivables have dispute with the other parties or involving
                                                                      lawsuit and arbitration; receivables have obvious indication
Reason of individually withdrawing bad debt provision
                                                                      showing that the debtors are likely to fail to perform the duty of
                                                                      repayment, etc.
                                                                      The Company made independent impairment test on receivables
                                                                      with insignificant amount but with the following characteristics,
                                                                      if any objective evidence shows that the accounts receivable has
                                                                      been impaired, impairment loss shall be recognized on the basis
Withdrawal method for bad debt provision                              of the gap between the current values of the future cash flow
                                                                      lower than its book value so as to withdraw provision for bad
                                                                      debts: receivables involved in disputes, lawsuits or arbitrations;
                                                                      receivables with clear signs that the debtor is not likely to repay;
                                                                      and the like.
11. Inventory
Is the Company subject to any disclosure requirements for special industries?
No.
(1) Classification
Inventories mainly include raw materials, work-in-progress, product processed on entrustment, consumptive biological assets and
stock products etc.
(2) Valuation method of inventories acquiring and issuing
Inventories shall be measured at actual cost when acquired, and the cost of the inventories including the procurement cost, processing
cost and other costs. Grey yarn, dyed yarn, and plus material shall be measured at first-in first-out method when acquired and
delivered; other inventories shall be measured as per the weighted average method
(3) Basis for determining net realizable value of inventories and provision methods for decline in value of inventories
Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion, the
estimated costs necessary to make the sale and relevant taxes. Net realizable value is determined on the basis of clear evidence
obtained, and takes into consideration the purpose of holding inventories and effect of post balance sheet events.
At the balance sheet date, inventories are measured at the lower of the cost and net realizable value. If the net realizable value is
below the cost of inventories, a provision for decline in value of inventories is made. The provision for inventories decline in value is
determined by the difference of the cost of individual item less its realizable value.
After the provision for decline in value of inventories is made, if the circumstances that previously caused inventories to be written
down below cost no longer exist so that the net realizable value of inventories is higher than their cost, the original provision for
decline in value is reversed and the reversal is included in profit or loss for the period.
(4) The perpetual inventory system is maintained for stock system.
Lu Thai Textile Co., Ltd.                                                                                     Annual Report 2017
(5) Amortization method of the low-value consumption goods and packing articles
For the low-value consumption goods, should be amortized by one-off amortization method when consuming; and for the packing
articles, should be amortized by one-off amortization method when consuming.
12. Assets Held for Sale
The Company classifies an asset into held-for-sale when its book value is mainly recovered by selling (including the exchanges of
non-monetary assets with commercial substance) instead of a non-current asset or disposal group. Specific standards are
simultaneously satisfying the following conditions: A asset or disposal group can be sold immediately under current conditions based
on the practice of selling such assets or disposal groups in similar transactions; the Company has already made a resolution on sale
plan and obtained a confirmed purchase commitment; and the sale is expected to will be completed within one year. A disposal group
refers to a group of assets that are disposed of together as a whole by sale or other means in a transaction and the liabilities directly
related to these assets transferred in the transaction. Where the asset group or combination of asset groups to which a disposal group
belongs apportions the goodwill acquired in the business combination in accordance with the \"Accounting Standards for Enterprises
No. 8 - Asset Impairment\", the disposal group shall include the goodwill allocated to it.
When the Company initially measures or re-measures on the balance sheet date the non-current assets and disposal groups classified
as held-for-sale, If the book value is higher than the fair value minus the net amount of the sale costs, the book value will be written
down to the net amount of fair value minus the sale costs, and the amount written down will be recognized as impairment loss of
assets and included in the current profit and loss, and provision for impairment of held-for-sale assets will be made at the same time.
For the confirmed amount of impairment loss of assets of the disposal groups held for sale, the book value of goodwill of the disposal
groups will be offset first, and then the book value of various non-current assets applicable to the measurement of Accounting
Standards for Business Enterprises No. 42 - Non-current Assets and Disposal Groups Held for Sale and Termination of Operations
(hereinafter referred to as “Held for sale standards”) in the disposal groups will be offset according to the proportions. If the net
amount that the fair value of the disposal groups held for sale on the follow-up balance sheet date minus the sale costs increases, the
previous written-down amount will be restored, and reversed to the asset impairment loss confirmed after the assets being classified
as held-for-sale. The reversed amount will be included in the current profit or loss. And its book value shall be increased
proportionately to the proportion of the book value of various non-current assets measured by the disposal group in addition to
goodwill applicable to the measurement of held-for-sale norms; The book value of deducted goodwill and the non-current assets
applicable to the measurement of held-for-sale norms will not be reversed if the asset impairment loss is recognized before it is
classified as held for sale.
Non-current assets held for sale or non-current assets in the disposal group are not subject to depreciation or amortization. Interest
and other expenses of liabilities in the disposal group held for sale will be confirmed as before.
When a non-current asset or disposal group ceases be classified as held-for-sale or a non-current asset is removed out from the
held-for-sale disposal group due to failure in meeting the classification conditions for the category of held-for-sale, it will be
measured by one of the followings whichever is lower: (1) The book value before being classified as held for sale will be adjusted
according to the depreciation, amortization or impairment that would have been recognized under the assumption that it was not
classified as held for sale; (2) The recoverable amount.
13. Long-term Equity Investments
The long-term equity investments of this part refer to the long-term equity investments that the Company has control, joint control or
significant influence over the investees. The long-term equity investment that the Company does not have control, joint control or
significant influence over the investees, should be recognized as available-for-sale financial assets or be measured by fair value with
the changes should be included in the financial assets accounting of the current gains and losses, and please refer the details of the
Lu Thai Textile Co., Ltd.                                                                                        Annual Report 2017
accounting polices to “9. financial instrument” in this section.
Joint control, refers to the control jointly owned according to the relevant agreement on an arrangement by the Company and the
relevant activities of the arrangement should be decided only after the participants which share the control right make consensus.
Significant influence refers to the power of the Company which could anticipate in the finance and the operation polices of the
investees, but could not control or jointly control the formulation of the policies with the other parties.
(1) Recognition of investment costs
As for long-term equity investments acquired by enterprise merger, if the merger is under the same control, the share of the book
value of the owner’s equity of the merged enterprise, on the date of merger, is regarded as the initial cost of the long-term equity
investment. The difference between the initial cost of the long-term equity investment and the payment in cash, non-cash assets
transferred as well as the book value of the debts borne by the merging party shall offset against the capital reserve. If the capital
reserve is insufficient to dilute, the retained earnings shall be adjusted. If the consideration of the merging enterprise is that it issues
equity securities, it shall, on the date of merger, regard the share of the book value of the shareholder's equity of the merged
enterprise on the consolidated financial statement of the ultimate control party as the initial cost of the long-term equity investment.
The total face value of the stocks issued shall be regarded as the capital stock, while the difference between the initial cost of the
long-term equity investment and total face value of the shares issued shall offset against the capital reserve. If the capital reserve is
insufficient to dilute, the retained earnings shall be adjusted.
For the long-term investment required from the business combination under different control, the initial investment cost regarded as
long-term equity investment on the purchasing date according to the combination cost, the combination costs shall be the sum of the
fair values of the assets paid, the liabilities incurred or assumed and the equity securities issued by the Company.
The commission fees for audit, law services, assessment and consultancy services and other relevant expenses occurred in the
business combination by the combining party or the purchase party, shall be recorded into current profits and losses upon their
occurrence.
Besides the long-term equity investments formed by business combination, the other long-term equity investments shall be initially
measured by cost, the cost is fixed in accordance with the ways of gaining, such as actual cash payment paid by the Company, the
fair value of equity securities issued by the Company, the agreed value of the investment contract or agreement, the fair value or
original carrying amount of exchanged assets from non-monetary assets exchange transaction, the fair value of the long-term equity
investments, etc. The expenses, taxes and other necessary expenditures directly related with gaining the long-term equity investments
shall also be recorded into investment cost.
(2) Subsequent measurement and recognition of gains or losses
A long-term equity investment where the investing enterprise has joint control (except for which forms into common operators) or
significant influence over the investors should be measured by equity method. Moreover, long-term equity investment adopting the
cost method in the financial statements, and which the Company has control on invested entity.
① Long-term equity investment measured by adopting cost method
The price of a long-term equity investment measured by adopting the cost method shall be included at its initial investment cost and
append as well as withdraw the cost of investing and adjusting the long-term equity investment. The return on investment at current
period shall be recognized in accordance with the cash dividend or profit announced to distribute by the invested entity, except the
announced but not distributed cash dividend or profit included in the actual payment or consideration upon gaining the investment.
② Long-term equity investment measured by adopting equity method
If the initial cost of a long-term equity investment is more than the Company's attributable share of the fair value of the invested
entity's identifiable net assets for investment, the initial cost of the long-term equity investment may not be adjusted. If the initial cost
of a long-term equity investment is less than the Company's attributable share of the fair value of the invested entity's identifiable net
assets for the investment, the difference shall be included in the current profits and losses and the cost of the long-term equity
investment shall be adjusted simultaneously.
Lu Thai Textile Co., Ltd.                                                                                         Annual Report 2017
When measured by adopting equity method, respectively recognize investment income and other comprehensive income according to
the net gains and losses as well as the portion of other comprehensive income which should be enjoyed or be shared, and at the same
time adjust the book value of the long-term equity investment; corresponding reduce the book value of the long-term equity
investment according to profits which be declared to distribute by the investees or the portion of the calculation of cash dividends
which should be enjoyed; for the other changes except for the net gains and losses, other comprehensive income and the owners’
equity except for the profits distribution of the investees, should adjust the book value of the long-term equity investment as well as
include in the capital reserve. The investing enterprise shall, on the ground of the fair value of all identifiable assets of the invested
entity when it obtains the investment, recognize the attributable share of the net profits and losses of the invested entity after it
adjusts the net profits of the invested entity. If the accounting polices adopted by the investees is 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 during the
accounting period and according which to recognize the investment income as well as other comprehensive income. For the
transaction happened between the Company and associated enterprises as well as joint ventures, if the assets launched or sold not
form into business, the portion of the unrealized gains and losses of the internal transaction, which belongs to the Company according
to the calculation of the enjoyed proportion, should recognize the investment gains and losses on the basis. But the losses of the
unrealized internal transaction happened between the Company and the investees which belongs to the impairment losses of the
transferred assets, should not be neutralized.
The Company shall recognize the net losses of the invested enterprise until the book value of the long-term equity investment and
other long-term rights and interests which substantially form the net investment made to the invested entity are reduced to zero.
However, if the Company has the obligation to undertake extra losses, it shall be recognized as the estimated liabilities in accordance
with the estimated duties and then recorded into investment losses at current period. If the invested entity realizes any net profits later,
the Company shall, after the amount of its attributable share of profits offsets against its attributable share of the un-recognized losses,
resume recognizing its attributable share of profits.
For the long-term equity investment held by the Company before the first execution of the new accounting criterion on 1 Jan. 2007 of
the associated enterprises and joint ventures, if there is debit difference of the equity investment related to the investment, should be
included in the current gains and losses according to the amount of the straight-line amortization during the original remained period.
③ Acquiring shares of minority interest
In the preparation for the financial statements, the balance existed between the long-term equity investment increased by acquiring
shares of minority interest and the attributable net assets on the subsidiary calculated by the increased shares held since the purchase
date (or combination date), the capital reserves shall be adjusted, if the capital reserves are not sufficient to offset, the retained profits
shall be adjusted.
④ Disposal of long-term equity investment
In the preparation of financial statements, the Company disposed part of the long-term equity investment on subsidiaries without
losing its controlling right on them, the balance between the disposed price and attributable net assets of subsidiaries by disposing the
long-term equity investment shall be recorded into owners’ equity; where the Company losses the controlling right by disposing part
of long-term equity investment on such subsidiaries, it shall treated in accordance with the relevant accounting policies in 6. (2)
“Method on preparation of combined financial statements” in this section.
For other ways on disposal of long-term equity investment, the balance between the book value of the disposed equity and its actual
payment gained shall be recorded into current profits and losses.
For the long-term equity investment measured by adopting equity method, if the remained equity after disposal still adopts the equity
method for measurement, the other comprehensive income originally recorded into owners’ equity should adopt the same basis of the
accounting disposal of the relevant assets or liabilities directly disposed by the investees according to the corresponding proportion.
The owners’ equity recognized owning to the changes of the other owners’ equity except for the net gains and losses, other
comprehensive income and the profits distribution of the investees, should be transferred into the current gains and losses according
Lu Thai Textile Co., Ltd.                                                                                      Annual Report 2017
to the proportion.
For the long-term equity investment which adopts the cost method of measurement, if the remained equity still adopt the cost method,
the other comprehensive income recognized owning to adopting the equity method for measurement or the recognition and
measurement standards of financial instrument before acquiring the control of the investees, should adopt the same basis of the
accounting disposal of the relevant assets or liabilities directly disposed by the investees and should be carried forward into the
current gains and losses according to the proportion; the changes of the other owners’ equity except for the net gains and losses, other
comprehensive income and the profits distribution among the net assets of the investees which recognized by adopting the equity
method for measurement, should be carried forward into the current gains and losses according to the proportion.
14. Investment Real Estates
Measurement model of investment real estate
Costing method measurement
Depreciation or amortization method
The investment real estate refers to the real estate gaining the rent or capital appreciation or both. It includes rented land use right,
holding land use right to be transferred after the appreciation and rented building, etc.
The investment real estate is measured initially according to the cost. The subsequent expenses related with the investment real estate
shall be calculated into the cost of investment real estate if the economic benefit related with the asset may flow in and the cost may
be measured reliably. Other subsequent expenses shall be calculated in the current profits and losses at the occurrence.
The Company adopts the cost mode to conduct the subsequent measurement on the investment real estate, depreciates or amortizes
according to the policy consistent with the house building or land use right.
The devaluation test method and devaluation provision method for the investment real estate can be seen in Section 20 “Long-term
Asset Devaluation”.
When the self-use real estate or stock is converted to the investment real estate or the investment real estate is converted to the
self-use real estate, the book value before the conversion shall be the entry value after the conversion.
When the investment real estate is disposed, or out of usage permanently, and it is expected not to get the economic benefit from the
disposal, the confirmation on the investment real estate shall be terminated. The disposal income for the sales, transferring, scrap or
damage of the investment real estate deducing the book value and related tax shall be calculated in the current profits and losses.
15. Fixed Assets
(1) Recognition Conditions
The term “fixed assets” refers to the tangible assets that simultaneously possess the features as follows: (a) they are held for the sake
of producing commodities, rendering labor service, renting or business management; and (b) their useful life is in excess of one fiscal
year. The fixed assets are only recognized when the relevant economic benefits probably flow in the Company and its cost could be
reliable measured. The fixed assets should take the initial measurement according to the cost and at the same time consider the
influences of the factors of the estimated discard expenses.
(2) Depreciation Method
 Category of fixed assets             Method                   Useful life                  Salvage value        Annual deprecation
Housing and building        Average     method      of 5-30                        0-10%                      3.00%-20.00%
Lu Thai Textile Co., Ltd.                                                                                        Annual Report 2017
                             useful life
                             Average       method    of
Machinery equipments                                      10-18                     0-10%                       5.00%-10.00%
                             useful life
                             Average       method    of
Transportation vehicle                                    5                         0-10%                       18.00%-20.00%
                             useful life
Electronic      equipments Average         method    of
                                                          5                         0-10%                       18.00%-20.00%
and others                   useful life
(3) Recognition Basis, Pricing and Depreciation Method of Fixed Assets by Finance Lease
The “finance lease” shall refer to a lease that has transferred in substance all the risks and rewards related to the ownership of an asset.
Its ownership may or may not eventually be transferred. The fixed assets by finance lease shall adopt the same depreciation policy for
self-owned fixed assets. If it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when the lease
term expires, the leased asset shall be fully depreciated over its useful life. If it is not reasonable to be certain that the lessee will
obtain the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully depreciated over the shorter one
of the lease term or its useful life.
16. Construction in Progress
Is the Company subject to any disclosure requirements for special industries?
No.
Construction in process is measured at actual cost. Actual cost comprises construction costs, borrowing costs that are eligible for
capitalization before the fixed assets being ready for their intended us and other relevant costs. Construction in process is transferred
to fixed assets when the assets are ready for their intended use.
See the details of the impairment test method of the impairment provision withdrawal method of the construction in progress to 20
“Long-term assets impairment” in this section.
17. Borrowing Costs
Borrowing costs include interest on borrowings, amortization of discounts or premiums, ancillary expenses and exchange differences
arising from foreign currency borrowings. The capitalization of borrowing costs, which can be directly attributable to asset
acquisition or construction, starts when asset expenditure or borrowing cost are generated, or the asset acquisition or construction is
launched to enable the asset to meet the predefined conditions for use or sale, and ends when the acquired or constructed asset
conforming to capitalization conditions meet the predefined conditions for use or sale. The other borrowing costs are recognized as
expenses in the current period.
The actual interest expenses incurred in the current period of specific borrowings shall be capitalized by subtracting the interest
income earned by the bank from unused borrowing funds or investment income gained from temporary investment. For general
borrowings, the amount to be capitalized shall be determined based on the weighted average of total asset expenditure exceeding the
specific borrowing multiplied by the capitalization rate of general borrowings. The capitalization rate is determined based on the
weighted average interest rate of general borrowings.
During the capitalization period, the foreign exchange differences on foreign currency specific borrowings shall be capitalized. The
exchange differences on foreign currency general borrowings shall be included in the current profits and losses.
Assets eligible for capitalization refer to assets such as fixed assets, investment real estate and inventory that require a considerable
Lu Thai Textile Co., Ltd.                                                                                        Annual Report 2017
amount of time for acquisition or construction to be ready for use or sale.
If the acquisition or construction process of the assets eligible for capitalization is stopped unexpectedly for more than 3 months, the
capitalization of borrowing costs shall be suspended until the asset acquisition or construction resumes.
18. Biological Assets
(1) Consumptive biological assets
Consumptive biological assets refer to the biological assets held for sale or to be harvested as agricultural products in future,
including crops, vegetables under growing, timber production forest and domestic animals for sale. The consumptive biological
assets shall be measured based on cost. All costs for planting, creating, cultivating or raising of consumptive biological assets shall be
the necessary expenses directly added to such assets that accrued before harvest, including any loan that satisfies capitalization
conditions. Subsequent expenses for keeping and feeding the consumptive biological assets after the harvest should be recognized as
the losses and gains of the current period.
Upon harvest or sale, the cost of consumptive biological assets shall be based on its book value through weighted average.
On the date of Balance Sheet, the consumptive biological assets shall be measured with lower of cost and net realizable value, and
the method for confirming the reserve for inventory price drop shall be adopted to confirm the reserve for price drop of consumptive
biological assets. If the impacts of depreciation disappear, the depreciation amount shall be recovered, and the reserve for price drop
originally accrued shall be reversed. Such amount reversed shall be recognized as loss and gain for the current period.
If consumptive biological assets change its usage to be as productive biological assets, the cost after such change shall be confirmed
based on the book value when the usage is changed. If consumptive biological assets are changed as public biological assets,
depreciation shall be taken into consideration pursuant to Corporate Accounting Rules No.8 – Assets Depreciation. When
depreciation occur, accrued the depreciation reserve first and then confirm based on the book value after such accrual.
(2) Productive biological assets
Productive biological assets refer to agricultural products produced, and biological assets held for labor provision or lease, including
economic forest, firewood forest, productive animals and labor animals. The productive biological assets shall be measured based on
cost. All costs for creating or fostering productive biological assets shall be the necessary expenses directly added to such assets that
accrued before it reaches expected production purpose, including any loan that satisfies capitalization conditions.
The Company shall withdraw the depreciation of the productive biological assets by adopting the straight-line method since the
second month of its useful life. Useful life, expected net salvage value and annual depreciation rate of each productive biological
assets are as below:
      Category                           Useful life (Year)              Expected net salvage value     Annual deprecation (%)
                                                                                     (%)
      Livestock             5                                                 5%
The Company shall review the service life, expected net residuals and depreciation method of the productive biological assets at least
by the end of the year. In case of any change, it shall be deemed as accounting estimate change.
The difference between proceedings from disposal (sale, loss, death or damage) of the productive biological assets deducted by book
value and related tax shall be recognized as loss and gain for the current period.
The Company shall check on the date of Balance Sheet whether there is a depreciation sign for the productive biological assets. If yes,
estimate the recoverable amount. Such recoverable amount shall be estimated based on single asset item. If it is difficult, the
recoverable amount of the portfolio shall be confirmed based on the portfolio such assets belong to. If the recoverable amount of the
assets is lower than book value, reserve for asset depreciation shall be accrued based on such difference, and recognized as loss and
gain for the current period.
The above assets impairment losses once be recognized should not be reversed during the accounting periods afterwards.
Lu Thai Textile Co., Ltd.                                                                                         Annual Report 2017
If the productive biological assets changed the usage as the consumptive biological assets, the cost after the change should be
recognized as the book value when changing the usage; of the productive biological assets changed the usage as non-profit living
assets, should be recognized according to the book value after the withdrawal of the impairment provision in accord with the
regulation of No. 8 of ASBE - Assets Impairment for considering whether there was impairment and should withdraw the impairment
provision in ahead of it.
19. Intangible Assets
(1) Pricing Method, Useful Life and Impairment Test
The term “intangible asset” refers to the identifiable non-monetary assets possessed or controlled by enterprises which have no
physical shape.
The intangible assets shall be initially measured according to its cost. The costs related with the intangible assets, if the economic
benefits related to intangible assets are likely to flow into the enterprise and the cost of intangible assets can be measured reliably,
shall be recorded into the costs of intangible assets; otherwise, it shall be recorded into current profits and losses upon the occurrence.
The use right of land gained is usually measured as intangible assets. For the self-developed and constructed factories and other
constructions, the related expenditures on use right of land and construction costs shall be respectively measured as intangible assets
and fixed assets. For the purchased houses and buildings, the related payment shall be distributed into the payment for use right of
land and the payment for buildings, if it is difficult to be distributed, the whole payment shall be treated as fixed assets.
For intangible assets with a finite service life, from the time when it is available for use, the cost after deducting the sum of the
expected salvage value and the accumulated impairment provision shall be amortized by straight line method during the service life.
While the intangible assets without certain service life shall not be amortized.
At the end of period, the Company shall check the service life and amortization method of intangible assets with finite service life, if
there is any change, it shall be regarded as a change of the accounting estimates. Besides, the Company shall check the service life of
intangible assets without certain service life, if there is any evidence showing that the period of intangible assets to bring the
economic benefits to the enterprise can be prospected, it shall be estimated the service life and amortized in accordance with the
amortization policies for intangible assets with finite service life.
(2) Accounting Policy for Internal Research and Development Expenditures
The expenditures for internal research and development projects of an enterprise shall be classified into research expenditures and
development expenditures.
The research expenditures shall be recorded into the profit or loss for the current period.
The development expenditures shall be confirmed as intangible assets when they satisfy the following conditions simultaneously, and
shall be recorded into profit or loss for the current period when they don’t satisfy the following conditions.
① It is feasible technically to finish intangible assets for use or sale;
② It is intended to finish and use or sell the intangible assets;
③ The usefulness of methods for intangible assets to generate economic benefits shall be proved, including being able to prove that
there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the
intangible assets itself or the intangible assets will be used internally;
④ It is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of
sufficient technologies, financial resources and other resources;
⑤ The development expenditures of the intangible assets can be reliably measured.
Lu Thai Textile Co., Ltd.                                                                                        Annual Report 2017
As for expenses that can’t be identified as research expenditures or development expenditures, the occurred R & D expenses shall be
all included in current profits and losses.
(3) Impairment testing method and provision-making method for intangible assets
See 20 “Impairment of long-term assets” in this section.
20. Impairment of Long-term Assets
For non-current financial Assets of fixed Assets, projects under construction, intangible Assets with limited service life, investing real
estate with cost model, long-term equity investment of subsidiaries, cooperative enterprises and joint ventures, the Company should
judge whether decrease in value exists on the date of balance sheet. Recoverable amounts should be tested for decrease in value if it
exists. Other intangible Assets of reputation and uncertain service life and other non-accessible intangible assets should be tested for
decrease in value no matter whether it exists.
If the recoverable amount is less than book value in impairment test results, the provision for impairment of differences should
include in impairment loss. Recoverable amounts would be the higher of net value of asset fair value deducting disposal charges or
present value of predicted cash flow. Asset fair value should be determined according to negotiated sales price of fair trade. If no
sales agreement exists but with asset active market, fair value should be determined according to the Buyer’s price of the asset. If no
sales agreement or asset active market exists, asset fair value could be acquired on the basis of best information available. Disposal
expenses include legal fees, taxes, cartage or other direct expenses of merchantable Assets related to asset disposal. Present value of
predicted asset cash flow should be determined by the proper discount rate according to Assets in service and predicted cash flow of
final disposal. Asset depreciation reserves should be calculated on the basis of single Assets. If it is difficult to predict the recoverable
amounts for single Assets, recoverable amounts should be determined according to the belonging asset group. Asset group is the
minimum asset combination producing cash flow independently.
In impairment test, book value of the business reputation in financial report should be shared to beneficial asset group and asset
group combination in collaboration of business merger. It is shown in the test that if recoverable amounts of shared business
reputation asset group or asset group combination are lower than book value, it should determine the impairment loss. Impairment
loss amount should firstly be deducted and shared to the book value of business reputation of asset group or asset group combination,
then deduct book value of all assets according to proportions of other book value of above assets in asset group or asset group
combination except business reputation.
After the asset impairment loss is determined, recoverable value amounts would not be returned in future.
21. Long-term Deferred Expenses
Long-term deferred expenses refer to general expenses with the apportioned period over one year (one year excluded) that have
occurred but attributable to the current and future periods. The long-term deferred expenses mainly including land contract fees, land
rental fees and house rental fees, and etc. And the long-term deferred expense shall be amortized by the straight-line method
averagely within the benefit period.
22. Payroll
(1) Accounting Treatment of Short-term Compensation
Short-term compensation mainly including salary, bonus, allowances and subsidies, employee services and benefits, medical
insurance premiums, birth insurance premium, industrial injury insurance premium, housing fund, labor union expenditure and
personnel education fund, non-monetary benefits etc. The short-term compensation actually happened during the accounting period
Lu Thai Textile Co., Ltd.                                                                                   Annual Report 2017
when the active staff offering the service for the Company should be recognized as liabilities and is included in the current gains and
losses or relevant assets cost. Of which the non-monetary benefits should be measured according to the fair value.
(2) Accounting Treatment of the Welfare after Departure
Welfare after demission mainly includes basic endowment insurance and unemployment insurance and welfare plans after demission
include setting drawing plan. Where the setting drawing plan is adopted, the corresponding payable and deposit amount should be
included into the relevant assets cost or the current gains and losses when happen.
(3) Accounting Treatment of the Demission Welfare
The Company relieves the labor relation with the employees before the due date of the labor contacts or puts forward the advice of
providing the compensation for urging the employees volunteered to receive the downsizing and when the Company could not
unilaterally withdraw the demission welfare owning to the relieving plan of the labor relation or the downsizing advice, should
confirm the liabilities of the employees’ salary from the demission welfare on the earlier day between the cost confirmed by the
Company and the cost related to the reorganization of the payment of the demission welfare and includes which in the current gains
and losses. But as for the demission welfare be estimated that could not be completed paid within 12 months after the end of the
annual Reporting Period, should be handled according to the other long-term employee’s salary.
The internal retire plan of the employees should be handled by adopting the same principles of the above demission welfare. The
Company includes the salary and the paid social insurance charges planed to pay by the personnel retreated inside during the period
from the date when ceased the services to the normal retire date in the current gains and losses (demission welfare) when met with
the recognition conditions of the estimated liabilities.
(4) Accounting Treatment of the Welfare of Other Long-term Staffs
The other long-term welfare that the Company offers to the staffs, if met with the setting drawing plan, should be accounting
disposed according to the setting drawing plan, while the rest should be disposed according to the setting revenue plan.
23. Revenue
Is the Company subject to any disclosure requirements for special industries?
No.
(1) Selling products
No revenue from selling goods may be recognized unless the following conditions are met simultaneously: the significant risks and
rewards of ownership of the goods have been transferred to the buyer by the enterprise; the enterprise retains neither continuous
management right that usually keeps relation with the ownership nor effective control over the sold goods; the relevant amount of
revenue can be measured in a reliable way; the relevant economic benefits may flow into the enterprise; and the relevant costs
incurred or to be incurred can be measured in a reliable way.
As for the revenues from the domestic sales products, the Company deliveries the products to the buyers according to the contracts
agreement, and the revenues amount of the products sales had been confirmed with the goods payment had been withdrawn or had
received the receipt voucher of which the relevant economic benefits probably flow into the enterprise as well as the relevant costs of
the products could be reliable measured when being confirming as the revenues.
As for the revenues from the export sales products, the Company executes the customs declaration and the products departure
according to the contracts agreement, and the Company had acquired the bill of lading with the revenues amount of the products sale
Lu Thai Textile Co., Ltd.                                                                                       Annual Report 2017
had been confirmed and the goods payment had been withdrawn or had had received the receipt voucher of which the relevant
economic benefits probably flow into the enterprise as well as the relevant costs of the products could be reliable measured when
being confirming as the revenues.
(2) Providing labor services
If the Company can reliably estimate the outcome of a transaction concerning the labor services it provides, it shall recognize the
revenue from providing services employing the percentage-of-completion method on the date of the balance sheet. The completed
proportion of a transaction concerning the providing of labor services shall be decided by the proportion of the labor service already
provided to the total labor service to provide.
The outcome of a transaction concerning the providing of labor services can be measured in a reliable way, means that the following
conditions shall be met simultaneously: ① The amount of revenue can be measured in a reliable way; ② The relevant economic
benefits are likely to flow into the enterprise; ③ The schedule of completion under the transaction can be confirmed in a reliable
way; and ④ The costs incurred or to be incurred in the transaction can be measured in a reliable way.
If the outcome of a transaction concerning the providing of labor services can’t be measured in a reliable way, the revenue from the
providing of labor services shall be recognized in accordance with the amount of the cost of labor services incurred and expected to
be compensated, and make the cost of labor services incurred as the current expenses. If it is predicted that the cost of labor services
incurred couldn’t be compensated, thus no revenue shall be recognized.
Where a contract or agreement signed between Company and other enterprises concerns selling goods and providing of labor services,
if the part of sale of goods and the part of providing labor services can be distinguished from each other and can be measured
respectively, the part of sale of goods and the part of providing labor services shall be treated respectively. If the part of selling goods
and the part of providing labor services can’t be distinguished from each other, or if the part of sale of goods and the part of providing
labor services can be distinguished from each other but can’t be measured respectively, both parts shall be conducted as selling
goods.
(3) Royalty revenue
In accordance with relevant contract or agreement, the amount of royalty revenue should be recognized as revenue on accrual basis.
(4) Interest revenue
The amount of interest revenue should be measured and confirmed in accordance with the length of time for which the Company’s
monetary fund is used by others and the agreed interest rate.
24. Government Subsidies
(1) Judgment Basis and Accounting Treatment of Government Subsidies Related to Assets
The government subsidy refers to the Company gets the monetary and non-monetary assets for free from the government, excluding
the capital that the government invests as the investor who enjoys the corresponding owner’s equity. It can be divided into the
asset-related government subsidy and income-related government subsidy. The Company defines the obtained government subsidy
for the acquisition and construction or forming the long-term asset in other ways as the asset-related government subsidy; other
government subsidies are defined as the income-related government subsidy. If the government document does not clearly prescribe
the subsidy object, the following ways shall be adopted to divide the subsidy into the income-related government subsidy and
asset-related government subsidy: (1) The government document clears the specific project for the subsidy, it shall divide according
to the relative ratio of asset expenditure amount and entry cost expenditure amount to be formed in the budget of specific project,
review according to the division ratio at each balance sheet date, and change when necessary; (2) The government document only
makes the general expression on the usage without indicated specific project, it shall be the income-related government subsidy. If
the government subsidy is monetary asset, it shall be measured according to the received or receivable amount. If the government
subsidy is non-monetary asset, it shall be measured according to the fair value; it the fair value can’t be got reliably, it shall be
measured according to the nominal amount. The government subsidy measured according to the nominal amount shall be calculated
Lu Thai Textile Co., Ltd.                                                                                       Annual Report 2017
in the current profits and losses directly.
The asset-related government subsidy shall be confirmed as the deferred income, and it shall be calculated into the current profits and
losses by stages in reasonable and systematic way within the service life of related asset.
Government subsidies related to routine activities of the Company shall be calculated into other income or offset related costs
according to the essence of economic business; government subsidies that have nothing to do with routine activities shall calculated
into non-operating income.
When the confirmed government subsidy needs to be returned and there is the related deferred income balance, the related deferred
income book balance shall be deducted, and the surpassing part shall be calculated into the current profits and losses; If in other
situations, it shall be calculated in the current profits and losses directly.
(2) Judgment Basis and Accounting Treatment of Government Subsidies Pertinent to Incomes
The Company usually confirms and measures the government subsidy according to the received amount when receiving actually.
However, the financial support fund which can be received complying with the related conditions prescribed in the financial support
policy indicated by the conclusive evidence shall be measured according to the receivable amount. The following conditions shall be
met for the government subsidy measured by the receivable amount: (1) The receivable subsidy amount has been confirmed by the
authorized government department, or it can be measured reasonably according to the officially released provisions related with the
financial fund management method, and it is expected there is no major uncertainty for the amount; (2) It is based on the financial
support project and financial fund management method actively opened released officially by the local financial department and
according to the provision in Government Information Disclosure Provisions, the management method shall be universal (any
enterprise complying with the prescribed condition can apply) rather than for the specific enterprise; (3) The related subsidy approval
document has clearly promised the appropriate term, and the appropriation of the amount shall have the corresponding financial
budget for the guarantee, therefore, it can ensure to receive within the prescribed term reasonably.
The income-related government subsidy to compensate the related expense and loss later shall be confirmed as the deferred income,
and it shall be calculated in the current profits and losses during the period to confirm the related costs or losses; the occurred related
costs or losses for compensation shall be calculated in the current profits and losses directly.
For government subsidy including the asset-related government subsidy and the income-related government subsidy at one time,
accounting treatment shall be conducted respectively to distinguish the different parts; if it is difficult to distinguish, then it shall be
classified into the income-related government subsidy
25. Deferred Income Tax Assets/Deferred Income Tax Liabilities
(1) Income tax of the current period
On the balance sheet date, for the current income tax liabilities (or assets) of the current period as well as the part formed during the
previous period, should be measured by the income tax of the estimated payable (returnable) amount which be calculated according
to the regulations of the tax law. The amount of the income tax payable which is based by the calculation of the current income tax
expenses, are according to the result measured from the corresponding adjustment of the pre-tax accounting profit of this Reporting
Period which in accord to the relevant regulations of the tax law.
(2) Deferred income tax assets and deferred income tax liabilities
The difference between the book value of certain assets and liabilities and their tax assessment basis, as well as the temporary
difference occurs from the difference between the book value of the items which not be recognized as assets and liabilities but could
confirm their tax assessment basis according to the regulations of the tax law, the deferred income tax assets and the deferred income
tax liabilities should be recognized by adopting liabilities law of the balance sheet.
No deferred tax liability is recognized for a temporary difference arising from the initial recognition of goodwill, the initial
Lu Thai Textile Co., Ltd.                                                                                      Annual Report 2017
recognition of assets or liabilities due to a transaction other than a business combination, which affects neither accounting profit nor
taxable profit (or deductible loss). Besides, no deferred tax assets is recognized for the taxable temporary differences related to the
investments of subsidiary companies, associated enterprises and joint enterprises, and the investing enterprise can control the time of
the reverse of temporary differences as well as the temporary differences are unlikely to be reversed in the excepted future. Otherwise,
the Group should recognize the deferred income tax liabilities arising form other taxable temporary difference.
No deferred taxable assets should be recognized for the deductible temporary difference of initial recognition of assets and liabilities
arising from the transaction which is not business combination, the accounting profits will not be affected, nor will the taxable
amount or deductible loss be affected at the time of transaction. Besides, no deferred taxable assets should be recognized for the
deductible temporary difference related to the investments of the subsidiary companies, associated enterprises and joint enterprises,
which are not likely to be reversed in the expected future or is not likely to acquire any amount of taxable income tax that may be
used for making up such deductible temporary differences. Otherwise, the Company shall recognize the deferred income tax assets
arising from a deductible temporary difference basing on the extent of the amount of the taxable income that is likely to be acquired
to make up such deductible temporary differences
For any deductible loss or tax deduction that can be carried forward to the next year, the corresponding deferred income tax asset
shall be determined to the extent that the amount of future taxable income to be offset by the deductible loss or tax deduction to be
likely obtained.
On the balance sheet date, the deferred income tax assets and the deferred income tax liabilities shall be measured at the tax rate
applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled.
The book value of deferred income tax assets shall be reviewed at each balance sheet date. If it is unlikely to obtain sufficient taxable
income to offset against the benefit of the deferred income tax asset, the book value of the deferred income tax assets shall be written
down. Any such write-down should be subsequently reversed where it becomes probable that sufficient taxable income will be
available.
(3) Income tax expenses
Income tax expenses include current income tax and deferred income tax.
The rest current income tax and the deferred income tax expenses or revenue should be included into current gains and losses except
for the current income tax and the deferred income tax related to the transaction and events that be confirmed as other comprehensive
income or be directly included in the shareholders’ equity which should be included in other comprehensive income or shareholders’
equity as well as the book value for adjusting the goodwill of the deferred income tax occurs from the business combination.
(4) Offset of income tax
The current income tax assets and liabilities of the Company should be listed by the written-off net amount which intend to executes
the net amount settlement as well as the assets acquiring and liabilities liquidation at the same time while owns the legal rights of
settling the net amount.
The deferred income tax assets and liabilities of the Company should be listed as written-off net amount when having the legal rights
of settling the current income tax assets and liabilities by net amount and the deferred income tax and liabilities is relevant to the
income tax which be collected from the same taxpaying bodies by the same tax collection and administration department or is
relevant to the different taxpaying bodies but during each period which there is significant reverse of the deferred income assets and
liabilities in the future and among which the involved taxpaying bodies intend to settle the current income tax and liabilities by net
amount or are at the same time acquire the asset as well as liquidate the liabilities.
Lu Thai Textile Co., Ltd.                                                                                     Annual Report 2017
26. Lease
(1) Accounting Treatment of Operating Lease
(1) Business of operating leases recorded by the Group as the lessee
The rent expenses from operating leases shall be recorded by the lessee in the relevant asset costs or the profits and losses of the
current period by using the straight-line method over each period of the lease term. The initial direct costs shall be recognized as the
profits and losses of the current period. The contingent rents shall be recorded into the profits and losses of the current period in
which they actually arise.
(2) Business of operating leases recorded by the Group as the lessor
The rent incomes from operating leases shall be recognized as the profits and losses of the current period by using the straight-line
method over each period of the lease term. The initial direct costs of great amount shall be capitalized when incurred, and be
recorded into current profits and losses in accordance with the same basis for recognition of rent incomes over the whole lease term.
The initial direct costs of small amount shall be recorded into current profits and losses when incurred. The contingent rents shall be
recorded into the profits and losses of the current period in which they actually arise.
(2) Accounting Treatments of Financial Lease
(1) Business of finance leases recorded by the Company as the lessee
On the lease beginning date, the Company shall record the lower one of the fair value of the leased asset and the present value of the
minimum lease payments on the lease beginning date as the entering value in an account, recognize the amount of the minimum lease
payments as the entering value in an account of long-term account payable, and treat the balance between the recorded amount of the
leased asset and the long-term account payable as unrecognized financing charges. Besides, the initial direct costs directly
attributable to the leased item incurred during the process of lease negotiating and signing the leasing agreement shall be recorded in
the asset value of the current period. The balance through deducting unrecognized financing charges from the minimum lease
payments shall be respectively stated in long-term liabilities and long-term liabilities due within 1 year.
Unrecognized financing charges shall be adopted by the effective interest rate method in the lease term, so as to calculate and
recognize current financing charges. The contingent rents shall be recorded into the profits and losses of the current period in which
they actually arise.
(2) Business of finance leases recorded by the Company as the lessor
On the beginning date of the lease term, the Company shall recognize the sum of the minimum lease receipts on the lease beginning
date and the initial direct costs as the entering value in an account of the financing lease values receivable, and record the
unguaranteed residual value at the same time. The balance between the sum of the minimum lease receipts, the initial direct costs and
the unguaranteed residual value and the sum of their present values shall be recognized as unrealized financing income. The balance
through deducting unrealized financing incomes from the finance lease accounts receivable shall be respectively stated in long-term
claims and long-term claims due within 1 year.
Unrecognized financing incomes shall be adopted by the effective interest rate method in the lease term, so as to calculate and
recognize current financing revenues. The contingent rents shall be recorded into the profits and losses of the current period in which
they actually arise.
27. Other Significant Accounting Policies and Estimates
Due to the internal uncertainty of operating activities, the Company needs to make judgments, estimates and assumptions for carrying
amounts of statement items that can’t be measured accurately during the process of applying accounting policies. Such judgments,
Lu Thai Textile Co., Ltd.                                                                                      Annual Report 2017
estimates and assumptions are made on the basis of the past experience of Company’s management staffs and on the consideration of
other relevant factors. Such judgments, estimates and assumptions have effect on reporting amount of incomes, expense, assets and
liabilities, as well as disclosure of contingent liabilities on the balance sheet date. However, the uncertainty of such estimates may
results in major adjustments of carrying amounts of assets or liabilities that will be influenced in future.
The Company shall have a check on the aforesaid judgments, estimates and assumptions at fixed intervals on the basis of sustainable
operation. As for the change in accounting estimates that only effects on the current period of the change, the affected amount thereof
shall be recognized at current period of the change. As for accounting estimates that effects on both the current period of the change
and future periods, the affected amount thereof shall be recognized at current period of the change and future periods.
On balance sheet date, major fields requiring judgments, estimates and assumptions on amounts of financial statement items by the
Company are as follows:
(1) Classification of leases
In line with rules in Accounting Standards for Enterprises No. 21 – Leases, the Company classifies leases into operating leases and
finance leases. Upon the classification, the management staffs need to make analysis and judgments on whether to essentially transfer
all risks and remuneration relating to the ownership of leased-out assets to the lessee, or whether the Company has essentially
undertaken all risks and remuneration relating to the ownership of leased-in assets.
(2) Withdrawal of bad debt provisions
The Company shall, in accordance with accounting policies of receivables, calculate bad debt provisions by adopting allowance
method. Impairment of accounts receivable is based on the assessment of the recovery of accounts receivable. Identification of
impairment of accounts receivable requires judgments and estimates by management staffs. The difference between actual outcomes
and originally estimated outcomes, which will influence the carrying amount of accounts receivable and bad debt provisions thereof
in the estimated period of the change, shall be withdrawn or reversed.
(3) 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 inventory
depreciation reserves shall be withdrawn. Impairment of inventories to realizable net value is based on the assessment of the
marketing of inventories and realizable net value thereof. Identification of inventory impairment requires well-established evidences
by management staffs, as well as judgments and estimates based on consideration of the purpose of holding inventories and other
factors such as events occurring after the date of balance sheet. The difference between actual outcomes and originally estimated
outcomes, which will influence the carrying amount of inventories and inventory depreciation reserves in the estimated period of the
change, shall be withdrawn or reversed.
(4) Fair values of financial instruments
As for financial instruments not existing in active trading market, the Company shall determine their fair values by all kinds of
assessment methods, which include model analysis of discounted cash flow and etc. During the assessment, the Company needs to
assess for respects such as future cash flows, credit risks, market volatility, correlation, and choose appropriate discount rate. Such
related assumptions have uncertainty, of which the change will effect on fair values of financial instruments.
(5) Impairment of financial assets available for sale
To a large extent, whether the impairment of financial assets available for sale is recognized or not relies on the judgments and
assumptions of the management staffs. In that way, the Company shall be certain about whether to recognize impairment losses of
financial assets available for sale in the profit statement. During the process of making judgments and assumptions, the Company
needs to evaluate how much the fair value of such investment is less than its cost, how long such investment will last, and the
financial condition and short-term business outlook of the invested parties, which include industry status, technology transform,
credit rating, default rate and risks from the opposite parties.
(6) Impairment provisions of non-financial non-current assets
Lu Thai Textile Co., Ltd.                                                                                     Annual Report 2017
The Company shall judge whether there is sign of impairment of non-current assets other than financial assets on balance sheet date.
Intangible assets with uncertain service lives, besides being conducted with annual impairment test every year, have to accept
impairment tests when there is sign of impairment. Other non-current assets except for financial assets have to accept impairment
tests when there is sign indicating the carrying amount thereof is unrecoverable.
When the carrying amounts of the asset or group assets are higher than the recoverable amounts, namely whichever is higher between
the net amount through deducting disposal charges from the fair value and the present value of the estimated future cash flow,
impairment occurs.
The net amount of the fair value of an asset minus the disposal expenses shall be determined in light of the amount of the basis of the
price as stipulated in the sales agreement or the observable market price in the fair transaction minus the incremental cost directly
subject to the disposal of the asset.
When estimating present value of future cash flows, it is necessary to make significant judgments on characters of the asset or asset
group, such as output, sales price, related operating costs, and discount used to calculate the present value. When estimating
recoverable amount, the Company shall adopt all relevant materials that can be required, including estimates relating to output, sales
price and relevant operating costs judged by rational and supportable assumptions.
The Company tests whether there is impairment of good will at least for every year, which requires itself to estimate the present value
of the future cash flow of group assets or combination of group assets. When estimating the present value of the future cash flow, the
Company needs to estimate the cash flow arising from future group assets or combination of group assets, and at the same time
choose appropriate discount rate to determine the present value of the future cash flow.
(7) Depreciation and amortization
Upon consideration on the salvage value of investment real estates, fixed assets and intangible assets, the Company shall withdraw
depreciation and amortization by straight-line method over their service lives. The Company checks on service lives at fixed intervals,
so as to determine the amounts of depreciation expenses and amortization expenses at each period. Service lives are confirmed in
accordance with the past experience on similar assets of the Company, along with renewed technology of expectation. If any
significant change occurred to previous estimated, depreciation expenses and amortization expenses will be adjusted in future period.
(8) Deferred income tax assets
In a limit providing large possibility of offset losses from sufficient taxable profits, the Group shall recognize deferred income tax
assets in line with all unused tax losses, which requires management staffs of the Group to estimate the time when future taxable
profits occurs and the amount thereof by applying plenty of judgments and combining tax planning strategies, so as to determine the
amount of the recognizable deferred income tax assets.
(9) 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 ultimate
recognition outcomes and the originally estimated amounts of such tax issues, then such differences shall effect on the current
income tax and deferred income tax during the ultimate recognition period.
(10) 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 a
asset or liability, the Company adopts the available and observable market data. During the process of confirming the fair value of
various assets and liabilities, relevant information of the adopted valuation technique and input value was disclosure in Note XI.
Lu Thai Textile Co., Ltd.                                                                                       Annual Report 2017
28. Changes in Main Accounting Policies and Estimates
(1) Change of Accounting Policies
√ Applicable □ Not applicable
      Content and reason for changes                      Approval procedures                                  Remark
Before May 1, 2017, inventories of the
Company shall be measured at planned
cost when acquired. When acquired and
                                                                                             For it is unpractical to confirm the
delivered, it shall be measured as per the
                                                                                             accumulative influences from the changes
weighted average method. According to
                                                                                             of the accounting policies, according to the
the requirements of refining operation
                                                                                             rules of Accounting Standards for Business
management of the Company, in order to         Approved by the 7th Meeting of the 8th
                                                                                             Enterprises - Changes in Accounting
further strengthen the refinement of           Board of Directors of the Company on
                                                                                             Policies and Estimates and Correction of
financial accounting, the Company              April 26, 2017
                                                                                             Errors, the changes in accounting policies
changed the pricing method of acquired
                                                                                             adopted prospective application method,
inventories from planned cost to actual
                                                                                             which was implemented from May 1,
cost from May 1, 2017, and changed the
                                                                                             2017.
pricing of delivered grey yarn, dyed yarn,
and plus material from the weighted
average method to first-in first-out method.
                                                                                             Accounting Standards for Business
                                                                                             Enterprises No. 42—Held-for-sale
                                                                                             Non-current Assets, Disposal Groups and
On April 28, 2017, the Ministry of Finance
                                                                                             Discontinued Operation standardize the
released Accounting Standards for
                                                                                             classification, measurement, and list of
Business Enterprises No.
                                                                                             held-for-sale non-current assets and
42—Held-for-sale Non-current Assets,
                                                                                             disposal group, and the list of termination
Disposal Groups and Discontinued
                                                                                             operation.
Operation (CaiKuai [2017] No. 3), which
                                                                                             According to Notice of the Ministry of
came into force from May 28, 2017.
                                                                                        th
                                               Approved by the Resolutions on the 16         Finance on Revision and Issuance of
On December 25, 2017, the Ministry of
                                               Meeting of the 8th Board of Directors of      Format of General Financial Statements of
Finance issued the “Notice on Revision
                                               the Company on April 15, 2018                 Enterprises, the Company adjusted the
and Issuance of Format of General
                                                                                             presentation of financial statement. The
Financial Statements of Enterprises”
                                                                                             amount adjusted to “assets disposal
(CaiKuai [2017] No. 30) to revise the
                                                                                             income” in 2017 was RMB1,242,000.54,
format of general finance statements of
                                                                                             and the amount adjusted to “assets disposal
enterprises and apply to financial
                                                                                             income” in 2016 was RMB-6,843,361.94.
statements in 2017 and the subsequent
                                                                                             The changes in accounting policies had no
periods.
                                                                                             significant influences on financial
                                                                                             situations, operating results, and cash
                                                                                             flows of the Company.
On May 10, 2017, the Ministry of Finance Approved by Resolutions on the 9th                  Government subsidy related to routine
Lu Thai Textile Co., Ltd.                                                                                      Annual Report 2017
released Circular on Issuance and Revision Meeting of the 8th Board of Directors of       activities happened after January 1, 2017
of Accounting Standards for Business         the Company on August 28, 2017               shall be calculated into other income;
Enterprises No. 16—Government Subsidy                                                    government subsidy that has nothing to do
(CaiKuai [2017] No. 15), and revised                                                      with routine activities shall be calculated
Accounting Standards for Business                                                         into non-operating income.
Enterprises No. 16—Government Subsidy,
which was implemented in the scope of all
companies who execute accounting
standards for business enterprises from
June 12, 2017.
(2) Significant Changes in Accounting Estimates
□ Applicable √ Not applicable
VI Taxes
1. Main Taxes and Tax Rates
              Category of tax                                Taxable basis                                   Tax rate
                                             Calculated the output tax at 17%, 11%,
                                             6%, 5%, 3% and 0% of taxable income and
VAT                                          paid the VAT by the amount after 17%, 11%, 6%, 5%, 3%, 0%
                                             deducting the deductible withholding VAT
                                             at current period.
                                             Paid at 7%, 5%, 1% of the circulating tax
Urban maintenance and construction tax                                                    7%, 5%, 1%
                                             actually paid
                                             Paid at 0%, 15%, 16.5% and 25% of
Enterprise income tax                                                                     0%, 15%, 16.5%, 25%
                                             taxable income respectively
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
                                                                    15%
“Lufeng Weaving & Dyeing”)
Lu Thai (Hong Kong) Textile Co., Ltd. (hereinafter refer to as
                                      

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