鲁泰Ｂ：2018年半年度报告（英文版）

Lu Thai Textile Co., Ltd. Interim Report 2018

LU THAI TEXTILE CO., LTD.

INTERIM REPORT 2018

August 2018

Lu Thai Textile Co., Ltd. Interim Report 2018

Part I Important Notes, Table of Contents and Definitions

The B oard of Di rectors (or the “Board”), the S upervi sory Committ ee as well as the directors,supervisors and senior management of Lu Thai Textile Co., Ltd. (hereinafter referred to as the“Company”) hereby guarantee the factuality, accuracy and co mpleteness of the contents ofthis Report and its summary, and shall be jointly and severally liable for anymisrepresentations, misleading statements or material omissions therein.Liu Zibin, the C ompany’s legal representative, Zhang Hongmei, the Company’s ChiefAccountant, and Zhang Keming, the Company’s Financial Manager hereby guarantee thatthe Financial Statements carried in this Report are factual, accurate and complete.Except for the following directors, all the other directors attended in person the Board

meeting for the review of this Report and its summary.

Name Office title

Reason for not attending in

person

Proxy entrusted to attend the

meetingXu Zhinan Director For reason of work Liu ZibinZeng Facheng Director For reason of work Qin GuilingBi Xiuli Independent Director For reason of work Xu JianjunZhao Yao Independent Director For reason of work Wang Xinyu

The Company has described in detail in this Report the possible risks. Please refer to thecontents unde r the subheading “Risks Facing the Company and Countermeasures” in “PartIV Operating Performance Discussion and Analysis” of this Report. Securities Times,Shanghai Securities News, China Securities Journal, Ta Kung Pao (HK) andwww.cninfo.com.cn have been d esignated by the Company for its information disclosure in2018. And all i nformation about the Company shall be subject to what’s disclosed by theCompany on the aforesaid media. Investors are kindly reminded to pay attention toinvestment risks.The Company has no interim dividend plan, either in the form of cash or stock.This Report and its summary have been prepared in both Chinese and English. Should therebe any discrepancies or misunderstandings between th e two versions, the Chinese versionsshall prevail.

Lu Thai Textile Co., Ltd. Interim Report 2018

Table of Contents

Part I Important Notes, Table of Contents and Definitions ...... 2

Part II Corporate Information and Key Financial Information ...... 5

Part III Business Summary ...... 9

Part IV Oper ating Performance Discussion and Analysis ...... 12

Part V Significant Events ...... 22

Part VI Share Changes and Shareholder Information ...... 32

Part VII Preferred Shares ...... 36

Part VIII Di r ectors, Supervisors and Senior Management ...... 36

Part IX Corporate Bonds ...... 39

Part X F ina ncial Report ...... 40

Part XI Documents Available for Reference ...... 153

Lu Thai Textile Co., Ltd. Interim Report 2018

Definitions

Term DefinitionThe “Comp any”, “LTTC”, “Issuer” or “we”

context otherwise requiresThe Board of Directors The Board of Directors of Lu Thai Textile Co., Ltd.The Supervisory Committee The Supervisory Committee of Lu Thai Textile Co., Ltd.CSRC The China Securities Regulatory Commission

RMB, RMB’0,000

Expressed in the Chinese currency of Renminbi, expressed in

Lu Thai Textile Co., Ltd. and its consolidated subsidiaries, except where theten thousand

RenminbiThe “Comp any Law” The “Company Law of the People‘s Republic of China”The “Securities Law” The “Securities Law of the People‘s Republic of China”The “Reporting Period” or “Current Period” The period from 1 January 2018 to 30 June 2018

Lu Thai Textile Co., Ltd. Interim Report 2018

Part II Corporate Information and Key Financial Information

I Corporate Information

Stock name LTTC, LTTC-B Stock code 000726, 200726Changed stock name (if any) N/A

listing

Shen zhen S to ck E xchange

Company name in Chinese 鲁泰纺织股份有限公司Abbr. (if any) 鲁泰纺织

Stock exchange for stockCompany name in English (if

any)

LU THAI TEXTILE CO., LTD.Abbr. (if any) LTTC

Legal repr esentative Liu Zibin

II Contact Information

Board Secretary Securities RepresentativeName Qin Guiling Zheng Weiyin and Li Kun

Address

No. 81,

Company name in English (ifSongling East Road, Zichuan

District, Zibo, Shandong, P.R. China

No. 81,

Songling East Road, Zichuan

Songling East Road, Zichuan

District, Zibo, Shandong, P.R. ChinaTel. 0533-5266188 0533-5285166Fax [phone]

Email addr es s [e-mail] [e-mail]，[e-mail]

III Other Information

1. Contact Information of the Company

Indi cate by tick mark wheth er any change occurred to the register ed address, office address and their zi p codes, websit e address andemail address of the Company in the Reporting Period.

□ Applicable √ Not applicable

No change occurred to the said information in the Reporting Period, which can be found in the 2017 Annual Report.

Lu Thai Textile Co., Ltd. Interim Report 2018

2. Media for Information Disclosure and Place where this Report is Kept

Indicate by tick mark whether any change o ccurred to the information disclosure media and the place for keeping the Company’speriodic reports in the Reporting Period.

□ Applicable √ Not applicable

The newspapers designated by the Company for information disclosure, the website designated by the CSRC for disclosing theCompany’s periodic reports and the place for keeping such reports did not change in the Reporting Period. The said information canbe found in the 2017 Annual Report.

IV Key Financial Information

Indicate by tick mark whether there is any retrospectively restated datum in the table below.

√ Yes □ No

Business combination under common control resulted in the retrospective restatements in the following table.

H1 2018

H1 2017 Change (%)Before Restated RestatedOperating revenue (RMB) 3,281,014,155.43

2,990,459,696.43

2,997,093,395.84

9.47%

Net profit attributable to

company’s shareholders (RMB)

377,355,959.02

the listed

393,069,981.55

395,130,296.26

-4.50%

Net profit attributable to

the listed

company’s shareholders

exceptio nal items (RMB)

366,948,339.88

before

385,081,158.45

387,141,210.63

-5.22%

Net cash generated from/used in operating

activities (RMB)

697,784,710.77

342,919,758.30

343,246,750.57

103.29%

Basic earnings per share (RMB/share) 0.41

0.43

0.43

-4.65%

Dilut ed earnings per share (RMB/share) 0.41

0.43

0.43

-4.65%

Weighted average return on equity (%) 5.13%

5.58%

5.58%

-0.45%

30 June 2018

31 December 2017 Change (%)Before Restated RestatedTotal assets (RMB) 10,233,390,492.09

10,170,624,027.75

10,170,624,027.75

0.62%

Equity

shareholders (RMB)

7,060,561,399.27

attributable to the listed company’s

7,230,942,770.16

7,230,942,770.16

-2.36%

Lu Thai Textile Co., Ltd. Interim Report 2018

V Accoun ti ng Data Di f feren c es u n d er China’s Accounting Standards for Business Enterpris es(CAS) and International Financial Reporting Standards (IFRS) and Foreign AccountingStandards

1. Net Profit and Equity Differences under CAS and IFRS

√ Applicable □ Not applicable

Unit: RMB

Net profit attributable to the listed company’s

shareholders

Equity attributable to the listed company’s

shareholdersH1 2018 H1 2017Ending amount Beginning amount

Under CAS377,355,959.02

395,130,296.26

7,060,561,399.27

7,230,942,770.16

Adjustments as per IFRS

deferred income under IFRS

Effect of tax credit from homemade equipment purchases bei ng recognized as

164,500.00

Under IFRS377,355,959.02

395,294,796.26

7,060,561,399.27

7,230,942,770.16

2. Net Profit and Equity Differences under CAS and Forei gn Acco unti ng Sta nd ar ds

□ Applicable √ Not applicable

No such differences for the Reporting Period.

3. Reasons for Accounting Data Di fferenc es Above

□ Applicable √ Not applicable

XI Exceptional Gains and Losses

√ Applicable □ Not applicable

Unit: RMBItem Reporting Period NoteGain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) -1,603,714.32

Government subsidies charged to current profit or loss (exclusive of gove

rnment subsidies given in the Company’s ordinary course of business at fixed quotas or amounts as per

government’s uniform standards)

39,071,113.48

Gain or loss on fair-

value changes in trading financial assets and liabilities & investment

in come f rom d isposal of trading financial assets and liabilities and available-for-

business)

-22,104,388.63

sale financial assets (exclusive of effective portion of hedges that arise in the Company’s ordinary course of

Lu Thai Textile Co., Ltd. Interim Report 2018Non-operating income and expense other than above 2,097,576.54

Less: Income tax effects 5,975,920.72

Non-controlling interests effects (net of tax) 1,077,047.21

Total 10,407,619.14

--Explanation of why the Company classifies a gain/loss item as exceptional according to the definition in the ExplanatoryAnnouncement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Exceptional Gain/LossItems, o r reclassifies any exceptional item listed in the said explanatory announcement as recurrent:

□ Applicable √ Not applicable

No such cases for the Reporting Period.

Lu Thai Textile Co., Ltd. Interim Report 2018

Part III Business Summary

I Core Business Scope of the Company in Reporting Period

Is the Company subject to any disclosure requirements for special industries?No.No changes occurred to the Company’s core businesses, prim ary products, business models and major growth drivers in theReport ing Period.

Lu Th ai has always adhered to its mission of “creating wealth, contributing to the society, clothing the world and weaving our way toevery corner of the globe”, as well as to its values of “people foremost policy, rigorous scientific attitude, client oriented principleand integrity for win-win outcome” for a long time. It is devoted to improving and expanding its industrial chain, making it arenowned textile and garment business group combing cotton growing, spinning, bleaching and dyeing, neatening, testing, garmentmaking and marketing. Lu Thai produces and sells middle and high-grade yarn-dyed fabric and dyeing fabric for shirts and garment.It claimed its fame for it s co mpreh ens ive manage men t, R &D abi lit y, advanced technolo gy, international devel op ment p lan and stablequality. Moreover, it also attaches great importance to improve the added value of its products, explore the emerging market andrenew its service philosophy. With natural fabric as its flagship, multi-component functional fiber fabric as its spearhead andwash-and-wear non-ironing technology as its core competency, the Company kept a watchful eye on the latest consumption trend.Great attention was paid to improve its healthy product series so as to satisfy the needs from the diversified and personalized market.

Lu Thai has become the world’s largest high-grad e yarn dyed fabric producer and a worl d-class premium shirt provider. It had pavedits development pattern featured in going green, low-carbon growth, science and technology and humanism. Its operationperformance was always among the top comparing to its peers. 70% of Lu Thai’s products are exported to over 30 countries andregions including America, the EU and Japan, of whi ch more than 70% is under the Company’s own brand. So far, the Company hastaken up around 18% of t he world market of yarn dyed fabric for medium- and high-end shirts.

II Material Changes in Major Assets

1. Material Changes in Major Assets

Major as sets Main reason for material changes

progress

The amount as at 30 June 2018 was RMB212,917,526.85, up 35.25% from

Construction in

the beginning amount, primarily driven by increased investments in Lu Thai Vietnam’s second phase project and the construction projects of the

Company as the parent.Engineering

materials

The amount as at 30 June 2018 was RMB152,136,560.03, up 167.31%

driven by a rise in Lu Thai Vietnam’s equipment to be installed.

2. Major Assets Overseas

√ Applicable □ Not applicable

Lu Thai Textile Co., Ltd. Interim Report 2018

Asset Formation

Asset size Location

Operating

model

Controlmeasures toensure as set

safety

Earnings

In theCompany’snet assets (% )

Major

impairment

riskLu Thai

(Hong Kong)Textile Co.,Ltd.

Incorporated

149,581,052.94

HongKong

Marketing

Mainmanagement

personnel sent

by theCompany as

the parent

1,455,136.51

1.96%

None

Lu Thai(America)Textile Co.,Ltd.

Incorporated

8,038,525.46

New York Marketing

Mainmanagement

personnel sent

by theCompany as

the parent

-922,064.37

0.11%

None

Lu Thai(Cambodia)Textile Co.,Ltd.

Incorporated

143,111,761.17

SvayRieng

Manufacturi

ng

Mainmanagement

personnel sent

by theCompany as

the parent

6,698,530.22

1.88%

None

Lu Thai(Burma)Textile Co.,Ltd.

Incorporated

73,656,698.21

Rangoon

Manufacturi

ng

Mainmanagement

personnel sent

by theCompany as

the parent

-708,600.57

0.97%

None

Lu Thai(Vietnam)Textile Co.,Ltd.

Incorporated

1,437,372,805.22

Tay Ninh

Manufacturi

ng

Mainmanagement

personnel sent

by theCompany as

the parent

40,012,706.19

18.87%

None

Lu A nGarmentsCo., Ltd.

Incorporated

129,387,425.52

Anjiang,Vietnam

Manufacturi

ng

Mainmanagement

personnel sent

by theCompany as

the parent

-2,713,164.81

1.70%

None

Lu Thai Textile Co., Ltd. Interim Report 2018

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 theCompany’s whole industry chain are the Company's core competitiveness, which did not change during the Reporting Period.1. A complete industrial chain and a global network: The Company boasts a complete industrial chain from cotton planting, yarning,dyeing, weaving and post-processing to cloth manufacturing, and thus enjoys the cost advantage brought by complete steps forproducing high-end dyed textile. The Company has set up production bases in Cambodia, Burma, Vietnam, etc., a design agency inItaly and a market service agency in America, which hel ps give full play to its international resources, form a global bu sinessnetwork and solidify its internationally leading position as a yarn-dyed fabric maker.2. The sound comprehensive management capacity and an efficient quality control system: The Company has passed ISO9000quality management system, ISO14000 environmental management system, OHSAS18000 occupational health safety managementsystem, and SA8000 social accountability management system successively from 1995. Ever since 2007, the Company has alsopassed WRAP: 1999 global garment production social accountability standard, C-TPAT: 2004 anti-terrorism standard, OE100 andGOTS organic cotton system certification and CNAS national laboratory recognition, to reali ze the internationalization andstandardization of the Company’s management. In order to pursue the operational management of performance excellence and betterthe Company’s performance and capability, the Company has gradually introduced GB/T19580-2004 -Standards for PerformanceExcellence Evaluation, created “Great Quality” system and promoted management innovation, to ensure the Company’s businessquality.3. It enjoyed strong R&D capability and high-end technological platform for cooperation. The Company highly valuedself-dependent innovation and made full use of various technology platforms, inclusive of the National Enterprise Technical Center,National Talent-in draught Demonstration Base and Shandong Engineering and Technological Research Center. Moreover, Lu Thaialso reinforced its technical cooperation with scientific research institutes, colleges and universities, strategic clines and majorsuppliers. It was committed to cutting-edge technical research, and transformed itself from product development to technicalresearches step by step. What’s more, the Company also upgraded itself from overcoming key technological difficulties to mastertechnical principles and set up industrial standards. In the past, it only focused on technical innovation, but now, it is exploring newtechnology on one hand and boosting innovation on the other for better growth. Consequently, the Company pushed forward itsdevelopment in a green, low-carbon and cyclic manner and strengthened its vitality and growing momentum. Meanwhile, the shareof technology to its development was also increased, which could push forward industrial up gradation.4. It boasted considerate and efficient customer’s service. With customer-oriented principle as its guidance, the Companycomprehensively enhanced its quality control so as to persistently provide high standard service and set up an industry-leading brandimage, which, in return, could help to win customer’s satisfaction and market recognition. Quality awareness was weaved into everystep of the manufacturing process and the impeccable quality traceability ensured product reputation. Objective analysis and thinkingin the customer’s perspective was the Company’s service rule, which also helped to win the customers’ trust.

Lu Thai Textile Co., Ltd. Interim Report 2018

Part IV Operating Performance Discussion and Analysis

I Overview

For the Reporting Period, the Company recorded operating revenue of RMB3,281 million, an operating profit of RMB452 million, anet profit attributable to the listed company’s shareholders of RMB377 million and a net prof it b efore excep tion al items of RMB367million, up 9.47%, -7.99%, -4.50% and -5.22% respectively from the same period of last year. No changes have occurred to the corebusinesses, the main profit sources and structure of the Company in this period.During the Reporting Period, the Company continued to steadily promote “Improving Quality and Efficiency” and “ComprehensiveInternationalization”, maintaining the sound, stable and sustained development trend; made smooth progress in overseas projects andbasically achieved th e design expectation; initiated the establishment of the new retail platform Luthai?1987 based on the S2B2Cmode and opened up online and offline OMO mode, enabling Luthai to better serve end customers together with its partners. TheCompany deepened its relationship with customers through proactive measures such as adjustment of product structure, integrationof supply chains, design and development connection, brand cooperation, overseas expansion and e-commerce platforms and facingnew characteristi cs and new demands of the market, kept improving product design concept and innovating service mode to satisfycustomers’ demands and market trend. During the Reporting Period, the Company was named as “2018 Top Twenty Enterprise ofChina Dyeing and Printing Industry” by CDPA, won the title of “China Quality Award for Textile Industry” granted by CNTAC, wasranked among the top 50 in the field of textile, garments, shoes and hats by China Council for Brand Development, was named as“2017 Top Ten Enterprise for Key Business Revenue in Yarn-Dy ed Fabric Industry” and “2017 Top 100 Enterprise for Key BusinessRevenue in Cotton Textile Industry” by China Cotton Textile Association and as “Demonstration Enterprise of Social Responsibilitiesin Shandong”.During the Reporting Period, the Company intensified the building and training of its team of design talents and kept deepening theearly-stage communication and cooperation with strategic customers in the design of fabrics and shirts, gaining favorable marketresponse. The Company won the Award of Best Market Application for its works Modest Luxury ? Distinctive Flowers in 2018 ChinaInternational Fabrics Design Competition and appraising of 2019 Spring-Summer China Fashionable Fabrics. Luthai Textile won thetitle of “Fifth China Advanced Unit for Development of Textile Fabric Designers”.During the Reporting Period, the Company continued to persist in R&D investments, making new achievements in two national keyR&D projects of the 13th Five-Year Plan as well as in the application of new materials, research of new fabrics, key technologies ofnew product development and research of equipment upgrading. As of the reporting period, the Company had been granted a total of301 licensing patents, and 1 software copyright; and hosted or participated in the formulation of 40 national and industrial standards.At the current stage, Lu Thai, with natural fabric as its flagship, multi-component functional fiber fabric as its spearhead,wash-and-wear non-ironing technology as its core competency, the latest consumption trend as its guidance and internationalizedindustrial manufacturing as its basis, is sparing every effort to attain a global integrated development, so as to ensure its leadingposition in the yarn-dyed shirt fabric sector.

II Analysis of Core Businesses

Summary:

For the Reporting Period, operating revenue, cost of sales and administrative expense increased 9.47%, 15.08% and 3.77%respectively on a year-on-year basis; and selling expense, finance costs and income tax expen se went down 2.08%, 1.31% and20.36% r espectively from a year earli er. Net cash generated from operat ing activities went u p 103.29% mainly due to a rise in cash

Lu Thai Textile Co., Ltd. Interim Report 2018proceed s from pr od uct sales. Net cash gener ated fro m investing activities dropped 90.13% mainly because of a rise in cash paymen ts

for fixed assets in the Current P eriod and the same period of last year seeing pro ceeds from selling mar ketable securities. Net cashgenerated fr o m financing acti vities were down 74.51% main ly because of the payments for the B-stock repurchase programme. Andnet increase in cash and cash equivalents went up 91.18% mainly owing to a rise in net cash generated from operating activities.Year-on-year changes in key financial data:

Unit: RMBH1 2018 H1 2017 Change (%)

Main reason for changeOperating revenue

3,281,014,155.43

2,997,093,395.84

9.47%

Cost of sales

2,360,836,431.41

2,051,483,003.79

15.08%

Selling expense 66,941,088.56

68,365,512.22

-2.08%

Administrative expense 325,870,756.50

314,037,319.49

3.77%

Finance costs 30,525,225.31

30,930,178.28

-1.31%

Income tax e xpense 63,275,514.57

79,455,627.02

-20.36%

R&D expense 162,596,245.80

158,802,502.01

2.39%

operating activities

697,784,710.77

Net cash gen erated from/used i n

343,246,750.57

103.29%

A rise in cash proceeds from productsales

investing activities

-423,627,352.67

Net cash gen erated from/used i n

-222,814,977.08

-90.13%

A rise in cash payments for fixedassets in the Current Period and thesame period of last year seeingproceeds f r om selling marketablesecurities

financing activities

-285,883,409.46

Net cash gen erated from/used i n

-163,823,565.09

-74.51%

Payments for the B-stock repurchaseprogramme

equivalents

-5,067,323.02

Net increase in cash and cash

-57,458,811.02

91.18%

A rise in net cash generated fro moperating activitiesMaterial changes to the profit structure or sources of the Company in the Reporting Period:

□ Applicable √ Not applicable

No such changes in the Reporting Period.Breakdown of core businesses:

Unit: RMB

Operating

revenue

Gross profit

margin

YoY change in

Cost of sales

operating revenue

(%)

YoY change incost o f sales ( %)

YoY change in

gross profitmargin (%)By operating division

apparel

2,921,119,883.93

Textile and

2,058,587,657.40

29.53%

5.70%

11.01%

-3.36%

Cotton 101,088,256.72

93,918,390.99

7.09%

204.77%

208.99%

-1.27%

Electricity and

101,760,249.29

98,746,424.74

2.96%

62.49%

41.84%

14.12%

Lu Thai Textile Co., Ltd. Interim Report 2018steam

Other 37,033,179.78

35,574,083.44

3.94%

86.89%

135.64%

-

19.87%

By product categoryFabric products 2,320,025,830.76

1,619,838,034.26

30.18%

8.28%

13.77%

-3.37%

Shirts 601,094,053.17

438,749,623.14

27.01%

-3.19%

1.88%

-3.63%

Cotton 101,088,256.72

93,918,390.99

7.09%

204.77%

208.99%

-1.27%

Electricity and

steam

101,760,249.29

98,746,424.74

2.96%

62.49%

41.84%

14.12%

Other 37,033,179.78

35,574,083.44

3.94%

86.89%

135.64%

-

19.87%

By operating segmentHong Kong 184,569,814.29

129,348,144.91

29.92%

-8.43%

-3.72%

-3.43%

Japan And

Korea

211,981,297.61

South

151,618,766.06

28.48%

-6.51%

-1.50%

-3.63%

Southe ast A sia 760,347,221.55

531,269,449.03

30.13%

25.33%

31.67%

-3.36%

Europe and

America

577,623,099.67

412,656,452.50

28.56%

-1.14%

3.63%

-3.29%

Other 320,588,111.47

225,341,185.18

29.71%

-5.58%

-0.74%

-3.43%

Mainland China 1,105,892,025.13

836,592,558.89

24.35%

20.16%

28.19%

-4.74%

III Non-Core Business Analysis

√ Applicable □ Not applicable

Unit: RMBAmount

Source/reason ContinuityInvestmen t g ains 4,646,023.78

	In total profits (%)
	1.02%

Gains on delivery of financial assets (liabilities)such as for ward exchange settlement, and losseson equ ities investment.

NoGains/losses on fair

value changes

-28,481,010.00

-

6.28%

Losses on fair val ue changes of financial assetsand financial liabilities

NoAsset i mpai rment 2,121,494.84

0.47%

Losses on bad-debt provisi o n for inventory NoNon-operatingrevenue

3,011,072.58

0.66%

Claim for compensation NoNon-operating

expense

1,994,923.71

0.44%

Losses on damage and scrap of n on-current assets

No

Lu Thai Textile Co., Ltd. Interim Report 2018

IV Analysis of Assets and Liabilities

1. Material Changes in Asset Composition

Unit: RMB

30 June 201 8 30 June 2017

Change inpercentage

(%)

material

change

Value As % of total assets

Value

As % of total

assetsMonetary funds 671,721,970.36

6.56%

601,918,539.58

6.27%

0.29%

Accountsreceivable

356,818,963.69

3.49%

284,403,883.10

2.96%

0.53%

Inventories 2,017,424,627.73

19.71%

2,062,727,887.61

21.48%

-1.77%

Investmentproperty

23,856,705.69

0.23%

25,220,354.21

0.26%

-0.03%

Long-term equityinvestment

95,806,134.43

0.94%

0.00%

0.94%

Fixed assets 5,359,308,862.06

52.37%

5,182,031,627.12

53.96%

-1.59%

Construction inprogress

212,917,526.85

2.08%

267,448,802.45

2.78%

-0.70%

Short-termborrowings

1,458,058,962.33

14.25%

1,170,346,491.12

12.19%

2.06%

Long-termborrowings

69,431,359.47

0.68%

0.00

0.00%

0.68%

2. Assets and Liabilities at Fair Value

√ Applicable □ Not applicable

Unit: RMB

Item

Beginning

amount

Gain/loss on

fair-valuechanges inReporting

Period

Cumulative

fair-valuechangescharged to

equity

Impairmentallowance for

Reporting

Period

Purchased in

Reporting

Period

Sold inReporting

Period

Financial assets

		Ending amount

derivatives)

0.00

1. Financial assets at fair value through profit or loss (exclusive of

Subtota l of0.00

Lu Thai Textile Co., Ltd. Interim Report 2018financial as sets

Total of above

0.00

0.00

Financialliabilities

0.00

-28,481,010.00

28,481,010.00

Material changes in the measurement attributes of the major assets in the Reporting Period:

□ Yes √ No

3. Restricted Asset Rights as of End of the Reporting Period

Not applicable

V Investments Made

1. Total Investments Made

√ Applicable □ Not applicable

Investmen ts made in the Reporting Period

(RMB)

Investmen ts made in same period of last

year (RMB)

+/-%0.00

0.00

0.00%

2. Significant Equity Investments Made in the Reporting Period

□ Applicable √ Not applicable

3. Significant Non-Equity Investments Ongoing in the Reporting Period

□ Applicable √ Not applicable

4. Financial Investments(1) Securities Investments

□ Applicable √ Not applicable

No such cases in the Reporting Period.

(2) Investments in Derivative Financial Instruments

√ Applicable □ Not applicable

Unit: RMB'0,000Operat

or

Relati

onship

Connect

Type of

onship

derivative

Initialinvestment

Starting

date

Ending

date

Beginning

Purchased

in the

Reporting

Impairment

Endinginvestment

Proporti

on of

Sold in the

Actual

gain/lo

Lu Thai Textile Co., Ltd. Interim Report 2018

withtheComp

edtransactio

n

amount invest

mentamoun

t

Reporting

Period

Period provisi

on (ifany)

any

amount closing

investme

ntamount

in theCompan

y’sending

netassets

ss intheReport

ing

Period

Commercialbank

Non-connect

ed

No

Forwardexchangesettlement

59,531.89

2018

January2019

February

59,531.89

21,477.86

38,054.03

5.00%

68.43

Commercialbank

Non-connect

ed

No

Foreignexchangeoption

219,775.64

November 2017

December 2018

19,800

199,975.64

134,129.87

85,645.77

11.24%

540.37

Commercialbank

Non-connect

ed

No

Forwardexchangetransactions

24,216.03

March2018

December 2018

24,216.03

16,881

7,335.03

0.96%

24.92

Commercialbank

Non-connect

ed

No

Foreignexchangeswap

5,925.81

March2018

1 1 April2018

5,925.81

5,925.81

3.95

Total 309,449.37

-- -- 19,800

289,649.37

178,414.54

131,034.83

17.20%

637.67

Capital source for derivativeinvestment

Self-owned fundsLawsuit (if applicable) Naught

Disclosure date of board ofdirectors announcement onapproval of derivativeinvestment (if any)

28 Apr il 2017Disclosure date of general

meeting of shareholdersannouncement on approval ofderivati ve i nvestment (if any)

Analysis on risks and controlmeasures of derivative p roducts

held in the Reporting Period

(including but not limited to market risk, liquidity risk, credit risk, operation risk, law risk,

The Company conducted derivatives products transaction in order for hedging. And the forward

settlement hedging was operated by installments, with the

derivati ves produ cts transacti ons. And all der ivatives prod ucts transact ion was zero -

deposit. Meanwhile, the Company had a complete risk control system for sufficient analysis and prevention of possible risks

such as market risk, liquidity risk and credit risk, operation risk and risk of laws and regulation.1.

Lu Thai Textile Co., Ltd. Interim Report 2018etc.) changes in exchange rates and interest rates may have an adve

risk-

controlled financial derivative tools with simple structure and good liquidity to carry out the hedging

business, stri

strateg y 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 o

r 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

guarantee deposit and can still be guaranteed in performance after the contract expires by

means of extension and balance settlement etc. to prevent t he 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 c

counterparty.3. Operation risk:

The derivat ives

had high specialty and complexity, so imperfect internal operation procedures, staffs and

external events would make the Company t o undertake risks during the transaction.

measures: T he Company

promulgated strict authorization and approval system and perfect regulatory mechanism, fixed the operation procedures and approval procedures system to conduct derivative

produ cts tran saction, establi shed

strengthening the professional ethics education and business training for them.

Besides, it established the

System of Reporting the Abnormal Situation Timely

maximum.4. R isk of laws and regulation:

The Company conducted derivatives product s transaction in strict accordance with rel

evant laws and

rules. If

legal documents signed. Risk control

measures: The Company carefully studied and mastered laws, regulations and policies relevant to derivative products transaction, formulated internal control rules for

the forward settlement hedging business, standardized the operation procedures.

compliant examination on derivative products transaction business. The Company conducted der

ivative

transacti on business

regulations, the Company’s Articles of Associati on , th e Man agemen t R ules for Der ivati ve Transaction

of

Lu Thai Textile Co., Ltd. and the Proposal on the Plan of Lu Thai Textile Co., Ltd. for

Transactions approved at the 7

th

M eeting of the 8

th

B oard of Directors on 26 April 2017

, and performed

relevant information disclosure responsibilities.

values in the Reporting Period

of the invested derivatives. And the analysis on the fair value of

the derivatives should

include

1. As of 30 June 2018, the Company held a total of 50 immature derivative contracts worth

US$204,285,800 in total, which were forward settlement of exchange, foreign exchange op

derivatives occupied 17.20% of the net assets as at the period end.2. From January to June 2018, the total amount of the Company’s matur

ed financial derivatives was

Lu Thai Textile Co., Ltd. Interim Report 2018

parameters.

US$287,412,400, including an execution of US$284,412,400 with the gains of RMB6

the specific use methods and the relevant assumptions and

,376,700 and an

extension of US$3 million. Of all the derivatives, the matured forwar

US$33.5 million, which had been delivered in full with the gains of RMB684,300; the matured

foreign

exchange op ti ons was US$ 219 million, including an execution of US$

contracts with the gains of RMB5,403,700 and an extension of US$3 million; the matured fo

reign

exchange trad ing was US$

the matured foreign exch ange swap was US$

9,399,300, which had been delivered in full with the gains

of RMB39,500.

occurred

to the Company’s accounting policy and specific accounting principles of

derivatives in the

Period

compared to the previous

Report ing Period

No sign ifi cant changes

Company’

s derivatives

investment and risk control

The Company

opinion that it will strengthen the Company

’s competitiveness to use derivative transactions with focus on forward settl ement an d pu rch ase as an effective too l to avo id forei gn exch ange ri sks, to st rengt hen the

relevant internal control and to carry out the loss and ris

purchase, t he Company

follows a legal approval procedure, has sound relevant institutions and keeps the

risks relatively controllable. No harm has been done to the interests of the Company’s shareholders.

VI Sale of Major Assets and Equity Interests

1. Sale of Major Assets

□ Applicable √ Not applicable

No such cases in the Reporting Period.

2. Sale of Major Equity Interests

□ Applicable √ Not applicable

VII 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: RMBCompany Relation

Mainbusine

Registered Total assets Net assets Operating Operating Net profit

Lu Thai Textile Co., Ltd. Interim Report 2018

name ship

with theCompan

y

ssscope

capital revenues profit

Lu Thai(Vietnam)Textile Co.,Ltd.

Subsidiary

Fabric 632,855,310.00 1,437,372,805.22

620,547,451.12

249,790,705.43

40,008,592.34

40,012,706.19

Subsidiaries obtained or disposed in the Reporting Period

□ Applicable √ Not applicable

Particulars about the main controlled and joint stock companies:

Lu Thai (Vietnam) Co., Ltd. is a wholly-owned subsidiary of the Company established in Vietnam in 2015. With a total investmentof US$150 million, the subsidiary now has 60,000 spindles and a capacity of 30 million meters of yarn-dyed fabrics. Theestablishment o f the subsidiary will give better play to the Comp any’s technical experience and bran d advantages in the yarn-dyedfabric industry, integrate domestic and foreign advantageou s resources, effectively avoid the impact of potential trade barriers,increase the Company’s internationalized production scale and maintain the Company’s leading position in the global yarn-dyedfabric industry. As of the end of the Reporting Period, Lu Thai (Vietnam) Co., Ltd. had total assets of RMB1.437 billion and netassets of RMB621 million and achieved operating revenues of RMB250 million and net profits of RMB40 million. During theReporting Period, the subsid iary achieved steady improvements in production and operation and synchronous growth of operatingrevenues and net profits. Currently, the introduction of the new 76,000-spinning production line to Phase II Spinning and theexpansion of the annual capacity of 40 million meters of yarn-dyed fabrics are under construction as scheduled.

VIII Structured Bodies Controlled by the Company

□ Applicable √ Not applicable

IX Performance Forecast for January-September 2018

Warning of possible loss or considerable YoY change in the accumulative net profit made during the period-beginning to the end ofthe next reporting period, as well as the reasons:

□ Applicable √ Not applicable

X Risks Facing the Company and Countermeasures

Risks that bring adverse impact to company development strategy and business objectives and countermeasures of the Company(1) Economic environment: the world economy is getting better, but trade protectionism and economic policies of advancedecono mies, especiall y the uncertain risks o f monetary poli cy, pose greater threats to the recovery of the world economy, producing acertain degree of uncertainty on the market environment that the Company faces. Meanwhile, the new development of China’seconomy shows more characteristics such as speed change, structural ad justment and dynamic changes. The economic trend istowards stability. To cope with these impacts, the Company will work hard to maintain the international market and develop thedomestic market to balance development of domestic and foreign sales.

Lu Thai Textile Co., Ltd. Interim Report 2018(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, exchan ge rates and quotas. Furthermore, with the development ofenvironmental protection policies, the cost of dyeing auxiliaries also increased. Therefore, besides ensuring the stable supply oflong-staple cotton by the subsidiary in Xinjiang, the Company must study the market dynamics to reduce the cost fluctuations due tochanges in raw cotton price, and develop with the concept of green and environmental protection to meet environmental protectionrequirements.(3) Exchange rate changes: at present and in the future, the Company will continue to sell its products mainly in the internationalmarket for a long period of time, and US dollars will account for a relatively larger portion in sales reven ue. In addition, the mainmachinery and equipment and some of its raw materials of the Compan y are also imported. The foreign currencies pa yment forimports includes US dollar and other currencies. Moreover, the commissioning of the Company's overseas production base andsubsequent expansion of investment will increase the use of US dollar. Therefore, the Company will still be sensitive to the impact ofexchange rate changes.In order to redu ce adver se in fluence o f exchange rat e fluctu ati on, the Company ado pt ed the follo wing measures: firstl y, the Companyconducted foreign exchange hedging, using forward FX sales and purchase, forward foreign exchange trading and option portfoliosto avoid some risks S econdly, the Company made reasonable arrangement o n settlement day and currency stru cture and conclusionof agree ments on fixed forei gn exchange r ate to avoid exchange rat e-related risks. Thirdly, the Company adjusted the Renminbi andforeign-currency liabilities structure to control financial costs. Fourthly, according to the fluctuation trend of exchange rates, theCompany properly adjusted imports of raw and auxiliary materials to partially offset the influence of exchange rate fluctuations onthe Company.

Lu Thai Textile Co., Ltd. Interim Report 2018

Part V Significa nt Events

I Annual and Extraordinary General Meeting Convened during the Reporting Period

1. General Meeting Convened during the Reporting Period

Meeting Type

Investor

Conve ne d da t e Disclosure date Index to disclosed information

The 1

st

Extraordinary

		participation ratio
General Meeting

of 2018

ExtraordinaryGeneralMeeting

0.00%

8 February 2018 9 February 2018

Announcement of Resolution (No.2018-007) published on SecuritiesTimes, China Securities Journal,Shan ghai Securities News, and HongKong Ta Kung Pao and

http://www.cninfo.co on 9 February

2018.The 2

nd

Extraordinary

General Meeting

of 2018

ExtraordinaryGeneralMeeting

0.00%

23 Marc h 201 8 24 March 2018

Announcement of Resolution (No.2018-013) published on SecuritiesTimes, China Securities Journal,Shan ghai Securities News, and HongKong Ta Kung Pao and

http://www.cninfo.co on 24 March

2018.The 2017

Annual Gener al

Meeting

AnnualGeneralMeeting

0.00%

16 May 2018 17 May 2018

Announcement of Resolution (No.2018-025) published on SecuritiesTimes, China Securities Journal,Shan ghai Securities News, and HongKong Ta Kung Pao and

http://www.cninfo.co on 17 May 2018.

2. Extraordinary General Meeting Convened at Request of Preference Shareholders with Resumed VotingRights

□ Applicable √ Not applicable

II Interim Dividend Plan for the Reporting Period

□ Applicable √ Not applicable

The Company has no interim dividend plan.

Lu Thai Textile Co., Ltd. Interim Report 2018

III Commitments of the Company’s Actual Controller, Shareholders, Connected Parties andAcquirer, as well as the Company and Other Commitment Makers, Fulfilled in the ReportingPeriod or still Ongoing at Period-End

□ Applicable √ Not applicable

The Company has no interim dividend plan.

IV Engagement and Disengagement of CPAs Firm

Has the Interim f inancial report been audited?

□Yes √ No

This Interim Report is unaudited.

V Explanations Given by Board of Directors and S upervisory Committee Regarding“Modified Auditor’s Report” Issued by CPAs Firm for the Reporting Period

□ Applicable √ Not applicable

VI Explanations Given by Board of Directors Regarding “Modified Auditor’s Report” Issuedfor Last Year

□ Applicable √ Not applicable

VII Bankruptcy and Restructuring

□ Applicable √ Not applicable

No such cases in the Reporting Period.

VIII Legal Matters

Significant lawsuits or arbitrations:

□ Applicable √ Not applicable

No such cases in the Reporting Period.Other leg al matters:

□ Applicable √ Not applicable

Lu Thai Textile Co., Ltd. Interim Report 2018

IX Punishments and Rectifications

□ Applicable √ Not applicable

No such cases in the Reporting Period.

X Credit Conditions of the Company as well as its Controlling Shareholder and ActualController

□ Applicable √ Not applicable

XI Eq ui ty In cen tiv e Pla n s, Empl oy ee S tock Ownership Plans or Other Incentive Measures forEmployees

□ Applicable √ Not applicable

No such cases in the Reporting Period.

XII Significant Connected Transactions

1. Connected Transactions Relevant to Routine Operations

□ Applicable √ Not applicable

No such cases in the Reporting Period.

2. Connected Transactions Regarding Purchase or Sales of Assets or Equity Interests

□ Applicable √ Not applicable

No such cases in the Reporting Period.

3. Connected Transactions Regarding Joint Investments in Third Parties

□ Applicable √ Not applicable

No such cases in the Reporting Period.

4. Credits and Liabilities with Connected Parties

□ Applicable √ Not applicable

No such cases in the Reporting Period.

Lu Thai Textile Co., Ltd. Interim Report 2018

5. Other Significant Connected Transactions

□ Applicable √ Not applicable

No such cases in the Reporting Period.

XIII. Particulars about the Non-operating Occupation of Funds by the ControllingShareholder and Other Connected Parties of the Company

□ Applicable √ Not applicable

The Company was not involved in the non-operating occupation of funds by the controlling shareholder and other connected partiesduring the Reporting Period.

XIV. Significant Contracts and Execution

1. Entrustment, Contracting and Leasing(1) Entrustment

□ Applicable √ Not ap p licable

No such cases in the Reporting Period.

(2) Contracting

□ Applicable √ Not ap p licable

No such cases in the Reporting Period.

(3) Leasing

□ Applicable √ Not ap p licable

No such cases in the Reporting Period.

2. Significant Guarantees

√ Applicable □ Not applicable

(1) Guarantees

Unit: RMB'0,000Guarantees provided by the Company for external parties (excluding those for subsidiaries)

Lu Thai Textile Co., Ltd. Interim Report 2018

Guaranteed party

Disclosuredate of theguarantee

lineannouncem

ent

Line of

Actualoccurr ence date

(date ofagreement

signing)

Actualguarantee

amount

Type ofguarantee

Term ofguarantee

Due or

not

Guarante

e for a

guarantee

connected

party or

notGuarantees provided by the Company for subsidiaries

Guaranteed

party

Disclos ure date ofthe guar antee line

announcement

Line of

Actual occurrence

date (date ofagreement signing)

guarantee

Actualguarantee

amount

Type ofguarantee

Term of guarantee

Due or

not

Guarant

connect

ed

party or

not

(Vietnam)Textile Co., Ltd.

25 January 2017 6,534.2

Lu Thai

20 January 2017 532.94

Guarantee of

joint and several

liability

Two years sincethe approval of theboard of theCompany

No Yes

(Vietnam)Textile Co., Ltd.

25 January 2017 5,227.36

Lu Thai

20 January 2017

Guarantee of

joint and several

liability

Two years sincethe approval of theboard of theCompany

No Yes

Lu A n GarmentsCo., Ltd.

25 January 2017 3,920.52

20 January 2017

Guarantee of

liability

Two years sincethe approval of theboard of theCompany

No Yes

		joint and several
Lu Thai

(Vietnam)Textile Co., Ltd.

25 January 2017 26,790.22

20 January 2017 7,389.65

Guarantee of

liability

Five year s s incethe approval of theboard of theCompany

No Yes

		joint and several
Lu Thai

(Vietnam)Textile Co., Ltd.

25 January 2017 19,602.6

20 January 2017

Guarantee of

liability

Two years sincethe approval of theboard of theCompany

No YesLu Thai

(Vietnam)Textile Co., Ltd./ Lu A nGarments Co.,Ltd.

25 January 2017 6,534.2

		joint and several

20 January 2017 3,701.28

Guarantee of

joint and several

liability

Two years sincethe approval of theboard of theCompany

No Yes

(Vietnam)

25 January 2017 17,969.05

Lu Thai

20 January 2017 7,259.53

Guarantee of

joint and several

Five year s s incethe approval of the

No Yes

Lu Thai Textile Co., Ltd. Interim Report 2018Textile Co., Ltd. liability board of the

CompanyXinjiang Lu

Thai Harves tCotton Co., Ltd.

14 October 2017 15,000

12 October 2017 10,000

Guarantee of

liability

Three years sincethe approval of theboard of theCompany

No Yes

		joint and several
Lu Thai

(Vietnam)Textile Co., Ltd.

27 October 2017 67,955.68

25 October 2017 14,756.08

Guarantee of

liability

Five year s s incethe approval of theboard of theCompany

No Yes

Total amount of approved guaranteefor subsidiaries during the ReportingPeriod (B1)

		joint and several

Total amount of actualguarant ee for subsidiaries

(B2)

43,488.64

during the Reporting Period

Total amount of approved guaranteefor subsidiaries at the end of theReporting Period (B3)

169,533.83

Total amount of actual

guarant ee for subsidiaries at

the end of the ReportingPeriod (B4)

43,639.48

Guarantees provided by subsidiaries for subsidiaries

Guaranteed

party

Disclos ure date ofthe guar antee line

announcement

Line of

guarantee

Actual occurrence

date (date ofagreement signing)

guarantee

Actualguarantee

amount

Type ofguarantee

Term ofguarantee

Due or

not

Guarant

connect

ed

party or

notXinjiang Lu

Ltd.

14 October 2017 30,000

Thai Textile Co.,

12 October 2017 20,000

Guarantee of

joint andseveral liability

12 months No YesTotal guarantee line approved for the

subsidiaries during the ReportingPeriod (C1)

Total actual occurred amoun tof guarant ee fo r thesubsidi a ri e s dur i ng t heReporting Period (C2)

20,000

Total guarantee line that has beenapproved for the subsidiaries at theend of the Reporting Period (C3)

30,000

Total actual guarantee balan ce

for the subsidiaries at the endof the Reporting Period (C4)

20,000

Total guarantee amount provided by the Company (total of the above-mentioned three kinds of guarantees)

Total guarantee line approved during

the Reporting Period (A1+B1+C1)

Total guarantee line approved during

Total actual occurred amoun tof guarantee during theReport ing Period (A2+B2+C2)

63,488.64

Total guarantee line that has beenapprov

199,533.83

ed at the end of the Reporting

Total actual guarantee balan ceat the end of the Reporting

63,639.48

Lu Thai Textile Co., Ltd. Interim Report 2018Period (A3+B3+C3) Period (A4+B4+C4)

assets of th e C ompany

9.01%

Proportion of total guarantee amount (A4+B4+C4) to the net

Of which:

Amount of

and related parties (D)

guarantee provide for shareholders, actual controller
Amount of guarantee provided directly or indirectly for guarantee

objects wi th asset-liability ratio reaching over 70% (E)

Balance between 50% of net assets an d total amou

nt of guarant ee

which exceeds 50% of net assets (F)

30,000

Sum total of the above three guaranteed amounts (D+E+F) 30,000

Explanation on possible bearing joint responsibility of liquidationdue to i mmatu re g uarantee (if any)

According to “Agreement on Count

October

2017 between Lu Thai Company and Xinjiang Lu Thai Company, Xinjiang Lu Thai Company, the warrantee Xinjiang Lu Thai Company provided the corresponding amount of counter

guarantee for Lu Thai Company.Explanation about external guarantee violating establishedprocedure (if any)

controlling subsidiaries.Notes for details about guarantee by complex method

(2) Illegal Provision of Guarantees for External Parties

□ Applicable √ Not applicable

No such cases in the Reporting Period.

3. Other Significant Contracts

□ Applicable √ Not applicable

No such cases in the Reporting Period.

XV. Social Responsibilities

1. Significant Environment Protection

Indicate by tick mark whether the Company or any of its subsidiaries is a heavily polluting business identified by the environmentalprotection authorities of China

The Company never provided guarantees for companies exceptName of the

Company or

its

Name of

mainpollutants

Emission

method

Numbe

Name of the Company or

r

ofdischarg

Distributio

n ofdischarge

Emissionconcentration

Carried emission

standa r d ofpollutants

Total emission

Verified

totalemission

Excessi

veemissio

Lu Thai Textile Co., Ltd. Interim Report 2018subsidiaries

andcharacteristi

cs

e outlet

outlet n

Lu ThaiTextile Co.,Ltd

COD andammonianitrogen

Continuousdischarge

Huangjiap

u

Park;EastZone

Industrial

Park

COD≤165mg/

L; ammonia

nitrogen≤10m

g/L

of waterpollut a nts i ntextile dyeing and

finishing industry:

GB 4287-2012

COD is330.82t, andammonianitrogen is19.89t

COD is1495.08t,andammonianitrogen is149.51t

Naught

LufengWeaving &

Dyeing Co.,

Ltd.

COD andammonianitrogen

Continuousdischarge

Lufengchiefdischargeoutlet

COD≤135mg/

L; ammonia

nitrogen≤3mg/

L

of waterpollut a nts i ntextile dyeing and

finishing industry:

GB 4287-2012

COD is 162t,and ammonianitrogen is3.03t

COD is575.985t,andammonianitrogen is57.6t

Naught

ZiboXinshengThermalPower Co.,Ltd.

SO2, NQx,and smoke

Continuousdischarge

Production

plant ofXinshengThermalPower

SO2：

≤35mg/m3、

NQx：

≤100(50)

mg/m3, and

smoke≤10

(5)mg/m3

Ultra-low

emis s i on No. 2modification listLZJBF (2016)No. 46 ofEmissionstandard of airpollut a nts ofThermal PowerPlant inShandongProvince

The first halfyear of 2018:

SO2 is 27.65t ,NQx is145.37t, andsmoke is 4.97t

SO2 is286.01t/a,NQx is817.18t/a,

is 81.72t/a.

Naught

Lu Thai(Vietnam)Textile Co.,Ltd.

Sewage

Dischargeinto sewageplant in thepark districtaftertreatment

Besidesewageplant

/

QCVN40：

2011/BTNMT

Sewage:

309,200t

/ Naught

Lu Thai(Vietnam)Textile Co.,Ltd.

Exhaust gas

Directdischargeaftertreatment

Besideboilerroom

/

QCVN19：

2009/BTNMT

Exhaust gas:

95 million m

/ Naught

Construction of pollution prevention equipment and operation conditionLu Thai Textile Co., Ltd. and its majority-owned subsidiary Lufeng Weaving & Dyeing Co., Ltd. strictly implement the "ThreeSimultaneous" management system for environmental protection in project constructions. The companies are equipped with completefacilities for waste gas and waste water treatment . In 2018, Lu Thai Textile Co., Ltd. and its majority-owned subsidiary Lufeng

Lu Thai Textile Co., Ltd. Interim Report 2018Weaving & Dyeing Co., Ltd. carried out the waste wat er treatm ent s ystem trans for matio n proj ect to improve the treated water quality

by systematic and comprehensive reform, further im proving the river water quality and local ecological environment. The newlyadded online monitoring devices for total phosphorus and total nitrogen in 2018 monitor and detect the pollutants discharge indexcomprehensively. S upport 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 forenvironmental protection in extension project construction in accordance with the government requirements, and adopts the"limestone-gypsum method" to reduce emission concentration of sulfur dioxide, the "SNCR+SCR method" to reduce emissionconcentration of nitrogen oxides, and the "five-field electrostatic precipitator + wet electrostatic precipitator" to reduce soot emissionconcentration. The overall system works well.The waste water t reat men t p ro ject of th e wholl y-owned subsidiary Lu Thai (Vietnam) Textile Co., Ltd. is designed to treat 3,000 tonsof sewage water daily. The C ompany 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 QCVN40:2011/BTNMT A-level emission standards stipulated by the Vietnam government. The treated waste water is all discharged to thewaste water t reatment st ation in th e park. Treated water qualit y analysis for January to June 2018: The COD (mean value) was 47.73mg/L, the ch rominance (mean val ue) was 44.4, the a mmonia nitrogen ( mean value) was 1.4 m g/L, and the total phosphorus (meanvalue) was 0.13 mg/L. All the parameters met the A-level emission standards set in the "Regulations on Parameters of IndustrialDrainage in Vietnam" (QCVN40:2011/BTNMT). Waste water discharge in the whole year met the standards without violation. Thetotal amount of waste water discharged in January to June 2018 was 309,200 tons, among which, the chemical oxygen demand (COD)was 1 4.758 tons, ammonia nitrogen (NH3-N) was 432.88 kg and total phosphorus (TP) was 40.196 kg. The Company is equippedwith multi-pipe and water film dust-separation devices to process the exhaust gas discharged from boilers of the Company. FromJanuary to June 2018, all the equipment was in normal operation, and the exhaust gas inspection parameters were lower than theQCVN19:2009/BTNMT emission standards set by Vietnam government. From January to June 2018, the total amount of sulfurdioxide emissions was 34.2 tons, and the total amount of nitrogen oxides emissions was 58.14 tons.Project Environmental Impact Assessment and Other Administrative Permission for Environmental ProtectionIn 2018, the environmental assessment project for technical upgrading of high-grade printed fabric production line of themajority-owned subsidiary Lufeng Weaving & Dyeing Co., Ltd. has been approved and entered the trial operation stage while thetrial operation stage o f the environmental assessment proj ect for high-grade grey fabric production line has been completed and isready t o enter the acceptance stage; the liq uid membrane separation of dyeing waste water and treat ment station comprehensiveupgrading projects have entered the commissioning stage. The wholly-owned subsidiary Zibo Xinsheng Thermal Power Co., Ltd. gotthe "Approval of Environmental Impact Assessment Report of the Environmental Protection Department of Shandong Province onthe Extension Project of Zibo Xinsheng Thermal Power Co., Ltd." (LHS [2015] No. 241) in accordance with the regulations, and thefirst ph ase of the project was put into trial operation at the end of 2017. The completion acceptance of the environmental protectionproject for the spinning and dyeing zone of the wholly-owned subsidiary Lu Thai (Vietnam) Co., Ltd. has been recognized, and theEIA report for the spinning and dyeing industrial park Phase II is under application.Emergency plan for environmental incidentsThe head office and facto ries in eastern dist rict of Lu Thai Textile Co., Ltd., and its majority-owned subsidiary Lufeng Weaving &Dyeing Co., Ltd. prepared the Emergency Plan for Environmental Incidents, which was filed with Zibo Environmental ProtectionBureau Xichuan Branch. The wholly-owned subsidiary Zibo Xinsheng Thermal Power Co., Ltd. has formulated the "Emergency Planfor Environmental Incidents" and filed it with the environmental protection management department. The identification and riskassessment of environmental ris k sources, prevention and early warning mechanisms, emergency protection and supervi sion andmanagement were included in the plan. The wholly-owned subsidiary Lu Thai (Vietnam) Co., Ltd. has prepared emergency plans fordifferent environmental incidents to reduce their impacts.Environmental self-monitoring program

Lu Thai Textile Co., Ltd. Interim Report 2018In accordance with the requirements of environmental protection authorities, Lu Thai Textile Co., Ltd. formulates environmental

self-testing plan for th e following year in December of each year, and implements the self-monitoring plan to submit data to ZiboAutomatic Environmental Monitoring System. The wholly-owned subsidiary Zibo Xinsheng Thermal Power Co., Ltd. complies withthe requirements of superior environmental protection authorities to meet discharge standards by online real-time monitoring ofenvironmental protection data. The wholly-owned subsidiary Lu Thai (Vietnam) Co., Ltd. installed an on-line monitoring device forreal-time treated water quality monitoring. In addition, the Company invites external qualified testing organizations to carry outinsp ections on waste water, sludge and exhaust gas every quarter, and provides reports to environmental inspection departments.Other environment information that should be disclosedNoOther related environment protection informationNo

2. Targeted Measures Taken to Help People Lift themselves out of Poverty

The Company didn’t conduct any targeted anti-poverty projects temporarily in the Reporting Period, no subsequent plan for targetedanti-poverty also.

XIX Other Significant Events

√ Applicable □ Not applicable

The Company implemented the project of repurchasing part of B shares in the Reporting Period. As of 30 June 2018, the Companyhad accumulatively repurchased 17,674,849 shar es, accounting for 1.9158% of total share capital. For details, see relevantannouncement about the repurchase of B shares.

XVII. Significant Events of Subsidiaries

□ Applicable √ Not applicable

Lu Thai Textile Co., Ltd. Interim Report 2018

Part VI Share Changes and Shareholder Information

I. Share Changes

1. Share Changes

Unit: share

Before Increase/decrease (+/-) AfterNumber

(%)

Newissues

Percentage

Bonus

shares

Bonusissuefromprofit

Other Subtotal Number

Percenta

ge (%)

I. Shar es subject to tradingmoratorium

119,079,944

12.91%

264,499

264,499

119,344,443

12.94%

3. Other domestic shares 847,544

0.09%

264,499

264,499

1,112,043

0.12%

Shares held by domestic

individuals

847,544

0.09%

264,499

264,499

1,112,043

0.12%

4. Shares held by overseas

shareholders

118,232,400

12.82%

118,232,400

12.82%

Including: Shares held by

overseas legal persons

118,232,400

12.82%

118,232,400

12.82%

II. Shares not subject to

trading moratorium

803,522,367

87.09%

-264,499

-264,499

803,257,868

87.06%

1. RMB ordinar y shar es 561,150,431

60.82%

-186,725

-186,725

560,963,706

60.80%

foreign shares

242,371,936

. Domestically listed

26.27%

-77,774

-77,774

242,294,162

26.26%

III. Total of shares 922,602,311

100.00%

922,602,311

100.00%

Reasons for the share changes

√ Applicable □ Not applicable

Due to the changes of locked shares from the r esignation of some supervisors and senio r executives, the “limited sales conditionshares-domestic natural person holding” of the Company increased 264,499 shares.Approval of share changes

□ Applicable √ Not applicable

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

Lu Thai Textile Co., Ltd. Interim Report 2018other financial indexes over 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

II. Issuance and Listing of Securities

□ Applicable √ Not applicable

III. Total Number of Shareholders and Their Shareholdings

Unit: shareTotal number of ordinaryshareholders at the period-end

57,783

Total number of preference shareholders with resumed voting rights

at the peri od-end (if any) (see Note 8)

5% or greater ordinary shareholders or the top 10 ordinary shareholders

Name of shareholder

Nature ofshareholder

Sharehol

dingpercenta

ge (%)

Total sharesheld at theperiod-end

Increase/decrease during

theReporting

Period

Number ofrestrictedshares h eld

Number ofnon-restricted

shares h eld

Pledged or frozen

sharesStatus

Pledged or frozen

Numbe

r

Investment Co., Ltd.

Domesticnon-state-owned

Zibo Lucheng Textile

legal

person

15.21%

140,353,583

140,353,583

Tailun (

Co., Ltd.

Foreign

Thailand) Textile

legal

person

12.82%

118,232,400

118,232,400

Hong Kong Securities

Clearing Co. Ltd

Foreign

person

3.32%

legal

30,593,555

12,767,400

30,593,555

Central Huijin Assets

Management Co., Ltd.

State-ownedlegal person

2.20%

20,315,300

20,315,300

T.Rowe Price Intl

Discovery Fund

Foreign

person

2.16%

legal

19,948,219

19,948,219

China Securities Finance

Corporation Limited

Domesticnon-state-owned

1.70%

legal

15,679,091

15,679,091

Lu Thai Textile Co., Ltd. Interim Report 2018

person

Authority-self-ownedfunds

Foreign

Hong Kong Monetary

legal

person

1.25%

11,540,893

3,126,256

11,540,893

National Social Security

Fund Port folio 103

Other 0.87%

7,999,947

7,999,947

7,999,947

Hua’an New

Investment Fund

Other 0.83%

Silk Road Theme Equity Securities

7,650,000

-3,340,000

7,650,000

Bosera Selected Mixed

Fund

Other 0.81%

Securities Investment

7,500,000

7,500,000

7,500,000

Strategic in vestors o r general corpo ration s

becoming top-

3)

Naught

Connected or acting-in-

ten shareholders due to placing of new shares (if any) (see No te

concert parties

among the shareholders above

Zibo Lucheng Textile Investment Co., Ltd. is the largest shareholder

controller of the Company.

Tailun (Thailand) Textile Co., Ltd. is the second largest

shareholder and the foreign sponsor of the Company. All the

holding tradable A-shares or B-shares. And it i s unknown whether there is any related

party or acting-in-concert party among them.Shareholdings of the top ten non-restricted ordinary shareholders

Name of shareholder

Number ofnon-restricted sharesheld at the period-

Type of sharesType Number

Zibo Lucheng Textile Investment Co., Ltd. 140,353,583

end
	RMB ordinary

share

140,353,583

Hong Kong Securities Clearing Co. Ltd 30,593,555

RMB ordinaryshare

30,593,555

Central Huijin Assets Management Co., Ltd. 20,315,300

	RMB ordinary

share

20,315,300

T.Rowe Price Intl Discovery Fund 19,948,219

Domestically

share

19,948,219

listed foreign

China Securitie s Finance Corporation Limited 15,679,091

RMB ordinary

share

15,679,091

Hong Kong Monetary Authority-self-owned funds 11,540,893

RMB ordinaryshare

11,540,893

National Social Security Fund Portfolio 103 7,999,947

	RMB ordinary

share

7,999,947

Lu Thai Textile Co., Ltd. Interim Report 2018Hua’an N ew Silk Road Theme Equity Securities Investment Fund 7,650,000

RMB ordinaryshare

7,650,000

Bosera S elected Mixed Securities Investment Fund 7,500,000

RMB ordinary

share

7,500,000

Foreningen AP Invest F.M.B.A. 6,879,562

Domestically

share

6,879,562

listed foreign

Explanation on connected relationship among the

tradable share not subject t o trading moratorium

, as well as among the

top ten shareholders of tradable share not subject to

and top ten shareholders, or explanation on acting-in-concert

trading moratorium

Zibo Lucheng Textile Investment Co., Ltd. is the largest

shareholder and the actu al controller of

Tailun (Thailand) Textile Co., Ltd

. is the second largest

shareholder and the foreign sponsor of

the o ther shareholders are holding tradable A-

shares or

B-shares. A nd it is unknown whether there is any related

party or acting-in-concert party among them.Particular about

shareholder participate in the securities lending and

borrowing business (if any) (note 4)

NaughtIndicate 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 the Reporting Period.

□ Yea √ No

No such cases in the Reporting Period.

IV. Change of the Controlling Shareholder or the Actual Controller

Change of the controlling shareholder in the Reporting Period

□ Applicable √ Not applicable

There was no any change of the controlling shareholder of the Company in the Reporting Period.Change of t he actual controller in the Reporting Period

□ Applicable √ Not applicable

There was no any change of the actual controller of the Company in the Reporting Period.

Lu Thai Textile Co., Ltd. Interim Report 2018

Part VII Preferred Shares

□ Applicable √ Not ap p licable

No preferred shares in the Reporting Period.

Part VIII Directors, Supervisors and Senior Management

I Changes in Shareholdings of Directors, Supervisors and Senior Management

√ Applicable □ Not applicable

Name Office title

Incumbent/former

Beginning

shareholding (share)

Increase in the Current

Period(share)

Decrease

in theCurrentPeriod(share)

Endingshareholding (share)

Number of

grantedrestrictedshares at theperiod-begin

(share)

Number ofrestricted

sharesgranted in

the

CurrentPeriod(share)

Number of

shares at theperiod-end

(share)Liu Zibin Chairman and GM

		granted r es tricted

Current

148,290

148,290

Xu Zhinan

Vice President

Current

FujiwaraHidetoshi

Director

Current

ChenRuimou

Director

Current

ZengFacheng

Director

Current

WangFangshui

GM, and

Chief

Engineer

Current

146,753

146,753

LiuDeming

Director

Current

QinGuiling

Director andSecretary o f theBoard

Current

126,542

126,542

ZhangHongmei

Directo r and

Accountant

Current

92,500

Chief

92,500

Lu Thai Textile Co., Ltd. Interim Report 2018Xu Jianjun

IndependentDirector

Current

Zhao Yao

IndependentDirector

Current

Bi Xiuli

IndependentDirector

Current

Pan Ailing

IndependentDirector

Current

WangXinyu

IndependentDirector

Current

ZhangShougang

SupervisoryCommitteeChairman

Current

73,100

73,100

Liu Zilong

Supervisor

Current

10,000

10,000

DongShibing

Supervisor

Current

5,000

5,000

ZhangJianxiang

Vice GM

Current

52,150

52,150

WangJiabin

Manager

Current

83,700

Vice GM, Product

83,700

ZhangZhanqi

Lufeng Company

Current

80,300

Vice GM, GM of

80,300

FujiwaraMatsuzaka

Manager of JapanOffice

Current

ZhangKeming

Financial Manager

Current

77,700

77,700

Li Wenji CIO

Current

10,000

10,000

Pan Pingli Customs Manager

Former

134,296

134,296

LvYongchen

Lufeng Company

Current

33,750

Vice GM of

33,750

YuShouzheng

Manager

Current

83,100

Energy Business

83,100

WangChangzhao

GM assistant,Fabri c MarketingManager

Current

22,500

22,500

Lu Thai Textile Co., Ltd. Interim Report 2018Quan Peng

Brand Marketingmanager

Current

27,750

27,750

ShangChenggang

Manager ofGarmentsProductionDepartment

Current

30,000

30,000

Du Lixin

GM of Lu T ha i(Vietnam)

Current

Guo Heng

Manager ofBusinessManagement

Current

Zhang Wei

GM assistant and

Manager ofStrategyPlanningDepartment

Current

LiTongmin

SupervisoryCommitteeChairman

Former

176,164

176,164

Total -- -- 1,413,595

1,413,595

II Changes in Directors, Supervisors and Executive Officers

√ Applicable □ Not applicable

Name Position Type Date ReasonLi Tongmin Supervisory Committee Chairman Left 18 January 2018 RetiredQin Guiling Vice GM Dismissed 18 January 2018 Job turnoverZhang Shougang Vice GM Dismissed 18 January 2018 Job turnoverZhang Shougang Supervisory Committee Chairman Elected 8 February 2018Pan Pingli Customs Manager Dismissed 18 January 2018 Job turnoverDu Lixin GM of Lu Thai (Vietnam) Employed 18 January 2018Guo Heng Manager of Business Management Employed 18 January 2018

Zhang Wei

GM assistant and Manager of

Strategy Plan ning Department

Employed 18 January 2018

Lu Thai Textile Co., Ltd. Interim Report 2018

Part IX Corporate Bonds

Are there any corporate bonds publicly offered and listed on the stock exchange, which were undue before the approval date of thisReport or were due but could not be redeemed in full?No

Lu Thai Textile Co., Ltd. Interim Report 2018

Part X Financial Report

I. Auditor’s Report

Whether the interim report has been audited?

□Yes √ No

The interim report of the Company has not been audited.

II. Financial Statements

The unit of the financial statements attached: RMB

1. Consolidated Balance Sheet

Prepared by Lu Thai Textile Co., Ltd.

30 June 2018

Unit: RMBItem 30 June 2018 31 December 2017Current assets:

Monetary assets 671,721,970.36

693,989,293.38

Derivative financial assets

Notes recei vable 115,709,268.88

139,276,742.34

Accounts r eceiv able 356,818,963.69

334,080,524.05

Prepayments 134,524,113.79

146,463,066.38

Interest recei vable 874,571.14

590,003.07

Dividends receivable

Other receiv ables 76,480,721.09

56,182,782.04

Financi al assets purchased under resale agreements

Inventories 2,017,424,627.73

2,100,661,221.93

Assets classi fied as held for sale

Curr e nt portion of non-current assets

Other curr ent assets 150,806,143.77

118,588,703.34

Total cur rent assets3,524,360,380.45

3,589,832,336.53

Non-current assets:

Lu Thai Textile Co., Ltd. Interim Report 2018Available-for-sale financial assets 85,733,000.00

84,533,000.00

Held-to-maturity investments

Long-term receivables 650,000.00

Long-term equity investments95,806,134.43

97,536,732.02

Investment property 23,856,705.69

24,563,544.58

Fixed assets5,359,308,862.06

5,421,295,850.03

Construction in progress 212,917,526.85

157,421,820.68

Engineeri ng mater ials152,136,560.03

56,913,806.06

Proceeds from disposal of fixed assets

Productive living assets

Intangible assets 491,291,914.65

498,948,301.48

R&D expense

Goodwill 20,613,803.29

20,613,803.29

Long-term prepaid expense110,885,589.66

107,877,194.52

Deferred in come t ax assets 75,315,743.25

74,697,159.71

Other no n-current assets80,514,271.73

36,390,478.85

Total non-current assets 6,709,030,111.64

6,580,791,691.22

Total assets10,233,390,492.09

10,170,624,027.75

Current liabilities:

Short-term borrowings1,458,058,962.33

1,135,124,996.40

Financial liabilities at fair value through profit or loss 28,481,010.00

Derivative financial liabilities

Notes payable 3,118,556.78

7,301,771.85

Accounts payable283,653,868.64

366,265,132.65

Advances fro m cust omers 99,307,372.64

119,785,945.48

Financi al assets sold under repurchase agreements

Handling char ges and comm issions payable

Payroll p ayable246,282,564.04

316,836,488.95

Taxes payable 42,752,421.70

33,055,090.58

Interest p ayabl e2,079,744.07

1,572,231.86

Dividends payable 441,113.64

441,113.64

Other payables157,412,933.90

127,090,009.25

Liabilities direc tly associated with assets classified as held for sale

Current portion of non-current liabilities

62,750,292.49

Lu Thai Textile Co., Ltd. Interim Report 2018Other current liabilities

Total current liabilities2,321,588,547.74

2,170,223,073.15

Non-current liabilities:

Long-term borrowings69,431,359.47

Long-term payables

Long-term payroll payable92,458,178.53

93,843,473.02

Specific payables

Provisions

Deferred in come 126,957,174.18

126,737,092.32

Deferred income tax liabilities3,112,735.33

2,904,899.46

Other no n-current liabilities 1,840,000.00

1,840,000.00

Total non-current liabilities293,799,447.51

225,325,464.80

Total liabilities 2,615,387,995.25

2,395,548,537.95

Owners’ equity:

Share capital 922,602,311.00

922,602,311.00

Capital reserves699,493,647.48

699,493,593.82

Less: Treasury shares 121,952,709.49

Other comprehensive income44,370,228.14

16,810,574.22

Specific reserv e

Surplus r es er ves962,933,579.06

962,933,579.06

General reserve

Retained profits4,553,114,343.08

4,629,102,712.06

Total equity attributable to owners of the Company as the parent 7,060,561,399.27

7,230,942,770.16

Non-controlling interests557,441,097.57

544,132,719.64

Total owners’ equity 7,618,002,496.84

7,775,075,489.80

Total liabilities and owners’ equity10,233,390,492.09

10,170,624,027.75

Legal repr esentative: Liu Zibin Chief A ccountant : Zhang HongmeiFinancial Manager: Zhang Keming

2. Balance Sheet of the Company as the Parent

Unit: RMBItem 30 June 2018 31 December 2017Current assets:

Monetary assets155,738,414.91

267,809,829.78

Lu Thai Textile Co., Ltd. Interim Report 2018Financial assets at fair value through profit or loss

Derivative financial assets

Notes recei vable 73,448,876.87

93,244,480.81

Accounts r eceiv able283,715,100.32

305,903,590.98

Prepayments 48,847,481.49

81,471,605.69

Interest recei vable

220,590.38

Dividends receivable

Other receiv ables442,255,215.86

519,788,239.57

Inventories 1,167,143,139.52

1,164,055,145.96

Assets classi fied as held for sale

Current portion of non-current assets

Other curr ent assets104,977,154.77

53,657,308.33

Total cur rent assets 2,276,125,383.74

2,486,150,791.50

Non-current assets:

Available-for-sale financial assets 73,733,000.00

72,533,000.00

Held-to-maturity investments

Long-term receivables

Long-term equity investments2,165,499,250.47

1,816,493,348.06

Investment property 15,170,780.40

15,536,968.08

Fixed assets2,665,189,699.04

2,811,046,847.91

Construction in progress 71,255,813.53

25,703,496.87

Engineeri ng mater ials21,630,265.23

1,609,204.75

Proceeds from disposal of fixed assets

Productive living assets

Intangible assets 245,840,436.86

249,994,817.83

R&D expense

Goodwill

Long-term prepaid expense

Deferred in come t ax assets 45,569,866.60

51,474,007.76

Other no n-current assets14,937,345.52

27,077,391.31

Total non-current assets 5,318,826,457.65

5,071,469,082.57

Total assets7,594,951,841.39

7,557,619,874.07

Current liabilities:

Short-term borrowings705,343,347.97

622,438,413.87

Lu Thai Textile Co., Ltd. Interim Report 2018Financial liabilities at fair value through profit or loss 18,847,500.00

Derivative financial liabilities

Notes payable 1,401,325.50

6,124,239.92

Accounts payable233,442,898.51

147,883,359.29

Advances fro m cust omers 56,386,065.62

52,314,250.61

Payroll p ayable183,941,763.51

240,391,459.47

Taxes payable 33,744,215.20

17,297,415.92

Interest p ayabl e2,013,677.88

973,134.21

Dividends payable 441,113.64

441,113.64

Other payables201,727,467.65

22,933,385.28

Liabilities directly associated with assets classified as held for sale

Current portion of non-current liabilities

Other current liabilities

Total current liabilities1,437,289,375.48

1,110,796,772.21

Non-current liabilities:

Long-term borrowings

Long-term payables

Long-term payroll payable92,458,178.53

93,843,473.02

Specific payables

Provisions

Deferred in come 81,699,952.30

80,580,249.14

Deferred income tax liabilities184,950.00

4,950.00

Other no n-current liabilities

Total non-current liabilities174,343,080.83

174,428,672.16

Total liabilities 1,611,632,456.31

1,285,225,444.37

Owners’ equity:

Share capital 922,602,311.00

922,602,311.00

Capital reser ves759,836,756.57

759,836,702.91

Less: Treasury shares 121,952,709.49

Other comprehensive income1,048,050.00

28,050.00

Specific reserv e

Surplus r es er ves959,824,839.42

959,824,839.42

Retained profits 3,461,960,137.58

3,630,102,526.37

Total owners’ equity5,983,319,385.08

6,272,394,429.70

Lu Thai Textile Co., Ltd. Interim Report 2018Total liabilities and owners’ equity 7,594,951,841.39

7,557,619,874.07

3. Consolidated Income Statement

Unit: RMBItem H1 2018 H1 20171. Reven ue3,281,014,155.43

2,997,093,395.84

Including: Operating revenue 3,281,014,155.43

2,997,093,395.84

2. Op erati ng costs and expenses2,840,765,404.50

2,517,282,163.05

Including: Cost of sales 2,360,836,431.41

2,051,483,003.79

Taxes and s urtaxes54,470,407.88

51,503,327.13

Selling expense 66,941,088.56

68,365,512.22

Administrative expense325,870,756.50

314,037,319.49

Finance costs 30,525,225.31

30,930,178.28

Asset impairment loss2,121,494.84

962,822.14

Add: Gain on changes in fair value (“-” for loss) -28,481,010.00

1,110,700.00

Investmen t income (“-” for loss)4,646,023.78

1,385,535.34

Including: Share of profit or loss of joint ventures and associates -1,730,597.59

Forei gn exchange gain (“-” for loss)

Asset disposal income (“-” for loss) -522,286.65

-1,191,082.48

Other income36,532,224.59

10,580,637.29

3. Operating profit (“-” for loss) 452,423,702.65

491,697,022.94

Add: Non-operating income3,011,072.58

4,365,273.28

Less: Non-operating expense 1,994,923.71

4,648,925.39

4. Profit before taxation (“-” for loss)453,439,851.52

491,413,370.83

Less: Income tax expense 63,275,514.57

79,455,627.02

5. Net profit (“-” for net loss)390,164,336.95

411,957,743.81

5.1 N e t profit fr om c onti n ui ng ope r a ti o ns (“-” for net loss) 390,164,336.95

411,957,743.81

5.2 Net profit from discontinued operations (“-” for net loss)

Net profit attributable to owners of the Company as the parent 377,355,959.02

395,130,296.26

Net profit attributable to non-controlling interests12,808,377.93

16,827,447.55

6. Other comprehensive income, net of tax 27,559,653.92

-14,785,091.90

Attributable to owners of the Company as the parent27,559,653.92

-14,785,091.90

6.1 Items that will not be reclassified to profit or loss

6.1.1 Changes in net liabilities or assets caused by

Lu Thai Textile Co., Ltd. Interim Report 2018remeasurements on defined benefit pension schemes

6.1.2

will not be reclassified to profit or loss under equity method

Share of other comprehensive income of investees that

6.2 Items that may subsequently be reclassified to profit or loss

27,559,653.92

-14,785,091.90

6.2.1

Share of other comprehensive income of investees that

will be reclassified to profit or loss under equity method

6.2.2 Gain/Loss on changes in fair value of available-for-

financial as sets

1,020,000.00

sale

6.2.3 Gain/Loss arising from reclassificatio n o f held -to-

investments to available-for-sale financial assets

maturity

6.2.4 Effective gain/loss on cash flow hedges

6.2.5

currency-denominated financial statements

26,539,653.92

Differences arising from translation of foreign

-14,785,091.90

6.2.6 Other

Attributable to non-controlling interests

7. Total comprehensive income 417,723,990.87

397,172,651.91

Attributable to owners of the Company as the parent404,915,612.94

380,345,204.36

Attributable to non-controlling interests 12,808,377.93

16,827,447.55

8. Ear ni ngs per share

8.1 B as ic earnings per share 0.41

0.43

8.2 Diluted earnings per share0.41

0.43

Where business mergers under the same control occurred in the current period, the net income achieved by the merged parties beforethe business mergers was RMB0.00, with the amount for last year being RMB0.00.Legal repr esentative: Liu Zibin Chief A ccountant : Zhang Hongmei

Financial Manager: Zhang Keming

4. Income Statement of the Company as the Parent

Unit: RMBItem H1 2018 H1 20171. Op erati ng revenue 2,504,395,230.25

2,482,323,588.80

Less: Cost of sales 1,861,404,465.69

1,766,681,024.07

Taxes and s urtaxes 40,307,584.75

37,477,779.18

Selling expense 38,315,465.09

43,320,775.03

Administrative expense 214,766,851.49

210,435,426.62

Finance costs 11,391,279.87

8,369,769.83

Asset impairment loss -1,182,154.91

262,131.70

Lu Thai Textile Co., Ltd. Interim Report 2018

Add: Gain on changes in fair value (“-” for loss) -18,847,500.00

1,110,700.00

Investmen t income (“-” for loss)1,917,402.93

19,258,397.61

Including: Share of profit or loss of joint ventures and

associates

-1,730,597.59

Asset disposal income (“-” for loss) -9,032,750.08

-243,716.20

Other i ncome27,986,366.59

5,169,055.33

2. Operating profit (“-” for loss) 341,415,257.71

441,071,119.11

Add: Non-operating income1,865,030.22

2,207,064.75

Less: Non-operating expense 1,119,027.21

3,935,434.10

3. Profit before taxation (“-” for loss)342,161,260.72

439,342,749.76

Less: Income tax expense 56,959,321.51

65,645,694.09

4. Net profit (“-” for net loss)285,201,939.21

373,697,055.67

4.1 Net profit from continuing operations (“-” for net loss) 285,201,939.21

373,697,055.67

4.2 Net profit from discontinued operations (“-” for net loss)

5. Other comprehensive income, net of tax 1,020,000.00

5.1 Items that will not be reclassified to profit or loss

5.1.1 Changes in net liabilities or assets caused by

remeasurements on defined benefit pension schemes

5.1.2

not be reclassified into profit or loss under equity method

Share of other compreh en sive inco me of investees t hat will

5.2 Items that may subsequently be reclassified to profit or loss1,020,000.00

5.2.1 Share of other compreh

be reclassified into profit or loss under equity method

ensive inco me of investees t hat will

5.2.2 Gain/Loss on changes in fair value of available-for-

financial as sets

1,020,000.00

sale

5.2.3 Gain/Loss arising from reclassifi cation of hel d-to-

investments to available-for-sale financial assets

maturity

5.2.4 Effective gain/loss on cash flow hedges

5.2.5 Differences arising from translation of foreign

currency-denominated financial statements

5.2.6 Other

6. Total comprehensive income286,221,939.21

373,697,055.67

7. Ear ni ngs per share

7.1 Basic earnings per share0.31

0.41

7.2 Diluted earnings per share 0.31

0.41

Lu Thai Textile Co., Ltd. Interim Report 2018

5. Consolidated Cash Flo w Statem ent

Unit: RMBItem H1 2018 H1 20171. Cash flows from operating activities:

Proceeds fr om sale of commodities and rendering of services 3,222,986,999.01

2,965,847,838.31

Tax rebates 114,081,775.79

103,287,108.06

Cash gener ated from other operating activities 58,830,516.70

50,784,884.88

Sub to tal of cas h generated from operating activities 3,395,899,291.50

3,119,919,831.25

Payments for commodities and services 1,580,866,513.00

1,633,500,466.75

Cash paid to and for employees 866,022,073.85

819,888,473.79

Taxes paid 138,363,376.99

179,630,100.30

Cash used in ot her operating activities 112,862,616.89

143,654,039.84

Subtotal of cash used in operating activities 2,698,114,580.73

2,776,673,080.68

Net cash gen er ated from/used in operating activities 697,784,710.77

343,246,750.57

2. Cash flows from investing activities:

Proceeds from disinvestments

Investment i ncome

439,800.00

Net

long-lived assets

936,526.59

proceeds from disposal of fixed assets, intangible assets and other

1,257,813.92

Net proceeds from disposal of subsidiaries or other business units

Cash gener ated from other investing activities13,528,136.07

70,035,606.25

Sub to tal of cas h generated from investing activities 14,464,662.66

71,733,220.17

Payments for acquisition of fixed assets, intangible assets and other

long-lived assets

438,092,015.33

294,548,197.25

Payments for inv estments

Net increase in pledged loans granted

Net payments for acquisition of subsidiaries and other business units

Cash used in other investing activities

Subtotal of cash used in investing activities438,092,015.33

294,548,197.25

Net cash gen er ated from/used in investing activities -423,627,352.67

-222,814,977.08

3. Cash flows from financing activities:

Capital contributions received 500,000.00

500,000.00

Including: Capital contributions by non-

subsidiaries

500,000.00

controlling interests to

500,000.00

Increase in borrowings obtained1,554,914,896.37

1,143,078,297.25

Lu Thai Textile Co., Ltd. Interim Report 2018

Net proceeds from issuance of bonds

Cash gener ated from other financing activities39,317,500.00

10,300,000.00

Sub to tal of cas h generated from financing activities 1,594,732,396.37

1,153,878,297.25

Repayment of borrowings1,235,496,710.59

833,454,881.16

Payments for interest and dividends 469,601,858.04

484,246,981.18

Including: Dividends paid by subsidiaries to non-controlling interests

Cash us ed i n other financing activities 175,517,237.20

0.00

Subtotal of cash used in financing activities1,880,615,805.83

1,317,701,862.34

Net cash gen er ated from/used in financing activities -285,883,409.46

-163,823,565.09

4. Effect of fo r eign exchange rate changes on cash and cash equivalents6,658,728.34

-14,067,019.42

5. Net in cr eas e in cash and cash equivalents -5,067,323.02

-57,458,811.02

Add: Cash and cash equivalents, beginning of the period676,639,212.86

659,116,137.67

6. Cash and cash equivalents, end of the period 671,571,889.84

601,657,326.65

6. Cash Flow Statement of the Company as the Parent

Unit: RMBItem H1 2018 H1 20171. Cash flows from operating activities:

Proceeds fr om sale of commodities and rendering of services 2,547,140,430.96

2,436,886,166.08

Tax rebates70,272,032.57

75,165,906.24

Cash gener ated from other operating activities 36,415,607.59

15,897,897.32

Sub to tal of cas h generated from operating activ ities2,653,828,071.12

2,527,949,969.64

Payments for commodities and services 1,356,047,613.94

1,526,580,047.50

Cash paid to and for employees605,320,730.04

587,514,691.21

Taxes paid 87,174,263.36

97,827,376.39

Cash us ed in other operating activities65,254,416.78

75,176,222.57

Subtotal of cash used in operating activities 2,113,797,024.12

2,287,098,337.67

Net cash gen er ated from/used in operating activities540,031,047.00

240,851,631.97

2. Cash flows from investing activities:

Proceeds from disinvestments

Investment i ncome

17,976,433.62

long-lived assets

71,378,849.40

Net proceeds from disposal of fixed assets, intangible assets and other

1,272,813.92

Net proceeds from disposal of subsidiaries or other business units

Lu Thai Textile Co., Ltd. Interim Report 2018Cash gener ated from other investing activities 408,047,687.20

143,584,458.87

Sub to tal of cas h generated from investing activities479,426,536.60

162,833,706.41

Payments for acquisition of fixed assets, intangible assets and othe

long-lived assets

75,495,986.86

r

35,162,185.30

Payments for inv estments 350,352,500.00

7,934,750.00

Net payments for acquisition of subsidiaries and other business units

Cash used in other investing activities 329,863,300.00

162,588,600.00

Subtotal of cash used in investing activities755,711,786.86

205,685,535.30

Net cash gen er ated from/used in investing activities -276,285,250.26

-42,851,828.89

3. Cash flows from financing activities:

Capital contributions received

Increase in borrowings obtained905,214,428.57

921,800,512.27

Net proceeds from issuance of bonds

Cash gener ated from other financing activities173,828,100.00

Sub to tal of cas h generated from financing activities 1,079,042,528.57

921,800,512.27

Repayment of borrowings821,108,369.41

597,328,780.40

Payments for interest and dividends 455,588,046.43

464,854,599.26

Cash us ed i n other financing activities175,517,237.20

Sub-total of cash used in financing activities 1,452,213,653.04

1,062,183,379.66

Net cash generated from/used in financing activities-373,171,124.47

-140,382,867.39

4. Effect of fo r eign exchange rate changes on cash and cash equivalents -2,646,087.14

-8,267,806.48

5. Net in cr eas e in cash and cash equivalents-112,071,414.87

49,349,129.21

Add: Cash and cash equivalents, beginning of the period 267,809,829.78

177,016,859.63

6. Cash and cash equivalents, end of the period155,738,414.91

226,365,988.84

7. Consolidated Statements of Changes in Owners’ Equity

Lu Thai Textile Co., Ltd. Interim Report 2018H1 2018

Unit: RMB

Item

H1 2018Equity attributable to owners of the Company as the parent

Non-controlling

interests

Total owners’

equityShare capital

Other equityinstruments

Capital reserves

Less: Treasury

shares

Othercomprehensiv

e income

Specifi

creserv

e

Surplus reserves

Generalreserve

Retained profits

Preferre

d shares

Perpetual bonds

d shares

Othe

r

end of prior year

922,602,311.00

1. Balances as of

699,493,593.82

16,810,574.22

962,933,579.06

4,629,102,712.06

544,132,719.64

7,775,075,489.80

Add: Adjustments for changed

accountingpolicies

previous errors

Adjustments for corrections of

businesscombinationsinvolving

enterprises under

common control

Otheradjustments

2. Balances as of

beginning of

year

922,602,311.00

the

699,493,593.82

16,810,574.22

962,933,579.06

4,629,102,712.06

544,132,719.64

7,775,075,489.80

3. Increase/

53.66

121,952,709.49

27,559,653.92

-75,988,368.98

13,308,377.93

-157,072,992.96

Lu Thai Textile Co., Ltd. Interim Report 2018

period (“-

” for

decrease)

comprehensiveincome

3.1 Total

27,559,653.92

377,355,959.02

12,808,377.93

417,723,990.87

3.2 Capital increased and reduced by owners

53.66

121,952,709.49

500,000.00

-121,452,655.83

3.2.1Ordinary sharesincreased byshareholders

121,952,709.49

500,000.00

-121,452,709.49

3.2.2 Capitalincreased byholders of otherequity instruments

3.2.3Share-based

in owners’ equity

payments included

3.2.4 Other

53.66

53.66

3.3

Profit

distribution

-453,344,328.00

-453,344,328.00

3.3.1

Appropriation to

surplus reserves

3.3.2

general reserve

Appropriation to

Lu Thai Textile Co., Ltd. Interim Report 20183.3.3

shareholders)

Appropriation to owners (or

-453,344,328.00

-453,344,328.00

3.3.4 Other

3.4Carryforwards

equity

within owners’

capital r es er ves

3.4.1 Increase in capital (or share capital) from

surplus reserves

3.4.2 Increase in capital (or share capital) from

make up losses

3.4.3 Surplus reserves used to

3.4.4 Other

3.5 Specific

reserve

3.5.1

period

Withdrawn for the

during t he pe r iod

3.5.2 Used

3.6 Other

Lu Thai Textile Co., Ltd. Interim Report 2018

end of the period

922,602,311.00

4. Balances as of

699,493,647.48

121,952,709.49

44,370,228.14

962,933,579.06

4,553,114,343.08

557,441,097.57

7,618,002,496.84

H1 2017

Unit: RMB

Item

H1 2017Equity attributable to owners of the Company as the parent

Non-controlling

interests

Total owners’

equityShare capital

Other equityinstruments

Capital reserves

Less: Treasury

shares

Othercomprehensiv

e income

Specifi

creserv

e

Surplus reserves

Generalreserve

Retained profits

Preferre

d shares

Perpetual bonds

d shares

Othe

r

end of prior year

922,602,311.00

1. Balances as of

761,280,557.83

53,293,544.89

891,870,522.68

4,341,866,189.19

475,088,111.17

7,446,001,236.76

Add: Adjustments for changed

accountingpolicies

previous errors

Adjustments for corrections of

businesscombinationsinvolving

enterprises under

common control

Otheradjustments

2. Balances as of

beginni

922,602,311.00

ng of the

761,280,557.83

53,293,544.89

891,870,522.68

4,341,866,189.19

475,088,111.17

7,446,001,236.76

Lu Thai Textile Co., Ltd. Interim Report 2018year

period (“-

” for

decrease)

-61,786,964.01

-36,482,970.6

71,063,056.38

287,236,522.87

69,044,608.47

329,074,253.04

3.1 Total

comprehensiveincome

-36,482,970.6

841,150,934.75

42,168,174.85

846,836,138.93

3.2 Capital increased and reduced by owners

-61,786,964.01

38,900,000.00

-22,886,964.01

3.2.1Ordinary sharesincreased byshareholders

500,000.00

500,000.00

3.2.2 Capitalincreased byholders of otherequity instruments

3.2.3Share-based

in owners’ equity

payments included

3.2.4 Other

-61,786,964.01

38,400,000.00

-23,386,964.01

3.3

distribution

Profit

71,063,056.38

-553,914,411.88

-12,023,566.38

-494,874,921.88

3.3.1

Appropriation to

surplus reserves

71,063,056.38

-71,063,056.38

Lu Thai Textile Co., Ltd. Interim Report 20183.3.2

general reserve

Appropriation to

3.3.3

shareholders)

Appropriation to owners (or

-482,851,355.50

-12,023,566.38

-494,874,921.88

3.3.4 Other

3.4Carryforwards

equity

within owners’

capital r es er ves

3.4.1 Increase in capital (or share capital) from

surplus reserves

3.4.2 Increase in capital (or share capital) from

make up losses

3.4.3 Surplus reserves used to

3.4.4 Other

3.5 Specific

reserve

3.5.1

period

Withdrawn for the

Lu Thai Textile Co., Ltd. Interim Report 2018

during t he pe r iod

3.5.2 Used

3.6 Other

4. Balances as of

end of the period

922,602,311.00

699,493,593.82

16,810,574.22

962,933,579.06

4,629,102,712.06

544,132,719.64

7,775,075,489.80

8. Statements of Changes in Owners’ Equity of the Company as the Parent

H1 2018

Unit: RMBItem

H1 2018Share capital

Other equity instruments

Capital reserves

Less: Treasury

shares

Othercomprehensive

income

Specificreserve

Surplus reserves

Retained profits

Total owners’

equityPreferre

Perpetual bonds

d shares

Other

1. Balanc

es as of end of prior year

922,602,311.00

759,836,702.91

28,050.00

959,824,839.42

3,630,102,526.37

6,272,394,429.70

Add: Adjustments for changed

acc ount ing pol ic i e s

previous errors

Adjustments for corrections of

Other adjustments

2. Balan ces as of beginning of the

year

922,602,311.00

759,836,702.91

28,050.00

959,824,839.42

3,630,102,526.37

6,272,394,429.70

3. Increase/ decrease in the p eriod

(“-” for decrease)

53.66

121,952,709.49

1,020,000.00

-168,142,388.79

-289,075,044.62

income

3.1 Total comprehensive

1,020,000.00

285,201,939.21

286,221,939.21

reduced by owners

3.2 Capital increased and

53.66

121,952,709.49

-121,952,655.83

Lu Thai Textile Co., Ltd. Interim Report 2018

3.2.1 Ordinary sharesincreased by shareholders

121,952,709.49

-121,952,709.49

3.2.2 Capital increased byholders of other equityinstruments

3.2.3 Share-based paymentsincluded in owners’ equity

3.2.4 Other

53.66

53.66

3.3 Profit distribution

-453,344,328.00

-453,344,328.00

3.3.1

surplus reserves

Appropriation to

3.3.2

owners (or shareholders)

Appropriation to

-453,344,328.00

-453,344,328.00

3.3.3 Other

owners’ equity

3.4 Carryforwards within

reserves

3.4.1 Increase in capital (or share capital) from capital

reserves

3.4.2 Increase in capital (or share capital) from surplus

to make up losses

3.4.3 Surplus reserves used

3.4.4 Other

3.5 Specific reserve

period

3.5.1 Withdrawn for the

Lu Thai Textile Co., Ltd. Interim Report 2018

3.5. 2 Us e d during the period

3.6 Other

4. Balances as of end of the period

922,602,311.00

759,836,756.57

121,952,709.49

1,048,050.00

959,824,839.42

3,461,960,137.58

5,983,319,385.08

H1 2017

Unit: RMBItem

H1 2017Share capital

Other equity instruments

Capital reserves

Less: Treasury

shares

Othercomprehensive

income

Specificreserve

Surplus reserves

Retained profits

Total owners’

equityPreferre

Perpetual bonds

d shares

Other

1. Balanc

es as of end of prior year

922,602,311.00

759,793,238.92

888,761,783.04

3,451,836,174.44

6,022,993,507.40

Add: Adjustments for changed

acc ount ing pol ic i e s

previous errors

Adjustments for corrections of

Other adjustments

2. Balan ces as of beginning of the

year

922,602,311.00

759,793,238.92

888,761,783.04

3,451,836,174.44

6,022,993,507.40

3. Increase/ decrease in the p eriod

(“-” for decrease)

43,463.99

28,050.00

71,063,056.38

178,266,351.93

249,400,922.30

3.1 Total comprehensive

income

28,050.00

710,630,563.81

710,658,613.81

reduced by owners

3.2 Capital increased and

43,463.99

43,463.99

3.2.1 Ordinary sharesincreased by shareholders

3.2.2 Capital increased byholders of other equity

Lu Thai Textile Co., Ltd. Interim Report 2018instruments

3.2.3 Share-based paymentsincluded in owners’ equity

3.2.4 Other

43,463.99

43,463.99

3.3 Profit distribution

71,063,056.38

-532,364,211.88

-461,301,155.50

3.3.1

Appropriation to

surplus reserves

71,063,056.38

-71,063,056.38

3.3.2

owners (or shareholders)

Appropriation to

-461,301,155.50

-461,301,155.50

3.3.3 Other

owners’ equity

3.4 Carryforwards within

reserves

3.4.1 Increase in capital (or share capital) from capital

reserves

3.4.2 Increase in capital (or share capital) from surplus

to make up losses

3.4.3 Surplus reserves used

3.4.4 Other

3.5 Specific reserve

period

3.5.1 Withdrawn for the

3.5. 2 Us e d during the period

3.6 Other

4. Balances as of end of the period

922,602,311.00

759,836,702.91

28,050.00

959,824,839.42

3,630,102,526.37

6,272,394,429.70

III. Company ProfileLu Thai Textile Co., Ltd. (hereinafter referred to as the “Company”) is a joint venture invested by

Zibo Lucheng Textile Investment Co., Ltd (originally named Zibo Lucheng Textile Co., Ltd,hereinafter referred to as Luchen g Textile) and Thailand Tailun Textile Co., Ltd. On 3 February1993, t he Company i s 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 forIndustry and Commerce issued the Company corporate business license with the registration No. ofQGLZZZ No. 000066. In July 1997, the Company is approved by the Securities Committee of theDepartment of the State in the ZWF (1997) No. 47 to issue 80 million shares of domestically listedforeign share( B-shares) at the price of RMB 1.00 per share. Upon approved by Shenzhen StockExchange with No. (1997) 296 Listing Notice, the Company is listed on the Shenzhen StockExchange on 19 A ugust 1997 with B-shares stock code of 200726. On 24 November 2000,approved by ZJGSZ [2000] No.199 by CSRC, the Company increased publication of 50 millionshares of gene ral sh a re ( A-shares) at the book val ue of RMB 1.00, which are listed on the ShenzhenStock Exchange on 25 D ecember 2000 with A-shares stock code of 000726 through approval byShenzhen Stock Exchange with No. (2000) 162 Listing Notice. As approved by 2000 AnnualGeneral Meeting in May 2001, the Company carried out the distribution plan that 10 shares ofcapital public reserve are converted to 3 more shares for each 10 shares. As approved byResolutions of 2001 Annual G eneral Meeting in June 2002, the Company imple mented thedistribution plan that 10 shares of capital public reserve are converted 3 more shares for each 10shares again. As approved by 2002 Annual General Meeting in May 2003, the Companyimplemented the distribution plan that 10 shares of capital public reserve ar e 2 mo r e sh a res fo r ea ch10 shares, and inner employees’ shared increased to 40.56 million shares. As examined andapproved by ZJGSZ No. [2000] 199 of CSRC, the inner employees’ shares will start circulation 3years later since listing on the A-share m arket. On 25 December 2003, the inner employees’ sharesreach 3 years s in ce li s ti ng on t he A -share stock market, and they set out circulation on 26 December2003. As approved by the Annual G eneral Meeting 2006 held in June 2007, the Companyimplemented the plan on converting 10 shares to all its shareholders with capital reserves for every10 shares. Aft er capitalizatio n, the registered c apital of the Company was RMB 844.8648 million.The Company, in accordance with the official repl y on approving Lu Thai Textile Co., Ltd. to issueadditional shares (ZJXK [2008] No. 890 document) from CSRC, issued the Renminbi commonshares (A s hares) amounting to 150 million shares on 8 December 2008. Ac cording to the relevantresolution of the 2

nd

Special Extraordinary General Meeting of 2011, the relevant resolution of the

th

Meeting of the 6

th

B oard of Directors, the Opini on of China Securities Regulator y Commissionon the Restricted Share Incentive Plan of Lu Thai Textile Co., Ltd. (Shang-Shi-Bu-Han [2011] No.206), t he Company a pplied for a registered capital increment of RMB 14.09 million, which wascontributed by restricted share incentive receivers with monetary funds. In accordance with theresolution of Proposal on Repurchasing and Canceling Partial Restricted Shares already Granted forthe Original Incentive Targets not Reaching the Incentive Conditions made at the 23

rd

Session of the

th

B oard of Directors on 13 August 2012, t he Company c anceling a total of 60,000.00 sharesalread y granted for the original incentive targets not reaching the incentive conditions. According tothe second temporary resolution of Proposal on counter purchase of part of the domestic listedforeign share (B share) on 25 June 2012, the Company counter purchase domestic listed foreign

share (B share) 48,837,300 shares. According to the Proposal on Repurchase and Cancel Part ofUnlocked Restricted Share of the Original Incentive Personnel not Conforming to the IncentiveCondition, Proposal on Repurchase and Cancel unlocked Restricted Share in Second UnlockedPeriod of all the Incentive Personnel reviewed and approved by the 26

th

Meet ing o f the 6

th

Board ofDirectors on 27 March 2013, the Company repurchase and cancel 4,257,000 shares owned byoriginal people whom to motivate. According to the Proposal on Repurchase and Write-off of Partlyof the Original Incentive Targets Not Met with the Incentive Conditions but Granted RestrictedShares approved on the 11

th

Meeting of the 7

th

B oard of Directors on 11 June 2014, to executerepurchase and write-off of the whole granted shares of 42,000 shares of the original incentivetargets not met with the incentive targets of the Company. As per the Proposal on Buy-back ofSome A- and B-shares considered and approved as a resolution at the 1

st

s pecial meeting ofshareholders on 5 August 2015, the Company repurchased 33,156,200 domestically listed foreignshares (B-shares). According to the Agreement about Repurchas e of Part of the Company’s BShares by t he Resolutions on the 2

nd

Ext raordinary General Meeting of 2018 on 23 March 2018, th eComp any repurchased 17.6748 millio n domestically listed foreign shares (B shares). As of 30 June2018, the registered capital of the Company was RMB922.6023 million.The Company’s registered address: No. 11, Mingbo Road, Hi-tech Development Zone, Zibo,ShandongThe Company’s legal representative: Liu ZibinThe Company’s business scope includes the production, processing and sales business of cottonyarn, yarn dyed fabrics, shirts, fashion accessories, health underwear and other textile products andtheir 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, cate ring, conferences, and training services; r ental business of the sel f-owned housesand land; the production and sales of the purified water projects.The Com pany’s financial statement s have been approved fo r issue b y the Board o f Directors of theCompany on 20 August 2018.There were 16 s ubsidiaries included into the consolidation scope of the Company from January toJune 2018, and for the details, please refer to Notes VIII. “Equities among Other Entities”.

IV Basis for Preparation of Financial Statements

1. Preparation Basis

With the going-concern assumption as the basis and based on transactions and other events thatactually occurred, the Group prepared financial statements in accordance with The AccountingStandards for Business Enterprises—Basic Standard issued by the Ministry of Finance with DecreeNo. 33 and revised with Decree No. 76, the 42 specific accounting standards, the ApplicationGuidance of Accounting Standards for Business Enterprises, the Interpretation of AccountingStandards for Business Enterprises and other regulations issued and revised from 15 Februar y 2006onwards (hereinafter jointly referred t o as “the Accounting Standards for Business Enterprises”,“China Accounting Standards” or “CAS”), as well as the Rules for Preparation Convention ofDisclosure of Public Offering Companies No.15 – G eneral Regulations for Financial Reporting(revised in 2014) by China Securities Regulatory Commission.

In accordance with relevant provisions of the Accounting Standards for Business Enterprises, theGroup adopted the accrual basis in accounting. Except for some financial instruments, the financialstatements were based on historical costs for measurement. Non-current asset h eld for sale waspriced according to the lower one between the amount of fair value minus estimated costs and theoriginal book value which complies with the conditions of holding for sale. If impairment occurredon an asset, an impairment reserve was withdrawn accordingly pursuant to relevant requirements.

V. Significant Accounting Policies and Estimates

Specific accounting policies and accounting estimates indicators:

The Company a nd each subsidiary mainly engage in the production and operation of textileproducts. T he Company a nd each subsidiary according to the actual production and operationcharacteristics and the regulations of th e relevant ASBE, formulated certain specific accountingpolicies and accounting esti mates of the transaction s and events such as recogniz ing the revenues,and f or details, please refer to each description of Notes V. As for the notes to the importantaccounting judgment and estimations made by the management level, please refer to Notes V. 28“Other important accounting policies and estimations”.

1. Statement of Compliance with the Accounting Standards for Business Enterprises

The financial st atements prepared b y the Company a re in compliance with in compliance with theAccounting Standards for Business Enterprises, which factually and completely present theCompany’s, and the Company’s financial positions as at 30 June 2018, business results and cashflows for the January to June of 2018, and other relevant information. In addition, the Company’sand t he Company’s financial statements meet the requirements of disclosing financial statementsand notes thereto stated in the Rules for Preparation Convention of Disclosure of Public OfferingCompanies No.15 – G eneral Regulations for Financial Reporting (revised in 2014) by ChinaSecurities Regulatory Commission.

2. Fiscal Period

The Company’s fiscal periods include fi scal years an d fiscal period s shorter than a complete fiscalyear. The Company’s fiscal year starts on January 1

st

a nd ends on December 31

st

of every yearaccording to the Gregorian calendar.

3. Operating Cycle

Normal operating cycle refers to the period from the Group purchases the assets for processing torealize the cash or cash equivalents. The Group regards 12 months as an operating cycle and regardswhich 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 circumstancesof 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 HKDollar, US Dollar and Vietnamese Dong as the recording currency according their major economicenvironment of the operating. When preparing the financial statements for the Reporting Period, theCompany adopted RMB as the recording currency.

5. Accounting Treatment for Business Combinations under the Common Control and Not under theCommon Control

Business combinations, it is refer to two or more separate enterprises merge to form a reportingentity transactions or events. Business combination is divided into under the same control and thosenon under the same control.(1) Business combinations under the same controlA business combination under the same control is a business combination in which all of thecombining enterprises are ultimately controlled by the same party or the same parties both beforeand after the business combination and on which the control is not temporary. In a businesscombination 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) thecombined party. The “combining date” refers to the date on which the combining party actuallyobtains control on the combined party.The assets and liabilities that the combining party obtains in a business combination shall bemeasured on the basis of their carrying amount in the combined party on the combining date. As forthe balance between the carrying amount of the net assets obtained by the combining party and thecarrying amount of the consideration paid by it (or the total par value of the shares issued), theadditional paid-in capital (share premium) shall be adjusted. If the additional paid-in capital (sharepremium) is not sufficient to be offset, the retained earnings shall be adjusted.The direct cost for the business combination of the combining party shall be recorded into theprofits and losses at the current period.(2) Business combinations not under the same controlA business combination not under the same control is a business combination in which thecombining enterprises are not ultimately controlled by the same party or the same parties bothbefore 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 theacquirer, and other combining enterprise(s) is (are) the acquiree.For a business combination not under the same control, the combination costs shall include th e fairvalues, on the acquisition date, of the assets paid, the liabilities incurred or assumed and the equitysecurities issued by the acquirer in exchange for the control on the acquire e, the expenses for audit,legal services and assessment, and other administrative expenses, whi ch are recorded into theprofits and losses in the current period. The trading expenses for the equity securities or debtsecurities issued b y the acquirer as the combination consideration shall be r ecorded into the amountof in itial measurement of the equity securities or debt securities. The involved contingentconsideration 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 theexisting 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 theacquirer and the identifiable net assets obtained by it in the combination shall be measuredaccordin g to th eir fair v alues at the acqu iring dat e. Th e acquirer s hall r ecogn ize t he pos itive bal ancebetween the combination costs and the fair value of the identifiable net assets it obtains from theacquiree as business reputation. Where the combination costs are less than the fair value of theidentifiable net assets it obtains from the acquiree, the acquirer shall re-examine the measurement ofthe fair values of the identifiable assets, liabilities and contingent liabilities it obtains from theacquiree as well as the combination costs. If, after the reexamination, the combination costs are stillless than the fair v alue of the identifiabl e net assets it obtains from the acquiree, the acquirer s hallrecord 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 notrecognized into deferred income tax liabilities due to their not meeting the recognition standards, ifnew or further information shows that the relevant situation has existed on the acquiring date andthe economic benefits brought by the deductible temporary differences the acquirer obtains from theacquiree on the acquiring date can be realized, they shall be recognized into deferred income taxassets 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 othercircumstances than the above, where the deductible temporary differences are recognized intodeferred income tax assets on the acquiring date, they shall be recorded into the profits and losses inthe current period.In a business combination not under same control realized by two or more transactions of exchange,according to about the 5

th

N otice about the Treasury Issuing the Accounting Standards forEnterprises (Finance accounting) [2012] No. 19 Criterion about the “package deal” (see Notes V. 6(2)), Whether the deals are “package deal” or n ot, belong to the “package deal”, see t he previousparagraphs described in this section and Notes V. 13 “Long term equity investment transaction” andconduct accounting treatment, those not belong to the "package deal" distinguish between theindividual financial statements and the consolidated financial statements and conduct relevantaccounting treatment.In the individual financial statements, the sum of the book value and new investment cost of theCompany hol ds in the acquiree befo re the acquiring date sh all be considered as initial cost of theinvestment. Other related comprehensive gains in relation to the equit y interests that the Companyholds in the acquiree before t he acquiring date shall be treated o n the same basis as the acquireedirectly disposes the related assets or liabilities when disposing the investment (that is, except forthe corresponding share in the changes in the net liabilities or assets with a defined benefit planmeasured at the equity method arising from the acquiree’s re-measurement, the others shall betransferred into current investment gains).In the Company’s consolidated financial statements, as for the equity interests that the Companyholds in the acquiree before the acquiring date, they shall be re-measured according to t heir fairvalues at t he acquirin g date; the pos itive differen ce between thei r fair val ues and carr ying amountsshall be recorded into the investment gains for the period including the acquiring date. Other relatedcomprehensive gains in relation to the equity interests that the Company hol ds in the acquireebefore the acquiring date shall be treated on the same basis as the acquiree directly disposes therelated assets or liabilities when disposing the investment (that is, except for the correspondingshare in t he 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 currentinvestment gains on the acquiring date).

6. Preparation of the Consolidated Financial Statements

(1) Principle for determining the consolidation scopeThe 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 relevantactivities 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 itssubsidiaries. A subsidiary is an enterprise or entity controlled by the Company.If any changes in the relevant facts or situations result in any changes in the elements involved inthe aforesaid definition of “control”, the Company shall carry out a reassessment.(2) Methods for preparing the consolidated financial statementsSubsidiaries are fully consolidated from the date on which the Compan y ob t ains control on their netassets and operation decision-making and are de-consolidated from the date when such controlceases. As for a disposed subsidiary, its operating results and cash flows before the disposal date hasbeen appropriately included in the consolidated income statement and cash flow statement; and asfor subsidiaries disposed in the current period, the opening items in the consolidated balance sheetare not adjusted. For a subsidi ary acquired in a busi ness combination not u nder the same control, itsoperating results and cash flows after the acquiring date have been appropriately included in theconsolidated income statement and cash flow statement, and the opening items and comparativeitems in the consolidated financial statements are not adjusted. For a subsidiary acquired in abusiness combination under the same control or a combined party obtained in a takeover, itsoperating results and cash flows from the beginning of the Reporting Period of the combination tothe combination date have been appropriately included in the consolidated income statement andcash flow statement, and the comparative items in the consolidated financial statements are adjustedat the same time.The finan cial stat emen ts of subs idi aries are adj ust ed in accord anc e with th e accou ntin g poli cies andaccounting period of the Company du ring the preparation of the consolidated financial statements,where the accounting policies and the accounting periods are inconsistent between the Companyand 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 theidentifiable net assets at the acquisition date.All significant inter-group balances, transactions and unrealized profits are offset in theconsolidated financial statements.The portion of a subsidiary’s shareholders’ equity and the portion of a subsidiary’s net profits andlosses for the period not held by the Company are recognized as minority interests and mino rityshareholder profits and losses respectively and presented separately under shareholders’ equity andnet profits in the consolidation financial statements. The portion of a subsidiary’s net profits andlosses for the period that belong to minority interests is presented as the item of “minorityshareholder profits and losses” under the bigger item of net profits in the consolidated financialstatements. 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 areoffset.Where t he Company l osses control on its original subsidiaries due to disposal of some equityinvestments or other reasons, the residual equity interests are re-measured according to the fairvalue on the date when s uch control ceases. The summation of the consideration obtained from th edisposal of equity interests and the fair value of the residual equity interests, minus the portion inthe original subsidiary’s net assets measured on a continuous basis from the acquisition date that isenjoyable by the Company accor ding to the original shareholding percentage in the subsidiary, isrecorded 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 aretreated on the same accounting basis as the acquiree directly disposes t he relevant assets orliabilities (that is, except for the changes in the net liabilities or assets with a defined benefit planresulted fro m re-measurement of the original subsidiar y, the rest shall all be transferred into currentinvestment gains) when such control ceases. And subsequent measurement is conducted on theresidual equity interests according to the No. 2 Accounting Standard for Business Enterprises—Long-term Equity Investments or the No. 22 Accounting Standard for BusinessEnterprises—Recogni tion and Measurement o f Financial Instruments. For details, see Notes V. 13“Long Term Equity Investment” or Notes V. 9 “Financial Instruments”.Where t he Compan y losses control on its original subsidi aries due to step by step disposal of equityinvestments through multiple transactions, it need to distinguish the Group losses control on itssubsidiaries due to disposal of equity investments whether belongs to a package deal. All thetransaction terms, conditions and economic impact of the disposal of subsidiaries’ equity investmentare 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 areat the same time or under the condition of considering the influence of each other to concluded; ②These transactions only be as a whole can a chieve a complete business result; ③ The occurrenceof a deal depends on at least one other transactions；④ A deal a lone is not economical, it is

economical with other trading together. Those not belong to a package deal, each of them a dealdepends on circumstances respectively conduct accounting treatment in accordance with theapplicable principles of “part disposal of subsidiaries of a long-term equity investment under the

condition of not losing control on its subsidiaries” (see Notes V. 13. (2) ④ in this section) and

“Where t he Company l osses control on its original subsidiaries due to disposal of some equityinvestments or other reasons” (see the front paragraph) relevant transactions of the Company lossescontrol 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 areconfirmed as other comprehensive income in consolidated financial statements, which togethertransferred into the current profits and losses in the loss of control, when the Company losingcontrol on its subsidiary.

7. Confirm ati on Standard for Cash and Cash Equi vale nt

The term “cas h” ref ers t o cas h on hand and d epos its t hat are avai labl e for p a yment at an y time. Th eterm “cash equivalents” refe rs to short-term (within 3 months from the purchase date) and highly

liquid i nvestments that are readily convertible to known amounts of cash and which are subject toan insignificant risk of change in value.

8. Foreign Currency Businesses and Translation of Foreign Currency Financial Statements

(1) Accounting treatments for translation of foreign currency transactionsAs for a foreign currency transaction, the Company shall convert the amount in a foreign currencyinto amount in its bookkeeping base at the spot exchange rate (usually referring to the central parityrate announced by the People’s Bank of China, the same below) of the transaction date, while as forsuch transactions as foreign exchange or involving in foreign exchange, the Company shallconverted into amount in the bookkeeping base currenc y at actual exchange rate the t ransaction isoccurred.(2) Accounting treatments for translation of foreign currency monetary items and non-monetaryitemsOn the balance sheet date, the foreign currenc y monetary items shall be translated at the spotexchange rate on the balance sheet date. The exchange difference arising from th e differencebetween the spot exchange rate on the b alance sheet date and th e spot exchange rate at th e time ofinitial recognition or prior to the balance sheet dat e shall be r eco rded in the profi ts an d l osses i n t he

current period, excluding the following situations: ① the exchange difference arising from foreign

currenc y loans relat ed to acq uisit ion of fix ed asset s shall b e treated at th e princi ple 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 ot her comprehensiveincomes, 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 monetar y items available for sale ex cept the amortized co sts shall be recorded int o othercomprehensive gains and losses.For the preparation for consolidated financial statement involved in foreign operations, if there areitems of foreign currency monetary of net investment in foreign operations in essence, then thebalance of exchange generated by changes in exchange rate shall included into other comprehensiveincome; when disposing foreign operations, it shall be converted into the disposal of the currentprofits and losses.A foreign currency non-monetary item measured at the historical costs shall still be translated at thespot exchange rate on the transaction date. Where the foreign non-monetar y items measured at thefair value shall be converted into amount in its bookkeeping base currency at spot exchange rate,the exchange gains and losses arising thereof shall b e treated as change in fair value, and record edinto the current period gains and losses or as other comprehensive incomes.(3) Translation of foreign currency financial statementsWhen it involves overseas business in preparing the consolidated financial statement, for thetranslation difference of foreign currency monetary items of net investment in overseas businessarisin g from t he ch an ge i n ex chan ge rate, it s hall be r ecord ed int o the item of “difference o f forei gncurrency financial statement trans lation” under the owners’ equity; and be recorded into disposalgains 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 sheetsshall be translated at a spot exchange rate on the bal ance sheet date. Among the owner’s equityitems, except for the items as “undistributed profits”, other items shall be translated at the spotexchange rate at the time when they are incur red. The income and expense items in the profitstatements shall be translated at the spot exchange rate of the transactio n date. The undistributedprofits 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 shallbe record ed into other comprehensive gains and los ses as difference of foreign currency translation.Where an enterprise disposes of an overseas business without the control right, it shall shift thedifferences, which is presented under the items of the owner’s equities i n the balance sheet andwhich arises from the translation of foreign currency financial statements relating to this overseasbusiness, into the disposal profits and losses of the current period by all or proportion of thedisposed overseas business.Foreign cash flow shall be translated at the spot exchange rate of the date of cash flow incurred. Theinfluence of exchange rate on the cash flow shall be adjustment item and individually listed in thecash flow statement.And the opening balance and t he actual balance of last year shall be listed at the amount s aftertranslation 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 someof the Company’s owner’s equity in the overseas operation or other reasons, the foreign-currencystatement translation difference belonging to the parent company’s owner’s equity in relation to theoverseas operation which is stated under the shareholders’ equity in the balance sheet shall be allrestated as gains and losses of the disposal period.Where the Company’s equity in an overseas operation decreases due to disposal of some equityinvestment or other reasons but the Company still has control over the overseas operation, theforeign-currency statement translation d ifference in relation to the disposed part o f the overseasoperation shall be recorded into minority interests instead of current gains and losses. If what’sdisposed is some equity in an overseas associated enterprise or joint venture, the foreign-currencystatement translation difference related t o the overseas operation shall be record ed into the gainsand losses of the current period of the disposal according to the disposal ratio.

9. Financial Instruments

The Company r ecognizes a financial asset or liability when it be comes a party of the relevantfinancial instrument contract. Financial assets and liabilities are measured at fair value in initialrecognition. As for the financial assets and liabilities measured at fair value of which changes arerecorded in to curr en t gai n s an d l os ses , t he rel ev an t deal i ng expenses are directly recorded into gainsand losses; and the dealing expenses on other kinds of financial assets and liabilities are included inthe amounts initially recognized.(1) Determination of the fair value of main financial assets and financial liabilitiesFair value refers to the price that a market participant shall receive for selling an asset or shall payfor transferring a liability in an orderly transaction on the measurement date. As for the financialassets 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 marketrefers to the prices available from stock exchange, broker’s agencies, guilds, pricing organizationand etc., whi ch represent t he actual tradin g price under equ al transactio n. Where there i s no activemarket 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 markettransaction upon their own free will, the current fair value obtained by referring to other financialinstruments of the same essential nature, the cash flow capitalization method and the option pricingmodel, etc., to determine its fair value.(2) Classification, recognition and measurement of financial assetsThe purchas e and sal e of finan cial asset s under the normal ways shall be recognized and stopped tobe recognized respectiv ely at the price of transaction date. Financial assets shall be cl assified intothe following four cat egories when the y are initially recognized: (a) the financial assets which aremeasured at their fair values and the variation of which is recorded into th e profits and losses of thecurrent period, (b) the investments which will be held to their maturity; (c) loans and the accountreceivables; 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 periodIncludi ng tr an sa ct i onal financial assets and the financial assets which are designated to be measuredat their fair value when they are initially recognized and of which the variation is recorded into theprofits 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 aremanaged in a centralized way and for which there are objective evidences proving that theenterprise 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 effectivehedging instruments, or derivative instruments to financial guarantee contracts, and the derivativeinstruments which are connected with the equity instrument investments for which there is noquoted price in the active market, whose fair value cannot be reliably measured, and which shall besettled by delivering the said equity instruments.A transactional financial asset is subsequently measured at the fair valu e. The gains and lossesarising fro m the fair valu e changes, as well as the dividend and interest incomes from the financialasset, 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 dateof maturity, a fixed or determinable amount of repo price and which the enterprise holds for adefinite 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 thepost-amortization costs, the profits and losses that arise when such financial assets or financialliabilities are terminated from recognition, or are impaired or amortized, shall be recorded into theprofits and losses of the current period.The actual interest rate method refers to the method by which the post-amortization costs and theinterest 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 orfinancial liabilities). The actual interest rate refers to the interest rate adopted to cash the future cashflow of a financial asset or financial liability within the predicted term of existence or within ashorter applicable term into the current carrying amount of the financial asset or financial liability.When the actual i nterest rate is det ermined, the future cash flow shall be predicted on the basis oftaking into account all the 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, tradin gexpen ses, pr emium s or redu ced val ues, etc., whi ch ar e paid or coll ected by th e p arties to a fi nancia lasset 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 noquotation in the active market, with fixed recovery cost or recognizable. F inancial assets that a redefined as loans and the accounts receivables by the Company including notes receivables, accountsreceivables, interest receivable, dividends receivable and other receivables etc..Loans and the accounts receivables are made follow-up measurement on the basis ofpost-amortization costs employing the effective interest method. Gains or loss arising from thetermination recognition, impairment occurs or amortization shall be recorded into the profits andlosses of the current period.

④ Assets available for sales

Assets available for sales including non-derivative financi al asset that has been assigned as assetsavailable for sales on the initial recogniti on and financial assets excluded those measured at fairvalue and of which the variation into profits and losses of the current period, they are some financialassets, loans and accounts receivables, held-to-maturity investment.The cost at the period-end of the available-for-sale liabilities instruments should be confirmedaccording to its amortized cost method, that is the initially recognized amount which deduct theprincipal that had been repaid, to plus or minus the accumulative amortization amount formed bythe amortization between the difference of the initially recognized amount and the amount on thedue date that adopted the actual interest rate method, and at the same time deduct the amount afterthe impairment loss happened. The cost at the period-end of the available-for-sale liabilitiesinstruments 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 p rofitsand losses of the current period. But, the equit y instrument investment which neither have quotationin the active market nor its fair valu e could not be reliable measured, as well as the derivativefinancial assets that concern with the equity instruments and should be settled through handing overto 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 distributionannouncement by invested companies, it shall be rec orded into the profits and losses of the currentperiod.(3) Impairment of financial assetsThe Company as sesses a t the b alance sheet d ate t he ca rr ying amoun t of ever y finan cial asset ex ceptfor the financial assets t hat m easured by the fair valu e. If there is objective evidenc e indicating a

financial asset may be impaired, a provision is provided for the impairment.The Company ca rries out a sep arate impairment test for every financial as set which is indi viduallysignificant. As for a financial asset which is individually insignificant, an impairment test is carriedout separately or in the financial asset group with similar credit risk. Where the financial asset(individually significant or insignificant) is found not impai red after th e separate i mpairm ent test , itis 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 thefinancial 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 cos t or amortized cost write down thei r carrying value by theestimated pres ent value of future cash fl ow. The difference is recorded as impairment l oss. If thereis obj ective evidence t o indicate t he recover y of value of financi al assets af ter impairmen t, and it isrelated with subsequent event after recognition of loss, the impairment loss recorded originally canbe reversed. Th e carrying value o f financial asse ts after impairment loss reversed shal l not exceedthe amortized cost of the financial assets without provisions of impairment loss on the reservingdate.

② Impairment of available-for-sale financial assets

When i t jud ged that t he decre ase of f air val ue of t he avail able-for-sale equit y instrument investmentis serious and not temporarily after comprehensive considering relevant factors, it reflected that theavailable-for-sale equity instrument investment occurred impairment. Of which, the “seriousdecline” 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 a sset is impaired, the accumulative losses arising from thedecrease of the fair valu e of the capital reserve wh ich is directly included are tr ansferred out andrecorded in the profits and losses for the current period. The accu mulat ive los ses tran sferred ou t arethe balance obtain ed from the initi ally obtained cost of t he said financial as set after deductin g theprincipals as taken back, the amortized amount, the current fair value and the impairment lossoriginally recorded in the profits and losses.Where the impairment loss has been recogni zed for an available-for-sale financial asset, if, withinthe accounting periods thereafter, there is any objective evidence proving that the value of the s aidfinancial asset has been restored and the restoration is objectively related to the events that occurafter 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 andrecognized as other comprehensive incomes, and the impairment losses on the available-for-saleliability instruments are reversed and recorded in the profits and losses for the current period.The impairment loss incurred to an equit y instrument investment for whi ch there is no quoted pricein the active market and whose fair value cannot be reliably measured, or incurred to a derivativefinancial asset which is connected with the said equity instrument investment and which must besettled by delivering the said equity investment, is not reversed.(4) Recognition and measurement of financial asset transfersWhere 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 areterminated; 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 t ransferred. And the Company ha s ceased its control on the said financial asset though itneither transfers nor retains nearly all of the risks and rewards related to the ownership of thefinancial asset.Where t he Company n either transfers nor retains nearly all of the risks and reward s related to theownership of a financial asset, and it does not cease its control on the said financial asset, itrecognizes the relevant financial asset and liability accordi ngly according to the extent of itscontinuous i nvolvement in the transferred financial asset. The term "continuous involvement in thetransfer red fin anci al asse t" re fers to t he ris k lev el th at the en terpris e fac es r esult ing from t he ch ang eof the value of the financial asset.If the transfer of an entire financial asset satisfies the conditions for stopping recognition, thedifference between the amounts of the following 2 items is recorded in the profits and losses of thecurrent period: (1) The book value of the transferred financial asset; and (2) The sum ofconsideration received from the transfer, and the accumulative amount of the changes of the fairvalue originally recorded in other comprehensive incomes.If the transfer of partial financial asset satisfies the conditions to stop the recognition, the bookvalue of the transferred financial asset is apportioned between the portion whose recognition hasbeen stopped and the portion whose recognition has not been stopped according to their respectiverelativ e fair valu e, and the d ifference betwe en the amounts of the following 2 items is included intothe profits and losses of the current period: (1) The summation of the consideration received fromthe transfer and the portion of the accumulative amount of changes in the fair value originallyrecorded in other comprehensive incomes which corresponds to the portion whose recognition hasbeen stopped; and (2) The amortized carrying amounts of the aforesaid amounts.In respect of the asset s using recour se to sell o r using endo rsement to tr ansfer, the Company needsto determine whether almost all of the risks and rewards of the financial asset ownership aretransferred. If almost all of the risks and rewards of the financial asset ownership had beentransfer red to th e tran s feree, derecognize the financial assets. For almost all of the risks and rewardsof the financial asset ownership retained, do not end to recognize the financial assets. For whichneither transfer or retain almost all of the risks and rewards of the financial asset ownership,continuously j udge whether the Company r etain the control of the assets, and conduct accountingtreatment according to the principle of mentioned in the previous paragraphs.(5) Classification and measurement of financial liabilitiesIn the initial recognition, financial liabilities are divided into the financial liabilities measured at fairvalues 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 measuredat fair value and whose changes are recorded in current gains and l osses, the relevant tradingexpense is directly recorded in the profits and losses for the current period. As for other financialliabilities, 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

lossesSuch financial liabilities are divided into transactional financial liabilities and financial liabilitiesdesignated to be measured at fair values and whose changes are recorded in current gains and lossesin the initial recognition under the same conditions where such financial assets are divided into

transactional financial assets and financial asset s designated to be measured at fair values andwhose changes are recorded in current gains and losses in the initial recognition.Financial liabilities measured at fair values and whose changes are recorded in cu rrent gains andlosses are subsequently measured at their fair values. Gains or l osses arising from the fair valu echanges, as well as the divi dend and i nterest ex penses i n relation to the sai d financial liabil ities, arerecorded 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 quotedprice in an active market and whose fair value cannot be reliably measured and which must besettled by delivering the equit y instrument, it is subsequently measured on the basis of costs. Otherfinancial liabilities are subsequently measured according to the amortized cost using the actualinterest rate method. Gains or losses arising from de-recognition or amortization of the saidfinancial liabilities is recorded in the profits and losses for the current period.(6) De-recognition of financial liabilitiesOnly when the prevailing obligations of a financial liability are relieved in all or in part may therecognition 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 ofany new financial liability, and if the contractual stipulations regarding the new financial liability issubstantially different from that regarding the existing financial liability, it terminates therecognition of the existing financial liability, and at the same time recognizes the new financialliability.Where the recognition of a financial liability is totally or partially terminated, the enterpriseconcerned shall include into the profits and losses of the current period for the gap between thebook value which has been terminated from recognition and the considerations it has paid(including the non-cash assets it has transferred out and the new financial liabilities it has assumed)(7) Derivatives and embedded derivativesDerivative financial instruments include derivatives are initially measured at fair value at the datewhen the derivative cont racts are entered into and are subs tantially re-measured at fair val ue. Theresulting gain and loss is recognized in profit or loss.An embedded derivative is separated from the hybrid instrument, where the hybrid instrument is notdesignat ed as a fi nan cial ass et or fi nancial liability at fair value though profit or loss, and the treatedas a standalone derivati ve if (a) the economic charact eristics and risks of t he embedded derivativeare not closely related to the economic characte ristics and risks of the host contract; and (b) aseparate instrument with the same terms as the embedded derivative would meet the definition of aderivative. If the Company is unable to measure the embedded derivative separately either atacquisition or at a subsequent balance sheet date, it designates the entire hybrid instrument as afinancial asset or financial liability at fair value through profit or loss.(8) Offsetting financial assets and financial liabilitiesWhen t he Company h as a le gal right th at is curre ntl y enforceable t o set off the reco gnized fi nancia lassets and financial liabilities, and intends either to settle on a net basis, or to realize the financialasset and settle the financial liability simultaneously, a financial asset and a financial liability shallbe offset and the net amount is presented in the balance sheet. Except for the above circumstances,financial asset s and financial li abilities shall be presented separatel y in the balance sh eet and shall

not be offset.(9) Equity instrumentsAn equit y inst rument is an y contract that ev idenc es a resi dual i nterest in t he assets of the C ompan yafter deducting all of its liabilities. The Company issues (including refinancing), re-purchases, sellsor written-offs the equity instrument as the disposing of the changes of the equity. The Group notrecognized the changes of the fair value of the equity instrument. The transaction expenses relatedto the equity transaction would be deducted from the equity.All t ypes of distribution (excluding stock dividends) made by the Company to holders of equityinstruments are deducted from shareholders’ equity. The Company does not recognize any changesin the fair value of equity instruments.

10. Receivables(1) Accounts Receivable with Significant Single Amount for Which the Bad Debt Provision is Made

Individually

Judgement

debts of the individually significant accounts receivable

Receivables with the amount of RMB5 million

basis or monetary standards of provision for bad

or more than

RMB5

significant single amount.

	million should recognize as the receivables with
Method of individual provision for bad debts of the individually

significan t accounts receivable

receivables

with significant single amounts; the financial assets without impairment by independent impairment test should be included in financial assets portfolio with similar credit risk to take the impairment test. Receivables was recognized with

impairment should

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 methodAging group Aging analysis methodIn the groups, adopting aging analysis method to withdraw bad debt provision:

√ Applicable □ Not applicable

Age

no longer be included in receivables portfolioWithdrawal proportion for accounts

receivable ( %)

Withdrawal proportion for accounts

Withdrawal proportion for other accounts

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

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 isMade Individually

withdrawing bad debt provision

Reason of individually

Receivables have dispute with the other parties or involving lawsuit and arbitration; receivables have obvious indication showing that the debtors are likely to fail to perform the duty of

repa yment, etc.

provision

Withdrawal method for bad debt

The Company made independent impairment test on receivables with insignificant amount but with the following characteri stics, if any objective evidence sh ows that the accounts receivabl e

has been impaired, impairment loss shall be recognized on the b

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) ClassificationInventories 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 issuingInventories shall be measured at actual cost when acquired, and the cost of the inventories includingthe procurement cost, processing cost and other costs. Gre y yarn, dyed yarn, and plus material sh allbe measured at first-in first-out method when acquired and delivered; other inventories shall bemeasured as per the weighted average method(3) Basis for determining net realizable value of inventories and provision methods for decline invalue of inventoriesNet realizable value is the estimated selling price in the ordinary course of business less theestimated 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 intoconsideration the purpose of holding inventories and effect of post balance sheet events.At the balance sheet date, inventories are m easu red at the lo wer of th e cost and net realiz able v alue.If the net realizable value is below the cost of inventories, a provision for decline in value ofinventories is made. The provision for inventories decline in value is determined by the differenceof the cost of individual item less its realizable value.After the provision for decline in value of inventories is made, if the circumstances that previouslycaused inventories to be written down below cost no longer exist so that the net re alizable v alue ofinventories is higher than their cost, the original provision for decline in value is reversed and thereversal is included in profit or loss for the period.

(4) The perpetual inventory system is maintained for stock system.(5) Amortization method of the low-value consumption goods and packing articlesFor the low-value consumption goods, should be amortized by one-off amortization method whenconsuming; and for the packing articles, should be amortized by one-off amortization method whenconsuming.

12. Assets Held for Sale

The Company classifies an asset into held-for-sale when its book value is mainly recovered byselling (including the exchanges of non-monetary assets with commercial subs tance) instead of anon-current asset or disposal group. Specifi c standards are simultaneously satisfying the followingconditions: A asset or disposal group can be sold immediately under current conditions based on thepractice of selling such assets or disposal groups in similar transactions; the Company has alreadymade a resolution on sale plan and obtained a confirmed purchase commitment; and the sale isexpected to will be completed within one year. A disposal group refers to a group of assets that aredisposed of together as a whole by sale or other means in a transaction and the liabilities directlyrelated to t hese assets transferred i n the transacti on. Where th e asset group or combination of assetgroups to which a disposal group belongs apportions the goodwill acquired in the businesscombination in accordance with the "Accounting Standards for Enterprises No. 8 - AssetImpairment", 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-currentassets and disposal groups cl assified as hel d-for-sale, If the book value is higher than the fair valueminus the net amount of the sale costs, the book value will be written down to the net amount of fairvalue minus the sale costs, and the amount written down will be recognized as impairment loss ofassets and included in the current profit and loss, and provision for impairment of held-for-saleassets will be made at the same time. For the confirmed amount of impairment loss of assets of thedisposal 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 ass ets appli cable to th e measurement of Accoun tingStandards for Business Enterprises No. 42 - Non-curre nt Assets and Disposal Groups Held fo r Saleand Termination of Operations (hereinafter referred to as “Held for sale standards”) in the disposalgroups will be offset according to the proportions. If the net amount that the fair value of thedisposal groups held for sale on the follow-up balance sheet date m inus th e sale costs increases, t heprevious written-down amount will be restored, and reversed to the asset impairment loss confirmedafter the as s et s b ein g cl ass ifi ed as hel d-for-s ale. The reversed amount will be included in the currentprofit or loss. And its book value shall be increased proportionately to the proportion of the bookvalue of various non-current assets measured by the disposal group in addition to goodwillapplicab le t o t he m eas ur e m ent of h eld -for-sale norm s; The book value of deducted goodwill and thenon-current assets applicable to the m easurement 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 todepreciation or amortization. Interest and other expenses of liabilities in the disposal group held forsale will be confirmed as before.When a non-current asset or disposal group ceases be classified as held-for-sale or a non-currentasset 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 thefollowings whichever is lower: (1) The book value before being classified as held for sale will beadjusted according to the depreciation, amortization or impairment that would have been recognizedunder 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 theCompany has control, joint control or significant influence over the investees. The long-term equityinvestment that the Company does not have cont rol, joint control or significant influence over theinvestees, should be recognized as available-for-sale financial assets o r be measured by fair val uewith the changes should be included in the financial assets accounting of the current gains andlosses, and please refer the details of the accounting policies to Notes V. 9 “Financial instrument”Joint control, refers to the control jointly owned according to the relevant agreement on anarrangem ent by the Company and t he relevant activities of the arrangement should be decided onlyafter the particip ants which share the cont rol right make consens us. Significant in fluence refers tothe power of the Company w hich could a nticipate in the finance and the operation polices of theinvestees, but could not control or jointly control the formulation of the policies with the otherparties.(1) Recognition of investment costsAs for lon g-term equit y invest ments acquired by enterp rise merger, if the merger is under the sam econtrol, the share of the book value of the owner ’s equity of the merged enterprise, on the date ofmerger, is regarded as the initial cost of the long-term equity investment. The difference betweenthe initial cost of the long-term equity investment and the payment in cash, non-cash assetstransferred as well as the book value of the debts borne by the merging party shall offset against thecapital 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 ofmerger, regard the share of the book value of the shareholder's equity of the merged enterprise onthe consolidated financial statement of the ultimate control party as the initial cost of the long-termequity 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 equit y investment and total face valueof the shares issued shall offset against t he capital reserve. If the capital reserv e is insufficient todilute, the retained earnings shall be adjusted.For the long-term investment required from the business combination under different control, theinitial investment cost regarded as long-term equity investment on the purchasing date according tothe combination cost, the combination costs shall be the sum of the fair values of the assets paid, theliabilities incurred or assumed and the equity securities issued by the Company.The commission fees for audit, law services, assessment and consultancy services and otherrelevant expenses occurred in the business combination by the combining party or the purchaseparty, shall be recorded into current profits and losses upon their occurrence.Besides the long-term equity investments formed by business combination, the other long-termequity investments shall be initially measured by cost, the cost is fixed in accordance with the waysof gaining, such as actual cash payment paid by the Company, the fair value of equity securitiesissued 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 ex change transaction, thefair value of the long-term equity investments, etc. The expenses, taxes and other necessaryexpenditures directly related with gaining the long-term equity investments shall also be recordedinto investment cost.(2) Subsequent measurement and recognition of gains or lossesA lo ng -term equity investment where the investing enterprise has joint control (except for whichforms into common operators) or significant influence over the investors should be measured byequity method. Moreover, long-term equity investment adopting the cost method in the financialstatements, and which the Company has control on invested entity.

① Long-term equity investment measured by adopting cost method

The price o f a lo ng-term equity investment measured by adopting the cost method shall be includedat its initial investment cost and append as well as withdraw the cost of investing and adjusting thelong-term equity investment. The return on investment at current period shall be recognized inaccordance with the cash dividend or profit announced to distribute b y the invested entity, exceptthe announced but not distributed cash dividend or profit included in the actual payment orconsideration 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 ofthe fair value of the invested entity's identifiable net assets for investment, the initial cost of thelong-term equity investment may not be adjusted. If the initial cost of a long-term equity investmentis less than the Company's attributable share of the fair value of the invested entity's identifiable netassets for the investment, the difference shall be included in the current profits and losses and thecost of the long-term equity investment shall be adjusted simultaneously.When measured by adopting equity method, respectively recognize investment income and othercomprehensive income according to the net gains and losses as well as the portion of othercomprehen sive in come which should be enjo yed or be shared, and at the same time adjust the bookvalue of the long-term equity investment; corresponding reduce the book value of the long-termequity investment according to profits which be declared to distribute by the investees or the portionof the calculation of cash dividends which should be enjoyed; for the other changes except for thenet gains and losses, other comprehensive income and the owners’ equity except for the profitsdistribution of the investees, should adjust the book value of the long-term equity investment aswell as include in the capital reserve. The investing enterprise shall, on the ground of the fair valueof all identifiable assets of the invested entity when it obtains the investment, recognize theattributable share of the net profits and losses of the invested entity after it adjusts the net profits ofthe invested entity. If the accounting policies adopted by the investees i s not accord wit h that of theCompany, should be adjusted according to the accounting policies of the Company and the financialstatement of the investees during the accounting period and according which to recognize theinvestment income as well as other comprehensive income. For the transaction happened betweenthe Company an d associat ed enterprises as well as joint v entures, if the assets launched or sold notform into business, the portion of the unrealiz ed gains and losses of the internal transaction, whichbelongs to the Company according to the calculation of the enjoyed proportion, should recognizethe investment gains and losses on the basis. But the losses of the unrealized internal transactionhappened between the Company a nd the investees which belongs to the impairment losses of the

transferred assets, should not be neutralized.The Company s hall recognize the net losses of the invested enterprise until the book value of thelong-term equity investment and other long-term rights and interests which substantially form thenet investment made to the invested entity are reduced to zero. However, if the Company h as theobligation to undertake extra losses, it shall be recognized as the estimated liabilities in accordancewith the estimated duties and then recorded into investment losses a t current period. If the investedentity realizes any net profits later, the Company shall, after the amount of its attributable share ofprofits offsets against its attributable share of the un-recognized losses, resume recognizing itsattributable share of profits.For the long-term equity investment held by the Company before the first ex ecution of the newaccounting criterion on January 1, 2007 of the as sociated enterprises and joint ventures, if there isdebit difference of the equity investment related to the investment, should be included in the currentgains and losses according to the amount of the straight-line amortization during the originalremained period.

③ Acquiring shares of minority interest

In the preparation for the financi al statements, the balance existed betw een the long-term equityinvestment in creased by acquirin g shares of minorit y interest and the att ributable net asset s on thesubsi di ar y calcul at ed by th e in cre ased sh a res h eld si nce t he pu rch as e d at e ( or co mb in ati on dat e), t hecapital reserves shall be adjusted, if t he capital reserves are not sufficient t o offset, the retainedprofits shall be adjusted.

④ Disposal of long-term equity investment

In the preparation of financial statements, the Company dispos ed part of the long-term equityinvestment on subsidiaries without losing its controlling right on them, the balance between thedisposed price and attributable net assets of subsidiaries by disposing the long-term equityinvestment shall be recorded into owners’ equity; where the Company losses the controlling right bydisposing part of long-term equity investment on such subsidiaries, it shall treated in accordancewith the relevant accounting policies in Notes V. 6. (2) “ Method on preparation of combinedfinancial statements”.For other ways on disposal of long-term equity investment, the balance between the book value ofthe disposed equity and its actual payment gained shall be recorded into current profits and losses.For the long-term equity investment measured by adopting e quity method, if the remained equityafter disposal still adopts the equity method for measurement, the other comprehensive incomeoriginally recorded into owners’ equity should adopt the same basis of the accounting disposal ofthe relevant assets or lia bilities directly disposed by the investees according to the correspondingproportion. The owners’ equity recognized owning to the changes of the other owners’ equity exceptfor the net gains and losses, other comprehensive income and the profits distribution of theinvestees, should be transferred into the current gains and losses according to the proportion.For the long-term equity investment which adopts the cost method of measurement, if the remainedequity still adopt the cost method, the other comprehensive income recognized owning to adoptingthe equity method for measurement or the recognition and measurement standards of financialinstrument before acquiring the control of the investees, should adopt the same basis of theaccounting disposal of the relevant assets or liabilities directly disposed by the investees and shouldbe 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 theprofits distribution among the net assets of the in vestees which recognized by adopting the equitymethod for measurement, should be carried forward into the current gains and losses according tothe proportion.

14. Investment Real Estate

Measurement model of investment real estateCosting method measurementDepreciation or amortization method

The inv estment real estate refe rs to the r eal estate gaini ng the rent or capita l appreciat ion or bot h. Itincludes rented land use r ight, holding land use right to be transferred after the appreciation andrented building, etc.The investment real estate is measured initiall y according to the cost. The subsequent expensesrelated with the investment real estate shall be calculated into the cost of investment real estate ifthe economic benefit related with the asset may flow in and the cost may be m easured reliably.Other subsequent expenses shall be calculated in the current profits and losses at the occurrence.The Company a dopts the cost mode to conduct the subsequent measurement on the investment realestate, depreciates or amortizes according to the policy consistent with the house building or landuse right.The devaluation test method and devaluation provision method for the investment real est ate can beseen in Notes V. 20 “Long-te rm Asset Devaluation”.When the self-use real estate or stock is con verted to the invest ment real estate or the investmentreal estate i s converted to t he self-use real estate, the book value before the conversion shall be theentry value after the conversion.When the investment real estate is disposed, or out of usage permanently, and it is expected not toget the economic ben efit from the disposal, the confirmation on the investment real estate shall beterminated. The disposal income for the sales, transferring, scrap or damage of the investment realestate deducing the book value and related tax shall be calculated in the current profits and losses.

15. Fixed Assets(1) Conditions for Recognition

The term “fixed assets” refers to the tangible assets that simultaneously possess the features asfollows: (a) they are held for the sake of producing commodities, rendering labor service, renting orbusiness management ; and (b) their useful li fe is in excess of one fis cal year. The fixed assets areonly recognized when the relevant economic benefits probably flow in the Company and its costcould be reliable measured. The fixed assets should ta ke the initial measurement according to thecost and at the same time consider the influences of the factors of the estimated discard expenses.

(2) Depreciation Methods

Category o f fi xed assets Method Useful life Salvage value Annual deprecation

Housing and building

useful life

5-30 0-10% 3.00-20.00Machinery equipments

Average method of

Average method of

useful life

10-18 0-10% 5.00-10.00Transportation vehicle

useful life

5 0-10% 18.00-20.00

	Average method of
Electronic equipments

and others

Ave

useful life

5 0-10% 18.00-20.00

(3) Recognition Basis, pricing and depreciation method of fixed assets by finance lease

The “finance leas e” shall refer to a l ease that has transf erred in substance all the risks and reward srelated to the own ership of an asset. Its ownership may or may not eventually be transferred. Thefix ed asset s by fi nance l ease s hall adop t the s ame depreci ati on po lic y for s elf-own ed fi xed assets . Ifit is reasonable to be certain that the lessee will obtain the ownership of the leased asset when thelease term expires, the leased asset shall be fully depreciated over its u seful life. If it is notreasonable to be certain that the lessee will obtain the ownership of the leased asset at the expiry ofthe leas e t erm , t he leased asset shall be fully depreciated over the shorter one of the lease term or its

useful life.

16. Construction in Progress

Construction in process is measured at actual cost. Actual cost comprises construction costs,borrowing costs that are eligible for capitalization befo re the fixed assets being ready for theirintended us and other relevant costs. Construction in process is transferred to fixed assets when theassets are ready for their intended use. See the details of the impairment test method of th eimpairment provision withdrawal method of the c onstruction in pro gress to Notes V. 20 “Long-termassets impairment”.

17. Borrowing Costs

Borrowing costs include interest on borrowings, amortization of discounts or premiums, ancillaryexpenses and exchange differences arising from foreign currency borrowings. The capitalization ofborrowing costs, which can be directl y attributable to asset acquisition or construction, starts whenasset expenditure or borrowing cost are generated, or the asset acquisition or construction islaunched to enable the asset to meet the predefined conditions for use or sale, and ends when theacquired or constructed asset conforming to capitalization conditions meet the predefinedconditions for use or sale. The other borrowing costs are recognized as expens es in the currentperiod.The actual interest expenses incurred in the current period of specific borrowings shall becapitalized by subtracting the interest income earned by the bank from unused borrowing funds orinvestment income gained from temporary investment. For general borrowings, the amount to becapitaliz ed shall be deter mined based on t he weighted aver age of total ass et expendit ure exceeding

the specific borrowing multiplied by the capitalization rate of general borrowings. Thecapitalization rate is determined based on the weighted average interest rate of general borrowings.During the capitalization period, the foreign ex change differences on foreign currency specificborrowings shall be capitalized. The exchange differences on foreign currency general borrowingsshall be included in the current profits and losses.Assets eligible for capitalization refer to assets such as fixed assets, investment re al estate andinventory that require a considerable amount of time for acquisition or construction to be ready foruse or sale.If the acquisition or construction process of the assets eligible for capitalization is stoppedunexpectedly for more than 3 months, the capitalization of borrowing costs shall be suspended untilthe asset acquisition or construction resumes.

18. Biological Assets(1) Consumptive biological assets

Consumptive biological assets refer to the biolo gical assets held for sale or to be harvested asagricultural products in future, including crops, vegetables under growing, timber production forestand domest ic animals fo r sale. The consu mptive bio logical assets s hall be measured based on cos t.All costs for planting, creating, cultivating or raising of consumptive biological assets shall be thenecessary expenses directly added to such assets that accrued before harvest, including any loan thatsatisfies capitalization conditions. Subsequent expenses for keeping and feeding the consumptivebiological 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 valuethrough weighted average.On the date of Balance Sheet, the consumptive biological assets shall be measured with lower ofcost and net realizable value, and the method for confirming the reserve for inventory price dropshall be adopted to confirm the reserve for price drop of consumptive biological assets. If theimpacts of depreci ation disappear, the depreciati on amount shall be reco vered, and the reserve forprice drop originally accrued shall be reversed. Such amount reversed shall be recognized as lossand gain for the current period.If consumptive biological assets change its usage to be as productive biological assets, the co st aft e rsuch change shall be confirmed based on the book value when the usa ge is changed. If consumptivebiological assets are changed as public biological assets, depreciation shall be taken intoconsideration pursuant to Corporate Accounting Rules No. 8 – Assets Depreciation. Whendepreciation occur, accrued the depreciation reserve first and then confirm based on the book valueafter such accrual.(2) Productive biological assetsProductive biological assets refer to agricultural products produced, and biological assets held forlabor provision or lease, including economic forest, firewood forest, productive animals and laboranimals. The productive biological assets shall be measured based on cost. All costs for creating orfostering productive b iological as sets shall be t he necessary ex penses directl y added to such asset sthat accrued before it reaches expected production purpose, including any loan t hat satisfiescapitalization conditions.

The Company shall withdraw the depreciation of the productive biological assets by adopting thestraight-line method since the second month of its useful life. Useful life, expected net salvagevalue and annual depreciation rate of each productive biological assets are as below:

Category Useful life (Year) Ex

(%)

Annual deprecation (%)Livestock

		pected net salvage value
	5	5%	19

The Company shall review the service life, expected net residuals and depreciation method of theproductive biological assets at least by the end of the year. In case of any change, it shall be deemedas accounting estimate change.The difference between proceedings from disposal (sale, loss, death or damage) of the productivebiological assets deducted b y book value and related tax shall be recognized as loss and gain for thecurrent period.The Company shall check on the date of Balance Sheet whether there is a depreciation sign for theproductive biological assets. If yes, estimate the recoverable amount. Such recoverable amount shallbe estimated based on single asset item. If it is difficult, the recoverable amount of the portfolioshall be confirmed based on the portfolio such assets belong to. If the recoverable amount of theassets is lower than book value, reserve for asset depreciation shall be accrued based on suchdifference, and recognized as loss and gain for the current period.The above assets impairment losses once be recognized should not be reversed during theaccounting periods afterwards.If the productive biological assets changed the usage as the consumptive biological assets, the costafter the change should be recognized as the book value when changing the usage; of the productivebiological assets ch anged the usage as non-p rofit living assets, should be recognized according tothe book value after the withdrawal of the impair ment provision in a ccord with the regulation of N o.8 of ASBE - Assets Impairment for considering whether there was impairment and should withdrawthe impairment provision in ahead of it.

19. Intangible Assets(1) Pricing Method, Useful Life and Impairment Test

The term “i nt angib le as s et ” ref ers to th e id ent ifi abl e no n-monetar y assets possessed or controlled byenterprises which have no physical shape.The intangible assets shall be in itially measured according to its cost . The costs related with theintangible assets, if the economic benefits related to intangible assets are likely to flow into theenterpri se and t he cost o f i ntangibl e asset s can be measured reli abl y, shall be recorded into the cos tsof intangible assets; otherwise, it shall be recorded into current profits and losses upon theoccurrence.The use right of land gained is usually measured as intangible assets. For the self-developed andconstructed factories and other constructions, the related expenditures on use right of land andconstruction costs shall be respectively measured as intangible assets and fixed assets. For thepurchased houses and buildings, the related payment shall be distributed into the payment for useright 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 costafter deducting the sum of the expect ed salvage value and the accumulated im pairment provisionshall be amortized by straight line method during the service life. While the intangible assetswithout certain service life shall not be amortized.At the end of period, the Company s hall check the service life and amortization method ofintangible assets wit h finite service life, if th ere is any change, it shall be regarded as a change ofthe accounting estimates. Besides, the Company shall check the service life of intangible assetswithout certain s ervice life, if there is any evidence showing that the period of intangible assets tobring the econo mic ben ef its t o the en terpris e can be pro spect ed, i t shal l be est imat ed the ser vice li feand amortized in accordance with the amortization policies for intangible assets with finite servicelife.For details of impairment testing method and provision-making method for intangible assets, seeNotes V. 20 “Long-term assets impairment”.

(2) Accounting Pol ic y for Interna l Resea r ch and Deve l opm ent Expendit ures

The expend itures for intern al research an d devel opment proj ects of an enterprise s hall be classifi edinto 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 thefollowing conditions simultaneously, and shall be recorded into profit or loss for the current periodwhen 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 T he 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 byapplying the intangible assets or there is a potential market for the intangible assets itself or theintangible assets will be used internally;

④ I t is able to finish the development of the intangible assets, and able to use or sell the intangible

assets, with the support of sufficient technologies, financial resources and other resources;

⑤ The development expenditures of the intangible assets can be reliably measured.

As for expenses that can’t be identified as research expenditures or development expenditures, theoccurred R & D expenses shall be all included in current profits and losses.

20. Impairment of Long-term Assets

For non-current financial Assets of fixed Assets, projects under construction, intangible Assets withlimited service life, investing real estate with cost model, long-term equity investment ofsubsidiaries, cooperative enterprises and joint ventures, the Company should judge whetherdecrease in value exists on the date of balance sheet. Recoverable amounts should be tested fordecrease in value if it exists. Other intangible Assets of reputation and uncertain service life andother non-accessible intangible asset s should be tested for decreas e in value no matter whether i t

exists.If the recoverable amount is less than book value in impairment test results, the provision forimpairment of differences should include in impairment loss. Recoverable amounts would be thehigher of net value of asset fair value deducting disposal charges or present value of predicted cashflow. Asset fair value should be determined according to negotiated sales price of fair trade. If nosales agreement exists but with asset active market, fair value should be determined according to theBu yer ’s price of the asset . If no sal es agreem ent o r asset active ma rket ex ists, as set fair value cou ldbe acquired on the basis of best information available. Disposal expenses include legal fees, taxes,cartage or other direct e xpenses of merchantable As sets related to asset disp osal. Present value ofpredicted asset cash flow should be determined by the proper discount rate according to Assets inservice and predicted cash flow of final disposal. Asset depreciation reserves should be calculatedon 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 isthe minimum asset combination producing cash flow independently.In impairment test, book value of the business reputation in financial report should be shared tobeneficial asset group and asset group combination in collaboration of business merger. It is shownin the test that if recoverable amounts of shared business reputation asset group or asset groupcombination a re lower than book value, it should determine the impairment loss. Impairment lossamount should firstly be deducted and shared to the book value of business reputation of assetgroup or asset group combination, then deduct book value of all assets according to proportions ofother book value of above assets in asset group or asset group combination except businessreputation.After the asset impairment loss is determined, rec overable value amounts would not be returned infuture.

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. Thelong-term deferred expe nses mainly including land contract fees, land rental fees and house rentalfees, and etc. And the long-term deferred expense shall be amortiz ed by the straight-line methodaveragely within the benefit period.

22. Payroll(1) Accounting Treatment of Short-term Compensation

The payroll of the Company mainly includes: short-term employees compensation, welfare afterdeparture, demission welfare, and the welfare of other long-term staffs, of which:

Short-term compensation mainly including salary, bonus, allowances and subsidies, employeeservices and benefits, medical insurance premiums, birth insurance premium, industrial injuryinsurance premium, housing fund, labor union expenditure and personnel education fund,non-monetary benefits etc. The short-term compensation actually happened during the accountingperiod 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-monetarybenefits 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 insuranceand welfare plans aft er demission incl ude setting drawing plan. Where the setting drawing plan isadopted, the corresponding payable and deposit amount should be included into the relevant assetscost 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 laborcontacts or puts forward the advice of providing the compensation for urging the employeesvolunteered to receive the downsizing and when the Company could not unilaterally withdraw thedemission 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 daybetween the cost confirmed by the Company and the cost related to the reorganization of thepayment of the demission welfare and includes which in the current gains and losses. But as for thedemission welfare be estimated that could not be completed paid within 12 months after the end ofthe annual Reporting Period, should be handled according to the other long-term employee’s salary.

(4) Accounting Treatment of the Welfare of Other Long-term Staffs

The internal retire plan of the employees should be handled by adopting th e same principles of theabove demission welfare. The Company includes the salary and the paid social insurance chargesplaned to pay by the personnel retreated inside during the period from the date when ceased theservices to the no rmal ret ire dat e i n the cur rent gai ns a nd losses (demission welfare) when met withthe recognition conditions of the estimated liabilities.The other long-term welfare that the Company offers to the staffs, if met with the setting drawingplan, should be accounting disposed according to the setting drawing plan, while the rest should bedisposed according to the setting revenue plan.

23. Revenue

Is the Company subject to any disclosure requirements for special industries?No.

(1) Selling productsNo revenue from selling goods may be recognized unless the following conditions are metsimultaneously: the significant risks and rewards of ownership of the goods have been transferred tothe buyer by the enterprise; the enterprise retains neither continuous management right that usuallykeeps r elation with the ownership nor e ffective control over the sold goods; the relevant amount ofrevenue can be measured in a reliable way; the relevant economic benefits may flow into theenterprise; 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 thebuyers according to the contracts agreement, and the revenues amount of the products sales hadbeen confirmed with the goods payment had been withdrawn or had received the receipt voucher ofwhich t he relevant econo mic benefit s probably flo w into the en terprise as well as t he relevant cost sof the products could be reliable measured when being confirming as the revenues.As for th e revenues from the export sales products, the Company executes the customs declarationand the products departure according to the contracts agreement, and the Company had acquired thebill of lading with the revenues amount of the products sale had been confirmed and the goodspayment had been withdrawn or had had received the receipt voucher of which the relevanteconomic benefits probably flow into the enterprise as well as the relevant costs of the productscould be reliable measured when being confirming as the revenues.(2) Providing labor servicesIf the Company can reliably estimate the outcome of a transaction concerning the labor services itprovides, it shall recognize the revenue from providing services employing thepercentage-of-completion method on the da te of the balance sheet. The completed proportion of atransaction concerning the providing of labor services shall be decided by the proportion of thelabor 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 ofrevenue can be measured in a reliable way; ② The relevant economic benefits are likely to flowinto the enterprise; ③ The schedule of completion under the transaction can be confirmed in areliable 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 areliable way, the revenue from the providing of labor services shall be recognized in accordancewith the amount of the cost of labor services incurred and expected to be compensated, and makethe cost of labor services incurred as the cu rrent expenses. If it is p redicted that the cost of labo rservices incurred couldn’t be compensated, thus no revenue shall be recognized.Where a contract or agreement signed bet ween Company and other enterprises conce rns sellinggoods and providing of labor services, if the part of sale of goods and the part of providing laborservices can be distin guished from each other and can be measured r espectivel y, the part of sale ofgoods and the part of providing labor services shall be t reated respectively. If the part of sellinggoods and the part of providing labor services can’t be distinguished from each other, or if the partof sale of goods and the part of providing labor services can be distinguished from each other butcan’t be measured respectively, both parts shall be conducted as selling goods.(3) Royalty revenueIn accordance with relevant contract or agreement, the amount of royalty revenue should berecognized as revenue on accrual basis.(4) Interest revenueThe amount of interest revenue should be measured and confirmed in accordance with the length oftime 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 fo r freefrom the government, excluding the capital that the government invests as the investor who enjoysthe corresponding owner’s equity. It can be divided into the asset-related government subsidy andincome-related government subsidy. The Company defines the obtained government subsidy for theacquisition and construction or forming the long-term asset in other ways as the asset-relatedgovernment subsidy; other government subsidies are defined as the income-related governmentsubsidy. If the government document does not clearly prescribe the subsidy object, the followingways shall be adopted to divide the subsidy into the income-related government subsidy andasset-related government subsidy: (1) The government document clears the specific project for thesubsidy, it shall divide according to the relative ratio of asset expenditure amount and entry costexpenditure amount to be formed in the bud get of specific project, review according to the divisionratio at each balance sh eet date, and change when necessary; (2) The government document onlymakes the general expression on the usage without indicated specific project, it shall be theincome-related government subsidy. If the government subsidy is monetary asset, it shall bemeasured according to the received or receivable amount. If the government subsidy isnon-monetary asset, it shall be measured according to the fair value; it the fair value can’t be gotreliably, it shall be measured according to the nominal amount. The gove rnment subsidy measuredaccording to the nominal amount shall be calculated in the current profits and losses directly.The asset-related government subsidy shall be confirmed as the deferred income, and it shall becalculated 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 otherincome or offset related costs accordin g to the essence of economic business; government subsidie sthat 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 relat ed deferredincome balance, the related deferred income book balance shall be deducted, and the surpassing partshall be calculated into the current profits and losses; If in other situations, it shall be calculated inthe 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 receivedamount when receiving actually. However, the financial support fund which can be receivedcomplying with the related conditions prescribed in the financial support policy indicated by theconclusive evidence shall be measured according to the receivable amount. The followingconditions shall be met for the government subsidy measured by the receivable amount: (1) Thereceivable subsidy amount has been confirmed by the authorized government department, or it canbe measured reasonably according to the officially released provisions related with the financialfund management method, and it is expected there is no major uncertaint y for the amount; (2) It isbased on the financial support project and financial fund management method actively opened

released offici ally by the local fi nancial department and according to the provision in GovernmentInformation Disclosure Provisions, the management method shall be universal (any enterprisecomplying with the prescribed condition can apply) rather than for the specific enterprise; (3) Therelated subsid y approval document has clearly promised the appropriate term, and the appropriationof the amount shall have the corresponding financial budget for the guarantee, therefore, it canensure to receive within the prescribed term reasonably.The income-related government subsi dy to compensate the related expens e and loss later shall beconfirmed as the deferred income, and it s hall be calculated in the current profits and losses duringthe period to confirm the related costs or losses; the occurred related costs or losses forcompensation shall be calculated in the current profits and losses directly.For government subsidy including the asset-related government subsidy and the income-relatedgovernment subsidy at one time, accounting treatment shall be conducted respectively to distinguishthe different parts; if it is difficult to distinguish, then it shall be classified into the income-relatedgovernment subsidy

25. Deferred Income Tax Assets/Deferred Income Tax Liabilities

(1) Income tax of the current periodOn the balance sh eet date, for the cu rrent income tax liabilities (or as sets) of the curr ent period aswell as the part formed during the previous period, should be measured by the income tax of theestimated payable (returnable) amount which be calculated according to the regulations of the taxlaw. The amount of the income tax payable which is based by the calculation of the current incometax expenses, are according to the result measured from the correspondin g adjustment of the pre -taxaccounting 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 liabilitiesThe differenc e bet we en t he b oo k val ue o f cert ain ass ets and l i abi li ti es and thei r t ax as ses sment basis,as well as the tempo rary difference o ccurs from t he difference betw een the bo ok value of t he itemswhich not be recognized as assets and liabilities but could confirm their tax assessment basisaccording to the regulations of the tax law, the deferred incom e tax assets and the defer red incom etax 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 recognitionof goodwill, the initial recognition of assets or liabilities due to a transaction other than a businesscombination, which affects neither accounting profit nor taxable profit (or deductible loss). Besides,no defer red tax as sets is recognized for the t axable t emporar y di fferences r elated t o the inves tmentsof subsidiary companies, associated enterprises and joint enterprises, and the investing enterprisecan contro l the t ime o f the revers e of temp orar y differenc es as well as the t empor ar y differences areunlikely to be r eversed in the excepted future. Otherwise, the Group should recognize the deferredincome tax liabilities arising form other taxable temporary difference.No deferred taxable asset s should be recognized for the dedu ctible temporary difference of init ialrecognition 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 affectedat the time of transaction. Besides, no deferred taxable assets should be recognized for thedeductible temp orary difference related to the investment s of the subsidiar y companies, associat edenterprises 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 dedu ctibletemporary differences. Otherwise, the Company shall recogni ze the deferred income tax assetsarising from a deductible temporary difference basing on the extent of the amount of the taxableincome that is likely to be acquired to make up such deductible temporary differencesFor any deductible loss or tax deduction that can be carried forward to the next year, thecorrespon ding deferr ed income tax asset shal l be determined to the extent that the amount of futuretaxable income to be offset by the deductible loss or tax deduction to be likely obtained.On the balance sheet date, the d eferred income tax assets and the deferred income tax liabilitiesshall be measur ed at the tax rate ap plicable t o the p eriod duri ng which the as sets are ex pected t o berecovered or the liabilities are expected to be settled.The book value o f deferred income t ax assets shall be reviewed at each b alance sheet date. If it isunlikely to obtain sufficient taxable income to offset against the benefit of the deferred income taxasset, the book value of t he deferred income tax a ssets shall be written down. An y such write-downshould be subsequently r eversed where it becomes prob able that sufficient taxable incom e will beavailable.(3) Income tax expensesIncome 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 includedinto current gains and losses ex cept for the curre nt income tax and the deferred income tax relatedto the transaction and events that be confirmed as other comprehensive income or be directlyincluded in the shareholders’ equity which should be included in other comprehensive income orshareholders’ equity as well as the book value for adjusting the goodwill of the deferred income taxoccurs from the business combination.(4) Offset of income taxThe curr ent income tax assets and liabilities of the Company should be listed by the written-off netamount which intend to executes the net amount s ettlement as well as the assets acquiring andliabilities 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 netamount when having the legal rights of settling the current income tax assets and liabilities by netamount and the deferred income tax and liabilities is relevant to the income tax which be collectedfrom the same taxpaying bodies by the same tax collection and administration department or isrelevant to the different taxpaying bodies but during each period which there is significant reverseof the deferr ed income assets and liabilities in the future and among which the involved taxpayingbodies intend to settle the current income tax and liabilities by net amount or are at the same timeacquire the asset as well as liquidate the liabilities.

26. Lease(1) Accounting Treatment of Operating Lease

(1) Business of operating leases recorded by the Group as the lesseeThe rent expenses from operating leases shall be recorded by the lessee in the relevant asset costs orthe 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 r ecogniz ed as the profits and losses of t he current period.The contingent rents shall be r ecorded into th e profits and losses of th e curr ent period in which the yactually arise.(2) Business of operating leases recorded by the Group as the lessorThe rent inco mes from operat ing leases shall be recognized as the profits and losses of the cu rrentperiod by using the straight-line method over each period of the lease term. The initial direct costsof great amount shall be capitalized when incurred, and be recorded into current profits and lossesin accordance with the same basis for reco gnition of rent incom es over the whole leas e term. Theinitial direct costs of small amount shall be recorded into current profits and losses when incurred.The contingent rents shall be r ecorded into th e profits and losses of th e curr ent period in which the yactually arise.

(2) Accounting Treatments of Financial Lease

(1) Business of finance leases recorded by the Company as the lesseeOn the l ease beginning d ate, the Com pany shall record t he lower one of th e fair value of the l easedasset and the present value of the minimum lease payments on the lease beginning date as theentering value in an account, recognize the amount of the minimum lease payments as the enteringvalue in an account of long-term account payable, and treat the balance between the recordedamount 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 oflease negotiating and signing the leasing agreement sh all be recorded in the asset value of thecurrent period. The balance through deducting unrecognized financing charges from the minimumlease payments shall be respectively stated in long-term liabilities and long-term liabilities duewithin 1 year.Unrecognized finan cing charges shall be adopted b y the effective interest rate met hod in the leaseterm, so as to calculate and recognize current financing charges. The contingent rents shall berecorded 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 lessorOn the beginning date of the lease term, the Company shall recognize the sum of the minimumlease receipts on the lease beginning date and the initial direct costs as the entering value in anaccount of the financi ng lease values receiv able, and record the un guaranteed residual val ue at thesame time. The balance between the sum of the minimum lease receipts, the initial direct costs andthe unguaranteed residual value and the sum of their present values shall be r ecognized asunrealized financing income. The balance through deducting unrealized financing incomes from thefinance lease accounts receivable shall be res pectively stated in long-term claims and long-termclaims due within 1 year.Unrecognized f inancing incomes shall be adopted b y the effective interest rat e method in the leaseterm, so as to calculate and recognize current fi nancing revenues. The contingent rents shall b erecorded into the profits and losses of the current period in which they actually arise.

27. Repurchase of Shares

No gains or losses shall be recognized when the consideration and transaction fees paid in share

repurchases reduce the shareho lders’ equit y and the Compan y’s shares are repurchas ed, transferredor cancelled.Transfer of treasury stocks shall be included into t he capital reserves according to the differencebetween the actually received amount and the book value of the treasury stocks. If the capitalreserves are insufficient for adjustment, the surplus reserves and retained profits shall be adjustedaccordingl y. For cancel lation of tre asury stocks, the share capi tal shall be reduced accordi ng to thepar val ue an d num ber of shares cancel led and th e capital res erves shall be adju sted a ccordi ng t o thedifference between the b ook value of the treasury stocks and the par value. If the capital reservesare insufficient for adjustment, the surplus reserves and retained profits shall be adjustedaccordingly.

28. 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 measuredaccurately during the process of applying accounting policies. Such judgments, estimates andassumptions are made on the basis of the past experience of Company’s management staffs and onthe consideration of other relevant factors. Such judgments, estimates and assumptions have effecton reporting amount of incomes, expense, assets and liabilities, as well as disclosure of contingentliabilities on the balance sheet date. However, the uncertainty of such estimates may results in majoradjustments 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 fixedintervals on the basis of sustainable operation. As for the change in accounting estimates that onl yeffects on the current period of the change, the affected amount thereof shall be recognized atcurrent period of the change. As for accounting estimates that effects on both the current period ofthe change and future periods, the affected amount thereof shall be recognized at current period ofthe change and future periods.On balance sheet date, major fields requiring judgments, estimates and a ssumptions on amounts offinancial statement items by the Company are as follows:

(1) Classification of leasesIn line with rules in Accounting Standards for Enterprises No. 21 – L e ases, the C ompany class ifiesleases i nto op eratin g leases and finan ce leas es. Up on the cl assif ication, the management s taffs needto make analysis and judgments on whether to essentially transfer all risks and remunerationrelating to the ownership of leased-out as sets to th e lessee, or wheth er the Co mpany has essenti allyundertaken all risks and remuneration relating to the ownership of leased-in assets.(2) Withdrawal of bad debt provisionsThe Company shall, in accordance with accounting policies of receivables, calculate bad debtprovisions by adopting allowance method. Impairment of accounts receivable is based on theassessment of the recovery of accounts receivable. Identification of impairment of accountsreceivable requires judgments and es timates by management staffs. The difference betw een actualoutcomes and originally estimated outcomes, which will influence the carrying amount of accountsreceivable and bad debt provisions thereof in the estimated period of the change, shall be withdrawnor reversed.

(3) Inventory depreciation reservesThe Compan y shall calculate w hichever is lowe r between the cost and realizab le net value in li ghtof inventory accounting policies. As for inventories of which the cost is h igher than the realizablenet valu e and inventories which are obsolete and unsalable inventory depreciation reserves shall bewithdrawn. Impairment of inventories to realizable net value is based on the assessment of themarketing of inventories and realizable net value thereof. Identification of inventory impairmentrequires well-established evidences by management staffs, as well as j udgments and estimatesbased on consideration of the purpose of holding inventories and other factors such as eventsoccurring after the date of balanc e sheet. The difference between actual outcomes and originallyestimated outcomes, which will influence the carrying amount of inventories and inventorydepreciation reserves in the estimated period of the change, shall be withdrawn or reversed.(4) Fair values of financial instrumentsAs for financial instruments not existing in active trading market, the Company shall determinetheir fair values by all kinds of assessment methods, which include model analysis of discountedcash flow and etc. During the assessment, t he Company needs to assess for respects such as futurecash flows, credit risks, market volatility, correlation, and choose appropriate discount rate. Suchrelated assumptions have uncertai nty, of which the change will effect on fair values of fi nancialinstruments.(5) Impairment of financial assets available for saleTo a large extent, whether the impairmen t of financial assets available for sale is reco gnized or notrelies on the judgments and assumptions of the management staffs. In that way, the Company shallbe cert ain about w hether t o recognize i mpairment losses of fi nancial assets avai lable for s ale in th eprofit statement. During the process of making judgments and assumptions, the Company needs toevaluate how much the fair value of such investment is less than its cost, h ow long such investmentwill last, and the financial condition and short-term business outlook of the invested parties, whichinclude industry status, technolog y transform, credit rating, default rate and risks from the oppositeparties.(6) Impairment provisions of non-financial non-current assetsThe Company shall judge whether there is sign of impairment of non-current assets other thanfinancial assets on b alance sheet date. Int angible assets with un certain service lives, b esides beingconducted with annual impai rment test every year, have to accept impairment tests when there issign of impairment. Other non-current as sets except for financial ass ets have to accept impairm enttests 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 thefair 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 lightof the amount of the basis of the price as stipulated in the sales agreement or the observable marketprice 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 judgmentson characters of the asset or asset group, such as out put, sales price, related operating costs, anddiscount used to calculate the present value. When estimating recoverable amount, the Companyshall 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 e very year, which requiresitself to estimate the present value of the future cash flow of group assets or combination of groupassets. When estimating the present value of the future cash flow, the Company needs to estimatethe cash flow arising from future group assets or combination of group assets, and at the same timechoose appropriate discount rate to determine the present value of the future cash flow.(7) Depreciation and amortizationUpon consideration on the salvage value of investment real estates, fixed assets and intangibleassets, the Company shall withdraw depreciation and amortization by straight-line method overtheir service lives. T he Company checks on s ervice lives at fixed intervals, so as to determ ine theamounts of depreciation expenses and amortization ex penses at each period. Service lives areconfirmed in accordance with the past ex perience on similar assets of the Company, along withrenewed technology of expectation. If any significant change occurred to previous es timated,

depreciation expenses and amortization expenses will be adjusted in future period.

(8) Deferred income tax assetsIn a limit providing large possibility of offset losses from sufficient taxable profits, the Group shallrecogniz e deferr ed inco me tax as sets in line wit h all unused t ax los ses, which requires man ageme ntstaffs of the Group to estimate the time when future taxable profits occurs and the amount thereofby applying plenty of judgments and combining tax planning strategies, so as to determine theamount of the recognizable deferred income tax assets.(9) Income taxesThere’s certain uncertainty of disposal and calculation of taxes of partial transactions in normaloperating activities. It is uncertain whether some pre-taxed items can set aside the app rovals b y taxauthorities or not. If there are differences between the ultimate recognition outcomes and theoriginally estimated amounts o f such tax issues, then such differences sh all effect on the currentincome tax and deferred income tax during the ultimate recognition period.(10) Measurement of fair valueSome 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 andobservable market data. During the process of confir ming the fair value of various assets andliabilities, relevant information of the adopted valuation technique and input value was disclosure inNote X.

29. Changes in Main Accounting Policies and Estimates(1) Change of Accounting Poli cies

□ Applicable √ Not applicable

(2) Significant Changes in Accounting Estimates

□ Applicable √ Not applicable

VI Taxes

1. Main Taxes and Tax Rates

Category o f tax Taxable basis Tax rateVAT

Calculated the output tax at 17%, 16%, 11%, 10%, 6%, 5%,3%, and 0% of taxable income and paid the VAT by the amountafter deducting the deductible withholding VAT at currentperiod.

17%, 6% , 11%, 10%, 6%, 5%, 3%, 0%Urban main tenance

and cons tr uc t i on t a x

Paid at 7%, 5%, 1% of the circulating tax actually paid 7%, 5%, 1%Enterprise income tax

Paid at 0%, 15%, 16.5% and 25% of taxab

respectively

0%, 15%, 16.5%, 25%Notes of the disclosure situation of the taxpaying bodies with different enterprises income tax rate

Taxpayer Income tax rateThe Company 15%

le incomeLufeng Weaving & Dyeing Co., Ltd. (hereinafter refer to as

“Lufeng Weaving & Dyeing”)

15%Lu Thai (Hong Kong) Textile

Lufeng Weaving & Dyeing Co., Ltd. (hereinafter refer to as

Co., Ltd. (hereinafter refer to as

“Lu Thai Hong Kong”)

16.50%Xinjiang Lu Thai Harvest Cotton Co., Ltd. (“Xinjiang Lu Th ai”) 25%

Zibo Luqun Textile Co., Ltd. (hereinafter refer to as “L

Textile”)

25%

uqun

Zibo Xinsheng Power Co., Ltd. hereinafter refer to as “Xinsheng

Power”)

25%Beijing Innovative Garment Co., Ltd.

“Beijing Innovative”

25%Shanghai Lu Thai Textile & Garments Co., Ltd.

(hereinafter referred to as

(hereinafter

referred to as “Shanghai Lu T ha i ”)

25%Beijing Lu Thai Youxian Electronic Commerce Co., Ltd.

(hereinafter referred to as “Beijing Y ouxian”)

25%Zibo Chengshun Heating Co., Ltd. (hereinafter referred to as

“Chengshun Heating”)

25%Zibo Helijie Energy-saving Technology Service Co., Ltd.

(hereinafter referred to as “Helijie”)

25%Xinji ang L u Thai Textile Co., Ltd. (herein after r eferred to as

“Xinjiang T extile”)

15%Lu Thai (C ambodia) Textile Co., Ltd. (herei

nafter referred to as

“L u T hai Cambodia”)

0%

Lu Th ai (

Thai Bur ma”)

0%Lu Thai (

Burma) Textile Co., Ltd. (herein after referred to as “Lu

Vietnam) Textile Co., Ltd. (hereinafter referred to as

“Lu Thai Vi etnam”)

0%Lu An Garmen

Garments”

0%Lu Thai (America) Textile Co., Ltd. (hereinafter referred to as

“Lu Thai America”

Refer to 2. Tax Preference presented as foll ows for details

2. Tax Preference

According to the "On the Recognition of 2078 Enterprises as High-tech Enterprises for 2017 suc has W eihaiTuozhan Fiber Co., Ltd." (LK Zi[2018 ] No. 37) issued Department of Science andTechnology of Shandong Province, Shandong Provincial Finance Department, State Administrationof Taxation of Shandong Province and Local Taxation Bureau of Shandong Province, the Companyand the holding subsidiary Lufeng Weaving and Dyeing Co., Ltd. were identified as high-techenterprises. Pursuant to Article 28 of the "Law of the PRC on Enterprise Income Tax” and the No.76 Announcement published by the State Administration of Taxation in 2015, namely“Management of Preferential Policy on Corporate Income Tax” and the “Measures for theAdministration of the Recognition of Hi-tech Enterprises” GKFH [2016] No. 195 revised andpublished by the Ministry of Science and Technology, Ministry of Finance and StateAdministration of Taxation, the Company and the holding subsidiar y Lufeng Weaving and DyeingCo., Ltd. enjoy a corporate income tax rate of 15%.According to the "Notice of the Ministry of Finance, the General Administration of Customs andthe State Administration of Taxation on Tax Policy Issues concerning Further Implementing theWestern China Development Strategy " (CS[2011] No. 58), Xinjiang Textile Co., Ltd., thesubsidiary of Lu Thai in Xinjiang, enjoys a preferential corporate income tax rate of 15%.Lu Thai (Hong Kong) Textile Co., Ltd. (hereinafter refers as Lu Thai (Hong Kong) Textile), thewholly-owned subsidiary company of the Company, was incorporated in Hong Kong SAR, whoseprofit tax shall be paid at tax rate of 16.5%.The wholly own subsidiary Lu Thai Cambodia, ac cording to the Lu Thai Cambodia Profits tax freeapproval issued by Investment Committee of Cambodia, Lu Thai Cambo dia enjoys tax preferen ceof tax free o n corp or at e income tax of 3 (3 years start-up period) + 3 (3 years tax holiday)+1 (1 yeargrace period). If profit during the 3 year start-up period then turn into 3 years tax holiday, aftergrace period, enterprise income tax rate was of 20%.The wholly own subsidiary Lu Thai Burma, according to the Burma’s Special Economic Zone Lawissued by Pyidaungsu Hluttaw, Lu Thai Burma enjoys tax preference on corporate income tax of 7(7 years t ax holiday) + 5 (5 years tax revenues drop by half) + 5 (re-invest the profits within 1 yearand continues to enjoy the half tax revenues 5 years afterwards). After grace period, enterp riseincome tax rate was of 25%.The wholly-owned subsidiary Lu Thai (Vietnam) Textile Co., Ltd. shall enjoy the preference ofenterprise income tax at 3 years’ starting term + 4 years’ dut y-free term + 9 y ears’ half-tax termaccording to the investment license issued by Vietnamese Fudong Industrial Zone Management

Committee, and it will enter into 2 years’ duty-free term if it is profitable within 3 years’ startingterm. The enterprise inc ome tax rate shall be 20% after the preference term ends. The Companyshall enjoy 10% of the preference tax rate within 15 years since the tax year to get the firstproduction and operation income, and the enterprise income tax rate shall be 20% after thepreference term ends.The wholly-owned subsidiary Lu An Garments Co., Ltd. shall enjoy the preference of enterpriseincome tax at 3 years’ starting term + 2 years’ duty-free term + 4 years’ half-tax term according tothe investment license issued by Vietnamese Anjiang Province Economi c Zone ManagementCommittee, and it will enter into duty-free term if the profitability is realized at any year within 3years’ starting term. The Company shall enjoy 17% of the preference tax rate within 10 years sincethe tax year to get the first production and operation income, and the enterprise income tax rate shallbe 20% after the preference term ends.Lu Thai America, the wholly-owned subsidiary of the Company registered in New York, America,was imposed the fed eral enterprise income tax at progressive tax rate in excess of specific amountof 15%-39%, and imposed the New Yo rk Enterpri se income tax at the r ate of 6.5%. The income taxrate shal l b e 6.5 % wh en t he sal es in com e in New York was b elow US $1 million, while 8.85% whenabove US$1 million.

VII. Notes to Main Items of Consolidated Financial Statements

1. Monetary Funds

Unit: RMBItem Ending balance Beginning balanceCash on hand 3,982,351.33

8,040,420.28

Bank deposits 667,589,538.44

668,598,792.58

Other monetary funds 150,080.59

17,350,080.52

Total 671,721,970.36

693,989,293.38

Of which: total amount deposited

oversees

310,358,555.04

54,911,636.96

Other notes:

On 30 June 2018, the monetary fund with restricted ownership of the Company was of RMB150,080.52 (31 December 2017: RMB17,350,080.52), which was guarantee deposit ofRMB150,080.52 by t he Company’s subsidiary Lufeng Weaving & Dyeing

2. Notes Receivable(1) Notes Receivable Listed by Category

Unit: RMBItem Ending balance Beginning balanceBank accept ance bill 24,304,548.05

28,926,913.53

L/C 91,404,720.83

110,349,828.81

Total 115,709,268.88

139,276,742.34

(2) Notes Receivable which Had Endorsed by the Company or Had Discounted and Had not Due on theBalance Sheet Date at the Period-end

Unit: RMBItem

Amount of recognition termination at the

period-end

Amount of not terminated recognition at

the period-endBank accept ance bill 178,434,467.09

Total 178,434,467.09

3. Accounts Receivable(1) Accounts Receivable Disclosed by Category

Unit: RMB

Category

Ending balance Beginning balanceCarrying amount Bad debt provision

Carrying value

Carrying amount Bad debt provision

Carrying valueAmount

Propor

tion

Amount

Withdraw

alproportio

n

Amount

Propor

tion

Amount

Withdraw

alproportio

nAccountsreceivablewithdrawal ofbad debtprovision ofby credit riskscharacteristics

375,832,028.96

100.00

%

19,013,065.27

5.06

%

356,818,963.69

351,991,919.14

100.00

%

17,911,395.09

5.09

%

334,080,524.05

Total 375,832,028.96

100.00

%

19,013,065.27

5.06

%

356,818,963.69

351,991,919.14

100.00

%

17,911,395.09

5.09

%

334,080,524.05

Accounts receivable with significant single amount for which bad debt provision separately accrued at the period-end:

□ Applicable √ Not applicable

In the groups, accounts receivable adopted aging analysis method to withdraw bad debt provision:

√ Applicable □ Not applicable

Unit: RMBAging Ending balance

Accounts receivable Bad debt provision Withdrawal proportionSubitem within 1 yearSubtotal within 1 year 373,199,150.22

18,659,957.51

5.00%

1 to 2 years 2,028,679.82

202,867.98

10.00%

2 to 3 years 310,198.92

62,039.78

20.00%

Over 3 years 294,000.00

88,200.00

30.00%

Total 375,832,028.96

19,013,065.27

5.06%

In the groups, accounts receivable adopted balance percentage method to withdraw bad debt provision:

□ Applicable √ Not applicable

(2) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period

The withdrawal amount of the bad debt provision during the Reporting Period was of RMB1,101,670.18; the amount of the reversedor collected part during the Reporting Period was of RMB0.00.

(3) Top 5 Accounts Receivable in Ending Balance Collected according to the Arrears Party

The tot al t op 5 ac co unt s r eceivable in ending balance collected according to the arrears party for theCompany was RMB105,332,965.56, accounting f or 28.03% of the total endi ng balance of accountsreceivable, and the total ending balance of bad debt provision correspondingly withdrawn wasRMB5,266,648.28.

4. Prepayment(1) Prepayment Listed by Aging Analysis

Unit: RMBAging

Ending balance Beginning balanceAmount Proportion Amount ProportionWithin 1 year 133,166,462.98

98.99%

145,673,771.77

99.46%

1 to 2 years 1,347,850.81

1.00%

625,210.35

0.43%

2 to 3 years 0.00

0.00%

162,029.49

0.11%

Over 3 years 9,800.00

0.01%

2,054.77

0.00%

Total 134,524,113.79

-- 146,463,066.38

--

(2) Top 5 Prepayment in Ending Balance Collected according to the Prepayment Target

The total top 5 prepayment in ending balance collected according to the prepayment target for th eCompany was RMB54,276,853.14, accounting for 40.35% of total ending balance of prepayment.

5. Interest Receivable(1) Category of Interest Receivable

Unit: RMBItem Ending balance Beginning balanceFixed term deposits 874,571.14

590,003.07

Total 874,571.14

590,003.07

6. Other Accounts Receivable(1) Other Accounts Receivable Disclosed by Category

Unit: RMB

Category

Ending balance Beginning balanceCarrying amount Bad debt provision

Carrying

value

Carrying amount

Bad debt provision

Carrying

valueAmount

Proportio

n

Amount

Withdra

walproportio

n

Proportio

n

Amount

Amount

Withdrawal

proportion

Other accounts

receivable with d rawn

bad debt pr ov i s ionaccording to creditrisks characteristics

83,485,3

77.63

100.00%

7,004,65

6.54

8.39%

76,480,72

1.09

62,067,808.10

100.00%

5,885,026

.06

9.48%

56,182,782.

Total

83,485,3

77.63

100.00%

7,004,65

6.54

8.39%

76,480,72

1.09

62,067,808.10

100.00%

5,885,026

.06

9.48%

56,182,782.

Other accounts receivable with significant single amount for which bad debt provision separately accrued at the period-end:

□ Applicable √ Not applicable

In the groups, other accounts receivable adopted aging analysis method to withdraw bad debt provision:

√ Applicable □ Not applicable

Unit: RMBAging

Ending balanceOther accounts receivable Bad debt provision Withdrawal proportionSubentry within 1 yearSubtotal of within 1 year 70,295,023.36

3,514,751.15

5.00%

1 to 2 years 2,313,867.15

231,386.72

10.00%

2 to 3 years 44,274.42

8,854.87

20.00%

Over 3 years 10,832,212.70

3,249,663.80

30.00%

Total 83,485,377.63

7,004,656.54

8.39%

In the groups, other accounts receivable adopted balance percentage method to withdraw bad debt provision

□ Applicable √ Not applicable

In the groups, other accounts receivable adopted other methods to withdraw bad debt provision:

□ Applicable √ Not applicable

(2) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period

The withdrawal amount of the bad debt provision during the Reporting Period was of RMB1,119,630.48; the amount of the reversedor collected part during the Reporting Period was of RMB0.00.

(3) Other Account Receivable Classified by Account Nature

Unit: RMBNature Ending carrying amount Beginning carrying amountExport taxes refund 18,877,922.77

26,928,248.68

Advance payment 45,328,177.05

19,470,920.20

Cash Pl edge & Margin 5,523,371.84

5,915,873.52

Borrowings and petty cash 3,587,192.13

1,533,438.12

Other 10,168,713.84

8,219,327.58

Total 83,485,377.63

62,067,808.10

(4) Top 5 Other Accounts Receivable in Ending Balance Collected according to the Arrears Party

Unit: RMBName of the entity Nature Ending balance

Aging

Propor tion to totalending ba la nc e of

other accounts

receivable

Ending balance

of bad debt

provisionAdvances for agricultural machinery Advance 20,144,428.21

Within 1 year 24.13%

1,007,221.41

Expor t taxes refund receivable

Export taxesrefund

16,212,237.17

Within 1 year 19.41%

810,611.86

Advance money r eceivable of thefundraising houses

Advance 7,393,934.63

Within 1 year 8.86%

369,696.73

Farmland premium Premium 5,607,294.08

Within 1 year 6.72%

280,364.70

Advances for farm land leveling andcanal projects in Xinjiang

Advance 4,811,384.69

Within 1 year 5.76%

240,569.23

Total -- 54,169,278.78

-- 64.88%

2,708,463.93

7. Inventory(1) Category of Inventory

Unit: RMBItem

Ending balance Beginning balanceCarrying amount

Depreciation

reserves

Carrying value Carrying amount

Depreciation

reserves

Carrying valueRaw materials 894,061,853.37

894,061,853.37

859,429,529.00

1,172,453.02

858,257,075.98

Goods in proc e s s 458,253,436.36

458,253,436.36

508,535,945.66

508,535,945.66

Inventory goods 668,773,766.10

32,279,398.47

636,494,367.63

754,961,464.17

51,653,377.28

703,308,086.89

Consumptiveliving assets

1,477,285.41

355,425.24

1,121,860.17

1,531,621.67

404,221.67

1,127,400.00

Assignedprocessingproducts

27,493,110.20

27,493,110.20

29,432,713.40

29,432,713.40

Total 2,050,059,451.44

32,634,823.71

2,017,424,627.73

2,153,891,273.90

53,230,051.97

2,100,661,221.93

Whether the Company needs to comply with the disclosure requirements of Shenzhen Stock Exchange Industry InformationDisclosure Guidelines No. 4 - Listed Companies Engaged in Seed Industry and Planting BusinessNo

(2) Falling Price Reserves of Inventory

Unit: RMBItem

Beginning

balance

Increased amount Decreased amount

Ending balanceWithdrawal Other

Reverse or

write-off

OtherRaw materials 1,172,453.02

1,172,453.02

Inventory goods 51,653,377.28

-99,805.82

19,274,172.99

32,279,398.47

Consumptiveliving assets

404,221.67

48,796.43

355,425.24

Total 53,230,051.97

-99,805.82

20,495,422.44

32,634,823.71

(3) Notes to the Inventory with the Ending Balance Including Capitalized Borrowing Expenses

Not ap pl icable

(4) The Withdrawal Basis for Inventory Falling Price Reserves and Reasons for Write-back or Write-offduring the Reporting Period

Item Specific basis of

withdrawal of inventory

falling price reserves

Reasons for write-back Reasons for write-off

Raw materials

The lower one between

cost of each item of

net value

inventory and its realizable

Disposed in the Reportin

g Period

Inventory goods

The lower one between

cost of each item ofinventory and its realiza

ble

net value

ble

Sold

Period

Consumptive livingassets

The lower one between

cost of each item of

net value

inventory and its realizable

Sold

Period

Notes: ①T he inventory falling price reserves shall be made based on the balance of inventory cost

and the realizable net val ue regarding the former is higher th an the latter, which is caused b y thequality problem of some raw materials, the gray yarn and dyed yarn in finished products, by thelong stock age of some shirts and fabric and by the decrease of market price of the consumptiveliving asset Hu sheep at the end of the Reporting Period.

②The subsidiary of the Company-Xinjiang Lu Thai Textile-obtained the short-term borrowing of

RMB100,000,000.00 f rom the bank taking t he inventories with the carrying value ofRMB67,984,874.74 as a pledge.

8. Other Current Assets

Unit: RMBItem Ending balance Beginning balanceVAT input tax to be deducted 44,426,042.78

68,286,428.20

Prepai d i ncome tax to be deducted 2,629,302.17

302,275.14

Financ ia l pr o duc ts 50,000,000.00

50,000,000.00

B-share repurchase account 53,750,798.82

Total 150,806,143.77

118,588,703.34

9. Available-for-sale Financial Assets(1) List of Available-for-sale Financial Assets

Unit: RMB

Item

Ending balance Beginning balanceCarryingamount

Depreciation

reserves

Carrying value

Carryingamount

Depreciation

reserves

Carrying valueAvailable-for-dale debt

instruments:

61,233,000.00

61,233,000.00

60,033,000.00

60,033,000.00

Available-for-sale equityinstruments:

67,282,600.00

42,782,600.00

24,500,000.00

67,282,600.00

42,782,600.00

24,500,000.00

Measured at fair value 61,233,000.00

61,233,000.00

60,033,000.00

60,033,000.00

Measured at cost 67,282,600.00

42,782,600.00

24,500,000.00

67,282,600.00

42,782,600.00

24,500,000.00

Total 128,515,600.00

42,782,600.00

85,733,000.00

127,315,600.00

42,782,600.00

84,533,000.00

(2) Available-for-sale Financial Assets Measured by Fair Value at the Period-end

Unit: RMBCategory o f av ailable-for-sale financial assets

Available-for-saleequity instruments

Available-for-sal e debt

instruments

TotalEquity inst

rument costs/debt instrument amortization

costs

rument costs/debt instrument amortization

60,000,000.00

60,000,000.00

Fair value

61,233,000.00

61,233,000.00

Accumulat ive amount of changes i n fair value included

in other comprehensive income

1,233,000.00

1,233,000.00

(3) Available-for-sale Financial Assets Measured by Cost at the Period-end

Unit: RMB

Investee

Carrying amount Depreciation reserves

Shareholdi

ng

proportion

in theinvestee

Cash

during theReportingPerio

d

Period-beginni

ng

Increa

se

Decrea

se

Period-end

Period-beginni

ng

Increa

se

Decrea

se

Period-end

		bonus
Yantai Rongchang

Pharmacy Co.,Ltd. (hereinafterrefer to as“Rongchang

55,282,600.00

Pharmacy”)

55,282,600.00

42,782,600.00

42,782,600.00

3.13%

ShandongHongqiao PowerCo., Ltd.(Hong qia o P

12,000,000.00

ower)

12,000,000.00

19.38%

Total 67,282,600.00

67,282,600.00

42,782,600.00

42,782,600.00

--

(4) Changes in the Depreciation of Available-for-sale Financial Assets during the Reporting Period

Unit: RMBCategory o f theavailable-for-sale

financial as sets

Available-for-

instruments

Available-for-sale debt

instruments

TotalBeginning balance of

impairment withdrawn

42,782,600.00

sale equity

42,782,600.00

Ending balance ofimpairment withdrawn

42,782,600.00

42,782,600.00

10. Long-term Accounts Receivable(1) List of Long-term Accounts receivable

Unit: RMBItem

Ending balance Beginning balance

Interval

ofdiscoun

t rate

Carryingamount

Bad debtprovision

Carrying

value

Carryingamount

Bad debtprovision

Carrying

valueFinanci ng lease accounts

650,000.00

650,000.00

29.40%

Of which: unrealized financing income

145,204.18

145,204.18

Total

650,000.00

650,000.00

--

11. Long-term Equity Investment

Unit: RMB

Investees

Increase/decrease

Endingbalance

Endin

gbalance ofdepreciatio

nreserv

es

Additiona

linvestme

nt

Redu

cedinvestment

Beginn ing balance

Gains and

lossesrecognizedunder theequity method

Adjustm

ent ofothercompreh

ensiveincome

Changesof otherequity

Cashbonus or

profits

announced

to issue

Withdra

wal ofdeprecia

tionreserves

Othe

r

I. Joint venturesII. Associated enterprisesNingbo M e i97,536,732.02

-1,730,597.59

95,806,134.43

shan BondedPoer AreaHaohongEquityInvestmentPartnership(L.P)(hereinafterreferred to as“HaohongInvestment”)Subtotal 97,536,732.02

-1,730,597.59

95,806,134.43

Total 97,536,732.02

-1,730,597.59

95,806,134.43

12. Investment Property(1) Investment Property Adopted the Cost Measurement Mode

√ Applicable □ Not applicable

Unit: RMBItem

Houses and

buildings

Land use right

Construction in

progress

TotalI. Original carrying value

1. Beginning balance 35,982,382.40

35,982,382.40

2. Increased amount of the period

(1) Outsourcing

(2) Transfer from inventory\

assets\construction in progress

fixed

(3) Enterprise combination increase

3. Decreased amount of the period

(1) Disposal

(2) Other transfer

4. Ending balance 35,982,382.40

35,982,382.40

II. Accumulative depreciation and accumulative

amortization

1. Beginning balance 11,418,837.82

11,418,837.82

2. Increased amount of the period 706,838.89

706,838.89

(1) Withdrawal or amortization 706,838.89

706,838.89

3. Decreased amount of the period

(1) Disposal

(2) Other transfer

4. Ending balance 12,125,676.71

12,125,676.71

III. Depreciation reserves

1. Beginning balance

2. Increased amount of the period

(1) Withdrawal

3. Decreased amount of the period

(1) Disposal

(2) Other transfer

4. Ending balance

IV. Carrying value

1. Ending carrying value 23,856,705.69

23,856,705.69

2. Beginning carrying value 24,563,544.58

24,563,544.58

(2) Investment Property Adopted the Fair Value Measurement Mode

□ Applicable √ Not applicable

13. Fixed Assets(1) List of Fixed Assets

Unit: RMBItem

Houses and

buildings

Machineryequipment

Transportation

equipment

Electronicequipment and

others

TotalI. Original carrying value

1. Beginning balance 3,136,008,729.48

6,013,226,456.60

75,605,860.26

118,680,314.89

9,343,521,361.23

2. Increased amount of theperiod

625,984.09

220,691,369.26

3,002,436.32

4,940,100.33

229,259,890.00

(1) Purchase 8,387.68

103,632,024.02

3,002,436.32

3,872,410.24

110,515,258.26

(2) Transfer f rom constructionin progress

617,596.41

117,059,345.24

1,067,690.09

118,744,631.74

(3) Enterprise combinationincrease

3. Decreased amount of theperiod

61,665,913.62

109,299,112.67

2,623,436.05

692,964.26

174,281,426.60

(1) Disposal or Scrap 2,273,039.58

9,678,561.86

2,676,654.36

730,095.66

15,358,351.46

(2) Transferred into investmentproperty

(3) Transferred into construction

in progress

63,326,344.11

104,747,451.53

11,980.00

168,085,775.64

(4) Other decrease -3,933,470.07

-5,126,900.72

-53,218.31

-49,111.40

-9,162,700.50

4. Ending balance 3,074,968,799.95

6,124,618,713.19

75,984,860.53

122,927,450.96

9,398,499,824.63

II. Accumulative depreciation

1. Beginning balance 888,764,731.56

2,869,058,997.31

53,792,239.67

78,471,588.54

3,890,087,557.08

2. Increased amount of theperiod

48,755,271.49

147,932,075.47

2,467,451.93

4,944,608.19

204,099,407.08

(1) Withdrawal 48,755,271.49

147,932,075.47

2,467,451.93

4,944,608.19

204,099,407.08

3. Decreased amount of theperiod

22,399,548.45

60,416,202.84

2,326,468.59

689,045.79

85,831,265.67

(1) Disposal or Scrap 335,639.84

7,970,480.70

2,344,130.34

696,971.60

11,347,222.48

(2) Transferred into construction

in progress

22,311,100.92

52,974,322.84

10,782.00

75,296,205.76

(3) Other decrease -247,192.31

-528,600.70

-17,661.75

-18,707.81

-812,162.57

4. Ending balance 915,120,454.60

2,956,574,869.94

53,933,223.01

82,727,150.94

4,008,355,698.49

III. Depreciation reserves

1. Beginning balance 2,893,416.89

29,123,503.34

27,269.67

93,764.22

32,137,954.12

2. Increased amount of theperiod

(1) Withdrawal

3. Decreased amount of theperiod

1,302,690.04

1,302,690.04

(1) Disposal or Scrap

1,302,690.04

1,302,690.04

4. Ending balance 2,893,416.89

27,820,813.30

27,269.67

93,764.22

30,835,264.08

IV. Carrying value

1. Ending carrying value 2,156,954,928.46

3,140,223,029.95

22,024,367.85

40,106,535.80

5,359,308,862.06

2. Beginning carrying value 2,244,350,581.03

3,115,043,955.95

21,786,350.92

40,114,962.13

5,421,295,850.03

(2) Fixed Assets Leased out by Operation Lease

Unit: RMBItem Ending carrying valueHouse s and bu il dings 19,075,215.72

(3) Fixed Assets Failed to Accomplish Certification of Property

Unit: RMBItem Carrying value

ReasonWeaving and yarn dying workshop 103,467,194.39

Ongoing inspection, surveying, verification to application proceduresby Housing authoritiesEmployee’s dormitory building of easternarea of industrial park

42,283,610.59

Same with aboveSpinning Fourth factory workshop 92,197,016.21

Same with aboveEmployee’s dormitory building of westernarea of industrial park

123,773,968.11

Same with aboveEastern sampl e plant 30,318,302.04

Same with aboveLufeng weaving dye workshop 128,263,529.32

Same with aboveXinjiang construction project of100,000-spindle spinning production line

64,027,681.05

Same with above

Note: T he original carrying value a nd other decrease in accumulative depreciation of fixed assets inthe Reporting Period were exchange rate difference generated from th e conversion of overseassubsidiaries’ recording currency into RMB due to the fluctuation of the exchange rates.

14. Construction in Progre ss(1) List of Construction in Progress

Unit: RMBItem

Ending balance Beginning balanceCarrying

amount

Depreciati

onreserves

Carrying value

Carryingamount

Depreciati

onreserves

Carrying value

Roof transformation engineering of forthe whole eastern weaving complexworkshop (Phase II)

33,997,010.54

33,997,010.54

Reform project of Xinsheng ThermalPower

9,719,978.74

9,719,978.74

6,192,038.65

6,192,038.65

Expansion project of Xinsheng ThermalPower

5,697,893.74

5,697,893.74

744,000.00

744,000.00

Expansion project of Xinsheng ThermalPower (Phase II)

9,864,619.23

9,864,619.23

Heat supply engineering of ChengshunHeating

5,028,045.18

5,028,045.18

1,805,751.30

1,805,751.30

Reform engineering of 100,000-spindlespinning

77,875,603.13

77,875,603.13

Lu Thai (Vietnam) project 34,325,323.53

34,325,323.53

34,325,323.53

34,325,323.53

Spinning Phase II of Lu Thai (Vietnam)project

40,564,949.43

40,564,949.43

4,922,411.28

4,922,411.28

Yarn Dye Phase II of

project

17,584,838.00

Lu Thai (Vietnam)

17,584,838.00

Proj ect of Lu An Garments 16,468,087.74

16,468,087.74

3,371,413.19

3,371,413.19

Other retails projects 39,666,780.72

39,666,780.72

28,185,279.60

28,185,279.60

Total 212,917,526.85

212,917,526.85

157,421,820.6

157,421,820.68

(2) Changes in Signi fic ant Construction in Progress during the Reporting Period

Unit: RMB

Item Budget

Beginning

balance

Increased

amount

Transferred in

fixed assets

Otherdecreased

amount

Ending balance

Propor

tion of

accumulatedinvestment

inconstruction

s to

Jobschedu

le

Accumulate

damoun

t ofinteres

tcapital

budget

ization

Ofwhich:

amount

ofcapitaliz

ed

for theReporting P

eriod

Capitaliz

rateofinterestsfortheReportin

gPeriod

Capi

talresource

s

Rooftransformationengineering offor thewholeeasternweavingcomplexworkshop (PhaseII)

36,000,000.00

33,997,010.54

33,997,010.54

94.00

%

94.00%

Other

ReformprojectofXinshengThermalPower

20,000,000.00

6,192,038.65

3,527,940.09

9,719,978.74

49.00

%

49.00%

Other

ExpansionprojectofXinshengThermalPower

240,000,000.0

744,000.00

4,953,893.74

5,697,893.74

86.00

%

86.00%

Other

ExpansionprojectofXinshengThermalPower(PhaseII)

97,950,000.00

9,864,619.23

9,864,619.23

10.00

%

10.00%

Other

Heatsupplyengineering ofChengshunHeating

38,000,000.00

1,805,751.30

3,222,293.88

5,028,045.18

99.00

%

99.00%

Other

Reformengineering of100,000-spindle

156,000,000.0

spinning

77,875,603.13

38,710,587.12

116,586,190.25

100.00

%

100.00%

Other

Lu Thai(Vietnam)project

242,282,300.0

34,325,323.53

34,325,323.53

99.00

%

99.00%

Other

Phase IIof LuThai(Vietnam)project

52,750,000.00

Spinning

4,922,411.28

35,233,707.58

-408,830.57

40,564,949.43

76.00

%

76.00%

Other

YarnDyePhase IIof LuThai(Vietnam)project

110,300,000.0

17,584,838.00

17,584,838.00

16.00

%

16.00%

Other

Project

Garments

93,035,700.00

of Lu An

3,371,413.19

13,573,989.65

512,433.99

-35,118.89

16,468,087.74

91.00

%

91.00%

Other

Otherretailsprojects

28,185,279.60

13,127,508.62

1,646,007.50

39,666,780.72

Other

Total

1,086,318,000

.00

157,421,820.68

173,796,388.45

118,744,631.74

-443,949.46

212,917,526.85

-- --

--

15. Engineering Materials

Unit: RMBItem Ending balance Beginning balanceSpecific material s

Specific equipment152,136,560.03

56,913,806.06

Total152,136,560.03

56,913,806.06

16. Intangible Assets(1) List of Intangible Assets

Unit: RMBItem Land use right Patent right

Non-patent

right

Software use

rights

Brand use

rights

TotalI. Original carrying value

1. Beginning balance 604,760,289.56

1,985,176.47

6,710,503.67

300,000.00

613,755,969.70

2. Increased amount of theperiod

1,106,048.24

1,106,048.24

(1) Purchase

1,106,048.24

1,106,048.24

(2) Internal R&D

(3) Business combinationincrease

3. Decreased amount of theperiod

(1) Disposal

4. Ending balance 604,760,289.56

1,985,176.47

7,816,551.91

300,000.00

614,862,017.94

II. Accumulated amortization

1. Beginning balance 111,042,573.91

1,422,710.04

2,252,384.27

90,000.00

114,807,668.22

2. Increased amount of theperiod

6,873,241.70

99,258.84

1,774,934.53

15,000.00

8,762,435.07

(1) Withdrawal 6,873,241.70

99,258.84

1,774,934.53

15,000.00

8,762,435.07

3. Decreased amount of theperiod

(1) Disposal

4. Ending balance 117,915,815.61

1,521,968.88

4,027,318.80

105,000.00

123,570,103.29

III. Depreciation reserves

1. Beginning balance

2. Increased amount of theperiod

(1) Withdrawal

3. Decreased amount of theperiod

(1) Disposal

4. Ending balance

IV. Carrying value

1. Ending carrying value 486,844,473.95

463,207.59

3,789,233.11

195,000.00

491,291,914.65

2. Beginning carrying value 493,717,715.65

562,466.43

4,458,119.40

210,000.00

498,948,301.48

The proportion of intangible assets formed from the internal R&D of the Company at the Period-end to the ending balance ofintangible assets was 0.00%.

17. R&D Expense

Unit: RMB

Item

Beginnin

Increase Decrease

Endingbalance

Internal R&D

expense

Other

g balance

Recogni zed asintangible assets

Transferred int othe current profit

or loss

R&D ofproducts

162,596,245.80

162,596,245.80

Total

162,596,245.80

162,596,245.80

18. Goodwill(1) Original Carrying Value of Goodwill

Unit: RMBName of the invested

units or ev entsgenerating goodwill

Increase Decrease Ending balance

Beginn ing balance

Xinshe ng Power 20,563,803.29

20,563,803.29

Helijie 50,000.00

50,000.00

Total 20,613,803.29

20,613,803.29

(2) Impairment Provision for Goodwill

Unit: RMBName of theinvested units or

events gener ating

goodwill

Beginning

balance

Increase Decrease Ending balance

events gener ating

Xinshe ng Power

Helijie

Notes of the testing process of goodwill impairment, parameters and the recognition method of goodwill impairment losses:

Refer to Note V-20 for details of the testing process of goodwill impairment.

19. Long-term Prepaid Expense

Unit: RMBItem Beginning balanceIncreased Amortization Other decreasedEnding balance

amount amount of the

period

amountLand contracting fee of

Xinjiang Luthai

26,693,642.92

543,109.50

26,150,533.42

Decorati on fee ofXinjiang Lu Thai

865,660.06

96,940.31

768,719.75

Land ren t of overseassubsidiaries

80,148,619.17

3,713,555.49

761,994.05

-866,155.88

83,966,336.49

Housing rent of overseassubsidiaries

169,272.37

171,406.99

-2,134.62

Total 107,877,194.52

3,713,555.49

1,573,450.85

-868,290.50

110,885,589.66

Other notes

Note: Other decrease wa s the exchange rate difference generated from the conversi on of overseassubsidiaries’ recording currency into RMB due to the fluctuation of exchange rates.

20. Deferred Income Tax Assets/Deferred Income Tax Liabilities(1) Deferred Income Tax Assets Had Not Been Off-set

Unit: RMBItem

Ending balance Beginning balanceDeduct ible temporary

difference

Deferred income tax

assets

Deduct ible temporary

difference

Deferred income tax

assetsProvi

sion for impairment

of assets

123,762,792.64

sion for impairment

19,984,983.02

140,256,135.72

22,531,008.74

Inter na l unr e a l iz e d pr ofit 109,048,430.64

14,813,500.08

100,706,925.35

11,627,841.87

One-time listeddecoration expenses

5,405,702.23

1,351,425.56

5,405,702.23

1,351,425.56

Payroll payable 124,021,657.72

18,701,206.18

124,021,657.72

18,701,206.18

Deferred income 126,957,174.18

20,464,628.41

126,737,092.32

20,485,677.36

Total 489,195,757.41

75,315,743.25

497,127,513.34

74,697,159.71

(2) Deferred Income Tax Liabilities Had not Been Off-set

Unit: RMBItem

Ending balance Beginning balanceDeduct ible temporary

difference

Deferred income tax

liabilities

Deduct ible temporary

difference

Deferred income tax

liabilitiesDepreciat ion of fixed16,979,223.43

2,927,785.33

16,820,058.15

2,899,949.46

assetsAvailable-for-salefinancial as sets

1,233,000.00

184,950.00

33,000.00

4,950.00

Total 18,212,223.43

3,112,735.33

16,853,058.15

2,904,899.46

(3) List of Unrecognized Deferred Income Tax Assets

Unit: RMBItem Ending balance Beginning balanceDeduct ible temporary difference 8,507,616.96

11,690,891.52

Deduct ible losses 28,067,909.91

27,993,886.84

Total 36,575,526.87

39,684,778.36

(4) Deductible Losses of Unrecognized Deferred Income Tax Assets will Due in the Following Years

Unit: RMBYears Ending amount Beginning amount NotesY2018 97,981.65

97,981.65

Y2019 1,456,659.23

1,456,659.23

Y2020 18,458,244.61

18,458,244.61

Y2021 4,250,703.45

4,250,703.45

Y2022 3,730,297.90

3,730,297.90

Y2023 74,023.07

Total 28,067,909.91

27,993,886.84

--

21. Other Non-current Ass ets

Unit: RMBItem Ending balance Beginning balancePrepayment for equipment 78,517,334.73

28,984,077.85

Prepayment for land 1,996,937.00

7,406,401.00

Total 80,514,271.73

36,390,478.85

22. Short-term Borrowings(1) Category of Short-term Borrowings

Unit: RMB

Item Ending balance Beginning balanceMort gage loan 150,000,000.00

440,000,000.00

Guaranteed loan 527,722,734.36

28,254,022.53

Credit loan 780,336,227.97

666,870,973.87

Total 1,458,058,962.33

1,135,124,996.40

Notes of the category for short-term loans:

Note: for the type and amount of the pledged assets for mortgage loan, please refer to Note VII-7,16and 58.

23. Financial Liabilities at Fair Value through Profit or Loss

Unit: RMBItem Ending balance Beginning balanceTrading financial liabilities 28,481,010.00

Of which: issued trading bonds

Derivative financial liabilities 28,481,010.00

Other

Financial liabilities desig nate d to bemeasured at fair value through profit orloss

Total 28,481,010.00

24. Notes Payable

Unit: RMBCategory Ending balance Beginning balanceTrade acceptance 2,039,106.28

2,441,810.45

Bank’s acceptance bill 1,079,450.50

4,859,961.40

Total 3,118,556.78

7,301,771.85

The total overdue but unpaid notes payable at the period-end were RMB0.00.

25. Accounts Payable(1) List of Accounts Payable

Unit: RMBItem Ending balance Beginning balance

Purchase of goods 188,533,806.46

219,463,023.43

Engineering equipment 83,642,879.87

134,864,245.66

Other 11,477,182.31

11,937,863.56

Total 283,653,868.64

366,265,132.65

26. Advances from Custom ers(1) List of Advances from Customers

Unit: RMBItem Ending balance Beginning balanceAdvance from goods 99,307,372.64

119,785,945.48

Total 99,307,372.64

119,785,945.48

27. Payroll Payable(1) List of Payroll Payable

Unit: RMBItem Beginning balance Increase Decrease Ending balanceI. Short-term salary 316,812,093.17

841,207,933.99

911,760,588.44

246,259,438.72

II. Post-employment benefit-definedcontribution plans

24,395.78

75,787,694.44

75,788,964.90

23,125.32

III. Termination benefits

180,688.20

180,688.20

Total 316,836,488.95

917,176,316.63

987,730,241.54

246,282,564.04

(2) List of Short-term Salary

Unit: RMBItem Beginning balance Increase Decrease Ending balance

subsidy

1. Salary, bonus, allowance,

267,328,134.33

757,339,575.32

831,946,327.90

192,721,381.75

2. Employee welfare

27,175,649.69

27,175,649.69

3. Social insurance

34,876,878.81

35,231.00

34,874,630.67

			37,479.14
Of which: 1. Medical

insurance premiums

27,627,857.60

28,800.70

27,627,430.47

29,227.83

Work-related injury insurance

3,570,163.13

5,065.07

3,568,361.67

6,866.53

Matern ity i nsurance

3,678,858.08

1,365.23

3,678,838.53

1,384.78

4. Housing fund

8,133,982.10

1,293.00

8,135,275.10

5. Labor union budget and

employee education budget

13,681,848.07

49,447,434.84

9,628,705.08

53,500,577.83

Total

841,207,933.99

316,812,093.17

911,760,588.44

246,259,438.72

(3) List of Defined Contribution Plans

Unit: RMBItem Beginning balance Increase Decrease Ending balance1. Basic pension benefits 22,636.70

72,984,343.09

72,984,781.91

22,197.88

2. Unemploymentinsurance

1,759.08

2,803,351.35

2,804,182.99

927.44

Total 24,395.78

75,787,694.44

75,788,964.90

23,125.32

Other notes:

The Company, in line with the requirement, participate the endowment insurance, unemploymentinsurance scheme and so on, according to the scheme, the Company monthly pay to the scheme inline with 18% and 0.7% of the endowment insurance base, except the monthly payment, theCompany no longer shoulder the further payment obligation, the relevant expense occurred wasrecorded into current profits and losses or related assets costs.

28. Taxes Payable

Unit: RMBItem Ending balance Beginning balanceVAT 2,760,614.68

2,639,133.26

Corp or ate income tax 21,524,297.71

13,934,074.08

Personal income tax 3,214,555.49

1,453,967.09

Urban maintenance and construction tax 2,967,638.49

3,036,340.88

Stamp tax 347,321.70

400,579.00

Property tax 4,667,520.13

4,618,710.82

Land use tax 4,486,008.66

4,537,230.07

Education surcharge 1,293,949.35

1,314,401.95

Local education surcharge 862,632.88

876,267.97

Local water conservan cy facili t yconstruction fund

214,710.11

217,869.46

Resource tax 139,102.00

26,516.00

Environmental protection tax 274,070.50

Total 42,752,421.70

33,055,090.58

29. Interest Payable

Unit: RMBItem Ending balance Beginning balanceInterest payable on short-term borrowings 2,079,744.07

1,572,231.86

Total 2,079,744.07

1,572,231.86

30. Dividends Payable

Unit: RMBItem Ending balance Beginning balanceDividends payable to individualshareholders by the Company

441,113.64

441,113.64

Total 441,113.64

441,113.64

Other notes, including significant dividends payable unpaid for over one year, the unpaid reason shall be disclosed:

Notes: the dividends payable unpaid for over one year were the cash divi dend of previous year notreceived by individual shareholders.

31. Other Accounts Payable(1) Other Accounts Payable Listed by Nature of Account

Unit: RMBItem Ending balance Beginning balanceDeposits and cash deposits etc. 18,572,061.86

19,600,682.80

Collecting payment on behalf of others 19,770,608.87

17,030,878.91

Intercourse funds 95,570,959.03

66,354,397.71

Other 23,499,304.14

24,104,049.83

Total 157,412,933.90

127,090,009.25

(2) Significant Other Accounts Payable Aging over One Year

Unit: RMBItem Ending balance Unpaid/Un-carry-over reasonCotton and Linen Company 11,925,000.00

Received deposit of sale contractTotal 11,925,000.00

--

32. Non-current Liabilities Due within One Year

Unit: RMB

Item Ending balance Beginning balanceLong-

term borrowings due within one year

62,750,292.49

Total

62,750,292.49

33. Long-term Borrowings(1) Category of Long-term Borrowings

Unit: RMBItem Ending balance Beginning balanceGuarantee loan 69,431,359.47

62,750,292.49

Less: long-term borrowings due within one year

-62,750,292.49

Total 69,431,359.47

34. Long-term Payroll Payable(1) List of Long-term Payroll Payable

Unit: RMBItem Ending balance Beginning balanceIII. Other long-term welfare 92,458,178.53

93,843,473.02

Total 92,458,178.53

93,843,473.02

35. Deferred Income

Unit: RMBItem Beginning balance Increase Decrease Ending balance

Reason forformationGovernmentsubsidies

126,737,092.32

2,417,500.00

2,342,622.32

126,811,970.00

Governmentsubsidies

incomes

Unrealized financing

237,606.84

92,402.66

145,204.18

Finance leaseTotal 126,737,092.32

2,655,106.84

2,435,024.98

126,957,174.18

--Item involving government subsidies:

Unit: RMBItem

Beginning

balance

Amount ofnewly subsidy

Amountrecorded

intonon-operat

Amountrecorded intoother income

in the

Amount

offset cost in

theReporting

Otherchange

s

Ending balance

Related to

offset cost in

assets/related

income

ingincome in

theReporting

Period

Reporting

Period

Period

Land 59,265,769.33

696,578.94

58,569,190.39

Related t o the

assetsEquipment 64,626,322.95

417,500.00

1,579,543.40

63,464,279.55

Related t o the

assetsProductionliving assets

691,000.04

66,499.98

624,500.06

Related t o the

assetsOverseasinvestment

100,000.00

400,000.00

500,000.00

Related t o the

assetsR&D 2,054,000.00

1,600,000.00

3,654,000.00

Related to the

incomeTotal 126,737,092.32

2,417,500.00

0.00

2,342,622.32

0.00

0.00

126,811,970.00

--Other notes:

36. Other Non-current Liabilities

Unit: RMBItem Ending balance Beginning balanceOther 1,840,000.00

1,840,000.00

Total 1,840,000.00

1,840,000.00

37. Share Capital

Unit: RMB

Beginning

balance

Increase/decrease (+/-)

New shares

issued

Bonus shares

Bonus issuefrom profit

Other SubtotalThe sum of

shares

922,602,311.00

						Ending balance

922,602,311.00

38. Capital Reserves

Unit: RMBItem Beginning balance Increase Decrease Ending balanceCapital premium(premium on stock)

640,470,910.34

640,470,910.34

Other capital reserves 59,022,683.48

53.66

59,022,737.14

Total 699,493,593.82

53.66

0.00

699,493,647.48

39. Treasury Shares

Unit: RMBItem Beginning balance

Increase Decrease Ending balanceShares of the Company acquired fordecrease in registered capital

0.00

121,952,709.49

0.00

121,952,709.49

Total

121,952,709.49

121,952,709.49

40. Other Comprehensive Income

Unit: RMB

Item

Beginning

balance

Report ing Period

Ending balance

Ending balanceIncome befor e

taxation in

the

Current Period

Less: reco rded in

othercomprehensiveincome in prior

period andtransferred inprofit or loss in

the Current

Period

Less:

Income tax

expense

Attributable to

owners of theCompany as

the parentafter tax

Attributable

tonon-controlling interests

after tax

II. Othercomprehensiveincome th at maysubsequently bereclassifi ed toprofi t or los s

16,810,574.22

27,739,653.92

180,000.00

27,559,653.92

44,370,228.14

Profit or lossgenerated fromchanges in f airvalue ofavailable-for-salefinancial as sets

28,050.00

1,200,000.00

180,000.00

1,020,000.00

1,048,050.00

Differencesarising fromtranslation offoreigncurrency-denomin

16,782,524.22

26,539,653.92

26,539,653.92

43,322,178.14

ated financialstatementsTotal of othercomprehensiveincome

16,810,574.22

27,739,653.92

180,000.00

27,559,653.92

44,370,228.14

41. Surplus Reserves

Unit: RMBItem Beginning balance Increase Decrease Ending balanceStatutory surplusreserves

959,592,006.48

959,592,006.48

Discretional surplusreserves

3,341,572.58

3,341,572.58

Total 962,933,579.06

962,933,579.06

42. Retained Profits

Unit: RMBItem Reporting Period Same period of last yearBeginning

balance of retained profits before

adjustments

4,629,102,712.06

balance of retained profits before

4,341,866,189.19

Beginning

balance of retained profits after

adjustments

4,629,102,712.06

4,341,866,189.19

Add: Net profit attributable to owners of theCompany as the parent

377,355,959.02

841,150,934.75

Less: Withdrawal of statutory surplus reserves

71,063,056.38

Divide nd of ordinary shares payable 453,344,328.00

482,851,355.50

Ending r e ta ined profits 4,553,114,343.08

4,629,102,712.06

List of adjustment of beginning retained profits:

(1) RMB0.00 beginning retained profits was affected by retrospective adjustment conducted according to the Accounting Standardsfor Business Enterprises and relevant new regulations.(2) RMB 0.00 beginning retained profits was affected by changes in accounting policies.(3) RMB0.00 beginning retained profits was affected by correction of significant accounting errors.(4) RMB0.00 beginning retained profits was affected by changes in combination scope arising from same control.(5) RMB0.00 beginning retained profits was affected totally by other adjustments.

43. Operating Revenue and Cost of Sales

Unit: RMBItem

Report ing Period Same Period of last yearOperati ng revenue Cost of sales Operating revenue Cost of salesMain operations 3,161,001,569.72

2,286,826,556.57

2,879,100,712.82

1,969,571,645.66

Other operations 120,012,585.71

74,009,874.84

117,992,683.02

81,911,358.13

Total 3,281,014,155.43

2,360,836,431.41

2,997,093,395.84

2,051,483,003.79

44. Taxes and Surtaxes

Unit: RMBItem Reporting Period Same Period of last yearUrban maintenance and construction tax 17,451,386.91

16,393,442.71

Education Surcharge 7,605,633.12

7,180,677.97

Property tax 10,374,539.75

9,865,797.76

Land use tax 9,379,056.90

9,262,257.89

Vehicle and vessel usage tax 75,652.02

71,177.18

Stamp duty 1,989,710.41

1,973,396.29

Local education surcharge 5,070,422.01

4,787,118.66

Local water conservan cy facili t yconstruction fund

1,262,384.77

1,969,458.67

Resource tax 220,654.00

Environmental protection tax 1,040,967.99

Total 54,470,407.88

51,503,327.13

45. Selling Expense

Unit: RMBItem Reporting Period Same Period of last yearSalary 19,297,126.63

18,231,453.63

Transport fees 20,928,650.85

19,456,296.25

Advertising expense 5,420,732.63

8,178,116.43

Mall costs 875,238.41

0.00

Port sur char ge 6,170,035.18

5,798,672.52

Depreciat ion charge 2,532,810.28

2,631,285.73

Business travel charges 1,629,252.55

2,401,690.68

Rental char ges 556,033.51

687,727.39

Other 9,531,208.52

10,980,269.59

Total 66,941,088.56

68,365,512.22

46. Administ rative Expense

Unit: RMBItem Reporting Period Same Period of last yearR&D expenses 162,596,245.80

158,802,502.01

Salary 49,380,053.99

50,247,742.67

Depreciat ion charge 13,579,871.22

12,850,463.13

Warehouse funding 14,923,489.16

14,931,054.00

Travel expense 8,855,345.37

12,066,196.48

Rental char ges 8,383,823.95

6,524,734.12

Labor-union expenditure 8,029,634.53

7,312,516.87

Employee education budget 5,642,213.54

5,469,769.99

Amortization of intangible assets 5,669,585.44

5,452,967.89

Transport fees 3,049,340.29

3,489,273.36

Other 45,761,153.21

36,890,098.97

Total 325,870,756.50

314,037,319.49

47. Finance Costs

Unit: RMBItem Reporting Period Same Period of last yearInterest ex pense 22,535,312.05

14,653,232.24

Less: Interest income 7,403,493.02

2,645,051.42

Less: Amount of capitalized interest

Forei gn exchange gains or losses 11,511,469.36

15,375,073.21

Other 3,881,936.92

3,546,924.25

Total 30,525,225.31

30,930,178.28

48. Asset Impairment Loss

Unit: RMBItem Reporting Period Same Period of last yearI. Bad debt loss 2,221,300.66

-1,283,546.44

II. Inventory falling price loss -99,805.82

2,246,368.58

Total 2,121,494.84

962,822.14

49. Gain on Changes in Fair Value

Unit: RMBSources Reporting Period Same period of last yearFinancial assets at fair value through profit or loss

1,110,700.00

Financial liabilities at fair value through profit or loss -28,481,010.00

Total -28,481,010.00

1,110,700.00

50. Investment Income

Unit: RMBItem Reporting Period

Same P er io d of last

yearLong-term equity invest ment income accounted by equity method -1,730,597.59

Investment incom

loss

6,376,621.37

e from disposal of financial assets at fair value through profit or

1,385,535.34

Total 4,646,023.78

1,385,535.34

51. Asset Disposal Income

Unit: RMBSources Reporting Period Same period of last yearIncome from disposal of fixed assets -522,286.65

-1,191,082.48

52. Other Income

Unit: RMBSources Reporting Period

Same period of

last year

No.2)

2,517,200.00

2016 Incentive Fund for international and provincial R&D platforms (CCQZ [2018] No.13 and

2017 Provincial Specific Fund for service industry development (ZCQZ [2017] No.169) 133,000.00

2017 Central Specific Fund for foreign trade and economic development (ZCQZ [2017]No.179)

48,200.00

2017 Municipal Specific fund for foreign trade and economic development (ZCQZ [2017]No.168)

131,200.00

Municipal Specific Fund for R&D of application technology (ZKF [2017] No.100) 400,000.00

2017 Municipal Specific Fund for patent development (ZCJZ [2018] No.23) 32,000.00

2017 Award for Shandong science and technology (LZF [2018] No.10) 200,000.00

Subsidy for leading talents in Mount Tai (ZZF [2018] No.14) 1,000,000.00

Subsidy for Zibo Gifted Person Plan (ZZF [2018] No.14) 700,000.00

Specific Raised Fund for integration of IT application with industrialization (ZCQZ [2017]No.189)

4,735,700.00

Government subsidy in premium of ECI (CCQZ [2018] No.9) 373,200.00

Government subsidy for new industry format of Foreign trade (CCQZ [2018] No.9) 10,600.00

Government subsidy for international market development project (CCQZ [2018] No.8) 23,200.00

Government subsidy for leading enterprises in export (CCQZ [2018] No.8) 100,000.00

2017 Government subsidy for 17

th

Asia International Textile Machine and Fittings Exhibition(CCQZ [2018] No.11)

5,400.00

Gov e r nme nt subsidy for TEXWORLD held in Feb. 2017 (CCQZ [2018] No.11) 40,000.00

Government subsidy for 30

th

Vietnam HCM Exhibition of Textile & Clothing Industry held inApril 2017 (CCQZ [2018] No.11)

21,300.00

Government subsidy for LT. GRFF (CCQZ [2018] No.11) 1,700,000.00

Government subsidy for international qualification certification (CCQZ [2018] No.11) 10,000.00

Specific government subsidy for corporate management improvement (ZGXWF [2018] No.1) 304,450.00

2016 Government subsidy for freight of cotton out of Xinjiang (XCJ [2017] No.206) 464,400.00

Government subsidy for capital of supporting infrastructure construction of Lu Thai Group(CCFSZ [2018] No.34)

16,527,500.00

Zibo Qilu Cup Industrial Design Rewards 30,000.00

Government subsidy for social insurance and post subsidy of people with job huntingdifficulties hired during Jan. to May of 2018 (LCS [2011] No.55)

1,042,819.75

2016 subsidy for outstanding energy-saving enterprises in Zibo (ZZZ [2017] No.118) 300,000.00

Fund for green cotton project with high yield and high efficiency 500,000.00

Specific fund for agricultural industrialized development 600,000.00

Compensatory resettlement fund from land acquisition for highway 500,390.33

2017 4

th

subsidy for freight of cotton yarn 908,274.23

2017 4

th

electricity price subsidy 305,711.64

2017 4

th

quarter social insurance subsidy 246,565.76

2017 Pre -employment training subsidy for textile enterprises 278,490.56

Deferred income amortization 2,342,622.32

2016 power industrial city 30 policies support fund (special fund for business managementZica iqi z hi [ 2016] No. 205)

3,036,000.00

Special fund for development of service sector (Chuancaiqizhi[2017] No. 16, No. 17)

70,500.00

Subsidy for Elite Program of Zibo (Zizhengbanzi[2016] No. 159)

500,000.00

Receiving subsidy from the academician workstation (Cheque No: 14916508)

200,000.00

Progress of Science and Technology Award

50,000.00

Reward fund for enterprises with an advantage in patent creation in 2016 (Zizhizi[2017] No.22)

30,000.00

Fund for energy-saving

30,000.00

Fund for supporting talents

300,000.00

Funding for Municipal Key Talents Introduce Project

50,000.00

Export credit insurance premiums

135,200.00

Subsidy for Las Vegas Show

56,000.00

Government subsidy for brand construction

740,200.00

Government subsidy for service trade

20,000.00

Progress of Science and Technology Award in of Zibo in 2016

50,000.00

Counterpart funding for post doctorates

50,000.00

Special subsidy liquidation fund for textile and garment in 2016

3,871,234.20

Deferred income amortization

1,391,503.09

Total 36,532,224.59

10,580,637.29

53. Non-operating Income

Unit: RMBItem Reporting Period

Same Period of

last year

Amount recorded in the current

non-recurring profit or lossGains from damage and scrap of non-current assets

12,598.97

12,598.97

Government subsidies unrelated to normaloperations of the Company

130,000.00

Other 2,998,473.61

4,235,273.28

2,998,473.61

Total 3,011,072.58

4,365,273.28

3,011,072.58

54. Non-operati ng Ex pense

Unit: RMBItem Reporting Period Same Period of last year

non-recurring profit or lossDonations 7,246.70

		Amount recorded in the current

3,010,000.00

7,246.70

Losses from d amage and scrap1,094,026.64

781,154.66

1,094,026.64

of non-current assetsOther 893,650.37

857,770.73

893,650.37

Total 1,994,923.71

4,648,925.39

1,994,923.71

55. Income Tax Expense(1) List of Income Tax Expense

Unit: RMBItem Reporting Period Same Period of last yearCurrent income tax expense 63,894,098.11

82,330,397.98

Deferred income tax expense -618,583.54

-2,874,770.96

Total 63,275,514.57

79,455,627.02

(2) Adjustment Process of Accounting Profit and Income Tax Expense

Unit: RMBItem Reporting PeriodProfit before taxation 453,439,851.52

Current inco me tax e xpense accounted at statutory/applicable tax rate 68,015,977.73

Influence of applying different tax rates by subsidiaries -917,425.56

Influence of income tax before adjustment 629,616.91

Influence of non-taxable income -9,000,551.96

Influence of not deductable costs, expenses and losses 3,795,257.08

Influence of deductable temporary difference or deductable losses of unrecognizeddeferred income tax in the Reporting Period

752,640.37

Income tax e xpense 63,275,514.57

56. Cash Flow Statement(1) Cash Generated from Other Operating Activities

Unit: RMBItem Reporting Period Same Period of last yearGovernment subsidies 38,328,491.16

32,282,179.48

Claim income 1,639,520.19

1,325,325.55

Recovery of employee borrowings, petty

cash and deposit

7,332,632.94

293,762.05

Collection for employees 2,811,301.35

278,441.53

Other 8,718,571.06

16,605,176.27

Total 58,830,516.70

50,784,884.88

(2) Cash Used in Other Operating Activities

Unit: RMBItem Reporting Period Same Period of last yearFreight and miscellaneous charges 30,263,702.56

29,710,088.63

Rental char ges 5,121,075.62

12,119,156.17

Advertising expense 361,478.56

2,594,594.92

Business travel charges 17,701,778.95

16,603,736.64

Insurance 9,043,863.69

3,345,635.81

Audit advisory announcement fee 4,654,078.64

2,901,671.62

Decorati on & repair expenses 1,092,271.20

4,151,211.04

Donation 207,152.51

4,226,982.21

Pre-payment 967,632.15

24,679,803.50

Payment of employee borrowings, pettycash and deposit

9,938,512.86

5,521,282.60

Other 33,511,070.15

37,799,876.70

Total 112,862,616.89

143,654,039.84

(3) Cash Generated from Other Investing Activities

Unit: RMBItem Reporting Period Same Period of last yearInterest income 7,141,264.70

2,642,590.05

Income from forward foreign exchange 6,274,421.37

1,385,535.34

Sale of secu r ities

66,007,480.86

Option cost 112,450.00

Total 13,528,136.07

70,035,606.25

(4) Cash Used in Other Investing Activities

Unit: RMBItem Reporting Period Same Period of last yearforward set tlement exchange loss 0.00

0.00

Payment of deposit for the L/C ofequipment purchase

0.00

0.00

(5) Cash Generated from Other Financing Activities

Unit: RMBItem Reporting Period Same Period of last yearReturn of loan guarantees 17,200,000.00

8,000,000.00

Recover y of intercourse accounts 21,300,000.00

2,300,000.00

Government subsidies related to assets 817,500.00

0.00

Total 39,317,500.00

10,300,000.00

(6) Cash Used in Other Financing Activities

Unit: RMBItem Reporting Period Same Period of last yearReturn of the B-share buy-back amount 175,517,237.20

0.00

Total 175,517,237.20

0.00

57. Supplemental Information for Cash Flow Statement(1) Supplemental Information for Cash Flow Statement

Unit: RMBSupplemental information Reporting Period Same period of last year

activities

-- --Net profit 390,164,336.95

1. Reconciliation of net profit to net cash flows generated from operating

411,957,743.81

Add: Provision for impairment of assets 2,121,494.84

962,822.14

Depreciat ion of fixed assets, oil-gas assets, and productive living assets 204,806,245.97

206,209,335.09

Amortization of intangible assets 8,762,435.07

7,901,439.13

Amortization of long-term prepaid expenses 1,573,450.85

2,182,955.03

Losses from disposal of fixed assets, intangible assets and otherlong-lived assets (gain s : negative)

522,286.65

1,972,237.14

Losses from s cr ap of fixed assets (gains: negative) 1,081,427.67

Losses from changes in fair value (gains: negative) 28,481,010.00

-1,110,700.00

Finance costs (gains: negative) 29,182,177.28

27,385,715.40

Investmen t loss (gains: negative) -4,646,023.78

-1,385,535.34

Decrease in deferred income tax assets (gains: negative) -618,583.54

-2,805,205.65

Increase in deferred income tax liabilities(“-” means decrease)

207,835.87

-69,565.31

Decrease in inventory (gains: negative) 103,831,822.46

-222,720,851.30

Decrease in accounts receivable generated

(gains: negative)

-10,014,110.37

from operating activities

35,400,564.44

Increase in accounts payable used in

operating activities (decrease:

negative)

-56,853,595.15

-122,634,204.01

Other -817,500.00

Net cash gen er ated from/used in operating a ctivities 697,784,710.77

343,246,750.57

2. Significant investing and financing activities without involvement of

cash receipts and payments

-- --3. Net in cr eas e/decrease of cash and cash equivalent: -- --

Ending balance of cash 671,571,889.84

601,657,326.65

Less: beginning balance of cash 676,639,212.86

659,116,137.67

Net incr ease in cash and cash equivalents -5,067,323.02

-57,458,811.02

(2) Cash and Cash Equivalent

Unit: RMBItem Ending balance Beginning balanceI. Cash 671,571,889.84

676,639,212.86

Includ i ng : Cas h on ha nd 3,982,351.33

8,040,420.28

Bank deposit on demand 667,589,538.44

668,598,792.58

Other monetary fund on demand 0.07

III. Ending

equivalents

671,571,889.84

balance of cash and cash

676,639,212.86

58. Assets with Restricted Ownership or Right to Use

Unit: RMBItem Ending carrying value Reason for restrictionMon etary capital 150,080.52

cash deposit of L/GInventory 67,984,874.74

Mortgaged for short-term borrowingsFixed assets 101,474,035.19

Mortgaged for short-term borrowingsTotal 169,608,990.45

--

59. Foreign Currency Monetary Items(1) Foreign Currency Monetary Items

Unit: RMBItem

Ending foreign currency

balance

Exchange rate

Ending balance converted t o

RMBMon etary capital -- --

Including: USD 35,333,824.63

6.6166

233,789,784.06

EUR 589,293.86

7.6515

4,508,981.98

HKD 11,259,904.56

0.8431

9,493,225.55

JPY 1,814,848.00

0.0599

108,709.39

THB 190.19

0.1998

38.00

SGD 1.90

4.8386

9.19

GBP 2,850.86

8.6551

24,674.47

AUD 131.03

4.8633

637.24

CHF 23,407.90

6.6350

155,311.42

SEK 920.00

0.7328

674.18

MMK 381,590,866.86

0.004887

1,864,834.59

Dong 832,968,600,275.00

0.000291

242,393,862.68

Accounts receivable -- --

Including: USD 35,861,603.26

6.6166

237,281,884.13

EUR

HKD 3,017,862.52

0.8431

2,544,359.89

Dong 19,943,156,276.00

0.000291

5,803,458.48

Long-term borrowings -- --

Including: USD 10,493,510.18

6.6166

69,431,359.47

EUR

HKD

Notes recei vable:

Including: USD 13,814,454.68

6.6166

91,404,720.83

Other accounts receivable

Including: USD 198,313.13

6.6166

1,312,158.66

HKD 6,500.00

0.8431

5,480.15

JPY 1,813,040.00

0.0599

108,601.10

EUR 10,000.00

7.6515

76,515.00

MMK 1,090,000.00

0.004887

5,326.83

Dong 4,714,754,917.00

0.000291

1,371,993.68

Accounts payable:

Including: USD 1,459,263.63

6.6166

9,655,363.74

JPY 998.37

0.0599

59.80

EUR 498,001.11

7.6515

3,810,455.50

MMK 54,124,376.26

0.004887

264,505.83

Dong 8,063,790,891.00

0.000291

2,346,563.15

Other accounts payable:

Including: USD 5,455.33

6.6166

36,095.74

HKD 5,813,035.34

0.8431

4,900,970.10

Dong 389,536,742.00

0.000291

113,355.19

Short-term borrowings:

Including: USD 91,703,604.26

6.6166

606,766,067.97

Dong 588,635,375,814.00

0.000291

171,292,894.36

(2) Notes to Overseas Entities Including: for Significant Oversea Entities, Main Operating Place, RecordingCurrency and Selection Basis Shall Be Disclosed; if there Are Changes in Recording Currency, RelevantReasons Shall Be Disclosed.

√ Applicable □ Not applicable

The operating places of Company’s subsidiaries Lu Thai( Hong Kong), Lu Thai(Cambodia), LuThai(Burma), Lu Thai(America), and Lu Thai(Vietnam), and Lu An Garment Co., Ltd. were HongKong, Cambodia, Burma, America, Vietnam and Vietnam, and the recording currency respectivelywas HKD, USD, USD, USD, Dong and Dong.

VIII. Equity in Other Entities

1. Equity in Subsidiary(1) Subsidiaries

Name

Mainoperating

place

place

Nature ofbusiness

Hold in g percentage (%)

Way of gainingDirectly Indirectly

Beijing Innovative Beijing Beijing

Registration
	Wholesal e and

retail industry

60.00%

Set-upLuthai (Hong Kong)

HongHong Kong

Wholesal e and

100.00%

Set-up

Kong retail industryShanghai Luthai Shanghai Shanghai

retail industry

100.00%

Wholesal e and

Set-upXinjiang Luthai Xinjiang

Xinjiang

Manufacturing

industry

59.92%

Business combination not under thesame control

Lufeng Wea ving &Dyeing

Zibo Zibo

industry

Manufacturing

75.00%

Set-upLuqun Textile Zibo Zibo

industry

100.00%

Manufacturing

Set-upXinshe ng Power Zibo Zibo

Ma

industry

100.00%

nufacturing

Business combination not under thesame controlXinjiang Textile(sub-subsidiary)

Xinjiang Xinjiang

industry

Manufacturing

59.92%

Set-upHelijie

(sub-subsidiary)

Zibo Zibo Service

100.00%

Business combination not under thesame controlChengshun Heating(sub-subsidiary)

Zibo Zibo

Manufacturing

industry

100.00%

Business combination under thesame control

Beijing Youxian Beijing Beijing

retail industry

Wholesal e and

90.00%

Set-upLu Thai (Cambodia)

Cambodia Cambodia

Manufacturing

industry

100.00%

Set-upLu Thai (Burma) Burma Burma

industry

100.00%

Manufacturing

Set-upLu Thai (America) America America

retail industry

100.00%

Wholesal e and

Set-upLu Thai (Vietnam) Vietnam Vietnam

industry

100.00%

Manufacturing

Set-upLu A n Garments Vietnam Vietnam

industry

100.00%

Manufacturing

Set-up

(2) Significant Non-wholly-owned Subsidiary

Unit: RMBName

Shareholdingproportion ofnon-controlling

shareholders

The profit or loss attributable

to the non-controlling

shareholders

Declaring dividends distributed to

non-controlling shareholders

Balance ofnon-controllingshareholders at the

period-endXinjiang

Luthai

40.08%

4,822,646.19

201,265,723.17

LufengWeaving &Dyeing

25.00%

7,920,513.21

355,592,421.35

(3) The Main Financial Inform at ion of Significant Not Wholly-owned Subsidiary

Unit: RMBName

Ending balance Beginning balanceCurrent

assets

Non-curr

entassets

Totalassets

Currentliabilities

Non-curr

entliability

Totalliabilities

Current

assets

Non-curr

entassets

Totalassets

Currentliabilities

Non-curr

entliability

Totalliabilities

XinjiangLuthai

488,075,

178.89

578,451,

477.03

1,066,526,655.92

555,782,

242.59

4,974,92

7.16

560,757,

169.75

533,910,

300.91

552,920,

939.85

1,086,831,240.76

593,505,

546.28

4,950,67

5.96

598,456,

222.24

LufengWeaving &Dyeing

817,800,

218.73

833,800,

294.71

1,651,600,513.44

193,995,

287.89

29,276,4

76.20

223,271,

764.09

756,065,

670.02

841,883,

193.85

1,597,948,863.87

168,738,

484.34

29,616,0

32.10

198,354,

516.44

Unit: RMBName

Report ing Period Same period of last yearOperating

revenue

Net profit

Totalcomprehensiv

e income

Cash flows

activities

Operating

revenue

Net profit

Totalcomprehensiv

e income

Cash flows from

from operating

operatingactivitiesXinjiangLuthai

342,127,462.81

3,505,617.21

3,505,617.21

96,172,947.55

259,171,106.59

14,636,728.56

14,636,728.56

79,439,238.74

LufengWeaving& Dyeing

793,449,942.60

28,734,401.92

28,734,401.92

16,773,852.80

791,134,076.11

66,827,430.66

66,827,430.66

69,665,169.07

2. Equity in Joint Ventures or Associated Enterprises(1) Significant Joint Ventures or Associated Enterprises

Unit: RMBEnding balance/Reporting Period

yearHaohong Investment Haohong InvestmentCurrent assets 70,056,089.94

Beginn ing balance/The same period of last

128,880,401.95

Non-current assets 217,511,055.06

163,879,055.06

Total assets 287,567,145.00

292,759,457.01

Current liabilities 150,000.00

150,000.00

Total liabilities 150,000.00

150,000.00

Equity attributable to shareholders of theCompany as the parent

287,417,145.00

292,609,457.01

Net assets shares calculated at theshareholding proportion

95,806,134.43

97,536,732.02

Carrying value of investment to associatedenterprises

95,806,134.43

97,536,732.02

Net profit -5,192,312.01

Total comprehensive income -5,192,312.01

IX. The Risk Related to Financial InstrumentsMain financial instruments of the Company included: Loans, accounts receivable, accounts payable,

etc., all the details of the financial instruments, see related projects of “Section V I”. The riskassociated with these financial instruments, as well as the Company’s risk management policy toreduce these risks which were described below. The Company's management managed andsupervised these risks to ensure that the above risk was controlled in a limited scope.The Company use sensitivity analysis technology to analyze the reasonable of risk variables,influence of probable changes to the current profits and Stockholders' equity. Because rarely anyrisk variables change in isolation, and the correlation between variables for the eventual impact ofthe change of a risk variables will have a significant effect, thus, the aforesaid con tent wasprocessing under the assumption of the change of each variable was conducted independently.(I) Risk management objectives and policiesThe goals of Company engaged in the risk management is to achieve the proper balance betweenthe risks and benefits, reduced the negative impa ct to the Company operating performance risk to aminimum, maximized the profits of shareholders and other equity investors. Based on the riskmanagement goal, t he basic strate gy of the Company's ris k management is d etermine and anal yzethe various risks faced by the Company, set up the bottom line of risk and conducted appropriaterisk management, and timely supervised various risks in a reliable way and controlled the riskwithin the range of limit.1. Market Risk(1) Foreign exchange riskForeign exchange risk is referred to the risk incurred due to loss of changes in exchange rate.Foreign exchange risk is referred to the risk incurred due to loss of changes in exchange rate. TheCompany’s foreign exchange risk was mainly related to USD, HKD and EUR, excepting theCompany’s several subsidiaries purchase and sale, in USD, HKD and Dong, the other mainbusiness settled by RMB. On 30 June 2018, in addition to the following assets or liabilities instatement was USD, HKD and EUR, the Company’s assets or liabilities was RMB balance. Theforeign exchange risk in curred by assets and liabili ties of foreign balance may have imp act to theoperation results of the Company.

Item Period-end Period-beginning

Cash and cash equivalents

492,340,742.75

556,296,995.92

Notes receivable

91,404,720.83

110,349,828.81

Account receivable

245,629,702.50

252,210,660.04

Other accounts receivable

2,880,075.42	6,010,153.41

Accounts payable

16,076,948.02

44,343,006.71

Other accounts payable

5,050,421.03

4,566,032.47

Short-term borrowings

778,058,962.33

695,124,996.40

Long-term borrowings due with one year

62,750,292.49

Long-term borrowings

69,431,359.47

(2) Interes t rate ri skThe risk of cash flow changes of financial instruments due to change of interest rate mainly wasrelated bank loan (for details, refer to Note VII-22 and 33).Sensitive analysis of interest rate risk:

Influence of interest increasing 100 BP to current profits and losses and equity of shareholdersbefore tax was followed:

Change Reporting Period Same period of last year

Influence to the

profits

Influence to equity of

shareholders

Influence to the

profits

Influence to equity of

shareholdersIncrease 100 BP

-

-1,891,755.11

3,208,984.32

-8,376,485.24

-7,702,361.91

Decrease 100 BP

1,891,755.11

3,208,984.32

8,376,485.24

7,702,361.91

2. Credit RiskOn 30 J une 2018, credit risk what may lead to the financial losses was the other party of thecontract failed to fulfill the obligations and causes loss of the Company’s financial assets, whichincluding: book value of financial assets recognized in consolidated balance sheet.In order to reduce the credit risk, the Company established a special team be responsible for thedetermination of credit limit to conduct credit approval, and perform other supervising proceduresto ensure that taking necessary measures to recycle expired claims. In addition, the Company ateach balance sheet date, review every single receivables rec ycling situation, to ensure that themoney unable to rec ycle withdrawn provision for bad debt fully. Thus, the Company managementbelieved that have assume the credit risk the Company shouldered had been greatly reduced.The Company's working capital was in bank with higher credit rating, so credit risk of workingcapital was low.3. Liquidity RiskWhen manage liquidity risk, the Company keep administrators deemed sufficient cash and cashequivalents and supervised it to meet the need of the operation of the Company and reduce theinfluence of cash flow volatilit y. The Company management supervised the usage of bank loan andensured to comply with the loan agreement.In the end of Reporting Period, the Company held cash and bank deposit of RMB672 million. In

recent two years, the average of net cash flow of operation activities was RMB1.176 billion. TheCompany believed that the liquidity risk was insignificant.

X. The Disclosure of Fair Value

1. Ending Fair Value of Assets and Liabilities at Fair Value

Unit: RMBItem

Ending fair valueFair value measurement

items at level 1

Fair value measurement

items at level 2

Fair value measurement

items at level 3

TotalI. Consistent fair value

measurement

-- -- -- --(II)Available-for-sale financial

assets

61,233,000.00

61,233,000.00

(1) Debt instrument investment

61,233,000.00

61,233,000.00

(2) Equity instrument investment

(3) Other

The total amount of assetsconsistently measured at fair value

61,233,000.00

61,233,000.00

(5) Trading financial liabilities 28,481,010.00

28,481,010.00

Of which: issued trading bonds

Derivative financial liabilities 28,481,010.00

28,481,010.00

Other

The total amount of liabilitiesconsi stently measured at fair value

28,481,010.00

28,481,010.00

2. Market Price Recognition Basis for Consistent and Inconsistent Fair Value Measurement Items at Level

The fair value of financial l iabilities at level 1 was determined in accordance with the quotation of future foreign exchange of thebank on 30 June 2018.

3. Valuation Technique Adopted and Nature and Amount Determination of Important Parameters forConsistent and Inconsistent Fair Value Measurement Items at Level 2

For the fund investment without active markets in avail able-for-sale financial assets, the fair value was determined in accordancewith th e eval uation on the balance sheet date provided by the asset manager.

XI. Connected Party and Connected Transaction

1. Information Related to the Company as the Parent of the Company

Name Registration place

Nature of business

Registered capital

Propor tion of share

held by theCompany as theparent ag ainst the

Company (%)

rights owned by the

Company as theparent against the

Company (%)Zibo LuchengTextile InvestmentCo., Ltd.

Zibo

Textile, chemistryand investment

RMB63,260,000 15.21%

	Propor tion of voting

15.21%

Notes to information on the Company as the parent of the Company:

The final controllers of the Company are Mr. Liu Zibin and Mr. Liu Deming.

2. Subsidiaries of the Company

Refer to Note VIII-1. Equity in Subsidiaries.

3. Information on the Joint Ventures and Associated Enterprises of the Company

Refer to Note VIII-2. Equity in Joint Ventures or Associated Enterprises.

4. Information on Other Connected Parties

Name Relationship with the CompanyZibo Stanluian Cosmetics Co., Ltd. (hereinafter called“Stanluian”)

Joint-stock company of the Company as the parentZibo Taimei Ties Co., Ltd. (hereinafter called Taimei Ties) Majority-owned subsidiary of the Company as the parent

Zibo Limin Purified Water Co., Ltd. (hereinafter called LiminPurified Water)

Wholly-owned subsidiary of the Company as the parentZibo Luqun Land Co., Ltd (hereinafter called Luqun Land) Wholly-owned subsidiary of the Company as the parent

Zibo Lur ui Fine Chemical Co., Ltd. (hereinafter referred to asLurui C hemi cal)

Majority-owned subsidiary of the Company as the parentZibo Luj ia Property Management Co. , Ltd. (hereinafter referred

to as Lujia Property)

Wholly-owned subsidiary of the Company as the parentShandong Chengshun Petrochemical Co., Ltd. (hereinafter

referred to as Chengshun Petrochemical)

Wholly-owned subsidiary of the Company as the parentHongkong Donghai International Co., Ltd. (hereinafter referred

to as “Donghai International”)

Wholly-owned subsidiary of the Company as the parent

5. List of Connected Transact ions(1) Information on Acquisition of Goods and Reception of Labor Service (Unit:RMB’0,000)

Information on acquisition of goods and reception of labor service

Unit: RMB

Content Reporting Period

Connec te d pa r t y

The appr oval trade

credit

Whether exceedtrade credit or not

last yearZibo LuchengTextileInvestment Co.,Ltd.

Processing of towel, sock, oilproduct, supermarket retail,

		Same period of
household chemicals and boot etc.

6,462,966.30

7,750,000.00

No 6,638,544.04

Taimei Ties Goods processing fee

No 641,693.32

Limin PurifiedWater

Recycled water, sewage treatment 12,624,335.83

14,310,000.00

No 11,460,424.24

ChengshunPetrochemical

Gas 15,016,102.73

18,000,000.00

No 8,940,846.94

Lurui FineChemical

Auxiliaries 53,067,182.08

63,600,000.00

No 44,827,622.22

Information of sales of goods and provision of labor service

Unit: RMBConnec te d pa r t y Content Reporting Period Same period of last year

Lucheng Textil e

Sales of materials, electricity, runningwater, draught water etc.

534,393.58

268,002.48

Taimei Ties Sales of electricity, heating charges

12,289.62

Stanluian Company

Sales of materials, electricity, andrunning water

29,595.68

6,926.79

Limin Purified Water

Sales of materials, electricity and lunchcomponents etc.

1,365.29

72,279.13

Lurui Fine Chemical

Sales of drinking water, water &electricity and lunch components

105,936.42

88,729.05

Lujia Property Sales of materials and recycled water

44,777.40

35,871.66

(2) Information on Connected Lease

The Company was lessor:

Unit: RMBName of lessee Category of leased assets

The lease in come confirmed in

the Repor t i ng Per iod

The lease in come confirmed in

the same period of last year

Zibo Lucheng TextileInvestment Co., Ltd.

House s and bu il dings 48,965.14

15,428.58

Lurui Fine Chemical Houses and buildings 4,091.82

4,091.82

The Company was lessee:

Unit: RMBName of lessor Category of leased assets

The lease fe e confirmed in the

Report ing Period

The lease fe e confirmed in the

same period of last yearZibo Lucheng TextileInvestment Co., Ltd.

Rent of land 1,807,428.60

1,807,428.60

Zibo Lucheng TextileInvestment Co., Ltd.

Rent of gas station 250,857.12

250,857.12

Zibo Lucheng TextileInvestment Co., Ltd.

Rent of land and buildings 5,748,600.80

5,634,857.16

Luqun Property Rent of land and buildings 697,142.82

697,142.82

(3) Information on Inter-bank Lending of Capital of Related Parties

Unit: RMBConnec te d pa r t y Amount Start date End date NoteBorrowingZibo Lucheng TextileInvestment Co., Ltd.

80,520,000.00

2 Aug . 2017 31 Dec. 2018

Borrowed by the Company’s subsidiariesXinshe ng Power and Chengshun Heating

Lujia Property 600,000.00

30 Mar. 2017 31 Dec. 2018

Borrowed by the Company’s subsidiaryChengshun Heating

Stanluian Company 1,450,000.00

17 Aug . 2017 31 Dec. 2018

Borrowed by the Company’s subsidiaryChengshun Heating

Taimei Ties 1,300,000.00

31 Mar. 2017 31 Dec. 2018

Borrowed by the Company’s subsidiaryChengshun HeatingLending

6. Accounts Receivable and Payable of Connected Party(1) Accounts Receivable

Unit: RMBItem Connected party Ending carrying amount Beginning carrying amountAccounts payable: Lurui Fine Chemical 3,774,559.50

Other accounts payable:

Zibo Lucheng TextileInvestment Co., Ltd.

83,474,436.64

60,456,317.14

Other accounts payable: Lujia Property 633,132.50

620,010.00

Other accounts payable: Stanluian Company 1,505,541.04

1,473,828.33

Other accounts payable: Taimei Ties 1,391,374.16

1,362,942.08

XII. Commitments and Contingency

1. Significant Commitments

Signi ficant commitments on the balance sheet date

Capital commitments

Item Ending balance

(RMB’0,000)

Beginning balance

(RMB’0,000)Commitments signed but hasn’t been recognized

in financial statements

-- Commitment for constructing and purchasinglong-lived assets

16,665.29

6,364.72

Total

16,665.29

6,364.72

2. Contingency(1) In Despite of no Significant Contingency to Disclose, the Company Shall Also Make Relevant

Statements.

There was no significant contingency for the Company to disclose.

XIII. Notes of Main Items in the Financial Statements of the Company as the Parent

1. Accounts Receivable(1) Accounts Receivable Disclosed by Category

Unit: RMB

Category

Ending balance Beginning balanceCarrying amount Bad debt provision

Carrying value

Carrying amount Bad debt provision

Carrying valueAmount

Propor

tion

Amount

Withdraw

alproportio

n

Amount

Propor

tion

Amount

Withdraw

alproportio

nAccounts298,726,378.20

100.0015,011,277.88

5.03283,715,100.32

322,076,206.04

100.0016,172,615.06

5.02305,903,590.98

receivablewithdrawal ofbad debtprovision ofby credit riskscharacteristics

%

%

%

%

Total 298,726,378.20

100.00

%

15,011,277.88

5.03

%

283,715,100.32

322,076,206.04

100.00

%

16,172,615.06

5.02

%

305,903,590.98

Accounts receivable with significant single amount for which bad debt provision separately accrued at the period-end:

□ Applicable √ Not applicable

In the groups, accounts receivable adopted aging analysis method to withdraw bad debt provision:

√ Applicable □ Not applicable

Unit: RMBAging

Ending balanceAccounts receivable Bad debt provision Withdrawal proportionSubitem within 1 yearSubtotal within 1 year 297,847,596.66

14,892,379.84

5.00%

1 to 2 years 568,582.62

56,858.26

10.00%

2 to 3 years 310,198.92

62,039.78

20.00%

Total 298,726,378.20

15,011,277.88

5.03%

In the groups, accounts receivable adopted balance percentage method to withdraw bad debt provision:

□ Applicable √ Not applicable

(2) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period

The withdrawal amount of the bad debt provision during the Reporting Period was of RMB-1,161,337.18; the amount of the reversedor collected part during the Reporting Period was of RMB0.00.

(3) Top 5 Accounts Receivable in Ending Balance Collected according to the Arrears Party

The tot al top5 acco unts r eceivabl e in ending bal ance co llected accordin g to the arre ars part y for theCompany was RMB101,861,233.11, accounting for 34.10% of total ending balance of accountsreceivable, and the total accounts receivable correspondingly withdrawn was RMB5,093,061.66.

2. Other Accounts Receivable(1) Other Accounts Receivable Disclosed by Category

Unit: RMBCategory Ending balance Beginning balance

Carrying amount Bad debt provision

Carrying value

Carrying amount Bad debt provision

Carrying valueAmount

Propor

tion

Amount

Withdraw

alproportio

n

Amount

Proporti

on

Amount

Withdraw

alproportio

nOther acco untsreceivable withsignificant singleamount for which

bad debt pr ov i s ion

separately accrued

410,476,728.06

92.21

%

410,476,728.06

486,974,195.33

93.16%

486,974,195.33

Other acco untsreceivablewithdrawn baddebt prov i s ion

according to credit

riskscharacteristics

34,673,033.83

7.79%

2,894,546.03

8.35

%

31,778,487.80

35,729,408.00

6.84%

2,915,363.76

8.16

%

32,814,044.24

Total 445,149,761.89

100.00

%

2,894,546.03

0.65

%

442,255,215.86

522,703,603.33

100.00%

2,915,363.76

0.56

%

519,788,239.57

Other accounts receivable with significant single amount for which bad debt provision separately accrued at the period-end:

√ Applicable □ Not applicable

Unit: RMBOther accounts receivable

(unit)

Ending balanceOther accounts

receivable

Bad debt provision Withdrawal proportion Withdrawal reasonLu Thai (Vietnam) 353,963,796.16

no impairment for the

individual testLu A n Garments 56,512,931.90

no impairment for the

individual testTotal 410,476,728.06

-- --In the groups, other accounts receivable adopted aging analysis method to withdraw bad debt provision:

√ Applicable □ Not applicable

Unit: RMBAging

Ending balanceOther accounts receivable Bad debt provision Withdrawal proportionSubentry within 1 year

Subtotal of within 1 year 28,291,279.16

1,414,563.96

5.00%

1 to 2 years 2,172,721.63

217,272.16

10.00%

2 to 3 years

20.00%

Over 3 years 4,209,033.04

1,262,709.91

30.00%

Total 34,673,033.83

2,894,546.03

8.35%

Notes to the determination basis for the Group:

In the groups, other accounts receivable adopted balance percentage method to withdraw bad debt provision

□ Applicable √ Not applicable

In the groups, other accounts receivable adopted other methods to withdraw bad debt provision:

□ Applicable √ Not applicable

(2) Bad Debt Provision Withdrawn, Reversed or Recovered in the Reporting Period

The withdrawal amount of the bad debt provision during the Reporting Period was of RMB-20,817.73; the amount of the reversed orcollected part during the Reporting Period was of RMB0.00.

(3) Other Account Receivable Classified by Account Nature

Unit: RMBNature Ending carrying amount Beginning carrying amountIntercourse funds 410,476,728.06

486,974,195.33

Expor t rebates 11,876,418.09

16,370,989.66

Payment on behalf 12,069,966.78

14,593,482.76

Guarantee deposit and cash deposit 2,434,068.07

2,532,658.50

Borrowings and petty cash 1,489,937.80

1,044,226.03

Other 6,802,643.09

1,188,051.05

Total 445,149,761.89

522,703,603.33

(4) Top 5 Other Accounts Receivable in Ending Balance Collected according to the Arrears Party

Unit: RMBName of the entity Nature Ending balance

Aging

Propor tion to totalending ba la nc e of

other accounts

receivable

Endingbalance of

bad debtprovision

Lu Thai (Vietnam) Intercourse funds 353,963,796.16

Within 1 year 79.51%

Lu A n Garments Intercourse funds 56,512,931.90

Within 1 year 12.70%

Refund of tax for exportreceivable

Expor t rebates 11,876,418.09

Within 1 year 2.67%

593,820.90

Accounts receivable ofadvance money for thesocial security undertakeby the individual of theemployee

Advance money for thesocial security undertake bythe individual of theemployee

7,263,748.25

Within 1 year 1.63%

363,187.41

B-share dividend refundsreceivable f r om securities

registration and settlement

companies

B-share dividend refundsreceivable f r om securitiesregistration and settlementcompanies

4,791,546.35

Within 1 year 1.08%

239,577.32

Total -- 434,408,440.75

-- 97.59%

1,196,585.63

3. Long-term Equity Investment

Unit: RMBItem

Ending balance Beginning balanceCarrying amount

Depreciation

reserve

Carrying value Carrying amount

Depreciation

reserve

Carrying value

Investment tosubsidiaries

2,069,693,116.04

0.00

2,069,693,116.04

1,744,156,616.04

25,200,000.00

1,718,956,616.04

Investment to jointventur es and associatedenterprises

95,806,134.43

95,806,134.43

97,536,732.02

97,536,732.02

Total 2,165,499,250.47

2,165,499,250.47

1,841,693,348.06

25,200,000.00

1,816,493,348.06

(1) Investment to the Subsidiary

Unit: RMBInvestee

Beginning

balance

Increase Decrease Ending balance

withdrawn

Ending balance of

Depreciat ion reserve

depreciation reserve

Beijing Innovative 25,200,000.00

25,200,000.00

0.00

Xinjiang Luthai 147,303,034.16

147,303,034.16

Xinshe ng Power 176,340,737.93

176,340,737.93

Lufeng Wea ving &

Dyeing

529,620,000.00

529,620,000.00

Luqun Textile 171,784,550.00

171,784,550.00

Luthai (HongKong)

128,771,800.00

128,771,800.00

Shanghai Luthai 20,000,000.00

20,000,000.00

Lu Thai108,242,335.38

108,242,335.38

(Cambodia)Lu Thai (America)

10,209,050.00

10,209,050.00

Lu Thai(Burma) 62,337,238.57

62,337,238.57

Beijing Youxian 13,500,000.00

4,500,000.00

18,000,000.00

Lu Thai (Vietnam) 318,034,810.00

314,820,500.00

632,855,310.00

Lu A n Garments 32,813,060.00

31,416,000.00

64,229,060.00

Total 1,744,156,616.04

350,736,500.00

25,200,000.00

2,069,693,116.04

0.00

(2) Investment to Joint Ventures and Associated Enterprises

Unit: RMB

Investee

Beginning

balance

Increase/decrease

Endingbalance

Ending

balance

ofdepreci

ationreserve

Additi

onalinvestment

Reduc

edinvestment

Gains and

lossesrecognizedunder theequity method

Adjustm

ent ofothercompreh

ensiveincome

Change

s o fotherequity

Cash bonus

or profitsannounced

to issue

Withdra

wal ofimpairmentprovisio

n

Other

I. Joint venturesII. Associated enterprisesHaohongInvestment

97,536,732.02

-1,730,597.59

95,806,134.43

Subtotal 97,536,732.02

-1,730,597.59

95,806,134.43

Total 97,536,732.02

-1,730,597.59

95,806,134.43

4. Operating Revenue and Cost of Sales

Unit: RMBItem

Report ing Period Same period of last yearOperati ng revenue Cost of sales Operating revenue Cost of salesMain operations 2,360,871,867.81

1,740,109,055.52

2,368,342,984.34

1,674,625,537.10

Other operations 143,523,362.44

121,295,410.17

113,980,604.46

92,055,486.97

Total 2,504,395,230.25

1,861,404,465.69

2,482,323,588.80

1,766,681,024.07

5. Investment Income

Unit: RMB

Item Reporting Period Same period of last yearLong-term equity investment incomeacc ount e d by c os t method

17,976,433.62

Long-term equity invest ment incomeacc ount e d by e qui ty method

-1,730,597.59

Investment income from disposal of

loss

3,648,000.52

financial assets at fair value through profit or

1,281,963.99

Total 1,917,402.93

19,258,397.61

6. Other

XIV. Supplementary Materials

1. Items and Amounts of Non-recurring Profit or Loss

√ Applicable □ Not applicable

Unit: RMBItem Amount NoteGains/losses from the disposal of non-current assets -1,603,714.32

Government grants recognized in the current period, except for those acquired in theordinary course of business or granted at certain quotas or amounts according to thegovernment’s unified standards

39,071,113.48

Gain/loss from change of fair value of trading financial assets and liabilities, andinvestment gains from disposal of trading financial assets and liabilities andavailable-for-sale financial assets, other than valid hedging related to the Company’scommon businesses

-22,104,388.63

Other non-operating income and expense other than the above 2,097,576.54

Less: Income tax effects 5,975,920.72

Non-controlling interests effects 1,077,047.21

Total 10,407,619.14

--Explain the reasons if the Company classifies an item as an non-recurring g ain/loss according to the definition in the ExplanatoryAnnouncement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Non-recurring Gains andLosses, or classifies any extraordinary gain/loss item mentioned in the said explanatory announcement as a recurrent gain/loss item

□ Applicable √ Not applicable

2. Return on Equity and E arni ngs Per S hare

Profit as of Reporting Period

Weighted average

ROE (%)

EPS (Yuan/share)EPS-basic EPS-diluted

Net profit attributable to ordinary

Company

5.13%

shareholders of the

0.41

0.41

Net profit attributable to ordinary

Company after deduction of non-recurring profit and loss

4.99%

shareholders of the

0.40

0.40

3. Differences between Accounting Data under Domesti c and Overseas Accounting Standards(1) Differences of Net Profit and Net Assets Disclosed in Fina ncial Reports Prepared under International

and Chinese Accounting Standards

√ Applicable □ Not applicable

Unit: RMB

Net profit Net assetsReport ing Period

Same peri od of last

year

Ending balance Beginning balanceAccording to Chinese accounting

standards

377,355,959.02

395,130,296.26

7,060,561,399.27

7,230,942,770.16

Items and amounts adjusted according to international accounting standards:

Impact on domestic equipment taxcredit recognized as deferred incomeunder international accountingstandards

164,500.00

According to internationalaccounting standards

377,355,959.02

395,294,796.26

7,060,561,399.27

7,230,942,770.16

(2) Differences of Net profit and Net assets Disclosed in Financial Reports Prepared under Overseas andChinese Accounting Standards

□ Applicable √ Not applicable

Part XI Documents Available for Reference

1. The financial statements signed and stamped by the Company’s legal representative, Chief Accountant andFinancial Manager.2. The originals of all the Company’s announcements and documents disclosed to the public during the ReportingPeriod on Securities Times, Shanghai Securities News, China Securities Journal and Ta Kung Pao.

Chairman of the Board: Liu Zibin

Lu Thai Textile Co., Ltd.

22 August 2018