Lu Thai Textile Co., Ltd. Annual Report 2016
LU THAI TEXTILE CO., LTD.
ANNUAL REPORT 2016
March 2017
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Lu Thai Textile Co., Ltd. Annual Report 2016
Section I Important Statements, Contents and Definitions
The board of directors (the “Board”), the supervisory board (the “Supervisory Board”), as
well as the directors, supervisors and executive officers of Lu Thai Textile Co., Ltd. (the
“Company”) hereby guarantee the factuality, accuracy and completeness of the contents of
this Report, and shall be jointly and severally liable for any false representation, misleading
statements or material omissions in this Report.
Liu Zibin, head of the Company, Zhang Hongmei, accounting head for this Report, and
Zhang Keming, head of the accounting department (head of accounting), hereby guarantee
that the Financial Report carried in this Report is factual, accurate and complete.
Except for the following directors, all the other directors attended in person the board
meeting for the review of this Report.
Reason for not attending in
Name Office title Proxy
person
Xu Zhinan Director For reason of work Liu Zibin
Zeng Facheng Director For reason of work Liu Zibin
Chen Ruimou Director For reason of work Qin Guiling
Xu Jianjun Independent Director For reason of work Bi Xiuli
The Company has described in detail in this Report the possible risks. Please refer to the
contents about the major risks and countermeasures in “Outlook of the Company’s future
development” in “Section IV Performance Discussion and Analysis” of this Report. Securities
Times, Shanghai Securities News, China Securities Journal, Ta Kung Pao (HK) and
www.cninfo.com.cn have been designated by the Company for its information disclosure in
2017. And all information about the Company shall be subject to what’s disclosed on the
aforesaid media. Investors are kindly reminded to pay attention to investment risks.
The Board has considered and approved the following proposal for profit distribution: Based
on the total shares of 922,602,311, a cash dividend of RMB5.00 (tax inclusive) per 10 shares
will be distributed to all shareholders of the Company. No bonus shares will be granted, nor
will any capital reserve be converted into share capital.
This Annual Report and its abstract have been prepared in both Chinese and English. Should
there be any discrepancies or misunderstandings between the two versions, the Chinese
version shall prevail.
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Lu Thai Textile Co., Ltd. Annual Report 2016
Table of Contents
Section I Important Statements, Contents and Definitions ............................................................ 2
Section II Corporate Profile and Financial Results ........................................................................ 5
Section III Business Profile ............................................................................................................... 9
Section IV Performance Discussion and Analysis ......................................................................... 12
Section V Significant Events ........................................................................................................... 32
Section VI Share Changes and Shareholders’ Profile ................................................................... 45
Section VII Preference Shares......................................................................................................... 53
Section VIII Directors, Supervisors, Executive Officers and Staff .............................................. 54
Section IX Corporate Governance ................................................................................................. 66
Section X Corporate Bonds ............................................................................................................. 78
Section XI Financial Report ............................................................................................................ 78
Section XII Documents Available for Reference ......................................................................... 218
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Lu Thai Textile Co., Ltd. Annual Report 2016
Definitions
Term Definition
Issuer, Company, the Company Lu Thai Textile Co., Ltd.
The Board of Directors The Board of Directors of Lu Thai Textile Co., Ltd.
The Supervisory Committee The Supervisory Committee of Lu Thai Textile Co., Ltd.
CSRC China Securities Regulation Commission
Yuan, Ten thousand RMB, RMB Ten thousand
The “Company Law” The “Company Law of the People‘s Republic of China”
The “Securities Law” The “Securities Law of the People‘s Republic of China”
Reporting Period January 1, 2016-December 31, 2016
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Lu Thai Textile Co., Ltd. Annual Report 2016
Section II Corporate Profile and Financial Results
I Corporate information
Stock name Lu Thai A, Lu Thai B Stock code 000726, 200726
Changed stock name (if any) N/A
Stock exchange Shenzhen Stock Exchange
Company name in Chinese 鲁泰纺织股份有限公司
Abbr. 鲁泰纺织
Company name in English (if
LU THAI TEXTILE CO., LTD.
any)
Abbr. (if any) LTTC
Legal representative Liu Zibin
Registered address No. 11, Mingbo Road, High-tech Industry Development Zone, Zibo, Shandong, P.R.China
Zip code 255086
No. 81, Songling East Road, Zichuan District, Zibo, Shandong, P.R.China; No. 11, Mingbo Road,
Office address
High-tech Industry Development Zone, Zibo, Shandong, P.R.China
Zip code 255100；255086
Company website www.lttc.com.cn
Email lttc@lttc.com.cn
II Contact information
Board Secretary Securities Representative
Name Qin Guiling Zheng Weiyin, Li Kun
No. 81, Songling East Road, Zichuan No. 81, Songling East Road, Zichuan
Address
District, Zibo, Shandong, P.R.China District, Zibo, Shandong, P.R.China
Tel. 0533-5266188 0533-5285166
Fax 0533-5418805 0533-5418805
E-mail qinguiling@lttc.com.cn wyzheng@lttc.com.cn，likun@lttc.com.cn
III Information disclosure and place where this Report is kept
Newspapers designated by the Company for Securities Times, Shanghai Securities News, China Securities Journal and
information disclosure Ta Kung Pao (HK)
Website designated by the China Securities www.cninfo.com.cn
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Lu Thai Textile Co., Ltd. Annual Report 2016
Regulatory Commission (CSRC) for the publication
of this Report
Place where this Report is kept The Securities Department of the Company
IV Company registration and alteration
Credibility code 91370300613281175K
Changes in main business activities of the Company after going public (if any) No changes
Changes of controlling shareholder (if any) No changes
V Other information
The CPAs firm hired by the Company
Name Ruihua Certified Public Accountants LLP
5-11F, West Tower, China Overseas Property Plaza, Block No. 7, Compound No. 8, Xibinhe
Office address
Road, Yongdingmen, Dongcheng District, Beijing, P.R.C.
Accountants writing signatures He Feng, Cui Xiaoli
Sponsor engaged by the Company to continuously perform its supervisory function during this Reporting Period
□ Applicable √ Not applicable
Financial advisor engaged by the Company to continuously perform its supervisory function during this Reporting
Period
□ Applicable √ Not applicable
VI Accounting and financial results
Indicate by tick mark whether the Company performed any retroactive adjustments to or restatement of its
accounting data due to changes of accounting policies or correction of accounting errors
□ Yes √ No
2016 2015 +/-% 2014
Operating revenues (RMB) 5,981,751,344.63 6,173,322,778.61 -3.10% 6,169,688,792.53
Net profit attributable to shareholders of the
805,446,326.99 712,193,243.19 13.09% 958,725,402.84
Company (RMB)
Net profit attributable to shareholders of the
759,471,125.12 718,263,125.89 5.74% 876,095,180.42
Company before exceptional profit and loss (RMB)
Net cash flows from operating activities (RMB) 1,310,765,281.28 1,027,595,404.34 27.56% 1,112,095,349.02
Basic earnings per share (RMB/share) 0.85 0.75 13.33% 1.000
Diluted earnings per share (RMB/share) 0.85 0.75 13.33% 1.000
Weighted average return on equity (%) 11.71% 10.66% 1.05% 15.39%
December 31, 2016 December 31, 2015 +/-% December 31, 2014
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Lu Thai Textile Co., Ltd. Annual Report 2016
Total assets (RMB) 9,407,103,263.34 9,091,170,499.22 3.48% 8,627,671,393.88
Net assets attributable to shareholders of the
6,937,985,729.19 6,837,113,075.58 1.48% 6,588,772,245.55
Company (RMB)
VII Differences in accounting data under domestic and foreign accounting standards
1. Differences in the net profit and the net assets disclosed in the financial reports prepared under Chinese
and international accounting standards
√ Applicable □ Not applicable
Unit: RMB
Net profit attributable to shareholders of the Net assets attributable to shareholders of
Company the Company
2016 2015 Closing amount Opening amount
According to Chinese accounting
805,446,326.99 712,193,243.19 6,937,985,729.19 6,837,113,075.58
standards
Items and amounts adjusted according to international accounting standards
Impact on domestic equipment tax credit
recognized as deferred income under 725,000.00 1,015,000.00 -329,000.00 -1,054,000.00
international accounting standards
According to international accounting
806,171,326.99 713,208,243.19 6,937,656,729.19 6,836,059,075.58
standards
2. Differences in the net profit and the net assets disclosed in the financial reports prepared under Chinese
and foreign accounting standards
□ Applicable √ Not applicable
No such differences for this Reporting Period.
3. Reasons for the differences in accounting data under domestic and foreign accounting standards
√ Applicable □ Not applicable
Effects of domestic equipment exempted from income tax
The Company exempted from income tax for buying domestic equipment. According to Chinese accounting
standards, the income tax expenses are directly reduced which are recognized as deferred income related to assets
by the international accounting standards. According to the regulations of the international accounting standards,
this difference is amortized over the fixed using periods of year of the fixed assets and adjusting net income and
net assets.
VIII Financial results by quarter
Unit: RMB
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Lu Thai Textile Co., Ltd. Annual Report 2016
1Q 2Q 3Q 4Q
Operating revenues 1,282,806,624.05 1,548,520,148.98 1,433,914,063.96 1,716,510,507.64
Net profit attributable to shareholders of the Company 150,268,522.21 194,372,662.52 236,519,891.59 224,285,250.67
Net profit attributable to shareholders of the Company
137,542,633.98 195,694,228.53 222,917,425.85 203,316,836.76
before exceptional profit and loss
Net cash flows from operating activities 183,258,282.60 380,149,064.83 527,827,860.41 219,530,073.44
Indicate by tick mark whether there are any material differences between the financial indicators above or their
summations and those which have been disclosed in quarterly or semi-annual reports
□ Yes √ No
IX Exceptional profit/loss
√ Applicable □ Not applicable
Unit: RMB
Item 2016 2015 2014 Note
Profit/loss on disposal of non-current assets (including offset asset
-8,321,693.49 -4,666,157.56 -3,316,012.55
impairment provisions)
Government grants charged to the profit/loss for this Reporting Period
(except for the government grants closely related to the business of the
64,121,633.01 43,266,788.43 99,126,878.52
Company and given at a fixed quota or amount in accordance with the
State’s uniform standards)
Profit/loss on fair value changes of transactional financial assets and
liabilities & investment income from disposal of transactional financial
3,212,471.16 -29,145,915.85 -5,319,435.30
assets and liabilities as well as financial assets available for sale, except
for effective hedges related to routine operations of the Company
Non-operating income and expense other than the above 3,926,191.60 3,432,535.47 21,173,199.30
Less: Corporate income tax 3,065,724.25 12,302,309.25 22,913,850.04
Minority interests (after tax) 13,897,676.16 6,654,823.94 6,120,557.51
Total 45,975,201.87 -6,069,882.70 82,630,222.42 --
Explanation of why the Company classified an item as exceptional profit/loss according to the definition in the
Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the
Public—Exceptional Profit and Loss, or reclassified any exceptional profit/loss item given as an example in the
said explanatory announcement to recurrent profit/loss
□ Applicable √ Not applicable
No such cases in this Reporting Period.
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Lu Thai Textile Co., Ltd. Annual Report 2016
Section III Business Profile
I. Main business during the Reporting Period
Whether the Company needs to comply with the disclosure requirements of the particular industry
No
Lu Thai, unremittingly taking “creating wealth, contributing to the society, clothing the country and boosting the development of the
world” as its mission, has been practicing the value of “people foremost policy, rigorous scientific attitude, client oriented principle
and integrity for win-win outcome” for a long time. It is devoted to improving and expanding its industrial chain, making it a
renowned textile and garment business group combing cotton breeding, spinning, bleaching and dyeing, neatening, testing, garment
making and marketing. Lu Thai produces and sells middle and high-grade yarn-dyed fabric and dyeing fabric for shirts and garment.
It claimed its fame for its comprehensive management, R&D ability, advanced technology, international development plan and stable
quality. Moreover, it also attaches great importance to improve the added value of its products, explore the emerging market and
renew its service philosophy. With natural fabric as its flagship, multi-component functional fiber fabric as its spearhead and
wash-and-wear non-ironing technology as its core competency, the Company kept a watchful eye on the latest consumption trend.
Great attention was paid to improve its healthy product series so as to satisfy the needs from the diversified and personalized market.
Lu Thai had already become the largest world renowned manufacturer for high-grade yarn dyed fabric and premium-brand shirts. It
had paved its development pattern featured in going green, low-carbon growth, science and technology and humanism. Its operation
performance was always among the top comparing to its peers. 80% of Lu Thai’s products were exported over 30 countries and
regions in the world, including America, EU and Japan. The export percentage for high-grade yarn dyed fabric--a self-owned brand
attained 70% of its export volume, accounting for 18% of the world’s export market share.
II. Significant changes in the main assets
1. Significant changes in the main assets
Main asset Reason for any significant change
RMB 154,668,358.96 as at 31 Dec. 2016, reduce 24.59% from opening amount, mainly
Construction in progress because of new inputs to Lu Thai (Burma) Garment project and Lu Thai (Vietnam)
Yarn-Dyed Fabric project.
RMB 117,120,463.50 as at 31 Dec. 2016, up 1753.24 % from opening amount, mainly
Engineer material
because of new inputs to Lu Thai (Vietnam) equipment addition project.
2. Main assets overseas
√ Applicable □ Not applicable
Operating Control In the Major
Asset Formation Asset size Location Earnings
model measures to Company’s impairment
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Lu Thai Textile Co., Ltd. Annual Report 2016
ensure asset net assets (%) risk
safety
Main
Lu Thai
management
(Hong Kong) 153,790,829.
Incorporated Hong Kong Marketing personnel 3,319,747.13 2.07% No
Textile Co., 75
sent by the
Ltd.
Company
Main
Lu Thai
management
(America)
Incorporated 5,955,611.11 New York Marketing personnel -693,781.68 0.08% No
Textile Co.,
sent by the
Ltd.
Company
Main
Lu Thai
management
(Cambodia) 156,072,805.
Incorporated Svay Rieng OEM personnel 2,799,831.58 2.11% No
Textile Co., 94
sent by the
Ltd.
Company
Main
Lu Thai
management
(Burma) 80,820,486.7
Incorporated Rangoon OEM personnel -7,106,520.52 1.09% No
Textile Co., 5
sent by the
Ltd.
Company
Main
Lu Thai
management
(Vietnam) 785,946,483. -59,910,174.1
Incorporated Tay Ninh OEM personnel 10.60% No
Textile Co., 25 1
sent by the
Ltd.
Company
Main
Lu An management
104,615,350. Anjiang, -11,655,275.5
Garments Incorporated OEM personnel 1.41% No
30 Vietnam 2
Co., Ltd. sent by the
Company
III. Core competitiveness analysis
Whether the Company needs to comply with the disclosure requirements of the particular industry
No
The comprehensive management ability, research and development ability, technological accumulation and global planning of the
Company’s whole industry chain are the Company's core competitiveness, which did not change during the Reporting Period.
1. A complete industrial chain and a global network: The Company boasts a complete industrial chain from cotton planting, yarning,
dyeing, weaving and post-processing to cloth manufacturing, and thus enjoys the cost advantage brought by complete steps for
producing high-end dyed textile. The Company has set up production bases in Cambodia, Burma, Vietnam, etc., a design agency in
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Lu Thai Textile Co., Ltd. Annual Report 2016
Italy and a market service agency in America, which helps give full play to its international resources, form a global business
network and solidify its internationally leading position as a yarn-dyed fabric maker.
2. The sound comprehensive management capacity and an efficient quality control system: The Company has passed ISO9000
quality management system, ISO14000 environmental management system, OHSAS18000 occupational health safety management
system, and SA8000 social accountability management system successively from 1995. Ever since 2007, the Company has also
passed WRAP: 1999 global garment production social accountability standard, C-TPAT: 2004 anti-terrorism standard, OE100 and
GOTS organic cotton system certification and CNAS national laboratory recognition, to realize the internationalization and
standardization of the Company’s management. In order to pursue the operational management of performance excellence and better
the Company’s performance and capability, the Company has gradually introduced GB/T19580-2004 -Standards for Performance
Excellence Evaluation, created “Great Quality” system and promoted management innovation, to ensure the Company’s business
quality.
3. It enjoyed strong R&D capability and high-end technological platform for cooperation. The Company highly valued
self-dependent innovation and made full use of various technology platforms, inclusive of the National Enterprise Technical Center,
National Talent-in draught Demonstration Base and Shandong Engineering and Technological Research Center. Moreover, Lu Thai
also reinforced its technical cooperation with scientific research institutes, colleges and universities, strategic clines and major
suppliers. It was committed to cutting-edge technical research, and transformed itself from product development to technical
researches step by step. What’s more, the Company also upgraded itself from overcoming key technological difficulties to master
technical principles and set up industrial standards. In the past, it only focused on technical innovation, but now, it is exploring new
technology on one hand and boosting innovation on the other for better growth. Consequently, the Company pushed forward its
development in a green, low-carbon and cyclic manner and strengthened its vitality and growing momentum. Meanwhile, the share
of technology to its development was also increased, which could push forward industrial up gradation.
4. It boasted considerate and efficient customer’s service. With customer-oriented principle as its guidance, the Company
comprehensively enhanced its quality control so as to persistently provide high standard service and set up an industry-leading brand
image, which, in return, could help to win customer’s satisfaction and market recognition. Quality awareness was weaved into every
step of the manufacturing process and the impeccable quality traceability ensured product reputation. Objective analysis and thinking
in the customer’s perspective was the Company’s service rule, which also helped to win the customers’ trust.
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Lu Thai Textile Co., Ltd. Annual Report 2016
Section IV Discussion & Analysis by the Management
I. Summary
In 2016, market demand was sluggish; cost of production factors continuously rose; the import quota of cotton decreased. The
Company stood on its reality in the industry, stably pushed forward the strategy “improve quality and enhance efficiency” and
“overall internationalization”, comprehensively improved service ability of market, popularized excellent performance management,
further improved Lu Thai Production System (LTPS), accelerated the integration of “marketization and internationalization”,
continuously developed innovation motility, carried forward harmonious enterprise culture and “spirit of the craftsman”, guided
employees to practice socialist core values and continuously maintained healthy, stable and sustainable development of the
Company.
For the Reporting Period, the Company achieved operating revenues of RMB 5.982 billion, operating profit of RMB 0.966 billion,
net profit attributable to the shareholders of the Company of RMB 0.805 billion and net profit of RMB 0.759 billion before
exceptional profits and losses. Compared with last year, the aforesaid figures respectively declined 3.1%, rose 14.76%, rose 13.09%
and rose 5.74%. During the Reporting Period, the main business, main profit sources and their structure of the Company remained
unchanged.
During the Reporting Period, the Company progressed in international layout, upgrade of management, innovation-driven and quality
service. The Company ranked first in the list of top 100 enterprises in Chinese textile industry in 2015/2016. It was awarded with the
title “2015 top-100 enterprise of clothing industry” issued by China National Garment Association, selected into the list “2015 top 20
Chinese dyeing and printing enterprises” and awarded with the title “five-star enterprise of performing social responsibility in
Chinese industry” by China Federation of Industrial Economics. During the Reporting Period, the Company passed the confirmation
on “national quality award” which was awarded 3 years ago; it had the honor to successively get the titles “2016 ‘3.15’ International
Consumer Rights Day national excellent enterprise of quality integrity”, “2016 national ‘quality month’ quality integrity advocacy
enterprise”, “national typical enterprise of quality integrity” and “Chinese demonstration enterprise of export quality safety”. It was
awarded as “2016 national textile enterprise of harmonious labor relation”, “national demonstration enterprise of advanced work of
Party building in textile industry”, “2016 talent construction demonstration enterprise in Chinese textile industry”, “national
cultivation base for textile model workers (first batch)” and “commendation prize of Chinese industrial award” by China National
Textile and Apparel Council and Chinese Association for Textile Enterprises Culture Construction. To better utilize technology
accumulation and give full play to the brand superiority of the Company in yam-dyed industry and shirt processing and effectively
integrate domestic and foreign resource superiority in different places, the Company successively set up Lu Thai (Milan) Office, Lu
Thai (America) Textile Co., Ltd., Lu Thai (Cambodia) Textile Co., Ltd., Lu Thai (Burma) Textile Co., Ltd., Lu Thai (Vietnam)
Textile Co., Ltd. and Lu An Garments Co., Ltd. In this way, the Company gets the equal competition platform as international
enterprises in product design, market information collection, after-sale service and products processing. During the Reporting Period,
the first yarn-dyed cloth project of Lu Thai (Vietnam) Textile Co., Ltd. was successfully put into production. After-treatment
production line and Lu An Garments production line are being constructed in order.
Popularize excellent performance management and further perfect Lu Thai Production System (LTPS). During the Reporting
Period, Ministry of Industry and Information Technology promulgated 2016 national industrial enterprises’ typical experience of
“quality benchmarking”. “Quality management with the core of quality, innovation and brand” of our company was recommended.
At the second national exchange meeting of equipment management and innovation achievements of China Association of Plant
Engineering held in Beijing, The Development and Application of OEE in Central Control System got first prize of Chinese
equipment management and innovation achievements. In 2016 national commendation activity for excellent teams of textile quality
management, 14 QC teams of the Company, including “quality improvement team”, were awarded with the title “national excellent
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Lu Thai Textile Co., Ltd. Annual Report 2016
team of textile quality management”. Two items of achievement got second prize of 2016 national quality management team
achievements in textile industry.
Strengthen the integration of intelligentization and automation; constantly upgrade equipment. Through introducing the
intelligent working procedures of Switzerland, Germany and Japan and integrating complete intelligent spinning production line, the
Company raised the efficiency of spinning production. National project of intelligent equipment manufacturing—cooperated with
Companion Group to jointly research and develop Chinese first “digital workshop of bobbin dyeing” which achieves the
center-control dye and intelligent distribution of warp beam. Through popularizing automatic reeding machines, weave efficiency
was raised and intelligent weaving production progressed. Up to now, the Company has preliminarily constructed the intelligent
production plant of spinning, weaving, bleaching and dyeing. Intelligent manufacture has shown its rudiment.
Lay emphasis on the investment in research, development and innovation; guarantee the driving force to sustainable
development. In 2016, the Company focused on strategic target, strengthened new products development, custom-made
development, scientific problem tackling and innovation, carried forward energy conservation and emission reduction, constantly
researched and applied new materials and new technologies and continuously enhanced core competitiveness of the Company. The
Company carried out custom-made development for “important customers”, built R & D team to exchange with the customers
periodically, timely knew customers’ demand and market direction and met their personalized product demand. At the same time, the
Company cooperated with professional colleges, downstream enterprises and upstream enterprises, pushed forward innovation and
development, expanded the innovation and application of new-type fiber and diversified structure of products.
The Company tackled key problems of “bottleneck” technology and new breakthrough was got to technological problems. In 2016,
the group company set up 212 technical topics, including spinning, weaving, dyeing, processing, clothing manufacture, energy,
environmental protection, information, brand and so on which closely related to development of the group. In 2016 Lu Thai meeting
of scientific and technological achievements authentication, 2 items of technology reached international leading level and 1 item of
technology reached international advanced level through the field authentication of experts team.
In the latest years, the Company has successfully developed more than 600 items of new technology and new products. Among them,
11 items reached international leading level; 28 items reached international advanced level. By 2016, the Company had undertaken
15 national-level and provincial and ministerial-level key research projects, including 1 national Torch Plan, 1 national 863 Program
and 2 national science and technology support programs. 44 national-level and provincial and ministerial-level awards have been got,
including 1 first prize of national scientific and technological progress, 2 second prizes of national scientific and technological
progress and 41 first prizes of provincial and ministerial-level scientific and technological progress. 260 patents had been authorized.
The Company had hosted or participated in establishing 32 national and industrial standards, including 7 national standards and 25
industrial standards.
Carry out green management facing “the future”; ecological development progressed stably. The Company persists in green,
low-carbon and sustainable development, constantly innovates management and has achieved great progress in energy conservation
and emission reduction, pollution control, recycling economy development, the recycle and comprehensive utilization of ammonia,
alkali and PVA, the advanced treatment and recycle of sewage and the incineration and harmless treatment of sludge. China National
Textile and Apparel Council and China Research and Promotion Association of Textile Ecological Civilization jointly initiated
activity “China Textile Ecology Civilization”. Regarding Cultivate and Build Evaluation Index System for Ecological Civilization
Demonstration Enterprises in Textile Industry as review basis, the Company was recommended to be “China Ecological Civilization
Demonstration Enterprise in Textile Industry”. At “2016 China Hi-Tech national annual meeting of energy conservation and
environment protection in printing and dyeing industry”, 2 key items of production technology of the subsidiary corporation Lufeng
Weaving & Dyeing Company Ltd. were assessed to be national tenth-batch advanced technology of energy conservation and
emission reduction in printing and dyeing industry.
In 2016, the Company actively carried forward Zero Discharge of Harmful Chemicals (ZDHC), established Lu Thai system of
ecological safety management and made safety management procedures for chemicals, procedures of new chemicals approval and
the plan of elimination and replacement of harmful chemicals. At the4th CNTAC-ZDHC meeting for interested parties of harmful
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Lu Thai Textile Co., Ltd. Annual Report 2016
chemicals management & green manufacture, the Company was awarded as the optimal pilot plant of ten problems practice pioneer.
Intensify brand construction, bring full industrial chain superiority of the Company into full play and constantly improve the
ability of independent design. During the Reporting Period, the Company optimized services to customers in the research,
development and design of shell fabrics and garments. It had laid firm foundation for creating high-end textile of the world. In 2016,
through attending 19 domestic and foreign large exhibitions and introduction & marketing conferences for customers held in Italy,
Shanghai, Hong Kong, America, Japan and so on, new functional products were presented and introduced to customers. Good
mechanism of communication with customers had been established and the products were favored by them. In 2016 selecting activity
of “Chinese excellent printing and dyeing shell fabric”, Random shell fabric and Glistening Phantom shell fabric of the Company got
first prize; Fantasy shell fabric got second prize. In activity “2016 Chinese shell fabric star survey on most satisfactory products”,
shell fabric of the Company got the prize “the most fashionable style”. In addition, shell fabric Ink Charm of the Company got
bronze prize in 2016 China international competition of shell fabric design & 2017/18 Chinese popular autumn and winter shell
fabric. In the latest years, Lu Thai has got more than 20 Excellence Awards in China international competition of shell fabric design
and ecological and environmental-protection design competition. As the representative of domestic excellent shell fabric enterprises,
many design products have been selected for French TEXWORLD shell fabric exhibition.
The holding subsidiary corporation Beijing Lu Thai Youxian E-Commerce Co., Ltd. used O2O mode featuring “place order online
and conduct measurement by visiting the customers”. Customers can make an appointment and order conveniently through Utailor,
Vshop, Jingdong Flagship Store or 400 telephone. The Company provides customized service for clients in high quality. Since
“UTAILORE”, one of its high-end men’s clothing was pushed to the market, repeat purchase rate from its customers, old and new, is
rising consistently. Now, its business expands from high-end shirt customization to garment customization, which paves the way for
the promotion of its garment brands.
At the current stage, Lu Thai, with natural fabric as its flagship, multi-component functional fiber fabric as its spearhead,
wash-and-wear non-ironing technology as its core competency, the latest consumption trend as its guidance and internationalized
industrial manufacturing as its basis, is sparing every effort to attain a global integrated development, so as to ensure its leading
position in the yarn-dyed shirt fabric sector.
II. Main business analysis
1. Summary
During the Reporting Period, operation revenue, operating costs, selling expenses and management expense respectively decreased
for 3.10%, 7.74 %, 17.23 % and 1.69 %. At the same time, financial expense and income tax respectively increased for 25.58% and
16.48 %. Increase 25.58% of financial expense was caused by the influence of exchange rate variation and the increase of net loss in
exchange; increase 16.48 % of income tax was caused by the increase of total profit made by parent company and Lufeng;
investment in the year was RMB 0.29 billion which declined for 1.73% comparing with that in the last year; the net cash flow in
business activities increased for 27.56% because the cash for commodity purchase and labor service payment decreased for 14.72 %;
net cash flow generated in investment activities decreased for 67.00% because the cash paid for fixed assets increased for 88.99%
and the cash expenditure for investment increased; net cash flow generated in financing activities decreased for 36.06% because
parent company increased the payment for B share; net increase of cash and cash equivalent decreased for 195.37% because the net
cash flow generated in investment activities decreased for 67.00%.
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Lu Thai Textile Co., Ltd. Annual Report 2016
2. Revenues and costs
(1) Breakdown of the operating revenues
Unit: RMB
2016 2015
In operating In operating +/-
Amount Amount
revenues revenues
Operating revenues 5,981,751,344.63 100% 6,173,322,778.61 100% -3.10%
By segment
Textile and apparel 5,559,988,040.46 92.95% 5,666,835,971.98 91.80% -1.89%
Cotton 12,617,667.25 0.21% 36,667,302.61 0.59% -65.59%
Electricity and steam 109,348,407.76 1.83% 130,561,983.84 2.11% -16.25%
Other 299,797,229.16 5.01% 339,257,520.18 5.50% -11.63%
By product
Fabric products 4,342,679,194.97 72.60% 4,497,661,649.68 72.86% -3.45%
Shirts 1,217,308,845.49 20.35% 1,169,174,322.30 18.94% 4.12%
Cotton 12,617,667.25 0.21% 36,667,302.61 0.59% -65.59%
Electricity and steam 109,348,407.76 1.83% 130,561,983.84 2.11% -16.25%
Other 299,797,229.16 5.01% 339,257,520.18 5.50% -11.63%
By area
Hong Kong 243,268,777.10 4.07% 319,142,637.77 5.17% -23.77%
Japan and South Korea 367,116,617.59 6.14% 404,101,936.72 6.55% -9.15%
Southeast Asia 1,973,589,974.34 32.99% 1,877,255,492.74 30.41% 5.13%
Europe and America 1,065,910,735.22 17.82% 1,002,515,150.25 16.24% 6.32%
Other 429,694,336.29 7.18% 486,694,905.10 7.88% -11.71%
China Mainland 1,902,170,904.09 31.80% 2,083,612,656.03 33.75% -8.71%
(2) Segments, products or areas contributing over 10% of the operating revenues or profits
√ Applicable □ Not applicable
Whether the Company needs to comply with the disclosure requirements of the particular industry
No
Unit: RMB
Operating Gross profit
Operating Gross profit Operating cost:
Operating cost revenue: YoY margin: YoY
revenue margin YoY +/-%
+/-% +/-%
15
Lu Thai Textile Co., Ltd. Annual Report 2016
By segment
Textile and
5,559,988,040.46 3,714,143,672.96 33.20% -1.89% -6.95% 3.64%
apparel
By product
Fabric products 4,342,679,194.97 2,879,947,896.50 33.68% -3.45% -9.12% 4.14%
Shirts 1,217,308,845.49 834,195,776.46 31.47% 4.12% 1.41% 1.83%
By area
Southeast Asia 1,973,589,974.34 1,309,327,081.90 33.66% 5.13% -1.01% 4.12%
Europe and
1,065,910,735.22 721,294,711.28 32.33% 6.32% 2.21% 2.73%
America
China 1,902,170,904.09 1,277,359,785.99 32.85% -8.71% -12.53% 2.94%
Main business data of the previous year restated according to the changed statistical caliber for the Reporting Period
□ Applicable √ Not applicable
(3) Product sales revenue higher than the service revenue
√ Yes □ No
Business segment Item Unit 2016 2015 +/-
Sales volume (0,000 meters) 22,035.33 22,207.14 -0.77%
Textile and fabric Output (0,000 meters) 25,185.85 25,468.85 -1.11%
Stock (0,000 meters) 3,286.52 3,104.67 5.86%
Sales volume (0,000 pieces) 1,844.13 1,837.08 0.38%
Textile and apparel Output (0,000 pieces) 1,856.04 1,859.32 -0.18%
Stock (0,000 pieces) 126.66 126.46 0.16%
Sales volume (ton) 618.91 2,903.68 -78.69%
Cotton Output (ton) 11,013.71 13,634 -19.22%
Stock (ton) 3,760.35 4,683 -19.70%
Sales volume (000 KWH) 95,570.01 108,044.04 -11.55%
Electricity Output (000 KWH) 406,457.36 383,485.09 5.99%
Stock (000 KWH)
Sales volume (ton) 318,171.76 307,894.71 3.34%
Steam Output (ton) 1,235,811.79 1,241,941.61 -0.49%
Stock (ton)
Reason for any over 30% YoY movements in the data above
√ Applicable □ Not applicable
The external cotton sale of affiliated companies decreased for 78.69% during January-December of 2016 because the cotton sale of
16
Lu Thai Textile Co., Ltd. Annual Report 2016
Xinjiang Lu Thai decreased.
(4) Execution progress of major signed sales contracts in the Reporting Period
□ Applicable √ Not applicable
(5) Breakdown of the operating costs
By segment and product
Unit: RMB
2016 2015
Segment Item +/-
Amount In operating costs Amount In operating costs
Textile and
Operating cost 3,714,143,672.96 92.74% 3,991,647,481.25 91.95% -6.95%
apparel
Cotton Operating cost 11,742,505.52 0.29% 30,736,539.86 0.71% -61.80%
Electricity and
Operating cost 94,471,256.88 2.36% 92,038,888.21 2.12% 2.64%
steam
Other Operating cost 184,663,982.02 4.61% 226,611,967.72 5.22% -18.51%
Unit: RMB
2016 2015
Product Item +/-
Amount In operating costs Amount In operating costs
Fabric products Operating cost 2,879,947,896.50 71.91% 3,169,035,497.16 73.00% -9.12%
Shirts Operating cost 834,195,776.46 20.83% 822,611,984.09 18.95% 1.41%
Cotton Operating cost 11,742,505.52 0.29% 30,736,539.86 0.71% -61.80%
Electricity and
Operating cost 94,471,256.88 2.36% 92,038,888.21 2.12% 2.64%
steam
Other Operating cost 184,663,982.02 4.61% 226,611,967.72 5.22% -18.51%
Note:
Manufacture
Product Period Raw material Labor cost Depreciation Energy Total
expenses
2016 54.82% 17.01% 5.22% 12.86% 10.09% 100.00%
Fabric
2015 55.56% 17.50% 4.91% 12.92% 9.11% 100.00%
2016 55.71% 39.10% 1.61% 0.74% 2.84% 100.00%
Shirts
2015 55.71% 39.10% 1.61% 0.74% 2.84% 100.00%
(6) Changes in the consolidation scope for the Reporting Period
√ Yes □ No
17
Lu Thai Textile Co., Ltd. Annual Report 2016
During this Reporting Period, the Company set up wholly-owned subsidiary Lu An Garments Co., Ltd. and canceled subsidiary
Beijing Lufeng Sunshine Garments Co., Ltd.
(7) Major changes in the business, products or services in the Reporting Period
□ Applicable √ Not applicable
(8) Main customers and suppliers
Main customers
Total sales to top 5 customers (RMB) 1,240,805,282.08
Ratio of total sales to top 5 customers to annual total sales 20.74%
(%)
Ratio of total sales to top 5 customers to annual total sales 0.00%
from the related party (%)
Information about the top 5 customers
Serial No. Name of customer Sales (RMB) Proportion in annual total sales (%)
1 TAL 406,591,614.86 6.80%
2 OLYMP 266,934,476.74 4.46%
3 CHENFENG (JIANGSU) GARMENT CO., LTD. 232,701,549.04 3.89%
4 THE MEN’S WEARHOUSE 223,286,163.57 3.73%
5 SEIDENSTICKER 111,291,477.87 1.86%
Total -- 1,240,805,282.08 20.74%
Other information about the main customers
□ Applicable √ Not applicable
Main suppliers
Total purchases from top 5 suppliers (RMB) 796,435,937.70
Ratio of total purchases from top 5 suppliers to annual total purchases (%) 20.35%
Ratio of total purchases from top 5 suppliers to annual total purchases from related party (%) 0.00%
Information about the top 5 suppliers
Serial No. Name of supplier Purchase amount (RMB) Proportion in annual total purchases (%)
ZIBO POWER SUPPLY COMPANY OF
1 STATE GRID SHANDONG ELECTRIC 212,172,341.45 5.42%
POWER COMPANY
XINJIANG PRODUCTION AND
2 CONSTRUCTION CORPS COTTON AND 203,697,535.43 5.20%
LINEN COMPANY
3 ALLENBERG COTTON CO. 153,281,799.32 3.92%
18
Lu Thai Textile Co., Ltd. Annual Report 2016
4 JESS SMITH AND SONS COTTON, LLC 130,591,336.60 3.34%
5 ZIBO SENHAI TRADING COMPANY 96,692,924.90 2.47%
Total -- 796,435,937.70 20.35%
Other information about the main suppliers
□ Applicable √ Not applicable
3. Expense
Unit: RMB
2016 2015 +/-% Reason for any significant change
Selling expenses 158,869,993.22 191,933,295.19 -17.23%
Administrative expenses 659,398,886.58 670,704,384.29 -1.69%
Financial expenses 20,697,661.64 16,481,023.89 25.58%
4. R&D input
√ Applicable □ Not applicable
With leading the technology development in the industry as the goal, the research staff of the Company work hard in new product
development, new technology promotion and transformation of new technological results to productivity to explore ways for
transforming the business mode, adjusting the structure and extending the industrial chain. These efforts will promote the Company’s
development towards an energy-saving and environment-friendly enterprise and truly achieve the sustainable development.
Particulars about the R&D input
2016 2015 +/-%
Number of R&D personnel 1,703 1,693 0.59%
R&D personnel in total
10.81% 10.17% 0.64%
employees
R&D input (RMB) 289,826,541.83 294,928,756.29 -1.73%
R&D input in operating
4.85% 4.78% 0.07%
revenues
Capitalized R&D input (RMB) 0.00 0.00 0.00%
Capitalized R&D input in total
0.00% 0.00% 0.00%
R&D input
Reasons for any marked YoY change of the proportion of the R&D input in the operating revenues
□ Applicable √ Not applicable
Reasons for any sharp variation of the capitalization rate on the R&D input and rationale
□ Applicable √ Not applicable
5. Cash flows
Unit: RMB
Item 2016 2015 +/-
19
Lu Thai Textile Co., Ltd. Annual Report 2016
Subtotal of cash inflows from operating activities 6,171,600,392.84 6,298,613,072.87 -2.02%
Subtotal of cash outflows from operating activities 4,860,835,111.56 5,271,017,668.53 -7.78%
Net cash flows from operating activities 1,310,765,281.28 1,027,595,404.34 27.56%
Subtotal of cash inflows from investing activities 36,705,249.54 53,217,989.19 -34.97%
Subtotal of cash outflows from investing activities 904,713,137.25 572,981,769.64 57.53%
Net cash flows from investing activities -868,007,887.71 -519,763,780.45 -67.00%
Subtotal of cash inflows from financing activities 2,244,937,867.50 1,535,434,022.24 46.21%
Subtotal of cash outflows from financing activities 2,807,150,042.60 1,948,641,555.44 44.06%
Net cash flows from financing activities -562,212,175.10 -413,207,533.20 -36.06%
Net increase in cash and cash equivalents -110,916,252.83 116,301,675.35 -195.37%
Main influence factors for any significant YoY changes in the items above
√ Applicable □ Not applicable
During the Reporting Period, net cash flow generated in investment activities was RMB 868,007,887.71, decreasing for 67.00%; this
is because the payment for fixed assets increased. Net cash flow generated in financing activities was RMB 562,212,175.10,
decreasing for 36.06%; this is because parent company increased the payment for B share. Net cash and cash equivalent increased for
RMB 110,916,252.83, decreasing for 195.37%; this is because net cash flow generated in investment activities decreased; the
investment in Lu Thai (Vietnam) yarn-dyed fabric project and Lu An garment project increased, which caused the increase of cash
expenditure in investment activities.
Reasons for any big difference between the net operating cash flows and the net profits in the Reporting Period
□ Applicable √ Not applicable
III. Non-core business analysis
√ Applicable □ Not applicable
Unit: RMB
Amount In total profits (%) Source/reason Continuity
Gains on delivery of financial assets such
Investment gains -60,779,660.20 -5.93% No
as forward exchange settlement
Gains/losses on fair Losses on fair value changes of financial
63,992,131.36 6.24% No
value changes assets and liabilities
Inventory falling price provision, bad-debt
Asset impairment 88,833,415.21 8.66% No
provision, etc.
Non-business
75,254,150.98 7.34% No
revenue Governmental subsidies
Non-business
15,528,019.86 1.51% No
expense Losses on disposal of non-current assets
20
Lu Thai Textile Co., Ltd. Annual Report 2016
IV. Asset and liability analysis
1. Significant changes in the asset composition
Unit: RMB
As at 31 Dec. 2016 As at 31 Dec. 2015 Reason for
Proportion
In total significant
Amount Amount In total assets (%) change（%）
assets (%) change
Monetary funds 662,967,785.49 7.05% 795,501,196.07 8.75% -1.70%
Accounts
293,129,727.93 3.12% 262,848,042.62 2.89% 0.23%
receivable
Inventories 1,816,700,441.85 19.31% 1,743,963,973.24 19.18% 0.13%
Investing real
25,844,090.56 0.27% 0.00% 0.27%
estate
Long-term equity
0.00% 0.00% 0.00%
investment
Fixed assets 5,244,335,459.80 55.75% 4,907,575,469.84 53.98% 1.77%
Construction in
154,668,358.96 1.64% 205,094,029.50 2.26% -0.62%
progress
Short-term
873,261,856.02 9.28% 802,766,318.90 8.83% 0.45%
borrowings
Long-term
135,678,044.89 1.44% 0.00% 1.44%
borrowings
2. Assets and liabilities measured at fair value
√ Applicable □ Not applicable
Unit: RMB
Gain/loss on Cumulative fair
Impairment Purchased
Opening fair value value changes Sold amount in Closing
Item provisions in amount in
amount changes in recorded into current period amount
current period current period
current period equity
Financial assets
1. Financial
assets measured
at fair value of
which changes
are recorded 71,696,678.70 14,122,247.61 85,287,883.87 0.00
into current
gains/losses
(excluding
derivative
21
Lu Thai Textile Co., Ltd. Annual Report 2016
financial assets)
Total of above 71,696,678.70 0.00 0.00 0.00 14,122,247.61 85,287,883.87 0.00
Financial
46,695,875.00 46,695,875.00 0.00 0.00 0.00
liabilities
Significant changes in the measurement attributes of the main assets in the Reporting Period
□ Yes √ No
V. Investment analysis
1. Total investments
□ Applicable √ Not applicable
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
Unit: RMB
Gain/los Cumulat
Variety Account s on fair ive fair
Code of Name of Initial Purchas Gain/los
of ing Opening value value Sold in Closing Account Source
ed in s in
securitie securitie investm measure book changes changes current book
securitie current current
ment value in recorde period value ing title of funds
s s ent cost model period period
s current d into
period equity
Guotai Transact
Domesti Fair
Junan 27,576, 25,043, -3,464,6 ional Own
c/overse 01788 value 0.00 0.00
Internati 964.80 754.02 20.38 financia funds
as stock method
onal l asset
Transact
Domesti Fair
13,692, 6,086,5 22,867, 2,625,9 ional Own
c/overse 02883 COSL value 0.00
542.85 10.22 472.11 54.60 financia funds
as stock method
l asset
Domesti Lianhua Fair Transact
10,872, 4,200,9 15,581, 141,190 Own
c/overse 00980 Superma value 0.00 ional
439.58 14.08 759.97 .60 funds
as stock rket method financia
22
Lu Thai Textile Co., Ltd. Annual Report 2016
l asset
Transact
Domesti Fair
Jinjiang 9,260,9 177,969 6,405,7 -3,346,0 ional Own
c/overse 02006 value 0.00
Hotel 73.54 .45 04.92 26.66 financia funds
as stock method
l asset
Transact
Domesti Chow Fair
427,664 3,656,8 4,646,3 547,403 ional Own
c/overse 00116 Sang value 0.00
.16 53.86 66.10 .75 financia funds
as stock Sang method
l asset
Tong
Transact
Domesti Ren Fair
3,197,4 4,013,3 707,962 ional Own
c/overse 01666 Tong value 0.00 0.00
26.40 81.74 .54 financia funds
as stock Technol method
l asset
ogies
Transact
Domesti Fair
Wongtee 2,180,2 1,772,0 -481,78 ional Own
c/overse 200056 value 0.00 0.00
B 15.80 69.80 2.60 financia funds
as stock method
l asset
Transact
Domesti Fair
Shenzhe 469,224 503,134 18,062. ional Own
c/overse 200058 value 0.00 0.00
n SEG B .00 .87 87 financia funds
as stock method
l asset
Transact
Domesti Fair
Baoye 430,501 459,086 5,197.2 ional Own
c/overse 02355 value 0.00 0.00
Group .87 .00 0 financia funds
as stock method
l asset
Transact
Domesti Guangsh Fair
2,756,2 2,767,4 -81,942. ional Own
c/overse 00525 en value 0.00 0.00
72.05 22.38 52 financia funds
as stock Railway method
l asset
Other securities
711,583. 832,453 1,227,7 360,730
investments held at -- 0.00 -- --
30 .65 31.96 .76
period-end
76,176, 71,696, 14,122, 85,287, -2,967,8
Total -- 0.00 0.00 0.00 -- --
261.25 678.70 247.61 883.87 69.84
Disclosure date of board
announcement on approval
of securities investment
Disclosure date of general
meeting announcement on
approval of securities
23
Lu Thai Textile Co., Ltd. Annual Report 2016
investment (if any)
(2) Investment in financial derivatives
√ Applicable □ Not applicable
Unit: RMB Ten thousand
Proporti
on of
closing
Actua
investm
l
Related- Type of Amount Impairm ent
Initial Opening Amount Closing gain/l
party derivativ purchas ent amount
Operato investm Beginni Ending investm sold in investm oss in
Relation transacti e ed in provisio in the
r ent ng date date ent Reportin ent Repor
on or investme Reportin n (if Compan
amount amount g Period amount ting
not nt g Period any) y’s
Perio
closing
d
net
assets
(%)
Forward
Commer
Non-rel exchange 79,386.2 26 Jan. 30 Dec. 79,386.2 123,015. -2,266
cial No 43,629.6 0 0.00%
ated settleme 1 2015 2016 1 81 .81
bank
nt
Commer
Non-rel Option 23 Jan. 26 Dec. 114,307. -1,784
cial No 104,300 104,300 10,007.5 0 0.00%
ated portfolio 2015 2016 5 .74
bank
183,686. 183,686. 237,323. -4,051
Total -- -- 53,637.1 0 0.00%
21 21 31 .55
Capital source for derivative
Own funds
investment
Lawsuit (if applicable) No lawsuits
Disclosure date of board
announcement on approval of 25 Apr. 2015
derivative investment (if any)
Disclosure date of general meeting
announcement on approval of 19 May 2016
derivative investment (if any)
Risk analysis and risk control The Company conducted derivatives products transaction in order for hedging. And the
measures for derivative products held forward settlement hedging was operated by installments, with the relevant amount not more
in Reporting Period (including but not than the planned derivatives products transactions. And all derivatives products transaction
limited to market risk, liquidity risk, was zero-deposit. Meanwhile, the Company had a complete risk control system for sufficient
24
Lu Thai Textile Co., Ltd. Annual Report 2016
credit risk, operation risk, legal risk, analysis and prevention of possible risks such as risk of laws and regulations, credit risk,
etc.) operation risk and market risk.
1. Risk concerning laws and regulations:
The Company conducted derivatives products transaction in strict accordance with relevant
laws and rules as well as regulatory policies from government securities regulatory
authorities, if there were no standard operation procedures and strict approval procedures, it
was easy to cause compliant and regulatory risks existing in the validity and feasibility of
contract, commitments and other legal documents signed.
Risk control measures: The Company carefully studied and mastered laws, regulations and
policies relevant to derivative products transaction, formulated internal control rules for the
forward settlement hedging business, standardized the operation procedures. And
strengthened the compliant examination on derivative products investment business, and
strictly abided by relevant laws, regulations and the Company’s internal management rules.
2. Credit risk and liquidity risk:
When the contract matures, the Company couldn’t deliver as scheduled due to insufficient
liquidity, and the counterparty or the Company couldn’t fulfill the contract due to other
aspects except the liquidity, which would cause credit risk and further economic losses for
the Company.
Risk control measures: the Company chose the powerful financial institutions with good
reputation as the counterparty, and signed standard derivative products transaction contract,
as well as strictly controlled the credit risk of counterparty. The Company conducted
derivative investment transactions according to the relevant approval procedure, which was
in line with relevant laws, regulations, the Company’s Articles of Association, the
Management Rules for Derivative Investment of Lu Thai Textile Co., Ltd. and the Proposal
on the Plan of Lu Thai Textile Co., Ltd. for Derivative Transactions in 2015 approved at the
20th Session of the 7th Board of Directors on 23 Apr. 2015, and performed relevant
information disclosure responsibilities. The Company decided the up limit for the amount of
derivative products transaction according to the production and operation scale and the
progress of foreign exchange income for the Company, and delivered by phases. It was also
possible to use extension of term and other ways to ensure the fulfillment of contract as
schedules upon the mature of contract, and wouldn’t cause any loss of credit risk for the
Company due to insufficient liquidity or other reasons.
3. Operation risk:
The derivative financial transactions had high specialty and complexity, so imperfect
internal operation procedures, staffs and external events would make the Company to
undertake risks during the transaction.
Risk control measures: The Company promulgated strict authorization and approval system
and perfect regulatory mechanism, fixed the departments, operation procedures and approval
procedures system to conduct derivative products transaction, established special risk
control positions, implemented strict authorization and post checks and balances system,
meanwhile, it improved the overall quality of relevant personnel through strengthening the
business training and professional ethics education for them. Besides, it established the
System of Reporting the Abnormal Situation Timely, formed an efficient risk management
25
Lu Thai Textile Co., Ltd. Annual Report 2016
procedures, so as to ensure to lower the operation risks to the maximum.
4. Market risk:
Since the RMB exchange rate reform on 8 Nov. 2015, the reform towards a market-based
RMB exchange rate regime has stepped into a new stage. In the short run, there is some
depreciation pressure on the RMB, but a sharp depreciation is considered unlikely. In the
long run, the positive economic fundamentals of China, the large surplus of the current
accounts and the faster globalization of the RMB will enable the RMB to remain a strong
currency. In the near future, the RMB exchange rate is expected to be more flexible with a
distinct feature of bidirectional volatility and stable within a rational and balanced range.
The forward settlement of exchange and the option business is important derivative product
transactions of the Company, which was significantly affected by the exchange rate
fluctuation. If the RMB is devalued by a large margin on the basis of the current situation
before the contract is due, so then, the larger losses shall incur in the contract on forward
settlement of exchange or option signed by the Company.
Risk control measures: Although a more flexible RMB exchange rate and the increased
fluctuation range added to the operation difficulty, it provided a certain opportunity.
Therefore, the relevant personnel of the Company will actively analyze market changes,
carefully operate and hold positive opportunity, so as to try the best to reduce the market
risks under the condition of increased market difficulty.
1. Up to 31 Dec. 2016, the Company held by the derivatives was fully delivered.
Changes in market prices or fair value 2. From Jan. 2015 to Dec. 2016, the due financial derivative products of the Company
of invested derivatives in Reporting totally equaled to USD 404.40 million, and the loss generated was RMB 40.5155 million. To
Period (fair value analysis should be specific, the due forward settlement was USD188.90 million, generating loss of RMB
include specific analysis methods as 22.6681 million; and the due foreign exchange options equaled to USD215.50 million of
well as relevant assumptions and which USD 189.50 million was delivered on time upon satisfaction of the delivery
parameters) conditions, generating loss of RMB17.8474 million, and USD 26million was undelivered
due to dissatisfaction of the delivery conditions.
Significant changes in the Company’s
accounting policy and specific
accounting principles for derivatives No significant changes
in Reporting Period when compared
to last period
The Company’s independent directors Xu Jianjun, Zhao Yao, Bi Xiuli, Pan Ailing and Wang
Xinyu, concerning conducting derivatives business, have issued the following professional
advice: We are of the opinion that it will strengthen the Company’s competitiveness to use
Specific opinion from independent derivative transactions with focus on forward settlement and purchase as an effective tool to
directors on the Company’s avoid foreign exchange risks, to strengthen the relevant internal control and to carry out the
derivatives investment and risk loss and risk prevention measures so as to improve the operation and management. In
control conducting derivative transactions with focus on forward settlement and purchase, the
Company follows a legal approval procedure, has sound relevant institutions and keeps the
risks relatively controllable. No harm has been done to the interests of the Company’s
shareholders.
26
Lu Thai Textile Co., Ltd. Annual Report 2016
5. Utilization of raised funds
□ Applicable √ Not applicable
No such cases in the Reporting Period
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 profits
Unit: RMB
Relationsh Main
Company Registered Operating
ip with the busine Total assets Net assets Operating profits Net profits
name capital revenues
Company ss
Lufeng
Weaving &
Subsidiary Fabric 706,160,000.00 1,436,247,902.02 1,295,510,863.20 1,607,276,257.49 153,541,612.78 136,980,576.95
Dyeing Co.,
Ltd.
Subsidiaries obtained or disposed in the Reporting Period
□ Applicable √ Not applicable
Particulars about the main controlled and joint stock companies:
Lufeng Weaving & Dyeing Co., Ltd. (hereinafter called “Lufeng Weaving & Dyeing”) is the holding subsidiary corporation of the
Company. Registration place: Zibo, Shandong; registered capital: RMB 706.160 million. It was authenticated to be high-tech
enterprise in October 2014, mainly manufacturing and selling textile printing and dyeing products and the products of clothing and
garments. Its export income accounted for more than 75%. During the Reporting Period, market required more and more on the
production and environmental protection of printing and dyeing products. Lufeng Weaving & Dyeing had been further acknowledged
in market as an enterprise with normative operation and the focus on environmental protection and sustainable development. At the
same time, the R & D and innovation of Lufeng Weaving & Dyeing constantly progressed. With the rise of the transfer ratio of
scientific and technological achievements, proportion of the sale of new products with high additional value rose largely. In 2016,
operation revenue of Lufeng Weaving & Dyeing was RMB 1.607 billion, increasing for 10.81% comparing with that of the last year.
In another aspect, thanks to comprehensive budget management, costs control and RMB devaluation, net profit RMB 0.137 billion
27
Lu Thai Textile Co., Ltd. Annual Report 2016
was achieved in 2016, increasing for 157.28% comparing with that of the last year.
VIII. Structured bodies controlled by the Company
□ Applicable √ Not applicable
IX. Outlook of the Company’s future development
1. Competition and development trends in the sector
At present, the global production capacity of high-ended dyed fabric is about 0.8 billion meters, which was the largest production
base of yarn-dyed fabric. The pure cotton yarn-dyed fabric has characters of dyed fastness, clear striped weave, abundant color,
comfort and strong gas permeability, which was always the main shell fabric of medium and high end shirts. In the recent years,
accompanied with the increase of the domestic environmental protection stress, the increasingly improvement of the production
factors and the guiding of the national transformation upgrade strategy, part of the low end and small scale yarn-dyed capacity which
quit the market had been inexorable trend.
The yarn-dyed fabric falls into three categories, i.e. the top, the high-end, and the middle /low end, which have formed a triangular
structure. To be specific, the top-grade yarn dyed fabric is mainly produced by few manufacturers in Italy, France, Germany, etc., and
it mainly targets at the fashion and top-brand shirt market. The high-end yarn dyed fabric was characterized of high-density and
high-counts, and delicateness after-finishing. Though inferior to the top-grade yarn dyed fabric in terms of the pattern design and
fashion, it requires an advanced manufacturing technology and a high product quality, which does not differ much from the former.
In the long run, along with the recovery of the global economy, as well as improvement of urbanization, residents’ incomes and
consumption in China, the market requirements of the future medium and high end yarn dyed fabric would constantly increase and at
the same time would appear the tendency that the market concentrate towards to the medium and large enterprises.
2. Development strategies of the Company
China’s textile industry enjoys outstanding advantages in the world and mainly in the aspects such as the capital, technology and
labor efficiency, and although the cost of the factor cost is increasing day by day, the prominent comprehensive advantage of China’s
textile industry remains unchanged. The Company is a large textile enterprise that boasts a complete industrial chain from cotton
planting, yarning, dyeing, weaving and post-processing to cloth manufacturing. It is the largest production base for dyed textile for
shirts in the world. Now, it has developed three series textiles for shirts, including pure cotton, cotton and natural fiber, and cotton
and functional fiber mixture. At present, the Company has speeded up the integration of internationally advantageous resources while
promoting the upgrading of Luthai manufacturing to Luthai creation as well as improving its product quality and increasing its
production efficiency. This helps realize a reasonable layout for the Company’s international capacity, further improves its
internationalization, and maintains its outstanding edges in global dyed materials for shirts. In terms of brand, the Company will
carve out a new marketing mode through the Internet and mobile terminals, and continuously enhance high-end shirt custom service,
to balance the development of domestic and international markets. Also, the Company will increase its investment in technology
R&D, design and energy saving & emission reduction, to offer more green and low-carbon products to the market.
3. Operating plan (The contents set forth herein do not form any commitment of the Company.)
(1) As for the Company government: The Company will strengthen the system construction of the enterprise internal control,
constantly perfect the organization structure and the legal person government structure as well as the prevention mechanism of the
risks, and guarantee the Company to realize the healthy, stable and sustainable development in the system level.
(2) As for the market expansion: The Company will adhere to the philosophy of attaching equal importance to both the domestic and
overseas markets, vigorously conduct activities for the “Year for Market Service Improvement”, proactively expand emerging
markets on the basis of stabilizing the existing markets, further enlarge the domestic market share, and promote a balanced
development of the domestic and overseas markets.
28
Lu Thai Textile Co., Ltd. Annual Report 2016
(3) As for the enterprise management: The Company will follow the guideline of improving its product quality and increasing its
production efficiency, refine management responsibility, deepen promoting excellent performance management mode in all-round,
carry forward LTPS, further deepen and refine comprehensive budget management, and keep pushing forward management
upgrading.
(4) As for the brand construction: The Company will make great efforts to promote the innovation marketing mode, gain more
customers with quality and service, further optimize resource allocation as well as perfect the integration of the online and offline
marketing mode. Depend on the internet and the mobile terminal means, provide the advanced customization service and satisfy the
individual needs of the market.
(5) Concerning global planning, the Company will let Lu Thai Milan and Lu Thai America play their roles in market expansion,
design and R&D, customer service, talent cultivation, etc. so as to increase the proportion of independently designed products in the
total sales. It will push forward the construction of its production bases in Southeast Asia step by step, integrate its resources at home
and abroad and avoid potential trade barriers to enlarge its international production scale and maintain a leading position in the global
yarn-dyed industry.
4. Fund demand, source and using plan
During the Reporting Period, the Lu Thai (Vietnam) Textile Co., Ltd. of 30-million-meter yarn-dyed fabric/year production lines
Phase I project has been put into operation, and the project is going on as planned. At present, the Company is also preparing to
incorporate a garment factory in Vietnam (Lu An Garments Co., Ltd.) with a designed annual capacity of 6 million pieces of shirts.
The funds for the aforesaid projects all come from the self-owned and self-raised funds of the Company.
5. Risk of reverse effect and countermeasures for the Company to achieve development strategy and business goal
(1) Economic environment impact: Compact of persistence of slow resurging of developed economic entity market and domestic
industrial structure deep adjustment on the whole consumption market may possibly cause uncertain for market environment of the
Company, and that may possibly influence on increase of oversees sales. The Company will try the best to stabilize the domestic and
international market and actively expand domestic market at the same time, to achieve a balanced development between domestic
and foreign sales.
(2) As the cost for production elements in China increases day by day, and the processing trade for textile garment especially garment
processing has been transferred to countries in southeastern Asia, it seems to be a must for top textile enterprise to go abroad. The
Company will, based on its comprehensive research on production elements, promote the comprehensive utilization of internationally
advantageous resources to create a reasonable layout for processing bases.
(3) The Company mainly uses long-staple cotton as its raw materials, whose price may be affected by market supply-demand,
climate, policy, exchange rate and quota. In 2016, when the government’s cotton quota policy stayed unchanged, the cotton cost will
be mainly affected by domestic market. Therefore, except ensuring stable supply of long-staple cotton from Xinjiang subsidiary, the
Company must carefully study on market developments, and make every effort to reduce the influences of raw material price
fluctuation on its business performance, through actively effective manners and methods.
(4) Change of exchange rate: at present and in the future for a long time, products of the Company are mainly exported to the
international market, and sales income mainly settled with USD; meanwhile, major equipment used in the Company was imported,
part foreign exchange paid for import was not USD. And the overseas production bases of the Company make it more sensitive to
exchange rate changes.
In short term, with the subsequent influence of FED interest rate rise, separation of UK from EU and the depressing economic
recovery of the economic entities of Europe and Japan, RMB-US dollar exchange rate still faces certain devaluation pressure. In
middle and long term, basic economy of China is promising; favorable balance of trade is high; and foreign exchange reserve is
sufficient. RMB has no basis of devaluation. At the same time, RMB has been formally demanded in SDR RMB assets configuration,
which will contribute to the improvement of supply and demand in foreign exchange market. The series of factors will support RMB
to maintain stable at reasonable and balanced level.
29
Lu Thai Textile Co., Ltd. Annual Report 2016
In order to reduce adverse influence of exchange rate fluctuation, the Company adopted the following measures: firstly, the Company
proactively conducted foreign exchange hedging, using forward FX sales and purchase, forward foreign exchange trading and option
portfolios to avoid some risks as well as making reasonable arrangement on settlement day and currency structure and conclusion of
agreements on fixed foreign exchange rate to avoid exchange rate-related risks. Secondly, the Company actively adjusted the
Renminbi and foreign-currency liabilities structure to control financial costs. Thirdly, according to the fluctuation trend of exchange
rates, the Company properly adjusted imports of raw and auxiliary materials to partially offset the influence of exchange rate
fluctuations on the Company. Fourthly, the Company tried to settle with its customers in Renminbi whenever was possible.
X. Visits paid to the Company for purposes of research, communication, interview, etc.
1. In the Reporting Period
√ Applicable □ Not applicable
Date Way of visit Type of visitor Main inquiry information
2016-03-30 By phone Institution About basic information of the Company
2016-04-27 By phone Institution Ditto
2016-05-20 One-on-one meeting Institution Ditto
2016-08-31 By phone Institution Ditto
Times of visit 8
Number of visiting institutions 30
Number of visiting individuals 0
Number of other visiting entities 1
Significant undisclosed information disclosed,
No
revealed or leaked
30
Lu Thai Textile Co., Ltd. Annual Report 2016
Section V Significant Events
I. Profit distribution to the common shareholders & increase of the share capital from the
capital reserves
Formulation, execution or adjustments of the profit distribution policy for the common shareholders, especially the cash dividend
policy, in the Reporting Period
□ Applicable √ Not applicable
Profit distribution plans (or preliminary plans) for the common shareholders and plans (or preliminary plans) for turning capital
reserves into share capital for the recent three years (including the Reporting Period)
1. The 2016 annual profit allocation pre-plan reviewed and approved at the 5st Session of the 8th Board of Directors:
Based on the total 922,602,311 shares on December 31, 2016, the Company is to distribute a cash dividend of RMB5.00 for every 10
shares (including tax). The individual income tax for Share A shall be subject to related regulations under CS [2012] No. 85 Notice
on Certain Question about the Implementation of Differentiated Individual Income Tax Policy for Share Dividend of Listed
Companies jointly issued by Ministry of Finance, SAT, and CSRC; and that for Share B shall be conversed to HKD based on the
central parity rate on interbank exchange market released by the People’s Bank of China on the following day after shareholder’s
meeting (for foreign shareholders, tax is free pursuant to CSZ (1994) No. 020 regulations; and non-residential corporate shareholders
is entitled to a 10% reduction of enterprise income tax according to related regulations under Enterprise Income Tax Law of the
People’s Republic of China).
Based on the 922,602,311 shares, the Company should distribute a cash dividend of RMB5.00 per 10 shares. The aforesaid profit
distribution plan is subject to the final approval of the 2016 annual meeting of shareholders.
2. The 2015 annual profit allocation pre-plan reviewed and approved at the 31th Session of the 7th Board of Directors:
By December 31 of 2015, (the total shares of 954,407,896as at 31 Dec. 2016 minus the 1,350,600 B-shares repurchased in the year),
the Company is to distribute a cash dividend of RMB5.00 distributed for every 10 shares (including tax). The individual income tax
for Share A was subject to related regulations under CS [2012] No. 85 Notice on Certain Question about the Implementation of
Differentiated Individual Income Tax Policy for Share Dividend of Listed Companies jointly issued by Ministry of Finance, SAT, and
CSRC; and that for Share B shall be conversed to HKD based on the central parity rate on interbank exchange market released by the
People’s Bank of China on the following day after shareholder’s meeting (for foreign shareholders, tax was free pursuant to CSZ
(1994) No. 020 regulations; and non-residential corporate shareholders were entitled to a 10% reduction of enterprise income tax
according to related regulations under Enterprise Income Tax Law of the People’s Republic of China).
In the profit distribution, 24,707,749 repurchased but not yet canceled shares in the special account for repurchased shares on the
book closure date were excluded. As such, the Company actually distributed RMB 465,525,373.50 dividends for 2015. The aforesaid
profit distribution plan was implemented in Jun. 2016 after being reviewed and approved by the Shareholders’ General Meeting 2015
held on 29 Apr. 2016.
3. 2014 profit distribution plan has been approved on the 19th session of the 7th board meeting: By December 31 of 2014, the
Company’s registered capital is based on 95,575.8496 shares, with RMB5.00 distributed for every 10 shares (including tax). The
individual income tax for Share A shall be subject to related regulations under CS [2012] No. 85 Notice on Certain Question about
the Implementation of Differentiated Individual Income Tax Policy for Share Dividend of Listed Companies jointly issued by
Ministry of Finance, SAT, and CSRC; and that for Share B shall be conversed to HKD based on the central parity rate on interbank
exchange market released by the People’s Bank of China on the following day after shareholder’s meeting (for foreign shareholders,
tax is free pursuant to CSZ (1994) No. 020 regulations; and non-residential corporate shareholders is entitled to a 10% reduction of
31
Lu Thai Textile Co., Ltd. Annual Report 2016
enterprise income tax according to related regulations under Enterprise Income Tax Law of the People’s Republic of China).
Based on the above distribution plan, the Company actually distributed RMB 477,879,248.00 dividends. Such plan was implemented
in Jun. 2015 after the review and approval on 2014 shareholder’s meeting convened on 21 May 2015.
Cash dividends distributed to the common shareholders in the recent three years (including the Reporting Period)
Unit: RMB
Net profits Proportion in net
attributable to profits attributable
Cash dividend (tax shareholders of the to shareholders of Ratio of cash
Cash dividend in
Year dividend in other
included) Company in the Company in other forms
forms
consolidated consolidated
statements statements (%)
2016 461,301,155.50 805,446,326.99 57.27% 0.00 0.00%
2015 465,525,373.50 712,193,243.19 65.37% 0.00 0.00%
2014 477,879,248.00 958,725,402.84 49.85% 0.00 0.00%
The Company made profits in the Reporting Period and the profits distributable to the common shareholders of the Company was
positive, but it did not put forward a preliminary plan for cash dividend distribution:
□ Applicable √ Not applicable
II. Preliminary plan for profit distribution and turning capital reserves into share capital for
the Reporting Period
√ Applicable □ Not applicable
Bonus shares for every 10 shares (share) 0
Dividend for every 10 shares (RMB) (tax included) 5.00
Increased shares for every 10 shares (share) 0
Total shares as basis for preliminary distribution plan (share) 922,602,311
Total cash dividends (RMB) (tax included) 461,301,155.50
Distributable profits (RMB) 3,451,836,174.44
Percentage of cash dividends in total distributed profits (%) 100.00%
About cash dividends
If the Company is in a growth stage and has any plan for significant expenditure, in profit distribution, the proportion of cash
dividends shall be 20% or above.
Details about preliminary plan for profit distribution and turning capital reserves into share capital
Based on the 922602,311 shares, the Company is to distribute a cash dividend of RMB5.00 for every 10 shares (including tax). The
individual income tax for Share A shall be subject to related regulations under CS [2012] No. 85 Notice on Certain Question about
the Implementation of Differentiated Individual Income Tax Policy for Share Dividend of Listed Companies jointly issued by
Ministry of Finance, SAT, and CSRC; and that for Share B shall be conversed to HKD based on the central parity rate on interbank
32
Lu Thai Textile Co., Ltd. Annual Report 2016
exchange market released by the People’s Bank of China on the following day after shareholder’s meeting (for foreign
shareholders, tax is free pursuant to CSZ (1994) No. 020 regulations; and non-residential corporate shareholders is entitled to a
10% reduction of enterprise income tax according to related regulations under Enterprise Income Tax Law of the People’s Republic
of China). Based on the 922,602,311 shares, a total of RMB 461,301,155.50 shall be paid out as dividends, and the retained profits
shall be carried forward to the future. Such plan may only be implemented after the review and approval on 2016 shareholder’s
meeting.
III. Fulfillment of commitments
1. Commitments of the Company, its shareholders, actual controller, acquirer, directors, supervisors, senior management
staff or other related parties fulfilled in the Reporting Period or ongoing at the period-end
√ Applicable □ Not applicable
Date of
Commitment Type of Period of
Commitment Contents making Fulfillment
maker commitment commitment
commitment
Commitments made in share reform
Commitments made in acquisition
reports or reports on equity changes
Commitments made in asset
reorganization
Commitments made in IPO or
refinancing
Commitments concerning stock
ownership incentive
The biggest Up to 10 Jan.
shareholder 2016, Zibo
Zibo Lucheng Lucheng
Textile Textile
Zibo Lucheng Investment Investment
Textile Co., Ltd. and Co., Ltd. and
Investment the directors, the directors,
Co., Ltd. and supervisors 10 Jul. 2015 supervisors
Other commitments made to minority Other
directors, and senior 10 Jul. 2015 to 10 Jan. and senior
shareholders commitment
supervisors executives of 2016 executives of
and senior the Company the Company
executives of committed did not reduce
the Company that the shares their
of the shareholdings
Company held in the
by them Company. As
would not be such, the
33
Lu Thai Textile Co., Ltd. Annual Report 2016
decreased commitment
within the six has been
months fulfilled.
starting from
10 Jul. 2015.
Executed on time Yes
Specific reasons for failing to fulfill
commitments on time and plans for Not applicable
next step
2. Where there had been an earnings forecast for an asset or project and the Reporting Period was still within the forecast
period, explain why the forecast has been reached for the Reporting Period.
□Applicable √ Not applicable
IV. Occupation of the Company’s funds for non-operating purposes by the controlling
shareholder or its related parties
□ Applicable √ Not applicable
No such cases in the Reporting Period.
V. Explanations given by the Board of Directors, the Supervisory Committee and the
independent directors (if any) regarding the “non-standard auditor’s report” issued by the
CPAs firm for the Reporting Period
□ Applicable √ Not applicable
VI. YoY changes in the accounting policy, estimation and methods
□ Applicable √ Not applicable
No such cases in the Reporting Period.
VII. Retrospective restatement due to correction of material accounting errors in the
Reporting Period
□ Applicable √ Not applicable
No such cases in the Reporting Period.
VIII. YoY changes in the consolidation scope
√ Applicable □ Not applicable
During this Reporting Period, the Company set up wholly-owned subsidiary Lu An Garments Co., Ltd. and canceled subsidiary
Beijing Lufeng Sunshine Garments Co., Ltd.
34
Lu Thai Textile Co., Ltd. Annual Report 2016
IX. Engagement and dismissal of the CPAs firm
The CPAs firm at present
Name of domestic CPAs firm Ruihua Certified Public Accountants (LLP)
Remuneration of domestic CPAs firm (RMB ten thousand) 158.5
Consecutive years of audit services provided by domestic CPAs firm 4
Name of certified public accountants from domestic CPAs firm He Feng, Cui Xiaoli
The CPAs firm changed in the current period or not
□ Yes √ No
CPAs firm, financial accountant or sponsor engaged for internal control audit
√ Applicable □ Not applicable
On 28 Mar. 2016, the Company held the 31th Session of the 7th Board of Directors, which reviewed and approved the Proposal on
Engaging Ruihua Certified Public Accountants (LLP) as the 2016 Financial Report and Internal Control Auditor. The Company paid
RMB435,000 in total for the internal control audit.
X. Listing suspension or termination after the disclosure of this Report
□ Applicable √ Not applicable
XI. Bankruptcy & reorganization
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XII. Significant litigations and arbitrations
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XIII. Punishments and rectifications
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XIV. Credit conditions of the Company as well as its controlling shareholder and actual
controller
□ Applicable √ Not applicable
35
Lu Thai Textile Co., Ltd. Annual Report 2016
XV. Implementation of any equity incentive plan, employee stock ownership plan or other
incentive measures for employees
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XVI. Significant related-party transactions
1. Related-party transactions relevant to routine operation
□ Applicable √ Not applicable
No such cases in the Reporting Period.
2. Related-party transactions regarding the purchase or sale of assets or equity interests
□ Applicable √ Not applicable
No such cases in the Reporting Period.
3. Related-party transitions regarding joint investments
□ Applicable √ Not applicable
No such cases in the Reporting Period.
4. Credits and liabilities with the related parties
□ Applicable √ Not applicable
No such cases in the Reporting Period.
5. Other significant related-party transactions
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XVII. Significant contracts and execution
1. Entrustment, contracting and leasing
(1) Entrustment
□ Applicable √ Not applicable
No such cases in the Reporting Period.
36
Lu Thai Textile Co., Ltd. Annual Report 2016
(2) Contract
□ Applicable √ Not applicable
There was no any contract of the Company in the Reporting Period.
(3) Lease
□ Applicable √ Not applicable
There was no any lease of the Company in the Reporting Period.
2. Significant guarantee
√ Applicable □ Not applicable
(1) Guarantees provided by the Company
Unit: RMB Ten Thousand Yuan
Particulars on external guarantee of the Company and its subsidiaries (excluding guarantees for subsidiaries)
Date of
disclosure Whether Whether
Date of making
of relevant Actual the guarantee
Name of guarantee Guarantee guarantee (date Type of Guarantee
announcem amount of guarantee ing for
object limit of signing guarantee period
ents on guarantee has been related
agreement)
guarantee fulfilled parties
limit
Particulars about guarantee of the Company for subsidiaries
Date of
disclosure
Whether Whether
of relevant Date of making Actual
the guarantee
Name of guarantee announcem Amount of guarantee (date amount of Type of Guarantee
guarantee ing for
object ents on guarantee of signing guarantee guarantee period
has been related
guarantee agreement)
fulfilled parties
limit
Three year
Guarantee of
since the
Lufeng Weaving & 10 Dec. joint and
25,000 9 Dec. 2014 0 approval of No Yes
Dyeing Co., Ltd. 2014 several
the board of
liability
the Company
Guarantee of Two years
Lu Thai (Vietnam) 27 Aug.
36,681.6 26 Aug. 2015 8,703.62 joint and since the No Yes
Textile Co., Ltd. 2015
several approval of
37
Lu Thai Textile Co., Ltd. Annual Report 2016
liability the board of
the Company
Six year
Guarantee of
since the
Lufeng Weaving & 25 Feb. joint and
47,025 24 Feb. 2016 0 approval of No Yes
Dyeing Co., Ltd. 2016 several
the board of
liability
the Company
Since the
approval of
the board
of the
Guarantee of
Company to
Lu Thai (Vietnam) 25 Feb. joint and
22,908.2 24 Feb. 2016 2,817.67 revoke, No Yes
Textile Co., Ltd. 2016 several
amend or
liability
replace the
new
resolution of
the resolution
Total amount of actual
Total amount of approved
guarantee for subsidiaries
guarantee for subsidiaries during 69,933.2 20,755.98
during the Reporting Period
the Reporting Period (B1)
(B2)
Total amount of actual
Total amount of approved
guarantee for subsidiaries at
guarantee for subsidiaries at the 131,614.8 20,755.98
the end of the Reporting
end of the Reporting Period (B3)
Period (B4)
Guarantees provided by subsidiaries for subsidiaries
Disclosure
date on Guarante
Actual
relevant Actual e for a
Amount for occurrence date Type of Period of Executed
Guaranteed party announcem guarantee related
guarantee (date of guarantee guarantee or not
ent of amount party or
agreement)
guaranteed not
amount
Guarantee of
Xinjiang Lu Thai 28 Oct. joint and
20,000 26 Oct. 2016 5,000 12 months No Yes
Textile Co., Ltd. 2016 several
liability
Total actual occurred
Total guarantee line approved for
amount of guarantee for the
the subsidiaries during the 20,000 20,000
subsidiaries during the
Reporting Period (C1)
Reporting Period (C2)
38
Lu Thai Textile Co., Ltd. Annual Report 2016
Total actual guarantee
Total guarantee line that has been
balance for the subsidiaries
approved for the subsidiaries at the 20,000 5,000
at the end of the Reporting
end of the Reporting Period (C3)
Period (C4)
Total guarantee amount provided by the Company (total of the above-mentioned three kinds of guarantees)
Total actual occurred
Total guarantee line approved
amount of guarantee during
during the Reporting Period 89,933.2 40,755.98
the Reporting Period
(A1+B1+C1)
(A2+B2+C2)
Total actual guarantee
Total guarantee line that has been
balance at the end of the
approved at the end of the 151,614.8 25,755.98
Reporting Period
Reporting Period (A3+B3+C3)
(A4+B4+C4)
Proportion of total guarantee amount (A4+B4+C4) to the net
2.05%
assets of the Company
Of which:
Amount of guarantee provide for shareholders, actual controller
0
and related parties (D)
Amount of guarantee provided directly or indirectly for guarantee
0
objects with asset-liability ratio reaching over 70% (E)
Balance between 50% of net assets and total amount of guarantee
0
which exceeds 50% of net assets (F)
Sum total of the above three guaranteed amounts (D+E+F) 0
According to “Agreement on Counter Guarantee” signed on 9
Dec. 2014 between Lu Thai Company and Xinjiang Lu Thai
Explanations about joint and several liability for repayment in
Company, Xinjiang Lu Thai Company, the warrantee Xinjiang
respect of undue guarantee (if any)
Lu Thai Company provided the corresponding amount of
counter guarantee for Lu Thai Company.
Explanation about external guarantee violating established The Company never provided guarantees for companies except
procedure (if any) controlling subsidiaries.
Explanations about guarantees provided with complex methods
(2) Particulars about illegal external guarantee
□ Applicable √ Not applicable
There was no particular about illegal external guarantee of the Company in the Reporting Period.
39
Lu Thai Textile Co., Ltd. Annual Report 2016
3. Cash assets management entrustment
(1) Wealth management entrustment
□ Applicable √ Not applicable
No such situation of the Company during the Reporting Period.
(2) Entrustment loans
□ Applicable √ Not applicable
No such situation of the Company during the Reporting Period.
4 Other significant contracts
□ Applicable √ Not applicable
No such situation of the Company during the Reporting Period.
XVIII. Social responsibilities
Perform the social responsibility of targeted poverty alleviation
√applicable □Not applicable
(1) Annual targeted poverty alleviation overview
In 2016, the Company continuously subsidized educational cause and poor students in poor areas and continuously carried out social
poverty alleviation. In this year, the Company will continuously subsidize poor employees, support poor villages and help poor
employees to solve practical difficulties. Holding subsidiary corporation of the Company Xinjiang Lu Thai Harvest Cotton Co., Ltd.
(“Xinjiang Lu Thai”) contributed RMB 0.0563 million to 10 local poor college students for continuing their school work and
contributed RMB 0.0947 million for raising the level of local preschool education and compulsory education. The two poverty
alleviation plans have been completed on time.
(2) Annual targeted poverty alleviation of listed company
Index Unit Amount / progress information
I. Overall conditions —— ——
In which: 1. funds Ten thousand yuan 91.9
II. Sub-item contribution —— ——
1.Get rid of poverty in industrial development —— ——
2.Get rid of poverty in employment transfer —— ——
3.Get rid of poverty in relocation —— ——
4.Get rid of poverty in education —— ——
In which: 4.1 Amount of contribution in
Ten thousand yuan 5.63
subsidizing poor students
4.2 The number of poor students subsidized Person 10
40
Lu Thai Textile Co., Ltd. Annual Report 2016
4.3 Amount of contribution for improving
Ten thousand yuan 39.47
education resource in poor areas
5. Poverty alleviation for health —— ——
6. Poverty alleviation for ecological protection —— ——
7. Basic subsidy —— ——
8. Social poverty alleviation —— ——
8.2 Amount of contribution for targeted poverty
Ten thousand yuan 46.8
alleviation
9. Other items —— ——
III. Awards (contents and grade) —— ——
(3) Subsequent targeted poverty alleviation plan
In 2017, the Company will continuously subsidize educational cause and poor students in poor areas and help poor employees to
solve practical difficulties through targeted poverty alleviation.
2. Perform other social responsibilities
The Company has formulated 2016 report of social responsibility. For details, please refer to the Report of Social Responsibility
released while 2016 annual report was issued.
Whether the listed company and its subsidiary corporations are the key pollution discharge units promulgated by Department of
Environmental Protection
The Company and its domestic and foreign subsidiary corporations lay emphasis on environmental protection and achieve
sustainable development from source. In 2015, the Company got the title “national water-saving benchmarking enterprise” from
Ministry of Industry and Information Technology of the People's Republic of China and Ministry of Water Resources and was
awarded as “outstanding energy-saving enterprise of Shandong”. The Company constantly perfects the systems of environmental
protection, makes and perfects environmental contingency plan, organizes emergency exercise, normalizes environmental protection
procedures, actively carries out the research on and application of new technology, new materials and new equipment, continuously
improves environment performance of the Company and enhances international competitiveness of products of the Company
I. Domestic implementation of environmental protection
Facing domestic and foreign increasingly strict environmental protection standards and requirement of customers, the Company is
focusing on investing, reforming and managing the facilities of pollution treatment. The discharge indexes of main pollutants in
printing and dyeing sewage shall be better than the indexes required in Quality Standards of Sewage Discharged into Sewer of Cities
and Towns CJ343-2010. Sewage will be discharged into Zibo Limin Cleansing Water Co., Ltd. and the quality standard of output
water will be higher than the standard at national first-grade A. Main pollutants will be discharged reaching standard. In 2016, the
Company intensified disposal of water pollution and invested more than RMB 5 million to reform sewage treatment station. Total
discharge amount of water pollution COD decreases year by year. Total discharge amount of COD approved is 3505 tons. The
discharge amount of COD was 912.31 tons in 2016, decreasing for 24.97% comparing with that in 2015. In 2017, the Company will
further implement comprehensive reconstruction engineering for water pollution treatment. Indexes of water pollution will decline
largely and the regional ecological environment will be improved.
According to the requirement of national policy Water Pollution Control Action Plan and considering the current lack of water
resource, the Company had completed recycled water utilization project. In 2016, 15 thousand tons of recycled water could be
supplied every day. The recycled water was used in dyeing of the Company and power generation. In this way, water resource could
be cyclically utilized. The quality indexes of the recycled water are better than those of the water for dyeing of the Company.
41
Lu Thai Textile Co., Ltd. Annual Report 2016
To improve surrounding air environment of the enterprise, the Company treats peculiar smell at sewage station and exhaust gas
generated from dyeing of the Company. More than RMB 13 million was invested in accumulation in the last year. The quality of
surrounding environment has been significantly improved and the level of occupational health and safety in work site has been
significantly raised.
The main pollutants of wholly-owned subsidiary Xinsheng Thermal Power Co., Ltd. are sulfur dioxide, nitric oxide and smoke (dust).
Pollution discharge standard: sulfur dioxide 200mg/m3; nitric oxide 200mg/m3; smoke (dust) 20mg/m3. Actual discharge is less than
the standard. Total discharge of the whole year: sulfur dioxide 208.337 tons, nitric oxide 586.924 tons, smoke (dust) 41.058 tons. The
Company invested RMB 80 million to construct “super-low discharge engineering” from September 2015. The first part and second
part of the engineering were put into operation in March 2016 and October 2016, respectively. At the same time, low-nitrogen
combustion technology reform has been almost completed.
In environmental protection management, the Company actively carries forward Cleaning Production and well does the work of
environmental protection in the mode of managing source, controlling process and treating the terminal. According to Method of
Environment Information Publicity (Trial Implementation), the index of main pollutants detected shall be uploaded to the website of
environmental protection agency of Zibo every month for publicity.
II. Overseas subsidiary companies’ environmental protection implementation
The sewage treatment project of Lu Thai (Vietnam) Textile Co., Ltd. mainly treats the production sewage and sanitary sewage in
local area. RMB 26 million was invested in the first part of the project. It was put into operation on August 20, 2016. Daily sewage
treatment amount could be 1500 tons. Water quality was better than that stipulated in QCVN40: 2011/BTNMT grade A of Vietnam.
In plan, the second part of the project will be completed in 2017, including project construction, installation and debugging, and
stable operation. The Company will reach the standard of sewage discharge, well do the work of environmental protection and help
to achieve sustainable development of the region.
Main pollutants in sewage (specially monitored by Vietnam) include: Chemical Oxygen Demand (COD), chrominance, ammonia
nitrogen (NH3-N) and Total Phosphorus (TP). In 2016, the quality of water discharged reached grade-A discharge standard of
Vietnam Regulations on Industrial Water Discharge Parameters (QCVN40: 2011/BTNMT) without exceeding standard. Total
weight of sewage discharged was 60 thousand tons in 2016. Chemical Oxygen Demand (COD): 2.316 tons; ammonia nitrogen
(NH3-N): 57kg; Total Phosphorus (TP): 7.8kg.
Whether release the report of social responsibility:
√ yes □ No
Report of enterprise’s social responsibility
Whether Whether Standard of report reveal
Whether
Enterprise containing containing
containing social
property environment treatment Domestic standard Overseas standard
information
information information
Other Yes Yes Yes Refer to CSC9000T SA8000
Detailed explanation:
1. Whether the Company has passed the authentication of
Yes
environment management system (ISO14001)
2. Annual amount of investment in environmental protection
2,381.66
(ten thousand yuan)
3. “Waste gas, waste water, industrial residue” emission In 2016, more than 5120 thousand yuan was saved through
reduction performance of the Company implementing energy-saving and water-saving project; energy
42
Lu Thai Textile Co., Ltd. Annual Report 2016
consumption for production value per ten-thousand yuan
declined for 2.44%
4. Investment of the Company in enhancing employees’
vocational development ability, knowledge and skills (ten 564.52
thousand yuan)
5. Among of social charitable donations (fund, materials, free
155.87
professional service) of the Company (ten thousand yuan)
XIX. Other significant events
□ Applicable √ Not applicable
No other significant events of the Company during the Reporting Period.
XX. Significant events of subsidiaries
□ Applicable √ Not applicable
43
Lu Thai Textile Co., Ltd. Annual Report 2016
Section VI. Change in Shares & Shareholders
I. Changes in shares
I. Changes in shares
Unit: share
Before the change Increase/decrease (+/-) After the change
Capitaliza
Newly
Proportio Bonus tion of Proportio
Amount issue Other Subtotal Amount
n shares public n
share
reserves
119,398,4 119,375,2
I. Restricted shares 12.49% -23,250 -23,250 12.94%
90 40
3. Shares held by other
1,166,090 0.12% -23,250 -23,250 1,142,840 0.12%
domestic corporations
Shares held by domestic
1,166,090 0.12% -23,250 -23,250 1,142,840 0.12%
natural persons
4. Shares held by foreign 118,232,4 118,232,4
12.37% 12.82%
investors 00 00
Among which: Shares held 118,232,4 118,232,4
12.37% 12.82%
by foreign corporations 00 00
Shares held by foreign natural 836,360,0 -33,132,9 -33,132,9 803,227,0
87.51% 87.06%
persons 06 35 35 71
560,799,2 560,822,4
58.68% 23,250 23,250 60.79%
II. Non-restricted shares 10 60
275,560,7 -33,156,1 -33,156,1 242,404,6
28.83% 26.27%
1. Renminbi ordinary shares 96 85 85 11
2. Domestically listed foreign 955,758,4 -33,156,1 -33,156,1 922,602,3
100.00% 100.00%
shares 96 85 85 11
Reasons of changes in shares
√ Applicable □ Not applicable
Because of employing senior managers and adjusting senior managers’ shares of Shenzhen branch of China Securities Depository
and Clearing Corporation Limited, 23,250 shares of “limited sales condition shares-domestic natural person holding” of the Company
decreased.
The Company held the first extraordinary shareholders meeting of 2015 on August 5, 2015. Proposal for Buying Back Some A
Shares and B Shares of the Company was passed at the meeting. On October 10, 2015, Report of Buying Back Some A Shares and B
Shares of the Company was promulgated. For details, please refer to the announcement (No.: 2015-029) and report of buying back
shares released on www.cninfo.com.cn on August 6, 2015 and October 10, 2015. The Company began implementing the scheme of
44
Lu Thai Textile Co., Ltd. Annual Report 2016
buying back shares from November 10, 2015. By August 4, 2016, 33156.185 thousand B shares had been bought back. In addition,
the shares were canceled by Shenzhen branch of China Securities Depository and Clearing Corporation Limited on August 22, 2016.
Approval of share changes
√ Applicable □ Not applicable
The Company held the first extraordinary shareholders meeting of 2015 on August 5, 2015. Proposal for Buying Back Some A
Shares and B Shares of the Company and Proposal for Authorizing Board of Directors to Buy Back Some A Shares and B Shares of
the Company were passed at the meeting. For example, Board of Directors would formulate concrete scheme of buying back the
shares, make, supplement, modify, sign and declare documents, implement the scheme of buying back the shares, cancel the shares
bought back and correspondingly modify Articles of Company according to actual implementation of buying back. The Company
began implementing the scheme of buying back shares from November 10, 2015. By August 4, 2016, 33156.185 thousand B shares
had been bought back. In addition, the shares were canceled by Shenzhen branch of China Securities Depository and Clearing
Corporation Limited on August 22, 2016.
Transfers in share changes
□ Applicable √ Not applicable
Influence of share changes towards financial indexes in the latest year and latest period such as basic EPS and diluted EPS, and net
assets per share belonging to shareholder with ordinary share
□ Applicable √ Not applicable
Other contents that the Company thinks necessary or is asked by securities regulators to be disclosed
□ Applicable √ Not applicable
2. Changes in restricted shares
√ Applicable □ Not applicable
Unit: share
Number of the Number of the
Number of the
restricted shares restricted shares Number of the
restricted shares
Name unlocked during increased during restricted shares Reason Unlocked date
at the
the Reporting the Reporting at the period-end
period-begin
Period Period
Locked the 6 months after
Qin Guiling (Lu shareholding of the departure
35,242 1,311 33,931
Thai A) the Senior
Executives
Locked the 6 months after
Lv Yongchen (Lu shareholding of the departure
33,750 8,438 25,312
Thai A) the Senior
Executives
Locked the 6 months after
Wang Changzhao shareholding of the departure
33,750 8,438 25,312
(Lu Thai A) the Senior
Executives
45
Lu Thai Textile Co., Ltd. Annual Report 2016
Locked the 6 months after
Wang Fangshui shareholding of the departure
45,000 5,625 39,375
(Lu Thai A) the Senior
Executives
Locked the 6 months after
Zhang Jianxiang shareholding of the departure
27,750 6,938 20,812
(Lu Thai A) the Senior
Executives
appointed by the 6 months after
8th board of the departure
Zhu Lingwen (Lu
7,500 7,500 Directors as the
Thai A)
Senior
Executives
Total 175,492 30,750 7,500 152,242 -- --
II. Issuance and listing of securities
1. Issuance of securities (excluding preferred stock) in Reporting Period
□ Applicable √ Not applicable
2. Explanation on changes in share capital & the structure of shareholders, the structure of assets and liabilities
√ Applicable □ Not applicable
The Company held the first extraordinary shareholders meeting of 2015 on 5 Aug .2015. Proposal for Buying Back Some A Shares
and B Shares of the Company and Proposal for Authorizing Board of Directors to Buy Back Some A Shares and B Shares of the
Company were passed at the meeting. For example, Board of Directors would formulate concrete scheme of buying back the shares,
make, supplement, modify, sign and declare documents, implement the scheme of buying back the shares, cancel the shares bought
back and correspondingly modify Articles of Company according to actual implementation of buying back. The Company began
implementing the scheme of buying back shares from 10 Nov. 2015. By 4 Aug. 2016, 33156.185 thousand B shares had been bought
back. In addition, the shares were canceled by Shenzhen branch of China Securities Depository and Clearing Corporation Limited on
22 Aug. 2016.
3. Existent shares held by internal staffs of the Company
□ Applicable √ Not applicable
III. Particulars about the shareholders and actual controller
1. Total number of shareholders and their shareholding
Unit: share
Total number 72,743 Total number of 70,414 Total number of 0 Total number of 0
46
Lu Thai Textile Co., Ltd. Annual Report 2016
of shareholders shareholders on preferred preferred
at the the 30th trading stockholder with stockholder with
Reporting day before the vote right restored vote right
Period disclosure date of (if any) (see notes restored on the
the annual report 8) 30th trading day
before the
disclosure date of
the annual report
(if any) (see
notes 8)
Shareholding of shareholders holding more than 5% shares
Number Increase Number Number Pledged or frozen shares
of and of shares of shares
Holding sharehold decrease held held not
Name of Nature of
percentag ing at the of shares subject to subject to
shareholder shareholders Status of shares Amount
e (%) end of the during trading trading
Reporting Reporting moratoriu moratoriu
Period Period m m
Zibo Lucheng Domestic
140,353,5 140,353,5
Textile Investment non-state-owned 15.21% 0
83 83
Co., Ltd. corporation
Tailun (Thailand) Foreign 118,232,4 118,232,4
12.82% 0
Textile Co., Ltd. corporation 00 00
Central Huijin
Assets State-owned 20,315,30 20,315,30
2.20% 0
Management Co., corporation 0 0
Ltd.
T.Rowe Price Intl Foreign 19,948,21 19,948,21
2.16% 975601
Discovery Fund corporation 9 9
China Securities
Finance State-owned 15,679,09 15,679,09
1.70% 0
Corporation corporation 1 1
Limited
Foreign 12,440,00 12,440,00
Lynas Asia Fund 1.35% -3224475
corporation 0 0
Foreign
BNP Paribas 0.88% 8,131,797 8132797 8,131,797
corporation
Hua’an New Silk
Domestic
Road Theme
Non-stated-owned 0.78% 7,200,000 -2910000 7,200,000
Equity Securities
corporation
Investment Fund
47
Lu Thai Textile Co., Ltd. Annual Report 2016
HTHK-Manulife Foreign
0.74% 6,858,138 6858138 6,858,138
China Value Fund corporation
Everbright
Pramerica
Domestic
advantage
non-stated-owned 0.71% 6,553,667 6553667 6,553,667
configuration
corporation
mixed securities
investment fund
Particulars about strategic investors or
common legal persons who became
the top ten shareholders because of the N/A
issuance of additional shares (if any)
(Notes 3)
Zibo Lucheng Textile Investment Co., Ltd. is the largest shareholder of the Company and
Explanations about associated the actual controller. Tailun (Thailand) Textile Co., Ltd. is the second largest shareholder as
relationship or concerted action among well as sponsor of foreign capital of the Company. All of other shareholders are people
the above shareholders holding circulating A share or circulating B share and the Company is not able to confirm
whether there is associated relationship or concerted action among other shareholders.
Shareholdings of the top ten shareholders not subject to trading moratorium
Type of shares
Name of shareholders Name of shareholders
Type Amount
Zibo Lucheng Textile Investment Co., RMB common
140,353,583 140,353,583
Ltd. shares
Central Huijin Assets Management RMB common
20,315,300 20,315,300
Co., Ltd. shares
Domestically
T.Rowe Price Intl Discovery Fund 19,948,219 listed foreign 19,948,219
shares
China Securities Finance Corporation RMB common
15,679,091 15,679,091
Limited shares
Domestically
Lynas Asia Fund 12,440,000 listed foreign 12,440,000
shares
RMB common
BNP Paribas 8,131,797 8,131,797
shares
Hua’an New Silk Road Theme Equity RMB common
7,200,000 7,200,000
Securities Investment Fund shares
Domestically
HTHK-Manulife China Value Fund 6,858,138 listed foreign 6,858,138
shares
48
Lu Thai Textile Co., Ltd. Annual Report 2016
Everbright Pramerica advantage
RMB common
configuration mixed securities 6,553,667 6,553,667
shares
investment fund
Domestically
RBC Emerging Markets Small Cap
6,428,684 listed foreign 6,428,684
Equity Fund
shares
Explanation about associated
relationship and concerted action Zibo Lucheng Textile Investment Co., Ltd. is the largest shareholder of the Company and
among the top ten shareholders not the actual controller. Tailun (Thailand) Textile Co., Ltd. is the second largest shareholder as
subject to trading moratorium as well well as sponsor of foreign capital of the Company. All of other shareholders are people
as between the top ten shareholders holding circulating A share or circulating B share and the Company is not able to confirm
not subject to trading moratorium and whether there is associated relationship or concerted action among other shareholders.
the top ten shareholders
Particulars about the top 10 common
shareholders participating in margin N/A
trading (if any) (Notes 4)
Did any shareholder of the Company carry out an agreed buy-back in the Reporting Period?
□ Yes √ No
No shareholder of the Company carried out any agreed buy-back in the Reporting Period.
2. Particulars about controlling shareholders of the Company
Nature of controlling shareholder: community collective holding
Type of controlling shareholder: corporation
Name of controlling Legal representative
Date of establishment Organization code Business scope
shareholder / company principal
Investment on textile,
Zibo Lucheng Textile electricity and chemical;
Liu Deming 25 Sep. 1998 91370303164200391J
Investment Co., Ltd. purchase, process and sale
of cotton; retail service etc.
Particulars about shareholding
of controlling shareholders
controlling and holding shares N/A
of other listed companies
during the Reporting Period
Changes in controlling shareholders during the Reporting Period
□ Applicable √ Not applicable
There was no change in controlling shareholders during the Reporting Period of the Company.
49
Lu Thai Textile Co., Ltd. Annual Report 2016
3. Particulars about the actual controller
Nature of actual controller: domestic nature person
Type of actual controller: nature person
Whether gain the right of residence in other countries or
Name of the actual controller Nationality
regions or not
Liu Zibin China No
Liu Deming China No
Liu Zibin is the Chairman of the Board and GM of Lu Thai Textile Co., Ltd. , Liu
Professions and titles over the past five years Deming is the Chairman of the Board and GM of Zibo Lucheng Textile Investment
Co., Ltd.
Particulars about listed companies with
shares ever held by the actual controller over N/A
the past 10 years
Changes in the actual controller during the Reporting Period
√ Applicable □ Not applicable
Name of the actual controller Liu Zibin, Liu Deming
Date of change 30 Sept, 2016
Index to the disclosed Announcement on the Resolution of the Meeting (No.: 2016-042) disclosed on Securities
Times, Ta Kung Pao, Shanghai Securities News and http://www.cninfo.com.cn
Disclosure date 12Oct. 2016
Block diagram of property rights and controlling relationship between the Company and the actual controller
Liu Zibin Liu Deming
4% 21%
Zibo Lucheng Textile Investment Co., Ltd.
0.02%
15.21%
Lu Thai Textile Co., Ltd.
The actual controller controls the Company in the means of entrustment or other means of assets management
□ Applicable √ Not applicable
50
Lu Thai Textile Co., Ltd. Annual Report 2016
4. Particulars about other corporate shareholders with shareholding proportion over 10%
√ Applicable □ Not applicable
Name of controlling Legal representative / Date of Registered capital Mainly engaged in business
shareholder company principal establishment or management activities
Tailun (Thailand) Textile 6 baht (Thai) 6 baht (Thai)
Xu Zhinan 29 Jan.1985
Co., Ltd.
5. Particulars about restriction of reducing holding-shares of controlling shareholders, actual controller, restructuring
parties and other commitment entities
□ Applicable √ Not applicable
51
Lu Thai Textile Co., Ltd. Annual Report 2016
Section VII. Preference Shares
□ Applicable √ Not applicable
There was no preferred stock during Reporting Period.
52
Lu Thai Textile Co., Ltd. Annual Report 2016
Section VIII. Directors, Supervisors, Senior Management Staff &
Employees
I. Changes in shareholding of directors, supervisors and senior management staff
Shares
Shares
held at Increase Decrease
Other held at
Starting Closing the of shares of shares
increase/d the end of
Incumben date of date of beginning in this in this
Name Title Gender Age ecrease the
t or not office office the Reporting Reporting
changes Reporting
term term Reporting Period Period
(share) Period
Period (share) (share)
(share)
(share)
Chairman
of the Incumben 6 Jun. 5 Jun.
Liu Zibin Male 52 148,290 148,290
Board/G t 2007 2019
M
Vice
Xu Chairman Incumben 6 May 5 Jun.
Male 87
Zhinan of the t 2004 2019
Board
Director/
Fujiwara Senior Incumben 7 May 5 Jun.
Male 77
Hidetoshi Consultan t 1998 2019
t
Chen Incumben 16 Apr. 5 Jun.
Director Male 73
Ruimou t 2000 2019
Zeng Incumben 6 Jun. 5 Jun.
Director Male 66
Facheng t 2007 2019
Director/
Wang Vice Incumben 7 May 5 Jun.
Male 56 146,753 146,753
Fangshui GM/Chief t 1998 2019
Engineer
53
Lu Thai Textile Co., Ltd. Annual Report 2016
Director/
Vice GM
Qin Incumben 7 May 5 Jun.
/Secretary Female 51 107,042 107,042
Guiling t 1998 2019
to the
Board
Director/
Zhang Chief Incumben 6 Jun. 5 Jun.
Female 47 92,500 92,500
Hongmei Accounta t 2007 2019
nt
Independ
Xu Incumben 6 Jun. 5 Jun.
ent Male 43
Jianjun t 2013 2019
Director
Independ
Incumben 19 Sep. 5 Jun.
Zhao Yao ent Male 47
t 2014 2019
Director
Independ
Incumben 6 Jun. 5 Jun.
Bi Xiuli ent Female
t 2016 2019
Director
Independ
Pan Incumben 6 Jun. 5 Jun.
ent Female
Ailing t 2016 2019
Director
Independ
Wang Incumben 6 Jun. 5 Jun.
ent Male
Xinyu t 2016 2019
Director
Superviso
Li Incumben 19 Sep. 5 Jun.
ry Board Male 61 176,164 176,164
Tongmin t 2014 2019
Chairman
Liu Superviso Incumben 6 Jun. 5 Jun.
Male 49
Zilong r t 2007 2019
Dong Superviso Incumben 6 Jun. 5 Jun.
Male 48 5,000 5,000
Shibing r t 2007 2019
Zhang Incumben 6 Jun. 5 Jun.
Vice GM Male 49 52,150 52,150
Jianxiang t 2007 2019
Assistant
GM,
Wang Incumben 6 Jun. 5 Jun.
Productio Male 54 83,700 83,700
Jiabin t 2007 2019
n
Manager
Assistant
Zhang Incumben 6 Jun. 5 Jun.
GM, Male 47 73,100 73,100
Shougang t 2007 2019
Garment
54
Lu Thai Textile Co., Ltd. Annual Report 2016
Division
Manager
Assistant
General
Manager,
Deputy
Zhang Incumben 6 Jun. 5 Jun.
GM of Male 45 80,300 80,300
Zhanqi t 2007 2019
Lufeng
Weaving
& Dyeing
Co., Ltd.
Manager
of the
Fujiwara Second
Matsuzak Departme Incumben 9 Dec. 5 Jun.
Male 44
a nt of t 2014 2019
Internatio
nal
Business
Manager
Zhang K of Incumben 6 Jun. 5 Jun.
Male 49 77,700 77,700
eming Financial t 2007 2019
Dep.
Incumben 8 Jun. 5 Jun.
Li Wenji CIO Male 10,00 10,000
t 2016 2019
Manager
of
Pan Pingl Internatio Incumben 6 Jun. 5 Jun.
Male 48 126,096 4,400 130,496
i nal t 2007 2019
Business
Dep. III
Deputy
General
Manager
Lv Yong Incumben 6 Jun. 5 Jun.
of Lufeng Male 49 33,750 33,750
chen t 2007 2019
Weaving
& Dyeing
Co., Ltd.
Manager
Yu Shouz of Energy Incumben 6 Jun. 5 Jun.
Male 49 83,100 83,100
heng Business t 2007 2019
Dep.
55
Lu Thai Textile Co., Ltd. Annual Report 2016
Manager
of the
First
Wang Ch Departme Incumben 6 Jun. 5 Jun.
Male 43 22,500 22,500
angzhao nt of t 2013 2019
Internatio
nal
Business
Marketin
Quan Pe Incumben 6 Jun. 5 Jun.
g Male 50 27,750 27,750
ng t 2013 2019
Manager
Manager
of
Enterprise
Shang C s Incumben 6 Jun. 5 Jun.
Male 44 30,000 30,000
henggang Managem t 2013 2019
ent
Departme
nt
Independ
Zhang C Incumben 29 Apr. 5 Jun.
ent Male 66
hengzhu t 2014 2019
Director
Independ
Zhou Incumben 5 Jun. 5 Jun.
ent Male 54
Zhiji t 2010 2019
Director
Independ
Incumben 5 Jun. 5 Jun.
Wang Lei ent Female 47
t 2010 2019
Director
Total -- -- -- -- -- -- 1,375,895 4,400 0 1,380,295
II. Particulars about changes of Directors, Supervisors and Senior Executives
Name Position Type Date Reason
Appointed and
Zhang Hongmei Director 6 Jun. 2016 Be selected as Director of the 8th Board of the Directors.
dismissed
Independent Appointed and Be selected as Independent Director of the 8th Board of
Bi Xiuli 6 Jun. 2016
Director dismissed the Directors.
Independent Appointed and Be selected as Independent Director of the 8th Board of
Pan Ailing 6 Jun. 2016
Director dismissed the Directors.
Independent Appointed and Be selected as Independent Director of the 8th Board of
Wang Xinyu 6 Jun. 2016
Director dismissed the Directors.
56
Lu Thai Textile Co., Ltd. Annual Report 2016
Other senior Appointed and 6 Jun. 2016 Be selected as other senior administrator of the 8th Board
Li Wenj
administrator dismissed of the Directors.
Independent Expired 6 Jun. 2016
Zhang Chengzhu Expiration of the term of the 7th Board of the Directors.
Director
Independent Expired 6 Jun. 2016 Expiration of the term of the 7th Board of the Directors.
Zhou Zhiji
Director
Independent Expired 6 Jun. 2016 Expiration of the term of the 7th Board of the Directors.
Wang Lei
Director
III. Resumes of important personnel
Main working experience of current directors, supervisors and senior management staff
1. Mr. Liu Zibin: Director and concurrently General Manager of the Company. He was born in 1965, and achieved Master Degree.
From Oct. 2004 to Jun. 2007, he acted as Chairman of the Board of Zibo Lucheng Textile Investment Co., Ltd, now concurrently was
Chairman of the Board of Xinsheng Power, Luqun Textile, Xinjiang Lu Thai and the President of Lu Thai (America), Director of
Beijing Innovative, Supervisory Board Chairman of Beijing Lu Thai Youxian and GM of Shanghai Lu Thai.
2. Mr. Xu Zhinan: Vice Chairman of the Board of the Company. He was born in 1930, Thailand Nationality. Since 2004, he has been
acting as Director and Vice Chairman of the Board of the Company, and General Manager of Tailun (Thailand) Textile Co., Ltd.
3. Mr. Fujiwara Hidetoshi: Director of the Company. He was born in 1940, Japanese Nationality. Since 1998, he has been holding
post of Director and Senior Consultant of Lu Thai Company, and concurrently was Director of Lufeng Weaving & Dyeing Co., Ltd.
4. Mr. Chen Ruimou: Director of the Company. He was born in 1944, and holder of bachelor degree. From 1998 to now, he has been
Director of the Company.
5. Mr. Zeng Facheng, Director of the Company, was born in 1951, Thailand nationality. He acts as Chairman of the Board of GOLD
MINE GARMENT CO., LTD. and BLOSSOM GARMENT MANUFACTURING (THAILAND) CO., LTD.
6. Mr. Wang Fangshui: Director, Vice General Manager and Chief Engineer of the Company. He was born in 1961, holder of MBA
degree. Since 1998, he has been Director and Chief Engineer of the Company, and concurrently is Director and General Manager of
Lufeng Weaving & Dyeing, Director of Xinjiang Lu Thai and Director of Luqun Textile as well as the Executive Director of Lu Thai
(Burma).
7. Ms. Qin Guiling: Director, Vice General Manager and Secretary to the Board of the Company. She was born in 1966, holder of
MBA degree. Since 1998, she has been Director and Secretary to the Board of the Company, and Director of Beijing Lu Thai
Youxian, Supervisory Board Chairman of Xinjiang Lu Thai, Director of Luqun Textile, and Director of Beijing Innovative.
8. Ms. Zhang Hongmei: Chief Accountant. She was born in 1970; holder of MBA degree and senior accountant. She had served
successively as Chief of cost section of financial department of Lu Thai Textile Co., Ltd., director of the accounting department and
deputy chief accountant. Now she serves as Chief Accountant of the Company.
9. Mr. Xu Jianjun: Independent Director of the Company, born in 1974, master degree holder. Once took the post of Senior Staff
Member of Head Office of Bank of China, Legal Counsel, lawyer at Beijing Jingtian Gongsheng Law Firm. From August of 2004 up
to now, serves as a partner of Beijing Deheng Law Firm. Now he is taking a post of partner and Deputy Director of Beijing Deheng
Law Firm.
10. Mr. Zhao Yao: Independent Director of the Company, born in 1970, master degree holder, associate professor of accounting,
master tutor and successively acted as member of a council of Accounting Association in Shandong Province, executive member of
the council of Shandong Province Institute of CPAs, member of Shandong Province internal control consultant experts, member of
Shandong Province accounting criterion consultant experts and currently act as Director of Department of Accounting of Shandong
57
Lu Thai Textile Co., Ltd. Annual Report 2016
University of Technology.
11. Ms. Bi Xiuli: female, independent director of the Company, born in 1967, master. She worked as a judge of Zibo Intermediate
People's Court from 1990 to 1996, worked as a lawyer of Beijing Jingwei Law Firm from 2002 to 2003, worked as a lawyer of
Beijing King & Capital Law Firm from 2003 to 2004, worked as a partner of Beijing JunZeJun Law Offices from 2004 to 2011 and
works as a partner of Beijing DeHeng Law Offices now.
12. Ms. Pan Ailing: female, independent director of the Company, born in 1965, doctor of economics, postdoctor of financial
management. Now, she works as a professor, doctoral supervisor and academic leader of accounting in School of Management of
Shandong University, the director of investment and financing research center of Shandong University, a member of Shandong
Accounting Society, an executive member of Shandong Research Society of Comparative Management and a visiting professor of
Taiwan Soochow University.
13. Mr. Wang Xinyu: male, independent director of the Company, born in 1967, master, certified public accountant, certified tax
agent and certified public assets estimator. From December 2007 to August 2013, he worked in Zhonglei Accounting Firm as the
vice general manager of Shandong branch. Now he works as the senior partner and director of Shandong branch of Reanda Certified
Public Accountants (special general partnership).
14. Mr. Li Tongmin: male, chairman of board of supervisors of the Company, born in 1956, technical secondary school education.
Now he works as chairman of the labor union of the Company. From October 1993 to 2010, he worked as supervisor, vice general
manager and the manager of production department of the Company.
15. Mr. Liu Zilong: Supervisor of the Company. He was born in 1968. From 2002 to present, he was General Manager of Lu Thai
(Hong Kong).
16. Mr. Dong Shibing: Supervisor of the Company. He was born in 1969, graduated from technical secondary school. He ever took
the post of Deputy Director of the General Manager Office of the Company, and now holds post of Manager of Property
Management Company.
17. Mr. Zhang Jianxiang: male, vice general manager of the Company & the executive director of Lu Thai Textile Garment
Engineering Research Institute, born in 1968, Master of Business Administration. He once worked as the manager of quality
management department of the Company and the director of textile finishing factory.
18. Mr. Wang Jiabing: General Manager Assistant and Manager of Production Department of the Company, head of security
checkpoint of production department. He was born in 1963, MBA and once acted as Manager of Dyeing Business Department.
19 Mr. Zhang Shougang: Assistant General Manager, Garment Division Manager of the Company. He was born in 1970, MBA and
senior engineer, once was Director of Weaving Factory, Manager of Weaving Business Department and Manager of Quality Control
Department in the Company.
20. Mr. Zhang Zhanqi: General Manager Assistant and deputy General Manager in Lufeng Weaving & Dyeing of the Company. He
was born in 1972, MBA, once worked as Director of Fabric Finishing Plant and Manager of Quality Control Department.
21. Mr. Fujiwara Matsuzaka: General Manager of International Business Department II of the Company. He was born in 1973 and
had acted as General Manager of International Business Department I of the Company.
22. Mr. Li Wenji: male, CIO & manager of information department of the Company, born in 1967. He once worked as a teacher in
Shandong University of Finance and Economics. From July 2005 to now, he works as the manager of information department of the
Company. In 2016, he was employed as chief information officer of the Company.
23. Mr. Zhang Keming: Manager of Financial Department of the Company. He was born in 1968, MBA and senior accountant. From
2002 to 2006, he held the post of Deputy Manager of Financial Department; from Apr. 2006 to present, he has acted as General
Manager of Financial Department.
24. Mr. Pan Pingli: Manager of International Business Department II. He was born in 1968 and MBA degree holder. He ever acted as
58
Lu Thai Textile Co., Ltd. Annual Report 2016
General Manager of International Business Department of the Company.
25. Mr. Lv Yongchen: Deputy General Manager of Lufeng Weaving and Dyeing Co., Ltd. He was born in 1968 and MBA degree
holder. From 2002 to 2010, he acted as Deputy Manager of International Business Department in the Company.
26. Mr. Yu Shouzheng: Energy Business Manager of the Company. He was born in 1968, MBA degree holder and engineer. He once
worked as Director of Dynamic Department in the Company. From 2007 to present, he has acted as Manager of Energy Business
Department in the Company.
27. Mr. Wang Changzhao: General Manager of International Business Department I of the Company. He was born in 1974 and had
acted as General Manger Assistant of International Business Department.
28. Mr. Quan Peng: Marketing Manager of the Company. He was born in 1967, MBA degree holder. From 2004 to prese
nt, he has acted as Marketing Manager.
29. Mr. Shang Chenggang: manager of garments production department of the Company, born in 1973. He once worked as the vice
director and director of general manager office, the manager of enterprise manager department and the representative of managers.
Employment in shareholders’ companies
√ Applicable □ Not applicable
Whether receiving
Posts held in subsidies and
Name of Start date of Expiration
Name of shareholders’ companies shareholders’ remuneration in
employers tenure Date of tenure
companies shareholders’
companies
Chairman of
Liu Zibin Zibo Lucheng Textile Investment Co., Ltd. the Board of 26 Feb. 1999 No
Directors
Chairman of
Xu Zhinan Tailun (Thailand) Textile Co., Ltd. the Board of 29 Jan. 1985 No
Directors
Mr. Liu Zibin is the Supervisor of Zibo Lucheng Textile Investment Co., Ltd., and holding 4% equities of Zibo
Explanations
Lucheng Textile Investment Co., Ltd., with his son Mr. Liu Deming jointly holding 25% equities of Zibo Lucheng
about holding
Textile Investment Co., Ltd., and they are the largest shareholder as well as the actual controller. Basic information
posts in
about Mr. Liu Zibin: Chinese, no right of residence in other countries or regions. Mr. Xu Zhinan is the sponsor of
shareholders’
foreign capital of the Company, shareholder of Tailun (Thailand) Textile Co., Ltd. and Tailun (Thailand) Textile Co.,
companies
Ltd. is the second largest shareholder of the Company. Basic information about Mr. Xu Zhinan: Thai.
Employment in other companies
√ Applicable □ Not applicable
Whether receiving
Posts held in
Name of Start date of Expiration Date subsidies and
Name of other companies shareholders’
employers tenure of tenure remuneration in
companies
other companies
Xinjiang Lu Thai Harvest Cotton Co., Ltd., Director,
Xinjiang Lu Thai Textile Co., Ltd., Lufeng Supervisor,
Liu Zibin 7 Dec. 2015 No
Weaving & Dyeing Co., Ltd. Zibo Luqun Supervisory
Textile Co., Ltd., Zibo Xinsheng Power Co., Board
59
Lu Thai Textile Co., Ltd. Annual Report 2016
Ltd., Zibo Luqun Textile Co., Ltd., Shanghai Chairman,
Lu Thai Textile Garment Co., Ltd., Beijing GM
Lu Thai Youxian E-commerce Co., Ltd., Lu
Thai (America) Textile Co., Ltd.
Xinjiang Lu Thai Harvest Cotton Co., Ltd.,
Xinjiang Lu Thai Textile Co., Ltd., Lufeng
Wang Fangshui Weaving & Dyeing Co., Ltd. Zibo Luqun Director 17 Jun. 2003 No
Textile Co., Ltd., Lu Thai (Burma) Textile
Co., Ltd.
Director,
Beijing Lu Thai Youxian E-commerce Co.,
Supervisory
Ltd., Xinjiang Lu Thai Harvest Cotton Co.,
Qin Guiling Board 17 Jun. 2003 No
Ltd., Zibo Luqun Textile Co., Ltd., Beijing
Chairman,
Sichuang Adornments Co., Ltd.
Director
Xu Jianjun Beijing Deheng Law Offices Partner 1 Aug. 2004 Yes
Associate
Zhao Yao Shandong University of Technology 1 Mar. 2001 Yes
Professor
Bi Xiuli Beijing Deheng Law Offices Partner 1 Jan. 2011 Yes
Pan Ailing Shandong University School of Management Professor 1 Jul. 1986 Yes
Reanda Certified Public Accountants
Wang Xinyu Director 1 Aug. 2013 Yes
Shandong Branch
Explanations
about Except independent directors, other companies directors, supervisors, senior executives are holding posts in are all
employment in controlling subsidiaries of the Company.
other companies
Particulars about the Company's current directors, supervisors and senior executives ‘punishments from Securities Regulatory
Institution of recent three years in Reporting Period
□ Applicable √ Not applicable
IV. Remuneration for directors, supervisors and senior management
Decision-making procedure, determining basis and actual payment for the remuneration of directors, supervisors and senior
management
Decision-making Remuneration committee under the board of directors is responsible for formulating assessment standards
procedures of remuneration of directors and senior executives and conducting assessment; for formulating and reviewing
of directors, supervisors, remuneration policy and program of directors and senior executives; it is responsible for the board of
senior executives directors. The remuneration committee, according to appraisal results of position performance and
motivation and restriction plan for senior executives, proposes amount of payment and methods of
reward for directors and senior executives and submits the above resolutions to the board of directors for
ratification after the approval by voting.
Determinate basis of The Chief Accountant Office, the Corporate Management Department and the HR Department of the
60
Lu Thai Textile Co., Ltd. Annual Report 2016
remuneration of directors, Company was responsible for preparations for the decision-making of the Remuneration and Appraisal
supervisors, senior Committee by providing relevant information of the Company as follows: (I) accomplishment of main
executives financial and business objectives; (II) accomplishment of relevant indicators of other listed companies in
the sector; (III) work scope and main responsibilities of senior management staff.
The remuneration committee appraised directors and senior management staff according to the
completion situation of the Company’s performance and the annual appraisal results of senior
management staff were put forward according to the performance appraisal results and the senior staff
incentive and disciplinary plan. Upon approval by voting, the results were reported to the Board of
Directors for approval.
Actual payment of The number of incumbent directors, supervisors and senior executives is 29, among which there are 28
remuneration of directors, persons actually receiving remuneration from the Company. Till 31 Dec. 2016, the total amount of annual
supervisors, senior payment drawn from the Company by directors, supervisors and senior executives is RMB24.4863
executives million (before tax).
Remuneration of the directors, supervisors and senior management of the Company during the Reporting Period is as follow:
Unit: RMB Thousand Yuan
Whether gained
Total before-tax
remuneration
remuneration
Name Position Gender Age Current/former from the related
gained from the
parties of the
Company
Company
Chairman of the Incumbent
Liu Zibin Board of Directors Male 52 135.99 No
/GM
Vice Chairman of Male Incumbent No
Xu Zhinan the Board of 87 27.75
Directors
Fujiwara Director/Senior Male Incumbent No
77 807.51
Hidetoshi Consultant
Chen Ruimou Director Male 73 Incumbent 27.75 No
Zeng Facheng Director Male 66 Incumbent 1.19 No
Director/Vice Male Incumbent No
Wang Fangshui Director/Chief 56 135.66
Engineer
Director/Vice Incumbent No
Qin Guiling Director/Chairman Female 51 135.53
Secretary
Zhang Hongmei Chief Accountant Female 47 Incumbent 84.88 No
Independent Dire Male Incumbent No
Xu Jianjun 43 4.8
ctor
61
Lu Thai Textile Co., Ltd. Annual Report 2016
Independent Dire Male Incumbent No
Zhao Yao 47 4.8
ctor
Independent Dire Male Incumbent No
Bi Xiuli 50 4.8
ctor
Independent Dire Male Incumbent No
Wang Xinyu 52 4.8
ctor
Supervisory Board Male Incumbent No
Li Tongmin 50 4.8
Chairman
Liu Zilong Supervisor Male 61 Incumbent 134.37 No
Dong Shibing Supervisor Male 49 Incumbent 55.73 No
Zhang Jianxiang Deputy GM Male 48 Incumbent 54.01 No
GM Assistant, Male Incumbent No
Manager of
Wang Jiabin 49 82.99
Production
Department
Assistant GM, Male Incumbent No
Zhang Shougang Garment Division 54 78.47
Manager
Assistant GM, Male Incumbent No
Deputy GM of
Zhang Zhanqi Lufeng Weaving 47 66.71
& Dyeing Co.,
Ltd.
Manager of the Male Incumbent No
Second
Fujiwara
Department of 45 68.78
Matsuzaka
International
Business
Manager of Male Incumbent No
Zhang Keming 44 113.74
Financial Dep.
Li Wenji CIO Male 49 Incumbent 53.36 No
Manager of Male Incumbent No
Pan Pingli International 39.44
Business Dep. III
Deputy General Male Incumbent No
Manager of
Lv Yongchen Lufeng Weaving 49 53.52
& Dyeing Co.,
Ltd.
Yu Shouzheng Manager of Male 49 Incumbent 53.75 No
62
Lu Thai Textile Co., Ltd. Annual Report 2016
Energy Business
Dep.
Marketing Male Incumbent No
Quan Peng 49 53.44
Manager
Manager of Male Incumbent No
Enterprises
Shang Chenggang 43 55.16
Management
Department
Independent Male Expiration No
Zhang Cehngzhu 50 52.99
Director
Independent Male Expiration No
Zhou Zhiji 44 51.91
Director
Independent Expiration No
Wang Lei Female 66 0
Director
Total -- -- 54 -- 0 --
Situations of equity incentives awarded to the directors, supervisors and senior management of the Company during the Reporting
Period
□ Applicable √ Not applicable
V. About employees
1. Number of the employees, component difference and educational background
Number of the serving employees of the parent company (person) 15,753
Number of the serving employees of the major subsidiaries
5,266
(person)
Total number of the serving employees (person) 21,019
Total number of the employees receiving the salary of the
21,019
Reporting Period (person)
Number of the left and retired employees that the parent company
0
and the major subsidiaries should undertake the expenses (person)
Component difference
Category Number (person)
Production personnel 14,588
Sales personnel 607
Technical personnel 5,384
Financial personnel 81
Administrative personnel 359
63
Lu Thai Textile Co., Ltd. Annual Report 2016
Total 21,019
Educational background
Category Number (person)
Doctor 2
Master 88
Bachelor 955
College 5,400
High school and below 14,574
Total 21,019
2. Remuneration policy
The Company has formulated a remuneration management system with its principle being “payment according to one’s work and
more pay for more work”. Through post evaluation and through researches of Social salary levels carried out as multi-faceted, as well
as the formulation of the reasonable salary management system, fully demonstrates the internal fairness, self-fairness and external
fairness. It has greatly motivated the employees and enhanced the corporate management.
3. Training plan
Trainings will be carried out according to requirements of the Company’s strategic development planning, improvement of
employees’ capability, performance management, employees’ career planning, etc. The annual training plan is determined by carrying
out researches on training needs. And the training courses fall into three major categories, i.e. management, technical skills and
general knowledge. Through these trainings, the Company will improve the knowledge structure of its employees, improve their job
skills and increase their comprehensive quality to provide excellent human resources for the long-term, sustained and stable
development of the Company.
4. Labor outsourcing
□ Applicable √ Not applicable
64
Lu Thai Textile Co., Ltd. Annual Report 2016
Section IX. Corporate Governance
I. Basic condition of corporate governance
1. The Company continued to perfect the corporate governance structure, establish and perfect the modern enterprise system and
ensure the efficient and standardized operation of the Company’s Shareholders’ General Meeting, Board of Directors, Board of
Supervisors and Senior Executives strictly according to Company Law, Securities Law and Governing Rules for Listed Company as
well as relevant stipulations and requirements from CSRC. It formed a relationship of clear division of rights and responsibilities,
assuming each own functions and check and balance each other between the management organ, decision-making organ, supervisory
organ and management layer, so as to provide a good internal operational environment for the Company’s standardized and efficient
operation. At present, there is no difference between the actual situation of the Company’s corporate governance structure and the
requirements on the corporate governance of CSRC and Shenzhen Stock Exchange.
2. About shareholders and Shareholders’ General Meeting
The Company convened and held the Shareholders’ General Meeting in strict accordance with the requirements from the Rules for
Shareholders’ General Meeting in Listed Companies and the stipulation of the Rules of Procedure for Shareholders’ General Meeting.
During the Reporting Period, as for the contents such as providing the internet voting platform and the individual voting calculation
as well as the disclosure of the medium and small shareholders, the Company revised part of the regulations of the Articles of
Association and Rules of Procedure of the Shareholders' General Meeting of Lu Thai Textile Co., Ltd. according to the requirements
of the Rules of Procedure of the Shareholders' General Meeting of Listed Companies (revised in 2014) and Articles of Association of
Listed Companies (revised in 2014), which ensured all shareholders especially medium to small shareholders to enjoy equal rights
and fully exercise their own rights.
3. About the relationship between the principal shareholders and the Company
The Company’s principal shareholders acted according to relevant standards without directly or indirectly intervening the Company’s
decision-making and operating activities over the Shareholders’ General Meeting; the Company was independent with its principal
shareholders in business, personnel, assets, organization, finance, and the Company’s Board of Directors, Supervisory Committee
and Internal Organs could completely independent to operate. There was no situation about annexing the assets or occupation of
funds of the Company by principal shareholders or other events on infringing the interest of the Company and other shareholders.
4. About the directors and Board of Directors
The Company nominated and elected directors in strict accordance with the Articles of Association, the structure of the Board of
Directors and the number of independent directors was in compliance with the requirement of laws and regulations. Besides, it
established four special committees such as Strategy Committee, Nomination Committee, Audit Committee and Remuneration &
Appraisal Committee in accordance with the Rules of Procedure for the Board of Directors, and accordingly promulgated the work
rules for the committees. The committees clearly understood their responsibilities and operated well. The directors and independent
directors completely enjoyed the rights stipulated in Company Law and Articles of Association, which ensure the scientific and
impartial decision made by the Board of Directors of the Company. During the Reporting Period, the Company revised the Rules of
Procedure of the Board of Directors of Lu Thai Textile Co., Ltd. according to the actual situation and revised the number of the
Directors.
5. About supervisors and Supervisory Committee
The Company’s Supervisory Committee and supervisors conscientiously performed their duties by strictly implementing relevant
regulations of Articles of Association and the Rules of Procedure for Supervisory Committee, and conducted effective supervision on
the Company’s finance, the legal and regulatory compliance of directors and senior executive in duty performance.
6. About information disclosure and the transparency
65
Lu Thai Textile Co., Ltd. Annual Report 2016
The Company authentically, accurately, completely and timely performed its information disclosure responsibility in strict
accordance with the stipulations of the Stock Listing Rules of Shenzhen Stock Exchange and relevant laws and regulations. Moreover,
it ensured all shareholders have equal opportunity to gain information by disclosing information in strict accordance with
Management System on Information Disclosure and Management System on Information Insiders as well as relevant stipulations.
7. Investors relationship management
The Company has established the Management System on Investor Relationship, and it paid special attention to the management of
investor relationship and continued to maintain good communication with investors during executing the said system. During the
Reporting Period, through attending the investor exchanging fair, accepting investors’ on-site visit and consultant by way of on-site
research and phone, the Company introduced its situation of production and operation and development strategy to the investors, so
as to enhance their understanding of the Company and increase the Company’s market transparency, as well as establish a good
corporate image in the capital market. Meanwhile, it fully took advantage of the investor interactive platform of Shenzhen Stock
Exchange to answer the questions and consultant from investors, and accepted the advices and opinion proposed by them, so as to
maintain a healthy and good relationship between the Company and the investors.
8. About relevant beneficiaries
The Company fully respected and protected the legal rights of its customers, banks, suppliers, other creditors, staffs and consumers,
etc., as well as paid special attention to the active cooperation with the said relevant beneficiaries, so as to mutually promote the
sustainable and healthy development of the Company.
Whether it exists any difference between the corporate governance and the Company Law and relevant rules of CSRC or not?
□ Yes √ No
There is no difference between the corporate governance and the Company Law and relevant rules of CSRC.
II. Particulars about the Company’s separation from the controlling shareholder in respect of
business, personnel, assets, organization and financial affairs
1. As for the business: the Company completely separates from the controlling shareholders in the business that possesses the entirely
independent production, supply and sales system and the autonomous operating ability.
2. As for the personnel: the Company remains completely independent in the Human Resources aspects such as the labor, the
personnel and the wages with entirely independent self-controlling ability.
3. As for the assets: the Company possesses the entire and independent legal person property right with independent and perfect the
production system, auxiliary production systems and supporting facilities; and possesses the independent ownership of the intangible
assets such as the i Industrial property, trademarks, non-patented technology.
4. As for the institution: the organizations and institutions of the Company are all independent and perfect that there is no any
situation of working with the controlling shareholders.
5. As for the finance: the Company possesses independent financial departments with normative financial accounting system and
financial management system as well as internal control system with independent bank account.
III. Horizontal competition
□ Applicable √ Not applicable
66
Lu Thai Textile Co., Ltd. Annual Report 2016
IV. Particulars about annual shareholders’ general meetings and temporary shareholders’
general meetings held during the Reporting Period
1. Particulars about annual shareholders’ general meetings during the Reporting Period
Proportion of
Session Type investors' Convening date Disclosure date Index to the disclosed
participation
Announcement on the
Resolution of the
Meeting (No.: 2016-010)
2016 1st
Extraordinary disclosed on 22 Mar.
Extraordinary 0.00% 21 Mar. 2016 22 Mar. 2016
General Meeting 2016 on Securities Times,
General Meeting
Ta Kung Pao, Shanghai
Securities News and
http://www.cninfo.com.cn
Announcement on the
Resolution of the
Meeting (No.: 2016-021)
2014 Annual Annual General disclosed on 30 Apr. 2016
0.00% 29 Apr. 2016 30 Apr. 2016
General Meeting Meeting on Securities Times, Ta
Kung Pao, Shanghai
Securities News and
http://www.cninfo.com.cn
Announcement on the
Resolution of the
Meeting (No.: 2016-031)
2016 2nd
Extraordinary disclosed on 7 Jun. 2016
Extraordinary 0.00% 6 Jun. 2016 7 Jun. 2016
General Meeting on Securities Times, Ta
General Meeting
Kung Pao, Shanghai
Securities News and
http://www.cninfo.com.cn
Announcement on the
Resolution of the
Meeting (No.: 2016-048)
2016 3rd
Extraordinary disclosed on 16 Nov.
Extraordinary 0.00% 15 Nov. 2016 15 Nov. 2016
General Meeting 2016 on Securities Times,
General Meeting
Ta Kung Pao, Shanghai
Securities News and
http://www.cninfo.com.cn
67
Lu Thai Textile Co., Ltd. Annual Report 2016
2. Special Shareholders’ General Meeting applied by the preferred stockholder with restitution of voting right
□ Applicable √ Not applicable
V. Performance of the Independent Directors
1. Particulars about the independent directors attending the board sessions and the shareholders’ general meetings
Particulars about the independent directors attending the board sessions
Sessions required Non-attendance
Attendance by
to attend during Attendance in Entrusted in person for two
Independent director way of Absence rate
the Reporting person presence (times) consecutive
telecommunication
Period times
Zhou Zhiji 5 1 4 0 No
Wang Lei 5 0 4 1 0 No
Zhang Chengzhu 5 1 4 0 No
Xu Jianjun 8 0 7 1 0 No
Zhao Yao 8 2 6 0 No
Bi Xiuli 3 1 2 0 No
Pan Ailing 3 0 3 0 No
Wang Xinyu 3 0 3 0 No
General meetings sat in on by
2
independent directors
Notes to non-attendance in person for two consecutive times
Not applicable.2. Particulars about independent directors proposing objection on relevant events
Whether independent directors propose objection on relevant events or not?
□ Yes √ No
During the Reporting Period, no independent directors proposed any objection on relevant events of the Company.
3. Other explanations about the duty performance of independent directors
Whether advices to the Company from independent directors were adopted or not
√ Yes □ No
Explanation on the advices of independent directors for the Company being adopted or not adopted
68
Lu Thai Textile Co., Ltd. Annual Report 2016
The Independent Directors of the Company had not raised any objection to the proposals and other events approved and reviewed by
the Board of the Directors while executed the carefully review on the events needed advices and put forward the professional
suggestion and advice as well as stated 15 independent advices which improved the scientificity and objectivity of the
decision-making that exerted the due role on the supervision mechanism for improving the Company.
VI. Performance of the Special Committees under the Board during the Reporting Period
I. Duty fulfillment of Audit Committee under the Boar
1. The Audit Committee of the 7th Board of the Directors held the 2st Meeting of Y2016 on 16 May 2016, which reviewed and
approved the 2016 Derivatives Trading Plan of Lu Thai Textile Co., Ltd. and stated the written advice：the Company faced with the
pressure of the enlarged fluctuation rage of the exchange rate of the foreign currency market Renminbi to the US dollar and the
derivatives trading plan raised by the Finance Department was the efficient instrument for avoiding the exchange rate risks, and
through the strengthen of the internal control as well as the execution of stop loss processing and the risk prevention measures could
improve the operating and management level and benefit to the fully exertion of the competition advantage of the Company. Under
the premises of guaranteeing the normal operation, the Company used the self-owned funds to execute the derivatives trading, which
was benefit for the avoiding of the changes risks of the Renminbi exchange rate and for improving the prevention ability of the
Company against the exchange rate fluctuation and the operating level as well as for fully exerting the competition advantage of the
Company without any situation that harm the benefits of the Company and the whole shareholders. We believed the derivatives
trading plan was feasible and necessary with the risks were controllable. And we agreed to submit the 2016 Derivatives Trading Plan
of Lu Thai Textile Co., Ltd. to the 33th Session of the 7th Board of the Directors for review and approval.
2. The Audit Committee of the 8th Board of the Directors held the 1st Meeting of Y2017 on 2 Mar. 2017, which reviewed and the
approved the Proposal on the Withdrawal of the Assets Impairment Provision and stated the written advice: for fairly reflected the
value of each asset of the Company and according to the relevant regulations of the ASBE and Management System of the
Withdrawal of the Assets Impairment Provision of Lu Thai Textile Co., Ltd. and the Company had executed the examination of each
asset at the year-end of 2016as well as the impairment test of the assets with impairment indication and when the estimated
recoverable amount of each asset was lower than its book value should execute the withdrawal of the assets impairment provision
through recognition or measurement. We considered that the events of the withdrawal of the assets impairment provision met with
the ASBE and the relevant accounting policies of the Company with sufficient evidence as well as indicated the accounting
conservation principles and met with the actual situation of the Company. After the withdrawal of the assets impairment provision,
the events could more fair to reflect the financial condition, assets value and operating results of the Company up to 31 Dec. 2016,
which made the accounting information of the Company more reasonable. The Company agreed to submit the Proposal on the
Withdrawal of the Assets Impairment Provision to the 5th Session of the 8th Board of the Directors for review and approval.
3. Major work of the 2016 annual report of the Audit Committee:
(1) The Audit Committee had held the 2016 1st Meeting of the Audit Committee on the Financial Audit Work in the meeting room of
the Company on 17 Nov. 2016 and the meeting had confirmed the time and arrangement plan of the 2016 annual financial audit work
unanimously with the 2016 Audit Institution Ruihua CPAs (LLP).
(2) On 20 Jan. 2017, the Audit Committee had held the 1st Meeting of the 2016 Audit Work, which reviewed and submitted the
financial report audited by Ruihua CPAs (LLP) and issued the written advice.
(3) During the audit process, the Company had been maintained the contract and communication with the project leader of Ruihua
CPAs (LLP) by the methods such as the telephones and e-mails and had been urged which to submit the audit report within the
appointed time.
(4) The 3rd Meeting on 2016 Annual Audit, as well as the 2016 Annual Work Conference, were convened by the Committee on 28
Mar. 2017, where the following proposals were approved as resolutions, namely, the audited 2016 Financial Report of the Company,
the Summary Report on the Audit Conducted by Ruihua CPAs (LLP) on the Company’s 2016 Financial Report, and the Proposal on
69
Lu Thai Textile Co., Ltd. Annual Report 2016
Renewing Employment of Ruihua CPAs (LLP) as the Company’s audit agency for 2016.
4. Written opinions, summary report of the annual audit, and resolutions of 2016 Work Conference on Annual Report by Audit
Committee
(1) Audit Committee’s written opinion on the 2016 financial and accounting statements prepared by the Company’s Financial
Department before the presence of the registered accountants for the annual audit:
According to the Rules for Audit Committee of the Board Concerning Annual Reports of Lu Thai Textile Co., Ltd., the Audit
Committee shall perform its duties of conducting supervision and checks in the Company’s preparation and disclosure of its annual
reports. The Committee reviewed the 2016 financial and accounting statements prepared by the Company’s Financial Department
before the presence of the registered accountants for the annual audit, and expressed its opinion as follows:
1. The financial and accounting statements were prepared in accordance with the Company’s accounting policy with proper
application of the accounting policy and reasonable accounting estimates, which were in line with the New Accounting Standards for
Business Enterprises, the Accounting System for Business Enterprises, and the relevant regulations issued by the Ministry of Finance
of PRC;
2. The subsidiary statements included in the Company’s consolidated statements were complete in terms of contents, providing an
accurate basis for the statement combination;
3. The Company’s financial statements were found objective, factual and accurate with no major misstatements or information
omission.
4. Since there is still a certain period of time from this review of the financial statements to the formal issuance of the auditor’s report
and the financial statements, the Company’s Financial Department is advised to pay close attention to and carefully handle the
matters after the balance sheet date, so as to ensure the fairness, factuality and completeness of the financial statements. The Audit
Committee is of the opinion that the financial and accounting statements are ready to be submitted to the registered accountants for
audit.
(2) Audit Committee’s written opinion on the Company’s financial statements after the preliminary audit opinion was issued by
Ruihua CPAs (LLP):
According to the Rules for Audit Committee of the Board Concerning Annual Reports of Lu Thai Textile Co., Ltd., the Audit
Committee shall perform its duties of conducting supervision and checks in the Company’s preparation and disclosure of its annual
reports. We effectively communicated with the said CPA firm (LLP) at the beginning of the audit. And we once again reviewed the
Company’s 2016 financial and accounting statements following the preliminary audit opinion issued by the CPA firm (LLP), and
expressed our opinions as follows:
In accordance with the New Accounting Standards for Business Enterprises and the Company’s relevant financial rules, the financial
statements were prepared in a rational and standardized way, which fairly, factually, accurately and completely presented the
Company’s assets, liabilities, shareholders’ equity and operation results by 31 Dec. 2016.
The Audit Committee is of the opinion that the Company’s 2016 financial and accounting statements preliminarily audited by RSM
China Certified Public Accountants (Special General Partnership) are ready to be submitted to the 6th Session of the 8th Board of the
Directors for review.
(3) Resolutions made at 2016 Annual Work Conference of Audit Committee of the Board
The Audit Committee of the Board of Lu Thai Textile Co., Ltd. held its 2016Annual Work Conference at Banyang Villa Meeting
Room of the Company on 28 Mar. 2017. Three persons were supposed to attend the meeting, and all three of them were in fact
present at the meeting as well as the Chief Accountant, the Manager Assistant of the Audit Department, the project responsible person
of Lu Thai of Ruihua CPAs attended the meeting. Mr. Zhao Yao, Chairman of the Audit Committee, presided over the meeting, and
Chief Accountant and Chief Auditor of the Audit Department sat in on the meeting. The meeting was convened in accordance with
the Company Law and the Articles of Association of the Company. And the following proposals were passed by vote at the meeting:
I. With 3 favorable votes, 0 negative votes and no abstentions, the 2016 Financial Report of the Company audited by Ruihua CPAs
70
Lu Thai Textile Co., Ltd. Annual Report 2016
(LLP) was passes;
II. With 3 favorable votes, 0 negative votes and no abstentions, the Summary Report on the Audit Conducted by Ruihua CPAs (LLP)
on the Company’s 2016 Financial Report was passed;
III. With 3 favorable votes, 0 negative votes and no abstentions, the Proposal on Renewing Employment of Ruihua CPAs (LLP) as
the Company’s audit agency and paid RMB1.585 million to the said CPAs firm as fees for the 2016 annual financial report audit and
internal control audit.
The Committee agrees to submit the above-mentioned proposals 1 and 3 to the Board of Directors for examination on the 6th Session
of the 8th Board of Directors.
II. Duty performance of Remuneration Committee affiliated to the Board of Directors
1. The Remuneration Committee of the Board of Lu Thai Textile Co., Ltd. held the First Conference in 2015 at Banyang Villa
Meeting Room of the Company on 27 Mar. 2016. Six persons were supposed to attend the meeting, and all of them were in fact
present at the meeting. The meeting held by the Company met with the relevant regulations of Company Law and the Articles of
Association of the Company and reviewed and approved the Proposal on the 2015 Appraisal Result of the Senior Executives of Lu
Thai Company by the voting method and agreed to submit the above-mentioned proposal to the Board of Directors for examination
on the 31st Session of the 7th Board of Directors.
2. According to authorization of the 31rd Meeting of the 7th Board of Directors of Lu Thai, remuneration committee of board of
directors of Lu Thai Textile Co., Ltd. held the second meeting of 2016 in the meeting room of Panyang Villa Meeting Room of the
Company on 16 May 2016. 6 persons should attend the meeting and 6 persons actually attended the meeting. Among the 6 persons,
Liu Shizhen and Liu Zibin voted on the spot; Zhang Chengzhu, Zhou Zhiji, Wang Lei and Zhao Yao voted in the form of
communication. Chief accountant and the secretary of board of directors also attended the meeting. The meeting accorded with
relevant stipulations in Company Law and Articles of Company. 2015 Proposal for Risk Fund Assessment and Release Amount and
Proposal for Suggesting Subsidy to the Independent Directors at the 8th Board of Directors were passed at the meeting in voting
form.
III. Duty execution of the strategy committee of board of directors
The Strategy Committee of Board of Directors of Lu Thai Textile Co., Ltd. held the 1st Conference of 2016 in the meeting room of
Panyang Villa Meeting Room of the Company on 27 Mar. 2016. 13 persons should attend the meeting and 13 persons actually
attended the meeting. Chief accountant also attended the meeting. This meeting was hosted by Liu Shizhen, the president of strategy
committee. The meeting accorded with relevant stipulations in Company Law and Articles of Company and passed the following
proposals in voting form.
1. Overall Strategic Objectives of Yarn Dyed Fabric of Lu Thai Textile Co., Ltd. for 2016-2018.
2. Overall Strategic Objectives of Shirts Processing of Lu Thai Textile Co., Ltd. for 2016-2018.
3. Brand, R&D, human resources, fabric information, and clothing manufacture ERP engineering sub-plan.
4. 2016 Annual Operation Plan of Lu Thai Textile Co., Ltd.
IX. Duty performance of nominations committee affiliated to the Board of Directors
1. Nominations committee of the 7th board of directors held the 1st meeting of 2016 on 16 May 2016 according to relevant
stipulations in Company Law and Articles of Company. At the meeting, 6 affirmative votes, 0 dissenting vote and 0 abstention vote
were involved to pass Proposal for Nominating Candidates of the 8th Board of Directors and Proposal for Nominating Candidates of
Independent Directors of the 8th Board of Directors. In addition, the proposals were submitted to the 33rd meeting of the 7th board of
directors for review and approval. The 33rd meeting of the 7th board of directors reviewed and passed above proposals.
1. The Company held the 1st meeting of 2015 of the norminations committee of the 7th Board of Directors on 27 Oct. 2015 according
to the relevent regulations of the Articles of Association, with 6 favorable votes, 0 negative votes and no abstentions, the proposal on
nominating the Director and GM-Mr. Liu Zibin as the candicate of the Chairman of the Board of the 7th Board of Director and had
71
Lu Thai Textile Co., Ltd. Annual Report 2016
submitted which to the 26th Session of the 7th Board of Directros for approval. The 26th Session of the 7th Board of Directors reviewed
and approved the proposal.
2. Nominations committee of the 8th board of directors held the 1st meeting of 2016 on 8 Jun. 2016 according to relevant stipulations
in Company Law and Articles of Company. At the meeting, 7 affirmative votes, 0 dissenting vote and 0 abstention vote were involved
to pass Proposal for Nominating the Candidates of Chairman and Vice Chairman of the 8th Board of Directors, Members of
Specialized Committees, General Manager, Vice General Manager, Chief Accountant, Secretary of Board of Directors,
Representative of Security Business and other Senior Managers. In addition, the proposal was submitted to the 1st meeting of the 8th
board of directors for review and approaval. Nominations are listed below:
(1) Nominate the candidate of chairman of the 8th board of director: Liu Zibin; nominate the candidate of vice chairman of the 8th
board of director: Xu Zhinan.
(2) Nominate the candidate of the members of strategic decision-making committee: Liu Zibin, Xu Zhinan, Fujiwara Hidetoshi,
Chen Ruimou, Wang Fangshui, Zeng Facheng, Qin Guiling, Zhang Hongmei, Xu Jianjun, Zhao Yao, Bi Xiuli, Pan Ailing and Wang
Xinyu. Liu Zibin was the candidate of president.
(3) Nominate the candidate of the members of audit committee: Zhao Yao, Wang Xinyu, Qin Guiling. Zhao Yao was the candidate of
president.
(4) Nominate the candidate of the members of remuneration and assessment committee: Liu Zibin, Bi Xiuli, Wang Xinyu, Zhao Yao
and Pan Ailing. Wang Xinyu was the candidate of president.
(5) Nominate Liu Zibin as the candidate of general manager; Nominate Wang Fangshui, Qin Guiling, Zhang Jianxiang, Wang Jiabin,
Zhang Shougang and Zhang Zhanqi as the candidates of vice general manager.
(6)Nominate Zhang Hongmei as the candidate of chief accountant of the Company; nominate Qin Guiling as the candidate of the
secretary of board of directors; nominate Zheng Weiyin and Li Kun as the candidates of the representative of security business.
(7) According to Articles of Company, nominate and employ Fujiwara Matsuzaka, Zhang Keming, Li Wenji, Pan Pingli, Lv
Yongchen, Yu Shouzheng, Quan Peng, Wang Changzhao, Shang Chenggang as senior managers of the Company.
(8)According to Articles of Company and Company Law, tenure of above personnel is three years.
The first meeting of the eighth board of directors reviewed and passed above proposals.
VII. Performance of the Supervisory Committee
During the Reporting Period, the Supervisory Committee found whether there was risk in the Company in the supervisory activity
□ Yes √ No
The Supervisory Committee has no objection on the supervised events during the Reporting Period.
VIII. Performance Evaluation and Incentive Mechanism for Senior Management Staff
In the Reporting Period, Remuneration Committee of the Board of Directors appraised operating achievements of the Company for
the year 2015 according to Incentive and Restricted Proposal for Senior Executives of Lu Thai Textile Co., Ltd, and drew up
incentive proposal for senior executives, which will be executed after review and approval by the 31st Session of the 7th Board of
Directors dated 28 Mar. 2016. During the Reporting Period, the Company constantly improved the performance evaluation
mechanism and made the evaluation and incentive of the Senior Executives concerned with the Company’s performances and the
individual working results. According to the overall development strategy and the annual operating target of the Company at the
period-begin, the Company confirms the annual performance comprehensive indication and the management duty of each Senior
Executives, and executes the performance examination and the redemption of the rewards and punishment for the Senior Executives
by the Remuneration and Examination Committee affiliated to the Board of Directors at the year-end. The Company will constantly
72
Lu Thai Textile Co., Ltd. Annual Report 2016
improve the evaluation and incentive mechanism that to tightly concern the salary of the Senior Executives with the management
level and the operating performance so that to fully mobilize and inspire the initiative and creativity of them.
IX. Internal Control
1. Particulars about significant defects found in the internal control during Reporting Period
□ Yes √ No
2. Self-appraisal report on internal control
Disclosure date of the Self-appraisal Report
30 Mar. 2017
on Internal Control
For the details, please refer to the Self-appraisal Report on Internal Control of Lu Thai
Disclosure index of the Self-appraisal
Textile Co., Ltd. simultaneously disclosed on www.cninfo.com.cn with the 2016 Annual
Report on Internal Control
Report of the Company.
The proportion of total assets included in
evaluation scope entities in the
88.81%
Company's total assets of the consolidated
financial statements
The proportion of operation revenue
included in evaluation scope entities in
93.82%
the Company's operation revenue of the
consolidated financial statements
Defect judging standards
Category Financial Report Non-Financial Report
Great defect: malpractices of the Directors, Great defect: violated the national laws
Supervisors and Senior Executives; the and regulations; the decision-making of
Company revised the published financial the enterprise was not scientific that led
report; the CPA founded the current financial to the mistakes of itself; outflow of the
report occurred significant misstatement management personnel or the technician
while during the operating process of the personnel was serious; frequently
internal control could not founded the appeared the negative news from the
misstatement; the supervision of the Audit Media; the significant business lacked of
Qualitative criteria
Committee and the internal audit institution systematic control or the systematic
of the Company on the internal control was control was invalid; the result of the
invalid. Significant defeat: had not abide by internal control assessment which was the
the generally accepted accounting principles great defect event had not been revised.
to choose and apply the accounting policies; Significant defeat: violated the enterprise
had not built up the anti-fraud and significant internal regulations that caused rather
counterbalance mechanism and control serious losses; significant business lacked
measures; during the financial report process, of systematic control; outflow of the
73
Lu Thai Textile Co., Ltd. Annual Report 2016
there occurred single or multiple defects rather important personnel was serious;
which not reached the recognition standard of the Media reported the negative news that
the significant defeat but influenced the true caused rather serious negative influence;
and accurate target of the financial report. rather important business lacked of
General defect: other internal control defect systematic control or the systematic
which had not constructed as the great defeat, control was invalid; the results of the
significant defect. internal control assessment which as the
significant defect had not been revised.
General defect: other internal control
defect which had not constructed as the
great defeat, significant defect.
Great defect: the direct financial losses
Great defect: misstatement≥2% of the total
were more than RMB6 million or had
profits amount; misstatement≥0.3% of the
been formally and externally disclosed
total assets amount; misstatement≥0.3% of
and caused negative influences on the
the total operating income;
disclosure of the periodical report of the
misstatement≥0.4% of the total owners’
Company. Significant defect: the direct
equities amount. Significant defect: 1% of the
financial losses were of RMB3 million
total profits amount≤misstatement<2% of the
(including RMB3 million)-RMB6 million
total profits amount; 0.15% of the total assets
or had been punished by the state-owned
amount≤misstatement<0.3% of the total
government sectors while not caused
Quantitative criteria assets amount; 0.15% of the total operating
negative influences on the disclosure of
amount≤misstatement<0.3% of the total
the periodical report of the Company.
operating amount; 0.2% of the total owners’
General defect: the direct financial losses
equities amount≤misstatement<0.4% of the
were of RMB0.5 million (including
total owners’ equities amount. General
RMB0.5 million)-RMB 3 million or had
defect: misstatement<1% of the total profits
been punished by the below-provincial
amount; misstatement<0.15% of the total
(including the provincial level)
assets amount; misstatement<0.15% of the
government sectors while not caused
total operating income; misstatement<0.2%
negative influences on the disclosure of
of the total owners’ equities amount.
the periodical report of the Company.
Number of significant defects of financial
0
report (piece)
Number of significant defects of non-
0
financial report (piece)
Number of important defects of financial
0
report (piece)
Number of important defects of
0
non-financial report (piece)
X. Audit report on internal control
√ Applicable □ Not applicable
74
Lu Thai Textile Co., Ltd. Annual Report 2016
Audit opinion paragraphs in the Audit Report on Internal Control
Internal control audit report
RHZSZ [2017] No. 37040001
To the shareholders of Lu Thai Textile Co., Ltd.:
According to the relevant requirements of the Enterprise Internal Control Audit Guidelines and the Practicing Standards for China’s
CPAs, we audited the validity of the internal control of the financial report on 31 Dec. 2016 of Lu Thai Textile Co., Ltd. (hereinafter
referred to as “the Company”).
I. Responsibilities of the Company for the internal control
According to the regulations of the C-SOX, the Enterprise Internal Control Application Guidelines and the Enterprise Internal
Control Evaluation Guidance, the Company built and improved as well as efficiently executed the internal control with the
responsibility of the Board of Directors for evaluating the efficiency of it.
II. Responsibilities of the CPA
Our responsibilities are to state the audit advices on the efficiency of the internal control of the financial report based on the
execution of the audit work and to disclose the noticed great defect of the non-financial report internal control.
III. Inherent limitation of the internal control
The internal control possesses its inherent limitation with the possibility of couldn’t prevent and discover the misstatement. Besides,
owning to the changes of the situation, there may cause the inappropriate of the internal control or the degree of the compliance to the
control policies and the process would decrease. The Company predicted that there were certain risks of the efficiency of the internal
control of the future according to the audit results of the internal control.
IV. Audit opinion of the internal control of the financial report
We believe that the Company has made valid internal control on financial report in all significant aspects on 31 Dec. 2015 according
to the Basic Rules for Enterprise Internal Control and other relevant stipulations.
Ruihua CPAs (LLP) CPA: Cui Xiaoli
ChinaBeijing CPA: He Feng
28 Mar. 2017
Particulars about Audit Report on
Disclosure
Internal Control
Disclosure date of the Audit Report
30 Mar. 2017
on Internal Control
Disclosure index of the Audit For details, please refer to the Auditor’s Report on Internal Control on www.cninfo.com.cn at
Report on Internal Control the same time of disclosing the Company’s 2016 Annual Report.
Type of Audit Report on Internal
Unqualified auditor’s report
Control
Whether there is significant defect
No
in non-financial report
Whether the CPAs firm issues an Audit Report on Internal Control with non-standard opinion or not?
□ Yes √ No
Whether the Audit Report on Internal Control from the CPAs firm is in consistent with the Self-appraisal Report from the Board or
not?
75
Lu Thai Textile Co., Ltd. Annual Report 2016
√ Yes □ No
76
Lu Thai Textile Co., Ltd. Annual Report 2016
Section X Corporate Bonds
Are there any corporate bonds publicly offered and listed on the stock exchange, which were undue before the
approval date of this Report or were due but could not be redeemed in full?
No.
Section XI Financial Report
I Auditor’s report
Type of auditor’s opinion Standard unqualified opinion
Date of signing the auditor’s report 03/30/2017
Name of the auditor Ruihua Certified Public Accountants LLP
No. of the auditor’s report RHSZ [2017] No. 37040003
Name of CPA He Feng, Cui Xiaoli
Text of the Auditor’s Report
All shareholders of Lu Thai Textile Co., Ltd.,
We have audited the accompanying financial statements of Lu Thai Textile Co., Ltd. (the
“Company”), which comprise the Company’s and consolidated balance sheets as at December 31,
2016, the Company’s and consolidated income statements, the Company’s and consolidated cash
flow statements, the Company’s and consolidated statements of changes in shareholders’ equity for
the year then ended, as well as the notes to the financial statements.
1. The management’s responsibility for the financial statements
The management of the Company is responsible for the preparation and fair presentation of these
financial statements. Such a responsibility includes: (1) preparing financial statements according to
the Accounting Standards for Business Enterprises and make them a fair presentation; and (2)
designing, implementing and maintaining internal control relevant to the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
2. Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
77
Lu Thai Textile Co., Ltd. Annual Report 2016
have conducted our audit in accordance with the Audit Standards for Chinese Registered
Accountants, which require that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance as to whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risks assessments, the auditor considers the internal control
related to the preparation of the financial statements so as to design proper audit procedures. An
audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate, which provides a
basis for us to express auditing opinion.
3. Auditor’s opinion
In our opinion, the financial statements of the Company have been prepared according to the
Accounting Standards for Business Enterprises in all material aspects, which give a fair view of the
Company’s and consolidated financial positions as at December 31, 2016 and the Company’s and
consolidated operating results and cash flows for the year then ended.
Ruihua Certified Public Accountants LLP Chinese CPA：Cui Xiaoli
Beijing China Chinese CPA：He Feng
March 28, 2017
II Financial statements
Currency unit for the financial statements: RMB
1. Consolidated balance sheet
Prepared by Lu Thai Textile Co., Ltd.
December 31, 2016
78
Lu Thai Textile Co., Ltd. Annual Report 2016
Unit: RMB
Item December 31, 2016 December 31, 2015
Current assets:
Monetary funds 662,967,785.49 795,501,196.07
Financial assets at fair value through profit/loss 71,696,678.70
Derivative financial assets
Notes receivable 84,161,909.91 133,145,518.39
Accounts receivable 293,129,727.93 262,848,042.62
Accounts paid in advance 212,487,501.51 196,809,904.13
Interest receivable 653,075.08
Dividends receivable
Other accounts receivable 46,262,835.47 70,821,406.28
Financial assets purchased under agreements to resell
Inventories 1,816,700,441.85 1,743,963,973.24
Assets held for sale
Non-current assets due within one year
Other current assets 107,535,889.38 57,391,316.34
Total current assets 3,223,246,091.54 3,332,831,110.85
Non-current assets:
Available-for-sale financial assets 24,660,000.00 67,442,600.00
Held-to-maturity investments
Long-term accounts receivable 2,310,000.00 4,980,998.00
Long-term equity investments
Investment property 25,844,090.56
Fixed assets 5,244,335,459.80 4,907,575,469.84
Construction in progress 154,668,358.96 205,094,029.50
Engineering materials 117,120,463.50 6,319,783.17
Disposal of fixed assets
Productive living assets 1,381,292.75 1,177,113.89
Intangible assets 384,253,077.39 363,385,986.63
R&D expenses
Goodwill 20,613,803.29 20,613,803.29
Long-term deferred expenses 114,227,364.54 85,124,145.25
Deferred tax assets 63,183,792.63 62,123,091.53
79
Lu Thai Textile Co., Ltd. Annual Report 2016
Other non-current assets 31,259,468.38 34,502,367.27
Total non-current assets 6,183,857,171.80 5,758,339,388.37
Total assets 9,407,103,263.34 9,091,170,499.22
Current liabilities:
Short-term borrowings 873,261,856.02 802,766,318.90
Financial liabilities at fair value through profit/loss 46,695,875.00
Notes payable 3,109,149.48
Accounts payable 252,538,563.06 248,570,405.57
Accounts received in advance 89,451,314.62 95,077,531.32
Payroll payable 315,618,449.91 291,263,599.62
Taxes payable 77,214,706.67 80,615,008.14
Interest payable 1,165,730.47 1,851,876.78
Dividends payable 441,113.64 441,113.64
Other accounts payable 69,365,641.15 62,514,814.53
Liabilities held for sale
Non-current liabilities due within one year
Other current liabilities
Total current liabilities 1,679,057,375.54 1,632,905,692.98
Non-current liabilities:
Long-term borrowings 135,678,044.89
Long-term accounts payable
Long-term payroll payable 79,122,422.89 81,499,403.98
Special payables
Provisions
Deferred income 95,990,489.79 96,135,077.91
Deferred tax liabilities 2,341,089.87 2,192,694.35
Other non-current liabilities 1,840,000.00 1,840,000.00
Total non-current liabilities 314,972,047.44 181,667,176.24
Total liabilities 1,994,029,422.98 1,814,572,869.22
Owners’ equity:
Share capital 922,602,311.00 955,758,496.00
Capital reserve 753,440,557.83 1,007,146,166.97
Less: Treasury shares 11,610,721.68
Other comprehensive income 53,293,544.89 17,090,772.31
80
Lu Thai Textile Co., Ltd. Annual Report 2016
Special reserve
Surplus reserve 888,761,783.04 815,648,504.28
Provisions for general risks
Retained earnings 4,319,887,532.43 4,053,079,857.70
Equity attributable to owners of the Company 6,937,985,729.19 6,837,113,075.58
Minority interests 475,088,111.17 439,484,554.42
Total owners’ equity 7,413,073,840.36 7,276,597,630.00
Total liabilities and owners’ equity 9,407,103,263.34 9,091,170,499.22
Legal representative: Liu Zibin Accounting head for this Report: Zhang Hongmei
Head of the accounting department: Zhang Keming
2. Balance sheet of the Company
Unit: RMB
Item December 31, 2016 December 31, 2015
Current assets:
Monetary funds 177,016,859.63 361,326,403.14
Financial assets at fair value through profit/loss
Derivative financial assets
Notes receivable 64,421,665.52 100,449,603.66
Accounts receivable 297,026,110.33 235,128,453.94
Accounts paid in advance 139,013,057.80 194,884,351.36
Interest receivable
Dividends receivable
Other accounts receivable 340,458,208.20 33,540,540.54
Inventories 1,086,364,931.72 1,194,474,541.81
Assets held for sale
Non-current assets due within one year
Other current assets 1,126,006.88 20,665,251.54
Total current assets 2,105,426,840.08 2,140,469,145.99
Non-current assets:
Available-for-sale financial assets 12,500,000.00 55,282,600.00
Held-to-maturity investments
Long-term accounts receivable
Long-term equity investments 1,711,021,866.04 1,577,704,740.04
Investment property 14,829,443.58
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Lu Thai Textile Co., Ltd. Annual Report 2016
Fixed assets 3,019,132,803.64 3,086,026,962.51
Construction in progress 25,796,329.33 47,195,873.42
Engineering materials 663,894.82 4,752,722.48
Disposal of fixed assets
Productive living assets
Oil-gas assets
Intangible assets 229,433,475.02 231,714,546.11
R&D expenses
Goodwill
Long-term deferred expenses
Deferred tax assets 62,042,513.61 56,039,573.79
Other non-current assets 8,831,098.34 25,733,137.67
Total non-current assets 5,084,251,424.38 5,084,450,156.02
Total assets 7,189,678,264.46 7,224,919,302.01
Current liabilities:
Short-term borrowings 503,005,010.24 509,321,176.41
Financial liabilities at fair value through profit/loss 39,527,800.00
Derivative financial liabilities
Notes payable 400,000.00
Accounts payable 158,737,347.81 156,939,081.65
Accounts received in advance 54,552,285.78 52,388,447.07
Payroll payable 240,389,712.34 225,146,911.56
Taxes payable 47,790,003.82 44,647,234.36
Interest payable 646,147.15 830,073.23
Dividends payable 441,113.64 441,113.64
Other accounts payable 19,309,386.42 19,453,519.54
Liabilities held for sale
Non-current liabilities due within one year
Other current liabilities
Total current liabilities 1,024,871,007.20 1,049,095,357.46
Non-current liabilities:
Long-term borrowings
Long-term payables
Long-term payroll payable 79,122,422.89 81,499,403.98
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Lu Thai Textile Co., Ltd. Annual Report 2016
Special payables
Provisions
Deferred income 62,691,326.97 61,687,374.76
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities 141,813,749.86 143,186,778.74
Total liabilities 1,166,684,757.06 1,192,282,136.20
Owners’ equity:
Share capital 922,602,311.00 955,758,496.00
Capital reserve 759,793,238.92 1,013,498,848.06
Less: Treasury shares 11,610,721.68
Other comprehensive income
Special reserve
Surplus reserve 888,761,783.04 815,648,504.28
Retained earnings 3,451,836,174.44 3,259,342,039.15
Total owners’ equity 6,022,993,507.40 6,032,637,165.81
Total liabilities and owners’ equity 7,189,678,264.46 7,224,919,302.01
3. Consolidated income statement
Unit: RMB
Item 2016 2015
1. Operating revenues 5,981,751,344.63 6,173,322,778.61
Including: Sales income 5,981,751,344.63 6,173,322,778.61
2. Operating costs 5,019,341,093.99 5,302,761,010.18
Including: Cost of sales 4,005,021,417.38 4,341,034,877.04
Taxes and surtaxes 86,519,719.96 55,309,984.03
Selling expenses 158,869,993.22 191,933,295.19
Administrative expenses 659,398,886.58 670,704,384.29
Finance costs 20,697,661.64 16,481,023.89
Asset impairment loss 88,833,415.21 27,297,445.74
Add: Profit on fair value changes (“-” means loss) 63,992,131.36 -60,685,931.36
Investment income (“-” means loss) -60,779,660.20 31,540,015.51
Including: Share of profit/loss of associates and joint ventures
Exchange gains (“-” means loss)
3. Operating profit (“-” means loss) 965,622,721.80 841,415,852.58
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Lu Thai Textile Co., Ltd. Annual Report 2016
Add: Non-operating income 75,254,150.98 52,201,733.84
Including: Profit on disposal of non-current assets 1,573,832.63 959,445.92
Less: Non-operating expense 15,528,019.86 10,168,567.50
Including: Loss on disposal of non-current assets 9,895,526.12 5,625,603.48
4. Total profit (“-” means loss) 1,025,348,852.92 883,449,018.92
Less: Corporate income tax 172,275,402.80 147,905,990.15
5. Net profit (“-” means loss) 853,073,450.12 735,543,028.77
Net profit attributable to owners of the Company 805,446,326.99 712,193,243.19
Minority interests’ income 47,627,123.13 23,349,785.58
6. Other comprehensive income net of tax 36,202,772.58 25,530,950.68
Other comprehensive income net of tax attributable to owners
36,202,772.58 25,530,950.68
of the Company
6.1 Other comprehensive income that will not be
reclassified into profit/loss
6.1.1 Changes in net liabilities or assets with a defined
benefit plan upon re-measurement
6.1.2 Share of other comprehensive income of investees
that cannot be reclassified into profit/loss under the equity method
6.2 Other comprehensive income to be subsequently
36,202,772.58 25,530,950.68
reclassified into profit/loss
6.2.1 Share of other comprehensive income of investees
that will be reclassified into profit/loss under the equity method
6.2.2 Profit/loss on fair value changes of
available-for-sale financial assets
6.2.3 Profit/loss on reclassifying held-to-maturity
investments into available-for-sale financial assets
6.2.4 Effective profit/loss on cash flow hedges
6.2.5 Currency translation differences 36,202,772.58 25,530,950.68
6.2.6 Other
Other comprehensive income net of tax attributable to
minority interests
7. Total comprehensive income 889,276,222.70 761,073,979.45
Attributable to owners of the Company 841,649,099.57 737,724,193.87
Attributable to minority interests 47,627,123.13 23,349,785.58
8. Earnings per share
8.1 Basic earnings per share 0.85 0.75
8.2 Diluted earnings per share 0.85 0.75
Where business mergers under the same control occurred in this Reporting Period, the net profit achieved by the merged parties
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Lu Thai Textile Co., Ltd. Annual Report 2016
before the business mergers was RMB 0, with the corresponding amount for the last period being RMB 0.
Legal representative: Liu Zibin Accounting head for this Report: Zhang Hongmei
Head of the accounting department: Zhang Keming
4. Income statement of the Company
Unit: RMB
Item 2016 2015
1. Operating revenues 5,078,847,567.10 4,944,030,174.49
Less: Operating costs 3,604,147,665.88 3,648,460,561.91
Taxes and surtaxes 59,722,954.27 43,900,218.04
Selling expenses 85,012,619.20 89,638,305.49
Administrative expenses 458,281,382.46 463,715,559.98
Finance costs 15,651,562.69 11,074,526.15
Asset impairment loss 104,344,445.08 105,767,874.66
Add: profit on fair value changes (“-” means loss) 39,527,800.00 -36,452,800.00
Investment income (“-” means loss) 21,172,648.92 251,963,173.61
Including: Share of profit/loss of associates and joint
ventures
2. Operating profit (“-” means loss) 812,387,386.44 796,983,501.87
Add: Non-operating income 32,775,872.85 21,081,302.96
Including: Profit on disposal of non-current assets 3,107,873.31 535,631.91
Less: Non-operating expense 3,817,597.33 4,557,976.86
Including: Loss on disposal of non-current assets 1,551,810.09 3,840,466.74
3. Total profit (“-” means loss) 841,345,661.96 813,506,827.97
Less: Corporate income tax 110,212,874.41 80,500,109.90
4. Net profit (“-” means loss) 731,132,787.55 733,006,718.07
5. Other comprehensive income net of tax
5.1 Other comprehensive income that will not be reclassified
into profit and loss
5.1.1 Changes in net liabilities or assets with a defined
benefit plan upon re-measurement
5.1.2 Share of other comprehensive income of investees that
cannot be reclassified into profit/loss under the equity method
5.2 Other comprehensive income to be subsequently
reclassified into profit/loss
5.2.1 Share of other comprehensive income of investees that
will be reclassified into profit/loss under the equity method
85
Lu Thai Textile Co., Ltd. Annual Report 2016
5.2.2 Profit/loss on fair value changes of available-for-sale
financial assets
5.2.3 Profit/loss on reclassifying held-to-maturity
investments into available-for-sale financial assets
5.2.4 Effective profit/loss on cash flow hedges
5.2.5 Currency translation differences
5.2.6 Other
6. Total comprehensive income 731,132,787.55 733,006,718.07
7. Earnings per share
7.1 Basic earnings per share 0.79 0.77
7.2 Diluted earnings per share 0.79 0.77
5. Consolidated cash flow statement
Unit: RMB
Item 2016 2015
1. Cash flows from operating activities:
Cash received from sale of commodities and rendering of service 5,871,764,184.97 6,030,509,998.21
Net increase in disposal of financial assets at fair value through profit/loss
Interest, fees and commissions received
Net increase in interbank borrowings
Net increase in funds in repurchase business
Tax refunds received 197,711,424.88 172,608,069.68
Cash received from other operating activities 102,124,782.99 95,495,004.98
Subtotal of cash inflows from operating activities 6,171,600,392.84 6,298,613,072.87
Cash paid for goods and services 2,820,409,717.54 3,307,297,819.20
Cash paid to and for employees 1,428,452,968.16 1,372,174,345.22
Taxes paid 378,426,016.38 356,064,268.45
Cash paid for other operating activities 233,546,409.48 235,481,235.66
Subtotal of cash outflows due to operating activities 4,860,835,111.56 5,271,017,668.53
Net cash flows from operating activities 1,310,765,281.28 1,027,595,404.34
2. Cash flows from investing activities:
Cash received from retraction of investments
Cash received as investment income
Net cash received from disposal of fixed assets, intangible assets and other
2,104,478.61 2,277,031.35
long-term assets
Net cash received from disposal of subsidiaries or other business units
86
Lu Thai Textile Co., Ltd. Annual Report 2016
Cash received from other investing activities 32,505,470.64 50,940,957.84
Subtotal of cash inflows from investing activities 34,609,949.25 53,217,989.19
Cash paid to acquire fixed assets, intangible assets and other long-term
861,098,602.96 455,625,977.74
assets
Cash paid for investment
Net increase in pledged loans
Net cash paid to acquire subsidiaries and other business units
Cash paid for other investing activities 41,519,234.00 117,355,791.90
Subtotal of cash outflows due to investing activities 902,617,836.96 572,981,769.64
Net cash flows from investing activities -868,007,887.71 -519,763,780.45
3. Cash flows from financing activities:
Cash received from capital contributions 500,000.00
Including: Cash received from minority shareholder investments by
500,000.00
subsidiaries
Cash received as borrowings 2,215,183,445.08 1,457,671,792.24
Cash received from issuance of bonds
Cash received from other financing activities 29,754,422.42 77,262,230.00
Subtotal of cash inflows from financing activities 2,244,937,867.50 1,535,434,022.24
Repayment of borrowings 2,047,960,531.26 1,320,131,980.26
Cash paid for interest expenses and distribution of dividends or profit 497,559,966.43 505,028,058.43
Including: dividends or profit paid by subsidiaries to minority interests 12,023,566.38 9,619,012.38
Cash paid for other financing activities 261,629,544.91 123,481,516.75
Sub-total of cash outflows due to financing activities 2,807,150,042.60 1,948,641,555.44
Net cash flows from financing activities -562,212,175.10 -413,207,533.20
4. Effect of foreign exchange rate changes on cash and cash equivalents 8,538,528.70 21,677,584.66
5. Net increase in cash and cash equivalents -110,916,252.83 116,301,675.35
Add: Opening balance of cash and cash equivalents 765,695,473.65 649,393,798.30
6. Closing balance of cash and cash equivalents 654,779,220.82 765,695,473.65
6. Cash flow statement of the Company
Unit: RMB
Item 2016 2015
1. Cash flows from operating activities:
Cash received from sale of commodities and rendering of service 5,092,041,690.19 4,961,880,181.41
Tax refunds received 151,105,262.23 129,451,700.19
Cash received from other operating activities 31,468,452.51 52,352,078.75
87
Lu Thai Textile Co., Ltd. Annual Report 2016
Subtotal of cash inflows from operating activities 5,274,615,404.93 5,143,683,960.35
Cash paid for goods and services 2,705,013,474.52 2,874,742,643.78
Cash paid to and for employees 1,072,276,579.49 1,050,513,463.85
Taxes paid 185,976,982.65 172,137,702.77
Cash paid for other operating activities 136,946,899.89 157,926,230.24
Subtotal of cash outflows due to operating activities 4,100,213,936.55 4,255,320,040.64
Net cash flows from operating activities 1,174,401,468.38 888,363,919.71
2. Cash flows from investing activities:
Cash received from retraction of investments
Cash received as investment income 55,179,470.68
Net cash received from disposal of fixed assets, intangible assets
1,413,254.61 1,738,821.35
and other long-term assets
Net cash received from disposal of subsidiaries or other business
units
Cash received from other investing activities 2,931,847.14 37,525,796.60
Subtotal of cash inflows from investing activities 59,524,572.43 39,264,617.95
Cash paid to acquire fixed assets, intangible assets and other
163,318,218.59 127,352,558.59
long-term assets
Cash paid for investment 137,295,249.67 442,518,167.48
Net cash paid to acquire subsidiaries and other business units
Cash paid for other investing activities 346,158,324.00
Subtotal of cash outflows due to investing activities 646,771,792.26 569,870,726.07
Net cash flows from investing activities -587,247,219.83 -530,606,108.12
3. Cash flows from financing activities:
Cash received from capital contributions
Cash received as borrowings 1,498,632,773.04 742,195,059.14
Cash received from issuance of bonds
Cash received from other financing activities 61,262,230.00
Subtotal of cash inflows from financing activities 1,498,632,773.04 803,457,289.14
Repayment of borrowings 1,543,292,096.38 483,324,013.96
Cash paid for interest expenses and distribution of dividends or
474,745,698.14 485,161,279.23
profit
Cash paid for other financing activities 253,629,544.91 93,507,094.33
Sub-total of cash outflows due to financing activities 2,271,667,339.43 1,061,992,387.52
Net cash flows from financing activities -773,034,566.39 -258,535,098.38
4. Effect of foreign exchange rate changes on cash and cash 1,570,774.33 12,593,972.00
88
Lu Thai Textile Co., Ltd. Annual Report 2016
equivalents
5. Net increase in cash and cash equivalents -184,309,543.51 111,816,685.21
Add: Opening balance of cash and cash equivalents 361,326,403.14 249,509,717.93
6. Closing balance of cash and cash equivalents 177,016,859.63 361,326,403.14
7. Consolidated statement of changes in owners’ equity
89
Lu Thai Textile Co., Ltd. Annual Report 2016
2016
Unit: RMB
2016
Equity attributable to owners of the Company
Other equity
instruments
Specia Gener
Item Pref Other Minority Total owners’
Perp Less: Treasury l al risk
Share capital eren Capital reserve comprehensiv Surplus reserve Retained earnings interests equity
etual Othe shares reserv reserv
ce e income
bond r e e
shar
s
es
1. Balance at the end of the prior
955,758,496.00 1,007,146,166.97 11,610,721.68 17,090,772.31 815,648,504.28 4,053,079,857.70 439,484,554.42 7,276,597,630.00
year
Add: Changes in accounting
policies
Correction of errors in prior
periods
Business mergers under the
same control
Other
2. Balance at the beginning of the
955,758,496.00 1,007,146,166.97 11,610,721.68 17,090,772.31 815,648,504.28 4,053,079,857.70 439,484,554.42 7,276,597,630.00
year
3. Increase/ decrease in the period
-33,156,185.00 -253,705,609.14 -11,610,721.68 36,202,772.58 73,113,278.76 266,807,674.73 35,603,556.75 136,476,210.36
(“-” means decrease)
3.1 Total comprehensive income 36,202,772.58 805,446,326.99 47,627,123.13 889,276,222.70
3.2 Capital increased and
-33,156,185.00 -253,705,609.14 -11,610,721.68 -275,251,072.46
reduced by owners
3.2.1 Ordinary shares
-33,156,185.00 -253,706,278.05 -11,610,721.68 -275,251,741.37
increased by shareholders
90
Lu Thai Textile Co., Ltd. Annual Report 2016
3.2.2 Capital increased by
holders of other equity instruments
3.2.3 Amounts of share-based
payments charged to owners’
equity
3.2.4 Other 668.91 668.91
3.3 Profit distribution 73,113,278.76 -538,638,652.26 -12,023,566.38 -477,548,939.88
3.3.1 Appropriation to surplus
73,113,278.76 -73,113,278.76
reserve
3.3.2 Appropriation to general
risk provisions
3.3.3 Appropriation to owners
-465,525,373.50 -12,023,566.38 -477,548,939.88
(or shareholders)
3.3.4 Other
3.4 Internal carry-forward of
owners’ equity
3.4.1 New increase of capital
(or share capital) from capital
reserve
3.4.2 New increase of capital
(or share capital) from surplus
reserve
3.4.3 Surplus reserve for
making up loss
3.4.4 Other
3.5 Special reserve
3.5.1 Withdrawn for the
period
91
Lu Thai Textile Co., Ltd. Annual Report 2016
3.5.2 Used in the period
3.6 Other
4. Closing balance 922,602,311.00 753,440,557.83 53,293,544.89 888,761,783.04 4,319,887,532.43 475,088,111.17 7,413,073,840.36
2015
Unit: RMB
2015
Equity attributable to owners of the Company
Other equity
instruments Specif Gener
Item Other Minority Total owners’
Perp Less: Treasury ic al risk
Share capital Prefer Capital reserve comprehensiv Surplus reserve Retained earnings interests equity
etual Othe shares reserv reserv
ence e income
bond r e e
shares
s
1. Balance at the end of the
955,758,496.00 1,007,039,561.13 -8,440,178.37 742,347,832.47 3,892,066,534.32 427,658,339.63 7,016,430,585.18
prior year
Add: Changes in
accounting policies
Correction of errors in
prior periods
Business mergers under
the same control
Other
2. Balance at the beginning of
955,758,496.00 1,007,039,561.13 -8,440,178.37 742,347,832.47 3,892,066,534.32 427,658,339.63 7,016,430,585.18
the year
3. Increase/ decrease in the
106,605.84 11,610,721.68 25,530,950.68 73,300,671.81 161,013,323.38 11,826,214.79 260,167,044.82
period (“-” means decrease)
3.1 Total comprehensive
25,530,950.68 712,193,243.19 23,349,785.58 761,073,979.45
income
92
Lu Thai Textile Co., Ltd. Annual Report 2016
3.2 Capital increased and
106,605.84 11,610,721.68 500,000.00 -11,004,115.84
reduced by owners
3.2.1 Ordinary shares
11,610,721.68 500,000.00 -11,110,721.68
increased by shareholders
3.2.2 Capital increased
by holders of other equity
instruments
3.2.3 Amounts of
share-based payments
charged to owners’ equity
3.2.4 Other 106,605.84 106,605.84
3.3 Profit distribution 73,300,671.81 -551,179,919.81 -12,023,570.79 -489,902,818.79
3.3.1 Appropriation to
73,300,671.81 -73,300,671.81
surplus reserve
3.3.2 Appropriation to
general risk provisions
3.3.3 Appropriation to
-477,879,248.00 -12,023,570.79 -489,902,818.79
owners (or shareholders)
3.3.4 Other
3.4 Internal carry-forward
of owners’ equity
3.4.1 New increase of
capital (or share capital) from
capital reserve
3.4.2 New increase of
capital (or share capital) from
surplus reserve
3.4.3 Surplus reserve for
making up loss
93
Lu Thai Textile Co., Ltd. Annual Report 2016
3.4.4 Other
3.5 Special reserve
3.5.1 Withdrawn for the
period
3.5.2 Used in the period
3.6 Other
4. Closing balance 955,758,496.00 1,007,146,166.97 11,610,721.68 17,090,772.31 815,648,504.28 4,053,079,857.70 439,484,554.42 7,276,597,630.00
8. Statement of changes in owners’ equity of the Company
2016
Unit: RMB
2016
Other equity instruments Specia
Other
Item Less: Treasury l Total owners’
Share capital Preference Perpetua Capital reserve comprehensive Surplus reserve Retained earnings
Other shares reserv equity
shares l bonds income
e
1. Balance at the end of the
955,758,496.00 1,013,498,848.06 11,610,721.68 815,648,504.28 3,259,342,039.15 6,032,637,165.81
prior year
Add: Changes in
accounting policies
Correction of errors in
prior periods
Other
2. Balance at the beginning of
955,758,496.00 1,013,498,848.06 11,610,721.68 815,648,504.28 3,259,342,039.15 6,032,637,165.81
the year
3. Increase/ decrease in the -33,156,185.00 -253,705,609.14 -11,610,721.68 73,113,278.76 192,494,135.29 -9,643,658.41
94
Lu Thai Textile Co., Ltd. Annual Report 2016
period (“-” means decrease)
3.1 Total comprehensive
731,132,787.55 731,132,787.55
income
3.2 Capital increased and
-33,156,185.00 -253,705,609.14 -11,610,721.68 -275,251,072.46
reduced by owners
3.2.1 Ordinary shares
-33,156,185.00 -253,706,278.05 -11,610,721.68 -275,251,741.37
increased by shareholders
3.2.2 Capital increased
by holders of other equity
instruments
3.2.3 Amounts of
share-based payments
charged to owners’ equity
3.2.4 Other 668.91 668.91
3.3 Profit distribution 73,113,278.76 -538,638,652.26 -465,525,373.50
3.3.1 Appropriation to
73,113,278.76 -73,113,278.76
surplus reserve
3.3.2 Appropriation to
-465,525,373.50 -465,525,373.50
owners (or shareholders)
3.3.3 Other
3.4 Internal carry-forward
of owners’ equity
3.4.1 New increase of
capital (or share capital) from
capital reserve
3.4.2 New increase of
capital (or share capital) from
surplus reserve
95
Lu Thai Textile Co., Ltd. Annual Report 2016
3.4.3 Surplus reserve for
making up loss
3.4.4 Other
3.5 Special reserve
3.5.1 Withdrawn for the
period
3.5.2 Used in the period
3.6 Other
4. Closing balance 922,602,311.00 759,793,238.92 888,761,783.04 3,451,836,174.44 6,022,993,507.40
2015
Unit: RMB
2015
Other equity instruments Specia
Other
Item Less: Treasury l Total owners’
Share capital Preferenc Perpetual Capital reserve comprehensive Surplus reserve Retained earnings
Other shares reserv equity
e shares bonds income
e
1. Balance at the end of the
955,758,496.00 1,013,392,242.22 742,347,832.47 3,077,515,240.89 5,789,013,811.58
prior year
Add: Changes in
accounting policies
Correction of errors in
prior periods
96
Lu Thai Textile Co., Ltd. Annual Report 2016
Other
2. Balance at the beginning of
955,758,496.00 1,013,392,242.22 742,347,832.47 3,077,515,240.89 5,789,013,811.58
the year
3. Increase/ decrease in the
106,605.84 11,610,721.68 73,300,671.81 181,826,798.26 243,623,354.23
period (“-” means decrease)
3.1 Total comprehensive
733,006,718.07 733,006,718.07
income
3.2 Capital increased and
106,605.84 11,610,721.68 -11,504,115.84
reduced by owners
3.2.1 Ordinary shares
11,610,721.68 -11,610,721.68
increased by shareholders
3.2.2 Capital increased
by holders of other equity
instruments
3.2.3 Amounts of
share-based payments
charged to owners’ equity
3.2.4 Other 106,605.84 106,605.84
3.3 Profit distribution 73,300,671.81 -551,179,919.81 -477,879,248.00
3.3.1 Appropriation to
73,300,671.81 -73,300,671.81
surplus reserve
3.3.2 Appropriation to
-477,879,248.00 -477,879,248.00
owners (or shareholders)
3.3.3 Other
3.4 Internal carry-forward
of owners’ equity
97
Lu Thai Textile Co., Ltd. Annual Report 2016
3.4.1 New increase of
capital (or share capital) from
capital reserve
3.4.2 New increase of
capital (or share capital) from
surplus reserve
3.4.3 Surplus reserve for
making up loss
3.4.4 Other
3.5 Special reserve
3.5.1 Withdrawn for the
period
3.5.2 Used in the period
3.6 Other
4. Closing balance 955,758,496.00 1,013,498,848.06 11,610,721.68 815,648,504.28 3,259,342,039.15 6,032,637,165.81
98
Lu Thai Textile Co., Ltd. Annual Report 2016
III. Company Profile
Lu Thai Textile Co., Ltd. (hereinafter referred to as the “Company”) is a joint venture invested by
Zibo Lucheng Textile Investment Co., Ltd (originally named Zibo Lucheng Textile Co., Ltd,
hereinafter referred to as Lucheng Textile) and Thailand Tailun Textile Co., Ltd. On Feb. 3, 1993,
the Company is approved by the former Ministry of Foreign Trade and Economy of the State (1993)
in WJMZEHZ No. 59 to convert into a joint-stock enterprise. Zibo Administration for Industry and
Commerce issued the Company corporate business license with the registration No. of QGLZZZ No.
000066. In July 1997, the Company is approved by the Securities Committee of the Department of
the State in the ZWF (1997) No. 47 to issue 80 million shares of domestically listed foreign
share( B-shares) at the price of RMB 1.00 per share. Upon approved by Shenzhen Stock Exchange
with No. (1997) 296 Listing Notice, the Company is listed on the Shenzhen Stock Exchange on
August 19, 1997 with B-shares stock code of 200726. On November 24, 2000, approved by ZJGSZ
[2000] No.199 by CSRC, the Company increased publication of 50 million shares of general share
(A-shares) at the book value of RMB 1.00, which are listed on the Shenzhen Stock Exchange on
December 25, 2000 with A-shares stock code of 000726 through approval by Shenzhen Stock
Exchange with No. (2000) 162 Listing Notice. As approved by 2000 Shareholders’ General Meeting
in May, 2001, the Company carried out the distribution plan that 10 shares of capital public reserve
are converted to 3 more shares for each 10 shares. As approved by Resolutions of 2001
Shareholders’ General Meeting in June 2002, the Company implemented the distribution plan that
10 shares of capital public reserve are converted 3 more shares for each 10 shares again. As
approved by 2002 Shareholders’ General Meeting in May 2003, the Company implemented the
distribution plan that 10 shares of capital public reserve are 2 more shares for each 10 shares, and
inner employees’ shared increased to 40.56 million shares. As examined and approved by ZJGSZ
No. [2000] 199 of CSRC, the inner employees’ shares will start circulation 3 years later since listing
on the A-share market. On Dec. 25, 2003, the inner employees’ shares reach 3 years since listing on
the A-share stock market, and they set out circulation on Dec.26, 2003. As approved by the
Shareholders’ General Meeting 2006 held in June 2007, the Company implemented the plan on
converting 10 shares to all its shareholders with capital reserves for every 10 shares. After
capitalization, the registered capital of the Company was RMB 844.8648 million. The Company, in
accordance with the official reply on approving Lu Thai Textile Co., Ltd. to issue additional shares
(ZJXK [2008] No. 890 document) from CSRC, issued the Renminbi common shares (A shares)
amounting to 150 million shares on 8 Dec. 2008. According to the relevant resolution of the 2nd
Special Shareholders’ General Meeting for 2011, the relevant resolution of the 15th Session of the
6th Board of Directors, the Opinion of China Securities Regulatory Commission on the Restricted
Share Incentive Plan of Lu Thai Textile Co., Ltd. (Shang-Shi-Bu-Han [2011] No. 206), the
Company applied for a registered capital increment of RMB 14.09 million, which was contributed
by restricted share incentive receivers with monetary funds. In accordance with the resolution of
Proposal on Repurchasing and Canceling Partial Restricted Shares already Granted for the Original
Incentive Targets not Reaching the Incentive Conditions made at the 23rd Session of the 6th Board of
Directors on 13 Aug. 2012, the Company canceling a total of 60,000.00 shares already granted for
the original incentive targets not reaching the incentive conditions. According to the second
temporary resolution of Proposal on counter purchase of part of the domestic listed foreign share (B
share) on 25 Jun. 2012, the Company counter purchase domestic listed foreign share (B share)
99
Lu Thai Textile Co., Ltd. Annual Report 2016
48,837,300 shares. According to the Proposal on Repurchase and Cancel Part of Unlocked
Restricted Share of the Original Incentive Personnel not Conforming to the Incentive Condition,
Proposal on Repurchase and Cancel unlocked Restricted Share in Second Unlocked Period of all the
Incentive Personnel reviewed and approved by the 26th meeting of 6th session of the board of the
directors on 27 Mar. 2013, the Company repurchase and cancel 4,257,000 shares owned by original
people whom to motivate. According to the Proposal on Repurchase and Write-off of Partly of the
Original Incentive Targets Not Met with the Incentive Conditions but Granted Restricted Shares
approved on the 11th Session of the 7th Board of Directors on 11 Jun. 2014, to execute repurchase
and write-off of the whole granted shares of 42,000 shares of the original incentive targets not met
with the incentive targets of the Company. As per the Proposal on Buy-back of Some A- and
B-shares considered and approved as a resolution at the 1st special meeting of shareholders on
August 5, 2015, the Company repurchased 33,156,200 domestically listed foreign shares (B-shares).
As of December 31, 2016, the registered capital of the Company was RMB922.6023 million.
The Company’s registered address: No. 11, Mingbo Road, Hi-tech Development Zone, Zibo,
Shandong
The Company’s legal representative: Liu Zibin
The Company’s business scope includes the production, processing and sales business of cotton
yarn, yarn dyed fabrics, shirts, fashion accessories, health underwear and other textile products and
their mating products; design, R&D and technology services of the textile and garment products;
acquisition and export of products not under exclusive rights or quota licenses; and hotel,
guesthouses, catering, conferences, and training services; rental business of the self-owned houses
and land; the construction and management of the purified water projects.
The Company’s financial statements have been approved for issue by the Board of Directors of the
Company on March 28, 2017.
There were 15 subsidiaries included into the consolidation scope of the Company in 2016, and for
the details, please refer to Notes IX. Equities among Other Entities. There was 1 increased
subsidiary and 1 decreased subsidiary in the consolidation scope as compard with last year, and
please refer to Notes VIII. Changes in Consolidation Scope for details.
IV. Basis for the preparation of financial statements
1. Preparation basis
With the going-concern assumption as the basis and based on transactions and other events that
actually occurred, the Group prepared financial statements in accordance with Standards for Business Enterprises—Basic Standard> issued by the Ministry of Finance with Decree No. 33 and revised with Decree No. 76, the 41 specific accounting standards, the Application Guidance of Accounting Standards for Business Enterprises, the Interpretation of Accounting Standards for Business Enterprises and other regulations issued and revised from 15 Feb. 2006 onwards (hereinafter jointly referred to as “the Accounting Standards for Business Enterprises”, “China Accounting Standards” or “CAS”), as well as the Rules for Preparation Convention of Disclosure of Public Offering Companies No.15 – General Regulations for Financial Reporting (revised in 2014) by China Securities Regulatory Commission. 100 Lu Thai Textile Co., Ltd. Annual Report 2016 In accordance with relevant provisions of the Accounting Standards for Business Enterprises, the Group adopted the accrual basis in accounting. Except for some financial instruments, where impairment occurred on an asset, an impairment reserve was withdrawn accordingly pursuant to relevant requirements. V. Important accounting policies and estimations Is the Company subject to any disclosure requirements for special industries? No. Indication of specific accounting policies and estimations: The Company and each subsidiary mainly engage in the production and operation of textile products. The Company and each subsidiary according to the actual production and operation characteristics and the regulations of the relevant ASBE, formulated certain specific accounting polices and accounting estimates of the transactions and events such as recognizing the revenues, and please refer to each description of the section for details. As for the notes to the important accounting judgment and estimations made by the management level, please refer to the “26. Other important accounting policies and estimations” of the section. 1. Statement of Compliance with the Accounting Standards for Business Enterprises The financial statements prepared by the Company are in compliance with in compliance with the Accounting Standards for Business Enterprises, which factually and completely present the Company’s, and the Company’s financial positions as at 31 Dec. 2016, business results and cash flows for the year of 2016, and other relevant information. In addition, the Company’s and the Company’s financial statements meet the requirements of disclosing financial statements and notes thereto stated in the Rules for Preparation Convention of Disclosure of Public Offering Companies No.15 – General Regulations for Financial Reporting (revised in 2014) by China Securities Regulatory Commission. 2. Fiscal period The Company’s fiscal periods include fiscal years and fiscal periods shorter than a complete fiscal year. The Company’s fiscal year starts on 1 Jan. and ends on 31 Dec. of every year according to the Gregorian calendar. 3. Operating cycle Normal operating cycle refers to the period from the Group purchases the assets for processing to realize the cash or cash equivalents. The Group regards 12 months as an operating cycle and regards which as the partition criterion of the mobility of the assets and liabilities. 101 Lu Thai Textile Co., Ltd. Annual Report 2016 4. Recording currency Renminbi (RMB) is regarded as the prevailing currency used in the main economic circumstances of the Company and its domestic subsidiaries. The Company and its domestic subsidiaries adopt RMB as the recording currency. The Company and its overseas subsidiaries confirm to adopt HK Dollar, US Dollar and Vietnamese Dong as the recording currency according their major economic environment of the operating. When preparing the financial statements for the Reporting Period, the Company adopted RMB as the recording currency. 5. Accounting treatment methods for business combinations under the same control or not under the same control Business combinations, it is refer to two or more separate enterprises merge to form a reporting entity transactions or events. Business combination is divided into under the same control and those non under the same control. (1) Business combinations under the same control A business combination under the same control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or the same parties both before and after the business combination and on which the control is not temporary. In a business combination under the same control, the party which obtains control of other combining enterprise(s) on the combining date is the combining party, the other combining enterprise(s) is (are) the combined party. The “combining date” refers to the date on which the combining party actually obtains control on the combined party. The assets and liabilities that the combining party obtains in a business combination shall be measured on the basis of their carrying amount in the combined party on the combining date. As for the balance between the carrying amount of the net assets obtained by the combining party and the carrying amount of the consideration paid by it (or the total par value of the shares issued), the additional paid-in capital (share premium) shall be adjusted. If the additional paid-in capital (share premium) is not sufficient to be offset, the retained earnings shall be adjusted. The direct cost for the business combination of the combining party shall be recorded into the profits and losses at the current period. (2) Business combinations not under the same control A business combination not under the same control is a business combination in which the combining enterprises are not ultimately controlled by the same party or the same parties both before and after the business combination. In a business combination not under the same control, the party which obtains the control on other combining enterprise(s) on the purchase date is the acquirer, and other combining enterprise(s) is (are) the acquiree. For a business combination not under the same control, the combination costs shall include the fair values, on the acquisition date, of the assets paid, the liabilities incurred or assumed and the equity securities issued by the acquirer in exchange for the control on the acquiree, the expenses for audit, 102 Lu Thai Textile Co., Ltd. Annual Report 2016 legal services and assessment, and other administrative expenses, which are recorded into the profits and losses in the current period. The trading expenses for the equity securities or debt securities issued by the acquirer as the combination consideration shall be recorded into the amount of initial measurement of the equity securities or debt securities. The involved contingent consideration shall be recorded into the combination costs at its fair value on the acquiring date. Where new or further evidences emerge, within 12 months since the acquiring date, against the existing circumstances on the acquiring date and the contingent consideration thus needs to be adjusted, the combined goodwill shall be adjusted accordingly. The combination costs of the acquirer and the identifiable net assets obtained by it in the combination shall be measured according to their fair values at the acquiring date. The acquirer shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as business reputation. Where the combination costs are less then the fair value of the identifiable net assets it obtains from the acquiree, the acquirer shall re-examine the measurement of the fair values of the identifiable assets, liabilities and contingent liabilities it obtains from the acquiree as well as the combination costs. If, after the reexamination, the combination costs are still less than the fair value of the identifiable net assets it obtains from the acquiree, the acquirer shall record the balance into the profits and losses of the current period. As for the deductible temporary differences the acquirer obtains from the acquiree which are not recognized into deferred income tax liabilities due to their not meeting the recognition standards, if new or further information shows that the relevant situation has existed on the acquiring date and the economic benefits brought by the deductible temporary differences the acquirer obtains from the acquiree on the acquiring date can be realized, they shall be recognized into deferred income tax assets and the relevant goodwill shall be reduced. Where the goodwill is not sufficient to be offset, the difference shall be recognized into the profits and losses in the current period. In other circumstances than the above, where the deductible temporary differences are recognized into deferred income tax assets on the acquiring date, they shall be recorded into the profits and losses in the current period. In a business combination not under same control realized by two or more transactions of exchange, according to about the 5th Notice about the Treasury Issuing the Accounting Standards for Enterprises (Finance accounting) [2012] No. 19 Criterion about the “package deal” (see 6 (2) in this section), Whether the deals are “package deal” or not, belong to the “package deal”, see the previous paragraphs described in this section and “12. long term equity investment transaction” in this section and conduct accounting treatment, those not belong to the "package deal" distinguish between the individual financial statements and the consolidated financial statements and conduct relevant accounting treatment. In the individual financial statements, the sum of the book value and new investment cost of the Company holds in the acquiree before the acquiring date shall be considered as initial cost of the investment. Other related comprehensive gains in relation to the equity interests that the Company holds in the acquiree before the acquiring date shall be treated on the same basis as the acquiree directly disposes the related assets or liabilities when disposing the investment (that is, except for the corresponding share in the changes in the net liabilities or assets with a defined benefit plan measured at the equity method arising from the acquiree’s re-measurement, the others shall be transferred into current investment gains). In the Company’s consolidated financial statements, as for the equity interests that the Company 103 Lu Thai Textile Co., Ltd. Annual Report 2016 holds in the acquiree before the acquiring date, they shall be re-measured according to their fair values at the acquiring date; the positive difference between their fair values and carrying amounts shall be recorded into the investment gains for the period including the acquiring date. Other related comprehensive gains in relation to the equity interests that the Company holds in the acquiree before the acquiring date shall be treated on the same basis as the acquiree directly disposes the related assets or liabilities when disposing the investment (that is, except for the corresponding share in the changes in the net liabilities or assets with a defined benefit plan measured at the equity method arising from the acquiree’s re-measurement, the others shall be transferred into current investment gains on the acquiring date). 6. Methods for preparing consolidated financial statements (1) Principle for determining the consolidation scope The consolidation scope for financial statements is determined on the basis of control. The term “control” is the power of the Company upon an investee, with which it can take part in relevant activities of the investee to obtain variable returns and is able to influence the amount of returns. The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. A subsidiary is an enterprise or entity controlled by the Company. Once any changes in the relevant facts or situations result in any changes in the elements involved in the aforesaid definition of “control”, the Company shall carry out a reassessment. (2) Methods for preparing the consolidated financial statements Subsidiaries are fully consolidated from the date on which the Company obtains control on their net assets and operation decision-making and are de-consolidated from the date when such control ceases. As for a disposed subsidiary, its operating results and cash flows before the disposal date has been appropriately included in the consolidated income statement and cash flow statement; and as for subsidiaries disposed in the current period, the opening items in the consolidated balance sheet are not adjusted. For a subsidiary acquired in a business combination not under the same control, its operating results and cash flows after the acquiring date have been appropriately included in the consolidated income statement and cash flow statement, and the opening items and comparative items in the consolidated financial statements are not adjusted. For a subsidiary acquired in a business combination under the same control or a combined party obtained in a takeover, its operating results and cash flows from the beginning of the Reporting Period of the combination to the combination date have been appropriately included in the consolidated income statement and cash flow statement, and the comparative items in the consolidated financial statements are adjusted at the same time. The financial statements of subsidiaries are adjusted in accordance with the accounting policies and accounting period of the Company during the preparation of the consolidated financial statements, where the accounting policies and the accounting periods are inconsistent between the Company and subsidiaries. For a subsidiary acquired from a business combination not under the same control, the individual financial statements of the subsidiary are adjusted based on the fair value of the identifiable net assets at the acquisition date. All significant inter-group balances, transactions and unrealized profits are offset in the 104 Lu Thai Textile Co., Ltd. Annual Report 2016 consolidated financial statements. The portion of a subsidiary’s shareholders’ equity and the portion of a subsidiary’s net profits and losses for the period not held by the Company are recognized as minority interests and minority shareholder profits and losses respectively and presented separately under shareholders’ equity and net profits in the consolidation financial statements. The portion of a subsidiary’s net profits and losses for the period that belong to minority interests is presented as the item of “minority shareholder profits and losses” under the bigger item of net profits in the consolidated financial statements. Where the loss of a subsidiary shared by minority shareholders exceeds the portion enjoyed by minority shareholders in the subsidiary’s opening owners’ equity, minority interests are offset. Where the Company losses control on its original subsidiaries due to disposal of some equity investments or other reasons, the residual equity interests are re-measured according to the fair value on the date when such control ceases. The summation of the consideration obtained from the disposal of equity interests and the fair value of the residual equity interests, minus the portion in the original subsidiary’s net assets measured on a continuous basis from the acquisition date that is enjoyable by the Company according to the original shareholding percentage in the subsidiary, is recorded in investment gains for the period when the Company’s control on the subsidiary ceases. Other comprehensive incomes in relation to the equity investment in the original subsidiary are treated on the same accounting basis as the acquiree directly disposes the relevant assets or liabilities (that is, except for the changes in the net liabilities or assets with a defined benefit plan resulted from re-measurement of the original subsidiary, the rest shall all be transferred into current investment gains) when such control ceases. And subsequent measurement is conducted on the residual equity interests according to the No. 2 Accounting Standard for Business Enterprises —Long-term Equity Investments or the No. 22 Accounting Standard for Business Enterprises—Recognition and Measurement of Financial Instruments. For details, see “12. Long Term Equity Investment” or “9. Financial Instruments” in this section. Where the Company losses control on its original subsidiaries due to step by step disposal of equity investments through multiple transactions, it need to distinguish the Group losses control on its subsidiaries due to disposal of equity investments whether belongs to a package deal. All the transaction terms, conditions and economic impact of the disposal of subsidiaries’ equity investment are in accordance with one or more of the following conditions, which usually indicate the multiple transactions, should be considered as a package deal for accounting treatment. ① These deals are at the same time or under the condition of considering the influence of each other to concluded; ② These transactions only be as a whole can achieve a complete business result; ③ The occurrence of a deal depends on at least one other transactions；④ A deal alone is not economical, it is economical with other trading together. Those not belong to a package deal, each of them a deal depends on circumstances respectively conduct accounting treatment in accordance with the applicable principles of “part disposal of subsidiaries of a long-term equity investment under the condition of not losing control on its subsidiaries” (see 12 (2) ④ in this section) and “Where the Company losses control on its original subsidiaries due to disposal of some equity investments or other reasons” (see the front paragraph) relevant transactions of the Company losses control on its subsidiaries due to disposal of equity investments belonging to a package deal, considered as a transaction and conduct accounting treatment. However, Before losing control, every disposal cost and corresponding net assets balance of subsidiary of disposal investment are confirmed as other 105 Lu Thai Textile Co., Ltd. Annual Report 2016 comprehensive income in consolidated financial statements, which together transferred into the current profits and losses in the lose of control, when the Company losing control on its subsidiary. 7. Recognition standard for cash and cash equivalents The term “cash” refers to cash on hand and deposits that are available for payment at any time. The term “cash equivalents” refers to short-term (within 3 months from the purchase date) and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. 8. Foreign currency businesses and translation of foreign currency financial statements (1) Accounting treatments for translation of foreign currency transactions As for a foreign currency transaction, the Company shall convert the amount in a foreign currency into amount in its bookkeeping base at the spot exchange rate (usually referring to the central parity rate announced by the People’s Bank of China, the same below) of the transaction date, while as for such transactions as foreign exchange or involving in foreign exchange, the Company shall converted into amount in the bookkeeping base currency at actual exchange rate the transaction is occurred. (2) Accounting treatments for translation of foreign currency monetary items and non-monetary items On the balance sheet date, the foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date. The exchange difference arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange rate at the time of initial recognition or prior to the balance sheet date shall be recorded in the profits and losses in the current period, excluding the following situations: ① the exchange difference arising from foreign currency loans related to acquisition of fixed assets shall be treated at the principle of capitalization of borrowing costs; ② the exchange difference arising from the hedging instruments used for effective hedging of net overseas operation investments shall be recorded into other comprehensive incomes, and shall be recognized into current gains and losses when the net investments are disposed; and ③ the exchange difference arising from change in the book balance of foreign currency monetary items available for sale except the amortized costs shall be recorded into other comprehensive gains and losses. A foreign currency non-monetary item measured at the historical costs shall still be translated at the spot exchange rate on the transaction date. Where the foreign non-monetary items measured at the fair value shall be converted into amount in its bookkeeping base currency at spot exchange rate, the exchange gains and losses arising thereof shall be treated as change in fair value, and recorded into the current period gains and losses or as other comprehensive incomes. (3) Translation of foreign currency financial statements When it involves overseas business in preparing the consolidated financial statement, for the translation difference of foreign currency monetary items of net investment in overseas business arising from the change in exchange rate, it shall be recorded into the item of “difference of foreign currency financial statement translation” under the owners’ equity; and be recorded into disposal 106 Lu Thai Textile Co., Ltd. Annual Report 2016 gains and losses at current period when disposing overseas business. The foreign currency financial statement of overseas business should be translated in to RMB financial statement by the following methods: The asset and liability items in the balance sheets shall be translated at a spot exchange rate on the balance sheet date. Among the owner’s equity items, except for the items as “undistributed profits”, other items shall be translated at the spot exchange rate at the time when they are incurred. The income and expense items in the profit statements shall be translated at the spot exchange rate of the transaction date. The undistributed profits at year-begin is the undistributed profits at the end of last year after the translation; undistributed profits at year-end shall be listed as various distribution items after the translation; after the translation, the balance between assets and the sum of liabilities and owners’ equities shall be recorded into other comprehensive gains and losses as difference of foreign currency translation. Where an enterprise disposes of an overseas business without the control right, it shall shift the differences, which is presented under the items of the owner’s equities in the balance sheet and which arises from the translation of foreign currency financial statements relating to this overseas business, into the disposal profits and losses of the current period by all or proportion of the disposed overseas business. Foreign cash flow shall be translated at the spot exchange rate of the date of cash flow incurred. The influence of exchange rate on the cash flow shall be adjustment item and individually listed in the cash flow statement. And the opening balance and the actual balance of last year shall be listed at the amounts after translation of foreign currency financial statement in last year. Where the control of the Company over an overseas operation ceases due to disposal of all or some of the Company’s owner’s equity in the overseas operation or other reasons, the foreign-currency statement translation difference belonging to the parent company’s owner’s equity in relation to the overseas operation which is stated under the shareholders’ equity in the balance sheet shall be all restated as gains and losses of the disposal period. Where the Company’s equity in an overseas operation decreases due to disposal of some equity investment or other reasons but the Company still has control over the overseas operation, the foreign-currency statement translation difference in relation to the disposed part of the overseas operation shall be recorded into minority interests instead of current gains and losses. If what’s disposed is some equity in an overseas associated enterprise or joint venture, the foreign-currency statement translation difference related to the overseas operation shall be recorded into the gains and losses of the current period of the disposal according to the disposal ratio. 9. Financial instruments The Company recognizes a financial asset or liability when it becomes a party of the relevant financial instrument contract. Financial assets and liabilities are measured at fair value in initial recognition. As for the financial assets and liabilities measured at fair value of which changes are recorded into current gains and losses, the relevant dealing expenses are directly recorded into gains and losses; and the dealing expenses on other kinds of financial assets and liabilities are included in the amounts initially recognized. (1) Determination of the fair value of main financial assets and financial liabilities 107 Lu Thai Textile Co., Ltd. Annual Report 2016 Fair value refers to the price that a market participant shall receive for selling an asset or shall pay for transferring a liability in an orderly transaction on the measurement date. As for the financial assets or financial liabilities for which there is an active market, the quoted prices in the active market shall be used to determine the fair values thereof. The quoted prices in the active market refers to the prices available from stock exchange, broker’s agencies, guilds, pricing organization and etc., which represent the actual trading price under equal transaction. Where there is no active market for a financial instrument, the enterprise concerned shall adopt value appraisal techniques, including the prices adopted by the parties, who are familiar with the condition, in the latest market transaction upon their own free will, the current fair value obtained by referring to other financial instruments of the same essential nature, the cash flow capitalization method and the option pricing model, etc., to determine its fair value. (2) Classification, recognition and measurement of financial assets The purchase and sale of financial assets under the normal ways shall be recognized and stopped to be recognized respectively at the price of transaction date. Financial assets shall be classified into the following four categories when they are initially recognized: (a) the financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period, (b) the investments which will be held to their maturity; (c) loans and the account receivables; and (d) financial assets available for sale. ① The financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period Including transactional financial assets and the financial assets which are designated to be measured at their fair value when they are initially recognized and of which the variation is recorded into the profits and losses of the current period; The financial assets meeting any of the following requirements shall be classified as transactional financial assets：A. The purpose to acquire the said financial assets is mainly for selling them in the near future; B. Forming a part of the identifiable combination of financial instruments which are managed in a centralized way and for which there are objective evidences proving that the enterprise may manage the combination by way of short-term profit making in the near future; C. Being a derivative instrument, excluding the designated derivative instruments which are effective hedging instruments, or derivative instruments to financial guarantee contracts, and the derivative instruments which are connected with the equity instrument investments for which there is no quoted price in the active market, whose fair value cannot be reliably measured, and which shall be settled by delivering the said equity instruments. A transactional financial asset is subsequently measured at the fair value. The gains and losses arising from the fair value changes, as well as the dividend and interest incomes from the financial asset, are recorded in the gains and losses for the current period. ② Held-to-maturity investment The term "held-to-maturity investment" refers to a non-derivative financial asset with a fixed date of maturity, a fixed or determinable amount of repo price and which the enterprise holds for a definite purpose or the enterprise is able to hold until its maturity. For the held-to-maturity investment adopting actual interest rate method, which is measured at the post-amortization costs, the profits and losses that arise when such financial assets or financial liabilities are terminated from recognition, or are impaired or amortized, shall be recorded into the 108 Lu Thai Textile Co., Ltd. Annual Report 2016 profits and losses of the current period. The actual interest rate method refers to the method by which the post-amortization costs and the interest incomes of different installments or interest expenses are calculated in light of the actual interest rates of the financial assets or financial liabilities (including a set of financial assets or financial liabilities). The actual interest rate refers to the interest rate adopted to cash the future cash flow of a financial asset or financial liability within the predicted term of existence or within a shorter applicable term into the current carrying amount of the financial asset or financial liability. When the actual interest rate is determined, the future cash flow shall be predicted on the basis of taking into account all the contractual provisions concerning the financial asset or financial liability (the future credit losses shall not be taken into account).and also the various fee charges, trading expenses, premiums or reduced values, etc., which are paid or collected by the parties to a financial asset or financial liability contract and which form a part of the actual interest rate. ③ Loans and the accounts receivables Loans and the accounts receivables refer to non-derivative financial assets, which there is no quotation in the active market, with fixed recovery cost or recognizable. Financial assets that are defined as loans and the accounts receivables by the Company including notes receivables, accounts receivables, interest receivable, dividends receivable and other receivables etc.. Loans and the accounts receivables are made follow-up measurement on the basis of post-amortization costs employing the effective interest method. Gains or loss arising from the termination recognition, impairment occurs or amortization shall be recorded into the profits and losses of the current period. ④ Assets available for sales Assets available for sales including non-derivative financial asset that has been assigned as assets available for sales on the initial recognition and financial assets excluded those measured at fair value and of which the variation into profits and losses of the current period, they are some financial assets, loans and accounts receivables, held-to-maturity investment. The cost at the period-end of the available-for-sale liabilities instruments should be confirmed according to its amortized cost method, that is the initially recognized amount which deduct the principal that had been repaid, to plus or minus the accumulative amortization amount formed by the amortization between the difference of the initially recognized amount and the amount on the due date that adopted the actual interest rate method, and at the same time deduct the amount after the impairment loss happened. The cost at the period-end of the available-for-sale liabilities instruments is its initial cost. Financial assets available-for-trade are subsequently measured at fair value, and gains or losses arising from changes in the fair value are recognized as other comprehensive income，and be carried forward when the said financial assets stopped recognition, then it shall be recorded into the profits and losses of the current period. But, the equity instrument investment which neither have quotation in the active market nor its fair value could not be reliable measured, as well as the derivative financial assets that concern with the equity instruments and should be settled through handing over to its equity instruments, should take the follow-up measurement according to the cost. Interest receive during the holding of assets available for sales and cash dividends with distribution announcement by invested companies, it shall be recorded into the profits and losses of the current period. 109 Lu Thai Textile Co., Ltd. Annual Report 2016 (3) Impairment of financial assets The Company assesses at the balance sheet date the carrying amount of every financial asset except for the financial assets that measured by the fair value. If there is objective evidence indicating a financial asset may be impaired, a provision is provided for the impairment. The Company carries out a separate impairment test for every financial asset which is individually significant. As for a financial asset which is individually insignificant, an impairment test is carried out separately or in the financial asset group with similar credit risk. Where the financial asset (individually significant or insignificant) is found not impaired after the separate impairment test, it is included in the financial asset group with similar credit risk and tested again on the group basis. Where the impairment loss is recognized for an individual financial asset, it is not included in the financial asset group with similar credit risk for an impairment test. ① Impairment on held-to maturity investment, loans and receivables The financial assets measured by cost or amortized cost write down their carrying value by the estimated present value of future cash flow. The difference is recorded as impairment loss. If there is objective evidence to indicate the recovery of value of financial assets after impairment, and it is related with subsequent event after recognition of loss, the impairment loss recorded originally can be reversed. The carrying value of financial assets after impairment loss reversed shall not exceed the amortized cost of the financial assets without provisions of impairment loss on the reserving date. ② Impairment of available-for-sale financial assets When it judged that the decrease of fair value of the available-for-sale equity instrument investment is serious and not temporarily after comprehensive considering relevant factors, it reflected that the available-for-sale equity instrument investment occurred impairment. Of which, the “serious decline” refers to the accumulative decline range of the fair value over 20%; while the “non-temporary decline” refers to the consecutive decline time of the fair value over 12 months. Where an available-for-sale financial asset is impaired, the accumulative losses arising from the decrease of the fair value of the capital reserve which is directly included are transferred out and recorded in the profits and losses for the current period. The accumulative losses transferred out are the balance obtained from the initially obtained cost of the said financial asset after deducting the principals as taken back, the amortized amount, the current fair value and the impairment loss originally recorded in the profits and losses. Where the impairment loss has been recognized for an available-for-sale financial asset, if, within the accounting periods thereafter, there is any objective evidence proving that the value of the said financial asset has been restored and the restoration is objectively related to the events that occur after the impairment loss was recognized, the originally recognized impairment loss is reversed. The impairment losses on the available-for-sale equity instrument investments are reversed and recognized as other comprehensive incomes, and the impairment losses on the available-for-sale liability instruments are reversed and recorded in the profits and losses for the current period. The impairment loss incurred to an equity instrument investment for which there is no quoted price in the active market and whose fair value cannot be reliably measured, or incurred to a derivative financial asset which is connected with the said equity instrument investment and which must be settled by delivering the said equity investment, is not reversed. (4) Recognition and measurement of financial asset transfers 110 Lu Thai Textile Co., Ltd. Annual Report 2016 Where a financial asset satisfies any of the following requirements, the recognition of it is terminated: ① The contractual rights for collecting the cash flow of the said financial asset are terminated; ② The said financial asset has been transferred and nearly all of the risks and rewards related to the ownership of the financial asset to the transferee; or ③ The said financial asset has been transferred. And the Company has ceased its control on the said financial asset though it neither transfers nor retains nearly all of the risks and rewards related to the ownership of the financial asset. Where the Company neither transfers nor retains nearly all of the risks and rewards related to the ownership of a financial asset, and it does not cease its control on the said financial asset, it recognizes the relevant financial asset and liability accordingly according to the extent of its continuous involvement in the transferred financial asset. The term "continuous involvement in the transferred financial asset" refers to the risk level that the enterprise faces resulting from the change of the value of the financial asset. If the transfer of an entire financial asset satisfies the conditions for stopping recognition, the difference between the amounts of the following 2 items is recorded in the profits and losses of the current period: (1) The book value of the transferred financial asset; and (2) The sum of consideration received from the transfer, and the accumulative amount of the changes of the fair value originally recorded in other comprehensive incomes. If the transfer of partial financial asset satisfies the conditions to stop the recognition, the book value of the transferred financial asset is apportioned between the portion whose recognition has been stopped and the portion whose recognition has not been stopped according to their respective relative fair value, and the difference between the amounts of the following 2 items is included into the profits and losses of the current period: (1) The summation of the consideration received from the transfer and the portion of the accumulative amount of changes in the fair value originally recorded in other comprehensive incomes which corresponds to the portion whose recognition has been stopped; and (2) The amortized carrying amounts of the aforesaid amounts. In respect of the assets using recourse to sell or using endorsement to transfer, the Company needs to determine whether almost all of the risks and rewards of the financial asset ownership are transferred. If almost all of the risks and rewards of the financial asset ownership had been transferred to the transferee, derecognize the financial assets. For almost all of the risks and rewards of the financial asset ownership retained, do not end to recognize the financial assets. For which neither transfer or retain almost all of the risks and rewards of the financial asset ownership, continuously judge whether the Company retain the control of the assets, and conduct accounting treatment according to the principle of mentioned in the previous paragraphs. (5) Classification and measurement of financial liabilities In the initial recognition, financial liabilities are divided into the financial liabilities measured at fair values and whose changes are recorded in current gains and losses and other financial liabilities. Financial liabilities are initially recognized at their fair values. As for a financial liability measured at fair value and whose changes are recorded in current gains and losses, the relevant trading expense is directly recorded in the profits and losses for the current period. As for other financial liabilities, the relevant trading expenses are recorded in the initially recognized amounts. ① Financial liabilities measured at fair values and whose changes are recorded in current gains and losses 111 Lu Thai Textile Co., Ltd. Annual Report 2016 Such financial liabilities are divided into transactional financial liabilities and financial liabilities designated to be measured at fair values and whose changes are recorded in current gains and losses in the initial recognition under the same conditions where such financial assets are divided into transactional financial assets and financial assets designated to be measured at fair values and whose changes are recorded in current gains and losses in the initial recognition. Financial liabilities measured at fair values and whose changes are recorded in current gains and losses are subsequently measured at their fair values. Gains or losses arising from the fair value changes, as well as the dividend and interest expenses in relation to the said financial liabilities, are recorded in the profits and losses for the current period. ② Other financial liabilities As for a derivative financial liability connected to an equity instrument for which there is not quoted price in an active market and whose fair value cannot be reliably measured and which must be settled by delivering the equity instrument, it is subsequently measured on the basis of costs. Other financial liabilities are subsequently measured according to the amortized cost using the actual interest rate method. Gains or losses arising from de-recognition or amortization of the said financial liabilities is recorded in the profits and losses for the current period. (6) De-recognition of financial liabilities Only when the prevailing obligations of a financial liability are relieved in all or in part may the recognition of the financial liability be terminated in all or partly. Where the Company (debtor) enters into an agreement with a creditor so as to substitute the existing financial liabilities by way of any new financial liability, and if the contractual stipulations regarding the new financial liability is substantially different from that regarding the existing financial liability, it terminates the recognition of the existing financial liability, and at the same time recognizes the new financial liability. Where the recognition of a financial liability is totally or partially terminated, the enterprise concerned shall include into the profits and losses of the current period for the gap between the book value which has been terminated from recognition and the considerations it has paid (including the non-cash assets it has transferred out and the new financial liabilities it has assumed) (7) Derivatives and embedded derivatives Derivative financial instruments include derivatives are initially measured at fair value at the date when the derivative contracts are entered into and are substantially re-measured at fair value. The resulting gain and loss is recognized in profit or loss. An embedded derivative is separated from the hybrid instrument, where the hybrid instrument is not designated as a financial asset or financial liability at fair value though profit or loss, and the treated as a standalone derivative if (a) the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract; and (b) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative. If the Company is unable to measure the embedded derivative separately either at acquisition or at a subsequent balance sheet date, it designates the entire hybrid instrument as a financial asset or financial liability at fair value through profit or loss. (8) Offsetting financial assets and financial liabilities When the Company has a legal right that is currently enforceable to set off the recognized financial assets and financial liabilities, and intends either to settle on a net basis, or to realize the financial 112 Lu Thai Textile Co., Ltd. Annual Report 2016 asset and settle the financial liability simultaneously, a financial asset and a financial liability shall be offset and the net amount is presented in the balance sheet. Except for the above circumstances, financial assets and financial liabilities shall be presented separately in the balance sheet and shall not be offset. (9) Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. The Company issues (including refinancing), re-purchases, sells or written-offs the equity instrument as the disposing of the changes of the equity. The Group not recognized the changes of the fair value of the equity instrument. The transaction expenses related to the equity transaction would be deducted from the equity. All types of distribution (excluding stock dividends) made by the Company to holders of equity instruments are deducted from shareholders’ equity. The Company does not recognize any changes in the fair value of equity instruments. 10. Receivables (1) Accounts receivable with significant single amount for which the bad debt provision is made individually Judgement basis or monetary standards of provision for bad Receivables with the amount of RMB 5 million or more than RMB 5 debts of the million should recognize as the receivables with significant single amount. individually significant accounts receivable Method of individual The Company made an independent impairment test on receivables with provision for bad significant single amounts; the financial assets without impairment by debts of the independent impairment test should be included in financial assets individually portfolio with similar credit risk to take the impairment test. Receivables significant accounts was recognized with impairment should no longer be included in receivable receivables portfolio with similar credit risk to take the impairment test. (2) Accounts receivable which the bad debt provision is withdrawn by credit risk characteristics Name of portfolios Bad debt provision method Aging group Aging analysis method In the groups, adopting aging analysis method to withdraw bad debt provision: √ Applicable □ Not applicable Withdrawal proportion for Withdrawal proportion for other Age accounts receivable (%) accounts receivable (%) 113 Lu Thai Textile Co., Ltd. Annual Report 2016 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 is made individually Receivables have dispute with the other parties or involving lawsuit and arbitration; receivables Reason of individually withdrawing bad debt have obvious indication showing that the debtors provision are likely to fail to perform the duty of repayment, etc. The Company made independent impairment test on receivables with insignificant amount but with the following characteristics, if any objective evidence shows that the accounts receivable has been impaired, impairment loss shall be recognized on the basis of the gap Withdrawal method for bad debt provision between the current values of the future cash flow lower than its book value so as to withdraw provision for bad debts: receivables involved in disputes, lawsuits or arbitrations; receivables with clear signs that the debtor is not likely to repay; and the like. 11. Inventory Is the Company subject to any disclosure requirements for special industries? No. (1) Classification Inventories mainly include raw materials, work-in-progress, product processed on entrustment, consumptive biological assets and stock products etc. (2) Valuation method of inventories acquiring and issuing Inventories shall be measured at planned cost when acquired, and the cost of the inventories including the procurement cost, processing cost and other costs. Inventories shall be measured as per the weighted average method when delivered; the difference between the actual cost and the 114 Lu Thai Textile Co., Ltd. Annual Report 2016 planned cost shall be stated as cost variance and the Company shall account the cost variances of the delivered inventories and adjust planned cost into actual cost periodically. (3) Basis for determining net realizable value of inventories and provision methods for decline in value of inventories Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion, the estimated costs necessary to make the sale and relevant taxes. Net realizable value is determined on the basis of clear evidence obtained, and takes into consideration the purpose of holding inventories and effect of post balance sheet events. At the balance sheet date, inventories are measured at the lower of the cost and net realizable value. If the net realizable value is below the cost of inventories, a provision for decline in value of inventories is made. The provision for inventories decline in value is determined normally by the difference of the cost of individual item less its realizable value. For large quantity and low value items of inventories, provision for decline in value is made based on categories of inventories. For items of inventories relating to a product line that are produced and marketed in the same geographical area, have the same or similar end users or purposes, and cannot be practicably evaluated separately from other items in that product line provision for decline in value is determined on an aggregate basis. After the provision for decline in value of inventories is made, if the circumstances that previously caused inventories to be written down below cost no longer exist so that the net realizable value of inventories is higher than their cost, the original provision for decline in value is reversed and the reversal is included in profit or loss for the period. (4) The perpetual inventory system is maintained for stock system. (5) Amortization method of the low-value consumption goods and packing articles For the low-value consumption goods, should be amortized by one-off amortization method when consuming; and for the packing articles, should be amortized by one-off amortization method when consuming. 12. Long-term equity investments The long-term equity investments of this part refer to the long-term equity investments that the Company has control, joint control or significant influence over the investees. The long-term equity investment that the Company does not have control, joint control or significant influence over the investees, should be recognized as available-for-sale financial assets or be measured by fair value with the changes should be included in the financial assets accounting of the current gains and losses, and please refer the details of the accounting polices to “9. financial instrument” in this section. Joint control, refers to the control jointly owned according to the relevant agreement on an arrangement by the Company and the relevant activities of the arrangement should be decided only after the participants which share the control right make consensus. Significant influence refers to the power of the Company which could anticipate in the finance and the operation polices of the investees, but could not control or jointly control the formulation of the policies with the other parties. 115 Lu Thai Textile Co., Ltd. Annual Report 2016 (1) Recognition of investment costs As for long-term equity investments acquired by enterprise merger, if the merger is under the same control, the share of the book value of the owner’s equity of the merged enterprise, on the date of merger, is regarded as the initial cost of the long-term equity investment. The difference between the initial cost of the long-term equity investment and the payment in cash, non-cash assets transferred as well as the book value of the debts borne by the merging party shall offset against the capital reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. If the consideration of the merging enterprise is that it issues equity securities, it shall, on the date of merger, regard the share of the book value of the shareholder's equity of the merged enterprise on the consolidated financial statement of the ultimate control party as the initial cost of the long-term equity investment. The total face value of the stocks issued shall be regarded as the capital stock, while the difference between the initial cost of the long-term equity investment and total face value of the shares issued shall offset against the capital reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. For the long-term investment required from the business combination under different control, the initial investment cost regarded as long-term equity investment on the purchasing date according to the combination cost, the combination costs shall be the sum of the fair values of the assets paid, the liabilities incurred or assumed and the equity securities issued by the Company. The commission fees for audit, law services, assessment and consultancy services and other relevant expenses occurred in the business combination by the combining party or the purchase party, shall be recorded into current profits and losses upon their occurrence. Besides the long-term equity investments formed by business combination, the other long-term equity investments shall be initially measured by cost, the cost is fixed in accordance with the ways of gaining, such as actual cash payment paid by the Company, the fair value of equity securities issued by the Company, the agreed value of the investment contract or agreement, the fair value or original carrying amount of exchanged assets from non-monetary assets exchange transaction, the fair value of the long-term equity investments, etc. The expenses, taxes and other necessary expenditures directly related with gaining the long-term equity investments shall also be recorded into investment cost. (2) Subsequent measurement and recognition of gains or losses A long-term equity investment where the investing enterprise has joint control (except for which forms into common operators) or significant influence over the investors should be measured by equity method. Moreover, long-term equity investment adopting the cost method in the financial statements, and which the Company has control on invested entity. ① Long-term equity investment measured by adopting cost method The price of a long-term equity investment measured by adopting the cost method shall be included at its initial investment cost and append as well as withdraw the cost of investing and adjusting the long-term equity investment. The return on investment at current period shall be recognized in accordance with the cash dividend or profit announced to distribute by the invested entity, except the announced but not distributed cash dividend or profit included in the actual payment or consideration upon gaining the investment. ② Long-term equity investment measured by adopting equity method If the initial cost of a long-term equity investment is more than the Company's attributable share of 116 Lu Thai Textile Co., Ltd. Annual Report 2016 the fair value of the invested entity's identifiable net assets for investment, the initial cost of the long-term equity investment may not be adjusted. If the initial cost of a long-term equity investment is less than the Company's attributable share of the fair value of the invested entity's identifiable net assets for the investment, the difference shall be included in the current profits and losses and the cost of the long-term equity investment shall be adjusted simultaneously. When measured by adopting equity method, respectively recognize investment income and other comprehensive income according to the net gains and losses as well as the portion of other comprehensive income which should be enjoyed or be shared, and at the same time adjust the book value of the long-term equity investment; corresponding reduce the book value of the long-term equity investment according to profits which be declared to distribute by the investees or the portion of the calculation of cash dividends which should be enjoyed; for the other changes except for the net gains and losses, other comprehensive income and the owners’ equity except for the profits distribution of the investees, should adjust the book value of the long-term equity investment as well as include in the capital reserve. The investing enterprise shall, on the ground of the fair value of all identifiable assets of the invested entity when it obtains the investment, recognize the attributable share of the net profits and losses of the invested entity after it adjusts the net profits of the invested entity. If the accounting polices adopted by the investees is not accord with that of the Company, should be adjusted according to the accounting policies of the Company and the financial statement of the investees during the accounting period and according which to recognize the investment income as well as other comprehensive income. For the transaction happened between the Company and associated enterprises as well as joint ventures, if the assets launched or sold not form into business, the portion of the unrealized gains and losses of the internal transaction, which belongs to the Company according to the calculation of the enjoyed proportion, should recognize the investment gains and losses on the basis. But the losses of the unrealized internal transaction happened between the Company and the investees which belongs to the impairment losses of the transferred assets, should not be neutralized. The Company shall recognize the net losses of the invested enterprise until the book value of the long-term equity investment and other long-term rights and interests which substantially form the net investment made to the invested entity are reduced to zero. However, if the Company has the obligation to undertake extra losses, it shall be recognized as the estimated liabilities in accordance with the estimated duties and then recorded into investment losses at current period. If the invested entity realizes any net profits later, the Company shall, after the amount of its attributable share of profits offsets against its attributable share of the un-recognized losses, resume recognizing its attributable share of profits. For the long-term equity investment held by the Company before the first execution of the new accounting criterion on 1 Jan. 2007 of the associated enterprises and joint ventures, if there is debit difference of the equity investment related to the investment, should be included in the current gains and losses according to the amount of the straight-line amortization during the original remained period. ③ Acquiring shares of minority interest In the preparation for the financial statements, the balance existed between the long-term equity investment increased by acquiring shares of minority interest and the attributable net assets on the subsidiary calculated by the increased shares held since the purchase date (or combination date), the capital reserves shall be adjusted, if the capital reserves are not sufficient to offset, the retained 117 Lu Thai Textile Co., Ltd. Annual Report 2016 profits shall be adjusted. ④ Disposal of long-term equity investment In the preparation of financial statements, the Company disposed part of the long-term equity investment on subsidiaries without losing its controlling right on them, the balance between the disposed price and attributable net assets of subsidiaries by disposing the long-term equity investment shall be recorded into owners’ equity; where the Company losses the controlling right by disposing part of long-term equity investment on such subsidiaries, it shall treated in accordance with the relevant accounting policies in “6. (2) Method on preparation of combined financial statements” in this section. For other ways on disposal of long-term equity investment, the balance between the book value of the disposed equity and its actual payment gained shall be recorded into current profits and losses. For the long-term equity investment measured by adopting equity method, if the remained equity after disposal still adopts the equity method for measurement, the other comprehensive income originally recorded into owners’ equity should adopt the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees according to the corresponding proportion. The owners’ equity recognized owning to the changes of the other owners’ equity except for the net gains and losses, other comprehensive income and the profits distribution of the investees, should be transferred into the current gains and losses according to the proportion. For the long-term equity investment which adopts the cost method of measurement, if the remained equity still adopt the cost method, the other comprehensive income recognized owning to adopting the equity method for measurement or the recognition and measurement standards of financial instrument before acquiring the control of the investees, should adopt the same basis of the accounting disposal of the relevant assets or liabilities directly disposed by the investees and should be carried forward into the current gains and losses according to the proportion; the changes of the other owners’ equity except for the net gains and losses, other comprehensive income and the profits distribution among the net assets of the investees which recognized by adopting the equity method for measurement, should be carried forward into the current gains and losses according to the proportion. 13. Investment real estate Measurement model of investment real estate Costing method measurement Depreciation or amortization method The investment real estate refers to the real estate gaining the rent or capital appreciation or both. It includes rented land use right, holding land use right to be transferred after the appreciation and rented building, etc. The investment real estate is measured initially according to the cost. The subsequent expenses related with the investment real estate shall be calculated into the cost of investment real estate if the economic benefit related with the asset may flow in and the cost may be measured reliably. Other subsequent expenses shall be calculated in the current profits and losses at the occurrence. The Company adopts the cost mode to conduct the subsequent measurement on the investment real estate, depreciates or amortizes according to the policy consistent with the house building or land 118 Lu Thai Textile Co., Ltd. Annual Report 2016 use right. The devaluation test method and devaluation provision method for the investment real estate can be seen 19 “Long-term Asset Devaluation”. When the self-use real estate or stock is converted to the investment real estate or the investment real estate is converted to the self-use real estate, the book value before the conversion shall be the entry value after the conversion. When the investment real estate is disposed, or out of usage permanently, and it is expected not to get the economic benefit from the disposal, the confirmation on the investment real estate shall be terminated. The disposal income for the sales, transferring, scrap or damage of the investment real estate deducing the book value and related tax shall be calculated in the current profits and losses. 14. Fixed assets (1) Conditions for recognition The term “fixed assets” refers to the tangible assets that simultaneously possess the features as follows: (a) they are held for the sake of producing commodities, rendering labor service, renting or business management; and (b) their useful life is in excess of one fiscal year. The fixed assets are only recognized when the relevant economic benefits probably flow in the Company and its cost could be reliable measured. The fixed assets should take the initial measurement according to the cost and at the same time consider the influences of the factors of the estimated discard expenses. (2) Depreciation methods Category of fixed Annual Method Useful life Salvage value assets deprecation Housing and Average method of 5-30 years 0-10% 3.00%-20.00% building useful life Machinery Average method of 10-18 years 0-10% 5.00%-10.00% equipments useful life Transportation Average method of 5 years 0-10% 18.00%-20.00% vehicle useful life Electronic 5 years Average method of equipments and 0-10% 18.00%-20.00% useful life others (3) Recognition basis, pricing and depreciation method of fixed assets by finance lease The “finance lease” shall refer to a lease that has transferred in substance all the risks and rewards related to the ownership of an asset. Its ownership may or may not eventually be transferred. The fixed assets by finance lease shall adopt the same depreciation policy for self-owned fixed assets. If it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when the 119 Lu Thai Textile Co., Ltd. Annual Report 2016 lease term expires, the leased asset shall be fully depreciated over its useful life. If it is not reasonable to be certain that the lessee will obtain the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully depreciated over the shorter one of the lease term or its useful life. 15. Construction in progress Is the Company subject to any disclosure requirements for special industries? No. Construction in process is measured at actual cost. Actual cost comprises construction costs, borrowing costs that are eligible for capitalization before the fixed assets being ready for their intended us and other relevant costs. Construction in process is transferred to fixed assets when the assets are ready for their intended use. See the details of the impairment test method of the impairment provision withdrawal method of the construction in progress to “19 Long-term assets impairment” in this section. 16. Borrowing costs Not applicable. 17. Biological assets (1) Consumptive biological assets Consumptive biological assets refer to the biological assets held for sale or to be harvested as agricultural products in future, including crops, vegetables under growing, timber production forest and domestic animals for sale. The consumptive biological assets shall be measured based on cost. All costs for planting, creating, cultivating or raising of consumptive biological assets shall be the necessary expenses directly added to such assets that accrued before harvest, including any loan that satisfies capitalization conditions. Subsequent expenses for keeping and feeding the consumptive biological assets after the harvest should be recognized as the losses and gains of the current period. Upon harvest or sale, the cost of consumptive biological assets shall be based on its book value through weighted average. On the date of Balance Sheet, the consumptive biological assets shall be measured with lower of cost and net realizable value, and the method for confirming the reserve for inventory price drop shall be adopted to confirm the reserve for price drop of consumptive biological assets. If the impacts of depreciation disappear, the depreciation amount shall be recovered, and the reserve for price drop originally accrued shall be reversed. Such amount reversed shall be recognized as loss and gain for the current period. If consumptive biological assets change its usage to be as productive biological assets, the cost after such change shall be confirmed based on the book value when the usage is changed. If consumptive biological assets are changed as public biological assets, depreciation shall be taken into consideration pursuant to Corporate Accounting Rules No.8 – Assets Depreciation. When depreciation occur, accrued the depreciation reserve first and then confirm based on the book value 120 Lu Thai Textile Co., Ltd. Annual Report 2016 after such accrual. (2) Productive biological assets Productive biological assets refer to agricultural products produced, and biological assets held for labor provision or lease, including economic forest, firewood forest, productive animals and labor animals. The productive biological assets shall be measured based on cost. All costs for creating or fostering productive biological assets shall be the necessary expenses directly added to such assets that accrued before it reaches expected production purpose, including any loan that satisfies capitalization conditions. The Company shall withdraw the depreciation of the productive biological assets by adopting the straight-line method since the second month of its useful life. Useful life, expected net salvage value and annual depreciation rate of each productive biological assets are as below: Category Useful life (Year) Expected net salvage Annual deprecation value (%) (%) Livestock 5 5% 19 The Company shall review the service life, expected net residuals and depreciation method of the productive biological assets at least by the end of the year. In case of any change, it shall be deemed as accounting estimate change. The difference between proceedings from disposal (sale, loss, death or damage) of the productive biological assets deducted by book value and related tax shall be recognized as loss and gain for the current period. The Company shall check on the date of Balance Sheet whether there is a depreciation sign for the productive biological assets. If yes, estimate the recoverable amount. Such recoverable amount shall be estimated based on single asset item. If it is difficult, the recoverable amount of the portfolio shall be confirmed based on the portfolio such assets belong to. If the recoverable amount of the assets is lower than book value, reserve for asset depreciation shall be accrued based on such difference, and recognized as loss and gain for the current period. The above assets impairment losses once be recognized should not be reversed during the accounting periods afterwards. If the productive biological assets changed the usage as the consumptive biological assets, the cost after the change should be recognized as the book value when changing the usage; of the productive biological assets changed the usage as non-profit living assets, should be recognized according to the book value after the withdrawal of the impairment provision in accord with the regulation of No. 8 of ASBE - Assets Impairment for considering whether there was impairment and should withdraw the impairment provision in ahead of it. 18. Intangible assets (1) Pricing method, useful life and impairment test The term “intangible asset” refers to the identifiable non-monetary assets possessed or controlled by enterprises which have no physical shape. The intangible assets shall be initially measured according to its cost. The costs related with the intangible assets, if the economic benefits related to intangible assets are likely to flow into the 121 Lu Thai Textile Co., Ltd. Annual Report 2016 enterprise and the cost of intangible assets can be measured reliably, shall be recorded into the costs of intangible assets; otherwise, it shall be recorded into current profits and losses upon the occurrence. The use right of land gained is usually measured as intangible assets. For the self-developed and constructed factories and other constructions, the related expenditures on use right of land and construction costs shall be respectively measured as intangible assets and fixed assets. For the purchased houses and buildings, the related payment shall be distributed into the payment for use right of land and the payment for buildings, if it is difficult to be distributed, the whole payment shall be treated as fixed assets. For intangible assets with a finite service life, from the time when it is available for use, the cost after deducting the sum of the expected salvage value and the accumulated impairment provision shall be amortized by straight line method during the service life. While the intangible assets without certain service life shall not be amortized. At the end of period, the Company shall check the service life and amortization method of intangible assets with finite service life, if there is any change, it shall be regarded as a change of the accounting estimates. Besides, the Company shall check the service life of intangible assets without certain service life, if there is any evidence showing that the period of intangible assets to bring the economic benefits to the enterprise can be prospected, it shall be estimated the service life and amortized in accordance with the amortization policies for intangible assets with finite service life. (2) Accounting polices of internal R & D expenses The expenditures for internal research and development projects of an enterprise shall be classified into research expenditures and development expenditures. The research expenditures shall be recorded into the profit or loss for the current period. The development expenditures shall be confirmed as intangible assets when they satisfy the following conditions simultaneously, and shall be recorded into profit or loss for the current period when they don’t satisfy the following conditions. ① It is feasible technically to finish intangible assets for use or sale; ② It is intended to finish and use or sell the intangible assets; ③ The usefulness of methods for intangible assets to generate economic benefits shall be proved, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the intangible assets itself or the intangible assets will be used internally; ④ It is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of sufficient technologies, financial resources and other resources; ⑤ The development expenditures of the intangible assets can be reliably measured. As for expenses that can’t be identified as research expenditures or development expenditures, the occurred R & D expenses shall be all included in current profits and losses. (3) Impairment testing method and provision-making method for intangible assets See “19 Impairment of long-term assets” in this section. 122 Lu Thai Textile Co., Ltd. Annual Report 2016 19. Impairment of long-term assets For non-current financial Assets of fixed Assets, projects under construction, intangible Assets with limited service life, investing real estate with cost model, long-term equity investment of subsidiaries, cooperative enterprises and joint ventures, the Company should judge whether decrease in value exists on the date of balance sheet. Recoverable amounts should be tested for decrease in value if it exists. Other intangible Assets of reputation and uncertain service life and other non-accessible intangible assets should be tested for decrease in value no matter whether it exists. If the recoverable amount is less than book value in impairment test results, the provision for impairment of differences should include in impairment loss. Recoverable amounts would be the higher of net value of asset fair value deducting disposal charges or present value of predicted cash flow. Asset fair value should be determined according to negotiated sales price of fair trade. If no sales agreement exists but with asset active market, fair value should be determined according to the Buyer’s price of the asset. If no sales agreement or asset active market exists, asset fair value could be acquired on the basis of best information available. Disposal expenses include legal fees, taxes, cartage or other direct expenses of merchantable Assets related to asset disposal. Present value of predicted asset cash flow should be determined by the proper discount rate according to Assets in service and predicted cash flow of final disposal. Asset depreciation reserves should be calculated on the basis of single Assets. If it is difficult to predict the recoverable amounts for single Assets, recoverable amounts should be determined according to the belonging asset group. Asset group is the minimum asset combination producing cash flow independently. In impairment test, book value of the business reputation in financial report should be shared to beneficial asset group and asset group combination in collaboration of business merger. It is shown in the test that if recoverable amounts of shared business reputation asset group or asset group combination are lower than book value, it should determine the impairment loss. Impairment loss amount should firstly be deducted and shared to the book value of business reputation of asset group or asset group combination, then deduct book value of all assets according to proportions of other book value of above assets in asset group or asset group combination except business reputation. After the asset impairment loss is determined, recoverable value amounts would not be returned in future. 20. Long-term deferred expenses Long-term deferred expenses refer to general expenses with the apportioned period over one year (one year excluded) that have occurred but attributable to the current and future periods. The long-term deferred expenses mainly including land contract fees, land rental fees and house rental fees. And the long-term deferred expense shall be amortized by the straight-line method averagely within the benefit period. 123 Lu Thai Textile Co., Ltd. Annual Report 2016 21. Payroll (1) Accounting treatment of short-term compensation Short-term compensation mainly including salary, bonus, allowances and subsidies, employee services and benefits, medical insurance premiums, birth insurance premium, industrial injury insurance premium, housing fund, labor union expenditure and personnel education fund, non-monetary benefits etc. The short-term compensation actually happened during the accounting period when the active staff offering the service for the Company should be recognized as liabilities and is included in the current gains and losses or relevant assets cost. Of which the non-monetary benefits should be measured according to the fair value. (2) Accounting treatment of the welfare after departure Welfare after demission mainly includes basic endowment insurance and unemployment insurance and welfare plans after demission include setting drawing plan. Where the setting drawing plan is adopted, the corresponding payable and deposit amount should be included into the relevant assets cost or the current gains and losses when happen. (3) Accounting treatment of the welfare after dimission The Company relieves the labor relation with the employees before the due date of the labor contacts or puts forward the advice of providing the compensation for urging the employees volunteered to receive the downsizing and when the Company could not unilaterally withdraw the dismission welfare owning to the relieving plan of the labor relation or the downsizing advice, should confirm the liabilities of the employees’ salary from the dismission welfare on the earlier day between the cost confirmed by the Company and the cost related to the reorganization of the payment of the dismission welfare and includes which in the current gains and losses. But as for the dismission welfare be estimated that could not be completed paid within 12 months after the end of the annual Reporting Period, should be handled according to the other long-term employee’s salary. The internal retire plan of the employees should be handled by adopting the same principles of the above dismission welfare. The Company includes the salary and the paid social insurance charges planed to pay by the personnel retreated inside during the period from the date when ceased the services to the normal retire date in the current gains and losses (dismission welfare) when met with the recognization conditions of the estimiated liabilities. (4) Accounting treatment of the welfare of other long-term staffs The other long-term welfare that the Company offers to the staffs, if met with the setting drawing plan, should be accounting disposed according to the setting drawing plan, while the rest should be disposed according to the setting revenue plan. 124 Lu Thai Textile Co., Ltd. Annual Report 2016 22. Revenue Is the Company subject to any disclosure requirements for special industries? No. (1) Selling products No revenue from selling goods may be recognized unless the following conditions are met simultaneously: the significant risks and rewards of ownership of the goods have been transferred to the buyer by the enterprise; the enterprise retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; the relevant amount of revenue can be measured in a reliable way; the relevant economic benefits may flow into the enterprise; and the relevant costs incurred or to be incurred can be measured in a reliable way. As for the revenues from the domestic sales products, the Company deliveries the products to the buyers according to the contracts agreement, and the revenues amount of the products sales had been confirmed with the goods payment had been withdrawn or had received the receipt voucher of which the relevant economic benefits probably flow into the enterprise as well as the relevant costs of the products could be reliable measured when being confirming as the revenues. As for the revenues from the export sales products, the Company executes the customs declaration and the products departure according to the contracts agreement, and the Company had acquired the bill of lading with the revenues amount of the products sale had been confirmed and the goods payment had been withdrawn or had had received the receipt voucher of which the relevant economic benefits probably flow into the enterprise as well as the relevant costs of the products could be reliable measured when being confirming as the revenues. (2) Providing labor services If the Company can reliably estimate the outcome of a transaction concerning the labor services it provides, it shall recognize the revenue from providing services employing the percentage-of-completion method on the date of the balance sheet. The completed proportion of a transaction concerning the providing of labor services shall be decided by the proportion of the labor service already provided to the total labor service to provide. The outcome of a transaction concerning the providing of labor services can be measured in a reliable way, means that the following conditions shall be met simultaneously: ① The amount of revenue can be measured in a reliable way; ② The relevant economic benefits are likely to flow into the enterprise; ③ The schedule of completion under the transaction can be confirmed in a reliable way; and ④ The costs incurred or to be incurred in the transaction can be measured in a reliable way. If the outcome of a transaction concerning the providing of labor services can not be measured in a reliable way, the revenue from the providing of labor services shall be recognized in accordance with the amount of the cost of labor services incurred and expected to be compensated, and make the cost of labor services incurred as the current expenses. If it is predicted that the cost of labor services incurred couldn’t be compensated, thus no revenue shall be recognized. Where a contract or agreement signed between Company and other enterprises concerns selling goods and providing of labor services, if the part of sale of goods and the part of providing labor services can be distinguished from each other and can be measured respectively, the part of sale of goods and the part of providing labor services shall be treated respectively. If the part of selling goods and the part of providing labor services can not be distinguished from each other, or if the 125 Lu Thai Textile Co., Ltd. Annual Report 2016 part of sale of goods and the part of providing labor services can be distinguished from each other but can not be measured respectively, both parts shall be conducted as selling goods. (3) Royalty revenue In accordance with relevant contract or agreement, the amount of royalty revenue should be recognized as revenue on accrual basis. (4) Interest revenue The amount of interest revenue should be measured and confirmed in accordance with the length of time for which the Company’s monetary fund is used by others and the agreed interest rate. 23. Government subsidy (1) Judgment basis and accountant arrangement method for the government subsidy related with the asset The government subsidy refers to the Company gets the monetary and non-monetary assets for free from the government, excluding the capital that the government invests as the owner. It can be divided into the asset-related government subsidy and income-related government subsidy. The Company defines the obtained government subsidy for the acquisition and construction or forming the long-term asset in other ways as the asset-related government subsidy; other government subsidies are defined as the income-related government subsidy. If the government document does not clearly prescribe the subsidy object, the following ways shall be adopted to divide the subsidy into the income-related government subsidy and asset-related government subsidy: (1) The government document clears the specific project for the subsidy, it shall divide according to the relative ratio of asset expenditure amount and entry cost expenditure amount to be formed in the budget of specific project, review according to the division ratio at each balance sheet date, and change when necessary; (2) The government document only makes the general expression on the usage without indicated specific project, it shall be the income-related government subsidy. If the government subsidy is monetary asset, it shall be measured according to the received or receivable amount. If the government subsidy is non-monetary asset, it shall be measured according to the fair value; it the fair value can not be got reliably, it shall be measured according to the nominal amount. The government subsidy measured according to the nominal amount shall be calculated in the current profits and losses directly. The Company usually confirms and measures the government subsidy according to the received amount when receiving actually. However, the financial support fund which can be received complying with the related conditions prescribed in the financial support policy indicated by the conclusive evidence shall be measured according to the receivable amount. The following conditions shall be met for the government subsidy measured by the receivable amount: (1) The receivable subsidy amount has been confirmed by the authorized government department, or it can be measured reasonably according to the officially released provisions related with the financial fund management method, and it is expected there is no major uncertainty for the amount; (2) It is based on the financial support project and financial fund management method actively opened released officially by the local financial department and according to the provision in Government Information Disclosure Provisions, the management method shall be universal (any enterprise complying with the prescribed condition can apply) rather than for the specific enterprise; (3) The related subsidy approval document has clearly promised the appropriate term, and the appropriation of the amount shall have the corresponding financial budget for the guarantee, therefore, it can ensure to receive within the prescribed term reasonably; (4) Other related conditions (if any) shall 126 Lu Thai Textile Co., Ltd. Annual Report 2016 be satisfied according to the specific case of the Company and the subsidy matter. The asset-related government subsidy shall be confirmed as the deferred income, and it shall be allocated in average and calculated in the current profits and losses within the service life of related asset. When the confirmed government subsidy needs to be returned and there is the related deferred income balance, the related deferred income book balance shall be deducted, and the surpassing part shall be calculated in the current profits and losses; If there is no related deferred income, it shall be calculated in the current profits and losses directly. The government capital investment is excluded in the government subsidy. (2) Judgment basis and accounting treatment of government subsidies related to profits The Company defines the obtained government subsidy for the acquisition and construction or forming the long-term asset in other ways as the asset-related government subsidy; other government subsidies are defined as the income-related government subsidy. If the government document does not clearly prescribe the subsidy object, the following ways shall be adopted to divide the subsidy into the income-related government subsidy and asset-related government subsidy: (1) The government document clears the specific project for the subsidy, it shall divide according to the relative ratio of asset expenditure amount and entry cost expenditure amount to be formed in the budget of specific project, review according to the division ratio at each balance sheet date, and change when necessary; (2) The government document only makes the general expression on the usage without indicated specific project, it shall be the income-related government subsidy. The income-related government subsidy to compensate the related expense and loss later shall be confirmed as the deferred income, and it shall be calculated in the current profits and losses during the period to confirm the related expenses; the occurred related expenses and losses for compensation shall be calculated in the current profits and losses directly. 24. Deferred income tax assets/deferred income tax liabilities (1) Income tax of the current period On the balance sheet date, for the current income tax liabilities (or assets) of the current period as well as the part formed during the previous period, should be measured by the income tax of the estimated payable (returnable) amount which be calculated according to the regulations of the tax law. The amount of the income tax payable which is based by the calculation of the current income tax expenses, are according to the result measured from the corresponding adjustment of the pre-tax accounting profit of this Reporting Period which in accord to the relevant regulations of the tax law. (2) Deferred income tax assets and deferred income tax liabilities The difference between the book value of certain assets and liabilities and their tax assessment basis, as well as the temporary difference occurs from the difference between the book value of the items which not be recognized as assets and liabilities but could confirm their tax assessment basis according to the regulations of the tax law, the deferred income tax assets and the deferred income tax liabilities should be recognized by adopting liabilities law of the balance sheet. No deferred tax liability is recognized for a temporary difference arising from the initial recognition of goodwill, the initial recognition of assets or liabilities due to a transaction other than a business 127 Lu Thai Textile Co., Ltd. Annual Report 2016 combination, which affects neither accounting profit nor taxable profit (or deductible loss). Besides, no deferred tax assets is recognized for the taxable temporary differences related to the investments of subsidiary companies, associated enterprises and joint enterprises, and the investing enterprise can control the time of the reverse of temporary differences as well as the temporary differences are unlikely to be reversed in the excepted future. Otherwise, the Group should recognize the deferred income tax liabilities arising form other taxable temporary difference. No deferred taxable assets should be recognized for the deductible temporary difference of initial recognition of assets and liabilities arising from the transaction which is not business combination, the accounting profits will not be affected, nor will the taxable amount or deductible loss be affected at the time of transaction. Besides, no deferred taxable assets should be recognized for the deductible temporary difference related to the investments of the subsidiary companies, associated enterprises and joint enterprises, which are not likely to be reversed in the expected future or is not likely to acquire any amount of taxable income tax that may be used for making up such deductible temporary differences. Otherwise, the Company shall recognize the deferred income tax assets arising from a deductible temporary difference basing on the extent of the amount of the taxable income that is likely to be acquired to make up such deductible temporary differences For any deductible loss or tax deduction that can be carried forward to the next year, the corresponding deferred income tax asset shall be determined to the extent that the amount of future taxable income to be offset by the deductible loss or tax deduction to be likely obtained. On the balance sheet date, the deferred income tax assets and the deferred income tax liabilities shall be measured at the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled. The book value of deferred income tax assets shall be reviewed at each balance sheet date. If it is unlikely to obtain sufficient taxable income to offset against the benefit of the deferred income tax asset, the book value of the deferred income tax assets shall be written down. Any such write-down should be subsequently reversed where it becomes probable that sufficient taxable income will be available. (3) Income tax expenses Income tax expenses include current income tax and deferred income tax. The rest current income tax and the deferred income tax expenses or revenue should be included into current gains and losses except for the current income tax and the deferred income tax related to the transaction and events that be confirmed as other comprehensive income or be directly included in the shareholders’ equity which should be included in other comprehensive income or shareholders’ equity as well as the book value for adjusting the goodwill of the deferred income tax occurs from the business combination. (4) Offset of income tax The current income tax assets and liabilities of the Company should be listed by the written-off net amount which intend to executes the net amount settlement as well as the assets acquiring and liabilities liquidation at the same time while owns the legal rights of settling the net amount. The deferred income tax assets and liabilities of the Company should be listed as written-off net amount when having the legal rights of settling the current income tax assets and liabilities by net amount and the deferred income tax and liabilities is relevant to the income tax which be collected from the same taxpaying bodies by the same tax collection and administration department or is 128 Lu Thai Textile Co., Ltd. Annual Report 2016 relevant to the different taxpaying bodies but during each period which there is significant reverse of the deferred income assets and liabilities in the future and among which the involved taxpaying bodies intend to settle the current income tax and liabilities by net amount or are at the same time acquire the asset as well as liquidate the liabilities. 25. Lease (1) Accounting treatment of operating lease (1) Business of operating leases recorded by the Group as the lessee The rent expenses from operating leases shall be recorded by the lessee in the relevant asset costs or the profits and losses of the current period by using the straight-line method over each period of the lease term. The initial direct costs shall be recognized as the profits and losses of the current period. The contingent rents shall be recorded into the profits and losses of the current period in which they actually arise. (2) Business of operating leases recorded by the Group as the lessor The rent incomes from operating leases shall be recognized as the profits and losses of the current period by using the straight-line method over each period of the lease term. The initial direct costs of great amount shall be capitalized when incurred, and be recorded into current profits and losses in accordance with the same basis for recognition of rent incomes over the whole lease term. The initial direct costs of small amount shall be recorded into current profits and losses when incurred. The contingent rents shall be recorded into the profits and losses of the current period in which they actually arise. (2) Accounting treatments of financial lease (1) Business of finance leases recorded by the Company as the lessee On the lease beginning date, the Company shall record the lower one of the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entering value in an account, recognize the amount of the minimum lease payments as the entering value in an account of long-term account payable, and treat the balance between the recorded amount of the leased asset and the long-term account payable as unrecognized financing charges. Besides, the initial direct costs directly attributable to the leased item incurred during the process of lease negotiating and signing the leasing agreement shall be recorded in the asset value of the current period. The balance through deducting unrecognized financing charges from the minimum lease payments shall be respectively stated in long-term liabilities and long-term liabilities due within 1 year. Unrecognized financing charges shall be adopted by the effective interest rate method in the lease term, so as to calculate and recognize current financing charges. The contingent rents shall be recorded into the profits and losses of the current period in which they actually arise. (2) Business of finance leases recorded by the Company as the lessor On the beginning date of the lease term, the Company shall recognize the sum of the minimum 129 Lu Thai Textile Co., Ltd. Annual Report 2016 lease receipts on the lease beginning date and the initial direct costs as the entering value in an account of the financing lease values receivable, and record the unguaranteed residual value at the same time. The balance between the sum of the minimum lease receipts, the initial direct costs and the unguaranteed residual value and the sum of their present values shall be recognized as unrealized financing income. The balance through deducting unrealized financing incomes from the finance lease accounts receivable shall be respectively stated in long-term claims and long-term claims due within 1 year. Unrecognized financing incomes shall be adopted by the effective interest rate method in the lease term, so as to calculate and recognize current financing revenues. The contingent rents shall be recorded into the profits and losses of the current period in which they actually arise. 26. Significant accounting judgments and estimates Due to the internal uncertainty of operating activities, the Company needs to make judgments, estimates and assumptions for carrying amounts of statement items that can’t be measured accurately during the process of applying accounting policies. Such judgments, estimates and assumptions are made on the basis of the past experience of Company’s management staffs and on the consideration of other relevant factors. Such judgments, estimates and assumptions have effect on reporting amount of incomes, expense, assets and liabilities, as well as disclosure of contingent liabilities on the balance sheet date. However, the uncertainty of such estimates may results in major adjustments of carrying amounts of assets or liabilities that will be influenced in future. The Company shall have a check on the aforesaid judgments, estimates and assumptions at fixed intervals on the basis of sustainable operation. As for the change in accounting estimates that only effects on the current period of the change, the affected amount thereof shall be recognized at current period of the change. As for accounting estimates that effects on both the current period of the change and future periods, the affected amount thereof shall be recognized at current period of the change and future periods. On balance sheet date, major fields requiring judgments, estimates and assumptions on amounts of financial statement items by the Company are as follows: (1) Classification of leases In line with rules in Accounting Standards for Enterprises No. 21 – Leases, the Company classifies leases into operating leases and finance leases. Upon the classification, the management staffs need to make analysis and judgments on whether to essentially transfer all risks and remuneration relating to the ownership of leased-out assets to the lessee, or whether the Company has essentially undertaken all risks and remuneration relating to the ownership of leased-in assets. (2) Withdrawal of bad debt provisions The Company shall, in accordance with accounting policies of receivables, calculate bad debt provisions by adopting allowance method. Impairment of accounts receivable is based on the assessment of the recovery of accounts receivable. Identification of impairment of accounts receivable requires judgments and estimates by management staffs. The difference between actual outcomes and originally estimated outcomes, which will influence the carrying amount of accounts receivable and bad debt provisions thereof in the estimated period of the change, shall be withdrawn or reversed. 130 Lu Thai Textile Co., Ltd. Annual Report 2016 (3) Inventory depreciation reserves The Company shall calculate whichever is lower between the cost and realizable net value in light of inventory accounting policies. As for inventories of which the cost is higher than the realizable net value and inventories which are obsolete and unsalable inventory depreciation reserves shall be withdrawn. Impairment of inventories to realizable net value is based on the assessment of the marketing of inventories and realizable net value thereof. Identification of inventory impairment requires well-established evidences by management staffs, as well as judgments and estimates based on consideration of the purpose of holding inventories and other factors such as events occurring after the date of balance sheet. The difference between actual outcomes and originally estimated outcomes, which will influence the carrying amount of inventories and inventory depreciation reserves in the estimated period of the change, shall be withdrawn or reversed. (4) Fair values of financial instruments As for financial instruments not existing in active trading market, the Company shall determine their fair values by all kinds of assessment methods, which include model analysis of discounted cash flow and etc. During the assessment, the Company needs to assess for respects such as future cash flows, credit risks, market volatility, correlation, and choose appropriate discount rate. Such related assumptions have uncertainty, of which the change will effect on fair values of financial instruments. (5) Impairment of financial assets available for sale To a large extent, whether the impairment of financial assets available for sale is recognized or not relies on the judgments and assumptions of the management staffs. In that way, the Company shall be certain about whether to recognize impairment losses of financial assets available for sale in the profit statement. During the process of making judgments and assumptions, the Company needs to evaluate how much the fair value of such investment is less than its cost, how long such investment will last, and the financial condition and short-term business outlook of the invested parties, which include industry status, technology transform, credit rating, default rate and risks from the opposite parties. (6) Impairment provisions of non-financial non-current assets The Company shall judge whether there is sign of impairment of non-current assets other than financial assets on balance sheet date. Intangible assets with uncertain service lives, besides being conducted with annual impairment test every year, have to accept impairment tests when there is sign of impairment. Other non-current assets except for financial assets have to accept impairment tests when there is sign indicating the carrying amount thereof is unrecoverable. When the carrying amounts of the asset or group assets are higher than the recoverable amounts, namely whichever is higher between the net amount through deducting disposal charges from the fair value and the present value of the estimated future cash flow, impairment occurs. The net amount of the fair value of an asset minus the disposal expenses shall be determined in light of the amount of the basis of the price as stipulated in the sales agreement or the observable market price in the fair transaction minus the incremental cost directly subject to the disposal of the asset. When estimating present value of future cash flows, it is necessary to make significant judgments on characters of the asset or asset group, such as output, sales price, related operating costs, and discount used to calculate the present value. When estimating recoverable amount, the Company shall adopt all relevant materials that can be required, including estimates relating to output, sales 131 Lu Thai Textile Co., Ltd. Annual Report 2016 price and relevant operating costs judged by rational and supportable assumptions. The Company tests whether there is impairment of good will at least for every year, which requires itself to estimate the present value of the future cash flow of group assets or combination of group assets. When estimating the present value of the future cash flow, the Company needs to estimate the cash flow arising from future group assets or combination of group assets, and at the same time choose appropriate discount rate to determine the present value of the future cash flow. (7) Depreciation and amortization Upon consideration on the salvage value of investment real estates, fixed assets and intangible assets, the Company shall withdraw depreciation and amortization by straight-line method over their service lives. The Company checks on service lives at fixed intervals, so as to determine the amounts of depreciation expenses and amortization expenses at each period. Service lives are confirmed in accordance with the past experience on similar assets of the Company, along with renewed technology of expectation. If any significant change occurred to previous estimated, depreciation expenses and amortization expenses will be adjusted in future period. (8) Development expenditure When recognizing the capitalized amount, the management layer of the Company needs to make suppose about the estimated future cash flow, the appropriate discounts rate and the estimated benefit period related to the assets. (9) Deferred income tax assets In a limit providing large possibility of offset losses from sufficient taxable profits, the Group shall recognize deferred income tax assets in line with all unused tax losses, which requires management staffs of the Group to estimate the time when future taxable profits occurs and the amount thereof by applying plenty of judgments and combining tax planning strategies, so as to determine the amount of the recognizable deferred income tax assets. (10) Income taxes There’s certain uncertainty of disposal and calculation of taxes of partial transactions in normal operating activities. It is uncertain whether some pre-taxed items can set aside the approvals by tax authorities or not. If there are differences between the ultimate recognition outcomes and the originally estimated amounts of such tax issues, then such differences shall effect on the current income tax and deferred income tax during the ultimate recognition period. VI. Taxation 1. Main taxes and tax rate Category of taxes Tax basis Tax rate Calculated the output tax at 17%, 13%, 6%, 5%, 3% and VAT 0% of taxable income and paid the VAT by the amount after 17%, 13%, 6%, 5%, 3%, 0% deducting the deductible withholding VAT at current period. Urban maintenance and Paid at 7%, 5%, 1% of the circulating tax actually paid 7%, 5%, 1% construction tax Enterprise income tax Paid at 0%, 9%, 15%, 16.5% and 25% of taxable income 0%, 9%, 15%, 16.5%, 25% 132 Lu Thai Textile Co., Ltd. Annual Report 2016 respectively Business tax Paid by 5% of taxable business income 5% Notes to the disclosure of taxpaying bodies in different corporate tax rate Name of taxpaying bodies Rate of income tax The Company 15% Lufeng Weaving & Dyeing Co., Ltd. (hereinafter refer to as 15% “Lufeng Weaving & Dyeing”) Lu Thai (Hong Kong) Textile Co., Ltd. (hereinafter refer to as 16.50% “Lu Thai Hong Kong”) Xinjiang Lu Thai Harvest Cotton Co., Ltd. (“Xinjiang Lu Thai”) 25% Zibo Luqun Textile Co., Ltd. (hereinafter refer to as “Luqun 25% Textile”) Zibo Xinsheng Power Co., Ltd. hereinafter refer to as “Xinsheng 25% Power”) Beijing Innovative Garment Co., Ltd. (hereinafter referred to as 25% “Beijing Innovative” Shanghai Lu Thai Textile & Garments Co., Ltd. (hereinafter 25% referred to as “Shanghai Lu Thai”) Beijing Lu Thai Youxian Electronic Commerce Co., Ltd. 25% (hereinafter referred to as “Beijing Youxian”) Lu Thai (Cambodia) Textile Co., Ltd. (hereinafter referred to as 0% “Lu Thai Cambodia”) Lu Thai (Burma) Textile Co., Ltd. (hereinafter referred to as “Lu 0% Thai Burma”) Lu Thai (Vietnam) Textile Co., Ltd. (hereinafter referred to as 0% “Lu Thai Vietnam”) Lu An Garments Co., Ltd. (hereinafter referred to as “Lu An 0% Garments” 2. Tax preference The Company, in accordance with the Notice on Passing the Re-examination of New High-tech Enterprise for 504 Companies Including Jinan Shengquan Group Co., Ltd. (Lu-Ke-Gao-Zi [2012] No. 19) from Department of Science & Technology of Shandong Province, Finance Bureau of Shandong Province, National Taxation Bureau of Shandong and Local Taxation Bureau of Shandong Province, was recognized as a New High-tech Enterprise and obtained the Certificate of New High-tech Enterprise on 31 Oct. 2011. The Company shall, in line with the Article 28 of Enterprise Income Tax Law of the People’s Republic of China and Notice of the State Administration of Taxation on the Issues concerning the Administration of Enterprise Income Tax Deduction and Exemption (GSF [2008] No. 111 document), enjoy a 15-percent rate for enterprise 133 Lu Thai Textile Co., Ltd. Annual Report 2016 income tax. The Company’s controlled subsidiary— Lufeng Weaving & Dyeing Co., Ltd., in accordance with the Notice on Confirmation of New High-tech Enterprise for 430 Companies Including Jinan Feshen Xinng’an Technologies Co., Ltd. (Lu-Ke-Gao-Zi [2012] No. 38) from Department of Science & Technology of Shandong Province, Finance Bureau of Shandong Province, National Taxation Bureau of Shandong and Local Taxation Bureau of Shandong Province, was recognized as a New High-tech Enterprise and obtained the Certificate of New High-tech Enterprise on 30 Nov. 2011.. The above subsidiary shall, in line with the Article 28 of Enterprise Income Tax Law of the People’s Republic of China and Notice of the State Administration of Taxation on the Issues concerning the Administration of Enterprise Income Tax Deduction and Exemption (GSF [2008] No. 111 document), enjoy a 15-percent rate for enterprise income tax. Lu Thai (Hong Kong) Textile Co., Ltd. (hereinafter refers as Lu Thai (Hong Kong) Textile), the wholly-owned subsidiary company of the Company, was incorporated in Hong Kong SAR, whose profit tax shall be paid at tax rate of 16.5%. The wholly own subsidiary Lu Thai Cambodia, according to the Lu Thai Cambodia Profits tax free approval issued by Investment Committee of Cambodia, Lu Thai Cambodia enjoys tax preference of tax free on corporate income tax of 3 (3 years start-up period) + 3 (3 years tax holiday)+1 (1 year grace period). If profit during the 3 year start-up period then turn into 3 years tax holiday, after grace period, enterprise income tax rate was of 20%. The wholly own subsidiary Lu Thai Burma, according to the Burma’s Special Economic Zone Law issued by Pyidaungsu Hluttaw, Lu Thai Burma enjoys tax preference on corporate income tax of 7 (7 years tax holiday) + 5 (5 years tax revenues drop by half) + 5 (re-invest the profits within 1 year and continues to enjoy the half tax revenues 5 years afterwards). After grace period, enterprise income tax rate was of 25%. The wholly-owned subsidiary Lu Thai (Vietnam) Textile Co., Ltd. shall enjoy the preference of enterprise income tax at 3 years’ starting term + 2 years’ duty-free term + 4 years’ half-tax term according 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’ starting term. The enterprise income tax rate shall be 20% after the preference term ends. The Company shall enjoy 17% of the preference tax rate within 10 years since the tax year to get the first production and operation income, and the enterprise income tax rate shall be 20% after the preference term ends. The wholly-owned subsidiary Lu An Garments Co., Ltd. shall enjoy the preference of enterprise income tax at 3 years’ starting term + 2 years’ duty-free term + 4 years’ half-tax term according to the investment license issued by Vietnamese Anjiang Province Economic Zone Management Committee, and it will enter into duty-free term if the profitability is realized at any year within 3 years’ starting term. The Company shall enjoy 17% of the preference tax rate within 10 years since the tax year to get the first production and operation income, and the enterprise income tax rate shall be 20% after the preference term ends. 134 Lu Thai Textile Co., Ltd. Annual Report 2016 VII. Notes on major items in consolidated financial statements of the Company 1. Monetary funds Unit: RMB Item Closing balance Opening balance Cash on hand 2,111,348.02 1,190,565.56 Bank deposits 742,998,281.72 631,971,943.96 Other monetary funds 50,391,566.33 33,131,288.78 Total 795,501,196.07 666,293,798.30 Of which total amount of deposited abroad 81,371,297.43 22,970,300.95 Other notes: On 31 Dec. 2016, the monetary capital with restricted ownership of the Company was of RMB 8,188,564.67 (31 Dec. 2015: RMB 29,805,722.42), which was the fixed deposit receipt of RMB 8,000,000.00 in order to pledge and obtain short term loan (See 24 and 58) by the Company’s subsidiary Lufeng Weaving & Dyeing and the expenses of the L/G margin of RMB 188,564.67. 2. Financial assets measured by fair value and the changes be included in the current gains and losses Unit: RMB Item Closing balance Opening balance Tradable financial assets 71,696,678.70 Derivative financial assets 71,696,678.70 Total 71,696,678.70 Other notes: 3. Derivative financial assets □ Applicable √ Not applicable 4. Notes receivable (1) Notes receivable listed by category Unit: RMB Item Closing balance Opening balance Bank acceptance bill 12,263,703.90 31,611,924.20 Letter of credit 71,898,206.01 101,533,594.19 Total 84,161,909.91 133,145,518.39 135 Lu Thai Textile Co., Ltd. Annual Report 2016 (2) Notes receivable which had endorsed by the Company or had discounted and had not due on the balance sheet date at the period-end Unit: RMB Amount of recognition termination at the Amount of not terminated recognition at Item period-end the period-end Bank acceptance bill 162,288,560.65 Total 162,288,560.65 5. Accounts receivable (1) Accounts receivable disclosed by category Unit: RMB Closing balance Opening balance Book balance Bad debt provision Book balance Bad debt provision Category Withdra Book Proportio wal Proportio Withdrawal Book value Amount Amount value Amount Amount n proportio n proportion n Accounts receivable withdrawn bad debt 308,637, 15,507,8 293,129,7 276,788 13,940,10 262,848,04 provision according 100.00% 5.02% 100.00% 5.04% 549.96 22.03 27.93 ,146.79 4.17 2.62 to credit risks characteristics 308,637, 15,507,8 293,129,7 276,788 13,940,10 262,848,04 Total 100.00% 5.02% 100.00% 5.04% 549.96 22.03 27.93 ,146.79 4.17 2.62 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 adopting aging analysis method to accrue bad debt provision: √Applicable □ Not applicable Unit: RMB Closing balance Aging Accounts receivable Bad debt provision Withdrawal proportion Sub-item within 1 year Within 1 year 308,294,658.96 15,414,732.93 5.00% Subtotal within 1 year 308,294,658.96 15,414,732.93 5.00% 1 to 2 years 48,891.00 4,889.10 10.00% 2 to 3 years 136 Lu Thai Textile Co., Ltd. Annual Report 2016 Over 3 years 294,000.00 88,200.00 30.00% Total 308,637,549.96 15,507,822.03 5.02% Notes of the basis of recognizing the group: In the groups, accounts receivable adopting balance percentage method to withdraw bad debt provision □ Applicable √ Not applicable In the groups, accounts receivable adopting other methods to accrue bad debt provision: (2) Accounts receivable withdraw, reversed or collected during the Reporting Period The withdrawal amount of the bad debt provision during the Reporting Period was of RMB 1,820,217.21; the amount of the reversed or collected part during the Reporting Period was of RM B0.00. (3) The actual write-off accounts receivable Unit: RMB Item Amount Actual write-off accounts receivable 252,499.35 (4) Top 5 of the closing balance of the accounts receivable collected according to the arrears party The total amount of the Company’s top 5 of the closing balance of the accounts receivable collected according to the arrears party was RMB 94,193,436.88, 30.52% of the total balance of account receivable at period-end. The relevant total balance of bad debt provision was RMB 4,709,671.84. 6. Prepayment (1) List by aging analysis: Unit: RMB Closing balance Opening balance Aging Amount Proportion Amount Proportion Within 1 year 211,402,803.04 99.49% 194,103,626.51 98.63% 1 to 2 years 805,437.09 0.38% 1,693,651.78 0.86% 2 to 3 years 242,576.42 0.11% 339,302.71 0.17% Over 3 years 36,684.96 0.02% 673,323.13 0.34% Total 212,487,501.51 -- 196,809,904.13 -- Notes of the reasons of the prepayment ages over 1 year with significant amount but failed settled in time: (2) Top 5 of the closing balance of the prepayment collected according to the prepayment target The total amount of top 5 of the closing balance of the prepayment collected according to the prepayment target was RMB 137 Lu Thai Textile Co., Ltd. Annual Report 2016 106,493,061.96, 50.12% of total balance of prepayment at period-end. 7. Interest receivable (1) Category of interest receivable Unit: RMB Item Closing balance Opening balance Fixed time deposit 653,075.08 Total 653,075.08 8. Other accounts receivable (1) Other accounts receivable disclosed by category Unit: RMB Closing balance Opening balance Book balance Bad debt provision Book balance Bad debt provision Category Withdra Book Proportio wal Proportio Withdrawal Book value Amount Amount value Amount Amount n proportio n proportion n Other accounts receivable withdrawn 52,008,9 5,746,12 46,262,83 80,678, 9,856,832 70,821,406. bad debt provision 100.00% 11.05% 100.00% 12.22% 61.83 6.36 5.47 238.51 .23 28 according to credit risks characteristics 52,008,9 5,746,12 46,262,83 80,678, 9,856,832 70,821,406. Total 100.00% 11.05% 100.00% 12.22% 61.83 6.36 5.47 238.51 .23 28 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 adopting aging analysis method to accrue bad debt provision: √Applicable □ Not applicable Unit: RMB Closing balance Aging Other accounts receivable Bad debt provision Withdrawal proportion Sub-item within 1 year Within 1 year 38,835,691.70 1,941,784.58 5.00% Subtotal within 1 year 38,835,691.70 1,941,784.58 5.00% 138 Lu Thai Textile Co., Ltd. Annual Report 2016 1 to 2 years 576,442.77 57,644.28 10.00% 2 to 3 years 323,507.10 64,701.42 20.00% Over 3 years 12,273,320.26 3,681,996.08 30.00% Total 52,008,961.83 5,746,126.36 11.05% Notes of the basis of recognizing the group: In the groups, other accounts receivable adopting balance percentage method to withdraw bad debt provision □ Applicable √ Not applicable In the groups, other accounts receivable adopting other methods to accrue bad debt provision: □ Applicable √ Not applicable (2) Accounts receivable withdraw, reversed or collected during the Reporting Period The withdrawal amount of the bad debt provision during the Reporting Period was of RMB-4,031,689.37; the amount of the reversed or collected part during the Reporting Period was of RMB 0.00. (3) The actual write-off other accounts receivable Unit: RMB Item Amount Actual write-off other accounts receivable 79,016.50 (4) Other accounts receivable classified by the nature of accounts Unit: RMB Nature Closing book balance Opening book balance Export taxes refund 18,563,850.28 23,876,307.85 Advance payment 17,597,169.14 33,467,444.93 Pledge and guarantee 3,757,964.01 6,956,093.54 Lending and deposit 1,404,072.87 3,811,593.38 Other 10,685,905.53 12,566,798.81 Total 52,008,961.83 80,678,238.51 (5) Top 5 of the closing balance of the other accounts receivable collected according to the arrears party Unit: RMB Proportion of the total end balance of Closing balance of Name of units Nature Closing balance Aging the accounts bad debt provision receivable (%) 139 Lu Thai Textile Co., Ltd. Annual Report 2016 Export taxes refund Export taxes refund 15,898,164.68 Within 1 year 30.57% 794,908.23 receivable Advance money receivable of the Advance money 6,878,257.09 Within 1 year 13.22% 343,912.85 fundraising houses Deposits for wages Deposits for wages paid to migrant paid to migrant 2,955,620.10 Over 3 years 5.68% 886,686.03 workers of Zichuan workers of District, Zibo infrastructure works Finance Bureau of Export tax refunds of Zichuan District, 2,665,685.60 Over 3 years 5.13% 799,705.68 the local government Zibo Advance money receivable of the Advance money 2,122,894.75 Within 1 year 4.08% 106,144.74 heating Total -- 30,520,622.22 -- 58.68% 2,931,357.53 9. Inventory Whether the Company needs to comply with the disclosure requirements of the real estate industry No (1) Category of inventory Unit: RMB Closing balance Opening balance Item Falling price Falling price Book balance Book value Book balance Book value reserves reserves Raw materials 719,354,838.11 620,979.00 718,733,859.11 608,670,473.36 1,635,229.99 607,035,243.37 Products in 412,808,521.45 412,808,521.45 445,688,953.21 445,688,953.21 process Inventory goods 731,266,751.73 64,673,863.30 666,592,888.43 714,280,833.84 43,608,998.71 670,671,835.13 Consumptive 1,141,156.72 671,556.72 469,600.00 869,404.33 392,309.29 477,095.04 biological assets Assigned processing 18,095,572.86 18,095,572.86 20,090,846.49 20,090,846.49 products Total 1,882,666,840.87 65,966,399.02 1,816,700,441.85 1,789,600,511.23 45,636,537.99 1,743,963,973.24 Whether the Company is required to comply with the "Shenzhen Stock Exchange Industry Information Disclosure Guidelines No. 4 - listed companies engaged in seed industry, planting business" disclosure requirements 140 Lu Thai Textile Co., Ltd. Annual Report 2016 No (2) Falling price reserves of inventory Unit: RMB Increased amount Decreased amount Item Opening balance Reverse or Closing balance Withdrawal Other Other write-off Raw materials 1,635,229.99 620,979.00 1,635,229.99 620,979.00 Inventory goods 43,608,998.71 45,396,578.64 24,331,714.05 64,673,863.30 Consumptive 392,309.29 503,423.59 224,176.16 671,556.72 biological assets Total 45,636,537.99 46,520,981.23 26,191,120.20 65,966,399.02 Item Specific basis of withdrawal of Reasons for reversal Reasons for write-off falling price reserves of inventory The lower one between cost of Sale in this year Raw materials each item of inventory and its realizable net value. The lower one between cost of Sale in this year Inventory goods each item of inventory and its realizable net value. Consumptive biological The lower one between cost of Sale in this year assets each item of inventory and its realizable net value. Notes: ① due to the quality problem in the garment accessories of partial raw materials, raw yarn and dyed yarn of finished goods and long age of partial shirts and fabric at the year-end as well as the falling market price of the consumptive biological assets-Hu-sheep, the costs of inventories became higher than the realizable net value, and the Company withdrew the provision for falling price of inventories according to their balance. ② Lu Thai (Xinjiang) Textile Co., Ltd., the Company’s subsidiary got the short-term borrowing of RMB 50 million with the inventory pledge of RMB 12 million book value. 10. Other current assets Unit: RMB Item Closing balance Opening balance Prepaid income tax to be deducted 1,325,487.99 3,108,886.97 141 Lu Thai Textile Co., Ltd. Annual Report 2016 VAT input tax to be deducted 40,242,307.31 16,640,924.10 Buy-back amount of B Share 20,634,142.65 Payment of the shares 17,007,362.62 Sales the shares 65,968,094.08 Total 107,535,889.38 57,391,316.34 Other notes: 11. Available-for-sale financial assets (1) List of available-for-sale financial assets Unit: RMB Closing balance Opening balance Item Depreciation Depreciation Book balance Book value Book balance Book value reserves reserves Available-for-sale equity 67,442,600.00 42,782,600.00 24,660,000.00 67,442,600.00 67,442,600.00 instruments Measured by cost 67,442,600.00 42,782,600.00 24,660,000.00 67,442,600.00 67,442,600.00 Total 67,442,600.00 42,782,600.00 24,660,000.00 67,442,600.00 67,442,600.00 (2) Available-for-sale financial assets measured by cost at the period-end Unit: RMB Book balance Impairment provision Shareholdi Cash ng bonus of Investee Period-beg Period-beg proportion the Increase Decrease Period-end Increase Decrease Period-end in in among the Reporting investees Period Zibo Chengshu n Heating Co., Ltd. (hereinafte 160,000.00 160,000.00 2.00% r refer to as “Chengshu n Heating” ) Yantai 55,282,600 55,282,600 42,782,600 42,782,600 4.13% Rongchan .00 .00 .00 .00 142 Lu Thai Textile Co., Ltd. Annual Report 2016 g Pharmacy Co., Ltd. (hereinafte r refer to as “Rongcha ng Pharmacy” ) Shandong Hongqiao Power Co., 12,000,000 12,000,000 19.38% Ltd. .00 .00 (Hongqiao Power) 67,442,600 67,442,600 42,782,600 42,782,600 Total -- .00 .00 .00 .00 12. Long-term accounts receivable (1) List of long-term accounts receivable Unit: RMB Closing balance Opening balance Discount rate Item Bad debt Bad debt Book balance Book value Book balance Book value range provision provision Financing lease 2,310,000.00 2,310,000.00 4,980,998.00 4,980,998.00 10.54% receivables Of which: unrealized 55,436.96 55,436.96 332,959.49 332,959.49 financing income Total 2,310,000.00 2,310,000.00 4,980,998.00 4,980,998.00 -- 13. Investment property (1) Investment property adopted the cost measurement mode √Applicable □ Not applicable Unit: RMB Item Houses and buildings Land use right Work in process Total I. Original book value 143 Lu Thai Textile Co., Ltd. Annual Report 2016 1. Opening balance 2. Increased amount of the Period 35,848,151.08 35,848,151.08 (1) Purchase (2) Inventory/fixed assets / transfer of 35,848,151.08 35,848,151.08 project under construction (3) Enterprise combination increase 3. Decreased amount of the Period (1) Disposal (2) Other transfers 4. Closing balance 35,848,151.08 35,848,151.08 II. Accumulative depreciation 1. Opening balance 2. Increased amount of the Period 10,004,060.52 10,004,060.52 (1) Withdrawal or amortization 854,487.76 854,487.76 (2) Accumulated depreciation of fixed 9,149,572.76 9,149,572.76 assets 3. Decreased amount of the Period (1) Disposal (2) Other transfers 4. Closing balance 10,004,060.52 10,004,060.52 III. Depreciation reserves 1. Opening balance 2. Increased amount of the Period (1) Withdrawal 3. Decreased amount of the Period (1) Disposal (2) Other transfers 4. Closing balance IV. Book value 1. Closing book value 25,844,090.56 25,844,090.56 2. Opening book value 144 Lu Thai Textile Co., Ltd. Annual Report 2016 14. Fixed assets (1) List of fixed assets Unit: RMB Houses and Machinery Transportation Electronic and other Item Total buildings equipment equipment equipment I. Original book value 1. Opening 2,678,346,700.26 5,590,479,536.09 72,011,120.11 111,875,276.29 8,452,712,632.75 balance 2. Increased 365,912,600.31 351,655,412.90 4,717,701.63 14,265,397.28 736,551,112.12 amount of the period (1) Outsourcing 8,692,949.37 288,590,774.04 4,717,701.63 9,320,089.56 311,321,514.60 (2) Transfer of inventory\fixed 357,219,650.94 63,064,638.86 4,945,307.72 425,229,597.52 assets\project under construction (3) Increased from enterprise merger 40,493,414.19 40,203,798.06 7,366,410.57 17,987,523.32 106,051,146.14 3. Decreased 4,645,263.11 40,203,798.06 7,366,410.57 17,987,523.32 70,202,995.06 amount of the period (1) Disposal or 35,848,151.08 35,848,151.08 Scrap 3,003,765,886.38 5,901,931,150.93 69,362,411.17 108,153,150.25 9,083,212,598.73 4. Closing balance II. Accumulative 743,043,738.02 2,643,463,604.14 52,009,768.71 79,137,398.87 3,517,654,509.74 depreciation 1.Opening 85,589,692.42 259,761,428.62 4,727,962.88 9,060,478.74 359,139,562.66 balance 2. Increased 85,589,692.42 259,761,428.62 4,727,962.88 9,060,478.74 359,139,562.66 amount of the period (1) Withdrawal 12,061,140.85 33,085,680.68 6,327,777.34 13,981,609.77 65,456,208.64 2,911,568.09 33,085,680.68 6,327,777.34 13,981,609.77 56,306,635.88 3. Decreased 9,149,572.76 9,149,572.76 amount of the period 145 Lu Thai Textile Co., Ltd. Annual Report 2016 (1) Disposal or scrap 816,572,289.59 2,870,139,352.08 50,409,954.25 74,216,267.84 3,811,337,863.76 4. Closing 4,823,890.00 22,535,428.59 53,835.13 69,499.45 27,482,653.17 balance III. Depreciation 6,780.26 1,718,834.35 15,691.53 1,741,306.14 reserves 1.Opening 6,780.26 1,718,834.35 15,691.53 1,741,306.14 balance 2. Increased 1,657,571.60 26,565.46 547.08 1,684,684.14 amount of the period (1) Withdrawal 1,657,571.60 26,565.46 547.08 1,684,684.14 4,830,670.26 22,596,691.34 27,269.67 84,643.90 27,539,275.17 3. Decreased amount of the period (1) Disposal or scrap 2,182,362,926.53 3,009,195,107.51 18,925,187.25 33,852,238.51 5,244,335,459.80 1,930,479,072.24 2,924,480,503.36 19,947,516.27 32,668,377.97 4,907,575,469.84 4. Closing balance IV. Book value 2,678,346,700.26 5,590,479,536.09 72,011,120.11 111,875,276.29 8,452,712,632.75 1. Closing book 365,912,600.31 351,655,412.90 4,717,701.63 14,265,397.28 736,551,112.12 value 2. Opening 8,692,949.37 288,590,774.04 4,717,701.63 9,320,089.56 311,321,514.60 book value (2) Fixed assets leased out from operation lease Unit: RMB Item Closing book value Houses and buildings 10,469,900.93 (3) Details of fixed assets failed to accomplish certification of property Unit: RMB Item Book value Reason Ongoing inspection, surveying, Weaving and yarn dying workshop 109,119,741.59 verification to application procedures by Housing authorities Employee’s dormitory building of eastern 45,462,923.66 Same with above area of industrial park 146 Lu Thai Textile Co., Ltd. Annual Report 2016 Spinning Fourth factory workshop 96,952,590.50 Same with above Employee’s dormitory building of western 130,021,743.30 Same with above area of industrial park Lufeng weaving dye workshop 32,543,630.20 Same with above Other notes: Note: Lu Thai (Xinjiang) Textile Co., Ltd., the Company’s subsidiary got the short-term borrowing of RMB 80 million with the pledge of RMM 30,265,483.04 fixed asset at the book value and RMB 671,845.07 land use right at the book value and the deposit of RMB 8 million, see 24 and 58. 15. Construction in progress (1) List of construction in progress Unit: RMB Closing balance Opening balance Item Impairment Impairment Book balance Book value Book balance Book value provision provision Complex building and employee’s dormitory 849,549.02 849,549.02 building in western area of Lu Thai A new 230,000-spindle production line project and a new 35,000-ingot 4,337,162.70 4,337,162.70 two-for-one twisting production line project Factory project of 1,153,723.06 1,153,723.06 Xinjiang Lu Thai Reform project of Xinsheng 13,387,636.75 13,387,636.75 30,335,215.53 30,335,215.53 Thermal Power Expansion project of Xinsheng 72,155,299.06 72,155,299.06 Thermal Power Energy 9,607,705.02 9,607,705.02 9,445,960.77 9,445,960.77 conservation 147 Lu Thai Textile Co., Ltd. Annual Report 2016 project of Helijie Lu Thai (Cambodia) 3,202,357.80 3,202,357.80 garment project Lu Thai (Burma) 27,134,693.98 27,134,693.98 project Lu Thai 26,114,552.04 26,114,552.04 86,589,660.94 86,589,660.94 (Vietnam) project Other small 3,966,433.79 3,966,433.79 projects Total 29,436,732.30 29,436,732.30 42,045,705.70 42,045,705.70 (2) Changes of significant construction in progress Unit: RMB Of Amount Proporti which: Accumul that on the Capitaliz Other ative Increase transferr estimate amount ation rate Estimate decrease amount Name of Opening d amount ed to Closing d of the Project of the of the Capital d d amount of item balance of the fixed balance project progress capitaliz interests resources number of the capitaliz period assets of accumul ed of the period ed the ative interests period interests period input of the period Complex building and employe e’s dormitor 106,500, 849,549. 372,553. 1,222,10 100.00% 100% Other y 000.00 02 16 2.18 building in western area of Lu Thai A new 230,000- 928,660, 4,337,16 18,498,6 22,835,8 spindle 100.00% 100% Other 000.00 2.70 90.80 53.50 producti on line 148 Lu Thai Textile Co., Ltd. Annual Report 2016 project and a new 35,000-i ngot two-for- one twisting producti on line project Factory project 26,150,0 1,153,72 7,970,02 9,123,74 of 100.00% 100% Other 00.00 3.06 3.00 6.06 Xinjiang Lu Thai Reform project of 62,770,0 30,335,2 23,803,7 40,751,2 13,387,6 Xinshen 86.00% 86% Other 00.00 15.53 14.89 93.67 36.75 g Thermal Power Expansio n project of 240,000, 72,155,2 72,155,2 Xinshen 30.00% 30% Other 000.00 99.06 99.06 g Thermal Power Energy conserva tion 40,880,0 9,445,96 2,596,59 2,434,85 9,607,70 99.00% 99% Other project 00.00 0.77 4.25 0.00 5.02 of Helijie Lu Thai (Cambod 123,056, 3,202,35 2,365,51 5,567,87 ia) 100.00% 100% Other 000.00 7.80 4.26 2.06 garment project Lu Thai 61,136,0 27,134,6 8,603,51 35,738,2 100.00% 100% Other 149 Lu Thai Textile Co., Ltd. Annual Report 2016 (Burma) 00.00 93.98 4.10 08.08 project Lu Thai 242,282, 86,589,6 145,789, 206,264, 26,114,5 (Vietnam 96.00% 96% Other 300.00 60.94 832.98 941.88 52.04 ) project Other 93,035,7 77,107,1 73,140,7 3,966,43 small 83.00% 83% Other 00.00 50.34 16.55 3.79 projects 42,045,7 15,541,0 28,150,0 29,436,7 Total -- 05.70 40.14 13.54 32.30 16. Engineering material Unit: RMB Item Closing balance Opening balance Specific materials 6,491.45 187,384.85 Specific equipment 117,113,972.05 6,132,398.32 Total 117,120,463.50 6,319,783.17 17. Productive biological assets (1) Productive biological assets adopted cost measurement mode √ Applicable □ Not applicable Unit: RMB Item Planting industry Livestock Forestry Aquaculture Total Hu sheep I. Original book value 1. Opening 1,398,871.02 1,398,871.02 balance 2. Increased 736,690.16 736,690.16 amount of the period (1) Outsourcing 39,650.00 39,650.00 (2) Self 697,040.16 697,040.16 cultivate 330,451.75 330,451.75 3. Decreased 254,500.00 254,500.00 amount of the period 150 Lu Thai Textile Co., Ltd. Annual Report 2016 (1) Disposal 75,951.75 75,951.75 (2) Other 1,805,109.43 1,805,109.43 4. Closing balance 221,757.13 221,757.13 II. Accumulative 291,369.95 291,369.95 depreciation 1. Opening 291,369.95 291,369.95 balance 2. Increased 89,310.40 89,310.40 amount of the period (1) Withdrawal 74,477.25 74,477.25 14,833.15 14,833.15 3. Decreased 423,816.68 423,816.68 amount of the period (1) Disposal (2) Other 4. Closing balance III. Depreciation reserves 1. Opening balance 2. Increased amount of the period (1) Withdrawal 3. Decreased 1,381,292.75 1,381,292.75 amount of the period (1) Disposal 1,177,113.89 1,177,113.89 (2) Other 1,398,871.02 1,398,871.02 4. Closing balance 736,690.16 736,690.16 IV. Book value 39,650.00 39,650.00 1. Closing book 697,040.16 697,040.16 value 2. Opening book 330,451.75 330,451.75 151 Lu Thai Textile Co., Ltd. Annual Report 2016 value 18. Intangible assets (1) List of intangible assets Unit: RMB Item Land use right Patent right Non-patent right Total I. Original book value 1. Opening balance 446,803,403.64 1,985,176.47 480,000.00 449,268,580.11 2. Increased amount of the period 33,169,532.18 33,169,532.18 (1) Purchase 33,169,532.18 33,169,532.18 (2) Internal R&D (3) Enterprise combination increase 3. Decreased amount of the period (1) Disposal 4. Closing balance 479,972,935.82 1,985,176.47 480,000.00 482,438,112.29 II. Accumulated amortization 1. Opening balance 84,646,918.80 1,025,674.68 210,000.00 85,882,593.48 2. Increased amount of the period 12,073,923.74 198,517.68 30,000.00 12,302,441.42 (1) Withdrawal 12,073,923.74 198,517.68 30,000.00 12,302,441.42 3. Decreased amount of the period (1) Disposal 4. Closing balance 96,720,842.54 1,224,192.36 240,000.00 98,185,034.90 III. Depreciation reserves 1. Opening balance 2. Increased amount of the period (1) Withdrawal 3. Decreased amount of the period (1) Disposal 4. Closing balance IV. Book value 1. Closing book value 383,252,093.28 760,984.11 240,000.00 384,253,077.39 2. Opening book value 362,156,484.84 959,501.79 270,000.00 363,385,986.63 The proportion the intangible assets formed from the internal R&D through the Company amount the balance of the intangible assets at the period-end is 0.00%. 152 Lu Thai Textile Co., Ltd. Annual Report 2016 19. R&D expenses Unit: RMB Increase Decrease Opening Internal Recognized Transfer into Closing Item balance development as intangible current profits or balance expenses assets losses Product 289,826,541.83 289,826,541.83 development Total 289,826,541.83 289,826,541.83 20. Goodwill (1) Original book value of goodwill Unit: RMB Name of the investees or the Opening balance Increase Decrease Closing balance events formed goodwill Xinsheng 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 21. Long-term unamortized expenses Unit: RMB Amortization Item Opening balance Increased amount Decrease Closing balance amount Land contracting fee 27,639,383.04 200,000.00 1,046,113.68 26,793,269.36 of Xinjiang Luthai Land rent of 57,484,762.21 30,812,175.30 1,401,964.61 86,894,972.90 overseas subsidiaries Housing rent of 718,829.84 179,707.56 539,122.28 overseas subsidiaries Total 85,124,145.25 31,731,005.14 2,627,785.85 114,227,364.54 Other notes: 153 Lu Thai Textile Co., Ltd. Annual Report 2016 22. Deferred income tax assets/deferred income tax liabilities (1) Deferred income tax assets had not been off-set Unit: RMB Closing balance Opening balance Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax difference assets difference assets Assets impairment 140,348,122.97 22,081,838.10 88,791,730.93 14,770,956.88 provision Unrealized internal sales 81,198,211.62 9,319,462.09 62,610,524.74 8,953,164.62 gain and loss One-time listed 2,901,238.68 725,309.67 decoration expenses Payroll payable 110,698,173.59 17,032,239.77 113,279,841.30 17,414,870.28 Deferred income 94,231,052.79 14,024,943.00 93,945,118.42 13,979,718.50 Change of fair value of trading financial 46,695,875.00 7,004,381.25 liabilities Total 429,376,799.65 63,183,792.63 405,323,090.39 62,123,091.53 (2) Deferred income tax liabilities had not been off-set Unit: RMB Closing balance Opening balance Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax difference liabilities difference liabilities Depreciation of fixed 13,289,056.67 2,192,694.35 12,513,412.24 2,064,713.02 assets Total 14,188,423.45 2,341,089.87 13,289,056.67 2,192,694.35 (3) Deferred income tax assets or liabilities listed by net amount after off-set Unit: RMB Mutual set-off amount of Amount of deferred Mutual set-off amount of Amount of deferred deferred income tax income tax assets or deferred income tax income tax assets or Item assets and liabilities at liabilities after off-set at assets and liabilities at liabilities after off-set at the period-end the period-end the period-begin the period-begin Deferred income tax 63,183,792.63 62,123,091.53 assets 154 Lu Thai Textile Co., Ltd. Annual Report 2016 Deferred income tax 2,341,089.87 2,192,694.35 liabilities (4) List of unrecognized deferred income tax assets Unit: RMB Item Closing balance Opening balance Deductible temporary difference 17,124,084.90 8,124,396.63 Deductible losses 28,727,921.83 134,950,376.05 Total 45,852,006.73 143,074,772.68 (5) Deductible losses of unrecognized deferred income tax assets will due the following years Unit: RMB Years Closing amount Opening amount Notes Y 2017 649,483.64 20,826,906.25 Y 2018 125,946.78 23,670,032.23 Y 2019 1,456,659.23 23,798,042.42 Y 2020 22,245,128.73 57,112,714.07 Y 2021 4,250,703.45 Total 28,727,921.83 125,407,694.97 -- 23. Other non-current assets Unit: RMB Item Closing balance Opening balance Prepayment for equipment 5,853,067.38 21,721,084.27 Prepayment for land 25,406,401.00 12,781,283.00 Total 31,259,468.38 34,502,367.27 24. Short-term loans (1) Category of short-term loans Unit: RMB Item Closing balance Opening balance Pledge loan 28,266,701.32 Mortgage loan 310,000,000.00 180,000,000.00 155 Lu Thai Textile Co., Ltd. Annual Report 2016 Guaranteed loan 33,987,976.00 50,000,000.00 Credit loan 529,273,880.02 544,499,617.58 Total 873,261,856.02 802,766,318.90 25. Financial liabilities measured by fair value and the changes included in the current gains and losses Unit: RMB Item Closing balance Opening balance Transaction financial liabilities 46,695,875.00 Derivative financial liabilities 46,695,875.00 Total 46,695,875.00 26. Notes payable Unit: RMB Category Closing balance Opening balance Trade acceptance 2,709,149.48 Bank acceptance bill 400,000.00 Total 3,109,149.48 The total amount of the due but not pay notes payable at the period-end was of RMB0.00. 27. Accounts payable (1) List of accounts payable Unit: RMB Item Closing balance Opening balance Purchase of goods 149,708,800.67 163,649,100.70 Engineering equipment 82,922,798.32 79,077,530.07 Other 19,906,964.07 5,843,774.80 Total 252,538,563.06 248,570,405.57 28. Advance from customers (1) List of advance from customers Unit: RMB Item Closing balance Opening balance Advance from goods 89,451,314.62 95,077,531.32 156 Lu Thai Textile Co., Ltd. Annual Report 2016 Total 89,451,314.62 95,077,531.32 29. Payroll payable (1) List of Payroll payable Unit: RMB Item Opening balance Increase Decrease Closing balance I. Short-term salary 290,779,347.63 1,400,373,114.90 1,375,614,314.43 315,538,148.10 II. Post-employment benefit-defined 484,251.99 214,414,273.87 214,818,224.05 80,301.81 contribution plans III. Termination benefits 4,270,971.98 4,270,971.98 Total 291,263,599.62 1,619,058,360.75 1,594,703,510.46 315,618,449.91 (2) List of Short-term salary Unit: RMB Item Opening balance Increase Decrease Closing balance 1. Salary, bonus, 253,024,097.84 1,221,798,714.15 1,201,789,528.86 273,033,283.13 allowance, subsidy 2. Employee welfare 54,386,604.59 54,386,604.59 3. Social insurance 254,795.56 80,250,769.44 80,462,718.97 42,846.03 Including: 1. Medical 227,380.70 68,989,626.42 69,181,088.52 35,918.60 insurance premiums Work-related injury 12,394.93 6,209,349.84 6,215,633.82 6,110.95 insurance Maternity insurance 15,019.93 5,051,793.18 5,065,996.63 816.48 4. Housing fund 22,460.32 18,347,586.70 18,369,379.95 667.07 5. Labor union budget and employee education 37,477,993.91 25,589,440.02 20,606,082.06 42,461,351.87 budget Total 290,779,347.63 1,400,373,114.90 1,375,614,314.43 315,538,148.10 (3) List of drawing scheme Unit: RMB Item Opening balance Increase Decrease Closing balance Basic pension benefits 458,648.69 203,122,516.82 203,507,441.69 73,723.82 157 Lu Thai Textile Co., Ltd. Annual Report 2016 Unemployment insurance 25,603.30 11,291,757.05 11,310,782.36 6,577.99 Total 484,251.99 214,414,273.87 214,818,224.05 80,301.81 Notes: The Company, in line with the requirement, participate the endowment insurance, unemployment insurance scheme and so on, according to the scheme, the Company monthly pay to the scheme in line with 26% and 1.5% of the endowment insurance base, except the monthly payment, the Company no longer shoulder the further payment obligation, the relevant expense occurred was recorded into current profits and losses or related assets costs. 30. Taxes payable Unit: RMB Item Closing balance Opening balance VAT 8,584,752.76 8,095,634.56 Business tax 45,985,549.11 54,874,320.89 Corporate income tax 1,376,971.80 677,155.21 Personal income tax 6,314,742.98 3,706,913.14 Urban maintenance and construction tax 346,838.39 Stamp tax 468,060.60 452,140.04 Property tax 4,484,688.82 4,554,321.87 Land use tax 4,428,494.17 4,592,696.80 Education Surcharge 2,798,858.01 1,668,460.01 Local education surtax 1,865,905.35 1,112,306.69 Local water conservancy facility 906,683.07 534,220.54 construction fund Total 77,214,706.67 80,615,008.14 31. Interest payable Unit: RMB Item Closing balance Opening balance Interest payable on short-term borrowings 1,165,730.47 1,851,876.78 Total 1,165,730.47 1,851,876.78 32. Dividends payable Unit: RMB Item Closing balance Opening balance 158 Lu Thai Textile Co., Ltd. Annual Report 2016 Common stock dividends of the Group 441,113.64 441,113.64 Total 441,113.64 441,113.64 Note: Including significant unpaid dividends payable over one year, the unpaid reason shall be disclosed: 33. Other accounts payable (1) Other accounts payable listed by nature of the account Unit: RMB Item Closing balance Opening balance The deposit and guarantee 18,768,467.36 19,946,789.66 Collecting payment on behalf of others 22,870,555.86 16,801,587.86 Intercourse funds 2,641,922.16 2,941,300.16 Other 25,084,695.77 22,825,136.85 Total 69,365,641.15 62,514,814.53 (2) Other significant accounts payable with aging over one year Unit: RMB Item Closing balance Unpaid/ Un-carry-over reason Cotton and Linen Company 11,925,000.00 Received deposit of sale contract Total 11,925,000.00 -- 34. Long-term loan (1) Category of long-term loan Unit: RMB Item Closing balance Opening balance Guaranteed loan 135,678,044.89 Total 135,678,044.89 35. Long term payroll payable (1) List of long term payroll payable Unit: RMB Item Closing balance Opening balance III. Other long term welfare 79,122,422.89 81,499,403.98 159 Lu Thai Textile Co., Ltd. Annual Report 2016 Total 79,122,422.89 81,499,403.98 36. Deferred income Unit: RMB Item Opening balance Increase Decrease Closing balance Formation reasons Government Government 95,802,118.42 2,601,700.00 2,468,765.59 95,935,052.83 subsidies subsidies Unrealized financing 332,959.49 277,522.53 55,436.96 Finance lease incomes Total 96,135,077.91 2,601,700.00 2,746,288.12 95,990,489.79 -- Items involved in government subsidies: Unit: RMB Amount accrued Amount of newly Related to the Item Opening balance in non-business Other changes Closing balance subsidy assets/ income income Related to the Land 62,052,085.09 1,393,157.88 60,658,927.21 assets Related to the Equipment 32,793,033.33 2,601,700.00 942,607.75 34,452,125.58 assets Production Related to the 957,000.00 132,999.96 824,000.04 biological assets assets Total 95,802,118.42 2,601,700.00 2,468,765.59 95,935,052.83 -- 37. Other non-current liabilities Unit: RMB Item Closing balance Opening balance Other 1,840,000.00 1,840,000.00 Total 1,840,000.00 1,840,000.00 38. Share capital Unit: RMB Increase/decrease (+/-) Opening Capitalization Closing Newly issue balance Bonus shares of public Other Subtotal balance share reserves The sum of 955,758,496.00 955,758,496.00 160 Lu Thai Textile Co., Ltd. Annual Report 2016 shares Notes: According to the Company’s resolution of Proposal on Repurchasing the Company’s some A shares and B shares in the first extraordinary shareholder’s meeting on 5 Aug. 2015, the Company repurchased 33,156,185.00 shares of domestic listed foreign shares (B shares). 39. Capital reserves Unit: RMB Item Opening balance Increase Decrease Closing balance Capital premium 948,167,616.39 253,706,278.05 694,461,338.34 Other capital reserves 58,978,550.58 668.91 58,979,219.49 Total 1,007,146,166.97 668.91 253,706,278.05 753,440,557.83 Other notes, including changes and reason of change: The capital reserve was reduced by RMB 253,706,278.05 at this year, and it was caused by repurchasing 33,156,185.00 shares of domestic listed foreign shares (B shares).The Company repurchased HKD 339,661,433.43 of domestic listed foreign shares (B shares) in monetary way (it is equivalent to RMB 286,862,463.05 according to the exchange rate at the repurchasing day) according to the highest price of HKD 10.55 for per share and the lowest price of HKD 9.92, the equity of RMB 33,156,185.00 was reduced respectively, and capital reserve- capital premium was reduced by RMB 253,706,278.05. 40. Treasury stock Unit: RMB Item Opening balance Increase Decrease Closing balance The Company’s shared acquired due to the 11,610,721.68 11,610,721.68 reduce of registered capital Total 11,610,721.68 11,610,721.68 41. Other comprehensive income Unit: RMB Reporting Period Less: Amount Amount After-tax After-tax Opening transferred Less: Closing Item incurred attribute to attribute to balance into profit and income tax balance before the parent minority loss in the expense income tax company shareholder current period 161 Lu Thai Textile Co., Ltd. Annual Report 2016 that recognized into other comprehensive income in prior period II. Other comprehensive reclassified 17,090,772.3 36,202,772. 36,202,772. 53,293,54 into profits or losses 1 58 58 4.89 Converted difference of the 17,090,772.3 36,202,772. 36,202,772. 53,293,54 foreign currency financial statement 1 58 58 4.89 17,090,772.3 36,202,772. 36,202,772. 53,293,54 total 1 58 58 4.89 42. Surplus reserves Unit: RMB Item Opening balance Increase Decrease Closing balance Statutory surplus 812,306,931.70 73,113,278.76 885,420,210.46 reserves Discretional surplus 3,341,572.58 3,341,572.58 reserves Total 815,648,504.28 73,113,278.76 888,761,783.04 Other note, including changes and reason of change: Notes: According to the provisions in Corporate Law and Articles of Association, the Company extracted the statutory surplus reserve at 10% of the net profit. 43. Retained profits Unit: RMB Item Reporting Period Last period Opening balance of retained profits before 4,053,079,857.70 3,892,066,534.32 adjustments Opening balance of retained profits after 4,053,079,857.70 3,892,066,534.32 adjustments Add: Net profit attributable to owners of the 805,446,326.99 712,193,243.19 Company Less: Withdrawal of statutory surplus reserves 73,113,278.76 73,300,671.81 Dividend of common stock payable 465,525,373.50 477,879,248.00 Closing retained profits 4,319,887,532.43 4,053,079,857.70 List of adjustment of opening retained profits: 162 Lu Thai Textile Co., Ltd. Annual Report 2016 1) RMB000 opening retained profits was affected by retrospective adjustment conducted according to the Accounting Standards for Business Enterprises and relevant new regulations. 2) RMB000 opening retained profits was affected by changes on accounting policies. 3) RMB000 opening retained profits was affected by correction of significant accounting errors. 4) RMB000 opening retained profits was affected by changes in combination scope arising from same control. 5) RMB000 opening retained profits was affected totally by other adjustments. 44. Revenues and operating costs Unit: RMB Reporting Period Last period Item Revenue Operating costs Revenue Operating costs Main operations 5,713,165,522.27 3,838,046,141.02 5,909,772,762.98 4,175,234,398.18 Other operations 268,585,822.36 166,975,276.36 263,550,015.63 165,800,478.86 Total 5,981,751,344.63 4,005,021,417.38 6,173,322,778.61 4,341,034,877.04 45. Business tax and surcharges Unit: RMB Item Reporting Period Last period Urban maintenance and construction tax 30,239,685.31 28,144,085.36 Education surcharge 13,667,756.39 12,865,492.60 Property tax 13,107,952.04 Land use tax 12,854,644.38 Vehicle usage tax 61,044.20 Stamp tax 2,550,190.04 Business tax 593,989.16 1,699,505.61 Local education surtax 9,111,881.84 8,576,995.04 Local water conservancy facility 4,332,576.60 4,023,905.42 construction fund Total 86,519,719.96 55,309,984.03 46. Sales expenses Unit: RMB Item Reporting Period Last period Salary 50,423,791.03 52,872,651.88 Transport fees 34,708,081.50 33,139,133.69 163 Lu Thai Textile Co., Ltd. Annual Report 2016 Advertising expense 12,619,004.10 24,551,068.37 Mall costs 8,740,936.16 13,806,476.08 Terminal Handing charges 10,170,488.09 7,552,206.39 Depreciation charge 5,654,563.26 7,225,171.78 Business travel charges 6,656,203.48 1,186,716.19 Travel expense 4,928,478.09 5,319,184.05 Copyright royalty 891,154.41 3,227,464.60 Rental charges 1,524,816.35 2,681,385.17 Design charges 2,209,686.15 2,553,719.50 Other 20,342,790.60 37,818,117.49 Total 158,869,993.22 191,933,295.19 47. Administrative expenses Unit: RMB Item Reporting Period Last period R&D expenses 289,826,541.83 294,928,756.29 Salary 132,863,419.92 115,940,476.52 Taxes 14,735,118.17 40,962,025.54 Depreciation charge 24,202,687.01 36,733,403.06 Warehouse funding 24,187,533.53 21,383,855.97 Travel expense 24,028,119.88 9,486,878.28 Rental charges 14,837,609.14 15,572,868.91 Labor-union expenditure 14,792,241.78 14,842,795.98 Employee education budget 10,797,684.26 10,483,788.24 Amortization of intangible assets 10,442,349.46 10,383,276.33 Transport fees 6,941,005.81 6,815,115.78 Other 91,744,575.79 93,171,143.39 Total 659,398,886.58 670,704,384.29 Notes: 48. Financial expenses Unit: RMB Item Reporting Period Last period Interest expenses 18,895,107.98 18,898,648.84 164 Lu Thai Textile Co., Ltd. Annual Report 2016 Less: Interest income 5,867,570.13 6,226,423.16 Less: Amount of capitalized interest Exchange gains and losses 953,185.06 -3,061,394.46 Less: capitalization of foreign currency exchange gains and losses Other 6,716,938.73 6,870,192.67 Total 20,697,661.64 16,481,023.89 49. Asset impairment loss Unit: RMB Item Reporting Period Last period I. Bad debt loss -2,211,472.16 4,827,646.30 II. Inventory falling price loss 46,520,981.23 19,902,794.60 III. Impairment losses on available-for-sale 42,782,600.00 financial assets VII. Impairment losses of fix asset 1,741,306.14 2,567,004.84 impairment loss Total 88,833,415.21 27,297,445.74 50. Gains on the changes in the fair value Unit: RMB Source Reporting Period Last period Financial assets measured by fair value and the changes be included in the current 17,296,256.36 -17,296,256.36 profits and losses Financial liabilities measured by fair value and the changes included in the current 46,695,875.00 -43,389,675.00 gains and losses Total 63,992,131.36 -60,685,931.36 51. Investment income Unit: RMB Item Reporting Period Last period Investment income received from financial assets measured by fair value and the changes 1,381,926.82 373,901.27 be included in the current profits and losses 165 Lu Thai Textile Co., Ltd. Annual Report 2016 during holding period Investment income received from disposal of financial assets measured by fair value and the -62,161,587.02 31,166,114.24 changes be included in the current profits and losses during holding period Total -60,779,660.20 31,540,015.51 52. Non-operating gains Unit: RMB Recorded in the amount of the Item Reporting Period Last period non-recurring gains and losses Total gains from disposal of 1,573,832.63 959,445.92 1,573,832.63 non-current assets Including: Gains from disposal 1,573,832.63 959,445.92 1,573,832.63 of fixed assets Government subsidies 64,121,633.01 43,266,788.43 64,121,633.01 Other 9,558,685.34 7,975,499.49 9,558,685.34 Total 75,254,150.98 52,201,733.84 75,254,150.98 Government subsidies recorded into current profits and losses Unit: RMB Whether Whether influence the Related to the Distribution Distribution Special Reporting Item Nature/type profits or Last period assets/ entity reason subsidy or Period losses of the income not year or not Due to engaged in special industry that the state Contract encouraged energy Finance and management Bureau of Subsidy supported, Yes No 3,230,000.00 financial Zibo gained Related to the reward subsidy income (obtaining in line with the law and the regulations of national 166 Lu Thai Textile Co., Ltd. Annual Report 2016 policy) Finance Due to Related to the Bureau of engaged in income Zibo special industry that the state encouraged Funds for and encouraging supported, Subsidy Yes No 67,700.00 foreign trade gained development subsidy (obtaining in line with the law and the regulations of national policy) Due to engaged in special industry that the state encouraged and Export credit supported, insurance Subsidy Yes No 22,700.00 Finance gained Related to the premiums Bureau of subsidy income Zibo (obtaining in line with the law and the regulations of national policy) Due to engaged in special industry that Export credit the state insurance Subsidy Yes No 20,500.00 encouraged premiums and Finance supported, Related to the Bureau of gained income Zibo subsidy 167 Lu Thai Textile Co., Ltd. Annual Report 2016 (obtaining in line with the law and the regulations of national policy) Due to engaged in special industry that the state encouraged Funds for and Industrial supported, upgrading Subsidy Yes No 1,000,000.00 Finance gained Related to the and Bureau of subsidy income upgrading Zibo (obtaining in line with the law and the regulations of national policy) Due to engaged in special industry that the state encouraged Finance and Funds for Bureau of supported, foreign trade Subsidy Yes No 52,400.00 Zichuan gained development District subsidy Related to the (obtaining in income line with the law and the regulations of national policy) Akesu Due to Agricultural Prefecture engaged in Related to the loan Bureau of Subsidy special Yes No 150,000.00 income Discounts Finance, industry that Office of the state 168 Lu Thai Textile Co., Ltd. Annual Report 2016 Poverty encouraged Alleviation and and supported, Development gained of Akesu subsidy Prefecture (obtaining in line with the law and the regulations of national policy) Subsidy gained due to Finance confirming Department with local of the government Loan subsidy Xinjiang Subsidy Yes No 270,000.00 attracting Uygur investment Autonomous and local Region supportive policy etc. Human Subsidy Resources gained due to and Social confirming Security with local Labor Bureau of government training Akesu Subsidy attracting Yes No 220,800.00 subsidy Prefecture, investment Akesu and local Prefecture supportive Bureau of policy etc. Finance Subsidy gained due to confirming The county with local World Bank government government Related to the Subsidy Yes No 517,000.00 loan subsidy office of Pupi attracting income Avati investment and local supportive policy etc. Lint freight Finance Subsidy Subsidy Yes No 2,850,000.00 Related to the 169 Lu Thai Textile Co., Ltd. Annual Report 2016 subsidies Department gained due to income of the confirming Xinjiang with local Uygur government Autonomous attracting Region investment and local supportive policy etc. The Letter Committee of the Xinjiang Uygur Autonomous Region, Subsidy Development gained due to and Reform confirming Commission with local Electricity of government Related to the Finance Autonomous Subsidy Yes No 318,191.00 attracting income subsidies Region, investment Finance and local Department supportive of policy etc. Autonomous Region, Chinese power company in Xinjiang Subsidy gained due to confirming with local Akesu VAT subsidy government Related to the Prefecture Subsidy Yes No 7,000,000.00 funds attracting income Bureau of investment Finance and local supportive policy etc. Subsidy Electricity Related to the Subsidy gained due to Yes No 308,664.00 subsidy income confirming 170 Lu Thai Textile Co., Ltd. Annual Report 2016 Akesu with local Prefecture government Bureau of attracting Finance investment and local supportive policy etc. Subsidy gained due to confirming with local Xinjiang Akesu government Related to the cotton Prefecture Subsidy Yes No 5,169,900.00 attracting income subsidies Bureau of investment Finance and local supportive policy etc. Subsidy gained due to confirming with local Akesu Loan government Related to the Prefecture Subsidy Yes No 22,200.00 discounts attracting income Bureau of investment Finance and local supportive policy etc. Subsidy gained due to confirming with local Cotton yarn Akesu government Related to the freight Prefecture Subsidy Yes No 5,034,500.00 attracting income subsidies Bureau of investment Finance and local supportive policy etc. Subsidy gained due to Loan confirming Related to the Subsidy Yes No 5,079,500.00 discounts with local income Akesu government Prefecture attracting Bureau of 171 Lu Thai Textile Co., Ltd. Annual Report 2016 Finance investment and local supportive policy etc. Subsidy Akesu gained due to Prefecture confirming Bureau of with local Cotton yarn Finance government Related to the freight Subsidy Yes No 4,151,915.00 attracting income subsidies investment and local supportive policy etc. Subsidy gained due to confirming with local Akesu government Related to the Electricity Prefecture Subsidy Yes No 335,556.00 attracting income subsidy Bureau of investment Finance and local supportive policy etc. Subsidy gained due to confirming with local Akesu government Related to the Electricity Prefecture Subsidy Yes No 313,920.00 attracting income subsidy Bureau of investment Finance and local supportive policy etc. Due to engaged in special Comprehensi Finance industry that ve utilization Bureau of Related to the Subsidy the state Yes No 1,257,701.12 of resources Zichuan income encouraged drawback District and supported, gained 172 Lu Thai Textile Co., Ltd. Annual Report 2016 subsidy (obtaining in line with the law and the regulations of national policy) Due to engaged in special industry that the state encouraged Finance and Funds for Bureau of supported, Related to the foreign trade Subsidy Yes No 600,000.00 Zichuan gained income development District subsidy (obtaining in line with the law and the regulations of national policy) Due to engaged in special industry that the state encouraged Finance and Export credit Bureau of supported, Related to the insurance Subsidy Yes No 200,000.00 Zichuan gained income subsidy District subsidy (obtaining in line with the law and the regulations of national policy) Foreign Finance Due to economic and Bureau of engaged in Related to the Subsidy Yes No 596,400.00 trade Zichuan special income cooperation District industry that 173 Lu Thai Textile Co., Ltd. Annual Report 2016 subsidies the state encouraged and supported, gained subsidy (obtaining in line with the law and the regulations of national policy) Due to engaged in special industry that the state encouraged Finance and Import Bureau of supported, Related to the discount Subsidy Yes No 52,000.00 Zichuan gained income interest funds District subsidy (obtaining in line with the law and the regulations of national policy) Due to engaged in special industry that the state "TOP 50 encouraged enterprises" Finance and management Bureau of Related to the Subsidy supported, Yes No 650,000.00 consulting Zichuan income gained special District subsidy subsidies (obtaining in line with the law and the regulations of national 174 Lu Thai Textile Co., Ltd. Annual Report 2016 policy) Due to engaged in special industry that the state encouraged Finance and E-commerce Bureau of supported, Related to the business Subsidy Yes No 100,000.00 Zichuan gained income award District subsidy (obtaining in line with the law and the regulations of national policy) Due to engaged in special industry that the state encouraged Finance and Export credit Bureau of supported, Related to the Subsidy Yes No 73,500.00 subsidy Zichuan gained income District subsidy (obtaining in line with the law and the regulations of national policy) Subsidy from Energy People's R&D saving Government Award Technical Related to the outstanding Yes No 1,000,000.00 of Shandong updating and income contribution Province transformatio award n, etc. People's Subsidy from Award for Government R&D Related to the Science and Award Yes No 50,000.00 of Shandong Technical income Technology Province updating and 175 Lu Thai Textile Co., Ltd. Annual Report 2016 transformatio n, etc. Zibo Award Subsidy from Science and High-tech R&D technology Industrial Technical Related to the innovation Development updating and Yes No 120,000.00 income support Zone transformatio Award Management n, etc. Committee Project Zibo Award Subsidy from Energy Municipal R&D Conservation Bureau of Technical Award housing and updating and urban rural transformatio Related to the Yes No 171,850.00 development, n, etc. income Zibo Municipal Finance Bureau Provincial Finance Award Due to export award Bureau of engaged in Zichuan special District industry that the state encouraged and supported, Related to the Yes No 42,400.00 gained income subsidy (obtaining in line with the law and the regulations of national policy) Due to engaged in special Patent Department industry that Related to the creation of Finance of Yes No 12,000.00 the state income award Shandong encouraged and supported, 176 Lu Thai Textile Co., Ltd. Annual Report 2016 Award gained subsidy (obtaining in line with the law and the regulations of national policy) Due to engaged in special industry that Human the state Resources encouraged Graduate and Social and employment Security supported, Related to the Subsidy Yes No 384,000.00 apprentice Bureau of gained income subsidies Zibo, Finance subsidy Bureau of (obtaining in Zibo line with the law and the regulations of national policy) Subsidy from Award for People's R&D Science and Government Technical Related to the Award Yes No 100,000.00 Technology of Shandong updating and income of Shandong Province transformatio n, etc. Due to engaged in special industry that the state Municipal Finance encouraged standardizati Related to the Bureau of Subsidy and Yes No 300,000.00 on project income Zibo supported, funds gained subsidy (obtaining in line with the law and the 177 Lu Thai Textile Co., Ltd. Annual Report 2016 regulations of national policy) Due to engaged in special industry that the state encouraged Subsidies for Finance and unemployme Bureau of supported, Related to the Subsidy Yes No 4,605,885.00 nt and stable Zichuan gained income position District subsidy (obtaining in line with the law and the regulations of national policy) Due to engaged in special industry that the state encouraged Finance and Export credit Bureau of supported, Related to the insurance Subsidy Yes No 60,200.00 Zichuan gained income subsidy District subsidy (obtaining in line with the law and the regulations of national policy) Subsidy from Taishan Finance R&D industry Bureau of Technical Related to the leading talent Subsidy Yes No 2,000,000.00 Zichuan updating and income project District transformatio subsidy n, etc. Social Financial Due to Subsidy Yes No 306,306.60 insurance Department engaged in 178 Lu Thai Textile Co., Ltd. Annual Report 2016 subsidies and of Shandong, special post subsidies Department industry that of Labour the state and Social encouraged Security of and Related to the Shandong supported, income gained subsidy (obtaining in line with the law and the regulations of national policy) Zibo Subsidy from Science and High-tech R&D technology Industrial Related to the Technical innovation Development Award Yes No 348,000.00 income updating and support Zone transformatio Award Management n, etc. Committee Due to engaged in special industry that Finance the state Bureau of encouraged Shandong ,H and Social uman Related to the supported, security Resources Subsidy Yes No 416,421.00 income gained subsidies and Social subsidy Security (obtaining in Bureau of line with the Shandong law and the regulations of national policy) Due to Funds for engaged in development Finance special of foreign Bureau of Subsidy industry that Yes No 228,200.00 trade and Zibo the state economic encouraged cooperation 179 Lu Thai Textile Co., Ltd. Annual Report 2016 and supported, Related to the gained income subsidy (obtaining in line with the law and the regulations of national policy) Due to engaged in Related to the special income industry that Financial the state Department encouraged of Shandong, and Employment Department supported, Subsidy Yes No 629,620.00 subsidy of Labour gained and Social subsidy Security of (obtaining in Shandong line with the law and the regulations of national policy) Subsidy from R&D Award for Technical Science and CTEI Award Yes No 10,000.00 updating and Technology transformatio n, etc. Related to the income Subsidy from Provincial R&D Related to the Finance key Technical income Bureau of Subsidy Yes No 1,500,000.00 laboratory updating and Zibo grants transformatio n, etc. Social Financial Due to insurance Department Subsidy engaged in Yes No 1,602,937.70 subsidies and of Shandong, special 180 Lu Thai Textile Co., Ltd. Annual Report 2016 post subsidies Department industry that of Labour the state Related to the and Social encouraged income Security of and Shandong supported, gained subsidy (obtaining in line with the law and the regulations of national policy) Due to engaged in special Related to the industry that income the state encouraged Garden, and Finance green land supported, Bureau of Subsidy Yes No 8,070,000.00 upgrade gained Zichuan subsidies subsidy District (obtaining in line with the law and the regulations of national policy) Party Zibo members Municipal Subsidy Yes No 30,000.00 training Committee of subsidies CPC Related to the income Subsidy for Subsidy from independent R&D innovation Finance Technical and Bureau of Subsidy Yes No 1,000,000.00 updating and Related to the achievements Zibo transformatio income transformatio n, etc. n 181 Lu Thai Textile Co., Ltd. Annual Report 2016 The Zibo Subsidy from outstanding High-tech R&D contribution Industrial Technical prize in Development Award Yes No 502,400.00 updating and science and Zone transformatio Related to the technology Management n, etc. income innovation Committee Due to engaged in special industry that the state encouraged Funds for Finance and encouraging Bureau of supported, Subsidy Yes No 422,000.00 foreign trade Zichuan gained Related to the development District subsidy income (obtaining in line with the law and the regulations of national policy) Due to engaged in special industry that the state Funds for encouraged Related to the development Finance and income of center Bureau of supported, Subsidy Yes No 100,000.00 foreign trade Zichuan gained and economic District subsidy cooperation (obtaining in line with the law and the regulations of national policy) Finance Due to Saving Bureau of engaged in Subsidy Yes No 330,000.00 energy funds Zichuan special District industry that 182 Lu Thai Textile Co., Ltd. Annual Report 2016 the state encouraged and supported, Related to the gained income subsidy (obtaining in line with the law and the regulations of national policy) Due to engaged in special industry that the state encouraged Credit Finance and insurance Bureau of supported, Subsidy Yes No 372,024.00 premium Zichuan gained Related to the subsidies District subsidy income (obtaining in line with the law and the regulations of national policy) Subsidy from Related to the R&D income Ministry of Project funds Technical Science and Subsidy Yes No 278,500.00 allowance updating and Technology transformatio n, etc. Subsidy from Related to the R&D income Ministry of Project funds Technical Science and Subsidy Yes No 46,000.00 subsidy updating and Technology transformatio n, etc. Social Career office Subsidy Related to the security of Zichuan Subsidy gained due to Yes No 7,082.10 income subsidy District confirming 183 Lu Thai Textile Co., Ltd. Annual Report 2016 with local government attracting investment and local supportive policy etc. Subsidy from Related to the Science and Finance R&D income technology Bureau of Technical Subsidy Yes No 4,640,000.00 innovation Chuan updating and fund District transformatio n, etc. Award for People's Subsidy from Related to the Science and Government R&D income Technology of Shandong Technical Award Yes No 100,000.00 Province updating and transformatio n, etc. Subsidy from Related to the Science and R&D income People's technology Technical Government Award Yes No 100,000.00 and patent updating and of Zibo City award transformatio n, etc. Subsidy Related to the gained due to income confirming Finance with local Industrial Bureau of government design Subsidy Yes No 400,000.00 Zichuan attracting support funds District investment and local supportive policy etc. Subsidy Related to the gained due to income The industry Finance confirming and Bureau of with local information Subsidy Yes No 100,000.00 Zichuan government industry District attracting support funds investment and local 184 Lu Thai Textile Co., Ltd. Annual Report 2016 supportive policy etc. Due to Related to the engaged in income special industry that Finance the state Bureau of encouraged Zichuan and Import District, supported, discount Subsidy Yes No 30,000.00 Bureau of gained interest funds Commerce of subsidy Zichuan (obtaining in District line with the law and the regulations of national policy) Due to Related to the engaged in income special industry that Finance the state Bureau of encouraged Zichuan and Export credit District, supported, insurance Subsidy Yes No 287,200.00 Bureau of gained premiums Commerce of subsidy Zichuan (obtaining in District line with the law and the regulations of national policy) Due to Related to the engaged in income special Finance Import industry that Bureau of discount Subsidy the state Yes No 70,000.00 Zichuan interest funds encouraged District and supported, gained 185 Lu Thai Textile Co., Ltd. Annual Report 2016 subsidy (obtaining in line with the law and the regulations of national policy) Subsidy Related to the gained due to income Shandong confirming Taishan Provincial with local scholar Party government Subsidy Yes No 300,000.00 construction Committee attracting funds Organization investment Department and local supportive policy etc. Subsidy Related to the Human gained due to income Resources confirming Graduate and Social with local employment Security government Subsidy Yes No 360,000.00 apprentice Bureau of attracting subsidies Zibo, Finance investment Bureau of and local Zibo supportive policy etc. Due to Related to the engaged in income special industry that the state Funds for encouraged development Finance and of center Bureau of supported, Subsidy Yes No 360,446.00 foreign trade Zichuan gained and economic District subsidy cooperation (obtaining in line with the law and the regulations of national policy) 186 Lu Thai Textile Co., Ltd. Annual Report 2016 Human Related to the Resources income and Social Security Subsidy Bureau of gained due to Shandong, confirming Subsidies for Finance with local unemployme Bureau of government Subsidy Yes No 4,214,746.00 nt and stable Shandong, attracting position Development investment and Reform and local Commission supportive of Shandong, policy etc. the Letter Committee of Shandong Subsidy from Related to the R&D income Award for Technical Science and CTEI Award Yes No 50,000.00 updating and Technology transformatio n, etc. Subsidy Related to the gained due to income Subsidies for Finance confirming transferring Department with local Xinjiang of the government cotton to Xinjiang Subsidy Yes No 1,667,800.00 attracting warehouses Uygur investment out of Autonomous and local Xinjiang Region supportive policy etc. Subsidy Related to the gained due to income confirming with local Exhibit Commerce government booths Department Subsidy Yes No 35,500.00 attracting subsidies of Shandong investment and local supportive policy etc. Technicians Human Subsidy Subsidy Yes No 50,000.00 Related to the 187 Lu Thai Textile Co., Ltd. Annual Report 2016 subsidies Resources gained due to income and Social confirming Security with local Bureau of government Zibo, Finance attracting Bureau of investment Zibo and local supportive policy etc. Subsidy Related to the Financial gained due to income Department confirming Social of Shandong, with local insurance Department government Subsidy Yes No 560,028.43 subsidies and of Labour attracting post subsidies and Social investment Security of and local Shandong supportive policy etc. Subsidy from R&D Patent Finance Technical development Bureau of Subsidy Yes No 80,000.00 Related to the updating and income subsidy Zibo transformatio n, etc. Due to engaged in special industry that the state encouraged Related to the and Import credit Finance income supported, insurance Bureau of Subsidy Yes No 45,485.00 gained premiums Zibo subsidy (obtaining in line with the law and the regulations of national policy) Funds for Finance Due to Subsidy Yes No 105,600.00 development Bureau of engaged in 188 Lu Thai Textile Co., Ltd. Annual Report 2016 of foreign Zibo special trade and industry that economic the state cooperation encouraged and supported, Related to the gained income subsidy (obtaining in line with the law and the regulations of national policy) Subsidy from Science and R&D People's technology Technical Government Award Yes No 30,000.00 Related to the and patent updating and income of Zibo City award transformatio n, etc. Subsidy Finance gained due to Bureau of confirming Special funds Zichuan with local for the District, government service Subsidy Yes No 54,600.00 Related to the Bureau of attracting industry income Commerce of investment development Zichuan and local District supportive policy etc. Due to engaged in special Special funds industry that Related to the for the state income development Finance encouraged of center Bureau of Subsidy and Yes No 37,530.00 foreign trade Zibo supported, and economic gained cooperation subsidy (obtaining in line with the law and the 189 Lu Thai Textile Co., Ltd. Annual Report 2016 regulations of national policy) Subsidy from R&D Award for CTEI Award Technical Science and Award Yes No 10,000.00 Related to the Office updating and income Technology transformatio n, etc. Due to engaged in special industry that the state encouraged and Import Department supported, discount of Finance of Subsidy Yes No 80,000.00 gained Related to the interest funds Shandong subsidy income (obtaining in line with the law and the regulations of national policy) Subsidy gained due to confirming Economic Energy with local and management government Information Award Yes No 2,880,000.00 Related to the financial attracting Commission income reward investment of Shandong and local supportive policy etc. Due to Zibo engaged in Related to the Environment special income Fund for the al Protection industry that control of air Subsidy Yes No 1,830,000.00 Agency, the state pollution Zichuan encouraged Branch and supported, 190 Lu Thai Textile Co., Ltd. Annual Report 2016 gained subsidy (obtaining in line with the law and the regulations of national policy) The Letter Subsidy Committee of gained due to the Xinjiang confirming Uygur with local Autonomous government Region, attracting Development investment and Reform and local Commission supportive Electricity of policy etc. Finance Autonomous Subsidy Yes No 925,204.72 subsidies Region, Related to the Finance income Department of Autonomous Region, Chinese power company in Xinjiang Subsidy Subsidies for gained due to Finance transferring confirming Department Xinjiang with local of the cotton yarn government Xinjiang Subsidy Yes No 4,351,400.00 Related to the to attracting Uygur income warehouses investment Autonomous out of and local Region Xinjiang supportive policy etc. Cotton Finance Subsidy production Department gained due to Subsidy Yes No 4,472,200.00 subsidies and of Xinjiang confirming discounts of Uygur with local 191 Lu Thai Textile Co., Ltd. Annual Report 2016 Xinjiang Autonomous government Uygur Region, the attracting Related to the Autonomous Letter investment income Region Commission and local of supportive Autonomous policy etc. Region Subsidy gained due to Finance confirming Department with local Social of the government security Xinjiang Subsidy Yes No 3,412,264.53 Related to the attracting subsidy Uygur income investment Autonomous and local Region supportive policy etc. Subsidy gained due to Subsidies for Finance confirming transferring Department with local Xinjiang of the government cotton to Xinjiang Subsidy Yes No 4,833,500.00 Related to the attracting warehouses Uygur income investment out of Autonomous and local Xinjiang Region supportive policy etc. Subsidy gained due to Finance confirming Department with local Social of the government security Xinjiang Subsidy Yes No 345,790.00 Related to the attracting subsidy Uygur income investment Autonomous and local Region supportive policy etc. Subsidy The county gained due to Related to the Finance government confirming income Subsidy Yes No 517,000.00 subsidies office of Pupi with local Avati government attracting 192 Lu Thai Textile Co., Ltd. Annual Report 2016 investment and local supportive policy etc. Akesu Subsidy Prefecture gained due to Bureau of confirming Finance, with local Office of government Financial Poverty Subsidy attracting Yes No 262,500.00 Discounts Related to the Alleviation investment income and and local Development supportive of Akesu policy etc. Prefecture Akesu Subsidy Prefecture gained due to Bureau of confirming Finance, with local Office of government Financial Poverty Subsidy attracting Yes No 150,000.00 Discounts Related to the Alleviation investment income and and local Development supportive of Akesu policy etc. Prefecture Human Subsidy Resources gained due to and Social confirming Security with local Labor Bureau of government training Akesu Subsidy attracting Yes No 162,305.00 Related to the subsidy Prefecture, investment income Akesu and local Prefecture supportive Bureau of policy etc. Finance Finance Subsidy Subsidies for Department gained due to Related to the growing of the confirming income Subsidy Yes No 25,158.10 superior grain Xinjiang with local cultivators Uygur government Autonomous attracting 193 Lu Thai Textile Co., Ltd. Annual Report 2016 Region investment and local supportive policy etc. Subsidy gained due to confirming with local Deferred government revenue Yes No 2,468,765.59 2,272,524.55 Related to the attracting amortization assets investment and local supportive policy etc. 64,121,633.0 43,266,788.4 Total -- -- -- -- -- -- 1 3 53. Non-operating expenses Unit: RMB Recorded in the amount of the Item Reporting Period Last period non-recurring gains and losses Loss on disposal of non-current 9,895,526.12 5,625,603.48 9,895,526.12 assets Including: Loss on disposal of 9,895,526.12 5,625,603.48 9,895,526.12 fixed assets Donation 1,558,693.43 2,758,673.04 1,558,693.43 Other 4,073,800.31 1,784,290.98 4,073,800.31 Total 15,528,019.86 10,168,567.50 15,528,019.86 54. Income tax expense (1) Lists of income tax expense Unit: RMB Item Reporting Period Last period Current income tax expense 173,187,708.38 159,937,653.51 Deferred income tax expense -912,305.58 -12,031,663.36 Total 172,275,402.80 147,905,990.15 194 Lu Thai Textile Co., Ltd. Annual Report 2016 (2) Adjustment process of accounting profit and income tax expense Unit: RMB Item Reporting Period Total profits 1,025,348,852.92 Current income tax expense accounted by tax and relevant 153,802,327.94 regulations Influence of different tax rate suitable to subsidiary 27,934,030.42 Influence of income tax before adjustment -777,150.65 Influence of non-taxable income -2,429,503.02 Influence of not deductable costs, expenses and losses 2,301,526.59 Influence of deductable losses of deferred income tax assets -766,575.46 derecognized used in previous period Influence of deductible temporary difference or deductible losses 7,777,339.87 of deferred income tax assets derecognized in Reporting Period. Influence of plus deducting costs -15,566,592.89 Income tax expense 172,275,402.80 55. Other comprehensive income Refer to the notes VII 41. 56. Supplementary information to cash flow statement (1) Other cash received relevant to operating activities Unit: RMB Item Reporting Period Last period Government subsidies 62,996,866.30 72,371,505.78 Claim income 2,439,371.55 2,044,561.45 Penalty income 87,029.48 53,787.00 Recovery of employee borrowings, petty 8,734,686.33 14,889,234.89 cash and deposit Collection for employees 18,969,901.19 419,975.80 Other 8,896,928.14 5,715,940.06 Total 102,124,782.99 95,495,004.98 195 Lu Thai Textile Co., Ltd. Annual Report 2016 (2) Other cash paid relevant to operating activities Unit: RMB Item Reporting Period Last period Freight and miscellaneous charges 53,789,783.05 52,801,900.32 Rental charges and management expenses 8,619,547.41 19,063,808.42 of the shops Rental charges 23,992,282.87 24,130,924.34 Advertising expense 4,894,117.88 8,107,292.05 Business travel charges 26,286,801.25 10,863,337.81 Insurance 9,153,888.03 9,069,684.52 Copyright royalty 796,432.28 2,893,772.65 Audit advisory announcement fee 5,190,501.86 3,730,447.16 Decoration & repair expenses 6,068,058.70 1,919,818.88 Donation 1,558,693.43 2,758,673.04 Pre-payment 7,752,260.57 1,033,475.80 Other 85,444,042.15 99,108,100.67 Total 233,546,409.48 235,481,235.66 (3) Other cash received relevant to investment activity Unit: RMB Item Reporting Period Last period Interest income 6,520,645.21 4,458,340.84 Income from forward foreign exchange 37,908,044.40 Sale of securities 24,602,898.61 7,196,971.33 Income from holding of tradable financial 1,381,926.82 373,901.27 assets during holding period Option cost 1,003,700.00 Total 32,505,470.64 50,940,957.84 (4) Other cash paid relevant to investment activity Unit: RMB Item Reporting Period Last period Purchase of securities 117,355,791.90 forward settlement exchange loss 41,519,234.00 196 Lu Thai Textile Co., Ltd. Annual Report 2016 Total 41,519,234.00 117,355,791.90 (5) Other cash received relevant to financing activities Unit: RMB Item Reporting Period Last period Return of loan guarantees 29,754,422.42 77,262,230.00 Total 29,754,422.42 77,262,230.00 (6) Other cash paid relevant to financing activities Unit: RMB Item Reporting Period Last period Return of the B-share buy-back amount 253,629,544.91 32,244,864.33 The certificates of deposit pledged 8,000,000.00 91,016,652.42 Power bonds payable 220,000.00 Total 261,629,544.91 123,481,516.75 57. Supplementary information to cash flow statement (1) Information of net profit to net cash flows generated from operating activities Unit: RMB Supplementary materials Reporting Period Last period 1. Reconciliation of net profit to net cash -- -- flows generated from operating activities Net profit 853,073,450.12 735,543,028.77 Add: Provision for impairment of assets 88,833,415.21 27,297,445.74 Depreciation of fixed assets, of oil-gas 360,285,420.37 355,945,695.90 assets, of productive biological assets Amortization of intangible assets 12,302,441.42 12,242,543.28 Long-term unamortized expenses 2,627,785.85 2,036,355.90 Losses on disposal of fixed assets, intangible assets and other long-term assets (gains: 6,843,361.94 3,501,007.84 negative) Losses on retirement of fixed assets 1,478,331.55 1,165,149.72 Losses from variation of fair value -63,992,131.36 60,685,931.36 Financial cost (gains: negative) 13,702,551.80 9,610,831.22 197 Lu Thai Textile Co., Ltd. Annual Report 2016 Investment loss (gains: negative) 60,779,660.20 -31,540,015.51 Decrease in deferred income tax assets -1,060,701.10 -12,159,644.69 (gains: negative) Increase in deferred income tax liabilities 148,395.52 127,981.33 (“-” means decrease) Decrease in inventory (gains: negative) -93,066,329.64 4,872,209.46 Decrease in accounts receivable from 30,104,833.69 -103,447,655.41 operating activities (gains: negative) Increase in payables from operating 38,704,795.71 -38,285,460.57 activities (decrease: negative) Net cash flows generated from operating 1,310,765,281.28 1,027,595,404.34 activities 2. Investing and financing activities that do -- -- not involving cash receipts and payment: 3. Net increase in cash and cash equivalents -- -- Closing balance of cash 654,779,220.82 765,695,473.65 Less: Opening balance of cash 765,695,473.65 649,393,798.30 Net increase in cash and cash equivalents -110,916,252.83 116,301,675.35 (2) Cash and cash equivalents Unit: RMB Item Closing balance Opening balance I. Cash 654,779,220.82 765,695,473.65 Including: Cash on hand 3,216,250.69 2,111,348.02 Bank deposit on demand 651,562,970.13 742,998,281.72 Other monetary funds on demand 20,585,843.91 III. Closing balance of cash and cash 654,779,220.82 765,695,473.65 equivalents 58. The assets with the ownership or use right restricted Unit: RMB Item Closing book value Restricted reason Monetary capital 8,188,564.67 Short term loan pledged, guarantee deposit Inventory 12,000,000.00 Fixed assets 30,265,483.04 198 Lu Thai Textile Co., Ltd. Annual Report 2016 Intangible assets 31,030,064.48 Short-term loan pledged Total 81,484,112.19 -- 59. Foreign currency monetary items (1) Foreign currency monetary items Unit: RMB Closing foreign currency Closing convert to RMB Item Exchange rate balance balance Including: USD 33,583,650.02 6.9370 232,969,780.21 EUR 193,087.08 7.3068 1,410,848.80 HKD 53,004,010.61 0.8945 47,412,087.49 JPY 114,165.00 0.0596 6,804.24 THB 120.19 0.194 23.32 SGD 91.90 4.7995 441.07 GBP 850.36 8.5094 7,236.06 AUD 2,821.03 5.0157 14,149.44 CHF 690.09 6.7989 4,691.74 SEK 920.00 0.7624 701.41 MMK 52,936,512.00 0.005082 269,026.16 Dong 43,009,069,142.00 0.000305 13,117,766.09 TWD 30,100.00 0.216 6,501.60 Notes receivable: Including: USD 10,364,452.35 6.9370 71,898,206.01 Accounts receivable: Including: USD 26,686,287.68 6.9370 185,122,777.73 HKD 16,623,335.00 0.8945 14,869,573.16 Dong 5,385,753,905.00 0.000305 1,642,654.94 Other receivables: Including: USD 767,118.30 6.9370 5,321,499.64 EUR 2,800.00 7.3068 20,459.04 Dong 925,545,248.00 0.000305 282,291.30 Other current assets: Including: HKD 73,748,568.00 0.8945 65,968,094.08 Accounts payable: 199 Lu Thai Textile Co., Ltd. Annual Report 2016 Including: USD 2,749,045.90 6.9370 19,070,131.40 JPY 146,456,990.00 0.0596 8,728,836.60 EUR 210,203.58 7.3068 1,535,915.52 Swiss Franc 79,852.00 6.7989 542,905.76 Dong 57,001,248,360.74 0.000305 17,385,380.75 Other accounts payable: Including: USD 591,886.43 6.9370 4,105,916.14 HKD 28,000.00 0.8945 25,046.00 Dong 509,849,978.00 0.000305 155,504.25 Short-term loans: Including: USD 77,000,215.09 6.9370 534,150,492.04 EUR 3,799,990.38 7.3068 27,765,769.71 JPY 22,577,085.00 0.0596 1,345,594.27 Long-term loans: Including: USD 9,511,184.18 6.9370 65,979,084.68 EUR 5,542,857.80 7.3068 40,500,553.37 JPY 489,906,155.00 0.0596 29,198,406.84 (2) Note to oversea entities including: for significant oversea entities, shall disclose main operating place, recording currency and selection basis, if there are changes into recording currency, shall also disclose the reason. √ Applicable □ Not applicable The operating places of Company’s subsidiaries Lu Thai (Hong Kong), Lu Thai (Cambodia), Lu Thai (Burma) Co., Ltd. (hereinafter referred to as “Lu Thai (Burma)”) Lu Thai (America) Co., Ltd.( Hereinafter referred to as “Lu Thai (America)”) and Lu Thai (Vietnam) Co., Ltd. , Lu An Garments Co., Ltd. were Hong Kong, Cambodia, Burma, America, Vietnam, Vietnam, and the recording currency respectively was HKD, USD, USD, USD , Dong and Dong. VIII. Changes of merge scope 1. Other reasons for the changes in combination scope Note to reasons for the changes in combination scope (Newly established subsidiary and subsidiary of liquidation) and relevant information: The Company newly set up subsidiary, Lu An Garments Co., Ltd., writes off subsidiary of Beijing Lufeng Sunshine Garments Co., Ltd. 200 Lu Thai Textile Co., Ltd. Annual Report 2016 IX. Equity in other entities 1. Equity in subsidiary (1) The structure of the enterprise group Name of the Main operating Nature of Holding percentage (%) Registration place Way of gaining subsidiary place business Directly Indirectly Beijing Wholesale and Beijing Beijing 60.00% Set-up Innovative retail industry Luthai (Hong Wholesale and Hong Kong Hong Kong 100.00% Set-up Kong) retail industry Wholesale and Shanghai Luthai Shanghai Shanghai 100.00% Set-up retail industry Business Manufacturing combination not Xinjiang Luthai Xinjiang Xinjiang 59.92% industry under the same control Lufeng Weaving Manufacturing Zibo Zibo 75.00% Set-up & Dyeing industry Manufacturing Luqun Textile Zibo Zibo 100.00% Set-up industry Business Manufacturing combination not Xinsheng Power Zibo Zibo 100.00% industry under the same control Xinjiang Luthai Manufacturing Textile Xinjiang Xinjiang 100.00% Set-up industry (sub-subsidiary) Business Helijie combination not Zibo Zibo Service 100.00% (sub-subsidiary) under the same control Wholesale and Beijing Youxian Beijing Beijing 90.00% Set-up retail industry Lu Thai Manufacturing Cambodia Cambodia 100.00% Set-up (Cambodia) industry Manufacturing Lu Thai (Burma) Burma Burma 100.00% Set-up industry Lu Thai America America Wholesale and 100.00% Set-up 201 Lu Thai Textile Co., Ltd. Annual Report 2016 (America) retail industry Lu Tha Manufacturing Vietnam Vietnam 100.00% Set-up i(Vietnam) industry Manufacturing Lu An Garments Vietnam Vietnam 100.00% Set-up industry (2) Significant not wholly owned subsidiary Unit: RMB The profits and losses Declaring dividends Balance of minority Shareholding proportion Name of the subsidiary arbitrate to the minority distribute to minority shareholder at closing of minority shareholder shareholders shareholder period Xinjiang Luthai 40.08% 24,671,169.03 12,023,566.38 191,570,087.42 Lufeng Weaving & 25.00% 34,245,144.24 323,877,715.79 Dyeing (3) The main financial information of significant not wholly owned subsidiary Unit: RMB Name of Closing balance Opening balance the Non-curr Non-curr Non-curr Non-curr current Total Current Total current Total Current Total subsidiar ent ent ent ent assets assets liabilities liabilities assets assets liabilities liabilities y assets liability assets liability Xinjiang 528,219, 350,642, 878,862, 402,356, 5,428,01 407,784, 441,261, 327,696, 768,958, 323,538, 5,897,44 329,435, Luthai 890.20 671.38 561.58 617.55 8.92 636.47 937.21 846.84 784.05 224.44 7.45 671.89 Lufeng Weaving 592,276, 843,971, 1,436,24 111,025, 29,711,1 140,737, 497,062, 887,529, 1,384,59 195,671, 30,390,2 226,061, & 639.42 262.60 7,902.02 894.92 43.90 038.82 573.74 106.38 1,680.12 138.17 55.70 393.87 Dyeing Unit: RMB Reporting Period Last period Name of the Total Total Operation Operating Operation Operating subsidiary Net profit comprehensi Net profit comprehensi revenue cash flow revenue cash flow ve income ve income Xinjiang 440,825,035. 61,554,812.9 61,554,812.9 17,047,373.8 569,106,231. 59,351,295.4 59,351,295.4 159,852,668. Luthai 33 5 5 0 16 8 8 02 Lufeng 1,607,276,25 136,980,576. 136,980,576. 104,830,712. 1,450,422,62 53,241,582.8 53,241,582.8 24,216,809.3 Weaving & 7.49 95 95 63 5.91 3 3 2 Dyeing 202 Lu Thai Textile Co., Ltd. Annual Report 2016 X. The risk related financial instruments Main financial instruments of the Company included: Loans, accounts receivable, accounts payable, etc., all the details of the financial instruments, see related projects of “Section VI”. The risk associated with these financial instruments, as well as the Company’s risk management policy to reduce these risks which were described below. The Company's management managed and supervised these risks to ensure that the above risk was controlled in a limited scope. The Company use sensitivity analysis technology to analyze the reasonable of risk variables, influence of probable changes to the current profits and Stockholders' equity. Because rarely any risk variables change in isolation, and the correlation between variables for the eventual impact of the change of a risk variables will have a significant effect, thus, the aforesaid content was processing under the assumption of the change of each variable was conducted independently. Risk management objectives and policies The goals of Company engaged in the risk management is to achieve the proper balance between the risks and benefits, reduced the negative impact to the Company operating performance risk to a minimum, maximized the profits of shareholders and other equity investors. Based on the risk management goal, the basic strategy of the Company's risk management is determine and analyze the various risks faced by the Company, set up the bottom line of risk and conducted appropriate risk management, and timely supervised various risks in a reliable way and controlled the risk within the range of limit. 1. Market risk (1) Foreign exchange risk Foreign exchange risk is referred to the risk incurred due to loss of changes in exchange rate. Foreign exchange risk is referred to the risk incurred due to loss of changes in exchange rate. The Company’s foreign exchange risk was mainly related to USD, HKD and EUR, excepting the Company’s several subsidiaries purchase and sale, in USD, HKD and Dong, the other main business settled by RMB. On 31 Dec. 2016, in addition to the following assets or liabilities in statement was USD, HKD and EUR, the Company’s assets or liabilities was RMB balance. The foreign exchange risk incurred by assets and liabilities of foreign balance may have impact to the operation results of the Company. Item Closing amount Opening amount Cash and cash equivalents 295,220,057.63 359,365,961.61 Notes receivable 71,898,206.01 101,533,594.19 Account receivable 201,635,005.83 198,486,967.97 Other accounts receivable 5,624,249.98 21,499,240.95 Other current assets 65,968,094.08 Accounts payable 47,263,170.03 20,029,203.14 Other accounts payable 4,286,466.39 3,773,841.47 Short-term borrowings 563,261,856.02 572,766,318.90 203 Lu Thai Textile Co., Ltd. Annual Report 2016 Long-term borrowings 135,678,044.89 Sensitive analysis of foreign exchange risk: Base on the foreign currency monetary assets and liabilities, and ignoring other factors, influence of change of exchange rate to current profits and losses and equity of shareholders was followed: Change Reporting Period Last period Influence to the Influence to equity of Influence to the profits Influence to equity of profits shareholders shareholders Up 10% against RMB 14,763,070.22 14,763,070.22 -6,138,055.73 -6,138,055.73 Down 10% against RMB -14,763,070.22 -14,763,070.22 6,138,055.73 6,138,055.73 (2) Interest rate risk The risk of cash flow changes of financial instruments due to change of interest rate mainly was related bank loan (for details, see Section VII 24, 34). Sensitive analysis of interest rate risk: Influence of interest increasing 100 BP to current profits and losses and equity of shareholders before tax was followed: Change Reporting Period Last period Influence to the profits Influence to equity of Influence to the profits Influence to equity of shareholders shareholders Increase 100 BP -7,634,051.31 -6,516,890.66 -7,394,269.19 -6,682,600.60 Decrease 100 BP 7,634,051.31 6,516,890.66 7,394,269.19 6,682,600.60 2 Credit risk On 31 Dec. 2016, credit risk what may lead to the financial losses was the other party of the contract failed to fulfill the obligations and causes loss of the Company’s financial assets, which including: book value of financial assets recognized in consolidated balance sheet. In order to reduce the credit risk, the Company established a special team be responsible for the determination of credit limit to conduct credit approval, and perform other supervising procedures to ensure that taking necessary measures to recycle expired claims. In addition, the Company at each balance sheet date, review every single receivables recycling situation, to ensure that the money unable to recycle withdrawn provision for bad debt fully. Thus, the Company management believed that have assume the credit risk the Company shouldered had been greatly reduced. The Company's working capital was in bank with higher credit rating, so credit risk of working capital was low. 3. Liquidity Risk When manage liquidity risk, the Company keep administrators deemed sufficient cash and cash equivalents and supervised it to meet the need of the operation of the Company and reduce the influence of cash flow volatility. The Company management supervised the usage of bank loan and ensured to comply with the loan agreement. In the end of Reporting Period, the Company held cash and bank deposit of RMB 663 million. In recent two years, the average of net cash flow of operation activities was RMB 1.169 billion. The 204 Lu Thai Textile Co., Ltd. Annual Report 2016 Company believed that the liquidity risk was insignificant. XI. Related party and related Transaction 1. Information related to parent company of the Company Proportion of voting Proportion of share rights owned by Name of parent held by parent Registration place Nature of business Registered capital parent company company company against the against the Company Company (%) (%) Zibo Lucheng Textile, electrical Textile Investment Zibo power and 63,260,000 14.69% 14.69% Co., Ltd. investment Notes: Information on the parent company: The finial control of the Company was Mr. Liu Zibin and Mr. Liu Deming. Notes: 2. Subsidiaries of the Company See details to Notes IX. 1. Equity in subsidiary. 3. Information on other related parties of the Company Name Relationship Zibo Stanluian Cosmetics Co., Ltd. (hereinafter called Affiliated person (the same chairman of the Board with the “Stanluian”) Company) Zibo Taimei Ties Co., Ltd. (hereinafter called Taimei Ties) Controlled subsidiary of the parent company Zibo Limin Purified Water Co., Ltd. (hereinafter called Limin Wholly-owned subsidiary of the parent company Purified Water) Zibo Luqun Land Co., Ltd (hereinafter called Luqun Land) Wholly-owned subsidiary of the parent company Chengshun Heating Controlled subsidiary of the parent company Zibo Lurui Fine Chemical Co., Ltd. (hereinafter referred to as Controlled subsidiary of the parent company Lurui Chemical) Zibo Lujia Property Management Co. , Ltd. (hereinafter referred Wholly-owned subsidiary of the parent company to as Lujia Property) Shandong Chengshun Petrochemical Co., Ltd. (hereinafter Wholly-owned subsidiary of the parent company referred to as Chengshun Petrochemical) 205 Lu Thai Textile Co., Ltd. Annual Report 2016 4. List of related-party transactions (1) Information on acquisition of goods and reception of labor service (unit: ten thousand Yuan) Information on acquisition of goods and reception of labor service (unit: ten thousand Yuan) Unit: RMB The approval trade Whether exceed trade Related-party Content Reporting Period Last period credit credit or not Towel, sock, oil product, supermarket retail, welfare, electronic Zibo Lucheng products, computer Textile Investment 12,157,996.07 14,250,000.00 No 10,664,706.25 equipment, Co., Ltd. computer supplies, paper core, hose processing fees, etc. Gift box for cosmetic, lotion, Stanluian Company 166,565.07 washing-up liquid, Liquid soap, etc. Goods processing No Taimei Ties 922,555.61 1,080,000.00 989,608.31 fee Limin Purified Sewage treatment, No 19,438,805.23 21,500,000.00 9,152,198.70 Water materials Chengshun Gas 742,901.39 Petrochemical Lurui Fine No Auxiliaries 81,933,412.13 100,000,000.00 71,967,937.29 Chemical Information of sales of goods and provision of labor service Unit: RMB Related-party Content Reporting Period Last period Sales of materials, clothing Lucheng Textile 1,163,940.37 902,131.95 materials Sales of electricity, heating Taimei Ties 20,180.03 19,820.34 charges Sales of materials, electricity, Stanluian Company running water, heating 36,152.79 35,778.98 charges, and LED lamp 206 Lu Thai Textile Co., Ltd. Annual Report 2016 Sales of materials, garment, Limin Purified Water 4,913.20 29,816.47 and LED lamp Sales of garments, equipment, Lurui Fine Chemical LED lamp, fabric, auxiliaries 579,514.02 967,389.83 and lunch components Sales of materials, power, hot water, running water, Low Chengshun Heating 6,513,331.59 5,129,186.09 temperature hot water, pipe flushing fee and garment Sales of materials and Lujia Property 43,831.55 92,734.28 recycled water (2) Information of related lease The Company was lessor: Unit: RMB The lease income confirmed in The lease income confirmed in Name of lessee Category of leased assets this year last year Zibo Lucheng Textile Houses and buildings 292,836.83 390,400.00 Investment Co., Ltd. Chengshun Heating Houses and buildings 4,091.82 The Company was lessee: Unit: RMB The lease income confirmed in lessor Category of leased assets Category of leased assets this year Zibo Lucheng Textile Rent of gas station 4,185,180.96 4,522,400.00 Investment Co., Ltd. Zibo Lucheng Textile Rent of land and buildings 12,404,419.08 12,614,400.00 Investment Co., Ltd. Luqun Property Rent of land and buildings 4,017,523.76 1,802,400.00 (3) Rewards for the key management personnel Unit: RMB Item Reporting Period Last period Rewards for the key management 24,486,346.18 22,455,700.00 personnel 207 Lu Thai Textile Co., Ltd. Annual Report 2016 5. Receivables and payables of related parties (1) Payables Unit: RMB Name of item Related-party Closing book balance Opening book balance Accounts payable Zibo Lucheng Textile 131,696.00 Investment Co., Ltd Taimei Ties 790,533.58 XII. Commitments and contingency 1. Significant commitments Significant commitments at balance sheet date Capital commitments Item Closing balance (RMB Ten Opening balance (RMB Ten thousand Yuan) thousand Yuan) Commitments signed but hasn’t been recognized in financial statements -- Commitment for constructing and purchasing 20,581.71 5,524.91 long-term assets Total 20,581.71 5,524.91 2. Contingency (1) Significant contingency at balance sheet date As of 31 Dec. 2016, there was no significant contingency to be disclosed. (2) The Company have no significant contingency to disclose, also should be stated There was no significant contingency in the Company. 208 Lu Thai Textile Co., Ltd. Annual Report 2016 3. Other XIII. Events after balance sheet date 1. Profit distribution Unit: RMB Profits or dividends planned for distribution 461,301,155.50 Profits or dividends declared for distribution upon review and 461,301,155.50 approval IX. Notes of main items in the financial statements of the Company 1. Accounts receivable (1) Accounts receivable classified by category Unit: RMB Closing balance Opening balance Book balance Bad debt provision Book balance Bad debt provision Category Withdra Book Proportio wal Proportio Withdrawal Book value Amount Amount value Amount Amount n proportio n proportion n Accounts receivable with insignificant single amount for 102,459, 102,459, 120,361 72,592,94 47,768,135. 24.68% 100.00% 0.00 37.90% 60.31% which bad debt 665.95 665.95 ,083.64 7.77 87 provision separately accrued Accounts receivable withdrawal of bad 312,659, 15,633,2 297,026,1 197,230 9,869,969 187,360,31 debt provision of by 75.32% 5.00% 62.10% 5.00% 373.66 63.33 10.33 ,287.58 .51 8.07 credit risks characteristics: 415,119, 118,092, 297,026,1 317,591 82,462,91 235,128,45 Total 100.00% 28.45% 100.00% 25.97% 039.61 929.28 10.33 ,371.22 7.28 3.94 Accounts receivable with significant single amount for which bad debt provision separately accrued at the period-end √ Applicable □ Not applicable Unit: RMB 209 Lu Thai Textile Co., Ltd. Annual Report 2016 Accounts receivable Closing balance (entity) Account receivable Bad debt provision Withdrawal proportion Withdrawal reason Due to the losses of the Company’s subsidiary Beijing Innovative 102,459,665.95 102,459,665.95 100.00% Beijing Innovative, the amount of net asset was negative. Total 102,459,665.95 102,459,665.95 -- -- In the groups, accounts receivable adopting aging analysis method to withdraw bad debt provision: √ Applicable □ Not applicable Unit: RMB Closing balance Aging Account receivable Bad debt provision Withdrawal proportion Subentry within 1 year Within 1 year 312,653,480.66 15,632,674.03 5.00% Subtotal of within 1 year 312,653,480.66 15,632,674.03 5.00% 1 to 2 years 5,893.00 589.30 10.00% Total 312,659,373.66 15,633,263.33 5.00% Notes: In the groups, accounts receivable adopting balance percentage method to withdraw bad debt provision: □ Applicable √ Not applicable In the groups, accounts receivable adopting other methods to withdraw bad debt provision: (2) Bad debt provision withdrawal, reversed or recovered in the Reporting Period The withdrawal amount of the bad debt provision during the Reporting Period was of RMB 35,630,012.00; the amount of the reversed or collected part during the Reporting Period was of RMB 0.00. (3) Top five of account receivable of closing balance collected by arrears party The total amount of top five of account receivable of closing balance collected by arrears party was RMB 223,769,751.98, 53.90% of total closing balance of account receivable, the relevant closing balance of bad debt provision withdrawn was RMB 108,525,170.25. 2. Other accounts receivable (1) Other account receivable classified by category Unit: RMB Category Closing balance Opening balance 210 Lu Thai Textile Co., Ltd. Annual Report 2016 Book balance Bad debt provision Book balance Bad debt provision Withdra Book Proportio wal Proportio Withdrawal Book value Amount Amount value Amount Amount n proportio n proportion n Other accounts receivable with significant single 317,675, 317,675,1 amount for which 92.64% 160.04 60.04 bad debt provision separately accrued at the period-end Other accounts receivable withdrawn 25,228,9 2,445,92 22,783,04 36,565, 3,024,839 33,540,540. bad debt provision 7.36% 9.69% 100.00% 8.27% 72.17 4.01 8.16 379.68 .14 54 according to credit risks characteristics 342,904, 2,445,92 340,458,2 36,565, 3,024,839 33,540,540. Total 100.00% 0.71% 100.00% 8.27% 132.21 4.01 08.20 379.68 .14 54 Other accounts receivable with significant single amount for which bad debt provision separately accrued at the period-end √ Applicable □ Not applicable Unit: RMB Closing balance Other accounts Other accounts receivable(refer to unit) Bad debt provision Ratio % Reason receivable no impairment of the Lu Thai (Vietnam) 247,916,427.83 individual test no impairment of the Lu An Garments 69,758,732.21 individual test Total 317,675,160.04 -- -- In the groups, other accounts receivable adopting aging analysis method to withdraw bad debt provision: √ Applicable □ Not applicable Unit: RMB Closing balance Aging Other accounts receivable Bad debt provision Withdrawal proportion Subentry within 1 year Within 1 year 19,988,903.59 999,445.17 5.00% Subtotal of within 1 year 19,988,903.59 999,445.17 5.00% 1 to 2 years 527,026.97 52,702.70 10.00% 211 Lu Thai Textile Co., Ltd. Annual Report 2016 2 to 3 years 201,363.50 40,272.70 20.00% Over 3 years 4,511,678.11 1,353,503.44 30.00% Total 25,228,972.17 2,445,924.01 9.69% Notes: In the groups, other accounts receivable adopting balance percentage method to withdraw bad debt provision □ Applicable √ Not applicable In the groups, other accounts receivable adopting other methods to withdraw bad debt provision: □ Applicable √ Not applicable (2) Bad debt provision withdrawal, reversed or recovered in the Reporting Period The withdrawal amount of the bad debt provision during the Reporting Period was of RMB -577,175.13; the amount of the reversed or collected part during the Reporting Period was of RMB000. (3) Particulars of the actual verification of other accounts receivable during the Reporting Period Unit: RMB Item Amount Other accounts receivable during the Reporting Period 4,175,136.88 (4) Other account receivable classified by account nature Unit: RMB Nature Closing book balance Opening book balance Intercourse funds 317,675,160.04 4,175,136.88 Export rebates 7,802,287.09 16,073,852.13 Payment on behalf 13,285,751.37 11,217,554.27 The deposit and guarantee 442,488.00 2,427,649.51 Borrowings and deposit 1,013,029.29 757,574.35 Other 2,685,416.42 1,913,612.54 Total 342,904,132.21 36,565,379.68 (5) Top 5 of the closing balance of the other accounts receivable collected according to the arrears party Unit: RMB Closing balance of Name of the entity Nature Closing balance Aging Proportion% bad debt provision Lu Thai (Cambodia) Intercourse funds 247,916,427.83 Within 1 year 72.30% 212 Lu Thai Textile Co., Ltd. Annual Report 2016 Lu An Garments Intercourse funds 69,758,732.21 Within 1 year 20.34% Refund of tax for Export rebates 7,802,287.09 2.28% 390,114.35 export receivable Within 1 year Accounts receivable Advance money for of advance money for the social security the social security Within 1 year undertake by the 6,766,009.07 1.97% 338,300.45 undertake by the individual of the individual of the employee employee Pre-paid heating Within 1 year Pre-paid 2,122,894.75 0.62% 106,144.74 charges Total -- 334,366,350.95 -- 97.51% 834,559.54 3. Long-term equity investment Unit: RMB Closing balance Opening balance Item Depreciation Depreciation Book balance Book value Book balance Book value reserves reserves Investment to the 1,736,221,866.04 25,200,000.00 1,711,021,866.04 1,613,379,740.04 35,675,000.00 1,577,704,740.04 subsidiary Total 1,736,221,866.04 25,200,000.00 1,711,021,866.04 1,613,379,740.04 35,675,000.00 1,577,704,740.04 (1) Investment to the subsidiary Unit: RMB Withdrawn Closing balance impairment Investee Opening balance Increase Decrease Closing balance of impairment provision in the provision Reporting Period Beijing Innovative 25,200,000.00 25,200,000.00 25,200,000.00 Xinjiang Luthai 147,303,034.16 147,303,034.16 Xinsheng Power 176,340,737.93 176,340,737.93 Lufeng Weaving & 529,620,000.00 529,620,000.00 Dyeing Luqun Textile 171,784,550.00 171,784,550.00 Luthai (Hong 128,771,800.00 128,771,800.00 Kong) Lufeng Sunshine 15,000,000.00 15,000,000.00 213 Lu Thai Textile Co., Ltd. Annual Report 2016 Shanghai Luthai 20,000,000.00 20,000,000.00 Lu Thai 108,223,964.38 18,371.00 108,242,335.38 (Cambodia) Lu Thai (America) 6,774,300.00 6,774,300.00 Lu Thai(Burma) 62,327,753.57 9,485.00 62,337,238.57 Beijing Youxian 9,000,000.00 9,000,000.00 Lu Thai (Vietnam) 213,033,600.00 105,001,210.00 318,034,810.00 Lu An Garments 32,813,060.00 32,813,060.00 Total 1,613,379,740.04 137,842,126.00 15,000,000.00 1,736,221,866.04 25,200,000.00 4. Revenues and operating costs Unit: RMB Reporting Period Last period Item Revenue Operating costs Revenue Operating costs Main operations 4,807,878,511.56 3,378,032,986.90 4,760,669,805.94 3,504,388,812.66 Other operations 270,969,055.54 226,114,678.98 183,360,368.55 144,071,749.25 Total 5,078,847,567.10 3,604,147,665.88 4,944,030,174.49 3,648,460,561.91 5. Investment income Unit: RMB Item Reporting Period Last period Long-term equity investment income accounted by cost method 55,179,470.68 217,976,429.21 Investment income from disposal of long-term equity investment -199,507.76 Investment income received from disposal of financial assets measured by fair value and the changes be included in the current profits and losses during holding -33,807,314.00 33,986,744.40 period Total 21,172,648.92 251,963,173.61 XV. Supplementary materials 1. Items and amounts of extraordinary gains and losses √ Applicable □ Not applicable Unit: RMB Item Amount Explanation Gains/losses on the disposal of non-current -8,321,693.49 214 Lu Thai Textile Co., Ltd. Annual Report 2016 assets Tax rebates, reductions or exemptions due to approval beyond authority or the lack of 64,121,633.01 official approval documents Gain/loss from change of fair value of transactional assets and liabilities, and investment gains from disposal of transactional financial assets and liabilities 3,212,471.16 and available-for-sale financial assets, other than valid hedging related to the Company’s common businesses Other non-operating income and expenses 3,926,191.60 other than the above Less: Income tax effects 3,065,724.25 Minority interests effects 13,897,676.16 Total 45,975,201.87 -- Explain the reasons if the Company classifies an item as an extraordinary gain/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Extraordinary Gains and Losses, or classifies any extraordinary gain/loss item mentioned in the said explanatory announcement as a recurrent gain/loss item □ Applicable √ Not applicable 2. Return on equity (ROE) and earnings per share (EPS) EPS（Yuan/share） Profit as of Reporting Period Weighted average ROE (%) EPS-basic EPS-diluted Net profit attributable to common 11.71% 0.85 0.85 shareholders of the Company Net profit attributable to common shareholders of the Company after 11.04% 0.80 0.80 deduction of non-recurring profit and loss 3. Differences between accounting data under domestic and overseas accounting standards (1) Differences of net profit and net assets disclosed in financial reports prepared under international and Chinese accounting standards √ Applicable □ Not applicable Unit: RMB Net profit Net asset 215 Lu Thai Textile Co., Ltd. Annual Report 2016 Reporting Period Last period Closing balance Opening balance According to Chinese 805,446,326.99 712,193,243.19 6,937,985,729.19 6,837,113,075.58 accounting standards Items and amounts adjusted according to international accounting standards Impact on domestic equipment tax credit recognized as deferred 725,000.00 1,015,000.00 -329,000.00 -1,054,000.00 income under international accounting standards According to international 806,171,326.99 713,208,243.19 6,937,656,729.19 6,836,059,075.58 accounting standards (2) Differences of net profit and net assets disclosed in financial reports prepared under overseas and Chinese accounting standards □ Applicable √ Not applicable (3) Explain reasons for the differences between accounting data under domestic and overseas accounting standards, for audit data adjusting differences had been foreign audited, should indicate the name of the foreign institutions Effects of domestic equipment exempted from income tax The Company exempted from income tax for buying domestic equipment. According to Chinese accounting standards, the income tax expenses are directly reduced which are recognized as deferred income related to assets by the international accounting standards. According to the regulations of the international accounting standards, this difference is amortized over the fixed using periods of year of the fixed assets and adjusting net income and net assets. 216 Lu Thai Textile Co., Ltd. Annual Report 2016 Section XII. Documents Available for Reference 1. Accounting statement signed by legal representative, responsible person in charge of accounting work and responsible person of accounting department; 2. The original of Auditors’ Report carried with the seal of the accounting firm, as well as the personal signatures of certified public accountants. 3. The originals of all documents and manuscripts of Public Notices of the Company disclosed publicly on Securities Times, Shanghai Securities News, China Securities Daily and Ta Kung Pao. Board Chairman: Liu Zibin Lu Thai Textile Co., Ltd. March 30, 2017 217
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