Lu Thai Textile Co., Ltd. Abstract of Third Quarter Report 2016 Stock code: 000726, 200726 Stock name: Lu Thai A, Lu Thai B Announcement No.: 2016-044 LU THAI TEXTILE CO., LTD.
ABSTRACT OF THIRD QUARTER REPORT 2016
Lu Thai Textile Co., Ltd. Abstract of Third Quarter Report 2016 Section I Important Statements
The Board of Directors, the Supervisory Committee, directors, supervisors and senior management staff of Lu Thai Textile Co., Ltd. (hereinafter referred to as “the Company”) warrant that the information carried in this report is factual, accurate and complete, without any false record, misleading statement or material omission. And they shall be jointly and severally liable for that.
All directors have attended the board session for reviewing this report.
Liu Zibin, company principal, Zhang Hongmei, chief of the accounting work, and Zhang Keming, chief of the accounting organ (chief of accounting), hereby confirm that the financial statements enclosed in this report are factual, accurate and complete.
This Report is prepared in both Chinese and English. Should there be any discrepancy between the two versions, the Chinese version shall prevail.
Lu Thai Textile Co., Ltd. Abstract of Third Quarter Report 2016 Section II Financial Highlights& Shareholder Changes
I Highlights of accounting data and financial indicators
Whether the Company performs any retroactive adjustments to or restatements of its accounting data of last year due to change in accounting policies or correction of accounting errors
□ Yes√ No
||||||||
|-|-|-|-|-|-|-|
||30 September 2016||31 December 2015||+/- (%)||
|Total assets (RMB)|8,917,997,686.72||9,091,170,499.22||-1.90%||
|Net assets attributable to shareholders|6,694,781,216.36||6,837,113,075.58||||
||||||-2.08%||
|of the Company (RMB)|||||||
|||||January-September|||
||July-September 2016|YoY +/- (%)||||YoY +/- (%)|
|||||2016|||
|Operating revenues (RMB)|1,433,914,063.96|-8.64%||4,265,240,836.99||-5.46%|
|Net profit attributable to shareholders of|236,519,891.59|||581,161,076.32|||
|||15.75%||||5.88%|
|the Company (RMB)|||||||
|Net profit attributable to shareholders of|||||||
||222,917,425.85|18.00%||556,154,288.37||11.79%|
|the Company excluding exceptional|||||||
|profit and loss (RMB)|||||||
|Net cash flows from operating activities||||1,091,235,207.84|||
||--|--||||30.92%|
|(RMB)|||||||
|Basic earnings per share (RMB/share)|0.25|19.05%||0.62||8.77%|
|Diluted earnings per share (RMB/share)|0.25|19.05%||0.62||8.77%|
|Weighted average return on equity (%)|3.55%|0.66%||8.65%||0.66%|

 Unit: RMB
||||
|-|-|-|
|Item|January-September 2016|Note|
|Profit/loss on disposal of non-current assets (including offset amount of asset|||
||-7,370,719.26||
|impairment provisions)|||
|Government grants charged to the profit/loss for the Reporting Period (except for the|||
|government grants closely related to the business of the Company and given at a fixed|24,358,681.93||
|quota or amount in accordance with the State’s uniform standards)|||
|Gains and losses on change in fair value from tradable financial assets and tradable|||
|financial liabilities, as well as investment income from disposal of tradable financial|||
||3,442,956.85||
|assets and tradable financial liabilities and financial assets available for sales, except|||
|for effective hedging related with normal businesses of the Company|||
|Non-operating incomes and expenses other than the above|4,137,517.15||
|Less: Income tax effects|-2,576,445.85||

Lu Thai Textile Co., Ltd. Abstract of Third Quarter Report 2016
||||
|-|-|-|
|Minority interests effects (after tax)|2,138,094.57||
|Total|25,006,787.95|--|

 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 thePublic—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 the Reporting Period.
II Total number of shareholders and shareholdings of top 10 shareholders at the period-end 1. Total number of ordinary shareholders and preference shareholders who had resumed their voting right& shareholdings of top 10 shareholders at the period-end
Unit: share
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Total number of ordinary|||Total number of preference shareholders who had|||||||
|shareholders at the end of the|60,734||resumed their voting right at the end of the|||||0||
|Reporting Period|||Reporting Period (if any)|||||||
|Shareholdings of top 10 shareholders||||||||||
||||||||Pledged or frozen|||
|||||Shareholdi||Number of||||
|||Nature of|||Number of||shares|||
|Name of shareholder||||ng||restricted shares||||
|||shareholder|||shares held||||Numbe|
|||||percentage||held|Status|||
||||||||||r|
|Zibo Lucheng Textile Investment Co., Ltd.||Domesticnon-state-ownedcorporation||15.21%|140,353,583|||||
|Tailun Textile Co., Ltd.||Foreigncorporation||12.82%|118,232,400|118,232,400||||
|Central Huijin Investment Co., Ltd.||State-ownedcorporation||2.20%|20,315,300|||||
|T.ROWE PRICE INTL DISCOVERY FUND||Foreigncorporation||2.16%|19,948,219|||||
|CHINA SECURITIES FINANCECORPORATION LIMITED||Domesticnon-state-ownedcorporation||1.70%|15,679,091|||||
|LYNAS ASIA FUND||Foreigncorporation||1.52%|14,000,000|||||
|BNP Paribas SA - Self-owned funds||Foreigncorporation||1.12%|10,330,698|||||
|HUA AN NEW SILK ROAD THEMEEQUITY SECURITIES INVESTMENT FUND||Domesticnon-state-owned||1.10%|10,110,000|||||

Lu Thai Textile Co., Ltd. Abstract of Third Quarter Report 2016
||||||||
|-|-|-|-|-|-|-|
||corporation||||||
|Remarkable Wealth Dividend Value StockProducts|Domesticnon-state-ownedcorporation|1.06%||9,765,753|||
|FIRST STATE INVESTMENTS ICVC-FIRSTSTATE GREATER CHINA GROWTH FUND|Foreigncorporation|0.87%||8,019,082|||
|Shareholdings of top 10 non-restricted shareholders|||||||
||||Number of||Type of shares||
||||non-restricted||||
|Name of shareholder|||||||
||||shares held at the||Type|Number|
||||period-end||||
|Zibo Lucheng Textile Investment Co., Ltd.|||140,353,583||RMB ordinary||
|||||||140,353,583|
||||||share||
|Central Huijin Investment Co., Ltd.|||20,315,300||RMB ordinary||
|||||||20,315,300|
||||||share||
|T.ROWE PRICE INTL DISCOVERY FUND|||19,948,219||Domestically||
||||||listed foreign|19,948,219|
||||||share||
|CHINA SECURITIES FINANCE CORPORATION LIMITED|||15,679,091||RMB ordinary||
|||||||15,679,091|
||||||share||
|LYNAS ASIA FUND|||14,000,000||Domestically||
||||||listed foreign|14,000,000|
||||||share||
|BNP Paribas SA - Self-owned funds|||10,330,698||RMB ordinary||
|||||||10,330,698|
||||||share||
|HUA AN NEW SILK ROAD THEME EQUITY SECURITIESINVESTMENT FUND|||10,110,000||RMB ordinary||
|||||||10,110,000|
||||||share||
|Remarkable Wealth Dividend Value Stock Products|||9,765,753||RMB ordinary||
|||||||9,765,753|
||||||share||
|FIRST STATE INVESTMENTS ICVC-FIRST STATE GREATER CHINAGROWTH FUND|||8,019,082||Domestically||
||||||listed foreign|8,019,082|
||||||share||
|HTHK-MANULIFE CHINA VALUE FUND|||6,858,138||Domestically||
||||||listed foreign|6,858,138|
||||||share||
||||Zibo Lucheng Textile Investment Co., Ltd. is the||||
||||largest shareholder of the Company and the actual||||
|Related or act-in-concert parties among the shareholders above|||controller. Tailun (Thailand) Textile Co., Ltd. is the||||
||||second largest shareholder as well as sponsor of||||
||||foreign capital of the Company. All of other||||

Lu Thai Textile Co., Ltd. Abstract of Third Quarter Report 2016
|||
|-|-|
||shareholders are people 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.|
|Top 10 ordinary shareholders conducting securities margin trading (if any)|N/A|

Did any of the top 10 ordinary shareholders or the top 10 non-restricted ordinary shareholders of the Company conduct any promissory repo during the Reporting Period?
□ Yea√ No
No such cases in the Reporting Period.
2. Total number of preference shareholders and shareholdings of the top 10 of them at the period-end□ Applicable√ Not applicable
Lu Thai Textile Co., Ltd. Third Quarter Report 2016 Section III Significant Events
I Changes in main accounting statement items and financial indicators in the Reporting Period, as well as reasons for the changes
√ Applicable□ Not applicable
(1) Notes receivable as at 30 September 2016 stood at RMB69,992,715.25, down47.43% from the year-beginning amount, mainly because bank acceptance bills were endorsed and paid to others and due L/Cs were honored.
(2) Interest receivable as at 30 September 2016 stood at RMB0.00, down100.00% from the year-beginning amount, mainly because accrued interest income was received.
(3) Other accounts receivable as at 30 September 2016 stood at RMB44,545,219.74, down37.10% from the year-beginning amount, mainly because export tax rebates receivable were received.
(4) Other current assets as at 30 September 2016 stood at RMB33,622,381.18, down41.42% from the year-beginning amount, mainly because the prepayment for B-share buyback and the input VAT to be deducted decreased.
(5) Construction in progress as at 30 September 2016 stood at RMB396,575,486.54, up93.36% from the year-beginning amount, mainly because the inputs to the Lu Thai (Vietnam) yarn-dyed fabric project and the Lu An Garments project increased.
(6) Engineering materials as at 30 September 2016 stood at RMB69,756,844.30, up1003.79% from the year-beginning amount, mainly because the to-be-installed equipment of Lu Thai (Vietnam) increased.
(7) Long-term deferred expenses as at 30 September 2016 stood at RMB113,055,639.73, up32.81% from the year-beginning amount, mainly because the land rental expenses of Lu Thai (Vietnam) and Lu An Garments increased.
(8) Financial liabilities at fair value through profit/loss as at 30 September 2016 stood at RMB0.00, down100.00% from the year-beginning amount, mainly because financial liabilities were delivered upon maturity.
(9) Notes payable as at 30 September 2016 stood at RMB1,242,220.00, down60.05% from the year-beginning amount, mainly because bank acceptance bills payable by the Company decreased.
(10) Long-term borrowings as at 30 September 2016 stood at RMB122,201,605.53, up100.00% from the year-beginning amount, mainly because Lu Thai (Vietnam) secured long-term borrowings.
(11) Treasury shares as at 30 September 2016 stood at RMB0.00, down100.00% from the year-beginning amount, mainly because the Company cancelled the B-shares bought back.
(12) Other comprehensive income as at 30 September 2016 stood at RMB34,374,282.73, up101.13% from the year-beginning amount, mainly because currency translation profit increased due to exchange rate changes.
(13) Finance costs for January-September 2016 stood at RMB26,357,253.37, up68.77% year on year, mainly because net exchange loss increased due to exchange rate changes.
(14) Asset impairment loss for January-September 2016 stood at RMB4,823,442.61, up107.87% year on year, mainly because of the inventory falling price provision.
(15) Profit on fair value changes for January-September 2016 stood at RMB46,397,456.20, up387.50% year on year, mainly because financial liabilities were delivered upon maturity.
(16) Return on investment for January-September 2016 stood at RMB-42,954,499.35, down217.32% year on year, mainly because of a greater loss on derivative financial instruments.
(17) Non-operating revenue for January-September 2016 stood at RMB33,540,794.44, down36.28% year on year, mainly because governmental subsidies decreased.
Lu Thai Textile Co., Ltd. Third Quarter Report 2016 (18) Non-operating expense for January-September 2016 stood at RMB12,415,314.62, up137.08% year on year, mainly because of a greater loss on disposal of fixed assets.
(19) Corporate income tax for January-September 2016 stood at RMB137,676,433.01, up37.04% year on year, mainly because the total profit increased and a change in the tax policy that theR&D expenses were not allowed for quarterly over-deduction in the calculation of the taxable income amount for the current period.
II Progress on significant events, as well as the influence and solutions
√ Applicable□ Not applicable
On 5 August 2015, the Company held the 2015 1st Extraordinary General Meeting, which reviewed and approved the Proposal on the Buy-back of Part of the A Shares and B Shares of the Company and issued the Report of the Buy -back of Part of the A Shares and B Shares of the Company on 10 October 2015, and as for their details please refer to the announcemet (Announcement No.: 2015-029) and the share buy-back report disclosed by the Company on www.cninfo.com.cn respectively on 6 August 2015 and 10 October 2015. The Company began to execute the buy-back proposal since 10 November 2015 and had accumulatively bought back the B shares of 33,156,185 shares up to the buy-back period expired on 4 August 2016 and as for the specific information, please refer to the announcement (Announcement No.: 2016-039) disclosed by the Company on www.cninfo.com.cn 5 August 2016. On 22 August 2016, the Company had completed the shares cancellation matters in Shenzhen Branch of CSDCC with the details on the announcement (Announcement No.: 2016-040) disclosed by the Company on www.cninfo.com.cn on 24 August 2016.
||||
|-|-|-|
|||Index to the relevant announcement|
|Overview of the significant event|Date of disclosure||
|||disclosed on the website|
|On 5 August 2015, the Company held the 2015 1st ExtraordinaryGeneral Meeting, which reviewed and approved the Proposal on theBuy-back of Part of the A Shares and B Shares of the Company andissued the Report of the Buy -back of Part of the A Shares and BShares of the Company on 10 October 2015, and as for their detailsplease refer to the announcemet (Announcement No.: 2015-029) andthe share buy-back report disclosed by the Company onwww.cninfo.com.cn respectively on 6 August 2015 and 10 October2015. The Company began to execute the buy-back proposal since 10November 2015 and had accumulatively bought back the B shares of33,156,185 shares up to the buy-back period expired on 4 August2016 and as for the specific information, please refer to theannouncement (Announcement No.: 2016-039) disclosed by theCompany on www.cninfo.com.cn 5 August 2016. On 22 August2016, the Company had completed the shares cancellation matters inShenzhen Branch of CSDCC with the details on the announcement(Announcement No.: 2016-040) disclosed by the Company onwww.cninfo.com.cn on 24 August 2016.||Announcement of No.: 2015-029 of the|
||6 Aug. 2015||
|||Company on www.cninfo.com.cn|
|||Announcement of No.:2016-039 of the|
||5 Aug. 2016||
|||Company on www.cninfo.com.cn|
|||Announcement of No.: 2016-040 of the|
||24 Aug. 2016||
|||Company on www.cninfo.com.cn|

Lu Thai Textile Co., Ltd. Third Quarter Report 2016 III Commitments of the Company, its shareholders, actual controller, acquirer, directors, supervisors, senior management or other related parties fulfilled in the Reporting Period or ongoing at the period-end
√ Applicable□ Not applicable
||||||||
|-|-|-|-|-|-|-|
|||||Date of|||
|||Type of|||||
||Commitment|||commitm|Term of||
|Commitment||commit|Contents|||Fulfillment|
||maker|||ent|commitment||
|||ment|||||
|||||making|||
|Commitments made in share|||||||
|reform|||||||
|Commitments made in acquisition|||||||
|documents or shareholding|||||||
|alteration documents|||||||
|Commitments made in time of|||||||
|asset restructuring|||||||
|Commitments made in time of|||||||
|IPO or refinancing|||||||
|Commitments concerning stock|||||||
|ownership incentive|||||||
|||||||The major|
|||||||shareholder Zibo|
||||The biggest|||Lucheng Textile|
||||shareholder Zibo|||Investment Co.,|
||||Lucheng Textile|||Ltd. and the|
||||Investment Co.,|||directors,|
||Zibo Lucheng||Ltd. and the|||supervisors as|
||Textile||directors,|||well as senior|
||Investment Co.,|Other|supervisors and|||executives of|
|Other commitments made to||||10 Jul.|10 Jul. 2015 to||
||Ltd. and the|commit|senior executives|||which had not|
|minority shareholders||||2015|10 Jan. 2016||
||directors,|ments|committed that the|||decreased the|
||supervisors and||shares of the|||shareholding of|
||senior executives||Company held by|||the Company|
||||them would not be|||from 10 July|
||||decreased from 10|||2015 to 10|
||||July 2015 to the|||January 2016.|
||||future six months|||The commitment|
|||||||had completed|
|||||||the execution.|
|Executed on time|Yes||||||
|Specific reasons for failing to|||||||
||N/A||||||
|fulfill commitments on time and|||||||

Lu Thai Textile Co., Ltd. Third Quarter Report 2016
||
|-|
|plans for next step|

IV Performance forecast for Y2016
Warning of possible loss or considerable YoY change in the accumulative net profit made during the year-beginning to the end of the next reporting period, as well as the reasons
□ Applicable√ Not applicable
V Securities investments
√ Applicable□ Not applicable
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Variety||Name|||||||||Source|
||Code of||Initial|Opening|Opening|Closing|Closing||Profit/loss|||
|of||of||||||Closing|in the|Accountin|of|
||securitie||investment|number|shareholdin|number|shareholdin|book value|Reporting|||
|securitie||securitie||of shares|g|of shares|g|||g title|securitie|
||s||cost (RMB)|held|percentage|held|percentage|(RMB)|Period|||
|s||s|||||||(RMB)||s|
|||||||||||Tradable||
||||27,978,491.2|12,100,00||11,500,00||29,110,410.0|2,406,495.0|||
|Stock|01788|GTJA|||0.17%||0.17%|||financial|Buy-in|
||||0|0||0||0|0|||
|||||||||||assets||
|||||||||||Tradable||
||||15,454,818.0|||||17,661,727.4||||
|Stock|02883|ZHYT||2,450,000|0.05%|3,048,000|0.06%||527,278.50|financial|Buy-in|
||||0|||||4||||
|||||||||||assets||
|||||||||||Tradable||
||||10,343,030.6|||||14,029,685.0|-1,146,802.7|||
|Stock|00980|LHCS||3,839,000|0.34%|5,468,000|0.49%|||financial|Buy-in|
||||8|||||4|5|||
|||||||||||assets||
|||||||||||Tradable||
||||||||||-2,560,958.4|||
|Stock|02006|JJJD|9,079,748.08|3,380,000|0.06%|3,380,000|0.06%|6,955,330.20||financial|Buy-in|
||||||||||0|||
|||||||||||assets||
|||||||||||Tradable||
|Stock|00116|ZSS|3,749,706.09|40,000|0.01%|350,000|0.05%|4,128,495.00|361,021.76|financial|Buy-in|
|||||||||||assets||
|||||||||||Tradable||
|Stock|01666|TRTKJ|3,177,673.80|300,000|0.02%|300,000|0.02%|3,874,500.00|588,924.00|financial|Buy-in|
|||||||||||assets||
|||||||||||Tradable||
|Stock|200056|HTB|1,945,028.80|200,000|0.02%|400,000|0.03%|1,907,976.00|-332,346.00|financial|Buy-in|
|||||||||||assets||
|||||||||||Tradable||
|Stock|200058|SSGB|493,908.10|100,000|0.01%|100,000|0.01%|485,604.00|3,444.00|financial|Buy-in|
|||||||||||assets||
|||||||||||Tradable||
|Stock|02355|BYJT|424,199.90|100,000|0.02%|100,000|0.02%|453,747.00|2,583.00||Buy-in|
|||||||||||financial||

Lu Thai Textile Co., Ltd. Third Quarter Report 2016
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|||||||||||assets||
|||||||||||Tradable||
|Stock|00525|GSTL|1,415,416.50|850,000|0.01%|||0.00|-83,840.36|financial|Buy-in|
|||||||||||assets||
|Other securities investment||||||||||||
||||698,357.15|50,000|--||--|0.00|364,958.10|--|--|
|held at the period-end||||||||||||
||||74,760,378.3|23,409,00||24,646,00||78,607,474.6||||
|Total|||||--||--||130,756.85|--|--|
||||0|0||0||8||||
|Disclosure date of the||||||||||||
|announcement about the||||||||||||
|board’s consent for the||||||||||||
|securities investment||||||||||||
|Disclosure date of the||||||||||||
|announcement about the||||||||||||
|general meeting’s consent||||||||||||
|for the securities||||||||||||
|investment (if any)||||||||||||

VI Investment in financial derivatives
√ Applicable□ Not applicable
Unit:RMB’0,000
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|||||||||||||Proporti||
|||||||||||||on of||
|||||||||||||closing||
|||||||||Amoun||||||
|||||||||||||investm|Actualgain/loss inreporti|
||||Type of|||||||Impairm||||
|||Related-p||Initial|||Opening|t|Amount||Closing|ent||
||||derivati||Beginni|Ending||purchas||ent||amount||
|Operator|Relation|arty||investm|||investm||sold in||investm|||
||||ve|||||ed inreporti||provisio||in the||
|||transactio||ent|ng date|date|ent||reportin||ent|||
|||n or not|investment|amount|||amount|ng|g period|n (ifany)|amount|Company’s|ng|
|||||||||period||||closing|period|
|||||||||||||net||
|||||||||||||assets||
|||||||||||||(%)||
||||Forward|||||||||||
||||exchang|||||||||||
|Commer|Non-rela|||79,386.|2015-01|2016-12|79,386.||79,430.||||-2,626.48|
|||No|e|||||44.3||0|0|0.00%||
|cial bank|t ed|||21|-26|-26|21||51|||||
||||settleme|||||||||||
||||nt|||||||||||
|Commer|Non-rela|No|Option|104,300|2015-01|2016-08|104,300|10,007.|110,960|0|3,347.5|0.47%|-1,711.|

Lu Thai Textile Co., Ltd. Third Quarter Report 2016
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|cial bank|t ed|portfoli||-23|-29||5|||||89|
|||o|||||||||||
||||183,686|||183,686|10,051.|190,390||||-4,338.|
|Total||||--|--||||0|3,347.5|0.47%||
||||.21|||.21|8|.51||||37|
|Capital source for derivative|||||||||||||
||||Own funds||||||||||
|investment|||||||||||||
|Lawsuit (if applicable)|||No lawsuits||||||||||
|Disclosure date of board announcement|||2015-04-25||||||||||
|on approval of derivative investment (if|||||||||||||
||||2016-05-19||||||||||
|any)|||||||||||||
|Disclosure date of board announcement|||||||||||||
|on approval of derivative investment (if|||||||||||||
|any)|||||||||||||
||||The Company conducted derivatives products transaction in order for hedging. And the||||||||||
||||forward settlement hedging was operated by installments, with the relevant amount not||||||||||
||||more than the planned derivatives products transactions. And all derivatives products||||||||||
||||transaction was zero-deposit. Meanwhile, the Company had a complete risk control system||||||||||
||||for sufficient analysis and prevention of possible risks such as risk of laws and regulations,||||||||||
||||credit risk, 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 analysis and risk control measures|||||||||||||
||||Risk control measures: The Company carefully studied and mastered laws, regulations and||||||||||
|for derivative products held in|||||||||||||
||||policies relevant to derivative products transaction, formulated internal control rules for the||||||||||
|reporting period (including but not|||||||||||||
||||forward settlement hedging business, standardized the operation procedures. And||||||||||
|limited to market risk, liquidity risk,|||||||||||||
||||strengthened the compliant examination on derivative products investment business, and||||||||||
|credit risk, operation risk, legal risk,|||||||||||||
||||strictly abided by relevant laws, regulations and the Company’s internal management rules.||||||||||
|etc.)|||||||||||||
||||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||||||||||

Lu Thai Textile Co., Ltd. Third Quarter Report 2016
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|-|-|
||20th Session of the 7th Board of Directors on 23 Apr. 2015 and the Proposal on the Plan of|
||Lu Thai Textile Co., Ltd. for Derivative Transactions in 2016 approved at the 33th Session of|
||the 7th Board of Directors on 17 May 2016, 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 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. 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. So far, the derivative product of the|
||Company held was only USD5 million, the fluctuation of RMB exchange rate will had no|
||significant influence to the Company’s derivative trasaction.|
||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.|
|Changes in market prices or fair value|1. As of 30 September 2016, the Company held 1 undue financial derivative product|
|of invested derivatives in reporting|contracts, totaling USD5 million, was foreign exchange option contracts which will due in|
|period (fair value analysis should|December 2016. The financial derivative products above accounted for 0.47% of the closing|
|include specific analysis methods as|net assets.|
|well as relevant assumptions and|2. From January- September 2016, the due financial derivative products of the Company|

Lu Thai Textile Co., Ltd. Third Quarter Report 2016
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|parameters)|totally equaled to USD 336 million and the losses generated was RMB43.3837 million. To|
||be specific, the due forward settlement was USD125.5 million, generating loss of|
||RMB26.2648 million; the due foreign exchange options equaled to USD210.5 million, of|
||which USD184.5 million was delivered on time upon satisfaction of the delivery conditions,|
||generating loss of RMB17.1189 million, and USD26 million was undelivered due to|
||dissatisfaction of the delivery conditions.。|
|Significant changes in the Company’s||
|accounting policy and specific||
|accounting principles for derivatives in|No significant changes|
|reporting period when compared to last||
|period||
||The Company’s independent directors Zhou Zhiji, Zhang Chengzhu, Wang Lei, Xu Jianjun|
||and Zhao Yao, concerning conducting derivatives business, have issued the following|
||professional advice: We are of the opinion that it will strengthen the Company’s|
||competitiveness to use derivative transactions with focus on forward settlement and|
|Specific opinion from independent||
||purchase as an effective tool to avoid foreign exchange risks, to strengthen the relevant|
|directors on the Company’s derivatives||
||internal control and to carry out the loss and risk prevention measures so as to improve the|
|investment and risk control||
||operation and management. In conducting derivative transactions with focus on forward|
||settlement and purchase, the Company follows a legal approval procedure, has sound|
||relevant institutions and keeps the risks relatively controllable. No harm has been done to|
||the interests of the Company’s shareholders.|

VII Visits paid to the Company for purposes of research, communication, interview, etc. during the Reporting Period
√ Applicable□ Not applicable
|||||
|-|-|-|-|
|Date of visit|Way of visit|Type of visitor|About|
||||Participate in GF Securities’ teleconference meeting about the|
|2016-08-31|By phone|Institution|Semi-annual Report in 2016 of Lu Thai Textile communicating|
||||upon the basic situation of the Company with investors.|

 VIII Illegal provision of guarantees for external parties
□ Applicable√ Not applicable
No such cases in the Reporting Period.
IX Occupation of theCompany’s funds for non-operating purposes by the controlling shareholder and its related parties
□ Applicable√ Not applicable
No such cases in the Reporting Period.
Lu Thai Textile Co., Ltd. Third Quarter Report 2016 Board Chairman: Liu Zibin
Lu Thai Textile Co., Ltd.
28 October 2016