Announcement Of Anhui Huamao Textile On The 35% Equity Interest Of Xinjiang Korla Lihua Cotton Industry Co., Ltd.

All members of the company and the board of directors guarantee that the contents of the information disclosure are true, accurate and complete, without false records, misleading statements or major omissions.

1. Summary of spanactions

1, according to Anhui Huamao Textile Co., Ltd. The main business development plan of the limited company (hereinafter referred to as "company", "company" or "Party B") is to further improve the industrial chain of the main textile industry of the company. In line with the principle of mutual trust and win-win development, the company invested 58 million 609 thousand and 400 yuan to Xinjiang Korla Lihua Cotton Industry Co., Ltd., which was granted by the natural person Zhang Qihai (hereinafter referred to as "party a"). Lihua cotton industry "35% stake.

In December 14, 2010, the agreement on equity spanfer signed jointly by the company and natural person Zhang Qihai. The item does not constitute a related spanaction, and does not constitute a major asset reorganization stipulated in the administrative measures for the major asset reorganization of listed companies.

2. the motion can be implemented after the first meeting of the five Board of directors held in December 14, 2010. (the five announcement of the resolution of the board of directors was published in the December 15, 2010 securities times, China Securities Journal and the tide online). The spanaction does not need to be approved by the shareholders' meeting.

3. the necessary approval and other related procedures for the implementation of the spanaction have been completed, and there is no major legal obstacle to the spanaction.

Two, the basic situation of the other party.

1. the name of the counterparty: Zhang Qihai

ID card number: 412931196809195535

2. Party A has no relationship with the company and the first ten shareholders of the company in terms of property rights, business, assets, claims, debts and personnel and other relationships that may or have caused the listed companies to tilt their interests.

Three, the basic situation of spanaction targets

1. the general situation of assets.

(1) in view of Party A's legal ownership of 94.50% stake in Lihua cotton industry, we hereby agree to spanfer the 35% equity interest of Lihua cotton trade to Party B at the price of RMB 58 million 609 thousand and 400 yuan (RMB fifty-eight million six hundred and nine thousand and four hundred). Lihua cotton registration office is located at the office building of cotton and Flax Company on the west side of Tuan Nan Road, Korla, Xinjiang.

(2) the evaluation report issued by Beijing KELONG Asset Appraisal Co., Ltd. (KELONG, P171, August 31, 2010) was assessed on the basis of the assessment date of August 31, 2010. The Korla Lihua Cotton Industry Co., Ltd. was assessed on the basis of the assessment date. The assets were valued at 153 million 480 thousand and 300 yuan, the assessed value was 187 million 751 thousand and 600 yuan, the appreciation rate was 34 million 271 thousand and 300 yuan, the appreciation rate was 22.33%, the debt book value was 20 million 306 thousand and 100 yuan, the assessment value was 20 million 296 thousand and 100 yuan, the impairment value was 10 thousand yuan, the impairment rate was 0.05%, the net assets value was 133 million 174 thousand and 200 yuan, the assessment value was 0.05% yuan, the appreciation value was up to RMB, and the value-added rate was 0.05%. By the end of the assessment date, the value of all the shareholders' rights and interests of Korla Lihua cotton Co., Ltd. in August 31, 2010 was 167 million 455 thousand and 500 yuan.

The results of the asset appraisal summary are as follows:

Base date for assessment: August 31, 2010

Unit of value: RMB 10000 yuan

Project name, book value assessment, value added or decreasing value increment rate% current assets 5733.73 5536.57-197.16-3.44 non current assets 9614.30 13238.59 3624.29 37.70: long term equity investment 50 124.18 74.18 148.36 fixed assets 8020.50 10177.73 10177.73 2157.23 65.30-- under construction project 2029.61-- intangible assets total assets, total liabilities, current liabilities, liabilities, liabilities, 1.00--1.00-100.00 liabilities, total liabilities 2029.61-1.00-0.05 assets (owners' equity)

Note: the appreciation of intangible assets in the above table is as follows:

(1) intangible assets included in the scope of assessment include land use rights and all kinds of software. The original entry value is 15512365.71 yuan, and the face value after audit is 14785052.39 yuan (of which 13915467.14 yuan is the right to use land).

Second, the land use right is evaluated by the benchmark land price coefficient correction method and the cost approximation method, and the simple arithmetic average of the two methods is selected as the final assessment result. The valuation results are as follows:

(currency category: RMB yuan)

The land area number (2058-10-28), the land price (yuan / square meter), the land price (yuan / m2), the land price (yuan), the land 1, 45090.99, 91.37, 4119841, the land 2 2057-9-19 52305.4, 91.13 4766369, the site 3 2057-9-19 36304.18 91.13, the 91.13 land, the 2059-7-24, the land, the 2057-11-20, the land, the /95976.01, the land and the land.

3. There are 8 other intangible assets that are included in the assessment scope. They are online reconditioning equipment software, gold disk financial software, acquisition system software, and cotton barcode information management system software. The original entry value is 459884.62 yuan, and the audited face value is 375561.04 yuan, and the assessment value is 375561.04 yuan.

4. The total value of intangible assets is 28713847.04 yuan.

The value added system of land use right evaluation of intangible assets was caused by the corresponding increase in the land price standard of the notice issued by the Ministry of land and resources in 2007 and the Ministry of land and resources in 2007 and the notice of the Ministry of land and resources concerning the adjustment of parts of the land and other land prices ([2006]307).

(3) this spanaction is not subject to approval by the shareholders' meeting.

2. basic situation of the company

(1) registration status

Name: Korla Lihua Cotton Industry Co., Ltd.

Registration number: 652801050005995

Date of establishment: August 17, 2004

Residence: office building of cotton and hemp company on the west side of Tuan Jie Nan Road, Korla.

Legal representative: Zhao Qingcai

Registered capital: RMB 10 million yuan.

Paid up capital: RMB 10 million yuan

Company type: limited liability company (natural person investment or holding)

Operating period: August 17, 2004 to August 16, 2024

Scope of operation: licensing items (specific operating items and duration with the approval documents of the relevant departments or licensing, qualification certificates): cottonseed processing, processing, wholesale and retail: oil (vegetable oil, cottonseed oil) (the above items are only limited to the company's operation).

General operating items (except for the special approval of national laws and administrative laws and regulations): Wholesale and retail: leather cotton and cotton by-products, and the acquisition of seed cotton.

(2) general situation of enterprises

The main products of Lihua cotton industry are lint, cottonseed, short pile, cottonseed oil and so on. The company is directly under five branches and a branch company, and is owned by a wholly owned subsidiary. It has nine domestic advanced cotton processing and production lines, and has more than 650 employees. The company has the annual production capacity of 200 thousand tons of lint, 75 thousand tons of cottonseed meal and 22 thousand tons of cottonseed oil.

In 2009, the total assets of the company were 603 million 493 thousand and 800 yuan, total liabilities 544 million 487 thousand and 800 yuan, total receivables 12 million 961 thousand and 500 yuan, net assets 59 million 6 thousand and 100 yuan, main business income 1 billion 8 million 715 thousand and 300 yuan, operating profit 9 million 380 thousand and 700 yuan, net profit 23 million 88 thousand and 400 yuan (of which the government subsidized income 15 million 310 thousand yuan), the net cash flow generated by operating activities was 57 million 133 thousand and 200 yuan.

As at August 31, 2010, the company had audited total assets of 153 million 480 thousand and 300 yuan, total liabilities of 20 million 306 thousand and 100 yuan, total receivables of 8 million 639 thousand yuan, net assets of 133 million 174 thousand and 200 yuan, main business income of 598 million 952 thousand and 800 yuan in the first 8 months of 2010, 827 million 564 thousand and 500 yuan of operating profit, 84 million 168 thousand and 100 yuan of net profit (of which the government subsidized income was 7 million 950 thousand yuan), and the net cash flow generated by operating activities was 473 million 278 thousand and 700 yuan.

The reasons for the above changes are: first, the 2009 cotton year begins in October 2009, and the Lihua cotton industry borrows 448 million 980 thousand yuan and short-term accounts receivable 46 million 736 thousand and 400 yuan in the short-term loans of banks, and buys new cotton seeds and has a large stock at the end of the term. Therefore, the total assets of the bank account for a larger sum. In the 2010 year, the bank's short-term loans were returned to 448 million 980 thousand yuan and the finished products were sold, resulting in a decrease in total assets in August 31, 2010. Two, 2009-2010 cotton annual market price of lint products increased compared with the previous year, and the level of income increased substantially compared with 2009.

(3) the ownership structure of the underlying company is as follows:

After the change, the capital contribution ratio of the shareholder name, the name of the shareholder, the contribution ratio of the shareholder name, Zhang Qihai, 47 million 250 thousand yuan, 94.50% Zhang Qihai, 29 million 750 thousand yuan, 59.50% Zhao Qingcai, Shi Qunhai, Hu Xiao, Bi Guirong and other natural persons 2 million 750 thousand yuan, 5.50% Anhui Huamao textile Limited by Share Ltd 17 million 500 thousand yuan 35% 50 million, 5.50%, and other natural persons 2 million 750 thousand yuan 5.50% total 50 million yuan 50 million total 50 million yuan 50 million

This spanaction target company has issued the standard unqualified audit report "Korla Lihua cotton industry limited liability company audit report" (Tian Tian Xin SJ[2010]1) by the Tian Yi international accounting firm limited, and the Beijing KELONG Asset Appraisal Co., Ltd. issued the "Kuehnle Leigh Hua cotton industry limited liability company intends to change the Limited by Share Ltd as a whole to the shareholders' equity value assessment project assets evaluation report" (KELONG 2010) No. [P171]. Audit institutions and evaluation institutions have the qualification to perform securities and futures related business. {page_break}

Four, the main contents of the spanaction agreement

(1) the mode of payment of share spanfer price and price.

1, the spanfer price of equity in the spanaction is RMB 58 million 609 thousand and 400 yuan (RMB fifty-eight million six hundred and nine thousand and four hundred yuan).

2, Party B agrees to pay Party A 30% yuan equity spanfer amount to RMB 17 million 582 thousand and 800 yuan after signing this Agreement and completing the registration of industrial and commercial alteration, and the remaining price of Party B will be paid to RMB 41 million 26 thousand and 600 yuan before July 2011 31.

(two) spanaction pricing basis

The spanaction price is based on the evaluation scope and evaluation results listed in Beijing KELONG Asset Appraisal Co., Ltd. (KELONG P171 2010).

(three) the source of funds for expenditure is the company's own currency fund of 58 million 609 thousand and 400 yuan.

(four) the agreement on equity spanfer shall come into force on the date of signature and seal by Party A and Party B.

Five. Other arrangements related to the acquisition of assets.

1. this spanaction does not involve personnel resettlement, land leasing, and other arrangements that do not involve stock spanfer of listed companies or high-level personnel change plans.

After the completion of this spanaction, the related spanactions may occur. The company will purchase and settle the market according to the fair market price according to the market situation of raw cotton.

2. Party A and Party B agree that after the completion of the spanfer of shares, the board of directors is composed of five members. Among them, the chairman is recommended by Party A, the second party recommends two directors, and the board of supervisors is composed of three members. Among them, Party B recommends a supervisor; the company has a general manager, and a party member recommends; and a deputy general manager is appointed; among them, Party B recommends two (including the deputy general manager in charge of Finance).

Six, the significance of investment projects and their impact on the company.

As the main raw material of the company, the cost of cotton accounts for more than half of the company's production cost. As a major province of the country's output, Xinjiang accounts for about 40% of the country's output, and its quality, consistency and spinnability have all maintained a high level. It is the company's main raw material purchasing base. In view of:

1, according to the current development of China's textile industry, the supply of raw cotton market is less than the demand, and the supply and demand is seriously unbalanced, and this situation is not expected to be solved in a long time in the future.

2, due to the requirements of the company's product quality, the purchase of raw cotton is mainly in the Xinjiang area. Xinjiang cotton, as an important purchasing variety of our company, accounts for more than 70% of the total cotton used by the company.

Therefore, the company's 35% stake in the spanferee Lihua cotton company is aimed at establishing a stable strategic partnership on the resources, stabilizing the supply and demand of high-quality cotton, and purchasing sufficient and reliable raw cotton for the implementation of the main development strategy of the company, and further improving the industrial chain of the main textile industry of the company.

Seven. Reference documents

1, Anhui Huamao textile Limited by Share Ltd and Zhang Qihai jointly signed " Equity spanfer agreement "

2, the Korla Lihua Cotton Industry Co., Ltd. intends to change the whole assets appraisal report of Limited by Share Ltd to all shareholders' equity valuation items of the company (KELONG commentary [2010] No. P171).

Notice hereby.

Anhui Huamao textile Limited by Share Ltd

Board of directors

December 16th, two